July 31, 2007

Do the recent student loan bills actually help?

Posted in Student Loan News, The Financial Aid Process at 8:51 AM by Joe From Boston


Port Folio Weekly has a very interesting article about whether or not the recently passed legislation actually helps. Read the entire article here.
No Justice for Student Borrowers
The Senate’s attempt to fix a flawed student loan industry is mere window dressing, say critics.
By Jennifer C. O’Donnell –Tuesday, Jul. 31, 2007

If you’re one of the many Americans facing overwhelming student loan debt, outrageous penalty fees and draconian collection practices by lenders, you may think that help is on the way. Unfortunately, it probably isn’t.

While recently passed legislation offers up the promise of a better student loan lending system, critics say the bills don’t go nearly far enough to truly help borrowers.

On July 20, in a 78 to 18 vote, the Senate passed H.R. 2669, otherwise known as the College Cost Reduction Act of 2007, and last week, the Senate took action again by passing the Higher Education Act. The legislation seeks to lower the cost of higher education for students by reducing lender subsidies, increasing grant amounts and cutting interest rates on student loans.

The bills are Washington’s way of dealing with a slew of media coverage in recent months regarding a generation of student borrowers paralyzed by overwhelming student loan debt. For months, newspapers, national magazines and television magazines harped on the financial distress new graduates experienced at the hands of loan lenders. At the heart of many of those stories was the almost mobster-like business tactics lenders imposed on their borrowers, specifically outrageous penalty fees and fines on late or defaulted loans…

In true Washington-style, supporters of the recent legislation quickly released statements and press releases to the media lauding their passage.

“The nation’s college students will have significant new resources for financial aid under two bill approved by the Senate,” reads Virginia Senator Jim Webb’s July 24 press release regarding the bills. “The bills jointly simplify the federal aid process…and provides $17 billion in additional aid to students – the largest increase since the G.I. bill.”

The bills also increase the maximum Pell Grant aid students are eligible to receive to $5,100 by 2008 and to $5,400 by 2011. In addition, the bills require that lenders provide students with a specific set of written disclosures prior to making a loan such as information on interest rates and repayment options.

While politicians high-five each other for coming to the aid of a generation of graduates-to-be, there’s a very vocal group of consumers who aren’t impressed.

“This is all really just window dressing,” said Alan Collinge, founder and executive director of Student Loan Justice, a grassroots organization of student borrowers working to reform the federal student loan system.

Collinge says the bills completely avoid what is the main concern regarding the issue of student loan borrowing—the lack of consumer protections. In order for student borrowers to enjoy the same rights home, car and other borrowers have, the student loan industry would have to experience a major overhaul, and that’s something Congress has failed to move on, he added.

Collinge concedes that the bills do slightly lower interest rates on student loans.

“But that’s not such a big deal,” he says. “The interest rates were never really that bad anyway.”

What is offensive, says Collinge, are the tactics in which student loan lenders can pursue borrowers and impose outrageous penalty fees for delinquent payments. Sallie Mae’s collection measures include wage garnishment, tax garnishment, withholding of professional certification and termination of employment. Penalty fees can be explosive, as much as 33 percent in some cases, causing original loan amounts to quickly double, triple or quadruple.

Even more frustrating to student borrowers is the fact that they can’t refinance a loan for a better interest rate, reduce debt amount or in drastic situations, file for bankruptcy protection, all options available to other kinds of borrowers.

Collinge is even skeptical about the bills’ increase in available Pell Grant moneys.

“This gives colleges and universities the green light to continue to increase tuition at the same (or greater) rates as before,” he says.

Collinge and his Political Action Committee set out to change the student loan system more than a year ago. Collinge is himself a student loan victim. When he lost his job as an aerospace engineer after September 11 and failed to meet his loan payments, the engineer-turned-activist saw his loan debt practically quadruple due to interest, fees and penalties.

When Collinge suspected his loans would be a financial drag that could last his lifetime, he started to speak out about unfair practices on the part of student loan lenders, namely Sallie Mae.

For awhile anyway, it appeared as though folks were listening. The press jumped on the story Collinge and his volunteers were willing to tell. Collinge found himself interviewed by newspapers across the country, including a story in this magazine dated March 6. 60 Minutes even ran a segment about him and the antics of Sallie Mae.

After a nationwide bus tour in which he touched base with nearly every member of the House and Senate Education Committee, Collinge thought Washington was listening, too.

Hillary Clinton introduced S.511, the Student Borrower Bill of Rights earlier this year, which Collinge said would have given student borrowers the consumer protections for which he’s fighting. But the bill’s language was watered down to the degree that it’s unlikely to help student borrowers even if it’s ever brought to vote. Other bills that offered up real concessions to student borrowers have been dropped as well, he added.

Student borrowers, says Collinge, are as vulnerable today as they’ve ever been…

Read the whole article here.

 

 

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7 Comments »

  1. For many students, student credits are sought at the start of their college career. Most students do work in a part-time job; however, this is not always enough to cover the many expenses of college. With student credits, the student can keep their attention on things such as studies and classes, without having to worry about many expenses. The great thing about student credits is that for the entire time you are in college full-time, the loan will not need to be repaid until you have finished college for good and graduated in your degree.

  2. Rick Jones said,

    A growing number of people are “working poor”. That means they work full time but live in relative poverty because of low pay and high costs of living. If someone like this is victimized by an IRS wage levy the effects can be devastating. Unfortunately the IRS won’t go away. Fortunately there is reasonably priced help available. Get your hands on a copy of the DVD by Attorney Darrin Mish, “How to Get a Release From an IRS Wage Levy.”

  3. Becquie said,

    Hi, I have a loan through Sallie Mae that has got me so overwhelmed that I sometimes feel the only solution is to kill myself. I won’t do that, but I feel so hopeless and helpless. They are unwilling to work with me at all. The interest rate is killing me. I have paid them over $40,000 and they are telling me I owe them more now than I ever borrowed. It isn’t right. By the time I end up paying the loan off I will be in my 60’s and will have paid back over 3 times the amount I borrowed. Something needs to be done to put a cap on the amount of interest they can charge. We all need to come together to fight this. Please feel free to contact me at the above e-mail address. Thanks. Becquie

  4. Very good points here. The problem is that the people passing these bills don’t really understand the nature of the beast. Most of the new legislation is a knee-jerk reaction to the student loan scandal and not a true representation of what needs to be accomplished to make college more affordable. Hopefully the next President will make some much needed changes and put into place legislation which allows everyone in this country to attend college.
    For more information on paying for college, visit:
    Student Loan Watcher

  5. frankly speaking said,

    Right On, the legislation won’t do a thing for those already burdened. Only allowing those with debt to refinance with any willing lender will bring real competition and lower costs.

    The amount of money made by the Student Loan Industry is obscene – they whine like little girls about their “razor thin profits” as they step on one of their three corporate jets or collect original works of art. Absolute scum they are.

    Albert Lord needs to be memorialized as creating some of the most damage to the American Education System in America.

  6. […] Original post by moniqueleonard […]

  7. […] Original post by moniqueleonard […]


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