H.R. 5 would amend the Higher Education Act of 1965 to reduce interest rates for student borrowers.
Detailed Summary
College Student Relief Act of 2007 - Amends the Higher Education Act of 1965 to phase-in cuts in the interest rate charged undergraduate student borrowers under the Federal Family Education Loan (FFEL) and Direct Loan (DL) programs, thereby reducing such rate from 6.8% in July 2006 to 3.4% in July 2011.
Limits FFEL lender insurance to 95% of the unpaid balance of such loans. (Currently, 97% of a FFEL issued after June 2006 is federally-insured.)
Provides for graduated reductions in the percentage of defaulted FFEL loan collections a guaranty agency is allowed to retain until, beginning in October 2010, it is equal to the average rate paid to collection agencies that have contracts with the Secretary of Education.
Eliminates exceptional performer status for lenders, servicers, and guaranty agencies, which rewards such entities for high due diligence in FFEL collection.
Reduces special allowance payments made to FFEL lenders to compensate them for the difference between FFEL interest rates and market rates. Exempts small lenders from such reduction.
Increases the loan fee charged FFEL lenders from .5% to 1% of the principal amount of loans disbursed after June 2007. Prohibits its collection from borrowers.
Increases, after June 2007, the rebate fee charged a holder of FFEL consolidated loans, provided that at least 90% of the total principal and accrued unpaid interest outstanding on loans held by such holder are such loans.
Status of the Legislation
Latest Major Action: 1/17/2007: Referred to Senate committee. Status: Received in the Senate and Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
Points in Favor
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Points Against
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Visitor Comments
This won't be a good thing
Whenever the government subsidizes college, the colleges use the subsidies to increase their budget. Then tuition will stay the same or increase, while taxes increase.
Akilah
Some students struggle to get undergraduate and graduate degrees and do need to take loans to get through. It is a wise move to roll back interest rates for most students as are heavily laden with education debt upon graduation.
Krlock
Seems to be an important role of government and a wise investment in the future. I don't know of anyone else that is gurenteed 8%.
6832jmg
Bad bill does not help people trying to go to college only those paying back their loans. If you garduated have a job you should be able to make your payments with out government subsidy.
collegegrad
its not a bad bill! If you are fortunate not have to take out loans then congrats! If you do, then this is a huge burden that doesn't seem so big anymore. Plus, this type of investment is worth the money that must be paid back
Why won't this be a good thing?
I don't see how this bill would allow colleges to increase their budgets, since it does NOT give money to them directly. What this bill would do is provide financial relief to those who depend on federal loans to fund their education.
From the federal government's point of view, something like this would probably be a good idea, because a more educated population produces more, and therefore pays more taxes. For them, something like this is really just a wise investment.
This bill would disproportionally benefit students from lower income households, because they are the most dependent on such loans. Therefore, this bill would promote equal opportunity for those facing the greatest financial obstacles to higher education.
Lastly, if universities can expand their budgets without increasing tuition, I'd count that as a win.
Amie
Those college graduates who can't pay back their loans need aid too. With a tightening job market some college grads are still waiting tables or doing other jobs just to get by. You know most college grads these days return to their parents house UNTIL they can pay back their loans because the loans are so high? I think this is great.
Dan
If you have to borrow for college, figure out how much it will cost and study something that will enable you to repay. Shifting college expenses away from the student (which subsidizing interest does) distorts the economies of higher education. The cost should fall on the student, who determines the expenses (via school selection) and field of study. The resulting efficiency increase ultimately benefits everyone.
Matt
I say keep it high; raise the price of tuition too! I'm tired of whiners skimming off the government and other tax payers with a sob story. I paid my way through college and did it WITHOUT leaching off of my parents.
Keep the interest rates high; raise tuition too. Maybe that way people looking for their Mrs. Degree and/or handouts will be a bit more reluctant to waste other people’s time and efforts in addition to freeing up resources.
Forced to work as a server or other such job. Are you kidding me, these people truly lack ambition and drive. They have plenty of ability to spin a topic to blame society and/or the economy. Put that talent to use and develop a worthy resume.
Steve
@Matt: And I'm sure your state college was happy to have you - as that's one of the few places anyone can AFFORD to "work through college" without taking out student loans.
I worked two jobs during college, earned scholarships, borrowed from my parents and STILL had to take out student loans simply by virtue of where I chose to go to school.
Am I asking for the government to give me money? No. But a better interest rate would be nice, especially if it meant the quality of a college education wouldn't have to suffer from it.
For the slow students like Matt
With lower interest rates more people can earn degrees. People with degrees earn more and pay taxes on bigger checks for the next 35 years. That is what is known as a good deal for the government. They also get company healthcare not medicaid, and the spend more money creating jobs.
This bill will help more than it hurts
Well, Matt, I used to think the same way you do until I entered the real world. I worked my way through college and worked my husband through college with my Masters degree. Steve is right. We still had to take out loans.
And for those who think this is a free ride for everyone, read the fine print. This bill is for those who are going into public service and such. This will help people who are out to help others. It will allow more qualified individuals to be teachers. It will make the job of public defender more appealing to the law school graduate, and hopefully help even the legal field.
Also, no one has mentioned how many people start college, rack up student loans and then don't finish. This bill does not assist those who give up. It helps those who have finished and then make use of their degree helping society. What could be so wrong with that?
Unemployed
What everybody failed to realize is that this bill left 1000's of people unemployed because it stripp ALL private lenders from being able to lend federal funding without making a profit, not to mention the increase on our tax dollars this will cause.
Frank
The interest rates ae currently inflated by the private lenders.
Sallie Mae currently has three corporate jets, the Chairman has made $250 million in the last 5 years and has anothe $250 million in stock.
This isn't a matter of subsidy - it's about eliminating the waste among a few greedy bastards.
Study this issue a little better. Some of these comments aren't in touch with reality.