New law can help Utah borrowers - Utah Student Loans

Student loans
New law can help Utah borrowers
Tribune Editorial
Updated: 04/02/2010 10:41:41 AM MDT

U.S. Secretary of Education Arne Duncan says Utah's successful program to help college students manage their student-loan debt will be allowed to continue under the new law that makes the federal government the direct lender.
We hope that is true. And we urge Utah's higher-education officials to hold Duncan to that promise, because the nonprofit Utah Higher Education Assistance Authority is already doing an excellent job of ensuring loan payments are made, and in counseling borrowers who are having repayment problems.
Congress adopted changes to the financial-aid system as part of historic health reform legislation. President Barack Obama says the provisions to cut out the banks -- the lending "middle man" -- will save about $68 billion, most of which will be used to raise caps on Pell grants and make them more accessible. Some of the savings will be used to bolster community college programs, especially those that serve minority students.

The federal government will originate the loans, eliminating the fees now paid to banks, and will contract with banks and other private entities to administer them. Duncan said Utah's UHEAA would qualify as a loan administrator.
That is good news for Utah students and for taxpayers, since the UHEAA has the nation's lowest default rate, 2.1 percent, which is less than one-third the national average. UHEAA has filled the void left when Zions Bank and others quit the student-loan market years ago. It originates loans, providing interest-rate breaks for on-time payments and custom repayment schedules.

Under the new law, UHEAA will no longer originate loans. But if the administration has the interests of students in mind with its loan-program overhaul, as it claims, it should be happy to contract with UHEAA to oversee repayment.
The education-assistance legislation has several other provisions to help cushion the burden of student-loan repayments for all college students, including those in Utah. Larger Pell grants will help low-income students -- many independent and young married students working at low-paying jobs while attending classes qualify -- along with an expanded income-based repayment program that would limit payments to 10 percent of a borrower's income.

A provision to forgive student-loan debt after 10 years for those who become teachers or go into public service could be a boon to Utah public schools, where teacher pay is relatively low. If UHEAA can continue to serve them, Utah students will benefit from the new law.