Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.
Government education watchdog faults Federal Student Aid
The inspector general tasked with auditing the Department of Education issued a report this week criticizing the oversight — or lack of oversight — of federal student loan servicers.
Specifically, the report said that when some servicers failed to inform borrowers about all their options or incorrectly calculated income-driven repayments, the Education Department’s Federal Student Aid office didn’t adequately track the problems or punish servicers for noncompliance.
By letting servicers off the hook, the report said, the FSA office was giving them no incentive to fix the problems. “Further, FSA’s not holding servicers accountable could lead to servicers being paid more than they should be (the contracts with servicers allow FSA to recover amounts paid for loans not serviced in compliance with requirements).”
The report notes that the FSA office “strongly disagreed with the overall conclusion” of the audit, which covered a period from January 2015 through September 2017, but said “it already had or will implement” the inspector’s recommendations to hold servicers more accountable.
How it affects YOU: If you’ve been following this issue, the report’s finding might not come as much of a surprise. While not all student loan servicers are derelict in their duties, some have definitely been the subject of the complaints laid out in the inspector general’s report.
If you feel you’ve been misled about your federal student loan options or are paying more than you should be, you can file a complaint and demand your rights as a borrower. Meanwhile, we’ll see if this latest exposure of problems within the student loan system results in any improvement.
Much ado about FAFSA
You might remember from last week that U.S. Sen. Lamar Alexander, R-Tenn., has come out with a bevy of proposals to reshape financial aid and student loans. Some of these might have huge impacts if enacted, such as his idea to cut the number of federal student loan payment plans to two. (Not to mention his more controversial suggestion to deduct student loan payments from borrowers’ paychecks, a topic that finance columnist Zack Friedman wrote about this week, if you’re interested.)
But Alexander, who chairs the Senate committee in charge of education, is also pushing for more minor adjustments, including a plan to drastically trim the number of questions on the Free Application for Federal Student Aid. He says he wants “no more than 25” questions on the form, compared to the 108 he counts there currently.
And now others are getting into the act: Ivanka Trump, the president’s daughter and White House advisor, joined Alexander in a Facebook video that touts FAFSA reform as a highlight of the senator’s proposed changes to higher education aid. In the short film, Alexander holds a printed copy of the FAFSA, designed to show how long the form is, while Trump asks him to “explain the ridiculousness of this.”
The high profile for this specific FAFSA proposal suggests it may be a priority for Republicans when they meet with the Democrats to discuss reauthorizing the Higher Education Act, something both sides have indicated interest in doing this year.
How it affects YOU: So, this won’t exactly solve the student debt crisis, but let’s look at what it will do. Currently, the Education Department says completing a FAFSA takes “most people less than an hour” to compile the needed information and fill out the form, though some claim the aid application itself can be dispatched in as little as four minutes.
Assuming the number of questions drops to 25, or about 23% of the current total Alexander cites, then if the old form took an hour, the new form would take about 14 minutes. So, under this planned reform, you would save about 46 minutes a year.
Also in the news …
- A bipartisan bill to beef up U.S. government support for historically black colleges and universities has made it through the Senate and looks set for a vote in the House by the beginning of March, Politico reported Thursday. The proposed legislation would have relevant agencies create annual plans to help support HBCUs.
- And there’s another student-related bill with bipartisan support: U.S. Sens. Mark Warner, D-Va., and John Thune, R-S.D., announced Wednesday the introduction of their Employer Participation in Repayment Act, which, if passed, would “allow employers to contribute up to $5,250 tax-free to their employees’ student loans.” While some companies already offer student loan repayment assistance to their employees, formal federal laws around such programs could help make them more commonplace, the senators said.
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
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 August 11, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 5.80% per year for a 5-year term, 3.30% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.69% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 3.94% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.98% (with autopay) to 6.90% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of June 26, 2020, the one-month LIBOR rate is 0.18%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.18% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.18% per year to 3.66% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.41% per year to 4.30% per year for a 12-year term, 3.18% per year to 6.65% per year for a 15-year term, 4.54% per year to 6.90% per year for a 20-year term, or 4.43% per year to 7.02% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. 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.
Variable APRs and amounts subject to increase or decrease. Variable rates are indexed to the one-month LIBOR rate. The following Variable Rate examples are based on a $10,000 loan amount. Repayment examples are for illustrative purposes only. All student loan rates below are shown without the autopay discount (.25%). There are no application or origination fees, and no prepayment penalties. The monthly payment for a sample $10,000 loan with an APR of 2.18% per year for a 5-year term would be $176.07. The monthly payment for a sample $10,000 loan with an APR of 4.00% for a 7-year term would be $136.69. The monthly payment for a sample $10,000 loan with an APR of 2.18% for a 8-year term would be $113.61. The monthly payment for a sample $10,000 with an APR of 4.25% for a 10-year term would be $102.44. The monthly payment for a sample $10,000 with an APR of 2.41% for a 12-year term would be $80.04. The monthly payment for a sample $10,000 loan with an APR of 3.18% for a 15-year term would be $69.93. The monthly payment for a sample $10,000 loan with an APR of 4.54% for a 20-year term would be from $63.48. The monthly payment for a sample $10,000 loan with an APR of 4.43% for a 25-year term would be from $55.19.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate 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 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for SoFi.
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 August 10, 2020. Information and rates are subject to change without notice.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). 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 0.18% effective July 10, 2020.