Petition: Tell the U.S. Department of Education to cap interest rates at 3% on all existing and future student loans

[Catherine Borg]

Hello SLJ California,

Please read, sign and share my petition on change.org calling on the
Department of Education to cap interest rates on all student loans at
3%. I can tell you from personal experience that a reform of this type
would bring relief to many borrowers and bring some sanity to the
system. Of course, restoring some basic consumer protections with the
checks and balances that used to exist is also crucial but so is this.

http://www.change.org/petitions/tell-direct-loan-and-the-us-department-of-education-to-cap-interest-rates-at-3-on-all-existing-and-future-student-loans

Here is the petition:

Tell Direct Loan and the U.S. Department of Education to cap interest
rates at 3% on all existing and future student loans

Though programs have been introduced to lower the monthly payments of
federal student aid borrowers, the Department of Ed's policies just
kick the can down the road and lead ultimately to exponential growth
in student loan debt burden for these borrowers and our nation's
economy. Capping interest rates on all student loans at 3% would
temper this growing economic bubble.

There are many relevant discussions happening about restoring basic
consumer protections to student loan borrowers and even discussion of
broad “student loan forgiveness.”

But one issue that is being ignored is the interest rates on these
debts. Even in an era of historically low lending rates, borrowers who
consolidated their loans at higher rates find themselves with interest
rates that they can never refinance to take advantage of lower lending
rates.

In the last decade Direct Loan introduced the Income-Contingent and
Income-Based Repayment plans which include loan forgiveness after 25
and 20 years respectively. These income-based plans can lower lender
monthly payments when their income is lower but in the meantime the
principal on their debt spirals to higher and higher levels. Then as
their income slowly rises they pay more and more on a debt that still
continues to grow only larger if the interest rate is not modest.

Case in point, my husband is one of these borrowers with an 8%
interest rate on a consolidated loan. After $33,000 of payments over
the last 8 years on a $49,000 loan balance (which was originally a
$27,000 loan he defaulted on due to hardship) his balance today is
$55,000. On the other hand, my consolidated loan has a 3% interest
rate. So even though the payments made on my loan total less that half
of his, in seven years I have been able to reduce my $41,000 loan
balance by $5000. Does this seem fair?

What is Direct Loan/the U.S. Department of Education's response to the
national discussion on the student loan crisis? On July 1, 2012, they
are doubling their current interest rates on all new subsidized
student loans from 3.4% to 6.8% and raising the rate to 6.8% on all
unconsolidated, subsidized student borrowers, many who currently have
a lower rate.

Consider that the Direct Loan program I mention is the Department of
Education’s federal student lending program….and that the same federal
government loaned TARP borrowers money with zero to 1%, interest
rates…

Sign this petition telling the Direct Loan and the U.S. Department of
Education to cap interest rates at 3% on all existing and future
consolidated and unconsolidated student loans ….Many borrowers DO want
to successfully pay back their student loans, just not pay them
multiple times over in ipayments but NEVER reach that goal and leaving
them in growing danger of default.

We do not need another smoke and mirror reform like payment caps based
on income that do not address any other aspect of the loans. Capping
interest rates would curb the astronomical balance growth that happens
within the first 5-10 years of repayment, crippling borrowers
financial futures...demand this real reform to student lending!

Please go to change.org and sign it...and pass it on
thank you,
Catherine Borg