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.
Lawmakers spark debate over income-share agreements
Income-share agreements (ISAs) offer to give you money for your education in exchange for a set portion of your income once you meet a certain earning level. Although still relatively rare, ISAs are becoming more common, and the Trump administration has expressed interest in using federal funds to experiment with the model.
But the possibility of using ISAs in federal programs was met with sharp pushback from a group of lawmakers Tuesday, who questioned whether these products were a good idea to begin with. Three members of Congress — Sen. Elizabeth Warren and Reps. Ayanna Pressley and Katie Porter — wrote the Department of Education with hard criticism against income-share agreements.
“ISAs … include some of the most exploitative terms in the private student loan industry, including mandatory arbitration agreements and class-action bans,” they wrote. “Unlike private student loans, however, these risky contracts have virtually no transparency and have experienced little to no oversight from federal regulators.”
They specifically argued that Purdue University’s ISA program was potentially harmful for borrowers if they meet the income threshold that triggers repayment but still have trouble making their bills.
So far, efforts to regulate ISAs (such as this one) have yet to pass Congress, and Manhattan Institute senior fellow Beth Akers told Inside Higher Ed that the market for ISAs is in need of regulation.
“Putting guardrails on this emerging market will help with fundraising efforts and obviously ensure that students don’t fall victim to unfair contracts,” said Akers, who supports the use of ISAs in some cases.
How it affects YOU: ISAs can’t match federal student loans when it comes to borrower protections — with federal loans, you can use an income-driven repayment plan to make sure your monthly bill is never more than you can afford, for example.
Then again, there are times when an ISA might make sense, such as if your school isn’t eligible for federal loans (though make sure you find out why it’s not!) or if you’ve maxed out your available federal loans and have a specific situation that could benefit from an ISA. Some students might even be interested on religious grounds, as we noted last week.
But caution is definitely warranted, especially with the lack of regulation in this space. Before you sign up for an ISA, make sure you know what would happen if you can’t meet your end of the deal, and reach out for advice if you’re not sure whether the program is right for you.
Also in the news …
- The Virginia Tobacco Region Revitalization Commission is rolling out a new student loan repayment assistance program for certain professionals willing to work in certain parts of the state, The Roanoke Times reported Sunday. Check the commission’s website “for future announcements about the new program.”
- A group of bipartisan lawmakers in Congress introduced a bill to change the structure of federal student loans by eliminating origination fees.
- Student loan servicer Navient’s management is reportedly under fire from an activist hedge fund, and the fallout could be mixed for borrowers, The Philadelphia Inquirer reported Sunday. We’ll keep an eye out for developments on this one.
- More than a decade after the start of the Great Recession, public colleges still face funding struggles, a report in Inside Higher Ed says.
News can be useful, but if you want some deeper advice, take a moment to sign up for the Student Loan Hero weekly digest email and get valuable financial knowledge sent straight to your inbox … for free!
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 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 3.47% APR (with Auto Pay) to 7.59% APR (with Auto Pay). Variable rate loan rates range from 2.27% APR (with Auto Pay) to 6.89% 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 August 15, 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 08/15/2019. 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 firstname.lastname@example.org, 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.
2 Important Disclosures for SoFi.
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 2.37% effective July 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.27% – 6.89%1||Undergrad & Graduate|
|2.27% – 7.55%2||Undergrad & Graduate|
|2.43% – 6.65%3||Undergrad & Graduate|
|2.24% – 6.67%4||Undergrad & Graduate|
|2.37% – 7.95%5||Undergrad & Graduate|
|2.46% – 9.24%6||Undergrad & Graduate|