04.21.09
“It also highlights the need to expand the Pell Grant scholarship and make our federal student loan programs more reliable, sustainable and efficient for students, families and taxpayers. In the coming months, our committee will be focused on making college more affordable and accessible by bolstering and stabilizing the Pell Grant scholarship and ensuring that our federal student loan programs operate as intended – in the best interests of Americans families and taxpayers.”
Miller highlighted recent laws enacted by the 110th Congress that will help encourage students to first maximize their federal student loan borrowing options, that will better protect borrowers against confusing and predatory private lending practices, and that will make federal student loans more manageable to repay.
The Higher Education Opportunity Act, which was enacted in August 2008 and begins to take effect for the 2009-2010 school year, will require lenders marketing private college loans to first inform student of their federal borrowing options and ensure that students are treated more fairly when borrowing both federal and private loans by:
For more information on these protections, click here.
Recently-released federal data also show that student loan defaults rates are on the rise. The College Cost Reduction and Access Act, enacted in September 2007, established an income based repayment program that will make federal loans more manageable to repay by allowing borrowers to cap monthly payments at just 15 percent of their discretionary income. The program will take effect July 1 of this year; any federal student loan borrower is eligible. For more information, click here.
A separate law enacted last spring, the Ensuring Continued Access to Student Loans Act, also increased the federal college loan borrowing limits to help reduce students’ dependence on private loans. For more information, click here.
Chairman Miller Statement on Jump in Private Student Loan Borrowing
WASHINGTON, D.C. – In response to a new study showing the number of undergraduate students borrowing private student loans increased by 9 percent over the past five years, from 5 percent in 2003-04 to 14 percent in 2007-08, U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, issued the following statement: “This report confirms our fear that many students – coping with a worsening college cost crisis – may be turning to more expensive, risky private student loans before first maximizing cheaper federal student aid they may be eligible for. These loans pose far greater financial dangers to students than federal student loans and have a history of being marketed to students in deceptive and aggressive ways. At a time when Americans are deeply worried about their economic stability, this data is another urgent reminder that we must do everything possible to make students fully aware of and maximize their federal student aid options, which can reduce debt burdens and default rates.“It also highlights the need to expand the Pell Grant scholarship and make our federal student loan programs more reliable, sustainable and efficient for students, families and taxpayers. In the coming months, our committee will be focused on making college more affordable and accessible by bolstering and stabilizing the Pell Grant scholarship and ensuring that our federal student loan programs operate as intended – in the best interests of Americans families and taxpayers.”
Miller highlighted recent laws enacted by the 110th Congress that will help encourage students to first maximize their federal student loan borrowing options, that will better protect borrowers against confusing and predatory private lending practices, and that will make federal student loans more manageable to repay.
The Higher Education Opportunity Act, which was enacted in August 2008 and begins to take effect for the 2009-2010 school year, will require lenders marketing private college loans to first inform student of their federal borrowing options and ensure that students are treated more fairly when borrowing both federal and private loans by:
- Ensuring that all federal and private student lenders are up-front about borrower benefits and that private lenders follow all ‘Truth in Lending Act’ provisions;
- Prohibiting lenders from issuing private student loans without first obtaining information on a borrower’s enrollment status, cost of attendance, and remaining financial need after available federal student aid.
- Instilling enforceable marketing protections, including disclosures and notifications, to students and institutions by lenders offering private loans.
- Requiring lenders to fully disclose to borrowers the terms and conditions of private loans at three different stages of the loan application process, including during loan marketing and solicitation.
- Prohibiting private loan lenders from charging borrowers fees for paying off their loans early.
- Requiring lenders to give applicants up to 30 days following the approval of a private loan to accept it with no changes in terms or conditions; and
- Granting borrowers up to 3 days to change their minds after private loan consummation.
For more information on these protections, click here.
Recently-released federal data also show that student loan defaults rates are on the rise. The College Cost Reduction and Access Act, enacted in September 2007, established an income based repayment program that will make federal loans more manageable to repay by allowing borrowers to cap monthly payments at just 15 percent of their discretionary income. The program will take effect July 1 of this year; any federal student loan borrower is eligible. For more information, click here.
A separate law enacted last spring, the Ensuring Continued Access to Student Loans Act, also increased the federal college loan borrowing limits to help reduce students’ dependence on private loans. For more information, click here.
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