- House to Vote Tomorrow on Bill that would Make Student Loans More Expensive
- Education Department Taking Public Comments on New Rulemaking; Broad Coalition Urges Action
- Strengthening Cal Grants to Better Serve Today's Students
- Improved Guidance for Colleges on Net Price Calculators
- New CFPB Report on Private Student Loans
On July 1, the interest rate for subsidized Stafford loans is set to double from 3.4% to 6.8% -- unless Congress acts. The House of Representatives is scheduled to vote tomorrow, May 23, on a bill that appears to address this rate increase but would actually make loans much more costly for students. Under the bill (H.R. 1911 sponsored by Reps. John Kline and Virginia Foxx), new loans would have variable interest rates that are projected to rise nearly three percentage points (to 7.4%) by the time this fall's freshmen graduate from college and make their first loan payment.
In fact, for students who graduate in four years and borrow the maximum amount ($27,000), the bill would actually cost them more than if rates were allowed to double on July 1. It then takes the billions of dollars more that students would have to pay for loans and uses it pay down the government's own debt. To make matters worse, the rate on every loan would change each year-- like on credit cards and the risky variable-rate mortgages that contributed to the financial crisis. This means the monthly payments required under most plans would change each year as well.
Instead, Congress should stop rates from doubling on July 1 and take more time to develop comprehensive reforms that truly keep federal student loans affordable for both students and taxpayers, today and in the future.
For more information see:
- Our statement on the Kline-Foxx student loan bill that would make loans more expensive
- Our statement on the Reed-Harkin bill that would freeze rates for two years to provide time for comprehensive reform
- Chart comparing federal student loan interest rate proposals and analysis of how some proposals would affect the cost of borrowing
The Department of Education recently announced plans to begin negotiated rulemaking this September. It's holding four public hearings in May and June and taking written comments on proposed topics to address. TICAS joined nearly 50 other organizations in sending a letter supporting prompt rulemaking to effectively enforce the statutory "gainful employment" requirement for all career education programs. The coalition letter is signed by organizations that work on behalf of students and college access, consumers, veterans, and civil rights.
- Read the coalition letter supporting a strong and effective gainful employment rule
- See the coalition web site, www.ProtectStudentsandTaxpayers.org, for more about the gainful employment rule
- Click here to learn about the public hearings and how to submit comments
TICAS and more than a dozen other student, civil rights, business, and college access organizations came together to release a new analysis of how Cal Grants could better serve California's low-income college students. The state's Cal Grant program provides $1.5 billion in need-based grant aid that each year helps hundreds of thousands of Californians pay for college. However, the issue brief finds that many needy college students either don't receive Cal Grants or receive less than others with more resources.
The Department of Education recently introduced improved guidance for college net price calculators, addressing several of the issues raised in our report, Adding It All Up 2012. The new guidance directs schools to make the online tools easier to find and aims to make them easier to use and their results easier to compare.
Click here to read our recent blog post on the new guidance
The Consumer Financial Protection Bureau (CFPB) continues to look out for student loan borrowers. Earlier this year, it asked for input on ways to help borrowers with unaffordable private student loans. Nearly 30,000 people responded with personal stories, ideas, and solutions (see TICAS' comments here). This month, the CFPB published a report highlighting how student debt is affecting individual financial decisions and the overall economy, and identifying ways for policymakers and others to address these problems.
Read the report here