Thursday, February 07, 2008

House Legislation to Reform Student Loans, FAFSA

Via the PIRGs:
"Today the House of Representatives will vote on the College Opportunity and Affordability Act. The legislation contains several important policy changes to reform private student loan policy, critical grant programs and lower the cost of textbooks. In addition the House will vote on an amendment to provide private student loan borrowers with basic bankruptcy protections."

On private student loans, they're addressing the problem that students and parents don't understand that these loans have higher interest rates and less borrower-friendly policies than federal education loans.
--Lenders must inform students "clearly and repeatedly" that private student loans are more expensive than federal student loans, and that all federal eligibility should be exhausted before taking out the private loans.
--Ban "co-branding" of private student loans (where a college cooperates or shares revenues with a private lender, or a private lender uses the "
name, emblem, mascot, or logo" of the college.)
--Require schools to certify all private loans to avoid over-reliance on these loans. School oversight was very successful in reducing reliance on private loans at Barnard and other schools.

Just as important, if not more so, is bankruptcy protection for private loans after five years in repayment.
Representative Danny Davis’s amendment ends an unfair policy of special bankruptcy treatment for lenders who saddle students and their families with high-risk, high-cost private student loans. Over the past decade private, non-federal student lending has grown significantly. These loans are more expensive, have more stringent repayment requirements, and provide fewer protections than federal loans. Moreover, private student loans exacerbate student indebtedness because they provide the worst rates and terms to those students with the greatest financial need. This result directly contradicts the public policies underlying the federal student aid system, which attempts to place a college education within reach of low and middle-income students. The Davis amendment would allow borrowers to discharge their loans in bankruptcy after five years in repayment."


SalesPerson said...

The College Loan Corporation, the eighth largest originator of federally guaranteed student loans, announced today that it would halt making loans in the federal program on March 1.


Anonymous said...

Try to rate FEDERAL STUDENT AID and you will agree with me that many students go for many concrete reasons.We all agree that there are so many loan opportunities offered by many institutions and many students are actually going for them. But let's get it straight that although many institutions give out loans, most of them will require you to pay at very high interest rates leading to a lot of pressure when it comes to paying them back. But with all these offers, sometimes its hard to land into a decision on the loan you should consider going for. Federal should stick!