One item that's been getting a lot of press attention lately is the interest rate increase on subsidized Stafford loans from 3.4 percent to 6.8 percent, scheduled to take place on July 1. The increase would raise the cost of repayment by an average of $1,000 each for around seven million undergraduates.
[Find out more about Stafford loans for graduate students.]
Despite the fact that the parties differ on how to pay for it—the Republicans will make cuts to a public health prevention fund, according to Politico, while Democrats in the Senate will consider options like closing corporate tax loopholes—the Student Loan Ranger is hopeful that a deal will get done and the interest rates won't be raised. We'll credit President Obama's slow jam with Jimmy Fallon in helping to close the deal.
But while we certainly aren't in favor of raising the interest rates on student loans, we do think that focusing on one issue can detract from systemic problems. For example, we've written recently about how devastating a lack of information can be for student borrowers and about the Know Before You Owe Act introduced in the Senate that would help borrowers understand the advantages of federal loans over private loans.
And, of course, there are existing disclosure and reporting requirements covering a wide range of issues that are intended to provide prospective students and parents with the ability to make informed choices.
A November 2011 report, "The Truth Behind Higher Education Laws," by Kevin Carey of Education Sector and Andrew P. Kelly of the American Enterprise Institute, examines information requirements contained in the 2008 reauthorization of the federal Higher Education Opportunity Act (HEOA).
Unfortunately, it found the reporting requirements—designed to provide students and parents with better consumer information, thereby putting competitive pressure on colleges to improve—aren't working as well as intended.
The report focused on 152 public and private four-year colleges and universities in a random sample and looked at five areas, including two that we've emphasized in the past: Pell grant graduation rates and private student loans.
Pell grants are need-based grants for low-income students who would otherwise be unable to afford a college education. Because of the challenges low-income students face, knowing the percentage of students who receive Pell grants and graduate from a particular college is a tremendous help to low-income students looking for institutions where they can succeed.
[See which universities enroll the most Pell grant recipients.]
Although the HEOA reauthorization requires colleges to disclose Pell grant graduation rates, the researchers were able to obtain rates from just 25 percent (38) of the 152 schools in the study. Only 28 posted their Pell grant graduation rates on a publicly available website.
Colleges are also required to provide students with information about their potential eligibility for federal student loans and the favorable terms they carry. Despite this requirement, almost 15 percent of college websites in the study failed to advise students to pursue federal loans prior to seeking out private loans.
The authors also examined whether schools had formal "Consumer Information" pages on their websites dedicated to providing the required HEOA information. Although the National Postsecondary Education Cooperative (NPEC), a voluntary organization of higher education institutions, agencies, and trade associations, suggested in 2009 that colleges and universities create one webpage linking to all of the requisite disclosure information, only 73 colleges in the report's sample had a functioning page.
The pages were variously titled, rarely linked to the institution's homepage, often had inactive links, were still under construction, or did not lead directly to the information. The authors concluded that prospective students "would likely experience a great deal of frustration."
The other 79 institutions did not even have a page, making tracking down the information much more difficult or impossible.
The report has a number of suggestions for improving reporting requirements, including amending the HEOA to require colleges and universities to report information to the National Center for Education Statistics on a regular basis, collecting and publicizing the information on graduation rates for Pell Grant recipients directly, and providing easy access by parents and students to truly important metrics like graduation rates and employment in formats that will make it easy for them to compare and assess colleges.
Reforms like these—which inform consumers and pressure colleges to improve—will ultimately be more beneficial to students than the interest rate reduction. Unfortunately, Obama's slow jam and Congress' infighting is focusing attention solely on the issue of student loan interest rates. And focusing on one issue, however important it may be, obscures the need for systemic reform.
Keep up to date on important student debt issues by following us on Twitter (@EJW_org #studentdebthelp) and Facebook. Make sure your friends are, too, by Tweeting this blog post. And if you're worried about your student loans, come to one of our free student debt webinars.
Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works' educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.