Dems plan to cut rates on college loans

[deadparrot]

WASHINGTON - Democrats say they are putting education reform at the top of their to-do list as they prepare to take control of Congress.

However, they have not spelled out what the math will look like.

Democrats say they will use their new authority in the House and Senate to slash interest rates on need-based college loans in half — from 6.8 percent to 3.4 percent.

"That will be done almost immediately, certainly within the first couple of weeks of the new session," California Democratic Rep. George Miller (news, bio, voting record), the incoming chairman of the House education committee, said in an interview.

http://news.yahoo.com/s/ap/democrats_education

[BadGimp]

1. Who's goose gets cooked as a result?

The lenders? Who re they?

Just wondering how much of a push back they can mount.

[Gormy Cuss]

9. The lenders will compete with the government.

According to the article, this sounds very much like they are recreating needs-based loans like the old National Direct Student Loan (NDSL) program -- students are borrowing directly from the government rather than through financial institutions. If eligibility is similar to the old program this is a great step.

Banks would probably rely on marketing to the tier of students who don't qualify for the direct loan rather than compete with the government for these loans with low rates.


on edit: Go George Miller! (CA-07, Martinez)

[whistle]

2. Good deal and lower interest rates for new home buyers as well

[lovuian]

3. Awesome

:woohoo:

[Jon8503]

10. Double Awesome, a government doing things for the people not

just the rich.

[lyonn]

4. Investing in our youth is money well spent.

This is a no brainer, must be why the bushies have reduced pell grants, raised interest on school loans, etc.

[JuniperLea]

5. Is this like gas prices?

What were the rates before they were hiked?

Is this like the euphoria at the pump when you see the price of gas at $2.75 and say "woohoo" because the price isn't $3.75 anymore? Roll it up, then knock it down so the sharp pain isn't there anymore, but you are still paying a hell of a lot more than you were six years ago.

[lindisfarne]

14. You're incorrect. Stafford student loan rates used to be set at 8% or 8.5%

(late 1980s/early-mid 1990's), then they were tied to an economic index (some additional amount was added to the index to get the interest rate), but they fluctuated annually, depending on that economic index (maxing out at 8 or 8.5%). In a few years (2004 & 2005, I believe), if you consolidated *before you graduated* (which gave you a 0.6% reduction in consolidation interest rate), you could lock in at a very low interest rate (3% - 3.5% or so).

Historically, rates have been WELL ABOVE this, and people who had already graduated, but not yet consolidated (you can only consolidate a loan once) couldn't get a rate below 3.5%, even in those years.

If the government changes Stafford student loans so that the maximum interest rate is 4% or lower, it will be a great improvement over any period in the last 25 years. (keep in mind you have always paid a 3-4% origination fee up front, as well).

[JuniperLea]

16. How can I be incorrect when I was asking a question?

But thanks for the info... it answers the question.

I paid out-of-pocket for three kids to avoid all this. I know people in their 40's who are still paying off these loans and I didn't want it to happen to my kids.

[lindisfarne]

18. I took out loans, continued to live for a few years like I did in college, and

paid them back within about 2 years (at the 8.5% rate). It's all a matter of what you choose. But an 8.5% rate is a bit ridiculous these days; wasn't as ridiculous in the 1980s when people were paying 15% for new mortgages, but still, the government could have cut the rate to 5% easily. Plus, banks have been making significant amounts of money off the loans because the government guarantees them a certain interest rate which was well above any rate they could have gotten elsewhere.

By taking out loans, I got a much better education than I could have afforded to pay for out of pocket.

In Australia, if you're earning above a certain annual income (a fairly reasonable number, it's equivalent to about $25000 US) you pay back from 4% to 8% of your income (starts at 4% and then increases as your income increases; if you earn less than the threshold income, you're not required to repay unless your earnings increase. There's no interest but there are some other fees (total debt increases at the rate of the consumer price index). Still, the system is much better than what we have in the US.

"A FEE-HELP loan can cover all or part of a student’s tuition fees. A maximum of $50,000 in tuition fees may be paid using FEE-HELP over a student’s lifetime. This is the FEE-HELP limit. This limit is indexed each year. A one-off loan fee of 20% applies to FEE-HELP loans for undergraduate courses of study. The $50,000 FEE-HELP limit does not include the loan fee. No loan fee applies to FEE-HELP loans for postgraduate courses.

The Commonwealth Government pays the amount of the loan directly to the College. Students repay their loan through the tax system once their income is above the minimum threshold for compulsory repayment.

Your eligibility for FEE-HELP is not affected by your income and assets. However once your income is above the minimum repayment threshold (The current threshold is $36,184AU) you will have to commence repayments of your FEE-HELP debt.

Interest is not applied to FEE-HELP debts however; an index amount is applied each year. This indexation amount is not counted as part of your FEE-HELP limit. The indexation amount is in line with the Consumer Price Index (CPI) and is applied to the outstanding debt that has existed for 11 months or more."

[JuniperLea]

19. Kid one is a chemical engineer now

And will probably do post-grad studies at Cal Tech. We were poor... those techy books alone were $300 each on average. But he got the best and would have not had better with a loan. We made our choices too. He stayed at home, we ate in ALL the time and took camping vacations. The economy was just too scary... still is really. He can work his way through grad school on his own now and still live nicely.

Perhaps it was my very humble beginnings, but I simply abhor debt.

One down, two to go;)

[lindisfarne]

21. When I was in college, I did everything I could to minimize loans, but looking back, that was stupid

My upbringing had taught me loans were undesirable but after I paid them off so quickly, I realized that educational loans can enable you to accomplish things you couldn't have otherwise. (Now, a car loan would have been REALLY stupid).
I would have had a much easier time financially if I had taken out even $250 more per year (assuming I was eligible). I had the equivalent of about $18000 (in today's money) in loans; by not having a car, I easily saved $4000 annually, which helped repay the loan faster!

[dansolo]

22. Loan rates were not quite that high

I had both GSL and NDSL loans when I went to college from '87-'91. The GSL rate was around 7.4%, and the NDSL rate was 5.25%

[lindisfarne]

24. GSL was a fixed 8%, beginning in 1983. I don't know about NDSL; it was a more limited program

and I wasn't eligible for it (far more student loan money is given out under the Stafford loan program than under the Perkins Loan program (formerly NDSL)). Sometime in the mid 1990s (by 1994 for sure; see http://ifap.ed.gov/dlbulletins/attachments/DLB0605Attach.pdf), GSL was changed to a variable interest rate, maxing out at 8.25%. GSL are now known as Stafford Loans (for students; parents get PLUS loans).

For all Stafford loans first disbursed on or after July 1, 2006, the interest rate is now fixed at 6.8 percent.
For Stafford Loans first disbursed between July 1, 1998 and June 30, 2006, the interest rate is variable (adjusted annually on July 1st) but will not exceed 8.25 percent.... The interest rate for these loans in 2006-07 is 7.14 percent. (This rate applies to loans in repayment status; the rate may be lower during grace and deferment periods.) http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp?tab=funding

http://www.finaid.org/educators/history.phtml
1983 Student Loan Consolidation and Technical Amendments Act of 1983 (GSL 8% interest rate, EFC)

1986 Reauthorization of the Higher Education Act (added Congressional Methodology as a second federal need analysis methodology, gave financial aid administrators broad discretion through "professional judgment", required financial need for the GSL interest subsidy, NDSL renamed Perkins Loan, created Supplemental Loan to Students (SLS) for graduate, professional and independent students, restricted PLUS loans to parent borrowers, added FFEL consolidation loans)

1987 GSL Program renamed the Stafford Loan Program

[ldf]

25. for the last 3 or 4 years, many lenders

charged Zero origination fees.

students got exactly what they borrowed. a medical student borrowed 8500 sub stafford a year, they got 8500, not 8245 (8500 minus 3% origination fee). it has been an accepted practice they were skimming off the top before the student ever received the loan, in ADDITION to the interest accrued over the life of the loan. AND the loans are guaranteed by the government (why do you think they call it the "guaranteed student loan program"?), meaning the lenders could NEVER LOSE!

basically, the zero fee lenders (or in many cases, the guarantors) paid the fees for the borrowers (students).

even the big bully on the block, sallie mae, had to offer zero fee loans.

and in spite of all those "incentives" for the students, apparently they are still making enough profit for it to be worthwhile. it is a HUGE, profitable business.

they could have been doing it all along.

[TaleWgnDg]

6. You go, Ted, you go!! Give em hell, Ted . . . !! n/t

[Monkeyman]

7. The Dems are stepping up to the plate on Education just like they promised

[WindRavenX]

8. PLEASE GOD LET THIS HAPPEN!!!

<--40K in student loans

[lindisfarne]

15. Unlikely to apply retroactively to existing loans. n/t

[WindRavenX]

20. god fucking dammit

:grr:

[rmgarrette64]

11. Needs to be two parts

They need to put caps on how much colleges can raise tuition as well. Getting great loan rates is useless if the colleges just raise cost more than you'd save on that rate. For that matter, tuition has been going up a lot faster than inflation for the last decade. Congress should require roll backs on tuition if the colleges want to continue receiving federal dollars.

R. Garrett

[brook]

12. I had heard somewhere

that the Democrats intended to make college tuition tax deductible. I'd like to see that happen!

[superconnected]

13. Wonderful! I got a couple kids staying at my place that need

college loans! Absolutely wonderful!

[lindisfarne]

Article mentions details on how to pay for the program undetermined ... how about oil royalties?

Lots of unpaid oil royalties going back a decade or more, and the Supreme Court just ruled the government could require them to be paid, regardless of how old the outstanding debt was. Of course, the unpaid oil royalty debt far, far, far exceeds the cost of this program.

[lindisfarne]

17. Article mentions details on how to pay for the program undetermined ... how about oil royalties?

Lots of unpaid oil royalties going back a decade or more, and the Supreme Court just ruled the government could require them to be paid, regardless of how old the outstanding debt was. Of course, the unpaid oil royalty debt far, far, far exceeds the cost of this program.

[OhioChick]

23. This is

refreshing news. :)

Now.....they need to keep jobs from being outsourced so that graduates can "find" a job upon graduation.

[Warren Stupidity]

26. Pell grant needs to be tripled. nt.

[Captain Hilts]

27. Yaaaaaaay, go team!!! nt

[greiner3]

28. Woo-hoo

By next December, when I get my Bachelor's, I should have right at $20,000 in student loans. I plan to attend Graduate school and could very well double that figure in two years. Go Dems!