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NY Student Lending Plan Gets F for “Flawed”

April 2, 2009

Albany, NY - Critics of a New York student loan program on the verge of passage say the program is wasteful, poorly structured and offers few safeguards for student borrowers. The New York Higher Education Loan Program (NYHELPs) is expected to be passed by the legislature, and will cost $50 million to launch and $10 million a year to run.

Thomas Hilliard, senior policy associate for the Schulyer Center for Analysis and Advocacy, says - as structured now – the program lacks basic borrower protection, such as income-based loan repayment or interest-rate caps.

"This is a difficult economy and for the state to be providing loans to students who are going to graduate and go into a very difficult labor market, is really exposing them to a lot of unnecessary risk."

Students are better advised to look into federal programs like the Parent PLUS loans and the state would be better off strengthening the Tuition Assistance Program, adds Hilliard.

"The state is spending $50 million to launch NYHELPs in a terrible budget year and that money could be better spent in other places."

Patrick Krug, a 39-year-old undergraduate at Brooklyn College, has gone back to school to change careers and already has taken out federal loans. He says he is wary of the NYHELPs loans.

"I'm not sure I'm going to be eligible for these, to begin with, but if I were eligible for them, I'm not sure I want to take on an additional debt with uncertain terms."

The state's Higher Education Service Corporation says NYHELP loans will help close student financing gaps because grant programs like the Tuition Assistance Program, and Federal Pell Grants only cover part of the cost of college attendance. Key decisions about interest rates, fees, payment plans and so forth, are not expected to be made until the bill is passed and the state is regulating the program.

Mark Scheerer, Public News Service - NY