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The bill introduced by Sen. Elizabeth Warren, D-Mass., would have allowed lower interest rates on student loans by raising taxes for the wealthy. Hatchet File Photo

The Senate voted Wednesday to block a student loan bill that would have given millions of graduates a chance at lower interest rates.

The legislation, introduced by Sen. Elizabeth Warren, D-Mass., would have allowed an estimated 25 million people to refinance the interest rates on their student loans. It also would have lowered rates on federal and private loans issued before 2010 to 3.86 percent.

But the measure was doomed from the start as a tax hike on the wealthiest Americans would have offset the costs of reducing interest rates, prompting Senate Republicans to vote down the bill.

“With this vote, we show the American people who we work for in the United States Senate: billionaires or students,” Warren said Wednesday.

The vote came just two days after President Barack Obama signed an executive order allowing borrowers to cap repayments on their federal student loans at 10 percent of their income.

Obama threw his support behind Warren’s bill in his weekly address Saturday, promising to push for college affordability efforts regardless of the results in Congress.

The White House hosted University President Steven Knapp alongside other higher education leaders last week to discuss the issue with Secretary of Education Arne Duncan and Second Lady Jill Biden. That was Knapp’s second visit to the White House this year, after he also attended a summit on college access in January.

Warren, who attended GW for two years, opposed a student loan bill that passed last year. While the legislation prevented the doubling of federal student loan rates to 6.8 percent, it ended the policy of fixed interest rates on those loans.

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GW students graduated in 2012 with an average debt of $33,399. Hatchet File Photo.

GW students graduated in 2012 with an average debt of $33,399. Hatchet File Photo.

This post was written by Hatchet staff writer Avery Anapol.

Students who take out federal loans will face even steeper fees next fall as interest rates surpass 5 percent.

Undergraduates will have to pay 30 percent more in interest compared to last year after a new law goes into effect tying interest rates to the 10-year Treasury note, Vox reported Wednesday.

The jump is still far less than the increase that would have gone into effect without last year’s stopgap legislation – though the interest rates will rise past 7 percent over the next four years, according to estimates released this week by the Congressional Budget Office.

This year, interest rates will rise to 5.04 percent from 3.86 percent in the 2013-2014 academic year.

Interest rate increases have faced opposition from Democrats. Led by President Barack Obama, activists and students launched the “Don’t Double My Rate” campaign last year.

At $33,399, the average debt load for GW students is higher than the national average of $29,400. But only 1.5 percent of students default on those loans, which is well below the national average.

The good news: federal student loans are subject to a fixed rate. For students who have already taken out their loans, their interest rate will not increase.

Congress will have the chance to change the law again this year, but its unlikely to lower interest rates as the government is projected to possibly make billions of dollars on student loans over the next decade.

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GW students graduated in 2012 with an average debt of $33,399. Hatchet File Photo.

GW students graduated in 2012 with an average debt of $33,399. Hatchet File Photo.

An Al Jazeera report published Tuesday brought attention back to GW’s controversial practice of suing alumni who default on their student loans.

GW sued more than two dozen former students in 2012 for repeatedly missing loan payments, making the University one of four East Coast schools – including Yale University and the University of Pennsylvania – that have brought the issue to court.

The Al Jazeera report features a 32-year-old GW business school alumnus, David Acevedo, who has struggled to pay back his loans since he enrolled in 1999.

He was ordered to pay $7,050 by a D.C. court last year – up from $3,084 in 2004. Those costs included his Perkins loan, plus interest, attorney fees and court costs, Acevedo told Al Jazeera.

“For many years I simply ignored it and swept under the rug the letters or the demands for the money for pragmatic reasons. I was totally out of money,” he said.

He now lives and works in Manhattan, but still doesn’t make enough to drive away GW legal team.

And Acevedo will not be the last one to see court orders because of his loans: experts say the practice will likely become even more prevalent amid rising student debt loads nationwide.

Student debt totaled $1.2 trillion in 2013, according to the Consumer Financial Protection Bureau, now surpassing credit card debt. And as student debt has swelled, so have loan defaults, with the percent of borrowers who can’t make their payments now reaching into the double-digits.

GW’s lawsuits against former students first came in the news last February, after a report by Bloomberg News that also featured Yale and UPenn.

The average debt load for GW graduates in 2012 was $33,399, though GW students’ default rate remains low at about 1.5 percent.

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Sen. Elizabeth Warren, D-Mass., opposed Wednesday’s student loan deal because it ended fixed-rate borrowing. Photo used under the Creative Commons license

The U.S. Senate ended more than a year of gridlock Wednesday when it voted to lower interest rates for students taking out loans this fall.

Interest rates for federal loans will sit at 3.9 percent this year, and can increase up to 8.25 percent for undergraduates and 10.5 percent for parents. The rates will be reset annually based on the market.

The bipartisan measure was approved 81-18, and will affect about 11 million borrowers, the Obama administration estimated.

The deal reverses the July 1 fee hike, which doubled interest rates to 6.8 percent after senators failed to reach a deal before the deadline. Some Democrats, including Sen. Elizabeth Warren, D-Mass., opposed the bill and said ending the fixed-rates meant that students would be used “to generate profits for the government.”

The House passed a bill last month, which also tied rates to the U.S. Treasury borrowing rate but did not include the rate cap advocated for by Senate Democrats. Still, the White House and House Majority Leader Rep. John Boehner, R-Ohio, praised the agreement as bipartisan.

“A victory indeed, and one that shows when we have common ground, we should seize it on behalf of the people we serve,” Boehner’s office wrote in a statement.

The student loans battle has stretched since last summer, when Congress reached a last-minute deal to avoid doubling the rates on subsidized and unsubsidized Stafford loans.

Obama, who said the law would save undergraduates an average of $1,500, also applauded the move as a “major victory.”

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Updated: Monday, July 1 at 2:05 p.m.

It’s about to get more expensive to borrow from the federal government.

Interest rates for new government-backed loans will jump to 6.8 percent — double the current rate — starting Monday after lawmakers failed to strike a deal before adjourning for the July 4th recess.

The loans have been a key debate on Capitol Hill this year as both parties seek compromises on the rates, which impact about 7 million students nationwide.  About 45 percent of GW students took out federal student loans last academic year.

Vice Provost for Academic Affairs and Planning Forrest Maltzman called federal loans “an important cornerstone of federal financial aid.”

“Curtailing this is neither good for our students or the country,” he said.

House Republicans passed a bill that would tie the federal Stafford loan to market rates and end the subsidized version of the loan, though the Senate criticized that the plan offered no cap for the loan rates.

Subsidized Stafford loans would float each year at a rate 2.5 percent higher than the market price of the 10-year Treasury note. That rate would increase to 4 percent next summer and 7.7 percent in 2023, according to the Congressional Budget Office.

Senate Democrats hoped to extend the 3.4 percent rate for two more years.

Last year, lawmakers extended the subsidized rate just two days before the July 1 deadline after Republicans succumbed to pressure from President Barack Obama and Democrats.

Students would not be hit with the higher interest rate until the loans are disbursed a few days before the start of the semester, Maltzman said.

Congress could still reach a deal after the July 1 deadline as most students sign their loan agreements in August.

But lawmakers must act fast as members adjourn August 2 for a month-long recess.

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Senior Sam Nelson, a leader of GW’s Progressive Student Union, was glad to see President Barack Obama advocate for lower interest rates on student loans Friday at the White House.

Senior Sam Nelson, back left, stood behind President Barack Obama during a White House press conference on student loans, earning screen time on national networks including MSNBC and PBS. Photo courtesy PBS NewsHour

But Nelson, who has rallied around student debt issues for years, was also center stage for the speech, meeting with the president beforehand and standing behind Obama as he spoke to national television cameras.

Nelson, who has already racked up $42,000 in debt, described the president as “very down to earth and relaxed” and said Obama shook hands with each student and asked where they were from and what college they attended.

Nelson got to the White House stage with a knack for advocacy. After protesting outside the headquarters of the student loan giant Sallie Mae last year – demanding an audience before shareholders and a meeting with the company’s CEO – the activists joined shareholders at their meeting on Thursday.

And after voicing their concerns to shareholders, Sallie Mae’s newly elected CEO Jack Remondi agreed to meet with the group of activists, and Nelson said he will be a part of the delegation.

“You feel the connection when you see that the work we do in organizing really has far reaching ramifications. And that’s a good feeling,” Nelson said.

With interest rates on federally subsidized Stafford student loans set to double in July, the president urged Congress to keep the lending rate at a locked-in 3.4 percent. He also railed against a House of Representatives bill that would allow rates on new subsidized Stafford loans to float.

And, in the beginning of his remarks, he said he enjoyed meeting with students.

“One of my favorite things about this job is that I get to spend some time with remarkable young people from all across the country,” Obama said. “It inspires me.”

In the meeting before the press conference, Obama told the students to keep up their activism and continue to put pressure on Congress, Nelson said.

“[The interest rates] didn’t double last year because students got out and we mobilized to stop it,” Nelson said. “We know about these problems, we know what they can do to people and families and we want this to end, this petty bickering over interest rates.

This post was updated May 31, 2013 at 7:59 p.m. to reflect the following:

Correction appended

The Hatchet incorrectly reported that Sam Nelson was the head of GW’s Progressive Student Union. In fact, he is on the coordinating committee. We regret this error.

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The House of Representatives voted Thursday to allow student loan interest rates to float with the free market, as lawmakers stare down a July 1 deadline when rates would double for undergraduates.

The Republican-backed measure, HR 1911, which passed mostly along party lines, would reset the rates for both subsidized and unsubsidized Stafford loans each year. The Congressional Budget Office projected rates would rise from their current 3.4 percent to 5 percent in 2014 and 7.7 percent in 2023.

Speaker John Boehner, R-Ohio, said the Republican-controlled House was taking action to deal with increasing student debt loads. Democrats, however, say Thursday’s measure would create too much volatility for student borrowers. Photo courtesy of the office of the Speaker of the House

“What the House is doing today is a responsible way to deal honestly with the issue of student loans,” Boehner said, according to news reports.

The bill is looking to stave off a doubling of rates for new subsidized Stafford loans later this summer if Congress does not act – an option neither party favors.

However, the measure now faces an unwelcoming Senate vote and a potential veto from President Barack Obama – likely pushing the student loan fight into the summer. Democrats in the Senate, who say the House measure creates too much unpredictability for interest rates, want to extend the current rate to give them more time to create a new formula.

The debate has an impact on a large swath of GW students, as about 4,700 undergraduates received more than $30 million in funding from subsidized Stafford loans last year. Borrowers’ monthly payments, however, would only increase slightly, if rates double to 6.8 percent this summer.

The Class of 2012 borrowed an average of $33,399 to earn their diplomas – nearly $9,000 more than 2011’s national average.


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President Barack Obama spoke earlier this month to a crowd of students in the White House's East Room, demanding that Congress come to an agreement. Obama said he was pleased with the Senate's agreement in a release sent Tuesday. Hatchet File Photo.

Just days before the July 1 deadline, Senate leaders said Tuesday they have reached an agreement to prevent the doubling of the student loan interest rate.

Senators of both parties are seeking to extend the current interest rate – 3.4 percent for new federally subsidized loans – for the next year.  The rate will double to the pre-recession level of 6.8 percent if no deal is reached before July 1.

“We’re very close to having everything done.  But until we get everything done, nothing’s done,” Senate Majority leader Harry Reid (D-Nev.) told reporters Tuesday.

To cover most of the $6 billion cost of keeping the lowered rate, senators proposed changes to federal pensions. Republicans also suggested limiting the time students can receive federally subsidized loans to six years.

The government estimates 7.4 million students receive this type of loan, and without a deal each would pay about $1,0o0 more in interest.

About 4,700 undergraduate students at GW received more than $30 million in education funding through Stafford loans this year.

Obama has demanded Congress come to an agreement, raising complaints by Republicans who say he is not helping with negotiations to grab attention of student voters.

The highly publicized debate has made headlines for months. This spring, Obama launched a two-day college tour focused on the student loan debate. In March, students nationwide signed more than 130,000 letters to Congressional leaders to protest the higher interest rates.

But as the deal takes shape, Mark Kantrowitz, founder and publisher of FinAid, points out that a rate hike would have little effect on the payments of individual students.

“This is a convenient tool for beating the drum of college affordability,” Kantrowitz said.

Kantrowitz said keeping the rate at 3.4 percent versus 6.8 percent translates into about a six-dollar difference in monthly payments for holders of subsidized loans.

Instead, more focus should be given to funding to Pell grants, Kantrowitz said, which provide need-based grants to low-income families.

“Certainly, those who get the benefit will like being able to get an additional cup of coffee or two a month, but it affects them only after they’ve already graduated,” Kantrowitz said, “What matters is how much money can you get for college and when do you have to start paying it back.”

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This post was written by Hatchet Reporter Kierran Petersen.

The Consumer Financial Protection Bureau is preparing to launch a campaign to educate students about college debt and how best to manage loan repayment.

The “Know Before You Owe” electronic program, accessible through the bureau’s website, will use each student’s information to generate a “financial aid shopping sheet” – a calculation of real cost of attendance and future loan payments.

The calculation incorporates a specific college’s tuition, extra fees and financial aid pool and weighs it against the prospective student’s self-reported loan eligibility to estimate future monthly payments.

Rohit Chopra, student loan regulator for the Consumer Financial Protection Bureau, said he hopes the the program will help student borrowers avoid financial complications by clarifying the layers of financial aid.

“We want to help improve the timing, because right now when seniors are about to graduate, many of them don’t know what their loan payments are going to be like, and in this tough economy, they get this sticker shock when they see how expensive payment it,” Chopra added. “We want to improve financial aid information even before someone steps foot on campus.”

Even basic information like full cost of attendance can be hard to wrestle out of universities, President of the Institute of College Access and Success Lauren Asher said. Asher believed the program will clarify payment discrepancies between schools with similar sticker prices.

“Its always helpful to students to have more information and make loan information more transparent,” Asher said.

Students within the District have an average debt of over $30,000 dollars, the highest in the country, according to a when report from the Project on Student Debt. Less than 1 percent of GW students defaulted on their student loan payments last year, a record low.

Executive Director of Financial Aid Dan Small said the University’s efforts to educate student borrowers already include an online questionnaire and exit interviews about loan repayment.

“Our graduates seem to understand and follow through in their responsibilities in making payments,” Small said.

GW students currently hold $60.8 million in undergraduate loans, including $37.9 million for federal student loans.

“The more informed one is the better prepared he or she will be in meeting their financial responsibility upon graduation,” Small said.

The Consumer Financial Protection Bureau program, which has no set launch date and is still in the developing phase, premieres as Capitol Hill is buzzing with debate about debt.

It follows growing demand by Occupy Wall Street protestors to reform the student borrowing and President Barack Obama’s “We Can’t Wait” campaign to alleviate student debt, which Small noted last week will affect only a small population at the University.

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The debt deal passed by Congress and signed into law today will step up Pell Grant funding in exchange for putting federally subsidized loans for graduate students on the chopping block.

The Budget Control Act of 2011 will not touch President Barack Obama’s $5,550 maximum Pell Grant award per undergraduate student and pours $17 billion into the program’s funding by 2015, but cuts the federal subsidy that previously reprieved graduate students from accruing interest on their loans while still in school.

About 11 to 12 percent of GW undergraduates receive Pell Grant awards in their financial aid packages. Associate Vice President for Financial Assistance Dan Small said in February more than 1,390 students received Pell Grants this year.

Congressional Budget Office estimates show the new measures will boost direct spending by $7.4 billion over the next four years but ultimately reduce spending by $4.6 billion by 2021.

Beginning July 2012,  graduate students with subsidized loans will not receive subsidies on their interest, making the students accountable for interest that builds up while they are in school to trim government spending by about $21.6 billion by 2021, according to the CBO. The bill also prevents the Department of Education from incentivizing on-time repayment of loans through programs, such as one that offers partial rebates for certain fees students incur during the loan process.

Graduate students who make payments automatically debited from their bank accounts will still receive interest rate reductions.

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