Congress Gets Involved with Student Loan Interest Rates

?The White House is working with private colleges and state university systems to improve the transparency of the costs of college, including loans and repayment options.

Congress is attempting to maintain low interest rates on federal education loans while the House Democrats and 10 private colleges and state university systems are trying to make changes targeted at improving the transparency of the costs of college, including loans and the options for repaying them. As Congress tries to end an election-year standoff over maintaining low interest rates on federal education loans, a central issue in financing for students throughout the U.S. higher education system, administration officials announced that Vice President Biden will lead a meeting with university and college presidents in an attempt to focus on the need to provide "clear and useful information" about the costs of college to students and their families.

Interest rates on many student loans are set to double to 6.8 percent this year without new action on rates or an extension of existing law. Those changes would add significant new costs over time for many students already struggling with rising education expenses. Smaller community colleges already cost several thousand dollars annually, and many four-year state schools exceed $20,000 per year. At the top of the heap, private colleges can cost more than $50,000 a year to attend.

Government data has shown that student loans are currently the largest component of average American household debt following home mortgages. At the same time, New York Federal Reserve Bank reports show that overall student loan debt rose 3.4 percent up to $904 billion in the first quarter of this year compared with the final three months of 2011. At the meeting with the university and college presidents, the higher education officials are expected to commit to developing several measures that will assist incoming students as part of the overall financial aid package that begins with the 2013-14 school year. The agenda calls for including clear information about the costs of attending college for one year and all of a student’s options for meeting the bill that clearly differentiate between grants and scholarships, which do not have to be repaid, and loans, which do.
The school officials will also present an example of the payment schedule due for federal student loans after graduation and include more information about default rates as well.

University and college participants include Arizona State University, Miami Dade College, North Carolina Agricultural & Technical State University, the State University System of New York, Syracuse University in New York, the University of Massachusetts System, the University of North Carolina at Chapel Hill, the University System of Maryland, the University of Texas System, and Vassar College in New York.