Generation Debt

Why we support H.R. 2711, the Student Loan Fairness Act of 2003...

H.R. 2711's stated purpose is to permit refinancing of Federal student consolidation loans, and to permit students freedom to select a student loan consolidator.

It removes the prohibition against refinancing in the Higher Education Act by changing the definition of "eligible borrower." It strikes the provision which states that a person's status as an eligible borrower terminates upon receipt of a consolidation loan, and all references to that provision.

H.R. 2711 allows for a choice of loan consolidator by striking the provision which requires loan agreements to state that the lender is to make the loan to the borrower only if the lender holds an outstanding loan to the borrower, or if the borrower certifies he or she has sought and was unable to obtain a consolidation loan from his or her loan holder. This section also adds requirements that lenders and institutions provide borrowers with clear and conspicuous notice of information regarding the effects of the consolidation loan on interest rates, amount of payments, interest accrued, repayment term, ability to pay, and the differences between variable and fixed rates.

It changes the dates on which certain interest rates are applicable to January of 2004 rather than 2006. It also changes the general rates to the market rate + 2.3% and lowers the cap interest rate from 8.25% to 6.8%, changes PLUS rates to the market rate + 3.1%, not to exceed 7.5%, and changes the consolidation rates to the market rate + 2.3% and lowers the cap interest rate from 8.25% to 6.8%, and offsets origination fees.

Under 20 U.S.C.A. 1077a (m), lesser rates are permitted: "Nothing in this section or section 1078-3 of this title shall be construed to prohibit a lender from charging a borrower at a rate less than the rate which is applicable under this part."† This provision is why it's so important that H.R. 2711 has a provision allowing for choice of lender.†

H.R. 2711 has bipartisan sponsorship and support, it strikes the "one-time consolidation rule", allows for choice of lender, requires lenders and institutions to provide clear and conspicuous information to borrowers regarding interest rates, the difference between fixed and variable rates, and payments, and on loans after January 1, 2004, it makes the rate variable, not to exceed 6.8%.

The bill's only drawbacks so far are that it contains no provisions for current students, and doesn't seem to help with PLUS loans, but it's the best of the bunch thus far.

H.R. 2711 is comprehensive, covers what needs to be covered, and doesn't add anything superfluous, and that's why it's the bill Generation Debt backs.