Congress Poised to Tackle Student Loans

[Jul 15, 2007.]

The $85 billion-dollar student loan industry is now under Congressional scrutiny.

Education committees in the Senate and House have O.K.'d legislation designed to overhaul the country's student loan program. The overhaul is designed to help increase financial aid to students and make it easier for recent college graduates to repay their loans.

In recent months, investigators at both the federal and the state levels have uncovered conflicts of interest involving lending institutions, government officials, and university leaders.

Senator Edward Kennedy was quoted as saying, "This legislation will help reverse the crisis in college affordability. It will restore balance to our broken student loan system by reducing unnecessary lender subsidies."

Under the Senate version of the legislation, subsidies to lenders would be reduced by $18.3 billion. The House would reduce subsidies by approximately $19 billion. Both pieces of legislation would earmark $1 billion for deficit reduction and reserve the remainder of the funds for financial aid for college students.

Meanwhile, the House education chairman, Rep. George Miller, was quoted as saying, "This is the biggest single investment in college financial aid since the GI Bill."

Still, lenders worry the legislation will cut benefits to students through the subsidy reductions. In fact, some lenders might be led to quit the student loan business altogether as a result of Congressional action.

The Executive Director of America's Student Loan Providers, Kevin Bruns, stated, "The budget cuts would make student loans uneconomical for lenders. One would have to suspend the law of economics to believe these cuts won't be passed on to students and parents in some fashion."

The controversy comes at a time when families are more worried than ever about college finances. With the cost of a college education ever on the increase, students must turn to loans to pay the cost. And some of those loans could keep them indebted for years, preventing them from buying their own homes and making other major purchases.

Julie Ann Amos
July 15th 2007

Recent Student Loan News

• Experts Offer Financial Help to College Students
  Now that summer's here, high school students may have some extra time on their hands. And financial experts note that this may be the perfect time for students thinking about college to plan out their financial strategies. [July 13th 2007]


• Financially-Smart Strategies for Summer
  With the arrival of summer may come the temptation to go on a shopping spree—at your vacation destination, on the Internet, or at your local mall. However, financial experts recommend being financially smart this summer by following some tried-and-true credit management techniques. [July 11th 2007]


• University Settles Student Loan Case
  Columbia University has agreed to a settlement in connection with its role in a nationwide student loan scandal. [June 29th 2007]


• Student Loan Rates to Rise Only Slightly
  There's good news on the interest rate front for college students. The rates on the two major federal student loan programs will increase only slightly this year, making a college education a little more affordable. [June 16th 2007]


• Student Loans Well Worth the Cost
  At a time when you may be feeling as if you need to take out a loan in order to pay the costs of your daily commute, you may be wondering whether it's worth it to go to the trouble and expense of taking out student loans. [June 14th 2007]


• Student Loan Debt Crimps Graduates' Style
  While a college education is undoubtedly a wise investment in this competitive marketplace, a number of college graduates are finding that their student loan bills are crimping their style. [June 13th 2007]


• Repayment Options Abound for Those Consolidating Student Loans This Year
  College graduates who choose to consolidate their student loans this year have a number of repayment options from which to choose. The sheer variety can be mind-boggling to the uninitiated. [June 11th 2007]