“Student Debt Viewpoints” is an occasional series looking at the student debt crisis — its causes and possible solutions — by speaking with different stakeholders in the issue, including government officials, students, school administrators, activists, and others. The views expressed are those of the articles’ subjects and are not necessarily those of Student Loan Hero or its parent LendingTree.
We hear a lot about the student loan debt crisis these days. And it’s a real threat: Outstanding student loan debt has surpassed $1.5 trillion — almost 50% more than total U.S. credit card debt — and the cost of college keeps rising.
Some lawmakers like Tom Reed, a Republican representing New York’s 23rd District in the House of Representatives, are interested in tackling the causes of the skyrocketing cost of college.
Reed has introduced legislation aimed at the problem, and he routinely advocates for different measures designed to make college more affordable for students.
“This is an area that affects the futures of so many young men and women, and it’s time to address the issue before it gets even worse,” said Reed. “We’re shackling our children and grandchildren to debt if we don’t do something.”
Meet Tom Reed
The youngest of 12 children, Reed was born into a busy household, headed by his father, decorated war veteran Tom Sr., and his mother Betty. But after the death of his father when he was 2 years old, Reed was on the hook for paying for his own schooling.
Reed learned, firsthand, the pain of student debt. His own student loans, after finishing law school at Ohio Northern University, amounted to about $110,000.
“The plight of students wanting to make a living is near and dear to my heart,” said Reed, who has two children of his own now in college. “I understand what it’s like to struggle with this debt.”
Reed served as the mayor of Corning, New York, from 2008-2009 and was elected to the House of Representatives during a 2010 special election in his mostly rural district running along the border with Pennsylvania.
Tom Reed on the Student Debt Crisis
“When you talk about the student debt crisis, you have to talk about the reasons college is so expensive today,” said Reed. “There’s no cost containment, and there’s a great deal of price inflation.”
Part of the problem comes from the fact that it’s so easy to get student loans to cover the costs of college. Because schools know that students will get funding from somewhere, Reed said, it leads to complacency about rising costs — and there’s no reason to rein in expenses.
On top of that, Reed also believes that there’s an element of unnecessary price inflation to give parents the illusion that the school is of a higher quality — and to give them something to brag about around the watercooler when their children get scholarships.
“We’re talking price inflation at the used-car salesman level,” said Reed. “People feel like they’re buying a Mercedes because of the cost. They look at it, and they don’t know how they’ll pay, but then the school offers a scholarship.”
Reed added that many of these scholarships don’t cover the full cost of college, so students have to turn to student loans to cover the rest. “But the psychological effect of having received a scholarship is powerful,” he said. “And you can’t discount the fact that we so often equate large expense with value, so people think they’re getting a good deal on a good education.”
Not only do schools inflate costs, according to Reed, but the idea that everyone has to attend a four-year school also contributes to the problem.
“You think you have to get a so-called traditional four-year degree, so you don’t consider other options,” he said. “However, many students could save money by starting at community college, and we’ve got a shortage of people skilled in the trades.”
Today, said Reed, a four-year degree isn’t a guarantee of a good-paying job. “Many grads find themselves drowning in debt they can’t afford, just because they were steered toward a four-year degree,” he said. “That debt delays their ability to meet other life milestones, like buying a house and starting a family. Those delays make ripples through our economy and our society.”
Proposals and solutions
Tom Reed believes it will take multiple strategies to fix the student debt crisis, and some of those ideas have bipartisan support.
Among the proposals Reed backs is making federal student loans eligible for public refinancing at lower rates, without losing access to federal programs like income-driven repayment and Public Service Loan Forgiveness. (Today, the only way to refinance federal loans is privately — resulting in borrowers getting locked out of those useful options.) He also likes the idea of work-off programs: “Expand programs that offer some level of loan forgiveness to graduates who work in underserved areas.”
However, one subject Reed is particularly focused on is universities that hoard money in billion-dollar endowments, rather than using these funds to benefit the neediest of students.
In May 2018, Tom Reed introduced the Reducing Excessive Debt and Unfair Costs of Education (REDUCE) Act into the House of Representatives. (You can keep up with higher education legislation using our Student Loan Bill Tracker.)
Reed said the main thrust of the legislation is to shed light on high-value endowments, citing 90 institutions with endowments amounting to $1 billion or more in tax-free dollars. Unfortunately, he said, there isn’t a lot of transparency in how that money is used.
“If you look at these endowments, there’s some crazy stuff,” Reed said. “Some people can give a tax-advantaged endowment to a university and put strings on how it’s used, including putting in a box at the football stadium for personal use.”
Reed said there are cases of universities spending $3.6 million a year on a finance manager or allowing a college president to spend $800,000 on sports season tickets, money that he believes should instead go toward lowering the cost of attendance for working-class families.
“Under the REDUCE Act, universities with the greatest wealth would be required to distribute 25% of their endowment profits to assist low- and middle-income students,” said Reed. “And the endowments would be required to clearly and transparently disclose exactly where they are spending money.”
Changes to tax deductions would also be made as a way to benefit schools that help students, while punishing endowments that don’t.
Other provisions of the REDUCE Act include:
- Requiring colleges to have a plan for limiting tuition increases to below the rate of inflation
- Encouraging university donors to focus more on low- and middle-income student assistance, rather than making restricted donations that don’t benefit students
“When these schools are required to evaluate their costs, and when the public can see where the money is really going, that should put pressure on universities to put more toward making college costs manageable for students,” said Reed.
How to make college affordable
“In the end, universities are doing a lot of things that inflate the cost of college without providing much value to students,” said Reed.
“There’s an amenity mindset with universities. They think they need all these bells and whistles, but when you talk to students, those amenities aren’t deciding factors,” he said.
While Reed believes that institutions can do a lot more to make costs affordable to students, he also places some of the responsibility on parents.
“It’s hard to tell your child that they can’t go to their expensive dream school,” he said. “But I did it with my own daughter when I told her she couldn’t go to Syracuse University because of its high cost.”
Interested in refinancing student loans?Here are the top 9 lenders of 2021!
|Lender||Variable APR||Eligible Degrees|
|1.88% – 6.15%1||Undergrad & Graduate|
|1.88% – 5.64%2||Undergrad & Graduate|
|2.50% – 6.85%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|2.25% – 6.59%5||Undergrad & Graduate|
|1.88% – 5.64%6||Undergrad & Graduate|
|1.90% – 5.25%7||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|2.13% – 5.25%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2021.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.59% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Refinancing Loan Cost Examples
These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.
One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.
© 2021 Earnest LLC. All rights reserved.
3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for SoFi.
Fixed rates from 2.49% APR to 6.94% APR (with autopay). Variable rates from 2.25% APR to 6.59% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
6 Important Disclosures for Navient.
7 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.75% Fixed APR with AutoPay.
8 Important Disclosures for PenFed.
Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.