New changes to your student loans can be found in the bill known as
College Student Relief Act of 2007 H.R.5.EH, which was passed by the House of Representatives in Mid-January. Unfortunately, this bill and its "add-ons" will negatively affect those in college and those who are about to start college.
Dale Henderson from:
http://collegestudentreliefact.blog-city.com/ lays out the pros and cons of these new bills and changes.
The media and our congress officials are praising this new bill, talking about how wonderful it will be for college students. The main reason is that bill H.R.5.EH combined with the
Student Debt Relief Act 2007 S.359, the
Student Loan Sunshine Act (S. 486), and the
H.R. 1010 The Student Aid Reward (Star) Act state that they will cut current rates in half. Yes, this is true that the interest rates will be lowered however, it is not an immediate rate reduction like most think. Additionally, these bills do not lower interest rates on all federal student loans as most media channels report. Only Federal subsidized Stafford loans will see a decrease, while unsubsidized Stafford loans (which is the majority of a students debt) will see no decrease.
Below are some pros and cons of the current bills. While I'm in favor of increasing student aid, I do not feel these bills are in the best interests of college students.
Pros:1.) Interest rates on federal subsidized Stafford loans will be cut in half. However, this process will take 5 years to accomplish. The 3.4% interest rate will not take affect until 2011.
2.) Federal subsidized Stafford loan limits will be increased by $2,000 for third and fourth year students.
3.) Increase overall aggregate loan limits (no details provided however).
4.) In-School Consolidation is reinstated. Currently student loans listed as, "in Attendance" status cannot be consolidated. However, a borrower can usually request an early repayment on their loans; consolidate them, and then place the loan right back into in-school deferment if they needed to.
5.) Limitations on reconsolidation are deleted. Currently, a borrower cannot consolidate loans that are previously consolidated unless they are adding additional loans into the consolidation.
Cons:1.) PLUS loans will be increased by the Direct Lending program from 7.9% to 8.3%.
2.) Only subsidized Stafford loans will be decreased. Federal unsubsidized Stafford loans (which is the majority of a college students debt) will not see a decrease.
3.) Rates are subjected to increase after the 5-year decrease (January 1, 2012), just after freshmen students in 2007 go into repayment...hmm.
4.) These bills impose higher "fees" on FFEL program lenders and entice schools to strictly work with the Direct Lending program (government). This will cause a decrease in FFELP lenders and most will disappear from the industry. This issue is HUGE to the borrower because the borrower will only have one choice now, the government, who does not offer incentives on borrowers loans. This will cost the students thousands of extra dollars in interest on their student loans when repaying.
5.) It takes 5 years for the interest rates to be cut in half on subsidized Stafford loans. (6.8% to 3.4% over 5 years. The plan is as so, 6.12% in 2007, 5.44% in 2008, 4.76% in 2009, 4.08% in 2010, and 3.40% in 2011).
6.) Since Direct Loans is trying to entice schools to work strictly with them, PLUS loan borrowers will be restricted to one lender, Direct Loans, who does not offer any credit resolutions for those who do not immediately qualify. FFELP lenders have teams who work with PLUS borrowers to get them the funds they need instead of just being denied. Most credit issues can be resolved easily however; Direct Loans will not work with a borrower if immediately denied. This happened to me!
My Opinion:The Senate should vote against these bills. Yes, the mentioned bills sound good upfront but at what cost to the students. Those who know about the bills have already mentioned that these bills negatively affect the middle class. Those in the middle class make up the majority of students in school. Your middle class student gets federal aid but most of this aid is unsubsidized loans, so where's the real benefit to a majority of the students? There is none.
Also, those who are less fortunate and receive a good amount of subsidized loans will see low rates while their in school but, almost as soon as they graduate and hit repayment their interest rate will increase. While a subsidized loan borrower is in school he or she is not paying the interest on these loans, which to me feels as if the government is only looking out for themselves. Lowering the interest on loans they pay the interest on while the student is in school, but then will increase it once these students graduate and are responsible for the interest. What's up with that?
I am against all of the above bills mentioned. The bills will have a negative affect on the student loan industry and therefore on the students. It sounds as if the government is secretly trying to weed out FFELP lenders and take over all of the student loan business, only giving borrowers one option (can you say monopoly?). I myself took my loans out through Direct Loans and can tell you this, do not expect great service through them or any benefits. Luckily I changed schools and was then able to take out loans through a FFELP lender and consolidated my previous direct loans to a FFELP lender. Much better service and incentives that will save me thousands (literally) over the life of my loans.
If you also feel that these bills are not in the best interest of the students, please contact your local Senator immediately. You can find your states senators contact information here: (
Click here). These bills are likely to be voted on in the next three weeks, right before Easter Break so voice your concerns now.
- By: Concerned College Student, Dale Henderson
http://collegestudentreliefact.blog-city.com/References:American Student Loan Providers:
http://www.studentloanfacts.org/NR/rdonlyres/81D7AFB7-FAC8-4F0F-8675-0F71DA0F478F/4500/STARAct032806v1_1.pdfThe Library of Congress:
http://thomas.loc.gov/cgi-bin/query/D?c110:3:./temp/~c110A4A34Y::,
http://thomas.loc.gov/cgi-bin/query/D?c110:3:./temp/~c110WIuAU5::
http://thomas.loc.gov/cgi-bin/query/D?c110:2:./temp/~c110WIuAU5::,
http://thomas.loc.gov/cgi-bin/query/D?c110:7:./temp/~c110WIuAU5::
Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2006/10/06/AR2006100600056.htmlMore info at:http://studentdebtreliefact.blog-city.com/http://collegestudentreliefact.blog-city.com/http://fearstudentloans.wordpress.com/http://360.yahoo.com/student.rights
