Loans Are as Tricky as Ever

Colleges break links with lenders but now give less guidance.

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Conflict. Smaller lenders have also warned that the benefit cuts may force them to get out of the market altogether. One lender, the College Board, announced in August that it would no longer accept loan applications after October 15 because new legislation and codes of conduct placed too many restrictions on it. Because the College Board is also an association for schools, it frequently hosts meetings for school officials. Such meetings, it said, may now conflict with the law as well as with schools' new codes of conduct. In the past, the College Board has also provided schools with discounts on its products in exchange for placement on their preferred-lender lists.

The legislation would use the subsidy cuts to create benefits of its own, including up to $16,000 of tuition assistance to students who commit to becoming public-school teachers and loan forgiveness for graduates who take certain public-service jobs, such as law enforcement officers and prosecutors. It would cap monthly federal loan payments at 15 percent of graduates' discretionary income. The legislation would also increase the value of Pell grants, which are awarded to low-income students, and cut the interest rates on need-based federal loans.

Proponents say the reforms' benefits far outweigh the borrower benefits offered by lenders, which typically go to only a minority of students. "They're giving away small incentives that most students don't qualify for," says Rep. George Miller, a California Democrat who is chairman of the House Education Committee and sponsor of the legislation.

Fields, the Morehouse freshman, stands to benefit if the president signs the legislation, especially if he decides to go into a public-service job. For now, he just knows how frustrating it was to navigate the loan world on his own, before he even made it to freshman orientation.

With Kim Clark