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.
White House urges big changes to student loan system
The Trump administration is turning its attention to higher education, including the student loan crisis, with a position paper and executive order both emanating from the White House this week. Among the top takeaways are the president’s call for stricter federal student loan limits, narrowing repayment options and making colleges and universities bear some responsibility for student loan default.
Specifically, the administration wants Congress to set limits on PLUS loans for graduate students and parents — currently, you can take out PLUS loans up to the entire cost of attendance, minus other aid — although it did not set a specific dollar target for this. It also wants financial aid administrators to work with students to help limit their overall borrowing.
The idea is that cutting down on these loans will curb schools’ tuition hikes, with the White House statement arguing that “the current system provides institutions of higher education with few incentives to control costs.”
It also calls on lawmakers to streamline the current menu of income-driven repayment plans into “one simple plan” that sets monthly payments at 12.5% of discretionary income. It would also offer forgiveness to undergrad loan borrowers after 15 years of qualifying on-time payments.
In addition, the policy statement urges rules that would force schools to provide more information about their programs and potential earnings so that students can “make better-informed choices about potential careers and educational opportunities.”
It also calls for creating programs that increase access to “non-traditional” education, improving federal support for historically black colleges and universities, and providing financial aid to fund the education of prisoners eligible for release.
As for the executive order, while much of it focuses on free speech rules for college campuses, it also asks the Department of Education to look at ways to hold schools financially responsible when a borrower defaults on their student loan, U.S. News & World Report reported.
How it affects YOU: At this point, these ideas are still just proposals to Congress as it looks to revamp the Higher Education Act. (See more details in our previous coverage here.) But if they do make it into law, they would have a major impact on both current and former students who access financial aid.
Under the system now, the federal direct loan program does have borrowing limits, but PLUS loans are only limited by the cost of attendance minus other aid. While the administration hopes that new limits would slow or halt rising tuition costs, it could also result in more people turning to private student loans once they max out their federal aid. And unfortunately, those private loans tend to have fewer repayment options and benefits compared with their federal counterparts.
For those now repaying student loans, a move to a single income-driven repayment option could cause problems in some cases. The proposed 12.5% discretionary income cap for the monthly repayment amount is above the 10% limit for some of the current plans, and the 15 years required for forgiveness is more than the 10 years now needed for most plans. According to Forbes, graduate students would need to wait 30 years to get their loans forgiven, which is also longer than is the case now.
As we’ve reported previously, the Senate is currently in the process of looking at changes to the Higher Education Act, so it might be worth writing or calling members of the relevant committee via their offices to add your voice to the debate.
School arbitration ban is back on
After losing in court, the Department of Education announced in December that it would now comply with the Obama-era rules protecting students who were defrauded by their school. Initially, some of the details on this were left out — specifically when it comes to colleges forcing students to accept arbitration rather than go to court, and barring students from joining class-action suits.
Late last week, however, the department filled in the blanks, stating that schools could no longer demand arbitration for cases involving alleged fraud or misrepresentation (but they still can for cases involving other issues, such as injuries or sexual harassment).
How it affects YOU: If you’re involved in any sort of legal action against a school — or if you believe you were defrauded — this latest development could make things a little easier for you. Remember, too, that legal aid is available, sometimes for free should you need it.
States getting ambitious on helping pay off student debt
According to a Politico report, state governments across the U.S. have introduced “nearly 200 bills so far this year aimed at addressing student loan debt.”
Of these, 119 would set up or expand forgiveness and loan repayment assistance programs, the report said, citing the National Conference of State Legislatures. Other measures call for tax relief for borrowers and setting up offices to help those struggling with student debt.
How it affects YOU: Moves on the state level don’t get the same attention as action from the federal government, so you’ll need to keep an eye out for opportunities in your own home state. Even better, get in touch with your state representatives. Because they have smaller constituencies, state-level officials can sometimes be more responsive than your U.S. senator or House member.
Also in the news …
- Changes and enhancements to Federal Student Aid log-in and ID system are coming at the end of this month, the National Association of Financial Aid Administrators says. Get the details here.
- While it’s rare to get your student loans discharged in bankruptcy, it is sometimes possible. But, student loan attorney Austin Smith says a few servicers have been hiding this fact from borrowers.
- A man identified only as “D. Richard” believes a divine miracle caused his student loans to be mysteriously paid off without his knowledge, Louisiana CBS affiliate KLFY reports.
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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 2.50% 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 April 17, 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 04/17/2019. 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 our student 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.
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.
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 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.81% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|