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Paying Back Student Loans - Grads Vs Banks Vs Congress

One would think that with the horrible economy, graduates who have tried to better themselves with higher education would be able to take advantage of the low interest rates when paying back their student loans. Only it's not that easy...
Thousands upon thousands of graduates in the United States have taken out student loans to pay for their education... and many more will continue to do so as the cost of higher education continues to rise. By the year 2000, approximately 70% of students took our loans to pay for college and post-graduate education. Many of those students consolidated their loans after graduation, unaware that a provision of the Higher Education Act of 1965 would prevent them from ever refinancing those loans.

Now, interest rates on Federal Student Loans have fallen to all time low percentages, a fact much publicized in the media, but very few media outlets mention that thre exists a considerable portion of the population locked into higher interest rates with no hope of refinancing.

Recently, Congresswoman Rosa L. DeLauro (D-CT 3) introduced a bill into the U.S. House of Representatives: H.R. 2505, The College Loan Assistance Act of 2003. This bill proposes to amend the Higher Education Act to allow borrowers to refinance their consolidated loans. The bill was referred to the House Committee on Education and the Workforce on June 18, 2003, the day it was introduced. That is where it sits today.

If any relief from locked-in high interest rates is to be afforded in the near future to the many student borrowers who have consolidated their loans, the general public must be made fully aware of this important issue. No one is really talking about it though.

You or I could go out and buy an SUV right now for less than 1% interest... and may be paying up to 8 or 9% on the money we owe for our educations.

We want to do something about it at www.collegeloanassistanceact.org. We've organized letters to the media, house representatives and senators to get the information out. We've written a petition to be forwarded to congress and have created a message board to share ideas on how to get the word out. Please come take a look and let's take back our educations.

homepage: homepage: http://www.collegeloanassistanceact.org

Does this only apply... 05.Aug.2003 18:25


To Federal Direct student loans? I don't see how it could possibly apply to anything else, even a Stafford-subsidized loan. I mean, there can't be a penalty for early re-payment, right? (At the state level, most private groups are prohibited from penalizing early re-payment).

I guess I'm pretty ignorant of this.

But if you can get a lower-cost fixed-rate loan from a credit union, surely you can use that and pay off your Federal Direct loan, right?

Very interesting though, I'll be perusing your website and looking into this.

higher ed should be free 07.Aug.2003 10:34

open mind

Students attending public universities in most European countries don't have to pay tuition.

But since our money-grubbing country would never go for that, why not offer interest-free federal student loans? If the supposed intention of establishing the federal student loan program was to provide those who could not otherwise come up with the funds to pay for a higher education, then the charging of interest means that it's real purpose is revenue generation for the government off the backs of those who are least able afford a higher education and PENALIZING economically disadvantaged people for trying to receive a level of education beyond what their existing financial circumstances will allow. Whether it's 1% or 8% it's still greedy and immoral. If you get $50,000 you should have to pay $50,000. Period.

Why should students have to pay for the government's time? When the government takes or "withholds" OUR hard-earned money every week in the form of taxes (SS and payroll) does the government pay us any interest when we receive our tax "refunds" or social security checks?

Also, since the government already makes money off American workers through tax collection, why then should taxpayers and future taxpayers have to pay the government more money on top of that?

Not true, open mind 07.Aug.2003 14:36


In most European countries with free higher education, like Sweden, if you attend university, you agree to pay a higher tax rate for the rest of your life. It's the mother of all loans, the interest that keeps on tickin'. As the adage goes, there's no such thing as a free lunch. (or education).

it's a question of values 07.Aug.2003 15:22

still paying back student loans

Some people value having money and other people value living in a country with an educated populace. Corporations favor the former (although if public education was done away with they would change their tune) and I personally favor the latter. But I agree with open mind that there is no moral justification for the government charging interest on loans. Take my money and loan it back to me while charging interest, that's pretty low... And yes, our tax withholdings are an interest free loan to the government, so perhaps we should start charging them interest...

Two points 07.Aug.2003 16:23


Unforunate as it is, we don't live and work in a collective. The government has to collect money from somewhere. If the government didn't charge interest on the loans, it would necessarily mean it would not have as much money to give out to the next generation. Like it or not, under our system of capitalism, inflation happens. If the government loaned $30,000 to students and didn't charge any interest whatsoever, when that money gets paid back 10 years later, the student may have only paid back $25,000 in real dollars.

That only speaks to Federal Direct assistance. Stafford loans are government-sponsored loans from private groups. (And Stafford-subsidized loans are from private groups, with the interest paid by the Federal Government).

Most students paying interest, I would venture to guess, come from middle class families.

I'm still not really clear whether this only applies to re-financing within the Federal Direct assistance program. I think it must.

As for tax withholdings -- I couldn't agree more. It's evil. Personally, I withhold nothing. You're free to do the same thing. I think we should probably do away with the whole system of withholding, but some people seem to like it. They'd rather pay twice a month than once at the end of the year, even if it means they're actually paying more.