Change on the Horizon for Student Loan Crisis

Student loans got loads of attention from educational lobbies as well as politicians in the last year. It has been one of the most serious issues affecting the US economy for some time. While the debate on how to resolve the growing student loan debt problem is going on, winds of change are already being felt. While politicians continue to argue, the New Year brings little relief for students graduating from high school and seeking independence. The upcoming re-authorization of the Higher Education Act may bring some relief for them, as industry veterans feel.

The issue of federal PLUS loans has been troubling students and their parents in the USA for quite some time. As it is, borrowers with bankruptcy filing, loan default or foreclosure in the last 5 years are not allowed to apply for PLUS loans. It was in 2011 that the Department of Education imposed more parameters. As a result, lots of PLUS loan borrowers were denied further loans. It led students looking for other personal loan options in middle of academic careers. This issue is going to be dealt with by Congress soon and a solution may be formed. The outcomes may include FICO credit scores and debt-to-income ratios for deciding suitability for federal PLUS loans.

Congress was in big trouble over student loan interest rates in 2013. In July, Congress finally agreed on market based rates. This resulted in temporary relief for borrowers. In the near future the interest rate for federal student loan is bound to go up according to analysts. The interest rates on all federal direct loans are linked to a 10-year Treasury note. Its value hike or fall will affect rates on Parent Direct PLUS loans and Stafford Loans. A number of experts think Treasury rate may raise by 3.75 percent or so while some others think it will not exceed 3 percent. The bottom-line is students opting for federal loans for imminent school year will have to churn out more. This may prompt some of them look at alternative fast cash loans.

As a matter of fact, exit and Entrance counseling is quite mandatory for borrowers taking federal student loan but experts and students agree that the process is yet to be refined. Students feel that there is hardly any scope for interaction in the process and just checking a few boxes for agreements leave lot to be desired.

The hope lies on Smarter Borrowing Act, a bill brought by Senator Tom Harkin. If it is put into effect, universities and colleges will have to take a more proactive role in making students aware of interest rates, repayment options and balance. It remains to be seen whether Congress can agree unanimously to clear a new version of Higher Education Act in 2014. It is a pity that the intended re-authorization was supposed to be passed way back in 2002 but after 13 extension bills it was cleared in 2008.

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