New Student Loan Bill - get your pens ready!

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Politics First > Politics > Current Politics > New Student Loan Bill - get your pens ready!

[TxQuiltGirl]

http://www.dailytexanonline.com/media/paper410/news/2006/01/18/TopStories/Congress.May.Cut.Student.Aid-1434876.shtml?norewrite&sourcedomain=www.dailytexanonline.com

The U.S. Congress is poised to pass the most significant cut to student loans in the federal aid program's history - a move that would result in higher interest rates for students.

As one of its last acts of 2005, Congress slashed $12.7 billion from government-backed student loan programs, accounting for one-third of the $40 billion deficit-reduction package that lawmakers approved before heading home for the holidays. The final version of the bill, scheduled to be voted on next month, includes higher interest rates for students and parents and would not allow students to consolidate their loans to get lower interest rates after July 1.

The cuts will have a "delayed impact" on the 24,000 students at UT who depend on federal aid, said Larry Burt, an associate vice president of Student Financial Services.

"The cost to students will really be in the interest rate increase, which they won't feel until they leave the University and have to begin paying off their loans," Burt said.

According to Burt, the current rate students pay on their government-backed loans is 4.7 percent. With the new bill, that rate would jump to a fixed rate of 6.8 percent. Interest rates on federally backed loans for parents would also jump from 6.1 percent to 8.5 percent.

"It concerns me," said Emily Grost, a nursing senior. "I mean, I'm going to be graduating $50,000 in debt. And then I'm going to go to grad school. I'm ready to pay it, but it's hard having all that money hovering over your head."

Congress initially planned to set aside $8.25 billion for Pell Grants, but it reduced that amount to $3.75 billion in the latest version of the bill.

The selection criteria for Pell Grants would also become more academically competitive and less need-based. The proposed plan provides grants of $750 and $1,300 for freshmen and sophomores, respectively, who maintain 3.0 grade point averages and have high school course loads deemed "rigorous" by the U.S. education secretary.

Additionally, there will be $4,000 grants available for juniors and seniors who major in mathematics, sciences, technology or certain foreign languages deemed critical to national security. Senate Majority Leader Bill Frist, R-Tenn., pitched the grants as a way to up America's competitiveness in the global economy, nicknaming them "Smart Grants," an acronym for "science and mathematics access to retain talent."

But Sen. Edward M. Kennedy, D-Mass., expressed concern that the "Smart Grants" abandon traditional principles of giving the most help to the neediest students.

"We should provide incentives for students to study math and science, but at the same time give every American the chance to attend college," Kennedy said, according to The Chronicle of Higher Education.

Since the cuts and changes were proposed, there have been many doomsday-style articles advising students to rush to consolidate their loans before the July 1 deadline is set to hit, but Burt advises students to consider their individual situations and not react impulsively.

"You have to be thoughtful and do your research before any kind of consolidation," he said.

The Chronicle of Higher Education contributed to this report.

[sx1100]

http://www.dailytexanonline.com/media/paper410/news/2006/01/18/TopStories/Congress.May.Cut.Student.Aid-1434876.shtml?norewrite&sourcedomain=www.dailytexanonline.com

The U.S. Congress is poised to pass the most significant cut to student loans in the federal aid program's history - a move that would result in higher interest rates for students.

As one of its last acts of 2005, Congress slashed $12.7 billion from government-backed student loan programs, accounting for one-third of the $40 billion deficit-reduction package that lawmakers approved before heading home for the holidays. The final version of the bill, scheduled to be voted on next month, includes higher interest rates for students and parents and would not allow students to consolidate their loans to get lower interest rates after July 1.

The cuts will have a "delayed impact" on the 24,000 students at UT who depend on federal aid, said Larry Burt, an associate vice president of Student Financial Services.

"The cost to students will really be in the interest rate increase, which they won't feel until they leave the University and have to begin paying off their loans," Burt said.

According to Burt, the current rate students pay on their government-backed loans is 4.7 percent. With the new bill, that rate would jump to a fixed rate of 6.8 percent. Interest rates on federally backed loans for parents would also jump from 6.1 percent to 8.5 percent.

"It concerns me," said Emily Grost, a nursing senior. "I mean, I'm going to be graduating $50,000 in debt. And then I'm going to go to grad school. I'm ready to pay it, but it's hard having all that money hovering over your head."

Congress initially planned to set aside $8.25 billion for Pell Grants, but it reduced that amount to $3.75 billion in the latest version of the bill.

The selection criteria for Pell Grants would also become more academically competitive and less need-based. The proposed plan provides grants of $750 and $1,300 for freshmen and sophomores, respectively, who maintain 3.0 grade point averages and have high school course loads deemed "rigorous" by the U.S. education secretary.

Additionally, there will be $4,000 grants available for juniors and seniors who major in mathematics, sciences, technology or certain foreign languages deemed critical to national security. Senate Majority Leader Bill Frist, R-Tenn., pitched the grants as a way to up America's competitiveness in the global economy, nicknaming them "Smart Grants," an acronym for "science and mathematics access to retain talent."

But Sen. Edward M. Kennedy, D-Mass., expressed concern that the "Smart Grants" abandon traditional principles of giving the most help to the neediest students.

"We should provide incentives for students to study math and science, but at the same time give every American the chance to attend college," Kennedy said, according to The Chronicle of Higher Education.

Since the cuts and changes were proposed, there have been many doomsday-style articles advising students to rush to consolidate their loans before the July 1 deadline is set to hit, but Burt advises students to consider their individual situations and not react impulsively.

"You have to be thoughtful and do your research before any kind of consolidation," he said.

The Chronicle of Higher Education contributed to this report.

They are trying to make it so that the only way the poor can get into college is through military service.

[breeze]

Maybe they want y'all to get your degrees in fields where you can earn a living.  :D

[Radi8]

Several inaccuracies in that article.

1) Consolidation would still be available to students who have finished school.
  After july 1  only those currently attending classes would be barred from consolidation.   And that in most cases is a good thing- consolidating a stafford loan while still in school ends the subsidy prematurely.

2) The grants for good grades and certain majors are in addition to the Pell grant, not a replacement for it.  They are income based like the Pell grant is, in fact the proposed income requirements are exactly the same.

3) Locking in a 6.8% rate isn't a bad thing when rates are on the increase. Currently the rate is capped at 8.25.  Existing variable-rate loans may actually be the worse deal in a few years unless you lock them in.

Increasing the limits on Stafford borrowing, removing origination fees,  allowing graduate students to qualify for PLUS loans- how are those changes negative?

[phinfan]

They are trying to make it so that the only way the poor can get into college is through military service.

And the military is such a terrible way to learn a trade, go to college or earn a living isn't it, SX? What did your Dad learn from being in the SeaBees?

Several inaccuracies in that article.

1) Consolidation would still be available to students who have finished school.
  After july 1  only those currently attending classes would be barred from consolidation.   And that in most cases is a good thing- consolidating a stafford loan while still in school ends the subsidy prematurely.

2) The grants for good grades and certain majors are in addition to the Pell grant, not a replacement for it.  They are income based like the Pell grant is, in fact the proposed income requirements are exactly the same.

3) Locking in a 6.8% rate isn't a bad thing when rates are on the increase. Currently the rate is capped at 8.25.  Existing variable-rate loans may actually be the worse deal in a few years unless you lock them in.

Increasing the limits on Stafford borrowing, removing origination fees,  allowing graduate students to qualify for PLUS loans- how are those changes negative?

Thanks for summing this up, Radi.

[ISW]

Maybe they want y'all to get your degrees in fields where you can earn a living.  :D

I didn't know you had to have a degree to kiss the ground upon which republicans stand. :o

[phinfan]

Maybe they want y'all to get your degrees in fields where you can earn a living.  :D

I didn't know you had to have a degree to kiss the ground upon which republicans stand. :o

Lame-O Corncob strikes again.  :

[ISW]

Maybe they want y'all to get your degrees in fields where you can earn a living.  :D

I didn't know you had to have a degree to kiss the ground upon which republicans stand. :o

Lame-O Corncob strikes again.  :

Well for once you're right.  I'm a little lame for the past month with an inflamed plantar tendon in my left foot.

[phinfan]

Maybe they want y'all to get your degrees in fields where you can earn a living.  :D

I didn't know you had to have a degree to kiss the ground upon which republicans stand. :o

Lame-O Corncob strikes again.  :

Well for once you're right.  I'm a little lame for the past month with an inflamed plantar tendon in my left foot hoof.

tee hee

[ISW]

Maybe they want y'all to get your degrees in fields where you can earn a living.  :D

I didn't know you had to have a degree to kiss the ground upon which republicans stand. :o

Lame-O Corncob strikes again.  :

Well for once you're right.  I'm a little lame for the past month with an inflamed plantar tendon in my left foot hoof.

tee hee

There isn't a tendon in a hoof. :D :D :D

[phinfan]

Maybe they want y'all to get your degrees in fields where you can earn a living.  :D

I didn't know you had to have a degree to kiss the ground upon which republicans stand. :o

Lame-O Corncob strikes again.  :

Well for once you're right.  I'm a little lame for the past month with an inflamed plantar tendon in my left foot hoof.

tee hee

There isn't a tendon in a hoof. :D :D :D

Then you are lying about the tendon......

[cinderella]

Maybe they want y'all to get your degrees in fields where you can earn a living.  :D

I didn't know you had to have a degree to kiss the ground upon which republicans stand. :o

Buttkissing 101 for Dummies.....

All neo-cons walk on water!  at least in their own heads

[angeleyeskkhr]

Several inaccuracies in that article.

1) Consolidation would still be available to students who have finished school.
  After july 1  only those currently attending classes would be barred from consolidation.   And that in most cases is a good thing- consolidating a stafford loan while still in school ends the subsidy prematurely.

2) The grants for good grades and certain majors are in addition to the Pell grant, not a replacement for it.  They are income based like the Pell grant is, in fact the proposed income requirements are exactly the same.

3) Locking in a 6.8% rate isn't a bad thing when rates are on the increase. Currently the rate is capped at 8.25.  Existing variable-rate loans may actually be the worse deal in a few years unless you lock them in.

Increasing the limits on Stafford borrowing, removing origination fees,  allowing graduate students to qualify for PLUS loans- how are those changes negative?

You said the subsidy ends if you consolidate in school..Which subsidy is this?  Are you referring to when the gov pays interest on subsidized loans, because it DOESN'T end the subsidy..At least from my experience.  When I consolidated my subsidized loans were consolidated together and my one unsub loan was consolidated separately..Currently I am only receiving bills for the unsub..THe subs say "$0.00" in the interest accrued section.

If the Pell Grant isn't being phased out, then I can see that...The way the article read that didn't seem to be the case, especially with the CUTS to the Pell Grant funds...

BUT, it wouldn't surprise me if you're right.

I'm not sure how I feel about fixing the rate at 6%...yeah it's not as high as it CAN go..but it is pretty high IMO..but then again, I only have experience with the lower percentages for SLs...

[hurricanesfans27]

anything to screw the citizen for this war for oil.   

[Radi8]

You said the subsidy ends if you consolidate in school..Which subsidy is this?  Are you referring to when the gov pays interest on subsidized loans, because it DOESN'T end the subsidy..At least from my experience.  When I consolidated my subsidized loans were consolidated together and my one unsub loan was consolidated separately..Currently I am only receiving bills for the unsub..THe subs say "$0.00" in the interest accrued section.

As I understand it, consolidating a subsidised loan ends the interest deferrment. Feds are trying to discourage consolidation to "lock" the rates when it means loss of subsidy. There are probably ways around it, as you have found out if yours are still carrying an interest subsidy after consolidation.

If the Pell Grant isn't being phased out, then I can see that...The way the article read that didn't seem to be the case, especially with the CUTS to the Pell Grant funds...
No changes to the pell grant. This is an additional grant, using part of the savings from the reduction in interest subsidies. 3.75 or so billion in additional funds.

BUT, it wouldn't surprise me if you're right.

I'm not sure how I feel about fixing the rate at 6%...yeah it's not as high as it CAN go..but it is pretty high IMO..but then again, I only have experience with the lower percentages for SLs...
The cap now is 8.5% or so and rates are rising. Personally, I'd take the 6% fixed over the variable.
 My SL's were in the early 1980's- they were in the 12-18% range.