Campus Progress, an organization dedicated to helping “young people to promote progressive solutions to key political and social challenges,” is taking on student loan interest rates. In a recent article titled It’s Our Interest: The Need to Reduce Student Loan Interest Rates, the organization discusses that although interest rates are at historic lows, in-debt student loan borrowers are one group that has not been able to take advantage of these rates to make their debt more affordable.
Campus Progress has criticized states for withdrawing support for public colleges while colleges have continued to push through tuition increases making higher education less affordable, cutting many out of the market for college and driving indebtedness for those that do attend. They also cite as another concern the 13% default rate of recent graduates who go into default within three years of graduating and add that another 26% of “borrowers at five of the major loan-guaranty agencies became delinquent on their loans.”
So what’s the solution? We’ve written here extensively about many suggested reforms to the troublesome student loan system to make this debt more manageable for the millions with school debt that either can’t make their payments or find it increasingly difficult to do so. Campus Progress writes: “It’s time for federal policymakers to take action.” We couldn’t agree more.
We’ve talked about reforms, forgiveness and interest rate modifications here extensively. Campus Progress suggests an interest rate reduction and for private borrowers to be able to consolidate into federal loans. They even crunched some numbers to back up their proposal. They calculate that refinancing all federal loans that are set above 5% interest would save debtors $14 billion in 2013 alone.
Here is a sum-up of Campus Progress’ suggestions:
FFEL (Federal Family Education Loans) issued by private lenders but backed by the federal government are set with a wide range of interest rates – all much higher than they need be. They recommend swapping FFEL loans for Direct loans and/or providing an incentive to private FFEL lenders to refinance these loans at lower interest rates. Campus Progress listed several pieces of existing legislation that could be utilized to accommodate the refinancing.
Private student loans are of utmost concern to Campus Progress (and Tuition.io and anyone else worried about the student loan bubble) because of the lack of flexibility in repayment plans, higher interest rates, notoriously poor customer service and aggressive collection tactics. They suggest a straight swap from private to Direct loans and/or incenting private lenders to refinance at lower rates. Campus Progress also suggests that legislative measures be enacted to protect these borrowers including new bankruptcy debt laws and pay as you earn options.
As with any of the recent recommendations about reforming student loans, the main issue is that even if we pinpoint the optimal solution, it will be of no help if legislators aren’t open to codifying the plan into law. Campus Progress is launching an “It’s Our Interest” national advocacy campaign and hopes to gather opinions from stakeholders on how to best deal with student debt.
For now, whether you have private, federal or a combination of these student loans, you need to know what you owe. Tuition.io’s free student loan tool allows you to view all of your loans in one easy interface, track payments, see prospective pay-off dates and view alternate payment plans.
And check out these recent blogs on student loan reform proposals – we’d love your comments on which plans you think are preferable and why: