Hillary Clinton Campaign Press Release - Clinton Pledges To Protect Families From Predatory College Loans

Announces Student Borrowers' Bill Of Rights, Will Increase College Access for Low-Income Students, Support for HBCU's and HSI's

At a speech at Benedict College in South Carolina today, Hillary Clinton announced a plan to protect students and their families from predatory lending practices that have been increasingly prevalent in the private student loan market. She called for a Student Borrowers' Bill of Rights that would provide students with a right to timely, accurate, and transparent information; a right to affordable loan payments; and a right not to be exploited by loan programs.

The announcement comes as the financial burden for student loans is increasingly harder for many families to bear. According to the Project on Student Debt, the average debt for a college graduate has soared 50% after inflation in the past decade. The average undergraduate owes just over $20,000 in student loans, with some students facing thousands more.

"Education loans should open the doors of opportunity, not condemn students to years of unmanageable debt. But today, just the opposite is happening," said Clinton. "I want to put these private loan companies on notice - when I'm President, we're going to hold you accountable. I'll create a Student Borrower's Bill of Rights to clean up the private student loan industry."

In addition, Hillary will launch a major new initiative to reward colleges and universities that serve large proportions of low-income students and enable these schools to invest more heavily in recruitment and retention efforts for these students. This initiative will provide colleges and universities with an additional $500 for each Pell-eligible student above 25% or 1,000 students. Over Hillary's first term, she will increase funding for the Strengthening Historically Black Colleges and Universities fund by $50 million annually, to $438 million annually - a total investment of $1.4 billion. She will provide the same increase to Hispanic Serving Institutions (HSI), growing their funding to close to $300 million annually by 2012.

"There may be an education gap in this country, but there is not a potential gap. Every single child in America is born with the God-given potential to succeed," said Clinton. "And when we don't give them the chance to fulfill that potential, then we should be ashamed of what that says about America in 2008. And we should change it."

These new initiatives build on Hillary's comprehensive plan to make college more affordable. She has proposed to more than double the HOPE tax credit, raising the maximum amount of benefits that students and their families can receive from $1,650 to $3,500. This new credit will cover more than 50% of the typical cost of public colleges and universities and more than the full cost of tuition of community colleges. She has also called for a Truth-in-Tuition policy so that schools have to set multi-year tuition rates and an increase to the maximum Pell Grant that students can receive to keep pace with the rising cost of college.

Hillary Clinton's full plan on widening the circle of opportunity is below:

As a nation, we will never reach our full potential until every young person has the opportunity to fulfill his or her potential. That means ensuring that the doors to higher education are open to everyone, and that every young person who starts college leaves with a degree. Yet today, low-income and students of color are far less likely to complete college than their peers. African-Americans graduate from college at a rate that is 33% lower than their white peers; Hispanic undergraduates are half as likely as whites to complete their degree; and only seven percent of students from low-income communities get a bachelor's degree by the age of 26. Even the highest-achieving low-income students go to college at the same rate as the lowest performing high-income students. This is anathema to the American Dream, and a danger to our nation's economic future.

We need to harness the talents of each and every American if we are going to remain strong and competitive throughout the next century. We cannot afford to leave a single person behind. As President, Hillary will widen the circle of opportunity by supporting colleges and institutions serving large proportions of people of color, low-income students, and first generation students (those who are the first in the family to go to college), and ensuring that all students are protected against abusive student lenders. Hillary will address this important issue with a fierce sense of urgency, because the future of our country depends upon our success. [U.S. Department of Education, 2006; Education Trust, 2004; Pew Hispanic Center, 2008; National Center for Education Statistics, 1997]

Protecting Student Borrowers Against Predatory Student Lenders and Increasing Financial Literacy. Students from low-income families are more likely to borrow in order to pay for their college education than their higher-income peers: almost 90% of college graduates who received a Pell Grant had student loans, compared with about half of non-Pell recipients. As a result, these students are more vulnerable to exploitation by private lenders, and more likely to struggle to meet their loan obligations. Private student loans do not have the same protections of federal student loans - the interest rate is not locked in; borrowers aren't assured the right a deferment or forbearance without accruing interest in times of economic hardship; borrowers aren't guaranteed the ability to consolidate their loans; and there is no loan forgiveness for public service or income-based repayment options. While student loans serve an important function - helping students afford college - some private lenders use deceptive practices in order to grow their profit, such as:

• aggressively marketing their products to college students without regard to their financial circumstances or ability to afford the payment;
• 
  
• advertising the lowest possible interest rate as opposed to the range;
• 
  
• using college brand names to deceive borrowers into believing they are signing up for a safer, federal loan;
• 
  
• describing the loan terms and conditions in a way that makes it virtually impossible to compare them to other options; and
• 
  
• not disclosing the basic terms, rates, and conditions.

Private loans have grown by 27% annually over the past five years, and expanded their market share from five to 20 percent ($17.3 billion) of the total student loan volume over the past decade. These increases occurred in part as a result of the increase in college costs, which hasn't been met with an increase in student financial aid, but also because of the predatory practices of some private student lenders. It is partly because of their higher reliance on private student loans that black students had an overall default rate that was over five times higher than white students. [The Institute for College Access & Success, 2007; Education Sector, 2007]

As President, Hillary will enact a Student Borrower's Bill of Rights that makes the student loan system work for students by providing:

A Right to Timely, Accurate, and Transparent Information

• Schools will be required to clearly state whether a loan is private or federal when providing students with financial aid packages.
• 
  
• Schools and lenders will be required to clearly state in easy-to-understand language: the annual interest rate and what that means over the life of the loan; monthly payment; length of the loan; and fees and interest rate increases that will occur if a student fails to make on-time payments.
• 
  
• Private lenders will be required to report the loans they make to students to the schools the students are attending so that financial aid counselors can give sound advice to student borrowers and steer students towards federal loans first.
• 
  
• Schools and lenders will be prohibited from co-branding their loans.

A Right to Affordable Loan Payments

• Private student lenders will be required to offer an affordable repayment option with payments calculated as a percentage of income and to explain in clear, easy-to-understand language the impact this payment plan will have on the student borrower's monthly payment, interest rate, and the length of the loan. Income-based repayment options make it possible for students who want to go into public service - teach, become a social worker - to pursue their dreams while repaying their student loans.

A Right Not to Be Exploited

• Colleges and financial aid administrators will be prohibited from receiving gifts, trips and other items of value from lenders. In recent years, there have been reports of college financial aid officers receiving trips and gifts, such as valuable stock options, in exchange for steering students towards these lenders. Students have a right to receive impartial, unbiased advice from an informed intermediary who is looking out for their best interest. [New York Times, 2007; Higher Ed Watch; New America Foundation]
• 
  
• Private student loans will be treated the same as all other consumer debt in bankruptcy.

College Opportunity and Diversity Fund. Hillary will launch a major new initiative to reward colleges and universities that serve large proportions of low-income students and enable these schools to invest more heavily in recruitment and retention efforts for these students. This initiative will provide colleges and universities with an additional $500 for each Pell-eligible student above 25% or 1,000 students. Half of the money will be distributed up front - in the first year of the student's enrollment - in order to provide an incentive to recruit more low-income students. The other half will be distributed when the student graduates, in order to provide an incentive for schools to invest in retention efforts. Under the initiative, schools will need to reinvest the funds in efforts to increase enrollment and graduation rates for students from low-income families. Historically Black Colleges and Universities, minority-serving institutions, Predominantly Black Institutions, and Hispanic-Serving Institutions will receive much of the funding from this initiative, as those schools have higher proportions of low-income students than others. Making college accessible and affordable are both important policy goals. Hillary has a robust agenda aimed at making college affordable; this initiative is aimed at expanding access by providing resources to help students who might not otherwise go to college. In recent years, state spending on non-need-based aid (aid that is not targeted at low-income students) has grown by 300 percent compared with 70% for need-based aid. Much of the growth in institutional financial aid during the same time period has gone to upper-income students, not students in need. This initiative is aimed at counteracting that trend. In order to benefit from this initiative, colleges and universities will be required to share data on performance of their students, including six-year graduation rates by Pell Grant recipient status, so that we can better understand the best practices that lead to success.

Stronger Support for Historically Black Colleges and Universities, Hispanic Serving Institions (HSIs), and other Minority-Serving Institutions (MSIs). HBCUs, HSIs, and other MSIs are on the forefront of preparing the next generation of leaders of color in every sector - from academia to medicine, from education to business. Many HBCUs were founded when the doors to opportunity at mainstream higher education institutions were closed to African Americans. Today, HBCUs enroll 14 percent of all African American students in higher education and award about one quarter of all postsecondary degrees conferred to African American students. They award forty percent of all degrees African American students receive in the sciences, mathematics, engineering and technology (STEM), fifty percent of all four-year degrees awarded to African American teachers, and have provided undergraduate training for three-fourths of all black people with doctorate degrees. Hispanic-serving institutions represent only six percent of all institutions of higher education but enroll almost half of all Latino undergraduates and serve as a critical pathway for Latinos to participate in higher education. Unfortunately, these schools typically have much lower endowments and receive less state funding than other schools, making it difficult for them to attract and retain faculty members, maintain state-of-the-art facilities, and provide adequate student aid and support. Over Hillary's first term, she will increase funding for the Strengthening Historically Black Colleges and Universities fund by $50 million annually, to $438 million annually – a total investment of $1.4 billion. She will provide the same increase to HSIs, growing their funding to close to $300 million annually by 2012. Hillary will also develop collaborations among MSIs, including tribal colleges and Predominantly Black Institutions, to help develop and share best practices for strengthening and improving these institutions so that they can fulfill their vital mission of making the American dream a reality for thousands of young students of color. Hillary will also continue to support the Minority Science and Engineering Improvement program and the federal programs aimed at strengthening graduate institutions for African American and Hispanics.

Upgrading to 21st Century Technology. Our fast-changing world requires knowledge of information technology and the ability to adapt quickly to innovation. According to a comprehensive analysis conducted by the National Association for Equal Opportunity in Higher Education, Historically Black Colleges and Universities are behind when it comes to information technology. Only 15 percent of HBCUs recommend that students own their own computers, compared to 30.5 percent of all institutions of higher education, and only one in four students studied owned their own computers. In addition, a majority of HBCUs were found to not be connected to the highest speed connection available and did not have strategic plans in place to upgrade their networks. Furthermore, many institutions reported that faculty members need additional support and training in order to integrate the latest technology into their teaching. HBCUs and HSIs are educating future leaders of America. They need to be on the front lines of the technological revolution, equipping their students with every tool available to ensure their long-term success in the global economy. As President, Hillary will provide $100 million to Minority-Serving Institutions to invest in: providing assistance to students to purchase their own computers; upgrading their information technology infrastructure, networks, and connectivity; providing support and training for faculty members; and other activities that will expand the student's technological capacity.

Fund a National Demonstration of "Opening Doors." For many low-income students, higher education begins at a community college. But graduation rates are a particularly acute problem among these institutions. Barely half of students who enroll in community colleges get a degree or transfer to a four-year institution within six years. In Louisiana, the "Opening Doors" initiative paid up to $2,000 in scholarships to students who enrolled in community colleges at least half time and maintained at least a C average. Random assignment evaluation showed that these students were significantly more likely to stay in school, and take and pass more classes. Hillary Clinton will provide federal funding to replicate this initiative in ten sites around the country.

This plan builds on Hillary's Plan to Make College Affordable for America's Families, which she released in October. In that agenda, Hillary proposed to:

• Create a new $3,500 College Tax Credit - She proposing to more than double the HOPE tax credit, raising the maximum amount of benefits that students and their families can receive from $1,650 to $3,500. This new credit will cover more than 50% of the typical cost of public colleges and universities and more than the full cost of tuition of community colleges.
• 
  
• Increase the Maximum Pell Grant - When the Pell Grant was implemented, it covered 99% of the full cost of a two-year college, 77% at a four-year public school and 36% of a private school. Today, it has fallen to half that (62%, 36%, and 15%, respectively). The College Cost Reduction Act significantly increased the Pell Grant to $4,800 in the 2008-2009 school year. As President, Hillary is committed to maintaining the value of the Pell Grant by annually adjusting it to take account of rising college costs.
• 
  
• Simplify Student Aid - The FAFSA (Free Application for Federal Student Aid) is longer and more complicated than the typical tax form. All told, Americans spend 100 million hours filling out financial aid forms - the equivalent of 55,000 full-time jobs. Hillary will eliminate this burdensome process and allow people to apply for financial aid by checking a box on their income tax return. This new system will be much simpler and, according to one estimate, increase the college-going rate by 5 to 7%.
• 
  
• Create a Truth in Tuition Disclosure - Students and their families should be able to make educated decisions about where to spend their money. As a condition of federal financial aid eligibility, state and local institutions of high education will be required to set multi-year tuition and fee levels for each cohort of students at the beginning of each student's freshman year so that students and their families will have a sense of how much their costs will be in the following years.
• 
  
• Create a Graduation Fund - The United States used to rank first in the world in our percentage of young people with a postsecondary degree; now, we have fallen to seventh. Today, 25% of students drop out of college after their first year, and every year half a million students who start at a four-year institution fail to earn a bachelor's degree within six years. Hillary will create a $250 million Graduation Fund that will provide incentive grants to four-year colleges to launch performance-based efforts to improve their graduation rates, especially among low-income and minority students.
• 
  
• Strengthen Community Colleges - Forty-three percent of undergraduates start their postsecondary education at community colleges. They give students the core tools they need to pursue further education or enter well-paying occupations. Hillary's plan will provide $500 million in incentive grants for investments by community colleges to ensure that students complete their degrees and, in partnership with four-year colleges, to increase graduation rates and promote smooth transfers to a four-year college or university.
• 
  
• Provide Public Service Scholarships - Hillary will increase the Segal Education Award to $10,000 to get it back on pace to covering a meaningful portion of the cost of going to college for people who devote a year or two of full-time public service through AmeriCorps.
• 
  
• Call on private colleges to increase spending on low-income students - While many of the most selective colleges and universities in the country have been real leaders in the fight to expand access to low-income students and students of color, there is still a lot of work to be done. Hillary issued a challenge to the most selective institutions in the United States to further expand access for low-income and minority students by spending a greater percentage of their endowment annually on recruiting and supporting these students. In recent months, several schools have met that challenge.

This plan also builds on Hillary's work in the Senate to make college more affordable. As Senator, she has worked to enact an:

• Income contingent repayment option - Hillary successfully included a provision in the College Cost Reduction Act, which was signed into law in September, which would give student borrowers of federal loans the right to fair monthly payments that do not exceed 15% of the borrower's discretionary income. After 25 years of payments, the remaining balance will be forgiven.
• 
  
• Reduction in the work penalty - Hillary authored a provision to allow college students to keep more of their income without losing crucial student aid by increasing the income protection allowance to $6,000 for dependent students; and $8,000 for independents students.
• 
  
• Increase in the Pell Grant - Hillary introduced the Non-Traditional Student Success Act, which increased the Pell Grant significantly, and fought for increase in the College Cost Reduction Act. The final bill increased the Pell Grant by $500 a year, to $5,400 by 2012.
• 
  
• Option for Year-Round Pell Grants - Hillary successfully fought to make it possible for students to receive three Pell Grants each year, so that non-traditional students who were attending college year-round could complete their studies more quickly.