U.S. News & World Report
Staggering debt loads and default rates kept student loans in the news last year; and 2014 promises to be another disruptive year for borrowers, with a number of changes to loan programs on deck.
One of the biggest will be a swing in interest rates. Congress provided some relief last summer for government-backed student loans; but because the new, market-based costs are tied to the 10-year Treasury note, they eventually will climb as does the value of the bond. The rate for the 2014-2015 academic year will not be known until June 1; and while the projections range from 2.96 percent to 3.75 percent, the general consensus is that they will be higher.
In the next several months, meanwhile, Congress is expected to take up the issue of eligibility guidelines for Parent Direct PLUS and graduate PLUS loans. Changes in 2011 stiffened the requirements, disqualifying thousands of borrowers who suddenly became ineligible because of a loan charged off or sent to collection. Congress could make the changes permanent; block them; or add more eligibility parameters, such as debt-to-income ratios and FICO scores.
Finally, proposed new legislation from Sen. Tom Harkin (D-Iowa) could lead to improvements in entrance and exit counseling for borrowers of federal student loans. The Smarter Borrowing Act would oblige schools to send students yearly updates on their balance, interest rates, and repayment options. Colleges and universities with above-average default rates would have to expand their counseling programs to include financial literacy and budgeting.