<p>Anyone familiar with the changes in GOV loans or the changes coming up? Is the feeling it will be better or more limited.</p>
<p>The general consensus is that it’s going to be mroe limited. The government is planning to take over the student loan industry, setting their own interest rates and imposing caps on the amount that students can borrow. They plan on using the savings (ie the money that they’re skimming for middle class families) to engorge the Pell loan program. Great news for the bottom 10% income wise, bad news for the rest of us, I’m afraid. </p>
<p>If you need student loans, I would honestly recommend chcking on private loans first. They might end up having better interest rates than the new government plans.</p>
<p>Instead of some schools being Direct schools and some not, all are now Direct schools. You do all your government loans through the schools, instead having to find a lender. The money saved by the government is the money not being paid to those private lenders to administer government loans. That is the money being funneled to increased Pell grants. </p>
<p>Loan limits are the same as they have been, as are interest rates. You can still apply for private loans; they just won’t be Stafford loans at any private lender. So the loans are subject to that lender’s terms and conditions.</p>
<p>Bedouin, I challenge you again to provide some facts. Please provide am objective source to backup your “opinion”. A college blog does not count as a general consensus. </p>
<p>If you want to post your opinion then fine. State it as such. Put stating opinion as fact is at best misleading.</p>
<p>My understanding is that, historically, the federal student loan program (aka Stafford) was administered by the schools (aka direct lenders). Then the FFEL program was created and allowed banks to also offer Stafford loans and many schools participated in FFEL instead of direct lending. The banks charged the feds fees and got the federal guarantees…a win-win for them, but expensive for the government. There was no “skimming” from the middle class, the fees were paid by all Stafford borrowers and FFEL participants. By discontinuing the FFEL program, the feds will save those fees that were paid to banks and will redirect them to the Pell program (and the nearly 30% of all students that are projected to be Pell eligible under the expanded program). The bottom line is that all schools that participate in the federal student loans program will become direct lenders…no more middleman. </p>
<p>I haven’t seen anything that specifies the rates for Stafford loans and the loan limits are changing and the federal government has always set those rates and limits, so that’s nothing new. The rates for subsidized Stafford loans are decreasing over the next few years, but that was already in place and is unrelated to the new legislation. Afaik, Stafford unsub rates are still fixed at 6.8%, which is extremely reasonable for students with no income and no credit history and no cosigner. The only other proposed change to student loans that I’m aware of would affect the Perkins loan program - changing the 5% interest from subsidized to unsubsidized. </p>
<p>Beduoin, I’d love to see some of these private loans that you’re always touting as having better rates for the student than Staffords. My D, a freshman, received an offer yesterday from SallieMae which had a variable rate that was well over 10%…it went straight into the circular file as she still has Stafford loans at her disposal if she needs them. With variable rates, limited options, and no hope of an interest subsidy while the student is in school, how do private loans CURRENTLY compare to the Staffords? My guess is that they are not competitive without a very credit worthy cosigner who is also willing to put their credit on the line for many years. Also, when you factor in the repayment advangtages/options that federal loans have, it would be difficult to see how the average student would be better off with a private loans instead of a Stafford.</p>
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Whose consensus is that? I have not heard of any such consensus. </p>
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You appear to be *very * unfamiliar with anything to do with student loans if you think the govt setting the interest rates and caps for federal student loans is something new. Stafford loan and PLUS loan are and always have been federal programs. The interest rates have always been set by the government. Even when some of the federal loans were being done through private banks they used the rates set by the government. There have also always been caps on the amounts students can borrow, both annually and cumulatively, through federal student loan programs.</p>
<p>The direct loan plan is not a new plan at all. It has existed for years and a large percentage of schools opted to participate in it, while some did not. The difference now is that all schools are required to participate in the direct loan plan as far as federal student loans are concerned. </p>
<p>I have one kid in a school that has been using direct loans for years and the other and myself go to schools that did not do direct loans. As far as interest rates, maximum amounts for the loans, cumulative aggregates etc the loans are identical. We all had to do the same master promissory notes and online counseling for the loans. The only differences we have noticed are that the direct loans were a little smoother from the student side as they were all administered by the school and once the initial MPN and counseling were done all that was required every year was to accept or decline whatever loans were in the FA package. The loans done through banks were a little (nothing major) less smooth as over time the banks willing to make the loan have changed requiring finding a different bank. One semester a whole bunch of people’s loans did not come through at all but I gathered it was some sort of computer glitch with the school verifying the loan amounts to the bank. The other thing we have seen is that the private banks often sell the loans on to someone else. My son’s loans and mine have been sold on several times so are held by several institutions. This does not happen with my daughter’s direct loans.</p>
<p>Private loans have always been and still are available. If someone finds private student loans that have better interest rates and that a student can get without any credit history or a cosigner then they have the option to take that, same as they have always had. If anyone finds some like these please post actual real details such as the interest rate and the bank name. We would all love to know about them. </p>
<p>Many parents, especially those with good credit scores, have opted for private loans or HELOCs in the past. If a parent finds private loans with better terms than PLUS loans they have that option,as they have always had.</p>
<p>I wonder if Bedouin got that info from glenbeck.com?</p>
<p>Look back on Bedouin’s posting history. Joined a couple days ago. Always posting the inaccurate information. Clearly there is an agenda.</p>
<p>I will try to find a link but I remember reading that it will be 4.5% sub and 6.5% unsub.</p>
<p>Currently sub Stafford loans are 4.5% for 2010-2011 and 6.8% for unsub. This is not a new change of any sort. Unsub loans have been 6.8% for a while. Sub loan interest rates have been scheduled to change over the last few years as follows:</p>
<p>2007-2008: 6.8%
2008-2009: 6%
2009-2010: 5.6%
2010-2011: 4.5%
2011-2012: 3.4%
2012-2013: back to 6.8% </p>
<p>These are not new changes but were under a bill passed several years ago.</p>
<p>Bedouin - you are coming from a different reality than the rest of us. Please keep reading cc as many others are well informed and able to educate you. I would suggest you start by reading all postings from swimcatsmom - a well informed and helpful cc poster.</p>
<p>My understanding is that all Stafford Loans will now be Direct Loans…from the Government. I have to tell you…many schools already did their loans that way. BOTH of my kiddos have Direct Loans…and dealing with them has been SEAMLESS. There was no issue of us shopping around for a vendor with a favorable origination fee…we had no choice at either college and it was FINE. Very easy…well administered.</p>
<p>On the private loan side, are they like unsubsidized loans, ie. they start to accrue interest while you are still in school, etc.</p>
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<p>Yes, but with a good cosigner such as your parents you can get a favorable interest rate and you might be able to halt the capitalization process by paying off the interest each and every month to ensure that the size of the loan remains manageable. The reason why you might take a private over a Direct federal loan is because of the national debt. Inevitably Obama and co. are going to see the interest payments on unsubsidized loans as a useful vein of cash to exploit, as a sort of backdoor tax increase on successful families. I honestly feel sorry for the parents who are going to have to deal with this financial aid bubble once it explodes, just like how the housing market and the dotcom bubble burst a few years ago after the government took those over too with regulation after regulation. </p>
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<p>Have you read the health care reconciliation bill? The Dems snuck in a little surprise about the Direct loan and the FEEL program. It might seem innocuous now, but they wouldn’t have done it without a reason…</p>
<p>Could we please stick to the topic of these loans and leave the political discussions in the Political area of this forum?</p>
<p>Bottom line…no one is going to force anyone into taking any kind of loan. Those needing loans will have to make their own decisions regarding the Stafford loans vs. other types of loans. This has always been the case and will continue to be the case.</p>
<p>For families who need loans or who want the student to have loans in the student name only (without a cosigner), the Stafford Loan continues to be a good option, in my opinion. Of course, others may have different opinions regarding this…and that is fine. I’m expressing MY opinion only,</p>
<p>Some difficult times…interesting about the possible explosion in FIN AID like the housing market. The home equity option to finance education took away one option to finance some of the EFC. The subsidized loan option is also not available to some middle income families, so there are fewer options these years vs. a few years back (when many parents were planning).</p>
<p>Bedouin, enough already! Just stop.</p>
<p>Bedouin, you don’t have a clue. Knock it off, it is juvenile.</p>
<p>Interesting side note … Direct Loans will be assigned to one of four organizations (one of which is SallieMae) who will service the loans. The consumer will not have a choice of who will service his loans (although one student’s loans will all be with one servicer, not split up). Supposedly, these servicers will be motivated to do an amazing job for their customers. We’ll discuss that in a few years, I am sure. ;)</p>