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.
Trump proposes 12% cut to education funding
As he did in his previous two budget requests, President Trump asked for a cut to funding for the U.S. Education Department. The proposed budget would slash $7.1 billion from programs while canceling surplus funds in the Pell Grant program, eliminating subsidized student loans, and putting an end to the Public Service Loan Forgiveness (PSLF) program, according to reports by CNBC, Inside Higher Ed and others.
The proposal also involves a “skin in the game” provision for colleges that accept federal funds. This addition might require colleges to pay if their students default on federal student loans, though the details of how exactly it would work remain unclear, the Washington Post said.
The budget proposal also seeks to reduce the number of income-driven repayment programs to just one. This single income-driven plan would cut borrowers payments to 12.5% of their discretionary income and offer loan forgiveness after 15 years for undergraduates (five years sooner than some current plans allow) and after 30 years for graduates (five to 10 years later than current plans offer).
Assistant Secretary of Education Jim Blew told reporters: “We’re coming back again asking for a reduction because the administration believes that we need to reduce the amount of discretionary funding for the Education Department.”
But few expect these budget cuts to pass, as they’ve been rejected by a Republican-led Congress in the previous two years and are even less likely to get through with today’s Democrat-led House.
How it affects YOU: In all likelihood, this budget proposal won’t make it through Congress, so you don’t have to worry about subsidized student loans or PSLF disappearing overnight. That said, keep an eye out for changes to federal programs and repayment plans, just in case funding priorities get shifted around in the future.
What’s more, the current system of income-driven repayment plans still stands, so explore your options — which include Income-Based Repayment, Pay As You Earn, Revised Pay As You Earn, and Income-Contingent Repayment — if you’re looking for a way to adjust your monthly student loan payments and ultimately get loan forgiveness.
Senate agrees to simplify the FAFSA for students
As we detailed last month, there’s been recent talk about how to simplify the FAFSA to make it more accessible to families seeking financial aid. As of a hearing on Tuesday, the Senate is ready to move forward with bipartisan legislation that would reduce the number of questions on the FAFSA from 108 to 15-25, Politico reported.
Among other reforms, this legislation would allow students to fill out the FAFSA on their own and to find out as early as eighth grade how much Pell Grant funding they might expect to receive. What’s more, families would be able to apply for financial aid sooner because they’d be able to use information from the previous year’s tax returns.
Discussions about simplifying the FAFSA have been in the works for the past five years, but this hearing could represent a big step forward, with the reform measure looking more likely to be enacted.
How it affects YOU: If you’re a soon-to-be college student (or parent of one), expect the FAFSA to become a lot simpler in the future. Although there’s no stated start date for these changes, students and their families should have an easier time applying for federal financial aid in the years to come.
FBI charges 50 in college admissions bribery scandal
You might not have been shocked by the news that wealthy families are buying their kids’ admission to top universities — but none of us expected Aunt Becky of “Full House” to be among those accused.
On Tuesday, the FBI charged 33 parents (among them actresses Lori Loughlin and Felicity Huffman), an owner of a college counseling firm, an exam proctor, a college administrator and college athletic coaches in the “largest college admissions scam ever prosecuted by the Department of Justice,” according to CNN and other reports.
Federal authorities allege that the parents involved paid over $25 million to ensure their children’s admissions to elite schools such as Yale, Stanford, and UCLA. In exchange for bribes, some coaches allegedly accepted students as athletic recruits despite their never having played the given sport competitively. And an SAT proctor is reportedly charged with correcting students’ answers on the SAT to get them a higher score.
The charges in this case include mail fraud, racketeering, money laundering, obstruction of justice and conspiracy to defraud the government.
How it affects YOU: Unfortunately, it’s no secret that the college admissions system tends to favor students and families in positions of privilege. From private college counseling to personal statement editing, wealthier students tend to get extra assistance navigating the college admissions process.
What’s more, entrance exams such as the SAT and ACT have been shown to be biased toward students from high-income families. While these rampant problems probably won’t be going away anytime soon, this case is at least shedding a light on inequities within the college admission process.
Also in the news…
- While the Senate was tackling FAFSA simplification, the House was talking about what to do about for-profit colleges, Politico reported. Various critics testified, including a veteran who says he was scammed by DeVry University.
- According to Roll Call, 68 members of Congress have their own student debt or have family members with debt. Collectively, Democrats and Republicans owe $2.5 million for higher education — so this issue is close to home.
- Student loan lawyer Adam Minsky penned a piece for Forbes about student loan reforms to watch out for in 2019. Among them, Minsky cites free tuition colleges, bankruptcy reform, and the introduction of a federal refinancing program.
- Although we’ll have to wait to see if the government will offer student loan refinancing, Democrats in the state of Wisconsin are pushing for a state-run refinancing program to ease the burden on borrowers, the Capital Times reports.
- In lighter news, there’s a new trivia app that’s awarding winners with money to pay off student loans. To date, the Givling app has paid out more than $2.5 million to its trivia-savvy winners, according to Fox News affiliate WBRC. Looks like that college degree is finally paying off.
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Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
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 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% 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 March 18, 2019, 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 0318/2019. 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@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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 Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 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.
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 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|