SIOUX FALLS, S.D. (KELO) — It’s meant to give students and parents another option if they can’t qualify for federal student loans. Since 2010, the Department of Education has issued all federal student loans. However, a new bill introduced by Senator Mike Rounds would add to the current system. If approved by Congress and the President, the Affordable Future Loan Program would work with banks and credit unions.
“What we looked at was going back to what used to work for a whole lot of people out there,” said Rounds. “Which was a guaranteed student loan, but run it through your local institution, a bank or credit union, and the federal government would guarantee 98 percent of that loan. So it is easy for the bank or credit union to make the loan.”
Under the plan, the government would guarantee the loans and pay the interest while the student is in school. 6 months after graduating, the student would start repaying the loan over 15 years. Rounds says the need was pointed out by South Dakotans who are not able to qualify for subsidized loans. This is especially true for farm and ranch families.
“One of the challenges we found with farm families is because of their asset base, it’s not liquid. It’s in land, and it’s in equipment, but because of that, they are not considered in many cases eligible for the federal guaranteed student loan under the existing loans today, or at least not under an affordable rate,” said Rounds.
The interest rate would be set by the Treasury 10-year note and caped at 6 and a quarter percent. Senator Rounds says students could borrow up to $19,000 a year. I asked the senator what he thought his chances were of getting the bill passed.
“We are going to do this in a bipartisan basis. We are not taking it away from anybody else. We hope to have strong industry support, and I think the support from moms and dads who are struggling—they are middle-income, they have nowhere else to go, and their kids aren’t being able to get into a college or technical school—this is one more opportunity for us to do that,” said Rounds.
According to Rounds, this bill would provide a low-interest choice for financing education and would take Washington bureaucrats out of the process. Rounds says he believes there is a high demand for this type of education funding.
