The federal government must do a lot more to protect college students and their families from falling into crippling debt. At the very top of that list is improving oversight of private student lenders. Too often, these lenders rush families into taking on risky, high-priced loans — even when students are eligible for safer, more affordable federal loans. Colleges must also be pressed to do a lot more to fully inform and protect their students. They often fail to explain the costs of loans and the dangers of choosing the wrong ones. Some colleges actively harm their students by packaging high-cost loans with their student-aid offers, to make the school appear more affordable than it really is.
A bill introduced by two Democratic senators, Richard Durbin of Illinois and Tom Harkin of Iowa, would require colleges and lenders to do a better job of making students aware of their borrowing options and the marked difference between federal and private student loans. College students often do not understand their eligibility for federal loans, or mistakenly believe that private loans work the same way that government loans do. But most federal student loans are capped at 6.8 percent, while private loans often have variable rates that can start at 15 percent or higher.