<p>News:</a> Senate Budget Would Preserve Pell - Inside Higher Ed</p>
<p>It looks like trading off Pell Grant for the six months of interest coverage is the best deal for the low income student.</p>
<p>One thing I’m curious about. If this passes, would it just apply to new loans? In other words, can they change the rules on loans students already have? I would have thought they could not, in which case I don’t see how it helps next years budget.</p>
<p>swimcatsmom, I would not think that they could change rules on loans that had been taken out under the old rules, but what if one consolidates the loans? How would that work?</p>
<p>Well, you can wait till just before the loans go into repayment to consolidate. My daughter graduates next May. I will have to keep a close eye on all this so that we can help her plan accordingly. She has been so lucky really. She was in school for the few years of the ACG and SMART grant programs existence, had summer pell a couple of summers, and is graduating just as student aid seems to be circling the drain. I am so grateful that she had these programs and will graduate with just a little over $20,000 in debt. Without these programs (and a pretty good merit scholarship), she (and we) would have had a lot more debt. </p>
<p>One thing the powers that be don’t seem to take into account is that educated students put back into the system. My son had a couple of years of pell and sub loans. He is nearing the end of his first year of his job. He is repaying the loans, with interest (and his loan rates were in the 5 and 6% ranges so not very low). His taxes for just this year will more than cover one year of his Pell. By the end of the next year he will have paid enough additional taxes (compared to the job he had before he went back to school) to cover all the need based aid he received. So, a pretty good investment I would think.</p>
<p>Great idea about consolidating just before repayment! I had not thought of that. This would make interest clock right away on just 2 years of Staffords (higher interest ones with greatest amounts of principle unfortunately) rather than all 4 years for my son.</p>
<p>I agree about it being a good investment on making college possible for our citizens, whether low income, middle income, or wealthy.</p>
<p>Consolidating is tricky and does not always result in lower overall payback. There are consolidation calculators available … I think they are on [National</a> Student Loan Data System for Students](<a href=“http://www.nslds.ed.gov%5DNational”>http://www.nslds.ed.gov).</p>
<p>Interest rates are fixed on prior loans, but I imagine there is nothing stopping Congress from eliminating the 6 month grace period on sub interest on all loans.</p>
<p>kelsmom, that isn’t good news. I wonder if the older loans will have that grace period or not. I guess we’ll have to wait until after graduation to find out.</p>
<p>[One thing the powers that be don’t seem to take into account is that educated students put back into the system.
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<p>Oh, I’m sure they are totally aware of all of those that make timely payments, which generates plenty of net profits from these students. The issue is that since these loans are available to all with no credit check – how can there be for an 18 year-old – there are thousands of students who do NOT pay back their loans. (google student loans at for-profit colleges and tradeschools.) In essence, students such as your son swimcatsmom, are subsidizing deadbeats.</p>
<p>I’m not sure I entirely understand this.</p>
<p>Unsubsidized loans are already collecting interest during that time, correct? So this would only affect subsidized loans, yes? If so- I’m confused as to how it would save THAT much money. Would that six months of interest really generate that much revenue? Or am I misunderstanding this?</p>
<p>However, I am in favor of this (if I understand it correctly). It’s only 6 months, and if it means sacrificing that to save the Pell then I’m all for it.</p>
<p>From the link above:</p>
<p>"Under the proposed change, borrowers would still have the six-month grace period before repayment begins, but they would be responsible for the interest that accrued during that time.</p>
<p>The change would save the government slightly less than $6 billion over 10 years. </p>
<p>Subsidized interest during the grace period is the latest program to be sacrificed to keep Pell Grants alive, following subsidized graduate loans, year-round Pell Grants, and LEAP grants, which provided grants to states for need-based financial aid."</p>
<p>^ No, I read that. I’m just really unsure of how that would really save $6b over 10 years. Guess there are just more sub loans out there than I thought.</p>
<p>Does the 6 month waiting period without accrued interest on subsidized Staffords disappear on loans that were already taken out by current college students?</p>
<p>How about this question…DD is in the Peace Corps and her loans are deferred until her return (all subsidized). Could she now be charged interest?</p>
<p>This isn’t even a bill yet. At this point, it’s just a panel that is recommending it to the Appropriations Committee. It’s not a given that it will make it through the Senate, and it faces opposition in the House if it does. In other words, it is too soon to know what this will look like if and when it does get passed. There are likely to be changes if it does pass.</p>
<p>I’m not sure, but I do think it’s possible that the 6 month grace period can affect all loans, even those made with the understanding that there would be no interest accumulating in that 6 months … the loans have fixed interest, but I don’t know that the grace period is by law “fixed.” At this point, only the grace period is being discussed, from what I can see, not deferment periods. Borrowers do still get a grace period … but interest starts when school ends.</p>
<p>kelsmom, thank you.</p>
<p>I think it’s unlikely that existing sub loans would be subject to this proposed revision, based on the terms of the Master Promissory Note the student has signed, which states:</p>
<p>“Ther terms and conditions of loans made under this MPN are determined by the Higher Education Acto of 1965, as amended…Note: Any change to the Act applies to loans in accordance with the effective date of the change.”</p>
<p>and</p>
<p>“We do not charge interest on a Direct Subsidized Loan while you are enrolled in school at least half time, during your grace period, during deferment periods, and during certain periods of repayment under the Income-Based Repayment Plan.”</p>
<p>I think it would be difficult, and very unpopular, to modify the terms of existing notes.</p>
<p>That’s what I was thinking. If the law when the student accepted the loan was that the interest was not charged during the grace period, I don’t see how they can change it for current loans. That being the case, I don’t see how it can help the 2012 budget. </p>
<p>I am curious to see what happens to sub loan interest rates next year. And unsub for that matter. 6.8% is a very high rate given the current interest rates in the real world.</p>
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<p>Agreed (10 characters).</p>
<p>^^Except market rates have been low for 3+ years, but rates were recently raised back to 6.8%. This is a profit making enterprise for the feds, or a hidden tax to cover the deadbeats, depending on how you want to look at it. (And it was an easy thing to do since college students voted for the current administration by a 2 to 1 margin.)</p>