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For better or for worse, higher education is a deeply political issue. The rules and regulations can vary substantially depending on who’s in office. One side wants to increase federal aid, while the other wants to do away with it altogether and leave it to private institutions. It can be difficult to keep up to date with it all, but it’s important to make sure that you do so. The government may not be as forthcoming with information that could be beneficial to you as you would hope.
Changes to Current Policy
Student loans have been garnering the most attention recently, and with good reason. While the situation may not be the irredeemable catastrophe as some might lead you to believe, there are fundamental problems with the way student loans are handled.
Chief among these problems is the poor dissemination of information as it pertains to loan repayment. There are already federal policies in place, offering repayment options designed to lighten the load on debtor’s month to month payments based on financial need, or even offer eventual loan forgiveness. However, this information is not actively presented to debtors in some cases, and intentionally obfuscated from them in others.
To date, loan servicers contracted by the government have been operating with relative impunity, which is one of the reasons the Student loan situation is as murky as it is. New legislation seeks to curtail that impunity and offer more accountability and transparency.
This new legislation is a part of the plan to incrementally revise the now out of date Higher Education Act created over 50 years ago. Among the changes are issues such as making the application for Student Aid more user friendly and easing the accessibility of information about colleges and universities. Though a complete overhaul is long overdue, it is hoped that these steps in the right direction will spark more extensive retooling. Only time will tell if things will work out that way.
Different Answers from Each Party on How to Fix Higher Education
November is fast approaching and education is a platform focus of both parties. Though the presidential election will undoubtedly garner the most attention, congressional races are likely to be of comparable importance. The republicans favor a more hands off policy from the federal government, encouraging the promotion of STEM fields (Science, Technology, Engineering, Math) and a larger emphasis on community control and consumer choice over Federal regulation. They also acknowledge that more innovative forms of higher education deserve more recognition than they are currently afforded. Also they want to end federal student loan programs, promoting private loans in their stead. Private loans offer far fewer protections to the debtor.
The democrats have a slightly different approach, the crux of which being continued and expanded federal responsibility and oversight. Their proposal is to refinance and lower interest rates to make repayment easier.
Proposed Tax Relief
Did you know that if you have a portion of your student loans forgiven, you have to pay taxes on them as if they were phantom income? The newly proposed Student Loan Tax Relief Act has been introduced to get rid of that “hidden” tax. The proposer of the bill, Ron Wyden, makes a strong point when he questions the logic of forgiving a loan only to charge a tax that ultimately goes to the same place, thus defeating the purpose. Should the bill be ratified into law, it would only apply to loans forgiven after the start of the new year.
While there seems to be an effort by the federal government to rectify the financial problems plaguing the higher education system, there is still a lot of work to be done. Furthermore, any steps taken by the federal government are subject to change based on which way the political winds blow. It would be a shame to lose the protections enjoyed under Federal Student Loans, though it could happen depending on how things turn out in November.
Visit My College Planning Team for a free consultation (or click here to schedule online now) and to keep yourself apprised of all the important legislation pertaining to higher education in order to make the best and most informed decision for your student and your family.