April 25, 2008
Hillary Clinton Lays Out New Plan for Tackling 'Student Loan Crisis'
Sen. Hillary Rodham Clinton today unveiled a sweeping plan to ensure that students are not left without money for college as a result of the withdrawal of dozens of lenders from the guaranteed-student-loan program.
Although members of Congress are skeptical that the troubles of some student-loan companies will leave students unable to find needed college funds, the Clinton campaign argues in a news release that “hundreds of thousands of students who are actively considering how to finance their college educations could be left in the lurch, without the ability to pay for college.”
The release said Mrs. Clinton is urging the Bush administration to act quickly and support her plan, which includes:
—Creating a way for colleges to quickly transfer from the guaranteed-student-loan program to the direct-loan program, administered by the Education Department. Currently colleges must wait about six weeks to make such a change.
—Giving breaks to parents who now run the risk of being denied access to federally guaranteed low-interest loans for their children as a result of defaulting on a mortgage or being 90 days late in repaying such debts. “Because of widespread predatory lending,” the campaign statement said, “this policy denies student loans to many people who defaulted because of deceptive or unfair practices.”
—Authorizing the Education Department to advance money to state or private entities that ensure student loans and to purchase federally guaranteed loans from lenders who are no longer able to handle them.
Peter Schmidt | Posted on Friday April 25, 2008 | PermalinkComments
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Ooohhh – I thought maybe some one would do something about the interest that makes a 10 thousand dollar loan into a 90 thousand dollar loan when loans go into default.
I hear students complain bitterly that they can’t finish their degree because, once in default, they have to work to pay interest rather than go to school full time. If a student drops out – like if she’s pregnant – and those loans come due – she’s indentured for the rest of her life. But, I guess paying 100 thousand dollars for a degree that is virtually worthless is OK.
In Kentucky, for example, the 4-year UK won’t accept the KCTCS business AA or the classes it takes to get it as fulfillment of the lower division classes for the BA/MA. No seamless education here.
Meanwhile, the community college student is screwed. Especially if the advisor doesn’t tell the poor SOB he’s SOL.
— Muap Conners Apr 25, 07:09 PM #
Quit whining and pay your loan. Interest rates are lower on student loans than anything else. When you don’t pay, the balance grows. Go figure.
How about a little personal accountability?
— George Apr 25, 10:28 PM #
Just to make you aware in a small number of countries in the world – (Scotland) – do not charge for HE thus allowing people to choose further study for the right reason – self-improvement. The loan system is designed to make sure you get in debt therefore you (1) must a get a job, any job, asap. (2) might as well get a mortgage because you are already in debt up to your eyeballs anyhow (3) vote conservative (lets face it, both Dems and Reps are conservative organisations) and always be looking over your fence with jealously at what the ‘other guy’ has got. This keeps the general public busy with worries about the mundane things rather than worrying about how our human rights are being violated or how much we are screwing up the environment.
Universal Declaration of Human Rights. Article 26
“Everyone has the right to education”, “higher education shall be equally accessible to all on the basis of merit”.
This patently does not happen in the US currently. Money talks is the only lesson you need to learn.
— free education Apr 26, 06:22 AM #
When your looking over the fence with jealously, did you ever think that guy probably had to deal with the same issues of ‘paying the piper’ about which your complaining? Now look at him. Besides, the general public is too worried about how to pay for the gas to put in the SUV so they can drive 50 miles a day driving the kids to school and then driving to the store and then driving back to school then driving them to soccer practice and music lessons etc,.
— stone Apr 26, 09:30 AM #
There is no such thing as free education in any country. Someone is paying for that educational opportunity. It is either the individual or the community as a whole through taxes. Education is an investment and must be financed as such. I managed to pay for mine and I am no financial genius.
As to the student/s that finances an education with limits the phrase “buyers beware” comes to mind. I spent most of ten years in enrollment management and have had to tell transferring students that there transcripted work isn’t transferable. Who is at fault? It might be the recruitment staff at institutions that are pushing them for more bodies in class rooms. Clearly the predatory sales practices of proprietary institutions have an effect and last but not least, the arrogance of faculty at those “elite” institutions of higher education.
— Dr. Bill Apr 26, 09:44 AM #
Yeah right! Another election gimmick. Why wasn’t this done during her 8 years as co-Commander-in-Chief in the White House? Tell me she has a bridge for sale.
— John Adams Apr 26, 03:22 PM #
I second what George (comment #2) said. There is no other loan interest rate as low as the student loan. And I don’t know of another type of loan that gives you flexible repayment options, deferments, and forbearances.
In my opinion, if you can’t make a simple call to put your loan into a forbearance so you don’t default, you deserve the negitive repercussions.
— Ann Apr 28, 09:32 AM #
‘New Plan’? More like Hillary jumping in to take credit for ideas that are already in the works. Then she can claim ‘her plan’ saved thousands of students.
— John Apr 28, 10:04 AM #
An analysis of the 2005 cohort default rates released this past fall reveals schools participating in the Direct Loan program had over a 6% default rate versus approximately 4.5% for schools in the FFEL program. Students taking out Direct Loans are charged an origination fee which most FFEL lenders waived before the subsidy cut. With the student loan “reform” Clinton and the dems passed, interest rates on Stafford loans were raised to 6.8% fixed. Were they still variable, they would be getting ready to hit close to 3% again when reset in July. Yes, they are lowering fixed rates on Stafford loans, but only SUBSIDIZED stafford loans. If you have an unsubsidized loan, you’re still stuck at the 6.8%.
Why do I mention all of this? Well, for starters, these changes they made are bad for students. It costs more now to take out student loans. There is a default fee, origination fee, and guarantor fee (FFEL only) paid with loan funds. More often in FFEL and always in Direct Loans these costs are passed on to the student thereby reducing the money received from their loan. Then, they are hit again in repayment with the higher fixed rate with fewer lenders willing to give reduced rates for on-time payments, autodraft, etc.
Taxpayers will also pay more. With a higher default rate on Direct Loans, taxpayers will be footing the bill. When I worked as a student loan collector, a 25% recovery rate was considered great. The taxpayer pays for the rest.
Finally, if Federal Direct begins and continues (believe me, it will have to) to purchase FFEL loans in good standing to inject cash into the program, we will all be paying more than we ever did when paying the lenders subsidies to participate.
We should return to paying subsidies to the lenders to keep costs down to students, make student loans profitable, and maintain competition in the market. We should also return to a variable rate that is capped but lower the cap to 6.8% if the dems feel so strongly this is the magic rate. Also, require employers to report income of their employees with defaulted student loans to guarantors regardless of the state the guarantor hails from. Congress should eliminate ACG, SMART, and SEOG and instead use this money to fund a larger increase to the Pell Grant reducing some need for loans.
— Paul Apr 28, 10:11 AM #
The funny thing is that we are reading all of these articles on how the government is going to fix this crisis. Well, this was never a crisis until Senator Kennedy had to step in and introduce The College Cost Reduction Act (more like Kenney’s way to monopolize the industry). Well guess what Kennedy you just took away one of the best products on the market and now you are forcing student to get private loans. Way to help these kids out with higher interest rates, adjustable rates and non forgivable loans. Not only are these kids going to be hurting for the rest of their lives 1,000’s of people lost their jobs. I think we need to think a little more conservatively on how we are going to bail Kennedy out from the mess he created. Accountability is the first word to come to mind. These kids should be 100% accountable for paying these student loans and we should be 100% accountable on giving them the best loans possible. A college education is almost a necessity these days unless you want to bartend or wait tables all of your life. I’m not taking anything away from bartenders and waiting tables but with the overall cost of living these days it doesn’t make sense to buy a home right now unless you have deep pockets. Give back some if not all of the subsidies on federal loans and make it worth these lenders to loan the money. That will give these kids the education they deserve in an affordable manor.
Fred
— Fred Apr 28, 11:29 AM #
Bravo, Paul! I’m getting sick of seeing how few loans are going to be available to FFELP borrowers. Best estimates say that the Federal Government is ill prepared to cover all the loans that will come through the Direct Loan program this fall! It will cost us all (especially our students!) less to pay the subsidies for FFELP lenders…but the leaders making this decision don’t understand how the Financial Aid process works…
— Steph Apr 28, 11:30 AM #
No one has mentioned the cash flow crunch that is yet addressed. If FELP/FDLP could handle all of the financing why are students/families using over $10 billion dollars a years in private loan money in addition to home equity to meet cost of education. It seems to me that this issue is missed by Senator Clinton and President Bush (in this weeks radio address).
— Dean Berk Apr 28, 11:31 AM #
Thanks #2 for the accountability comment, but America’s “got to have it now and screw the future ramifications” is alive and well among those taking out college loans and their lenders. Only when some parents and students face the fact that maybe, just maybe, they CANNOT AFFORD college will this crisis end.
— Eric Apr 28, 11:54 AM #
Paul – don’t complain about “taxpayers footing the bill” regarding Direct Lending defaults and then turn around and suggest that FFELP’s taxpayer-funded subsidies – simply corporate welfare – be increased. FFELP subsidies only serve to help wealthy lenders and their shareholders, typical Republican trickle up economics.
— DS Apr 28, 12:04 PM #
Number 9 and 10 hit it right on the head. There is nothing more to add. Read those 2 if you want to know what is going on in the federal student loan industry and how to fix it.
— Sam Apr 28, 12:13 PM #
There has been a major problem with higher education for many, many years now…only now has it come to the forefront in the press, because other things have been covered (such as Britney going out on the town, sans underwear…). You have kids out there in college who get to about the third year of their education, only to find they can’t finish it, because they need a private loan—one either they or their parents can’t obtain. They’ve maxxed out their borrowing capacity, they can’t get any more assistance out of the college they’re attending, and if they work still more, they won’t have time to do their assignments…that leads to failure in school, and in the one place you don’t want to flunk out of. The “crisis” is one that has affected my wife in her studies.
It would take far, far more then what is being offered to fix the mess in higher education. You’d have to make college affordable for all those who desire it. Raising the borrowing limit alone might not do much, unless the student is going into a high-paying profession; otherwise, the student is then saddled with debt that he’s never going to be able to pay. Sure…you’ll allow them their education, then leave them with no reasonable way to pay it off, unless they going into one of the occupations that actually pays a living wage—to which the numbers are steadily dwindling. You can defer paying your student loans, yes…but then the IRS will declared the “forgiven” loan income which you will then pay tax on.
Until the issues of income and job inequality are addressed, along with a few other basic issues, you won’t change the situation for the better. You can’t force a college student to work and study at the same time, under penalty of losing their apartment, transportation, food. It causes college students to fail…just do the math. As a grad student, I need a hand financially, not a concrete lifesaver (which is what my loans are). Working more hours isn’t an option here. In 3 semesters, I have dropped one class in 2 of them. That’s no way for me to advance through school….and it’s because the money won’t go far enough, despite borrowing to the max, and working close to 25 hours a week. I fI work longer hours, I can’t keep up with the assignments. If I work less, I then default on the rent, or I leave myself without money for food, transportation…or mandatory health insurance (which is the case here in Massachusetts). This sets a person up to fail. Surely the richest country on earth can do better then that…!
If colleges take their endowments and simply hoard them (as at least one book on higher education suggest is going on right now…), the poor will be shut out of higher education…just like my grandfather was in the 1920s, when he wanted to go to Wentworth, here in Boston. That will only further separate the rich from the poor here, and one day…you will have something you really don’t want. That’s no good. You don’t want a country with this kind of inequality. It doesn’t benfit anyone, not even the rich.
— Mark Murphy Apr 28, 01:15 PM #
The statement that America is the richest country in the world may soon be America is the least educated and certainly not the wealthiest country in the world.
— LM Apr 28, 02:11 PM #