DeSaulnier bill would lower student loan rates

Student loan borrowers would be able to refinance their interest rates at the rate offered to banks by the Federal Reserve, under a bill announced Monday by Rep. Mark DeSaulnier.

DeSaulnier, D-Concord, held an event at the University of California, Berkeley to roll out H.R. 3675, the Student Borrower Fairness Act, which would offset its costs by increasing corporate tax rates on companies that pay their CEOs or highest paid employees more than 100 times the median compensation of all employees.

Mark DeSaulnier“It is patently unfair that the same big banks that toppled our economy borrow from the federal government at extremely low interest rates while student borrowers are struggling to pay back their loans,” DeSaulnier said in a news release. “Meanwhile, people of all ages are buried in student loan debt which holds them back from being able to buy a car, purchase a home, save for retirement, or start a family. This bill is a first step toward making sure our students can emerge from under their piles of crippling debt and enter tomorrow’s highly-trained workforce.”

Congress acted on student loan rates in 2013, but the changes only applied to new borrowers.

UC-Berkeley Chancellor Nicholas Dirks applauded the bill. “College students and their families depend on student loans to access higher education,” Dirks said in the congressman’s release. “At Berkeley, we are proud that 61 percent of our undergraduates graduate without debt and the average debt of students who do borrow is only $17,584, much lower than the national average. This legislation would benefit all borrowers because it will help them manage their debt and repayment.”

James Donahue, president of St. Mary’s College of California in Moraga, said his college “is built on the idea that education has the power to transform lives. The Student Borrower Fairness Act will provide opportunities for all students to pursue their dreams of a higher education, and ultimately highly successful lives. Student loan debt is a national issue and reducing it must be a national priority.”

DeSaulnier’s office said outstanding student loans now total more than $1.3 trillion, surpassing total credit card debt. More than 37 million Americans have outstanding student loan debt, with an average outstanding balance of $29,400 for those who borrowed to get a bachelor’s degree. From 2004 to 2012, student loan debt rose an average of 14 percent per year.


California parents value college but aren’t saving

California parents value a college education more than a good-paying job for their kids, but most have not started saving to help pay for that education, according to a new survey conducted for ScholarShare, the state’s “529” college savings plan.

“The good news is parents realize the importance of a college degree to their kids’ future and economic prosperity,” State Treasurer Bill Lockyer, who chairs the ScholarShare Investment Board, said in a news release. “The bad news is higher education costs continue to rise, and most parents have not been able to start making preparations to help ensure their family can afford those costs. A ScholarShare account can help fill that critical financial need.”

Named for the section of the IRS code under which they were created, 529 plans let earnings on investments grow tax-deferred, and disbursements, when used for tuition and other qualified higher education expenses, are federal and state tax-free. ScholarShare accounts can be opened with as little as $25, or $15 when combined with regular, automatic monthly contributions of at least $15. The program has no annual account maintenance fee, no income limit and offers a high maximum contribution cap of $350,000. ScholarShare now holds more than $4.4 billion in assets in about 250,000 accounts.

The survey conducted by Hart Research Associates found 84 percent of parents considered it “very important” that their children attend college. That’s a higher percentage than those who prioritized having a good-paying job (75 percent) or owning a home (69 percent). Latino (93 percent), black (88 percent) and Asian (90 percent) parents said attending college was “very important” at significantly higher rates than white parents (72 percent). And 78 percent of parents overall said a college education was more important now than it was 10 years ago.

The survey also that when asked what they would be willing to do to improve their current financial situation, 65 percent of parents would be willing to delay their retirement and 46 percent would be willing to save less for their retirement. But only 45 percent said they would delay saving for their kids’ college education and 40 percent said they would save less for their kids’ education.

Yet most parents worry about being able to afford their kids’ tuition: 53 percent said they’re “very concerned” about their ability to pay.

Only 43 percent of parents have a college savings account. Parents who have been saving more than 10 years have set aside an average of $25,193, compared to $14,733 for those saving 6-10 years and $4,663 for those saving five years or less.

Fifty-nine percent of parents surveyed said it’s certain or very likely their children will attend a University of California or California State University school; 51 percent said it was certain or very likely their children would go to a community college; and only 26 percent said it was certain or very likely their children would attend a private university. (That adds up to more than 100 percent because the “very likelies” have some either-or.)

And 44 percent of parents said they expected scholarships or grants to cover at least half of their children’s higher education costs; 35 percent said cost coverage would come from their own savings and income, and 28 percent said it would come from student loans. (That adds up to more than 100 percent because parents expect to use more than one funding source.)