The reasons to eliminate the Federal Family Education Loan Program (FFELP) grow by the lawsuit. FFELP allows private banks to receive billions of dollars in government subsidies to issue federal student loans. However, participating lenders have become notorious for exploiting the program by cutting corners and taking advantage of students. Recently, according to Bunsinessinsider.com, banking giants JPMorgan and Citigroup have joined the fray and are being sued for conspiring with education financing company Nelnet to falsify government claims and illegally recruit student borrowers.
Nelnet, which has a history of shady dealings with financial aid administrators, has been accused of issuing false reports to the U.S. Department of Education in order to receive more subsidies under the FFELP program. The charges include illegally pushing students to apply for loans, paying telemarketers to aggressively sell packages, and engaging in false advertising to increase sales. While Nelnet was in litigation for these accusations, JPMorgan and Citigroup loaned them $500 million and provided and additional $120 million themselves for assistance. Nelnet faced similar charges by the New York and Nebraska Attorney General offices as recently as 2007.
Congress is working to address these problems by passing the Student Aid and Fiscal Responsibility Act (HR 3221), which would end FFELP. Private lenders are trying to maintain their profits in the student loan industry by developing a counter-proposal. Instead of having Congress invest in low-income financial aid programs like the Pell grant and Perkins loan, lenders want those dollars to go towards banking fees and other services that pad the pockets of executives.
Bank lobbyists argue that direct government lending limits competition. Yet with all the back-dealings and illegal solicitation from private lenders, FFELP runs counter to everything free market principles stand for. Instead, direct government loans offer students more secure aid with increased public accountability. Congress must send President Obama a student aid reform bill this year that eliminates FFELP and invest in direct student aid to help reduce the level of debt students graduate with, allowing them to grow the economy and help America regain its educational prestige.
Oct 27, 2009
Oct 23, 2009
Regulating the “Wild West” of Student Loans
The need for strengthened consumer protection in the lending industry became painfully evident as millions of American lost their homes, jobs, or both in the wake of the recent financial meltdown. While healthcare still dominates congressional debate, legislation in the U.S. House of Representatives is being crafted to create a federal Consumer Financial Protection Agency to regulate forms of consumer credit traditionally subject to little government oversight. College affordability advocates, including the United States Student Association, are working to ensure that private student loans, the “wild west of lending” according to New York’s Attorney General, fall under the jurisdiction of the new agency.
This is where it gets tricky. Representative Barney Frank (D-MA) is authoring an exemption for small businesses and local merchants that would suffer under excessive regulation. That makes sense; after all, it’s not the mom and pop shops we need to worry about. The problem is that the exemption language is vague and could be interpreted to include higher education institutions that issue private loans, not the type of businesses the carve out was intended to protect.
The concern is over aid issued by these higher education companies called “gap” loans. Because federal loans don’t always cover the entire cost of college, private “gap” loans are offered by institutions to pay the difference between the maximum amount of federal aid and the remaining college cost. While these loans play a necessary role in financial aid, they are often structured as consumer financing, like credit cards, and can reach double-digit interest rates, which leads to higher loan debt and increased student default. Lenders argue excessive regulation will harm students by preventing companies from issuing these loans. Yet, the new agency would only enforce laws that require lenders to inform students about federal loan options and to disclose information about their private loans, such as interest rates and estimated monthly payments.
The USSA supports these regulations that would simply mandate lenders tell the truth about their loans.
This is where it gets tricky. Representative Barney Frank (D-MA) is authoring an exemption for small businesses and local merchants that would suffer under excessive regulation. That makes sense; after all, it’s not the mom and pop shops we need to worry about. The problem is that the exemption language is vague and could be interpreted to include higher education institutions that issue private loans, not the type of businesses the carve out was intended to protect.
The concern is over aid issued by these higher education companies called “gap” loans. Because federal loans don’t always cover the entire cost of college, private “gap” loans are offered by institutions to pay the difference between the maximum amount of federal aid and the remaining college cost. While these loans play a necessary role in financial aid, they are often structured as consumer financing, like credit cards, and can reach double-digit interest rates, which leads to higher loan debt and increased student default. Lenders argue excessive regulation will harm students by preventing companies from issuing these loans. Yet, the new agency would only enforce laws that require lenders to inform students about federal loan options and to disclose information about their private loans, such as interest rates and estimated monthly payments.
The USSA supports these regulations that would simply mandate lenders tell the truth about their loans.
Oct 14, 2009
Students March for Justice
The National Mall in Washington, DC has been the epicenter for many of America's most memorable social justice moments. Last Sunday was no different as tens of thousands of people marched and rallied for LGBT rights during the National Equality March. While many participants were stalwart civil rights activist veterans and seasoned political leaders, young people played a large role in the historic events. Students from New York, Kentucky, and Minnesota spoke to the crowd, which included hundreds of their college-going peers.
The United States Student Association (USSA), the country’s oldest and largest student-led organization, believes that no one should be denied basic human rights on account of sexual orientation or gender identity. “It is important for students to be engaged in the fight for LGBT rights because social justice isn't secured for just one group but for all those who seek a better world,” said Gregory Cendana, the organization’s first openly gay Asian American President.
In addition to the traditional access and affordability barriers to a higher education, LGBT students face potentially unsafe living conditions, homophobic classmates and professors, institutional heterosexism, and an overall lack of university support. "Queer students joined the National Equality March in order to demonstrate that we are tired of injustices and have the numbers to prove it," said USSA Queer Students Coalition chair Nestor Rivera, a student at UC Santa Cruz.
Queer students of color face particular obstacles in the fight for social justice and the USSA works with the community to address some of the specific challenges. “As both queer and students of color, one of the obvious but unique struggles that we face is reconciling the intersection of these identities,” said USSA Queer Students of Color Caucus chair Rich Yap, a student at UCLA.
The National Equality March, and students across the country, showed the world that the LGBT community will no longer allow the dreams of equality and justice to be deferred by political conveniences. The USSA urges all Americans to participate in the National Day of Silence on April 16, 2010.
The United States Student Association (USSA), the country’s oldest and largest student-led organization, believes that no one should be denied basic human rights on account of sexual orientation or gender identity. “It is important for students to be engaged in the fight for LGBT rights because social justice isn't secured for just one group but for all those who seek a better world,” said Gregory Cendana, the organization’s first openly gay Asian American President.
In addition to the traditional access and affordability barriers to a higher education, LGBT students face potentially unsafe living conditions, homophobic classmates and professors, institutional heterosexism, and an overall lack of university support. "Queer students joined the National Equality March in order to demonstrate that we are tired of injustices and have the numbers to prove it," said USSA Queer Students Coalition chair Nestor Rivera, a student at UC Santa Cruz.
Queer students of color face particular obstacles in the fight for social justice and the USSA works with the community to address some of the specific challenges. “As both queer and students of color, one of the obvious but unique struggles that we face is reconciling the intersection of these identities,” said USSA Queer Students of Color Caucus chair Rich Yap, a student at UCLA.
The National Equality March, and students across the country, showed the world that the LGBT community will no longer allow the dreams of equality and justice to be deferred by political conveniences. The USSA urges all Americans to participate in the National Day of Silence on April 16, 2010.
Oct 13, 2009
Access Denied: 2-Year Students Prevented from Receiving Federal Loans
Federal loans are the safest, most stable loans available to students. They don't fall victim to the fluctuations of the market economy, come with low interest rates, and provide flexible repayment plans. Yet roughly 900,000 community college students, nearly 1 in 900,00010, are denied access to these loans because their college administrators choose not participate in federal loan programs, according to a recent Project on Student Debt study. Students of color face even higher barriers to federal aid, with 18% of African-American and 19% of Native American 2-year students lacking access to federal loans.
Without these options, students are forced to mitigate the cost of college by increasing their workload, cutting back on classes, or dropping out altogether.
Student aid reform legislation currently in the U.S. Senate makes unprecedented investments in federal aid programs such as the Pell grant and Perkins loan. Hopefully these historic increases will spur community college administrators into participating in these programs. Such involvement is essential, for while community college tuition and fees are traditionally lower than at 4-year universities, the cost of books and supplies, rent, transportation, and similar expenses are incredibly high and usually exceed tuition and fees.
“Access to college is crucial to the economic future of our nation because America will need a well-educated and trained workforce in order to compete in the global economy. Community colleges are critical to these efforts and the reform proposed in the financial aid system as well as efforts to improve these institutions are welcomed news to students,” said USSA Community College chair Nathan Hanson, a student at Inver Hills in Minnesota. If education is to be the engine driving America's economic prosperity, then community college administrators must allow their students to have access to federal aid; otherwise, the skyrocketing cost of college will continue to deny thousands of hardworking students the dream of attaining a college degree or certificate.
Without these options, students are forced to mitigate the cost of college by increasing their workload, cutting back on classes, or dropping out altogether.
Student aid reform legislation currently in the U.S. Senate makes unprecedented investments in federal aid programs such as the Pell grant and Perkins loan. Hopefully these historic increases will spur community college administrators into participating in these programs. Such involvement is essential, for while community college tuition and fees are traditionally lower than at 4-year universities, the cost of books and supplies, rent, transportation, and similar expenses are incredibly high and usually exceed tuition and fees.
“Access to college is crucial to the economic future of our nation because America will need a well-educated and trained workforce in order to compete in the global economy. Community colleges are critical to these efforts and the reform proposed in the financial aid system as well as efforts to improve these institutions are welcomed news to students,” said USSA Community College chair Nathan Hanson, a student at Inver Hills in Minnesota. If education is to be the engine driving America's economic prosperity, then community college administrators must allow their students to have access to federal aid; otherwise, the skyrocketing cost of college will continue to deny thousands of hardworking students the dream of attaining a college degree or certificate.
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