As of late, Senator Edward M. Kennedy (D-MA), known as an advocate for students' rights, has pushed to make his voice heard more loudly on funding issues. Earlier this month, Kennedy joined Susan Collins (R-ME), Norm Coleman (R-MN), and Russ Feingold (D-WI) in lobbying to raise the maximum Pell Grant award, which is currently set at 4,050 dollars. At a mid-November press conference, Kennedy outlined his legislative agenda for the upcoming session, keeping higher education at the forefront by introducing a new bill called the Student Loan Sunshine Act. The bill proposes legislation that would require colleges and lenders to provide detailed accounts of their arrangements with one another.
Kennedy adamantly expressed his intentions to protect students' rights: "Going to college is hard enough—students shouldn't have to worry about being exploited when they take out student loans."
While Kennedy's words may be construed as biased, his argument comes as a result of the growing demand for private lender loans. Taking out private loans is becoming a necessity for students, and private lenders can make their own rules—unlike lenders approved by federal programs. This is where Kennedy believes the exploitation lies. He remarked, "We already know that the federal student loan program is filled with unnecessary subsidies for the bid lenders. That's why I'm even more troubled when I hear of the aggressive marketing practices of some lenders who make private loans to students. We need to examine these practices closely and put a stop to any action that prevents students from getting the best loan deal possible."
Whether or not private lenders are taking advantage of students is entirely subjective. However, there is no denying their surging growth. Higher Education Washington, Inc. posted the following facts. The amount taken out in the form of private student loans has grown at an average rate of 27% per year since 2001, bringing the total to 17.5 billion dollars.
In addition, private loans comprised 20% of total education borrowing in 2005. In 2000, private loans only made up 8%. As stated earlier, unlike federal loans, private loans are not guaranteed or subsidized by the government. As a result, they frequently carry much higher interest rates, especially for students without strong credit ratings.
As for how the Student Loan Sunshine Act will reform the student loan program, Kennedy clearly lays out its main objectives. The act would require all institutions of higher education receiving federal funds to report annually to the Secretary of Education any financial or material benefits their lenders, or agents of their lenders, give to them that originate student loans. Additionally, these institutions will need to report to the Secretary of Education all gifts exceeding 10 dollars.
Concerning interest rates, the institutions will be required to publicly report, each year, their rates on all loans made to students through arrangements between themselves and their lenders. Institutions will also need to justify, with written evidence, why they believe their rates represent competitive offers for student borrowers. Lastly, the act directs the Government Accountability Office (GAO) to conduct studies on inducements made by lenders to institutions of higher education to secure institutions' student loan business and report its findings to Congress.
Senator Kennedy explained what he believes is the bottom line: "At a time when families are pinching pennies more than ever to afford college, we need to ensure that students are getting the best rate on their student loans."
Only time will tell whether the Student Loan Sunshine Act will shed a little light on the issue of higher education affordability.
Article Title : Sen Kennedys Student Loan Sunshine Act
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