Earlier this morning the House Committee on Education and the Workforce,?led by Chairman John Kline (R-Minn.), held a hearing on college loans to look at how the government can simplify and strengthen its current federal aid programs to make college more obtainable for all young Americans.
Dr. Deborah J. Lucas, a Sloan Distinguished Professor of Finance at the Massachusetts Institute of Technology, urged the committee to revisit how the interest rates on student loans are calculated.
?The current practice of setting fixed interest rates that extend many years into the future?rather than linking them by formula to prevailing market interest rate conditions?has adverse consequences for students, for taxpayers, and for the stability and control of budgetary costs,? Lucas said.
She added that having the government fix the interest rate results in government subsidies shrinking when students would benefit from them the most. It should be noted that the interest rate on the federal Stafford loan is set set to increase once again this summer.
Jason Delisle, the director of the Federal Education Budget Project for the New America Foundation, called on the committee to discuss the current flaws in the 2007 Income-Based Repayment plan and use that as the sole repayment option for future borrowers.
Not only are record numbers of Americans struggling to pay back college loan debts, but in just a few years there will be more Americans with outstanding student loans than receive social security or food stamps, according to Justin Draeger,?president and CEO of the National Association of Student Financial Aid Administrators. A media advisory released by the committee Monday noted that the average full-time undergraduate received $13,218 in student aid during the 2011-2012 academic year and that 73 percent of all student aid comes from the federal government.
?Given these numbers, it?s imperative that we get federal student loan policies right. We have a collective interest in ensuring that federal loans remain accessible, affordable, predictable, and fiscally sustainable,? he told the committee.
Draeger also suggested that the committee consider revising its loan counseling programs so that students and their families are better educated when it comes to the financial loan process.
Dr. Charmaine Mercer, the Vice President of Policy at the Alliance for Excellent Education, reminded the committee that they shouldn?t just focus on re-evaluating?the student loan process, but also federal grants and tax credits.
?The complexities of the federal student aid system require that it be examined in its entirety,?Mercer?said. ?Addressing any one aspect of this system is necessary but individually, each is not sufficient for true reform of postsecondary aid programs and promoting student success and completion.?
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