Stafford Loan Justice

Bank on Students Loan Fairness Act

Senator Elizabeth Warren introduced the Bank on Students Loan Fairness Act (S. 897 and H. R. 1979) during the 113th Congress, first session. While the bill is important in terms of interest rate increases set for July 1 (on federal subsidized Stafford loans) from 3.4 to 6.8 percent – and this IS important –  those of us who have graduated face huge capitalization (compounded interest) on their existing student loans. As I’ve stated on this blog in multiple posts, the Secretary of Education has the power to determine policies regarding capitalization. A remedy must be found to help borrowers from this crippling debt.

In a Factsheet from Sen. Warren’s office,  the following claim is made; couldn’t the same be made that long term capitalization of loans has contributed to this $1 trillion debt?  And it hampers postgrads from actively participating in “buying homes, saving for retirement,” and so on?

Outstanding student loans now total more than $1 trillion, surpassing total credit card debt. Last month, the Federal Reserve identified this mounting debt as a risk to household spending. The burden of loans keeps borrowers from buying homes, saving for retirement, and engaging in consumption that will keep our economy on the road to recovery. (Factsheet)

The text of Sen. Warren’s proposed legislation is here. Other recent initiatives are in the news as well, but capitalization reform is not in the cards.


Written by S.

June 18, 2014 at 10:18 pm