This week, Obama signed the ‘Student Loan Bill of Rights’. We all know that Obama is committed to making higher education available to everyone (#CollegeOpportunity), but student debt is currently off the charts at over $1 trillion dollars. The student loan landscape can get a little confusing, so we’ve broken it down for you.
What does the Student Loan Bill of Rights say?
1. Every student deserves access to a quality, affordable education at a college that’s cutting costs and increasing learning.
- America’s College Promise: His plan to make the first two years of community college free
- ‘First in the World Grants': $75 million (soon to be $200 million maybe) that goes to colleges that adopt cutting-edge innovations and strategies that improve student learning and cut costs
- Call to Action on College Opportunity: Over 600 commitments Obama has made to make students more prepared to graduate
- College Ratings: By the 2015-2016 school year we should have a college ratings system that will help incoming freshmen compare before they pay.
2. Every student should be able to access the resources needed to pay for college.
- Increasing investments in Pell Grants to a maximum of $5,730
- Simplifying the FAFSA (Thank goodness!)
- Simplifying the tax benefits of sending your kids to college (including extending the American Opportunity Tax Credit for 5 years)
3. Every borrower has the right to an affordable repayment plan.
- Streamlining Pay As You Earn (PAYE) loans which cap federal student loan payments at 10% of income. These were launched in ’11 and will cost you more over the life of the loan because of interest, but are a good option if students know that they won’t have enough cash flow to make their payments.
4. And every borrower has the right to quality customer service, reliable information and fair treatment, even if they struggle to repay their loans.
- Holding back government money from private loan services unless they help borrowers repay their loans on time and ensure high-quality servicing
Anything else? Obama wants the Department of Education to do several things including:
- Create a state-of-the-art (read: ‘online’) complaint system to ensure that companies can’t intentionally confuse their lenders without receiving a big bolded complaint.
- Form a series of steps, like a roadmap, to help students responsibly repay their loans.
- Actually look at student debt data across states and recommend changes in legislation.
Rejoice! From now on it appears that it will be harder for loan servicers to scam you! But also take a second to remember that this ‘Bill of Rights’ does NOT mean that you are off the hook for repaying your loans. Every borrower has the right to an affordable repayment plan. That does NOT mean loan forgiveness. It is more important than ever to make sure that you understand your loan requirements BEFORE you borrow.
If you need help building a repayment plan, you’re in the right place. We’ve got you covered!