President Obama recently proposed a new Student Aid Bill of Rights to help take action on the student debt problem, and provide borrowers with more rights and protections. With the current average borrowers student loan debt at $37,172, and the average default rate at nearly 14%, its neither a surprise nor secret that the country is facing a very large crisis due to student loans. President Obama has been a champion of student loans, already having created the Pay As You Earn Repayment Plan, as well as making changes to the current forgiveness programs which has led to people calling it the Obama Student Loan Forgiveness program.
I. Have access to a high-quality, affordable higher education
Higher education continues to be one of the best investments one can make in their own future, so the importance of a college education has never been more important. In January 2015 President Obama proposed a bold plan of making community college completely free for students. This plan would potentially help 9 million people, and make the first two years of college free to students who start their degree at a community college.
College Rating System
The Department of Education is also currently working on developing a rating system for colleges which is expected to be completed by the start of the 2015-2016 school year. This system would provide a measurement that would be easy for anyone to compare colleges with actual data based on historical performances of each college.
Data Used To Rate Colleges
- Average net price of attendance – The average cost a person will pay to attend the school
- Graduation rates – The average number of students who attend and graduate from the college
- Transfer Rates – Measuring students who transfer in, and who are not happy and transfer out of the college
- Employment Rates – Measuring the success of the students in their field of studies post-graduation
- Loan Performance – How well are the students able to repay their loans after receiving their degree.
II. Be Able to easily find the resources they need to pay for college
With the cost of tuition on the rise and higher education continuing to be one of the best investments one can make in their own future, the President realizes the need for people to have access to federal funds to help pay for college. President Obama has helped make aid easier to obtain by increasing the maximum Pell Grant by $1,000 as well as modifying the American Opportunity Tax Credit to be able to claim up to $10,000 as a tax deductible over four years of college.
Simplification of the FAFSA
Further, the Department of Education has simplified the Free Application for Federal Student Aid(FAFSA) application. The average time it takes someone to currently complete this application is 20 minutes, reduced from the initial length of over one hour. The Department of Education has streamlined part of the application to be internally link to the Internal Revenue Database. This allows the Department of Education to view financial records directly through the IRS, instead of having the borrower complete that section of the form. The President has also requested to remove more questions from the application to make it even easier, and to put less restrictions on applying.
Tax Debt Elimination for Forgiven Student Loans
Under the American Opportunity Tax Credit, President Obama has also proposed eliminating any tax debt on student loans forgiven under any of the income driven repayment plans. This would include the Income Based, Income Contingent, and Pay As You Earn repayment plans. Currently, any loan forgiveness may end up with the borrower receiving a 1099-c for the amount forgiven which would need to be claimed on income tax returns. If the proposal of eliminating this tax liability goes through, many borrowers would see light at the end of the tunnel with their student loans.
III. Be able to choose an affordable repayment plan for student loans
Since currently 14% of all student loans are in default status, the President has committed to providing borrowers with affordable repayment plans for their student loans. In December 2012 the Pay As You Earn repayment plan was passed into law. This repayment plan allows borrowers to make affordable monthly payments on their student loans at a maximum of 10% of their discretionary income. This means that new borrowers can always have affordable payments for their student loans, with payments as low as $0.00 per month with loan forgiveness after 20 years.
With the income driven plans, there is almost never a reason for a borrower to be in default on their loans if they are adequately educated about their repayment options. Unfortunately, many of the lenders are not doing a good job of educating their borrowers, and often times the consumer falls into default after seeking help and contacting their lender. This leads into the next student aid bill of rights point.
IV. Receive quality customer service, reliable information, and fair treatment when repaying loans.
As we have previously reported, the Department of Education has found problems at Sallie Mae, the largest student loan lender in the United States. Issues such as miscalculation of income based payments, charging unlawful interest rates on student loans to military members, and unlawful late fees being charged to borrowers. The Department of Education has tried to incentivize servicers to find ways to best serve their borrowers. Lenders are now compensated better depending on the help being provided to borrowers on repayment of their loans and quality of their customer service. The Department of Education will further make sure that all debt collections practices are fair, transparent, and that the fees charged for collecting the debt are reasonable.
Educating Borrowers via Social Outreach
The Department of Education has also created a social media campaign trying to target student loan borrowers to help educate them on the options available. An estimated 3.5 million borrowers were contacted from November 2013 to December 2013. The campaign was focused most on loan repayment options, common mistakes, and general student loan advice.
Student Loan Counseling Tool
The Department of Education created the Student Loan Counseling Tool in 2012 to help educate borrowers who have not yet received loans, and those with existing loans. This can greatly help those in high school who have no knowledge of how loans work, and the gravity of the situation when borrowing many thousands of dollars to pursue a degree. The tool also provides financial planning tips, and provides an estimation of what their debt is likely to be after graduation.
Centralized Student Loan Complaint System
The Secretary of Education will create a website that will give borrowers a simplified and centralized place to file complaints about federal student loan lenders. The borrower would be able to track the complaint and see what type of resolution would be provided to the individual complaint. The DoE would also be able to use all the data collected to evaluate the performance of the servicers. The complaint system would be used for complaints against lenders, servicers, colleges, and collections agencies.
Do you think these new proposed ideas will help the student loan situation in our country? Leave a comment and let us know your thoughts!
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
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.
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.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
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 qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). 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 of 10 years or less. For loan terms of 10 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 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 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 04/23/19. 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 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.