<p>So... thought I would start this thread for those in the know to chime in with what they've read about the Senate decision to tie student loan rates--also Parent PLUS loan rates--to Government notes. Here's a blurb so far (FOX News), more info today:</p>
<p>"Undergraduates last year borrowed at 3.4 percent or 6.8 percent rates, depending on their financial need. Graduate students had access to federal loans at 6.8 percent and parents borrowed at 7.9 percent.</p>
<p>Under the tentative deal, all undergraduates this fall would borrow at 3.85 percent interest rates. Graduate students would have access to loans at 5.4 percent and parents would be able to borrow at 6.4 percent.</p>
<p>However, if the economy improves as congressional economists predict, rates would climb in coming years. The proposed compromise reached Wednesday evening would limit how high those rates could go, although all were higher than the current fixed levels."</p>
<p>Although it would improve almost everybody's rates now, changing rates often sounds very complicated and potentially a real cluster. And what about consolidation for existing loans?</p>
<p>Let's keep our collective eye on the ball here and post good information as this plays out, not MISinformation.</p>
<p>I have a question related to the “pending” action by Congress. When do we need to formally accept my D’s student loan? </p>
<p>She received an email last week from Financial Aid that says ‘accept your financial aid package now’ and provides links to the relevant University websites for this purpose. We are unable to find any mention of a deadline to do this. We have been holding out hoping that one of the reduced rate proposals would pass before she signs a promissory note. Is it safe to assume everyone is doing the same?</p>
<p>I’m afraid this might not happen quickly enough for those making decisions now. From CNN:</p>
<p>"Still, one word of caution came late Wednesday from an aide to a Democratic senator deeply involved in negotiations. That aide said final details were still being worked out.</p>
<p>This same group of negotiators had previously announced a tentative agreement, but it fell apart after the Congressional Budget Office estimated the costs were high.</p>
<p>The agreement, if approved by the full Senate, would tie interest rates on a variety of government-backed loans to 10-year Treasury notes and would lock in surcharges paid to the government for administrative costs.</p>
<p>It was not known when the Senate would vote on the bill."</p>
<p>College4K–your D will have to sign a promissory note regardless of interest rate, correct? Is it a question of reduced rate, yes–higher rate, alternative funding? I will say, however, that for an August start date for your D, financial aid should be in place by now or very soon.</p>
<p>I think this deal will pass the Senate, but we will need to exert some pressure to get it through the US House. There are some members of Congress who don’t want to see any federal subsidies of any student loans. </p>
<p>This Senate plan is a fair proposal that takes into account federal borrowing costs over time. Therefore, it avoids the risk to huge federal subsidies in the future if interest rates rise. This is the way the loans rates were determined in some earlier years.</p>
<p>The intent is that this new rate would apply to all new loans taken out after July 1 and would be retroactive if someone takes out a loan in July before the deal is finalized. To be conservative, you might try to delay the actual payment of any funds from the loans until this deal is finalized, but you can still sign loan agreements. </p>
<p>Unlike the bill that passed the US House, under this Senate plan, each loan would have a fixed interest rate. The student could estimate the total cost before agreeing to the loan. The bill that passed the US House would have made each loan into a variable rate loan - it could have started at 4% and then the same loan could have risen to 9% a few years later, with no predictability.</p>
<p>The 3.85% percent loan rate for 2013-2014 academic year is proposed to only apply to subsidized Stafford loans.</p>
<p>I think the latest agreement is all undergraduate loans will be at 3.85, that is the version that the Senate will be voting on momentarily, then the US House will be able to vote on that next. It is expected to pass both houses and the president is expected to have no problem signing it if it gets to his desk. But I guess nothing is done until it is actually done.</p>
<p>I imagine the subsidized part now only applies to interest free while in school, but I don’t know???</p>
<p>Are they saying these rates on the loans taken out now would change in the future, tied to Treasury rates or are they saying rates on new loans would be changing each year? In other words is the rate you take now locked in or tied to Treasury rates?</p>
<p>Any deal that is made will be retroactive to loans disbursed on or after July 1, 2013. It’s a huge mess for finaid offices, which have already originated loans at the current rate … we will have to adjust every loan & resend to the processor.</p>
<p>I am most concerned about the cap that is proposed … 9.5% for grad PLUS and 10.5% for parent PLUS is ridiculously high. </p>
<p>Until this is a done deal, there will be changes. Don’t get too invested in any one plan until things are finalized.</p>
<p>Are they saying these rates on the loans taken out now would change in the future, tied to Treasury rates or are they saying rates on new loans would be changing each year? In other words is the rate you take now locked in or tied to Treasury rates?</p>
<hr>
<p>The rate is locked for all loans originated in a particular year; future year rates can climb. Each loan is a fixed rate, but a student could have 4 years’ worth of loans, each at a different rate (and each type at a different rate).</p>
<p>Good heavens, they come up with something new every day. I won’t comment on the clowns in charge, because my mom taught me that if I don’t have something nice to say, I shouldn’t say anything at all.</p>
<p>Grandstanding or no? While I agree in concept with Sen. Warren, there’s no chance this will pass in a dysfunctional Congress. Nice to dream, though. From CBS News:</p>
<p>"Another key Democrat – Sen. Elizabeth Warren, D-Mass., has yet to say whether she’ll support the effort. Progressives have largely fallen behind a bill that Warren introduced to reduce student loan interest rates to 0.75 percent, the same level big banks receive from the Federal Reserve.</p>
<p>She and other Democrats have railed against more conservative plans, which use the money earned from the interest rates to fill government coffers. According to the Congressional Budget Office, the U.S. will pocket a record $51 billion in profits this year off new and current federal student loans. On Wednesday, Warren called those profits “morally wrong” and “obscene.” </p>
<p>With the Senate set to vote on the new compromise early next week, activist groups are mobilizing opposition. Democracy for America is asking its 1 million supporters to share its loan calculator, which shows how much interest a student would have to pay under the new plan, compared with what they would pay under other proposals. </p>
<p>Democracy for America and other groups like MoveOn.org and PCCC have also been organizing support for Warren’s legislation. More than 600,000 people have signed a petition in support of the measure, while more than 13,000 have called their senators about it. PCCC, meanwhile, as rounded up more than 1,200 university professors to come out in support of Warren’s bill."</p>
<p>From the NASFAA website, here is the info on the latest proposal:
According to a statement released today by the Senate HELP Committee, the Act requires that for each academic year, all newly-issued student loans be set to the U.S. Treasury 10-year borrowing rate (specifically, the yield on the 10-year note as determined by the last auction held before June of each yearnot the changing daily rate) plus add-ons to offset costs associated with defaults, collections, deferments, forgiveness, and delinquency. The resulting interest rates for loans taken out this year, after July 1, 2013, would be 3.86 percent for subsidized and unsubsidized loans for undergraduate students, 5.41 percent on unsubsidized loans for graduate students, and 6.41 percent on PLUS loans for parents and graduate students. These rates would apply retroactively to newly issued loans taken out after July 1, 2013. The interest rate would be fixed over the life of the loan to provide borrowers with certainty to plan for the future. </p>
<p>Additionally, this bill protects against the threat of unforeseen circumstances by imposing a cap to ensure interest rates never exceed 8.25 percent for undergraduate students, 9.5 percent for graduate students, 10.5 percent for PLUS borrowers. The Congressional Budget Office has determined this legislation would save taxpayers $715 million over ten years.</p>
<p>My D just took out an unsubsidized grad school loan in June @ 6.8%. They had better make it retroactive for all loans for the 2013-14 school year.</p>
<p>Yes, any changes are definitely retroactive (I know this for a fact). The only caveat would be if the loan borrowed in June was for summer, and the summer term is 2012-2013 award year … in that case, the 2012-2013 interest rate is used.</p>