<p>I am not sure why Grad loans or even PLUS loans carry much higher interest rate than undergrad. From risk perspective, I thought they are less likely to be defaulted and having parents co-sign should mean less risk. That is why I like one of the proposals by some law makers that would set the rate to be the same for all loans.</p>
<p>^^ the higher rates are subsidizing the cost of the Pell grant program…</p>
<p>Again, I think that is the wrong way to pay for the program. Pell grant recipients can be much better off than the poor folks that get stuck with paying interest after graduation.</p>
<p>EK4 said:
I dont feel the need to subsidize students who would not qualify for subsidized loans if they were attending instate public schools. </p>
<p>I might agree with this. But in our oh so expensive NJ, instate publics run 22K+ with R&B.
So, many in our state do qualify for subsidized loans as our son did even without attending those evil overpriced privates.:)</p>
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<p>Everything for my daughter is handled through [FedLoan</a> Servicing](<a href=“http://www.myfedloan.org/]FedLoan”>http://www.myfedloan.org/).</p>
<p>400,000 parents have been rejected for Parent PLUS Loans since the underwriting standards were tightened in 2011.</p>
<h2>[Education</a> Department hears comments on PLUS loans, gainful employment and for-profit colleges | Inside Higher Ed](<a href=“http://www.insidehighered.com/news/2013/05/22/education-department-hears-comments-plus-loans-gainful-employment-and-profit]Education”>Education Department hears comments on PLUS loans, gainful employment and for-profit colleges)</h2>
<p>Excerpt from link below:</p>
<p>“The Education Department’s recent change in how it defines adverse credit history—adding unpaid collections accounts or charged-off debt as grounds for denial—is meant to “prevent people from taking on debt they may not be able to afford…” The change may result in significantly more Parent PLUS loan denials, according to Mr. Kantrowitz—and some financial-aid officers’ recent observations seem to bear that out. But new denials may actually involve the wrong people. … Instead the new policy may exclude borrowers who once fell behind on a debt, he says, but now pose little credit risk."</p>
<p>Much more about the downsides of Parent PLUS loans at the following:</p>
<p><a href=“http://blog.collegeup.org/parents-now-that-your-child-is-definitely-going-to-college-how-do-you-pay-for-it[/url]”>http://blog.collegeup.org/parents-now-that-your-child-is-definitely-going-to-college-how-do-you-pay-for-it</a></p>
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<p>Probably a good thing, but dont’ get caught up in headlines. The fact is that before the credit rules were tightened, the feds rejected 28% of all plus apps. The newer rules mean that they reject 10% more, or 38%. In other words, 60% are still approved quickly. (And for those rejected, the student can borrow an additional unsub amount.)</p>
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<p>Really? Stafford subsidized loans are a central component of need-based FA at almost every school in the country. I just happened to be looking at the University of Texas common data set for another thread. In 2012-2013, UT awarded $90.6 million in “need-based” loans to its undergraduates, and $20.8 million in “non-need-based” loans. Unsubsidized Stafford loans, which go to students who aren’t eligible for need-based FA or those with need who have already borrowed the maximum in subsidized Stafford loans, fall into the “non-need based” category. Subsidized Stafford loans are considered a form of need-based FA, and probably make up the bulk of that $90.6 million in need-based loans UT is disbursing. For comparison purposes, UT distributed $46.5 million in federal need-based grant aid, which would be mostly Pell grants. So need-based loans represent twice as much of the need-based aid UT students are receiving, as compared to Pell grants and other federal grants. </p>
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<p>So what you’re saying then, is you don’t mind if we cut federal need-based financial aid for low- to moderate SES students? Because that’s just what the proposal is. These loans are subsidized because large numbers of students can’t go to college without need-based FA. At most schools, a Pell grant covers only a fraction of COA, and for lower SES students, a Pell grant plus EFC falls far short of COA. Subsidized loans are a way of partially filling that gap; it’s cheaper for the government than increasing the size of Pell grants, but it allows lots of people to attend college who otherwise wouldn’t. </p>
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<p>People who can afford to buy a $12,000 car can and do borrow $12,000. Not everyone can afford to buy a car, or even if they can buy a car, many can’t afford a $12,000 car even with a loan, so they buy a $4,000 used car instead. </p>
<p>And many students borrow far more than $12,000. Again to use Texas as an example, for the class that graduated in 2012, 50% had borrowed, and those who had borrowed left college with an average indebtedness of $26,097. That means some were probably in the $35K, $40K, $50K range. And this is at a public flagship, mind you; no luxury education here. Many of those borrowing that much money were lower SES students who had maxed out on Pell grants, maxed out on work-study, maxed out on subsidized Stafford loans, and may already have been taking out the maximum unsubsidized Stafford loans, because like most public universities, the University of Texas routinely “gaps” students on need-based FA. It just strikes me as extremely cavalier to say to that lower SES student whose finances are already strained to the max that it just doesn’t matter if suddenly the cost of borrowing is going to go way up. It matters to those lower SES students. For some, it may indeed be a deal-breaker.</p>
<p>Glad I’m not the only one who found that unusual.</p>
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<p>I’ve often suggested on cc that Pells and subsidies be eliminated for private colleges, and that the extra cash be added to the publics, including jucos.</p>
<p>Do everything you can to avoid loans, any educational loans that are non-dischargeable in bankruptcy. Even with IBR programs, all they do is make a young graduate an indentured servant to the financial industry for the next twenty-fives years. If you can’t afford it and you are spending for an expensive, private education instead of a more reasonable public education, you are likely making a large error. Those loans will come back to haunt you, and the people on College Confidential will be for the most part rooting for the banks and judging those who default to be freeloaders.</p>
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<p>I could live with that. A lot of the financially weaker, tuition-dependent private colleges and universities probably couldn’t, because Pells and subsidized Staffords make up a significant fraction of their annual revenue. But many of them are probably not financially sustainable over the long run anyway.</p>
<p>Really? Stafford subsidized loans are a central component of need-based FA at almost every school in the count</p>
<p>I know a lot of people attending instate schools, not private or OOS, its only on CC do you not only find people who “have to go to their dream school”, but those who will not consider a less expensive route transition to adulthood than taking out large loans.
Your life is not over if you do not attend college right after high school, or ever.
;)</p>
<p>*So what you’re saying then, is you don’t mind if we cut federal need-based financial aid for low- to moderate SES students? *</p>
<p>What I said was I think, was that I would prefer that to increase student mobility into the middle class, I would put the money toward pre3- 12 education and subsidize loans for students eligible for Pell, but not for higher income families who only qualify for subsidized loans because they are opting for expensive private or out of state schools, but would not qualify for subsidized loans if they were attending instate schools.</p>
<p>So IMHO there should not be both susbsidized and unsibsidized loans - just one type. These loans should carry the same rate. My daughter can only qualify for unsibsidized loans based on her parents income. Yet she will be the one legally responsible for paying these back - not me. She and students like her will be coming out of college and will be at no financial advantage over students that had subsidized loans, yet they are expected to contribute more. Does not make sense to me.</p>
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<p>we spend plenty on K-12 education. More per student than almost every country in the world. You wouldn’t know it from the results we get for our investment though…</p>
<p>We need more effective K-12 education.</p>
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<p>But often it’s not either-or. Very often low SES students max out on need-based grants, then max out on subsidized loans, then need to take out unsubsidized loans on top of that. Especially at schools that don’t meet 100% of need, which unfortunately is the vast majority of colleges and universities in this country. If you take away the subsidy, you’re making college less affordable to those with the greatest need, and removing an important ladder of opportunity out of poverty. If you make them all subsidized, you’re subsidizing, at taxpayer expense, people who, according to the federal definition of need, don’t need a subsidy.</p>
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<p>To follow on to bc’s post, if everyone received subsidized loans, then your taxes – and mine – would have to go up to pay for them, DadofTwo. And that ‘doesn’t make sense to me.’</p>
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<p>Since the impact of the interest rate hike will not be felt until AFTER the student leaves school, I dont see how the interest rate materially impacts TODAY a students choice of college or even the decision whether or not to go to college. </p>
<p>A 6.8% loan is can still be regarded as aid in that it is an unsecured loan. Where else will one find an unsecured loan at that rate.</p>
<p>If you put the 6.8% in historical perspective of federal student loans, it is a BARGAIN. Back in the 80s it was 8-10%!</p>
<p>Difficult to compare educational systems in Finland to usa since we are a tad less homogeneous. ;)</p>
<p>Sounds great though doesnt it?
[Strong</a> Performers and Successful Reformers in Education](<a href=“http://www.pearsonfoundation.org/oecd/finland.html]Strong”>http://www.pearsonfoundation.org/oecd/finland.html)</p>