<p>Subsidized stafford loans are going to double from 3.4% to 6.8% unless the congress acts to stop this hike by July 1st. This is really distressing to hear as a undergraduate student. The only loans I currently take our are subsidized loans. I expect to have around 12,000 dollars in loan debt by the time I am finished as an undergraduate (doing my best to save money at the same time) so this hike will have a huge impact on me. When you also consider that professional/grad students can no longer receive subsidized loans, it is quite depressing to think about the future outlook of borrowing to fund one's education. </p>
<p>Since most of you are parents, I am sure most of you are concerned about this too. What are your thought about this?</p>
<p>I know very few people who have subsidized loans-
As far as I can tell, they are bringing rates of subsidized to match unsubsidized loans.
Since interest for subsidized loans is uh * subsidized*, doesn’t seem like a deal breaker to me.
$12,000 in loans for an undergrad degree are very minimal.
Don’t folks borrow more than that to buy a car?
Your education should last your life long, surely that is worth paying for!
:)</p>
<p>This is a difference of about $360 per year to you, correct? Or about $30/month.</p>
<p>I know one parent that has a student taking out Stafford loans but it’s just so that she has skin in the game. The parents can well afford full-pay private.</p>
<p>I have a nephew that is taking out loans for his education as well even though his parents can pay for his schooling. Their decision-making on where he goes has me somewhat confused as they wanted him to pick a pricier private whereas he wanted to go to the local community college as he was worried about loans.</p>
<p>Most other parents that I know are doing full-pay private or full-pay public, with or without scholarships.</p>
<p>Fixing something like this in less than a month during the summer seems like a tall order.</p>
<p>EK4- surprised by your comment re:subsidized loans. Is it that unusual? Or just in your circle?
Our DS finished undergrad with about 18K in subsidized Staffords a few years ago. He also took a few thousand in unsub loans that we paid off for him.
Our EFC was between 12 and 16K for his 4 years. Just curious, because we were grateful that his loans were subsidized during his time at school. He is currently paying them off, not a problem for that total amount.</p>
<p>My circle? You mean other blue collar parents of first gen kids?
My oldest qualified for subsidized loans, and she also had an education voucher that she put toward loans, although I still have no idea what her loans were like for graduate school.
Interest was subsidized until six months after she graduated, which was long after she found a job.</p>
<p>My youngest didnt qualify for subsidized loans because she is attending a much less expensive college, but if they were going to lower the interest rates for all, it would make much more sense to me.
If she was attending an expensive private she would have qualified, but why incur more expense just to get subsidized loans?</p>
<p>I glad some people above don’t need subsidized federal loans, but for most students, they are absolutely essential.</p>
<p>The US House passed a bill that would make all federal loans into variable rate loans. The loan you take out Fall of 2013 might start at 4%, but in a few years, that same loan could double to 8.5%. People would not have predictable payments.</p>
<p>The US Senate yesterday voted on competing Democratic and Repub plans. Neither plan was able to get enough votes to pass. </p>
<p>As noted above, if Congress can’t agree, the rate for subsidized Staffords increases to 6.8% for all new loans after this summer. Also, if Congress does not act, the Perkins loan program could disappear in a year.</p>
<p>The President has proposed market-rate loans that would have a fixed rate over the life of each loan. That proposal would reduce the current rate of all federal loans, because the feds are currently borrowing money at 2%. However, future loans could have higher rates if inflation and federal borrowing rates would increase (which is likely).</p>
<p>I think there is a good chance that a new bill will be agreed on and the rate won’t be as much as 6.8%. At least there are many republican proposals that are not very far apart from the democrats. The posture here is not to stonewall but to reduce it in some forms.</p>
<p>In any case if nothing gets done, it will only effect new loans, outstanding loans terms cannot be changed. So in reality it won’t even be a difference of $30 a month, it should be much less than that. When you are done and ready to start paying off, hopefully $12k can afford you to pay more than minimum, just pay off the the ones with higher interest rate first.</p>
<p>I remember when the interest rates being charged were in the 20s% but I dont remember anything that * paid out* that much.
I dont know if my parents even had anything that paid that much.
I paid for some college classes with social security checks ( when I was about 19-20) which currently end to dependents at 18. I did not know about loans, subsidized or otherwise.</p>
<p>If voters really want to help kids move into the middle class, target subsidized loans to students who receive PELL and bring back social security checks for dependents who are 18-22 and trying to continue their education.</p>
<p>I dont feel the need to subsidize students who would not qualify for subsidized loans if they were attending instate public schools.</p>
<p>Emeraldkity4, lots of students attend instate public universities with efc only a bit higher than the cut-off for pell grant and receive subsidized stafford loans. Are you against subsidized staffords for them? Do you have data to show that subsidized staffords are used mainly at expensive private schools or OOS public universities?</p>
<p>The subsidized Staffords are used by almost everyone who is eligible, including people going to in-state public universities. </p>
<p>If you want to reduce government waste, then allow the President to crack down on for-profit diploma mills who are wasting far too much federal aid with extremely high default rates. So far, Congress has obstructed those reform efforts.</p>
<p>Many upper-middle-income families sending their kids to expensive schools actually are using the Parent PLUS loans, which have a 7.9% interest rate. Fortunately, my family has not needed those. That rate is particularly hard to swallow, at 7.9% when the feds have borrowed those same dollars at 2%. Some of the proposals before Congress would also decrease that interest rate initially (although it could increase in the future if the federal cost of borrowing money would increase).</p>
<p>DS has been borrowing both Perkins and subsidized Staffords. W/o them, the private would become not affordable. </p>
<p>If the rate does go up, we will probably refinance home mortgage to get the extra cash instead of taking out the high interest loan.</p>
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<p>BTW, I am very interested in how would you do that. DS is piling up the loans and we don’t have a clue if all the loans will be on one payment or different year will have a different account.</p>
<p>Increased rates is a good thing, IMO. While 6.8% is too profitable for the feds, 3.4% fixed is too low. The correct – breakeven number – is probably somewhere in the middle. (includes admin costs, default costs, borrowing costs, etc.)</p>
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<p>Many upper-middle income families can easily find a less expensive rate, so not sure why it matters. OTOH, the PLUS loans require the barest of bare credit checks, so they are approved for many lower income parents who do not have the income to repay them.</p>
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<p>It’s a big hassle, but can be done. With the recent nationalization of the ed loans, the feds now consolidate them for ‘convenience’. So, when a extra payment goes in, one has to call the servicer – perhaps numerous times – to get them to apply the excess to the high interest loan only.</p>
<p>We log into our son Sallie Mae account and they list all the loans by type and you can elect to apply any payment to the one you want. In fact, it maybe the case that if you don’t choose, the payment goes to the unsubsidized ones first. My son is still in school, so we have not had to pay anything yet.</p>
<p>Fwiw, almost every person I know who filled out a fafsa at my public u took subsidized (as well as unsub) direct loans. A few had parents who paid out of pocket so need for fafsa.</p>
<p>I don’t know where the idea it’s primarily for those at private schools came from.</p>
<p>I’ve read that the credit standards for being eligible for Parent PLUS loans were tightened a year or so ago. Some families who received them 2 years ago could not get them 1 year ago. My understanding that eligibility is based upon your credit score, not your actual ability to pay. Therefore, some people are allowed to take out far more PLUS loans than they can ever repay.</p>
<p>If an upper middle income family does not have much home equity, it still may be difficult for them to find a better deal than the 7.9% parent Plus loans. The stats I read showed that some of the biggest increases in student debt were among upper middle income families taking out PLUS loans to pay for private colleges. </p>
<p>There is a good post on this parents part of CC about the down-sides of Parent PLUS loans.</p>
<p>(PLUS loans are also used by Grad and professional students if they need to exceed the maximum amount of 6.8% grad stafford loans per year. None of the grad staffords are subsidized.)</p>
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