Fewer student loan lenders under bill
By Kristen Hoverman
The Collegian
On Wednesday, the U.S. House
began review of a bill to cut student loan subsidies as part of the reauthorization
of the Higher Education Act.
If approved, House Resolution 609, the College Access and Opportunity
Act, would cut out competition in the student loan program. In addition,
it imposes new fees on students who default on loans or consolidate them,
and higher fees on parents who get loans to help pay for their children’s
college education.
“Students and parents lose out by getting lousy loans,” said
columnist Nancy Fay, mother of two college students. “The General
Accounting Office reports that people who consolidate their loans are
three times less likely to default on their student loans, even though
their loan balances are twice as large.”
The Single Holder Rule ensures that big lenders keep their customers safe
from competition, Fay said.
“If students get their loans from a single lender, they cannot change
that lender, even if another lender offers them better rates, terms or
service,” she said.
Wire magazine in New Hampshire recently reported how Diana Lamphiere,
an attorney with more than $100,000 in debt after law school, was stuck
with an 8.25 percent interest rate on that total.
She had consolidated her loans earlier in her college career, but under
current education loan policies she could only consolidate once. Today's
loans have lower interest rates, but she's locked into the higher rate
of interest.
On average in the United States federal aid accounts for 54 percent of
money students receive.
Annually, 60 to 65 percent of
the campus population at Fresno State receives loans, said director of
financial aid Maria Hernandez.
The bill will lower subsidies that loan companies receive and eliminate
fixed interest on loans.
“At this point lenders charge 3 percent interest in processing and
holding,” Hernandez said. “Many of our lenders have opted
for zero percent.
“It is a reflection of the area,” she said. “Last year
we disbersed about $22.5 million in subsidized Stafford loans (need-based
loans) and almost $11 million in unsubsidized loans.”
The Financial Aid department at Fresno State annually lists 10 to 12 lenders
recommended to students.
“We try to work with lenders that are more inclined to work with
students,” Hernandez said. “Some lenders are in it more for
profit and are not likely to be on our list.”
The bill would also give lawmakers authority to determine the size of
the U.S. Education Department's yearly allowance, putting federal loan
allowances in competition with other areas of spending.
“This may tighten the reigns for lenders,” Hernandez said.
“It is somewhat a competitive market, but they will still offer
incentives to attract student borrowers.
“We discourage students from getting loans if they don’t need
to. However, if it means getting a college education, that student becomes
more marketable in the future.”
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