Senators Kennedy & Boxer's plans for student loan programs

[paineinthearse]

I am so proud of our bi-coastal Senators!

From http://tedkennedy.com/journal/91/stopping-corporate-abuse-of-student-loans

Stopping Corporate Abuse of Student Loans
Senator Kennedy introduced the STAR Act - http://tedkennedy.com/journal/66/the-star-act---billions-of-dollars-for-students-not-for-banks - earlier this session, which would put funds intended for students into their hands, and not into the hands of student loan companies. Now, he is working with Senators Murray, Mikulski, Clinton, Dorgan, and Durbin to pass The Student Loan Abuse Prevention Act of 2005. http://thomas.loc.gov/cgi-bin/query/D?c109:13:./temp/~c109sKe2It::

Private student loan companies have been earning 9.5% interest from the government for every loan they give to students. This interest rate is more then three times current interest rates – meaning that the loan companies are being paid close to three times as much as the going rates for the loans by the federal government. In dollars and cents, this translates into more than $900 million paid to companies that issue private loans, more than four times as much as they received three years ago.

The high expense of these loans might be understandable if these companies were undertaking a major risk to lend the money to students in financial need. It’s harder to understand when you consider that these loans are government guaranteed – if the loans default, the government will pay the private companies back, in addition to the extraordinary rates already being paid.

Congress passed legislation to phase out the 9.5 % return in 1993. Since then, lenders have been able to exploit loopholes to carry over the 9.5 percent rate, at incredible (and growing) expense to taxpayers. In 2001, the federal government spent $200 million to subsidize student loan companies – this year, costs to the government are expected to near $1 billion. The Student Loan Abuse Prevention Act would close the loopholes, stopping the exorbitant fees paid to private student loan lenders, and instead use that money for direct assistance to students.

“Closed Loophole Hasn’t Cut Subsidies for Student Loans” – New York Times - http://www.altrue.net/site/ndslc/content.php?type=1&id=10115&print=1

The role of the Department of Education is also being scrutinized. The Department has allowed the loopholes to expand, and has weighed in on the side of the private lenders in these matters. One of the biggest benficiaries is the Nelnet Corporation, which has given out eight times as many 9.5% loans in 2004 as it did in 2003 to increase its subsidies from the government.

Senator Kennedy and Congressmen Kildee and Van Hollen have written this letter - http://www.tedkennedy.com/content/92/letter-to-secretary-paige-regarding-student-aid-loopholes - to Education Secretary Roderick Paige, asking for an accounting of the Department’s relationship with the Nelnet Corporation, as well an explanation of the exorbitant fees to the company.

The Evolution of the 9.5% Payoff for Student Loan Companies - http://ticas.org/ticas_d/timeline.htm

Received by email from Senator Boxer.

Senator Boxer: Time to Act on Student Loans
Date: Thu, 26 May 2005 16:44:55 -0700

I thought you would be interested in the following message.

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Dear Friend:

This July 1 is an important date for anyone with a student loan. College student loan rates are expected to soar in July. However, borrowers who act before July 1 can save by converting their variable-rate loans into fixed-rate loans.

Most types of student loans have variable interest rates that are readjusted every July 1 based on the yield set at the last 91-day Treasury-bill auction in May. A set percentage is then added to this rate, based on the type of student loan. Rates being charged today are at historically low levels, but most experts predict that rates will rise by about 2 percentage points on July 1. Borrowers who consolidate their student loans before the deadline can lock in today's low rates for the life of the new loan.

Students can refinance all their student loans into one loan through a process called consolidation, in which the debt converts from a variable-rate loan that adjusts once annually into a fixed-rate debt. Consolidation to obtain a fixed rate is an option even for people who have just one loan. The new loan rate is calculated on a weighted average rate of all the loans being consolidated.

To check into loan consolidation, you can visit the Department of Education's website at www.ed.gov or the loan consolidation feature at http://loanconsolidation.ed.gov / . You will find a questionnaire that will help you to determine if you qualify and an application form for consolidation.

For those with student loans from banks, the situation is a bit more complicated but worth checking into. You can check with your lender for more information.

Sincerely,

Barbara Boxer
United States Senator

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For more information on Senator Boxer's record and other
information, please go to: http://www.boxer.senate.gov

Ted and Barbara, :yourock:

[AP]

1. One of the many beautiful things about Labour (UK)'s education loan plan

is that there's no interest and it's managed by the government. Private banks don't handle the loans and they don't get the interest profits.

Other beautiful things: you only have to pay up to a fixed maximum percentage of your salary, and you only pay if your salary is above the median income (IIRC). You also have your whole life to pay back the loan.

That creates an incentive for the government to create well-paying jobs for college graduates if the government wants to get its money back.

In the US, student loans stick with you despite bankruptcy, and the banks keep getting their interest, so they don't care what the job market is like.

[paineinthearse]

2. Slow weekend! nt