Earlier, Easier FAFSA Process Now Online!
TICAS Scuttles Troubling Amazon/Wells Fargo Private Loan Marketing Deal
Two Bipartisan Bills Based on TICAS Proposals
Default Rate Declines, but Record 8.1M in Default Includes Defrauded Borrowers
Community College Students Struggle to Afford to Stay in School, Even with Low or Free Tuition
Nearly 1 in 10 Community College Students Can’t Get a Federal Student Loan
Thanks for Standing Up for Defrauded Students!
October 1 brought a dramatic improvement to the student aid process that TICAS led the way for, and students and families can now file the FAFSA earlier and more easily. As announced by the White House last year, federal student aid eligibility is now based on the tax data that’s available when students typically apply to college instead of months later, and the FAFSA becomes available in October instead of the next January. This practical change fixes a major timing problem in the college process, enables millions more students to electronically transfer their own tax data in the FAFSA, and garnered support from both parties in Congress and dozens of organizations. Want to help spread the word? Start by checking out this blog post from the Department of Education.
TICAS played a central role in ending a high-profile marketing deal between Amazon.com and Wells Fargo that was bad news for student borrowers, as highlighted in the Wall Street Journal last month. In July, the two huge companies announced a multi-year marketing agreement to promote Wells Fargo’s pricey private education loans to Amazon’s student customers, offering them a small interest-rate discount while burying the actual rates. We quickly uncovered just how high those rates were: up to 13.74%, more than triple the undergraduate federal student loan interest rate of 3.76%. There was no mention that students could be eligible for federal loans with record low rates, or that private loans lack the consumer protections and flexible repayment options that come with federal student loans. Knowing Amazon’s reach and the fact that nearly half of undergraduates with private loans haven’t maxed out on safer, cheaper federal loans first, we took action.
The day the deal was announced, we went to the press and policymakers with our findings and concerns, prompting immediate action. Within six weeks, the agreement was called off. Our statements shaped coverage in the Washington Post and more, and lawmakers credited us for the abrupt cancellation.
September brought the announcement of two bipartisan bills that would make practical reforms based on TICAS policy recommendations. First, the Pell Grant Flexibility Act (H.R. 5764), introduced by Congressman Mark DeSaulnier (D-CA) and three Republican colleagues, would make sure need-based Pell Grants aren’t taxed if students use them to help pay for books or other educational expenses besides tuition and fees. This simplifies the tax code, reduces paperwork for colleges and students, and helps low-income students access the American Opportunity Tax Credit (AOTC).
The Streamlining Income-driven, Manageable Payments on Loans for Education (SIMPLE) Act, introduced by Representatives Suzanne Bonamici (D-OR) and Ryan Costello (R-PA), would help borrowers in income-driven repayment (IDR) plans keep their federal loan payments manageable and prevent default. Rather than having to submit new income information every year or get bumped to a non-income-based payment, borrowers in IDR would be able to give the Department of Education permission to get the required information directly from the IRS. The bill would also let the Department automatically enroll new borrowers who become severely delinquent (120 days) in an IDR plan, where payments are likely to be more manageable: as low as $0 while borrowers’ income is very low.
Newly released cohort default rates (CDRs) show that 11.3% of federal student loan borrowers who entered repayment in 2013 had defaulted by 2015. It was 11.8% for those who entered repayment the prior year and 13.7% the year before that. This drop in CDRs is very good news. But as we said in our press release, the total number of borrowers in default is at a record 8.1 million, including students who went to Corinthian Colleges and other schools known to have committed widespread fraud. We continued to urge the Department to stop requiring individual discharge applications from borrowers it knows were defrauded and automatically cancel their loans instead. The day after the new default rates were released, Senator Elizabeth Warren sent a widely publicized letter to Education Secretary John King. It exposed that 80,000 borrowers in default had attended Corinthian during the period when the Department found widespread fraud, and 44% of them were having their taxes seized or wages garnished. She called on the Department to halt collections, and to “discharge these Corinthian borrowers' debts and take additional steps to ensure that no other students are facing collections or shouldering debt that is eligible for discharge due to fraud.”
Read our CDR press release and statement on Senator Warren’s letter
View our Cohort Default Rate Resources page
In a recent TICAS report, financially strapped community college students reveal their struggles to cover college expenses beyond tuition, their experiences with financial aid, and the troubling tradeoffs they face when available resources don’t stretch far enough. On the Verge: Costs and Tradeoffs Facing Community College Students shows that even in California, where community college tuition is the lowest in the country and waived for all students with financial need, the financial obstacles to low-income students’ success are high and widespread. The report draws on a TICAS survey of thousands of California community college students and a growing body of research on how the ability to pay for non-tuition costs affects academic progress and success. And it features personal stories like these:
- “Financial aid helps me so much; however, I still am homeless because it is not enough to pay for housing, even if you work part time.”
- “I pay for all of my bills, school, and personal needs with the hours I work. Because of this, it’s taking me much longer to get through school than I would like, and I struggled a lot my first two years with the balance of work and school.”
TICAS’ report, States of Denial: Where Community College Students Lack Access to Federal Student Loans, found that nearly one in 10 community college students – almost 1 million across 32 states – can’t get a federal student loan because their school doesn’t offer them. Federal loans are the lowest cost and safest option for students who need to borrow to stay in school. We found that too many schools take that option off the table by choosing not to participate in the federal loan program; some even promote risky and costly private loans instead. The report also documents disparities by state and race/ethnicity, explores notable state trends, and makes recommendations for improving loan access.
This summer we asked you to tell the Department of Education to make it easier, not harder, for defrauded students to get the debt relief they’re entitled to under existing law. A big thanks to the thousands of you who made your voice heard! More than 56,000 people across the country spoke up for strong rules to protect students and taxpayers from fraud and other misconduct by unscrupulous colleges. We’ll let you know what happens when the regulations are finalized later this year.
Read TICAS’ detailed comments
Read the coalition comments we organized, signed by 58 groups that advocate for students, veterans, service members, civil rights, consumers, college access and success, and college faculty and staff.