Heard About the Red Act? Here’s What You Need to Know!
By Drew Cloud, The Student Loan Report
It’s not a secret that the U.S. has a problem with student debt. With outstanding loan balances now ballooning over $1.2 trillion and average graduates coming out of school with around $17,000 in student debt, many people believe that this problem has gotten out of control.
Politicians have been listening to their constituents and are trying to come up with solutions. One such solution was proposed in January 2016 by a group of Senate Democrats. They put forward a bill called the Reducing Education Debt Act which has come to be known as the RED Act. The act includes several bills which had been introduced previously but which have not yet been passed.
Here are some of the important things to know about the three parts of the RED Act.
Bank on Students Emergency Loan Refinancing Act
The Bank on Students Emergency Loan Refinancing Act is based on legislation that was proposed by Senator Elizabth Warren in 2014 but which was voted down.
This legislation would provide students with the option to refinance their student loans with the Federal government. This would primarily benefit those who have student loans that were taken out prior to 2010 when student loan interest rates were much higher. These student would be allowed to refinance their loans at a lower rate.
The legislation would also provide the option for students with private student loans to refinance their loans via the federal student aid program. They would qualify for refinancing at whatever the current interest rate is on federal loans.
While you might be able to get lower refinancing rates from private lenders, this depends heavily on your personal credit and income. This legislation would make it easier for those with credit issues to refinance their loans. It would also allow borrowers who are currently paying higher interest rates on their student loans to get a lower rate without having to refinance with a private lender and potentially lose a lot of the benefits that the federal student loan program offers.
America’s College Promise Act
Many people remember Obama’s promise for tuition-free community college during his State of the Union address in 2015. The America’s College Promise Act is the act that would allow that idea to become a reality.
It would do this by providing federal funding so that states could make community colleges free. The act proposes to do this by giving states $3 in funding for every $1 they put aside towards community college tuition waivers.
Making community college free would allow more young people to go to post-secondary and would ensure that they could do so without having to worry about drowning in debt. It would also allow students to start their degrees at community colleges and then transfer to 4 year colleges or universities.
The America’s College Promise Act would also provide additional funding to black colleges and universities and other schools that primarily serve minorities. It would ensure that any low-income students attending such institutions would have funding for their first two years of school. This would help protect historically black colleges and ensure that low income minority students would be able to attend school without accumulating overwhelming amounts of student debt.
Pell Grants are extremely important to many low income students, but they are often at risk or in jeopardy. Because of how the Pell Grants are funded, the Senate has to approve any increases in spending. Unfortunately, Republicans tend to want to cut Pell Grant spending while the Democrats want to stabilize funding and adjust the disbursements for inflation.
The Pell Grant program was recently expanded and stabilized through The Health Care and Education Reconciliation Act, but only on a short term basis. This section of the RED Act would make future inflation adjustments automatic so that it wouldn’t become such a contentious issue.
This legislation would provide more certainty and stability around the Pell Grant program and ensure that it will continue to keep up with the rising costs of higher education.
Want to Support the RED Act?
The RED Act is a great beginning to addressing the student loan crisis. It’s critical that we act now if we want to stop the ballooning of student loan debt and these interventions would have a huge impact on many students and borrowers.
If you support the RED Act and would like to see it be made into law, contact your representatives and let them know!
The Student Loan Report is a content partner of The Port Arthur News providing news and commentary. This content is produced independently of The Port Arthur News.