Financial institutions that have private
student loan workout programs are requested to provide student loan borrowers with
information that clearly explains the programs, including eligibility criteria
and the process for requesting a loan modification. This week the federal bank
regulatory agencies issued a statement encouraging financial institutions to
work with private student loan borrowers experiencing financial difficulties.
This is a good start but stricter penalties should be implemented. Financial institutions should be fined if
they refuse to assist private loan borrowers with an affordable repayment plan.
Congress finally approved a plan to address
the interest rate for federal student loans. New student loan interest rates will be set according
to the 10-year Treasury yield plus a few percentage points. Under the plan,
undergraduates taking out federal loans in 2013 would pay about 3.86%, graduate
students would pay 5.4% and parent PLUS loans would pay 6.4 %. This only provides
relief for this year. If the Treasury
yield increases so do student loan interest rates which will affect 11 million
borrowers.
Under Congressional Budget Office projections, the interest rate
is expected to increase over the next couple years, forcing student loan
interest rates near 7% by 2017. Undergraduate loans are capped at 8.25% instead
of 3.4%, graduate loans are capped at 9.5% instead of 6.8%, and PLUS loans at
10.5% instead of 7.9%. This
would not be needed if the cost of college tuition was regulated.
“We are opposed to the current
deal,” Minnesota State Colleges Student Association president Kelly
Charpentier-Berg said. “In the long-term, it’s actually going to cost students
more. With it being market-based, when the economy goes up, the interest rate
goes up.”
Unfortunately the Pell Grant does not provide
enough money to cover one semester of tuition and forces students to obtain
student loans. Tuition has become so expensive some students cancel their plans
to go to college. Some experts believe that college tuition has become so
expensive due to several factors such as: declines in state or federal funding, increasing
health care costs, soaring costs for labor productivity, colleges don’t and are
not required to compete on tuition prices - Ivy league and other well-known
colleges compete on academic reputation, hundreds of new rules, regulations and
requirements that require colleges to change their business practices; other
requirements that require colleges to hire additional administrators and
compliance officers to ensure that they are not in violation of various new rules.
However,
college tuition has also increased due to food choices including well-known fast food restaurants
such as McDonalds, Starbucks, Pizza Hut, etc., more variety of bachelor degrees,
new construction – at least 50% of construction cranes in America are on
college campuses, elaborate student centers with theaters and bowling alleys, state
of-the-art recreation facilities with rock-climbing walls; cable TV and
wireless Internet access, online access to washing machines and dryers, and high
college executive salaries, bonuses and exit payments.
Some experts
state that the more aid colleges give the more they increase tuition. Colleges charge
as much as someone is willing to pay. Colleges
that don’t accept federal loans have tuition that is half that of similarly-ranked
colleges. The Minerva Project, a for-profit university in
California stated that it will refuse Federal aid in order to keep tuition costs
low. Cooper Union keeps tuition costs down because they don’t have a
gym, swimming pools, climbing walls or a major cafeteria. Dormitories only
house freshmen.
Students have
been bamboozled to think that if a college charges a high tuition it must be a
good school; this is not always the case. If you have student loans take advantage of
student loan forgiveness programs and demand affordable student loan reform
from Congress and tuition reform from colleges.
