<p>Q: How will the administration of student loans change as a result of this bill, and what differences will students experience directly?</p>
<p>A: Instead of having to find a bank or other financial institution to get their federal education loans, families will get the loans through the colleges financial aid office. I list the differences [url=<a href="http://www.finaid.org/loans/dl-vs-ffel.phtml%5Dhere%5B/url">http://www.finaid.org/loans/dl-vs-ffel.phtml]here[/url</a>]. The major differences are: The interest rate on the PLUS loan is lower in the Direct Loan program (7.9 percent as opposed to 8.5 percent). And the PLUS loan denial rate in the Direct Loan program is half that in the federally guaranteed student loan program, so more parents will qualify for the PLUS loan.</p>
<p>'Bout time that we got those freeloading SOB banks out-of-our pockets. There were borrowing from the FedReserve at near 0% and then lending out to you at 8.5%. If you default, the GOV pays the Bank. The banks also got money upfront for the origination fee and the processing fees.</p>
<p>Those goldarn socialists, what is becoming of my crony capitalism??? And I do wish that pesky Paul Volcker would shut his trap about my derivatives gambling … I mean investing … :)</p>
<p>I posted this here for informational purposes for families, not to engage in a discussion about the politics. I think this forum should remain free of that. </p>
<p>BC, I believe the rates are linked to two main factors: a) defaults and the higher credit risk of a non-collateralized loan pool and b) repayment terms. Remember that many loans don’t have payments required for a number of years and that adds cost to the pool even as interest accrues. But I do think that lowering the rate would be a very good social subsidy that would benefit America in the long run.</p>
<p>I agree with BC, my DD is taking Grad Plus loans at 8.5% but any interest offered today is 0.5-1.5% and there is no loss risk as these student loans cannot be BKed and are subject to rigourous garnishments, etc</p>
<p>BCEagle - the reason the federal government is charging such a high interest rate is that the it wants to use the money for more PELL grants. They are taxing working middle-class families that do not have enough money to send their kids to college without loans to pay for the college education of poor kids. So middle-class kids take out 20 year loans to college so poor kids get to go to college free and keep all of their salary for the next twenty years. It is called “Change that you can believe in.”</p>
<p>^^^^I wonder if this had any the boom in home equity loans – when parents figured out that they could take a PLUS loan at 8% (no deferment for parent loans) or take a home equity at 4% many, many of them took mortgage backed home equities.</p>
<p>If I remember, DS PLUS loan got down to 2.63% and Stafford to 2.25%, 2005-2006. Consolidated PLUS is ~2.375% and consolidated Stafford will be down to ~1.75%. I don’t pay attention now that the rate has been fixed since 7/2006 and because DS pays the loans. We borrowed a bunch. Should have borrowed more but I wanted to stay within 1:1, debt/asset ratio.</p>
<p>FEFL lenders are guaranteed rates of 6.5% stafford and 8.5% PLUS, and therefore the taxpayer pays the difference between what we pay and the guaranteed rate to the lenders. Taxpayer got another 21 years of 6%, before PLUS is amortized. 11 years on the Stafford, at 5%. . Thankyou Bill, W, and Alan.</p>
<p>The student loan world has changed a lot since we parents went to college. The loans are bigger and longer and there is more default. A great deal of the reason for the increases in interest has to do with the logistics. It costs a lot of overhead to track loans over long periods. I think that a lot is spent on trying to beat money out of potential defaulters as well. Defaults are higher than they used to be because people are taking out more than they can pay back. I remember that my loans amounted to about 1/4 of the payments on my new (but cheap) car, and lasted a small number of years. Now you have kids paying mortgage-like amounts.</p>
<p>I didn’t have it so swell back in the day. Entered college in fall of '82. Guaranteed student loan rates were fixed at the rate one entered the program. My rate for the duration of my loans was 9%. Not so good…</p>
<p>Okay, so part of the reason is to subsidize grants and the others are due to higher relative loans compared to expected incomes. As far as amounts go, we have tax credits of $2,500 and Pell Grants (?) of about $5,500 which goes quite far for state university tuition and fees. You need to add a few thousand in loans/summer jobs/work-study. Then you need to cover room and board. It is possible if you’re scrappy or if your parents help you out.</p>
<p>I think that my loan was in 79 - grad rates were a lot higher than undergrad?</p>
<p>My sister went a year after I did and she had much bigger loans than I did - I think around $10K. Most would probably laugh at that being considered large. I don’t know what her interest rate was but I don’t recall it being onerous.</p>
. Thankyou Bill, W, and Alan.</p>