A coalition of financial aid administrators, parents, loan providers and organizations (including NASFAA) today proposed a five-part plan to increase access to higher education by bolstering the federal student loan program.
The Coalition for Better Student Loans has sent its proposal to Congress, which is beginning debate on the reauthorization of the Higher Education Act. The recommendations include increasing Stafford loan limits, providing relief from origination fees, offering more flexible repayment options, maintaining a viable loan consolidation program, and extending loan forgiveness to borrowers in certain occupations.
The Coalition also released the results of a survey of likely voters that showed overwhelming support for federal student loans, and strong backing for enhancing the program.
"We all recognize that the ideal option would be to increase grant aid to all students who have a financial need," said Dallas Martin, president of NASFAA, "However, limited federal budget resources will mean a continued need for federal student loans. Fortunately, we have a vibrant and successful program. Today we recommend some important steps to bolster that program."
Martin went on to note that "When the various higher education associations presented their reauthorization positions earlier this year, there was broad agreement on most issues. However, in the area of loan limits, there were noticeable differences. Since then my staff and I have been working with a number of major associations and loan providers to develop a consensus loan proposal to advance during this reauthorization.
"While this consensus proposal does not replace NASFAA's original recommendations that we will continue to advocate as the best Title IV student aid policy position overall, the Coalition for Better Student Loans proposal does offer a viable compromise that will garner greater support," Martin said. "I believe working together offers a far greater opportunity for serious consideration and enactment of the proposal than if individual groups simply advocate their own positions. A great deal of effort and negotiation has gone into the development of the consensus proposal. I hope that our Members will fully support it. The consensus proposal is very similar to NASFAA's and supports the goals and policy positions that we advocate."
The Coalition's Recommendations
- Increase Stafford loan limits: Borrowing limits on federal student loans have not changed since 1992 and freshman loan limits have essentially been unchanged since 1972. The result of these outdated limits is considerable evidence that students are increasingly forced to take other measures to fund their education, including working longer hours and taking out other types of loans that offer less favorable terms.
The Coalition proposes increasing loan limits in each of the first two years of postsecondary education and creating "flexible borrowing accounts" for the remainder of undergraduate study (see Excel chart). The Coalition also recommends increasing loan limits for graduate and professional students. To minimize unnecessary borrowing, the Coalition proposes giving schools flexibility to set lower loan limits for entire groups of students.
- Provide origination fee relief: The origination fee was established as a temporary measure in 1981, yet 20 years later it is still being charged to students.
The Coalition proposes providing relief for all students from this education tax, but at a minimum the group recommends targeting such relief to subsidized Stafford loan borrowers.
- Provide more flexible repayment options: Student loan borrowers generally have 10 years to repay their student loans under federal law. The current repayment options can result in unmanageable monthly payments for some borrowers first entering the workforce.
The Coalition proposes three options for these borrowers:
- Targeted assistance to these borrowers through an interest-only plan (borrowers pay only the amount of accruing interest for two years)
- A partial interest plan (borrowers with high debt and modest income would pay only 50 percent of the interest for two years); and
- Expansion of the current extended repayment concept.
- Maintain a viable loan consolidation program: Loan consolidation was originally created by Congress to simplify the process of loan repayment for borrowers with multiple lenders and to help lower monthly payments for borrowers in difficult financial circumstances.
The Coalition supports use of consolidation loans for those original purposes. Student loan consolidation was never intended to be a refinancing mechanism. The Coalition opposes proposals to permit consolidated loans to be refinanced because it would drain crucial federal resources needed for incoming or current students.
The Coalition proposes:
- Creating a consolidation interest rate structure that tracks the Stafford loan program;
- Retaining the single holder rule;
- Closing the Perkins loan consolidation loophole to prevent circumvention of the single holder rule (Perkins Loans should continue to be included in consolidation loans. However, some consolidation firms treat the school as a separate "loan holder" to get around the single holder rule. Congress needs to clarify the existing law.); and
- Charging a fee to consolidation borrowers, if necessary, to offset the cost of student loan improvements.
- Extend loan forgiveness to those working in certain highly needed occupations: Borrowers leaving school with significant debt should have some relief if they enter lower paying, high-need career fields such as teaching in low-income areas.
The Coalition proposes Congress provide $1 billion in funds for such loan forgiveness programs.
"With their below-market interest rates, federal student loans offer low- and middle -income students the opportunity to invest in themselves regardless of their credit history," said Brett Lief, president, National Council of Higher Education Loan Programs. "Compared to interest rates on unsecured consumer credit, the value of federal student loans to a student who has no credit history, no co-signer and no chance for a private loan is virtually 'priceless.'"
Survey Results
The Coalition also commissioned a survey of 800 likely voters, conducted by Public Opinion Strategies and Hart Research. The findings include:
- 83 percent feel the federal student loan program is more important today than it was a few years ago.
- 88 percent say Congress should increase the current maximum Stafford loan limits so that students and their families can borrow more money to pay for college.
- 81 percent support offering greater financial assistance to current and future students, as opposed to those who have graduated college.
"The coming together of this coalition shows the overwhelming support among our members for increasing access to higher education," said Joe Belew, president, Consumer Bankers Association. "As an industry, we owe it to students to ensure the federal student loan program fully serves their needs."
Six financial aid administrators (one from each region) have volunteered to serve as on-campus press contacts for the Coalition:
- Catherine Breuer, Normandale Community College, MN
- Youlonda Copeland-Morgan, Harvey Mudd College, CA
- Karen Fooks, University of Florida
- Myron L. Hanson, The University of Montana
- David Myette, Champlain College, VT (NASFAA National Chair)
- Christine Zuzack, Indiana University of Pennsylvania
Useful Advocacy Tools
The Coalition has posted on its Web site at www.betterstudentloans.org several documents that provide useful information for when aid administrators need to talk to the press or contact their elected officials, including "Fact or Fiction" and "Message Points."
The Coalition for Better Student Loans is a group of financial aid administrators, parents, loan providers and organizations representing more than 2,000 colleges and universities that are working together to improve the federal student loan program and increase access to higher education for more students. The group is composed of the American Council on Education (ACE), Association of American Universities (AAU), College Parents of America (CPA), Consumer Bankers Association (CBA), Education Finance Council (EFC), National Association of Independent Colleges and Universities (NAICU), National Association of State Universities and Land-Grant Colleges (NASULGC), National Association of Student Financial Aid Administrators (NASFAA), National Council of Higher Education Loan Programs (NCHELP), and Sallie Mae.
Posted September 3, 2003 on www.NASFAA.org, Web Site of the
National Association of Student Financial Aid Administrators
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