Lobbying efforts focused on improving terms, conditions for federal student loans
Posted June 1, 2016
With 88 percent of veterinary students borrowing from federal student loan programs, according to the 2016 AVMA & AAVMC Report on the Market for Veterinary Education, even small changes in borrowing practices and regulations could have a dramatic impact on their collective debt.
And it just so happens that there is opportunity to advocate on this issue, as lawmakers are currently laying the groundwork for reauthorization of the Higher Education Act in the 115th Congress, which begins in January 2017. A thorough review of the measure will give lawmakers a chance to revisit all of the major federal student aid programs that assist so many postsecondary students, including veterinary students, pay for college.
Already, more than a hundred bills have been introduced in the 114th Congress dealing with various aspects of federal student financial aid, including 34 pertaining to student loans and repayment programs and 10 dealing with education tax issues.
“The sheer volume of bills means lawmakers are engaged and many advocates are weighing in. It is imperative for veterinarians and veterinary students to remain engaged now and in the coming months,” wrote Gina Luke, an assistant director of the AVMA Governmental Relations Division, in a backgrounder on the reauthorization.
The topic of advocacy came up frequently during the Economics of Veterinary Medical Education Summit in late April at Michigan State University (see story) as a way to help reduce the debt-to-income ratio for current and future veterinarians. Dr. Ron DeHaven, AVMA CEO, said he envisions launching a national campaign on veterinary student debt and promoting legislation aimed at fixing the problem. This would involve creating a coalition to promote better funding of veterinary colleges, with coalition organizations potentially including the Student AVMA, state VMAs, Association of American Veterinary Medical Colleges, and other related associations with representatives in Washington, D.C.
Already, the AVMA and other veterinary organizations are seeking changes to existing federal policy that would ease the burden of student loan debt held by veterinary students and improve the terms and conditions on federal student loans, including grace, forbearance, and default. The top priorities, according to the AVMA GRD, are as follows.
The sheer volume of bills means lawmakers are engaged and many advocates are weighing in. It is imperative for veterinarians and veterinary students to remain engaged now and in the coming months.”
Gina Luke, assistant director,
AVMA Governmental Relations Division,
in a backgrounder on the upcoming
reauthorization of the Higher Education Act
Abolish origination fees
Origination fees range from 1.073 to 4.292 percent and are deducted upfront from student loans before the funds are paid to the school. The AVMA believes students should not be charged a fee for financing their professional education through student loans. This is why the Association supports the Eliminating the Hidden Student Loan Tax Act (HR 1285), which would abolish origination fees.
Reinstate Stafford loan subsidy
The Federal Stafford Loan subsidy prevents interest from accruing on a loan while a student is in school and for six months after graduation. The federal government pays for the interest that accrues on subsidized loans. But the Budget Control Act of 2011 eliminated subsidies for graduate and professional students with financial needs. While veterinary students may borrow the same annual and aggregate loan amounts as before, the entire amount is now unsubsidized. To address this issue, AVMA supports the Protecting Our Students by Terminating Graduate Rates that Add to Debt Act (HR 4223), which would restore the in-school subsidy.
Maintain borrowing limits
The annual loan cap for veterinary students borrowing federal student loans is $47,167; the aggregate limit for each health profession student is $234,000. Lowering these loan limits, as proposed by the Financial Aid Simplification and Transparency Act (S 108), has the potential to force veterinary students into higher-cost private loans, according to Luke, which is why the AVMA does not support lower limits. The FAST Act would establish a single graduate and professional federal loan program by eliminating Grad PLUS and subsidized Stafford loans and would institute a $30,000 to $45,000 annual loan limit and a $150,000 aggregate loan limit for graduate and professional students. Those limits could be increased on an annual, case-by-case basis so long as the aggregate would be no greater than $225,000. For perspective, the real weighted mean educational debt of veterinarians who graduated in 2015 from U.S. veterinary colleges was $141,354.
||(From left) Dr. Ernest Godfrey, Florida delegate to the AVMA House of Delegates; Aaron Judson (Tuskegee ’19); Denae Campanale (Florida ’18); and Rep. David Jolly of Florida’s 13th Congressional District talk about legislation related to educational debt during the AVMA Legislative Fly-in earlier this year. (Photo by R. Scott Nolen)
Lower student loan interest rates
Interest rates on new federal student loans are fixed for the life of the loan, with the rate determined when the loan is taken out. Interest rates are reset on July 1 each year, with the rate based on the current 10-year Treasury note rate plus a fixed margin, as follows:
Direct subsidized loans (undergraduate): 10-year Treasury note plus 2.05 percentage points, not to exceed 8.25 percent.
Direct unsubsidized loans (graduate or professional): 10-year Treasury note plus 3.6 percentage points, not to exceed 9.5 percent.
Grad PLUS loans: 10-year Treasury note plus 4.6 percentage points, not to exceed 10.5 percent.
During the reauthorization, Luke said the AVMA will seek to lower interest rates for graduate and professional students by working to lower the fixed margin portion that helps determine the interest rates on federal loans.
The interest rates for new unsubsidized Stafford loans will drop from 5.84 percent for 2015-2016 to 5.31 percent for 2016-2017, and the interest rates for new Grad PLUS loans will drop from 6.84 to 6.31 percent.
Remove restrictions on refinancing
Removing restrictions on refinancing would allow borrowers with federal student loans to refinance anytime a lower interest rate were available. The AVMA supports the Student Loan Refinancing Act (HR 649), which would permit those with federal student loans to refinance, just as with a home mortgage or car loan, bringing down the long-term cost of a college degree.
Preserve the Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness program provides an incentive for veterinarians to work in eligible public sector and government jobs at the federal, state, and local levels as well as in 501(c)3 organizations that promote public and animal health and ensure food safety. Federal student loans are forgiven after 10 years of full-time service in an eligible job. President Barack Obama has proposed capping the program at $57,500. Placing limits on the program and withholding taxes from forgiven loans would create insurmountable barriers for veterinarians to participate in the program, Luke said.
Facilitate enrollment in income-driven repayment plans
The AVMA is urging Congress to help borrowers manage their federal student loan debt by making it easier for them to enroll in income-driven repayment plans. Currently, borrowers must know about the plans, assess which plan is best for them, complete paperwork and income verification, and provide ongoing documentation of eligibility.
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