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Fact or Fiction?
| Fiction: | The only way to assist low-income students and increase access to higher education is to increase grant aid. |
| FACT: | Low-income students are best served by increased grant aid. However, budget limitations will mean that student loans will continue to provide a substantial share of the federal financial aid for low- and middle-income students. |
Fiction: |
Increasing borrowing limits on federal student loans will only serve to increase the debt burden that students carry after graduation. |
| FACT: | Loan limits on federal student loans have not changed since 1992 and freshman loan limits have essentially been unchanged since 1972. As a result of these limits, students are increasingly forced to take other measures to fund their education, including working longer hours, “maxing out” credit cards, and taking out other types of loans that offer less favorable terms and interest rates. |
Fiction: |
Federal consolidation loans were established to provide student loan borrowers with the ability to "refinance" their loans. |
| FACT: | Loan consolidation was originally created by Congress to simplify the process of loan repayment for borrowers with multiple lenders and to help lower monthly payments for borrowers in difficult financial circumstances. |
Fiction: |
Historic low interest rates have led to a boom in home refinances. Student loan borrowers should have the same opportunities to refinance their federal student loans. |
| FACT: | Federal education loans are different than mortgages and therefore cannot be refinanced in the same manner. Student loans are guaranteed. No credit checks are performed, and no collateral is required. There are no fees, points, or closing costs for the borrower. In sharp contrast, no mortgage company in America would make a loan without running a credit check and charging fees and points dependent upon the borrower’s employment and credit history. |
OTHER FACTS: |
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Earning a college degree is the ticket to the American Dream. Over a lifetime, college graduates earn, on average, $1 million more than individuals with high school degrees. An educated population impacts society as a whole by stimulating the economy, improving workforce productivity, and decreasing poverty, crime and reliance on government financial support. Increasingly, student loans are the single most important source of college financial aid today -- making completion of a Bachelor's degree possible for nearly 61 percent of students. Today's students need loans to pay for higher education more than ever. In 1980, grants made up 55 percent of financial aid and loans made up only 41 percent of By providing maximum benefits to students while they are attending school, and targeted help to borrowers facing financial difficulty once they have left school the federal student loan program can be improved such that current, future and former students may benefit. Federal student loans offer better terms to students and families than any other source of financing available in the consumer marketplace. |
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