March and April are the main months graduating high school seniors get acceptance or rejection letters from colleges -- and a chance to go into debt for much of their working lives. Congress has been working to assure that, with legislative assaults on the student loan process and a boost to the record profits posted by the largest student loan corporation, Sallie Mae.
Deficit-reduction bills passed by this Republican Congress in the past few months cut billions of dollars from federal student loan subsidy programs, making it tougher for students who need financial assistance to find the money to attend college. But the changes go far beyond that slap at the futures of low-income or middle-income students, because there are new rules for student loans as well.
Under the rules, there's a once-in-a-lifetime limit on loan refinancing -- while student loan interest rates, starting July 1, go up to about 7 percent and parent loan rates rise to 8.5 percent. Defaulting on loans now triggers massive fees and penalties collectable through a lender right to garnish wages, block professional certifications or seize income tax refunds or Social Security benefits. Declaring bankruptcy now will have no effect on student loan debts, and lenders don't have to negotiate before demanding repayment, penalties and interest on the penalties.
All this is legal -- because the laws were changed to make it so. But it's still bad policy, and it must be reversed.
Educating young Americans to compete in a global economy increasingly driven by technology and information is in America's interests. Boosting the profits of a loan company in ways that place insufferable burdens on those students is not. Congress ought to ban the excessive penalties, remove the restrictions on loan refinancing and restore the consumer protections it has stripped from students who need to borrow money to pursue a college education.