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---------- Forwarded message ----------
>Date: Mon, 9 Mar 1998 18:52:59 -0700 (MST)
>From: Tim Benner <bennert@bogart.colorado.edu>
>To: uggs@lists.colorado.edu
>Subject: Student Loan Interest Rates
>
>
>     Here is the latest legislative update from NAGPS.  If you have
>student loans, you need to contact Congress now, otherwise you could
>end up paying a lot more for them.  It's your money.
>
>Tim Benner, President
>United Government of Graduate Students
>
>---------------------------------------------------------------------------
>
>                          NAGPS Legislative Update
>                            Monday, March 9, 1998
>       Legislation Proposed to Take Billions of Dollars from Students!
>                    CALLS TO CONGRESS NEEDED IMMEDIATELY
>
>Late last week, three House Democrats and eight House Republicans
>introduced legislation that would take as much as $10 BILLION over the
>next ten years out of students' pockets and give it to student loan
>lenders and banks. 
>
>This bill, H.R. 3291, the Student Loan Preservation Act, would repeal the
>reduction in the interest rate on student loans, scheduled to take effect
>for loans made after July 1, 1998.  For the average student (borrowing
>$12,000 to $50,000 to get an undergraduate or graduate degree), the
>interest rate reduction will save you between $1,200 and $6,000 on the
>cost of your loan. 
>
>H.R. 3291 will probably not become law, but as a negotiating point it
>illustrates the impressive inroads made by lobbyists for student loan
>companies with Congress - convincing many that if the scheduled rate
>reduction goes into effect, massive chaos will reign in the student loan
>market.  To mix metaphors, the Chicken Littles of the loan industry say
>that the sky is falling - but it is up to students to tell Congress that
>the "Emperor has no Clothes." 
>
>Members of Congress, faced with lobbyists from the banking industry, and
>highly concerned campus administrators (whose lending relationships have
>been threatened with termination by some in the lending industry), are
>looking to solve this "Student Loan Crisis." Students' voices are being
>drowned out, and the result could very well be the elimination or
>emasculation of the only federal initiative in many years that comes close
>to addressing growing student loan debt.
>
>IF YOU HAVE A STUDENT LOAN OR PLAN ON TAKING OUT A STUDENT LOAN IN THE
>FUTURE, YOU NEED TO COMMUNICATE WITH CONGRESS THIS WEEK OR YOUR LOANS WILL
>COST YOU MUCH MORE MONEY TO REPAY.
>
>It's that simple.
>
>The rest of this update gives you:
>
>   * Background Information
>   * Suggested Actions You Can Take
>   * Talking Points
>   * How to Find More Information
>
>In sum, the best thing you can do today to help ensure that your student
>loan remains as affordable as possible is to call Congress and tell them

>"don't repeal the interest rate reduction on my student loans just to make
>the banks richer."
>
>BACKGROUND INFORMATION:
>
>Under the Student Loan Reform Act (SLRA) of 1993, the means for annual
>adjustment of the interest rate is to change from the "bond rate of the
>91-day Treasury bill + 2.5%" to the "average simple interest rate on the
>10- to 20-year Treasury bonds + 1%". The effect of this index change at
>today's rates would be to reduce the rate on student loans from 7.5% to
>7.1% for students in school, and from 8.1% to 7.1% for students in loan
>repayment.  These changes which will take effect on July 1, 1998 will save
>students as much as $10 BILLION! over the life of their loans, according
>to an analysis by the Congressional Budget Office. 
>
>In the past few months, for-profit banks and tax-exempt lenders which
>offer student loans have complained to Congress that the change of
>interest rate indexes used in calculating the student loan interest will
>make it harder for them to turn a profit on student loans. In response to
>the lenders' claims , the House Subcommittee on Postsecondary Education,
>Training and Life-Long Learning convened a hearing on Thursday, March 5,
>to discuss possible changes to the current law proposed to take effect on
>July 1.  Lenders have proposed that interest rates only be reduced by
>0.15% on new loans, forcing students to absorb several billion dollars in
>increased interest rate costs on their student loans that they would not
>have to absorb under current law! An analysis by the Treasury Department
>showed that lenders, on average, could sustain a 0.5% to 0.8% reduction in
>student loan interest rates and still remain profitable, and this analysis
>did not figure in some of the particular advantages held by tax-exempt
>lenders like the Student Loan Marketing Association (SLMA, or "Sallie
>Mae"), who, because of their tax-exempt status, actually realize a much
>higher profit on student loans than for-profit banks like Citibank
>currently do. Based largely on the findings of the Treasury report, the
>Clinton Administration proposed that interest rates be reduced by 0.8% for
>all new loans in both programs after July 1, 1998; this proposal largely
>achieves the savings intended by the current law, but remedies some of the
>lenders' concerns in other areas as well. H.R. 3291 represents the worst
>of all possible outcomes for students:  no rate reduction at all! 
>
>Banks and lenders have also claimed that a reduction in the interest rate
>on new student loans would force some smaller lenders out of the market
>and decrease access to student loan funds, perhaps even causing a
>"collapse of the student loan system". However, many lenders, particularly
>smaller lenders with small profit margins, have been using the rate
>reduction as a marketing tool, trying to get college Financial Aid offices
>and college Presidents to commit to "preferred lender arrangements" which
>tie the financial needs of students at a given college or university to a
>particular student loan lender. No example has yet been cited where the
>proposed interest rate reduction would leave students at a particular

>college or university without any form of student loans! The "impending
>crisis" really isn't a "crisis" at all! 
>
>SUGGESTED ACTIONS YOU CAN TAKE:
>
>Members of the House Committee on Education and the Workforce are meeting
>THIS WEEK to discuss possible changes to the Higher Education Act which
>would reduce or eliminate the scheduled interest rate reduction on new
>student loans. It is absolutely imperative that you call the following
>offices and express your support for the maximum interest rate reduction
>possible! Use the talking points provided below to make your case for an
>interest rate reduction. Contact EACH of the following offices:
>
>       NAME                     PHONE           FAX              EMAIL
>
>William F.Goodling (R-PA-19)  202-225-5836   202-226-1000         N/A
>Bill Clay (D-MO-01)           202-225-2406   202-225-1725         N/A
>``Buck'' McKeon (R-CA-25)     202-225-1956   202-226-0683
tellbuck@mail.house.gov
>Dale E. Kildee (D-MI-09)      202-225-3611   202-225-6393
dkildee@mail.house.gov
>
>Once you've done that, call or fax BOTH of the offices of the Education and
>the Workforce Committee:
>
>Republican Committee Staff  Phone: 202-225-4527  Fax: 202-225-9571
>Democratic Committee Staff  Phone: 202-225-3725  Fax: 202-225-9050
>
>Now, contact as many of the members of the Committee from your state or
>district as you can by phone:
>
>Republicans:                                  Democrats:
>
>Thomas E. Petri, Wisconsin           George Miller, California
>Marge Roukema, New Jersey            Matthew G. Martinez, California
>Harris W. Fawell, Illinois           Major R. Owens, New York
>Cass Ballenger, North Carolina       Donald M. Payne, New Jersey
>Bill Barrett, Nebraska               Dennis J. Kucinich, Ohio
>Peter Hoekstra, Michigan             Patsy T. Mink, Hawaii
>Michael N. Castle, Delaware          Robert E. Andrews, New Jersey
>Sam Johnson, Texas                   Timothy J. Roemer, Indiana
>James M. Talent, Missouri            Robert C. (Bobby) Scott, Virginia
>James C. Greenwood, Pennsylvania     Lynn C. Woolsey, California
>Joe Knollenberg, Michigan            Carlos A. Romero-Barcel=F3, Puerto Rico
>Frank Riggs, California              Chaka Fattah, Pennsylvania
>Lindsey O. Graham, South Carolina    Ruben Hinojosa, Texas
>Mark E. Souder, Indiana              Carolyn McCarthy, New York
>David M. McIntosh, Indiana           John Tierney, Massachusetts
>Charlie Norwood, Georgia             Ron Kind, Wisconsin
>Ron Paul, Texas                      Loretta Sanchez, California
>Bob Schaffer, Colorado               Harold E. Ford, Jr., Tennessee
>John E. Peterson, Pennsylvania
>Fred Upton, Michigan
>Nathan Deal, Georgia
>Van Hilleary, Tennessee
>Joe Scarborough, Florida
>
>Use the House Switchboard at 202-225-3121, and ask for the office of your
>choice. Additionally, send a FREE FAX to members of the Committee using
>the NAGPS Email-to-FAX Gateway. Just go to the NAGPS Home Page
>(http://www.nagps.org/NAGPS/) and click on the Interest Rate Page
>link.There, you'll see the E-mail-to-FAX Gateway link at the very top.
>Click on that, and fill out the forms, edit the sample letter provided (or

>write your own!) and send it off! Your email message will become a fax,
>delivered to the correct office! 
>
>Finally, call your campus Financial Aid office and your college or
>university President's or Chancellor's office. Tell them you're against
>the elimination of the interest rate reduction and need their help to
>convince Congress. Ask them to call Congress and members of the House
>Committee on Education and the Workforce themselves to communicate how
>important saving the rate reduction is to their students, and to reducing
>the growing student debt burden on all students across the nation. 
>
>TALKING POINTS:
>
>The key message to convey is that we want to see the student loan interest
>rate reduced by the maximum amount possible (at least 0.8%) while still
>maintaining the health of the FFELP student loan program. The banks and
>lenders clearly can sustain a larger reduction in the interest rate than
>the 0.15% they have offered, and current law demands a substantial rate
>reduction for students. 
>
>When communicating with fellow students, your Financial Aid office, your
>campus Administration, or offices of Members of Congress, be sure to
>communicate the following points:
>
>  1. Failing to reduce the student loan interest rate, as promised in
>     current law, represents the loss of billions of dollars in financial
>     aid to students trying to finance their college educations.
>  2. Interest rate reductions are the surest way to minimize student debt,
>     and make college more affordable for all, because the benefits are
>     compounded for the life of the loan, not just once.
>  3. A reduction of the interest rate by 1% will save a student roughly $100
>     per year for each $10,000 in student loans they accumulate, according
>     to the American Council on Education. Tell them how your student loans
>     would have benefitted from such a change, and urge them not to deny
>     this benefit to future students!
>  4. Threats of an "impending student loan crisis" caused by lender
>     withdrawals from the FFELP program are hollow. There is not a single
>     confirmed instance where students at any college or university will be
>     left without financial aid because of this pending rate change. In
>     fact, many lenders are using this issue to consolidate their hold on
>     particular colleges and universities.
>  5. The true "student loan crisis" is the massive levels of debt held by
>     today's college students which prevent investment in first homes, small
>     businesses, and delay the start of families upon graduation. Reducing
>     the interest rate will reduce student debt.
>  6. The Treasury Department analysis shows that banks and lenders can, on
>     average, give up to 0.8% in interest rate reductions and still maintain
>     profitability, and this analysis does not include the benefits that
>     tax-exempt lenders use to increase their profit margins! They can give
>     even more!
>  7. There is no indication that a higher student loan interest rate will
>     force colleges and universities to reduce college costs. The true
>     "college cost" problem is in the overall cost to the student, and

>     reducing the loan interest rate is one way to reduce this cost.
>  8. Without an interest rate reduction, students will end up losing all of
>     the benefits of last year's tax initiatives in higher student loan
>     interest accumulation and higher monthly payments.
>  9. Loan and mortgage rates in most every other economic sector have been
>     on the decline for the past few years. If you can get a home mortgage
>     for 30 years or an automobile loan at 7%, why not a student loan for 10
>     years at the same rate?
>
>HOW TO FIND MORE INFORMATION:
>
>A more detailed fact sheet on this issue is available from the NAGPS
>"Interest Rate Debacle" Page, located on the NAGPS Web Site at
>
>                http://www.nagps.org/Student_Aid/Loan_Rates/
>
>This page also has comprehensive background information on this and
>parallel issues, including background data on lenders, reports on the
>emergence of interest rate reduction proposals, and analysis from the
>Treasury Department on the health of the student loan program. 
>
>___________________________________________________________________________
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