Polis Student Loan Provisions Included In Landmark Wall Street Reforms

Press Release

Polis Student Loan Provisions Included In Landmark Wall Street Reforms

An amendment authored by Congressman Jared Polis (D-CO) that provides vital consumer protections to some of our most vulnerable borrowers--college students and their families--was successfully included in H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, to be voted on the House floor today.

"Private student loans are one of the riskiest and most expensive ways to pay for college," said Polis. "They do not offer the fixed rates or favorable terms of federal student loans and are virtually impossible to discharge in bankruptcy. My amendment protects our students and their families from a lifetime of excessive and unnecessary debt by helping to ensure that they apply for and exhaust all of the available federal financial aid, which they subsidize as taxpayers, before turning to high-cost private loans."

Unlike federal student loans, private student loans' rates are typically variable with no maximum and can be as high as 18%, with the highest rates for those who can least afford them. Private loan borrowers are not eligible for the deferment, income-based repayment, or loan forgiveness options available to federal student loan borrowers. Recent research has documented that nearly two-thirds (64%) of private loan borrowers in 2007-2008 borrowed less than they could have in safer federal (Stafford) loans. One-quarter (26%) of private loan borrowers took out no federal loans at all. Research has also found that the certification of loans that Polis' amendment requires is associated with significantly lower default rates than uncertified loans.

To reduce the risk for students, Polis' amendment requires lenders to confirm with colleges that the borrower is in fact a student and is eligible to borrow the requested amount; and that students have been informed about federal financial aid options. This gives colleges the opportunity to counsel students before they take out an expensive private student loan. Similar language was included in the bi-partisan 2008 Higher Education Opportunity Act, which overwhelmingly passed the House in the previous Congress.

"Using private student loans to fund a college education can be riskier than using a credit card to pay for tuition," said Polis. "It is high time we empower our students with critical information about their federal financial aid options, their consumer rights, and how private loans may impact their eligibility for federal financial aid."

Polis, a member of the House Education and Labor Committee, represents the 30,000 students attending the University of Colorado--the state's flagship university and one of our nation's premier public institutions of higher learning.

Polis' amendment is supported by the following organizations: American Association of Community Colleges, American Association of State Colleges and Universities, American Association of University Women, Americans for Fairness in Lending, Americans for Financial Reform, Campus Progress Action, Consumer Action, Dēmos: A Network for Ideas & Action, The Greenlining Institute, The Institute for College Access & Success and the Project on Student Debt, NAACP, National Association for College Admission Counseling, National Association of Consumer Advocates, National Association of Consumer Bankruptcy Attorneys, National Association of Student Financial Aid Administrators, National Consumer Law Center (on behalf of its low income clients), National Consumers League, National Council of La Raza, New York Public Interest Research Group (NYPIRG), The Sargent Shriver National Center on Poverty Law, U.S. Public Interest Research Group, United States Student Association, USAction, American Association of Collegiate Registrars, Admissions Officers and Consumers Union.

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