Here are a few points worth noting:
Congress would scrap a special kind of federal loan for graduate students. So-called subsidized student loans don't charge students any interest on the principal of student loans until six months after students graduated.
Congress would also nix a special credit for all students who make 12 months of on-time loan payments.
The other big cut that Congress is targeting is a credit that all students get on the origination fee they pay the federal government to process their loans. Students pay 1% of the loan as an origination fee, but all students get half of that back unless they miss one of their first 12 payments.
The loss of that credit would cost a student who borrows $5,000 from the federal government $25. This would cost students $3.6 billion over the next decade, according to the budget office
Our politicians clearly have their priorities straight and care about educating citizens. Go Congress. You're looking out for all the right things and entities. No word on what will happen to variable interest rates and current borrowers. One thing is certain. We aren't even in line anymore when it comes to Congress. The indentured educated class has truly been betrayed and on so many levels by this debt deal. It's time we unite and do something about it. Stay tuned for strategy plans.
Related Links
"Quick Update: Default, The Debt Ceiling Fiasco, and Interest on Your Student Loans," AEM (July 31, 2011)
Pedro Nicolaci da Costa, "Default cloud hangs over U.S. job market," Reuters (July 31, 2011)
Progressive Co-Chair Rep. Raúl M. Grijalva Statement on Emerging Debt Deal, Official Statement (July 31, 2011)
Gregory Floyd, "It's Time to Question Labor's Ties to Democrats," HuffPost (July 30, 2011)
"Debt Ceiling Fiasco and Student Loans," AEM (July 30, 2011)
"Who's Terrified? Debt Ceiling Fiasco and Student Loans," AEM (July 29, 2011)
"Call to Action: Tell Leaders in D.C. to Raise the Debt Ceiling," AEM (July 28, 2011)
"Sell Those Indenture Instruments Immediately! The Debt Ceiling Disaster and Student Loans," AEM (July 25, 2011)
"The Debt Ceiling Fiasco and Student Loans," AEM (July 25, 2011)
7 comments:
What does it all mean? And where is it all going?
God I feel so lost.
The banks own Congress - as U.S. Senator Dick Durbin said.
http://www.progressillinois.com/2009/4/29/durbin-banks-own-the-place
The banks own Congress - as U.S. Senator Dick Durbin said.
http://www.progressillinois.com/2009/4/29/durbin-banks-own-the-place
Nando: That is the reason why "reform" is so unlikely. The changes have to be total.
On the surface, it is unclear what the banks have to do with any of this. No new FFELP loans can be issued after June 30, 2010; FFELP is the program involving banks, non-bank lenders, state lenders and "nonprofit" lenders. Since then, all new federal loans are issued through Direct Lending.
And the terms & conditions of the existing $500b in FFELPs can't be changed unless the changes do not impact the loan holder, as the loan holder has existing contractual rights. Thus, in general, additional taxes would be needed to "sweeten" borrower benefits on the old loans, unless it is something which simultaneously benefits the borrower and the loan holder.
Looking below the surface, however, the lenders have been fighting to eliminate the Direct Loan borrower benefit programs since they were created a decade ago. They even sued to prevent borrowers from having these benefits (after several years they dropped their lawsuit). Yes, you heard that correct, lenders sued to make loans more expensive for borrowers. It appears that the removal of these borrower benefits is part of a larger plan to return to the bank-based program at some point in the future. There was even language in the Coburn budget plan at one point to fudge the way Direct Lending is costed out, overall, to lay the future groundwork for fake math making the bank-based program look like not as bad a deal for the taxpayer.
It is unclear how removing these borrower benefits saves money. Paying by auto-debit keeps borrowers out of delinquency and default. You can't possibly become delinquent. And providing an interest rate reduction for making a year of consecutive on-time payments is another tool to encourage good repayment habits and thus prevent many defaults. More importantly, it is a classic capitalist use of economic incentives -- something one would think the tea partiers would whole-heartedly support . . .
There is no change coming: SLABS and a safe annuity are needed for all the coming retirements. If student loan balances are discharged or modified, what investment would provide satbility to retirements? That is the problem that is holding back any reform.
Have heard about some issues with regards to student loaning lately, I was quite afraid to pursue my plan in applying for a student loan. Now I'm finding some better reviews to prove that the issues on student loans are wrong and could be corrected.
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