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.
Federal Reserve cut could ease refi, variable student loan rates
The Federal Reserve cut its interest rate target by half a percentage point, the largest such cut since 2008, according to CNBC. The Fed’s benchmark — known as the “fed funds rate” — doesn’t directly relate to what consumers pay, but it could translate to lower rates for borrowers. The move was a response to the potential economic challenges posed by the coronavirus outbreak.
How this affects YOU: While the fixed rates you have on your federal student loans won’t change, a lower benchmark interest rate could lead to a dip in any variable rates you have on private student loans, though this isn’t guaranteed. Of course, rates could go back up, so if you have variable-rate loans, you might want to pay them off faster if possible, before rates rise again. It could also be a good time to consider applying for student loan refinancing to take advantage of the low rates currently on offer.
Advocates urge Dept. of Education to streamline disabilities discharge
Student loan advocates from more than 30 groups, seven states and the District of Columbia sent letters to Education Secretary Betsy DeVos, urging her to make student loan discharge more accessible to student loan borrowers with disabilities, NPR reported Tuesday.
While borrowers who experience a total and permanent disability are supposed to have their student loan balances wiped away, the letters said that the process for doing this is too cumbersome. According to an NPR investigation, only 28% of eligible borrowers had their loans erased for permanent disability between 2016 and 2019.
For its part, the Department of Education said it is “interested” in providing automatic student loan discharge for those with serious disabilities, but to do this, it will first “require the department to undergo negotiated rulemaking.”
How it affects YOU: If you have a major medical disability, you can apply for student loan discharge through the Department of Education. But note that the burden falls on you to file the application — unless and until the government makes student loan discharge for disability an automatic process for eligible borrowers.
Also in the news…
- Senators Elizabeth Warren (D-Mass), Cory Booker (D-N.J.) and Kamala Harris (D-Calif.) are urging the Department of Education to launch a civil rights probe into the federal student loan program, Politico reported Monday. In their letter, they urged the department to investigate “alarming racial disparities in student borrowing and student loan outcomes faced by students of color.”
- Washington state is considering a bill that would create a student loan program for undocumented students, including DACA recipients, the Kitsap Daily News reported late last week. Currently, undocumented students are not eligible for federal student loan programs.
- Skincare brand First Aid Beauty is set to offer $1 million in student loan repayment assistance, with 10 or more grand prize winners receiving up to $100,000 each to pay off their debt. To enter, student loan borrowers from the classes of 2018 to 2020 must submit a two-minute video, as well as an optional essay, by Aug. 31.
- The NYC Department of Consumer and Worker Protection says around 14% of the city’s residents with student loans are 90 days or more past due on their payments, according to a recent New York Post report. More than 1 million New Yorkers are carrying a collective $35 billion in student loan debt, the report said.
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