Changes to Student Loan Repayment Programs Not Enough, Advocates Say

Student Loan Girl — Thu, 30 Oct 2008 18:34:00 GMT

Despite 1,500 individuals and a dozen national organizations pushing for further changes to legislative provisions that help low-income college students repay their student loans, the Education Department recently issued the provisions’ final regulations without first making modifications to problematic language (“Low-Income Student Borrowers May Miss Some Intended Benefits,” The Chronicle of Higher Education, Oct. 26, 2008).

One issue involves the rules of a new student loan forgiveness program that would allow college graduates to have their federal loans forgiven in return for at least 10 years of public service in specific professions. Advocates of the program say that language in the program’s regulations fail to establish procedures that would inform college graduates ahead of time about which specific positions qualify for loan forgiveness.

Robert Shireman, executive director of The Project on Student Debt, a California-based advocacy group, believes that there may still be a way for the Department of Education to resolve this issue without having to backtrack through the regulatory process.

Education Department spokeswoman Samara Yudof, on the other hand, says that regulations for the loan forgiveness program “are clear, and provide a broad list of eligible occupations.” Department officials prefer to identify the eligible occupations in paperwork they give to applicants, instead of detailing the occupations within the regulations themselves, she says.

The other major regulatory issue creates a “double-counting penalty” for married couples under a new income-based repayment plan for student loans. If both partners are eligible for income-based repayment and they file joint income tax returns, supporters of the program say, the regulation’s language could be interpreted in such a way that the couple’s total joint income would be used to determine how much each spouse pays individually. This “double- counting” effect may require them to pay twice as much as two unmarried borrowers in similar financial circumstances.

“This is obviously unfair and inappropriate,” Shireman said, “and needs to be changed by Congress.” Yudof concedes that, in this case, Congress may need to take action to resolve the “double-counting” penalty problem.

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Changes to Federal Loan Programs Reviewed

Student Loan Girl — Mon, 18 Dec 2006 21:22:00 GMT

At a meeting Dec. 12, 2006 assembled by the Department of Education, a committee discussed potential changes to regulations in federal student loan programs, according to a Dec. 13, 2006 article by Kelly Field titled “Rulemaking Panel Begins Debate on How to Change Federal Student-Loan Programs” that appeared in The Chronicle of Higher Education.

The committee, made up of individuals such as students and representatives of higher education institutions, guarantee agencies and lenders, will report to Secretary of Education Margaret Spellings in the spring with “a package of proposed rules,” the article stated.

Priority Items on Initial Agenda

As reported in Field’s article, there are several key elements that will be included in the recommended rules to Spellings. These include:

· Repayment Program Based On Income. In response to student groups and the Project on Student Debt that have asked the Department of Education to relieve the burdens of loan-repayment for those with low incomes, the panel is considering a “plan to create a new ‘partial economic-hardship deferment.’ ” Borrowers’ payments would be limited to a maximum of 15 percent of their discretionary income, calculated at 150 percent of the poverty level. The figure also would take family size into consideration.

· Identity Theft Victim Loan Discharge. Current law stipulates that fraudulent funds illegally borrowed in the victim’s name only can be discharged in court and only when the court has reached a decision that a crime has been committed. The proposal entails adopting the identity theft definition as outlined by the Federal Trade Commission and the Fair Credit Reporting Act in order to avoid the long wait required for the court rendering.

· “Preferred Lender” Lists Used by Colleges. The Department of Education, concerned that some institutions are being influenced by benefits provided by lenders to colleges, will review colleges’ use of preferred lender lists. Colleges maintain that the lenders they suggest simply represent companies with the most benefits and best rates offered to students.

· Unlawful Incentives for Guaranteed-Loan Programs. The article said that the panel will scrutinize whether lenders offer illegal “inducements to secure loan applications” from borrowers or if lenders generate advertising that misleads the consumer.

Other Proposed Additions Discussed

According to Field’s article, a much-needed suggestion that would greatly benefit institutions of higher education across the country was posited by Alisa M. Abadinsky, a University of Illinois at Chicago student-aid official. She recommended that the money collected on defaulted Perkins loans be returned to the schools that awarded the loans instead of going to the U.S. Treasury, as currently is the case, the article said.

Eileen K. O’Leary, chairwoman at the National Direct Student Loan Coalition, also proposed that loan servicing companies “be required to provide borrowers with periodic reminders of their repayment options,” the article said.

It is important to keep up to date on all the news regarding student loans and education.

Talk to the education financial advisors at NextStudent. They have all the information and advice you need on student loans. Check out www.nextstudent.com.

Be sure to tune in next Monday for my next blog on student loan issues in the news.

Student Loan Girl

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Student Loan Blog : Student Loan Repayment

Changes to Student Loan Repayment Programs Not Enough, Advocates Say

Changes to Federal Loan Programs Reviewed