Generation Debt

BusinessWeek covers debt issues, especially student loan debt issues, for those 30 years old and over:

"The cost of higher education, however, has increased so dramatically in the past decade and a half -- up by 63% at public schools and 47% at private -- that more students have to borrow tens of thousands of dollars to attend, ensuring that many of them are paying off those loans well into their 40s. The median debt-to-income ratio now is about 8%. But fully one-quarter of graduates are paying more than 12% of their income, a level many financial experts regard as worryingly high. That burden will only grow: Interest rates on student loans are going up for the first time in five years.

***

These trends have intersected before -- paying off college loans has never been easy, and earlier generations have had to contend with weak job markets -- but they are felt more keenly today. Almost two-thirds of students have to borrow money to get through school; as many as one-quarter may be accumulating credit-card debt to help pay for tuition. The median debt for college graduates in 2004 was $15,162, an increase of 66.5% since 1993. That may not seem like a crippling sum, but plenty of individuals owe much more. Back in 1993, only 4.2% of graduates had loans exceeding $25,000. A decade later, 17% did."

My comments to the article (should they be approved):

"Certainly we all should have been better about being more frugal while we were in college and/or grad school, but I wonder how many of the "it's your own fault" types of commenters have made mistakes or decisions based upon immature judgment in their past? Were we all supposed to be perfect adults, able to make informed decisions on any issue at age 18? At 22? The fact is, the student loan industry, aided by the current state of higher education law, sets many borrowers up for a life that indentures them to their debt. High interest rates on government-guaranteed loans (loans that can't be discharged in bankruptcy) insure that lenders make huge profit off the backs of student borrowers. The one-time consolidation rule alone is a boon to lenders and a bane to borrowers.

There are a few small, simple fixes that can be put in place to help ease the burden of debt for those who went to college to make a better life for themselves, only to find that they are now stuck with exorbitant interest payments to student loan companies. H.R. 1029, the Student Loan Fairness Act of 2005, was introduced in the House to permit refinancing of Federal student consolidation loans, and to permit students freedom to select a student loan consolidator. H.R. 1033, the Student Loan Interest Full Deductibility Act, was introduced in the House to amend the Internal Revenue Code of 1986 to repeal the limitations on the maximum amount of the deduction of interest on education loans. These small changes will ease the debt burden of thousands of citizens, yet the bills are stuck in committee, with no action in sight."

Posted by Diana at 10:27 AM | Permalink | Comments (1)

This article in the North County Times raises what should be common sense questions about the student loan industry, and you might just recognize one story mentioned:

"The key player here is the Student Loan Marketing Corp., commonly known as Sallie Mae, which is a government-sponsored enterprise created by the federal government, but owned by public investors. As a government-sponsored enterprise, if too many students defaulted on their loans, Uncle Sugar would come to the rescue. Sallie Mae was put together to help students obtain loans to attend college.

Today, Sallie Mae is growing in size, while attempting to raise costs of student loans and eliminate competition. Imagine the human outcry if the country's largest mortgage lenders tried to set up a monopoly that sought such unworthy goals.

***

The Wire magazine in New Hampshire recently reported how an attorney with more than $100,000 in debt learned that she was saddled with an 8.25 percent interest rate on that total because she had consolidated her loans earlier in her college career, and that under current education loan policies, she could only consolidate once. Today's loans carry 4.75 percent interest, but she's locked into the higher rate of interest."

Posted by Diana at 10:58 AM | Permalink | Comments (4)

USA Today notes a provision of bankruptcy law that will change on October 17 that's of interest to those of us with student loans:

"Even if you meet the means test, it will be harder to get rid of some types of debts after Oct. 17.

The change is particularly significant for borrowers with a lot of student loans.

Under current law, it's extremely difficult to wipe out student loans from the government or a non-profit organization, even under Chapter 7 bankruptcy. The new law expands that provision to include student loans from private lenders, says Henry Sommer, editor-in-chief of Collier on Bankruptcy."

Private lenders get more legislation to their liking, and borrowers struggling with debt get fewer options to relieve that burden. Way to go, Congress.

More on student loans and bankruptcy via The San Francisco Chronicle.

Posted by Diana at 10:07 AM | Permalink | Comments (3)

A report by the Educational Policy Institute compares student loan repayment conditions and debt management programs in eight countries: Austrialia, Canada, Germany, Holland, New Zealand, Sweden, the United Kingdom and the United States. The author of the report, Alex Usher, states in a press release:

"The key weakness of the American system is lack of protection for borrowers with low incomes...These borrowers pay far more in the US than they do anywhere else in the world, and it is largely because interest rates are too high and the income threshold for loan deferment is far too low. A rise in the threshold for eligibility for deferment would significantly improve America’s student loan system." (Emphasis added.)

So would lowering interest rates, and allowing borrowers who've already consolidated to refinance their loans at those lower interest rates.

Posted by Diana at 09:50 AM | Permalink | Comments (1)

"Almost two thirds of Americans with outstanding student loans (64%) say these student loans prevent them from making other major purchases, such as a house, car or other large ticket items, according to the Cambridge Consumer Credit Index."

The Center for Economic and Policy Research reports that "High levels of student debt are the result of rapidly increasing college costs and policy choices that have made more loans -- and not grant aid -- available to students. ... Higher levels of student debt have implications for how students think about career and life-choices. Highly indebted college graduates may choose to postpone marriage, buy a house, or start a family in order to pay off their loans."

And that, of course, is the crux of our problem. Having student loans hanging over our heads makes us put our lives on hold. Allowing borrowers to refinance consolidation loans at lower interest rates would be a small way to help ease that burden.

Posted by Diana at 11:00 AM | Permalink | Comments (0)

The Wire (a weekly New Hampshire paper) writes about the post-college pinch of debt, and you just might recognize one person who's quoted. ;)
__________

Resources include Web sites like GenerationDebt.org, which co-creator Diana Lamphiere describes as an "information clearinghouse" for young adults struggling with debt problems. Lamphiere and friends Gerry Garcia and Liz Schwarz started the site in 2004 as a way to keep students updated on loan consolidation and refinancing regulations.

Lamphiere, an attorney, had over $100,000 in debt when she graduated from law school in 2001. When the time came to consolidate her loans and lock in a fixed interest rate, she did so, figuring that she could always refinance again when interest rates dropped. However, she didn’t realize that education loans could only be consolidated once, and she has since been stuck with an 8.25 percent rate; the current rate for those currently consolidating their loans is 5.3 percent.

"I think all of us realize that we borrow this money and we have a responsibility to pay it back," she says. "But when the fact that your payment is going toward interest and the going interest rate is much lower than the interest that you’re paying, that seems fundamentally unfair."

GenerationDebt.org tracks current legislation relating to student loans and federal aid, and also provides tips on how to manage loan payments. The site also has a message board where new and current students can talk about their financial difficulties.

"Most of the time, the reaction is 'I thought I was the only one who had this problem,'" Lamphiere says of the posting. She also receives feedback on the site from representatives from student loan lenders who write in to say that not all loan companies are bad.

"We don't try to attack," she says, but sometimes it's difficult because "it seems like huge companies like Sallie Mae are making money off students' backs."

The debt burden has wide-reaching effects, according to Lamphiere, influencing everything from career choice to future financial opportunities.

"Most people I know … are in the same boat," she says. "They'd rather take public interest jobs … (but) you have to make X amount a month to make that loan payment every month. You're in grad school and you're idealistic and when you get out, you have this huge debt and you say, 'That corporate job is what I have to do, at least for a while.' And you kind of get sucked in."

For those who pursue advanced degrees, that debt burden can extend well beyond their student years.
"People have written me, saying 'We've always wanted to buy a house but we can't,'" Lamphiere says. "People who are paying off their own loans who have their own kids, they're worried about setting up a college fund. It hurts the future of students, not giving them flexibility about little things like interest rates."
__________

Well, I graduated law school in 2000, not 2001 (I consolidated my loans in 2001), and Liz spells her last name "Schwartz" not "Schwarz", but otherwise it's all good. :)

Posted by Diana at 01:49 PM | Permalink | Comments (6)

One columnist in the Cinncinnati Post advises students not to take out student loans at all, in response to this letter from a reader: "I consolidated at a high rate of interest with payments of $500 a month. I would need an income three times my highest-ever gross salary to afford to pay off my loan in 30 years. ... Now I have terminal cancer, but cannot have my consolidated loans discharged unless I give up the job that gives me the medical coverage to fight this disease. To qualify for Social Security and Medicare, I have to be on welfare for two years, which is past my life expectancy."

Posted by Diana at 05:18 PM | Permalink | Comments (3)

Anya Kamenetz at the Village Voice writes about H.R. 609, and mentions the following:

"Lenders and for-profit colleges contributed nearly four times as much to the leaders of the House education committee during this HEA reauthorization cycle as they did during the seventh reauthorization, in 1997-1998. As of 2003, Sallie Mae was both the largest student lender and the second most profitable company in the Fortune 500. They gave $185,000 to the members of the committee in 2003-2004, making the company the committee's single largest donor by far."

Note also that a recent 60 Minutes segment on career colleges mentioned this:

"Over the past two years, career colleges and lending institutions that benefit from government-backed student loans handed out more than a million dollars in campaign contributions to members of the House Education Committee. Half of that money went to the committee's two ranking members: Chairman John Boehner of Ohio and Buck McKeon of California."

Posted by Diana at 10:37 AM | Permalink | Comments (1)

This Inside Higher Ed article breaks down H.R. 609.

No mention of the defeat of Congressman Wu's amendment that would have allowed reconsolidation.

Of note, however: "With the House committee's work done for now, further action on the Higher Education Act is unlikely until after Congress's August recess, when the full House is expected to take up the legislation approved Friday and the Senate will draft its own version of the bill."

With the August recess coming up, representatives will be coming home to their districts, and it's a perfect time to stop by their offices to talk to them about our issues. Let's take advantage of it and let our representatives know our concerns, and also let them know how their response to our concerns affects our vote.

Posted by Diana at 09:54 AM | Permalink | Comments (0)

Information promoted from comments to our last post:

Via Rob: "I checked with Congressman Wu's office and confirmed that the amendment accepted was related only to the single holder rule. I asked about what had happened with about the first part of congressman Wu's bill dealing with the eligible borrower rule and was told that that portion of his bill had not been allowed. I asked if a vote had been taken and was told that the eligible borrower portion of the bill had been voted down by a vote of 17-28. I had been hoping for a closer vote. The assistant said that the bill was not dead and was still out there."

Via Jillian Schoene, Congressman Wu's Communications Director: "H.R. 609 only includes the provision of Congressman Wu's Student Loan Fairness Act which repeals current law denying graduates with loans from a single lender the right to seek out the lowest cost consolidation loan (The Single Lender Rule). Congressman Wu did offer an amendment to allow reconsolidation for all borrowers during the full committee markup, but the committee voted down the amendment 17 to 28.

Sorry for the confusion."

I called Congressman Wu's office this morning, and received a call back this afternoon confirming the above.

Here is Friday's press release, with corrected language: "Just as families have saved money when refinancing their home mortgages, graduates will be able to consolidate their student loans with the lender of their choice, taking advantage of competitive interest rates and loan terms. H.R. 609 includes a core provision of Congressman Wu's Student Loan Fairness Act which repeals current law denying graduates with loans from a single lender the right to seek out the lowest cost consolidation loan."

So the amendment was, in fact, too good to be true. I apologize for getting everyone's hopes up (including my own). Let's keep contacting our representatives, though, and pushing for Congressman Wu's bill that would allow reconsolidation.

Posted by Diana at 01:31 PM | Permalink | Comments (0)

Congressman David Wu (D-OR 1st) Successfully Amends H.R. 609.

"Congressman Wu succeeded in amending H.R. 609, the College Access and Opportunity Act of 2005, to include several of his higher education priorities. H.R. 609 amends and reauthorizes higher education programs receiving federal dollars. It was marked up today [July 14] in the Subcommittee on 21st Century Competitiveness.

***

The subcommittee adopted the core provision of H.R. 1029, Congressman Wu's Student Loan Fairness Act which repeals current law denying graduates with a loan from a single lender the right to seek out the lowest cost consolidation loan. Just as families have saved money by refinancing their home mortgages, graduates will be able to reconsolidate their student loans with the lender of their choice, taking advantage of historically low interest rates."

!!!

A webcast of today's continued markup session can be viewed.

Swing into action, folks! Write and call your Congressional Representatives and ask them to support H.R. 609 with Congressman Wu's amendment attached. This bill could go to the House floor as early as next week, so the time to act is now. Concentrate immediately on those representatives that are Committee Members, then contact all House members once the bill is out of Committee. Congressman Wu's H.R. 1029, the Student Loan Fairness Act, is the former H.R. 2711, the bill we've always supported. This is what we've been waiting for, so let's mobilize!

(Thanks to John Lysenko for the heads up on all of this activity on H.R. 609.)

Posted by Diana at 10:17 AM | Permalink | Comments (8)

In this video transcript from an ABC television affiliate, a mention is made of the fact that one can't refinance a consolidation loan (apologies for the caps, that's how it's typed on the website):

"CONSOLIDATING CAN SAVE YOU MONEY BUT ONCE YOU LOCK IN THE RATE, THAT'S IT.

Jevita de Freitas: so it's not like a mortgage most of the time depending on the lending institution where you can refinance every time the interest rates go down."

Note that today is the day the rates go up, so maybe now the media can focus on the problems of those who've already consolidated instead of just harping on those who haven't.

Happy Independence Day, all, and have a great holiday weekend from GenerationDebt!

Posted by Diana at 09:37 AM | Permalink | Comments (0)

Via the Indianapolis Star:

"If you have a student loan, chances are you have earned a degree in confusion.

Many borrowers, who have already bundled their student loans into a single fixed-rate loan with one payment, are confused about letters they've been getting from lenders looking for business from them.

'These days I am bombarded with offers from financial institutions to refinance my loans,' wrote Myriam Contiguglia of Rochester, N.Y. 'What a fantastic opportunity. With a lower rate, I could start to think about buying a house.'

Contiguglia graduated in the early 1990s after six years of college. She couldn't afford the $700 student loan payment on a $19,000-a-year salary. So she consolidated her loans to reduce her monthly payment. Her interest rate at the time: 8.5 percent.

In recent years student loan rates have dropped to historically low levels, under 3 percent for many borrowers.

Contiguglia wanted to refinance her consolidated loan, but when she called the lenders who contacted her, she was turned down. And why?

Unlike home mortgages or even car loans, you can consolidate your federal loans only once, unless you have new loans that were not included in the original consolidation.

Contiguglia is stuck with that 8.5 percent rate."

I still get those letters just about every day. I just rip them up...

Posted by Diana at 10:08 AM | Permalink | Comments (2)

It isn't pretty:

"[T]his 26-year-old has an education -- and $180,547 in student loans to pay for it.

***

[he] graduated from the University of Illinois College of Medicine at Rockford this spring, an achievement that someday will earn him a low six-figure income as a doctor.

That's still a few years off. In the meantime, he'll be making $43,600 a year as a medical resident.

***

Unless he postpones his payments until after residency, he'll be expected to pay the loans off to the tune of $1,684 a month.

He's not unique."

No, he certainly isn't.

No mention of the one-consolidation rule in this article, though it does advise borrowers to consolidate.

*Site note: Still working out site glitches with links, names of bills, etc. We are working on it and hope to have everything smoothed out soon!

Posted by Diana at 10:22 AM | Permalink | Comments (1)

This morning Good Morning America did a quick spot on consolidating student loans, advising borrowers to consolidate by June 30 before interest rates go up. You may have noticed that the media has been reporting like mad on the July 1 interest rate hike, without mentioning the problems of people like us who are stuck with high interest rates with no option to refinance.

The spot mentioned the one-time consolidation rule:

"You can only consolidate once. It is not like refinancing a mortgage where you can keep locking in lower rates."

But as usual, there was no elaboration on that point.

Posted by Diana at 10:42 AM | Permalink | Comments (0)

Unsurprisingly, Sallie Mae is lobbying Congress to ban consolidated fixed-rate loans, and require that all future student loans carry variable rates. Sallie Mae's rivals say that banning fixed-rate loans would hurt them.

It's interesting to note the lobbying money spent by Sallie Mae: $1.1 million in 2003, as well as "donations to lawmakers through a political action committee that ranked 25th among 1,368 corporate PACs in 2004."

This article does not mention the issue of refinancing consolidation loans, but we already know Sallie Mae is against that.

*Site note: We realize the bill numbers on the right of the main screen are the old ones from 2003. The content of the entries is updated, but we've been having some glitches with the site as far as getting the categories changed. Please be patient with us (we do all this in our spare time, remember), and email us with any questions.

Posted by Diana at 10:11 AM | Permalink | Comments (2)

This Chicago Tribune story (subscription) speaks in general terms about the amount of debt facing young adults these days, including student loan debt.

"America's youngest adults are joining the work force at salaries their parents never dreamed of, but their obligations are even bigger, several research efforts suggest.

In a briefing paper titled 'Generation Broke: The Growth of Debt Among Young Americans,' New York policy group Demos said adults younger than 25 who have debt spend 30 percent of their income making the payments, double the percentage for this age group in 1992.

In a sample budget for a recent college graduate earning a $36,000 starting salary, the group found average basic expenses for loan debt, taxes, rent, food and transportation eats up all but $34 a month. That has to cover child care, entertainment, clothing, furniture, Internet access and other items, the group said."

This article touches on something I find so difficult to explain to people sometimes: the fact that my salary may look pretty decent, but the debt payments I make (mainly the student loan debt, in my particular case) eat up so much of my paycheck that it's as if I'm making much less. The fact that most (if not all) of those payments are going to inflated interest and not my principal just pours salt and lemon into that particular wound.

Posted by Diana at 09:58 AM | Permalink | Comments (7)

Seacoast Online has a little story about student loan consolidation, with a small mention of the reconsolidation factor: "The drawbacks of consolidation? You only get one chance to consolidate student loans..."

This article also mentions the White House's 2006 Budget: "President Bush and his congressional allies propose ending fixed-rate consolidation loans.

The president’s 2006 budget proposes raising the limit on the amount of federal loans that students can borrow. But to cover that $2.6 billion cost, the administration would end fixed-rate consolidation loans and replace them with variable-rate loans that fluctuate with market rates but could rise no higher than 8.25 percent."

That's not the provision that would allow for reconsolidation, which we've discussed here in the past, but the reconsolidation provision would allow for a variable rate as well. Opinions on switching from a fixed to variable rate?

Posted by Diana at 10:06 AM | Permalink | Comments (5)

An article about interest rates and consolidation in the Minneapolis Star Tribune that mentions our plight: "But unlike refinancing a mortgage, which you can do a gazillion times if you wish, you cannot refinance your consolidated student loans even once."

I suppose every small mention of this issue may help us, as more people read items like this one and realize the injustice of such a situation.

I'm hoping to get some legislative research done this week to update the status of all the bills we've mentioned here as well as searching for new ones that may have been introduced, so stay tuned...

Posted by Diana at 09:59 AM | Permalink | Comments (1)

Letters to Newsweek about Anna Marrian's article, one that criticizes her, and one that praises her:

"One Costly Education
While the inability to refinance her student loans to a lower rate is decidedly unfair, I still find it hard to sympathize with Anna Marrian's plight ("Struggling to Pay the Mortgage on My Mind," my turn, Feb. 7). She is in this predicament due to her own lack of responsibility. She could have cut down on her debt substantially by going to a cheaper university or even a community college, checking into scholarships and grants (many are merit based), and choosing a profession that pays more than $30,000 a year to start. Also, at 31, she was certainly old enough to understand that you never sign any document without reading it thoroughly—and that —includes that pesky fine print. I'm saving Marrian's column so I can show it to my daughter. In nine years she will be getting ready to go to college and the burden of funding it will fall upon her. Marrian's experience should serve as an excellent example of what not to do.
Judy Nichols
Wilmington, N.C.

Good for Anna Marrian for taking on America's deep dark secret: student loans. My husband and I worked hard so that our children wouldn't have to bear the burden of owing for their college educations. In law school my son took out about a third of the cost in loans. Foolishly, since they were government guaranteed, I thought they would be low interest and manageable. Not so: he came out owing more than $50,000 with an astronomical interest rate. Many of my children's friends are burdened with undergrad and graduate loans that put them well into the $100,000- debt range. The government should not make an exorbitant profit on the backs of the future of this country.
Lyla Fox
Kalamazoo, Mich."

Posted by Diana at 10:09 AM | Permalink | Comments (7)

According to the American Association of Collegiate Registrars and Admissions Officers while overall reducing the money allocated to the Department of Education... the Bush White House has taken a swipe at many "ineffective programs" including student loan consolidation.

"Consolidation loans allow students to turn multiple loans from one or more lenders into a single consolidated student loan. In his budget proposal, President Bush advocates elimination of the single holder rule, the fixed interest rate and rules banning reconsolidation. The budget request would replace the current fixed-rate interest formula for Consolidation Loans with the variable rate formula used for students loans and would allow borrowers to reconsolidate previous consolidations. A 1 percent origination fee would be imposed on borrowers that reconsolidate and the current one-time lender fee on all new Consolidation Loans would be increased from 0.5 percent to 1 percent."

Posted by Liz at 04:48 PM | Permalink | Comments (2)

Here we are: here's our story, as told by the author, Anna Marrian (a fellow sufferer), in this week's Newsweek.

So here's our chance, everybody. Write letters, send emails, DELUGE Newsweek with your stories. Make the response so huge they have to do follow up stories. Tell them about the bills pending in Congress to fix the issue. Make this an issue people are talking about. Here's where to write:

Newsweek Domestic Edition

Letters to the Editor for the U.S. print edition:
Letters@newsweek.com

Mailing Address:
Newsweek
251 W. 57th St.
New York, NY 10019

Posted by Diana at 10:13 AM | Permalink | Comments (3)

Here's a big shocker: Student loans drive Sallie Mae business higher. "Sallie Mae, which in December severed its last ties as a government-sponsored enterprise, says student loan originations rose 18 percent last year. Fourth-quarter profits more than doubled."

And another big shocker: Increasing college costs leave many with legacy of loans. "[One college grad] sometimes has trouble sleeping and often worries about how she will pay back her student loans."

While your elected officials are celebrating in D.C. today, write them letters and plan to call their offices to ask why it's OK for a college grad to struggle for years to payoff student loans while lenders rake in the cash from your interest payments. Then point them toward H.R. 2711.

Posted by Diana at 09:48 AM | Permalink | Comments (1)

From Fox News:

"Other sources at the [House Education and the Workforce] committee say NCLB [No Child Left Behind] will likely take a back seat in 2005 to the Higher Education Act reauthorization — something both Democrats and Republicans have been working on throughout 2004.

'It's a very complicated bill with many avenues,' David Schnittger, spokesman for Committee Chairman John Boehner, R-Ohio, said about the Higher Education Act. 'This January, it will be one of the top things on our agenda.'

After a year of disagreements regarding several aspects of higher-education spending, the House committee was unable to pass a reauthorization bill last year. The Senate Health, Education, Labor and Pensions Committee held hearings but also did not produce any legislation. Schnittger said Democratic opposition to how they were going to pay for financial aid increases was largely to blame. Little progress has been made on that front, he added."

It's time to gear up again. Give your representatives a call or write them a letter, and tell them that the ability to refinance loans that have already been consolidated should be a major part of the HEA reauthorization discussion. Point them to H.R. 2711 as a solution. Tell them your own stories, and ask them not to forget about yesterday's graduates while trying to help today's students. Contact your local media (and national media), and tell them your story, connect it to the broader impact of the HEA authorization.

The bottom line is this: We are becoming a nation of educated graduates who can't get out from under the yoke of crippling student loan debt, and that doesn't help us advance at home or in the world.

Posted by Diana at 10:37 AM | Permalink | Comments (2)

From an editorial in the Pittsburgh Post-Gazette:

"It didn't take long for the Pennsylvania Higher Education Assistance Agency to reject a $1 billion offer from rival SLM Corp., more commonly known as Sallie Mae. Reston, Va.-based Sallie Mae, which manages more than $98 billion in student loans, wants to take over most of PHEAA's operations.

***

'PHEAA is not now and never will be for sale, especially to a profit-driven corporation with a track record of overcharging borrowers, laying off workers and gobbling up any organization that stands between students and a quest for bigger profits,' says state Rep. Elinor Z. Taylor, the Chester Republican who serves as chairman of PHEAA's board."

!!!

Posted by Diana at 10:31 AM | Permalink | Comments (0)

This editorial from The Fort-Wayne Journal Gazette is informative on a few issues. First, it notes that Congress has cut Pell Grants, and "about 85,000 of the 5.2 million students currently eligible to receive Pell grants will become ineligible with this latest congressional action. And 1.2 million others will get smaller awards under a new formula the government will use to determine how much families can afford to pay for college – a change that will take effect for students starting or returning to classes next summer or fall."

This editorial also answers some questions regarding the Higher Education Act reauthorization: "Signed into law in 1965 as a way of authorizing federal student-aid programs for colleges and universities, the Higher Education Act is subject to congressional reauthorization every five years, a process that reviews legislation affecting the ability of more than two-thirds of the nation’s students to attend college. Now, after a two-year extension, the reauthorization of the Higher Education Act is again on the Congressional agenda, with the bulk of the discussion centering on institutional accountability, the challenge of keeping higher education affordable and access to the college of one’s choice."

So the HEA reauthorization is still ongoing.

Posted by Diana at 11:06 AM | Permalink | Comments (0)

More from the Village Voice series on "Generation Debt", this time focusing more on the feelings young men get about being in debt way over their heads, and the feelings young women get.

From "I, Breadwinner?":

"Thus was a Matterhorn of debt created. But as I morphed from a twentysomething into a thirty-nothing, the realization began to dawn: Will the supersized student loans and maxed-out credit cards stay with me until the bitter end? Will I spend the rest of my life barely making rent, forever beholden to myriad creditors? Will I be able to purchase a home? Will I be solvent enough to provide, God help me, for a family? Will, in other words, there be consequences to an early life of profligate borrowing?

Well, yeah. 'As a group, young adults underestimate how long it will take to repay the debt,' said Jill Norvilitis, an associate professor of psychology at Buffalo State University, who has studied collegiate debt.

***

This wasn't what our parents had in mind for us. Many young men grew up hearing their fathers lecture on the importance of financial stability, business success, and home ownership. The thrust of these soliloquies was that if you make the right choices you won't have any problems. If I did it, so can you, son. But there was a caveat: Don't be stupid with your cash. (Also: You'll get none from me.) Implicit in all this was the suggestion that foolishness with money equals weakness. Debt was a moral deficiency. It's not the way a man conducts himself.

Easy for them to say, we thought. They didn't grow up in the age of easy credit. The credit card is just 40 years old, and it wasn't until the 1980s that a young person could get one without a signature from a parent. They didn't have to struggle to pay for an education. College is now hugely expensive—and a required step on the pathway of American citizenship. Avoid the university, we are told, and you'll wind up as a telemarketer. (You probably will anyway.) They didn't have to carry debt. We do. It's part of our life today.

***

'It's painful,' said Barry Glassman, a certified financial planner who counsels law students. 'If you don't make those monthly interest payments, you get a horrible credit rating and it goes on your permanent record. It's part of that anchor that is dragging you down. I see it with law students who I think would be great in the public sector. But they can't afford it. As a financial planner I can't see the numbers working. It forces people to take jobs they wouldn't normally take.

'It's tough to think long-term when there are so many pressing issues month to month,' he said."

"If you're a woman between the ages of, say, 18 and 30, then chances are good you were raised by a mother who aspired to be an '80s superwoman, a CEO-domestic goddess in shoulder pads—and so, minus the shoulder pads, do you. Creative satisfaction, along with money, romance, and gorgeous offspring, is part of our deluxe have-it-all package. And yet, in the years between college and settling down, we run smack into some harsh economic realities that can leave us sounding like women on the verge of a nervous breakdown.

***

A study conducted in 2002 by the Women's Institute for a Secure Retirement found that more than half the single young women in the United States are living paycheck to paycheck, compared to only 42 percent of single young men.

***

Young women today were raised with clear messages of achievement and self-reliance. They often outnumbered men at their colleges and graduate programs, and are making economic sacrifices for the fulfillment of their own dreams, without waiting for anyone else's permission. They have taken their equality for granted. Yet as they now struggle to establish themselves, they're realizing, for the first time, the betrayals of gender."

Posted by Diana at 09:52 AM | Permalink | Comments (0)

This article in the Decatur Daily discusses the financial problems that graduates face after school's out, and also mentions reconsolidation:

"Companies flood young adults with mail about consolidating loans, extending repayment terms and locking in at a lower fixed interest rate to better manage debt. Consolidation can cut payments by half for recent graduates who do it within their 6-month grace period, but it doesn't help everyone.

Those who've already consolidated once can't consolidate again unless they go back to school and take out more loans, a federal stipulation companies don't advertise.

'What frequently isn't mentioned is that in order to expand the loan consolidation program to allow reconsolidation, the federal government would have to come up with billions of extra dollars,' said David Schnittger, communications director for the House of Representatives Education Committee.

'The money would have to come from other student aid programs such as Pell grants and Perkins loans, programs that exist to provide access to college for those in danger of not getting a degree.'

Legislators aren't going to give graduates struggling with loans subsidies at the expense of those who still need help going to college, Schnittger said, but they are in favor of switching to a variable interest rate instead of a fixed one on new consolidation loans, he said."

There you have it. The House Education Committee is basically saying that once we graduate, they don't really care about helping us anymore. Thanks a lot.

Posted by Diana at 10:10 AM | Permalink | Comments (1)

The Albuquerque Tribune reports that New Mexico District attorneys are planning to ask their legislature for salaries on par with other government attorneys, and to "ask legislators to approve a bill that would forgive part of the student loans of attorneys who become prosecutors."

Posted by Diana at 10:47 AM | Permalink | Comments (0)

Just in time for Thanksgiving (ha ha), another article from the St. Petersburg Times on our drowning-in-debt generation.

"Fresh financial data show young adults are challenged as never before, certainly not since World War II, thanks to debt pressures today that did not exist a generation or two ago.

'This is as bad as it has been for young adults - absolutely,' says Tamara Draut, who works for the Demos USA think tank in New York and recently analyzed the financial plight of young Americans.

The impact goes beyond financial.

'The larger social implication is that we will have a whole generation of people for whom this country's social contract does not exist,' Draut says. The social contract means that if you work hard and play by the rules, you will get ahead.

That will not happen for this generation, warns Draut, if current trends continue.

***

Every politician and business leader bemoans the mediocre U.S. educational system and insists a better-educated population is key to keeping this country competitive in the future. Yet here we are, describing how college educations are getting so expensive that they undermine the financial stability of their own graduates.

***

By far the biggest concern is what happens to the young and in-debt if they enter middle age still struggling to pay off ancient loans. That could make the American Dream look more like the American Nightmare."

Posted by Diana at 11:08 AM | Permalink | Comments (0)

The St. Paul Pioneer Press gives us another article lamenting the plight of the student who graduates college in the red from student loans, but fails to mention any of the bills pending before Congress to ease that burden after graduation (instead offering only advice to students and parents to think of the burdens before and during college).

Posted by Diana at 10:23 AM | Permalink | Comments (1)

Here's an interesting Village Voice piece on "trading bonds made up of thousands of loans like yours, profiting off your inability to pay for college."

Posted by Diana at 11:55 AM | Permalink | Comments (0)

A non-profit public policy organization called Demos has released a report called Generation Broke: The Growth of Debt Among Young Americans, and you can read a press release about it as well.

The report details the pinch we're all feeling: "The economic security of younger Americans is eroding at an alarming pace as a result of slow wage growth, underemployment, rising costs and mounting student loan and credit card debt." It also notes specifically that rising student loan costs are partly to blame.

Posted by Diana at 12:08 PM | Permalink | Comments (0)

Thought you guys might appreciate an update on the various bills we're interested in. Not exactly heartening.

From Thomas billfinder:

H.R. 2711 (our choice) = Latest Major Action: 7/28/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on 21st Century Competitiveness.

H.R. 2504 = Latest Major Action: 7/21/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on 21st Century Competitiveness.

H.R. 2505 = Latest Major Action: 7/21/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on 21st Century Competitiveness.

H.R. 3180 = Latest Major Action: 10/20/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on 21st Century Competitiveness.

H.R. 4283 (the one that doesn't even deal with our issue) = Latest Major Action: 7/13/2004 House committee/subcommittee actions. Status: Committee Hearings Held.

Posted by Diana at 02:59 PM | Permalink | Comments (0)

Lawmakers head home while "[h]undreds of programs -- from highway building to welfare reform -- are being kept on life support through temporary measures because lawmakers failed to meet deadline after deadline for renewing them." And as we all know, H.R. 2711 languishes in committee.

Take this time while your representatives are home to call or visit them. As a constituent, you have every right to speak to and question your leaders, and they have a duty to speak to you about issues you find important.

Note also that the bill closing the loophole allowing student loan companies to collect subsidies from the government is being decried as inadequate. [Free registration required to view that story.]

Posted by Diana at 10:40 AM | Permalink | Comments (0)

"The House ... unanimously passed a bill aimed at saving billions of dollars in future federal subsidies to commercial and nonprofit lenders of student loans." But does it do the job?

"Republicans pushed through the legislation to end a guaranteed return of 9.5 percent to lenders of student loans, which currently have interest rates of less than 3.4 percent. ... Democrats said they reluctantly supported the bill but wanted to go further by retroactively cutting the federally guaranteed 9.5 percent return for college loan lenders who recycled profits from current loans into new ones that capture more federal subsidies."

And what about H.R. 2711? That one still sitting in your committee, Congressman Boehner?

Posted by Diana at 02:46 PM | Permalink | Comments (0)

From the Lexington Herald Leader:

"Congress is trying to end a practice that unintentionally has allowed banks to take in billions of dollars meant to help students pay for college.

Lenders are profiting from a promise the government made in 1980 to encourage college loans: a guaranteed return of 9.5 percent on those loans financed by tax-exempt bonds.

The government must pay lenders the interest that is not covered by students. With interest rates now below 3.4 percent, making up the difference has become a budget nightmare.

Republicans and Democrats have different ideas about how to end the big payments to lenders. Lawmakers on both sides hope to pass at least a temporary fix before Congress is done for the year.

Yesterday, the Republican chairmen of the House and Senate education committees offered legislation to erase the 9.5 percent guarantee and shift the savings to teachers.

Teachers who spend five years in poor schools and in the fields of math, science and special education would get as much as $17,500 in loan forgiveness, more than triple the current aid.

'This is obviously a much better use of these funds than simply lining the pockets of lenders,' said GOP Sen. Judd Gregg of New Hampshire, chairman of the Senate Health, Education, Labor and Pensions Committee.

The Republican plan would last for just one year. Sponsors say they would seek a permanent solution during the renewal of the higher education law next year.

The top Democrat on the House Education and the Workforce Committee, Rep. George Miller of California, said Dem-ocrats would support the bill if it were the only choice that Republican leaders offered before Congress adjourned.

Sen. Edward Kennedy of Massachusetts, the top Democrat on the Senate committee, said that if Republicans were serious, 'Congress will act immediately to end this rip-off once and for all.' "
__________________________________________

Note how quickly Congress got on top of this issue. How can we get them to take notice of OUR issue?

Posted by Diana at 10:39 AM | Permalink | Comments (0)

This Washington Post opinion column (free registration required) outlines the latest student loan company swindle:

"Thanks to loopholes in the student loan system, financial institutions that lend to students will earn an unprecedented $1 billion over the next year. None of that money will go to students. All of it will go to the lenders, and all of it will come from you, the American taxpayer. It would be a scandal -- if, that is, anybody were upset about it."

The column also notes that "the student loan industry has contributed about $750,000 to the 49 Republican and Democratic members of the House education committee in the past 18 months."

Read more about the loophole issue in this Daily Nebraskan article, which deals specifically with the lender Nelnet. "By dusting off old student loans and repackaging them as new, the loan agency has collected more than $124 million in loose change from the pockets of taxpayers. Old loans become new when Nelnet augments a portfolio of old loans with new student loans – utilizing government loopholes that have some industry watchdogs questioning the company’s ethics."

Will any of these journalists notice that the student loan industry is fleecing those of us who consolidated at high interest rates as well?

Posted by Diana at 11:17 AM | Permalink | Comments (1)

I found an interesting commentary in the Christian Science Monitor regarding the money the student loan industry donates to Congressional Representatives.

"Federal Election Commission (FEC) records show that student loan and related industry officials contributed mightily (almost $1 million) to many of the 49 members serving on the House Committee on Education and the Workforce. ... Sallie Mae, no surprise, was the largest donor to those members, giving some $185,000 over the past 18 months.

***
Whose dollars will hold sway? Stay tuned. The bill [H.R. 4283] is stalled over partisan bickering. But when the money flow to politicians can be so clearly connected to the development of this education bill, the need for voters to better hold politicians accountable - and for politicians to avoid even the appearance of being bought off - is plain."

Posted by Diana at 11:23 AM | Permalink | Comments (6)

While this doesn't deal directly with the issue of refinancing consolidation loans, it seems important to note this article from PR Web that notes: "A petition by Congressman John Boucher (R-Ohio), seeks to eliminate consolidated fixed interest rates entirely. With the federal cap on student loans as high as 8.25%, Rep. Boucher's proposal could equate to higher monthly payments and thousands of dollars in unnecessarily paid interest for student borrowers."

The article also mentions Presidential candidate John Kerry's take: "'This proposal would leave thousands of struggling students with thousands of dollars in higher interest payments on their student loans. This will do a great service to lenders, but cause great harm to students.'"

Nice to see the media and Kerry noticing that a proposed bill would hurt students when they're trying to pay back their loans after graduation. Now, how about noticing that little lack of refinancing options for graduates who've consolidated?

Posted by Diana at 11:52 AM | Permalink | Comments (2)

The Minneapolis Star Tribune (free subscription) ran an editorial this week about the continued need for student loan consolidation. Citing the Republican backed legislation in the works the newspaper is arguing the needs of loan consolidation to help recent grads manage the growing cost of higher education.

"Now, in the face of tightening fiscal pressure, congressional Republicans instead are portraying fixed-rate student loan consolidation as a federal subsidy for well-heeled young professionals. They say it is consuming tax money that might otherwise be used to provide more help to needy students.

A skeptical view of that argument is warranted, given how little eagerness Congress has been displaying for helping students. Texas Democratic Rep. Silvestre Reyes voiced an alternative theory about GOP thinking: "The White House is again resorting to penalties against the most vulnerable Americans in order to finance the war in Iraq," he told the El Paso Times. Other critics say the change is being sold to Congress by big players in the student loan industry, which stand to gain financially if fixed-rate consolidation disappears. Besides, the Bush administration has never shown a reluctance to finance tax-cut benefits for really well-heeled Americans that reduce government's ability to finance program benefits for the poor.

Whether the real goal is more money for the military, the lenders or needy college students, the way to get it should not be to add to the repayment cost of student loans. Congress had it right in 1986: The nation has an interest in helping recent college grads establish their careers. Loan consolidations fixed at today's low rate levels will give those careers important financial breathing room. Providing that opportunity is the least the federal government can and should do for debt-burdened college students."

Posted by Liz at 02:05 PM | Permalink | Comments (0)

Last week we told you about a collection of Education Lobbyists who were not satisfied with the recent Congressional efforts. The group sent letters to the Committee on Higher Education about issues they found with H.R. 4283. Today the Chronicle of Higher Education reports that two House Republicans have fired back at the Lobbyists. (Sorry, the story will only be available for 5 days without subscription.) Stephen Burd of the Chronicle writes:

"In a sharply written letter that they mailed to the college groups on Monday, the representatives -- John A. Boehner, the Ohio Republican who heads the House Committee on Education and the Workforce, and Howard P. (Buck) McKeon, the California Republican who leads the panel's subcommittee on higher education -- expressed outrage that the lobbyists called for "billions in new federal spending" on higher education at the same time that they "oppose reforms that would give more power to higher-education consumers and encourage federally subsidized colleges and universities to be more accountable."
...
"College lobbyists who had seen the congressmen's letter said they found it disheartening. "While their letter is high on rhetoric, they refuse to acknowledge the many problems in the bill and pointedly ignore the dozens of proposed solutions we offered," said Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, which had written to the lawmakers on behalf of itself and 44 other college groups."
...
"Mr. Hartle said that colleges would take them up on that offer. "The letter's rhetoric is pretty harsh, and that's probably in response to some of the rhetoric in the letters they received from us," he said. "But their bottom line is that they want concrete proposals with legislative language to make changes. So the onus is on us to provide them with that."

Posted by Liz at 01:58 PM | Permalink | Comments (0)

The Daily Iowan (the University of Iowa's newspaper) editorial board wrote a piece today on the plus' and minus' of student loan consolidation. The story mostly focus' on their recommendation of changing the consolidation program to a variable interest rate as a compromise between Republican and Democratic lawmakers.

"Currently, graduating students can consolidate their loans and lock in an interest rate for as long as 30 years. That interest rate is determined by the interest rate when the students graduate. Graduating now? You'd pay off your college loans at a 35-year low. Graduated five years ago? You'd still be paying off college at a much higher interest rate for the exact same degree. This system pushes students to graduate based on the market, rather than their academic career."

"A variable interest rate, however, would vary payments based on the contemporary interest rate. That would put students who graduated five years ago - but lost their jobs when the economy took a nosedive - in the same position as a student graduating now. When the economy recovers, both graduates would be in a better position to pay back their loans."
...
"Critics point to the difficulties of those entering public-service careers to pay of their loans at even these small interest rates. A difference of a few thousand dollars a year, which would happen if the economy grew and interest rates shot up, would be a crushing blow to such people, because their salaries do not tend to rise with the economy. This is a crucial problem that must be addressed by the reauthorization of this bill. Particularly for those who graduate when the economy is strong, paying back student loans is already a hardship. This bill must include a provision for loan forgiveness. Often available to teachers by both state and local agencies, loan forgiveness for an expanded number of careers would turn these vital jobs into fiscally viable options for students graduating with loans."

"The Higher Education Act is designed to offer education to a larger slice of the American public. It is also designed so we can learn from our mistakes; the law is not set in stone. We need to take advantage of this chance to help more incoming students get the funds they need to go to school, rather than keeping the money tied up subsidizing bank profit."

Posted by Liz at 01:06 PM | Permalink | Comments (0)

The Campaign for America's Future and MoveOn have organized a new site called Send Bush Your Student Loan Bill. The site (which is supported by ClickBack America, PunkVoter, United States Student Association and ACORN) has you send an email to the President as an invoice for the extra $5,500 that it will cost per student on their student loans under the rules of HR. 4283. They have additional links to facts on the growing cost of higher education and the pitfalls of the College Access and Opportunity Act. Definitely go check it out!

Posted by Liz at 12:32 PM | Permalink | Comments (0)

The Houston Chronicle is running an article (that appears to be reprinted from the Albany Times Union) about the pitfalls of consolidation... specifically the one-time consolidation rule.

"It was never meant to be a refinancing bonanza," said Tom Joyce, a spokesman for student loan giant Sallie Mae.

While a handful of laws have been proposed that would allow borrowers to refinance more than once, there appears to be little political impetus in Washington to adopt any of them. Rep. JohnBoehner, the Ohio Republican who is chairman of the House of Representatives' Education and the Workforce Committee, said in March that reconsolidation is "dead as a doornail," according to a higher education newsletter.
...
There are conflicting reports on whether that proposal would wind up hurting or helping students. Some wonder why students are being asked to shoulder any of this burden.

"Student loans shouldn't be a profit-making means," said Miriam Kramer, higher education coordinator for the New York Public Interest Research Group, which is partly supported by student money. The group backs reconsolidation legislation.

Variable-rate proponents argue that the switch will take away the inequity many face by consolidating at the wrong time. But that's of little comfort to those who consolidated when rates were at their apex.

Posted by Liz at 04:12 PM | Permalink | Comments (3)

Another story on H.R. 4283. After a cursory review of H.R. 4283, I've not seen anything in it that helps us on the refinancing front. As far as I can see, it contains no provisions on that issue. But the stories on the bill are interesting, if only for the dialogue they raise, and the almost anti-graduate sentiments that come out, like the following:

"Said Jim Boyle, College Parents of America's president: 'In a situation where there's a zero-sum game going on when it comes to budgets for higher education, our group wants to see money allocated to current and future college students, not to those who have already graduated.' "

Also note this MSN article urging borrowers to consolidate. As a nice change, the author actually talks about the one-time consolidation rule and how it screws us:

The bad news for the already-consolidated

Many borrowers locked in what seemed like great deals in 2000 -- only to see the prevailing rate drop by more than four percentage points since then.

'My daughter consolidated her $45,000 in debt just before (Federal Reserve Chairman Alan) Greenspan started lowering interest rates,' fumed Steve Lustig of Greenwood Village, Colo. 'I’ve called, written and e-mailed my congressional delegation (asking them to change the one-consolidation rule) . . . to no avail.'

Lustig said his daughter could save over $9,000 if she could refinance her loans at current rates, but chances for change are slim.

As Michael O’Brien of FinancialAid.com explains, major lenders have billions of dollars of loans in their portfolios that were consolidated at higher rates. Changing those rules would cost them a fortune and, some say, could even require a federal bailout, since the lenders count those loans as rock-solid assets.

The only way you can consolidate again under current rules is if you have another loan to wrap into the package. Even in that case, you won’t be able to lower the rate on the loans you’ve already consolidated. Remember, the consolidated rate is based on a weighted average of the rates on the underlying loans.

Your best bet: pay your loans off as quickly as possible. An extra $100 a month could pay off that $20,000 loan in half the time and save you over $12,000 in interest.

Posted by Diana at 09:51 AM | Permalink | Comments (0)

In today's Progress Report from the Center for American Progress there's an "Under The Radar" alert about H.R. 4283 (although not specifically name-checked). According to the Progress Report, "Figures released last week by the Department of Education "show the share of full-time college students who borrowed to pay for college rose from 30% in 1990 to 45% in 2000" I haven't come across this study so if anyone finds it please let us know.
If highly trafficked sources like the Progress Report keep up the Higher Education discussion, hopefully talk we can get a serious debate on the table in the upcoming election.

Posted by Liz at 10:52 AM | Permalink | Comments (0)

Michelle Singletary's Washington Post article grades The College Access & Opportunity Act. (The Washinton Post site requires registration to read the article, but it's free.)

• Thumbs down (way down) for a move that would change from fixed to variable the interest rate for consolidation loans. This is probably the most controversial issue in the bill. Anyone who has taken out student loans should be paying attention to this proposal. Right now, student borrowers can bundle their various loans into one low, fixed-rate loan that can be stretched out as long as 30 years. But we all know that interest rates are not likely to stay as low as they have been recently. If the provision passes and the loan rate is changed to variable, a lot of people will pay thousands of dollars more on their consolidated student loans.

A big thanks to Michelle Singletary for tirelessly talking about student loan consolidation (in particular the one-time consolidation rule) to so many different media sources. In addition to the Washington Post and syndicated columns around the country, she can now also be heard on NPR's Tuesday show "Day to Day".

Posted by Diana at 11:40 AM | Permalink | Comments (0)

The various members of the House Subcommittee for 21st Century Competitiveness (the House subcommittee where all higher education legislation is debated) have received a total of $82,700 from Sallie Mae to date.

Is there a reason that all legislation that is debated in this committee benefits the student loan lenders LIKE Sallie Mae instead of the student borrowers?

Posted by Liz at 11:49 AM | Permalink | Comments (0)

The Washington Bureau of KnightRidder published a breakdown today of the student loan debate by what each party is pushing as a solution. Interestingly the author of the story doesn't believe the student loan issues will be resolved with the reauthorization of the Higher Education Act.

The political debate over the student-loan program comes in the midst of the debate over reauthorizing the Higher Education Act, which pays for the government's educational-loan programs. It was introduced by the education committee's Boehner last week. While the act isn't likely to pass this year, the issue will come up again during the next presidential term.

Posted by Liz at 03:39 PM | Permalink | Comments (0)

Another opinion column about the student consolidation loan interest rate debate.

Posted by Diana at 04:25 PM | Permalink | Comments (0)

The Kerry campaign released a statement on student loans in which the Senator stated the he was against eliminating consolidation at fixed rates. While it makes no mention of the refinancing issue, it seems to me that Kerry's statement backs us up a little bit: "We need a market-based auction where banks get student loan business based on their ability to offer the best service at the lowest price."

Posted by Diana at 10:36 AM | Permalink | Comments (2)

This article from the Heritage Foundation by Krista Kafer seems to back up Rep. John Boehner's claims that the federal consolidation program benefits the rich folks. Heritage is a conservative foundation, so not too surprising that they'd back up Rep. Boehner's claims, but I think this has mostly been refuted by Michelle Singletary's article (posted previously).

Posted by Diana at 10:29 AM | Permalink | Comments (0)

Another good article from Michelle Singletary calling out Rep. John Boehner, R-Ohio, chairman of the House Committee on Education and the Workforce for not being straight with the facts on the consolidation loan program.

"To back up his claim, Boehner used information from a report by the General Accounting Office that he says found that the chief beneficiaries of federal consolidation loans are not low- or middle-income students striving for college, but higher-income individuals who have graduated and entered the workforce.

Really?

Because I read the GAO report, and it does not say consolidation loans generally benefit rich people. Boehner didn't use the word rich, but that's what is implied in his letter.

Notice Boehner used the words 'higher-income.' His assertion may be true, and yet it is very misleading.

What the GAO report said is that the average income level for those who consolidate their student loans is $47,150. That's only modestly above the median U.S. household income of $42,000.

So technically, people who consolidate their student loans do have incomes higher than those who don't consolidate. I would think earning $47,000 a year still qualifies you as middle-income."

Posted by Diana at 10:00 AM | Permalink | Comments (0)

A Houston Chronicle article by Shannon Buggs provides some good reasoning to back up the idea of allowing students to refinance consolidation loans.

"With this being an election year and MTV declaring the votes of 20 million people age 18 to 30 could decide the presidency, both political parties should be trying to woo young voters by working overtime to update and approve changes to the Higher Education Act.

But so many issues are swirling around this law, it would be a surprise if both chambers approved anything before the election. Congress is considering:

...

Modifying student loan consolidation rules to allow multiple refinancings or eliminate fixed interest rates on one-time consolidations. This is the hot issue now.

The consolidation debate centers on whether to spend limited public dollars on grants to current and future students, or on subsidies that lower the repayment costs of former students.

But that's the wrong way to look at it.

The government has a financial stake in helping both groups.

The more educated the taxpaying populace is, the more income it earns and more taxes it remits. Plus, former college students are better able to buy home