Heading Logo


Student loan rates rising

By KAYLA BEARD GateHouse Ohio Media Published: July 3, 2017 4:00 AM

College students and parents now have to pay more for federal student loans.

That's because interest rates are set to rise on loans dispersed on or after July 1, due to a U.S. Department of the Treasury auction of 10-year Treasury notes.

Direct Subsidized and Unsubsidized Loans for undergraduates will be 4.45 percent. Direct Unsubsidized Loans for graduate or professional students will be 6 percent; Direct PLUS loans for parents and graduate or professional students will be 7 percent.

Just last week, Ohio Attorney General Mike DeWine's office released a report that said Ohio is eighth in the nation when it comes to college graduates with student loan debt, with 66 percent of Ohio students leaving school with debt.

"This is a national crisis, really," DeWine said. "We have so many students who are leaving college with enormous debts."

[Article continues below]

Last year, DeWine commissioned the Student Loan Debt Collection Advisory Group, which issued the report, in response to a Dispatch investigation that found that some former Ohio State students had been wrongfully sued over loans.

"I think every university, in light of this report, needs to fully examine what they're doing and how they're doing it," DeWine said.

The 17-member advisory group heard presentations from legislators, university officials, members of DeWine's staff and others who outlined the current situation for student debt collection in Ohio. The result was a list of 22 recommendations for institutions, debt-collection agencies and the attorney general's office to prevent debt problems.

One recommendation states that institutional late fees and penalties -- those added on by a college or university -- should not be included in the calculation used by DeWine's office for the final amount owed.

"The way they've been calculating the percentages leads to higher percentages," said Scott Torguson, managing attorney with the consumer team at the Legal Aid Society of Columbus, explaining that the total amount owed is calculated by the state AG's office using a formula that starts with the amount the school says is owed. "That means it likely (already) includes interest and other fees" before calculations, Torguson said.

[Article continues below]

Students who need loan money for college are at a legal disadvantage, he said. "A student can't say, 'I'm not going to accept this contract term' and then take it out."

Torguson also said he thinks Ohio Revised Code section 131.02, which outlines the protocol for collecting debts owed the state, is too vague. The section allows the attorney general to assess collection costs "in such manner and amount as prescribed by the attorney general."

"Because there's no limit, there's no way for the student to know what they're going to be charged," Torguson said.

Dan Tierney, a spokesman for the attorney general's office, said the new recommendations should address the problems, particularly a few that emphasize the need to warn students of possible fees in collection letters and when signing up for classes.

Still, students can't know from the start the exact amounts of fees they'll be charged and collection letters don't typically arrive until a student is already in default. Torguson said that's unfair and fees should be set at a specific rate listed "in the initial materials when the student signs up."

DeWine said 17- and 18-year-olds "many times don't fully understand the consequences of these debts."

Tierney said "that's why a large number of those recommendations are going toward financial literacy ... (and) transparency." Among the recommendations is that high school students take financial-literacy courses and atypical debt accounts be flagged sooner, he said.

"Debt from the 1970s ... would be an atypical debt," he said, noting "a very small subset" of students allow school loans to go unpaid for many years.

More often, students are not paying because they don't have the means, Torguson said. For those students, Tierney recommends trying to settle the debt for less than the full amount, which some institutions don't offer. The advisory group suggests all colleges and universities offer settlements when possible.

Tierney said universities also should get students to sign a waiver that would allow them to be contacted by any communication method, including cellphone numbers and email addresses, which collection agencies can't use without express permission but might be most effective for reaching the students.

Ohio law states that unpaid debts should be certified to the attorney general no later than 45 days after their due date. But Torguson said that doesn't always happen and the law does not say what happens if that doesn't occur.

"The key here is that if it's certified 10 years later, it's going to have 10 years' interest added to that once it's certified," he said.

DeWine said it's up to higher education institutions to keep improving the process.

"This needs to be a continuing discussion," DeWine said.


Rate this article

Do you want to leave a comment?   Please Log In or Register to comment.