The current structure of federal student loan interest rates is out of step with market rates and thereby confuses students and families.
Washington, DC (PRWEB) March 13, 2013
Today at 10:00 am ET Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators (NASFAA), will testify before the U.S. House of Representatives at the Committee on Education and the Workforce’s hearing on "Keeping College Within Reach: Examining Opportunities to Strengthen Federal Student Loan Programs."
Draeger will answer questions and share testimony outlining some of the practical insights that financial aid administrators experience when working directly with students and parents—and what steps can be taken to strengthen the current loan programs.
“The current structure of federal student loan interest rates is out of step with market rates and thereby confuses students and families," states Draeger in his prepared testimony. "Students and parents often question why federal student loan interest rates are higher than nearly all other installment loans, particularly for families with good credit. And the truth is, there is no good, reasonable answer to that question."
As Draeger will explain to lawmakers, NASFAA continues to advocate for a long-term, market-based solution to these problems by returning to a variable interest rate, where the rate is determined based on the cost of government capital and origination (without any reliance on origination fees), the cost of proper servicing and loan counseling, and future market risk.
Draeger will also outline additional steps that could be taken to strengthen the federal loan programs, such as instituting new safeguards to prevent students and parents from over-borrowing, streamlining and consumer testing counseling materials for student borrowers, and making the repayment process as simple as possible.
In his testimony, Draeger writes that for those families that need to fall back on loans, the strongest program will be one where interest rates are fair and understandable, additional safeguards are in place to deter over-borrowing, consumer information is streamlined and delivered in a way that is easy for students and parents to understand, and loan repayment is simple and affordable.
Other hearing witnesses include:
-- Deborah J. Lucas, Sloan Distinguished Professor of Finance, Massachusetts Institute of Technology
-- Jason Delisle, Director of the Federal Education Budget Project, the New America Foundation
-- Charmaine Mercer, Vice President of Policy, Alliance for Excellent Education
A live webcast of the hearing will be made available. For additional questions about NASFAA’s testimony, or to schedule an interview, please email news(at)nasfaa(dot)org.
The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents nearly 20,000 financial aid professionals at over 3,000 colleges, universities, and career schools across the country. Each year, financial aid professionals help more than 16 million students receive funding for post-secondary education. Based in Washington, D.C., NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. For more information, visit http://www.nasfaa.org.