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Resolution Item: S.359 Date Voted: February 15th, 2007 We voted to endorse S. 359, the Student Debt Relief Act of 2007, introduced by the Senate Health, Education, Labor and Pensions Committee. This bill would provide protection for borrowers who have high student loan debt burdens. Please sign the Democracy For New York petion
Senator Kennedy recently proposed the Student Debt Relief Act of 2007 (S. 359). In 1997, the Republican controlled congress amended the Higher Education Act of 1965 to allow profit-driven corporate lenders to charge interest rates as high as 8.25% and prohibit their clients from re-financing at more competitive rates (the 10-yr. treasury is currently only 4.87%). Straining student borrowers, this legislation also allows the same lenders to tack on an additional 25% to a loan's principal should a student default, even temporarily. Since graduate students finish school with an average of $74,000 in student loans, the 1997 HEA amendment allowed for record profits for educational lending institutions. Sallie Mae's stock value grew 1300% between 1997 and 2006 and its CEO, Albert Lord, even acknowledged in 2003 that the company's phenomenal earnings-per-share growth came "...largely from debt management operations (collections of defaulted student loans)." Furthermore, these loans are guaranteed by the U.S. taxpayer so there is exactly zero risk to the lender but oh so much profit. The Student Debt Relief Act of 2007, currently in the Finance Committee, would tie payments to a borrower's income level. The federal government would cover unpaid interest on subsidized loans so that it could not be capitalized by the lender. In addition, there are several provisions for debt forgiveness after years of regular payments as well as altruism clauses, such as debt cancellation for teachers, social workers, etc. This legislation could virtually eliminate student defaults and curb taxpayer subsidization of corporate profits. |
