The End of Subsidized Loans :(

[Virginger]

(Maybe I am behind on current events but) I just found out that the Budget Control Act signed into law last August a provision that eliminated the Federal Direct Loan subsidy for professional students ... which is effective July 1, 2012

Summer 2012 is the last term professional students will be able to receive Federal Direct Subsidized loans.

.... so basically the loans start accruing interest as soon as you take out the loan... starting this fall there are no government loans that pay the interest while you are in school.

... this sucks... ... are they going to keep loan options with lower interest rates?? Does anyone know more about this?!

Financing 4 years of vet med education is gonna uber scary... it seems worth while to end up waiting for another year to be IS at my first choice (... if dont make it off that waitlist)

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[2CatMatt]

Yep, this is true. Although what I think sucks more is that interest rates aren't set by the market. We are paying an inflated rate of what, 6.8%? Interest rates are at historic lows...except for student loans.

 

[JosephKnechtDVM]

I found this.

http://info.umkc.edu/umatters/2012/...loan-subsidy-effective-july-1-2012/#more-9221

With something like this, veterinary schools are really going to have to look at rapid and substantial curriculum reform if they and the profession are going to survive.

 

[Virginger]

I can only come up with a partial solution that helps the problem but doesnt solve it.

(I have talked with my mother about this possibility, which is not a solve) Once I get the loans, graduate, and have the ability to start paying them back... my Mother would be willing to take out a home equity loan on her property, use that loan to pay for my student loans, and then I could pay her back. The home equity loans have outstandingly low interest rates which would allow me to save $$$$ from paying less interest... but the only reason that works is that our property value increased substantially (since it was bought 20 years ago), the property is paid off, and that the the current interest rates are low (but who knows how low they will be 4-5 years from now)

... looking at this problem, I am totally swayed in favor of curriculum reform. Even if they raised tuition to keep most of the income, having less years of interest accumulate would still be a win for the students.

 

[david594]

I can only come up with a partial solution that helps the problem but doesnt solve it.

(I have talked with my mother about this possibility, which is not a solve) Once I get the loans, graduate, and have the ability to start paying them back... my Mother would be willing to take out a home equity loan on her property, use that loan to pay for my student loans, and then I could pay her back. The home equity loans have outstandingly low interest rates which would allow me to save $$$$ from paying less interest... but the only reason that works is that our property value increased substantially (since it was bought 20 years ago), the property is paid off, and that the the current interest rates are low (but who knows how low they will be 4-5 years from now)

... looking at this problem, I am totally swayed in favor of curriculum reform. Even if they raised tuition to keep most of the income, having less years of interest accumulate would still be a win for the students.

This is an option for some people, but this ends up laying the risks associated with the loans on your family. If the interest rates were to go up, you could be just as bad off(or worse) than you had been with the federal loans without the option of the federal alternative repayment options. Doing this would also prevent the loans from being written off if you were to become permanently disabled or were to die.

 

[sooprnova]

This is an option for some people, but this ends up laying the risks associated with the loans on your family. If the interest rates were to go up, you could be just as bad off(or worse) than you had been with the federal loans without the option of the federal alternative repayment options. Doing this would also prevent the loans from being written off if you were to become permanently disabled or were to die.

Not to mention defaulting means your mom loses her house. There's no IBR for HELOCs if you fall on hard times.

 

[Virginger]

Yeah I agree... those are a few big problems with the alternate plan... life insurance policy would have to be take out on me while I was repaying my family.

Situations with loan repayment stink. So many people complain about the rising costs of human health care, veterinary care, dental care, and legal aid... but in the end, prices are just going to sore... everyone needs to repay their student debt some way.

 

[bayarea15]

This is lovely

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[Taigadog]

I guess I missed the curriculum reform part of the debate, but what exactly would be the proposed change? I don't really see any way to make it shorter... without significant cuts to critical pieces of clinical experience?

Either way, it is very bad news.

 

[Virginger]

I remember this popping up on another thread... its now buried deep in one of those >20 paged discussions...

Some people had commented on that there were courses that they felt could be cut or at least be made into an elective. Also, some feel that clinical experience could be cut down.

my $0.02:
- I think the change in program length would prompt them to increase the tuition rates, schools wouldnt want to loose their income (we might only be avoiding a year's worth of accruing interest and gain nothing else from the situation then)
- If curriculum was shortened, I would be in favor of "tracking" programs.. then we can focus the curriculum on what we plan to do for our career (which would work well if people really knew what they wanted to do but people change their minds all the time)
- If clinical rotations were shortened, then I would be in favor of clinicals being done over the summer or I would want the veterinary community to embrace providing more paid internships (working experience is invaluable)

many other people had great ideas and good recommendations... I dont recall all of them right now.

 

[LetItSnow]

Also, some feel that clinical experience could be cut down.

Say what? Who says this? Pretty much everyone I've ever talked to already agrees we get far less clinical experience than we NEED (and I know we're looking at ways to increase it here at UMN, not reduce it).....

 

[SnowyRox]

Say what? Who says this? Pretty much everyone I've ever talked to already agrees we get far less clinical experience than we NEED (and I know we're looking at ways to increase it here at UMN, not reduce it).....

Penn & Illinois have both implemented programs to increase clinical experience too. I already find it strange that med schools are 2+2, while vet schools are 3+1 for more species.

 

[Virginger]

The main idea (from what i get) with changing the curriculum is that people are concerned about the increasing saturation of the veterinary field and income:cost of education. I think they are reasonable concerns but I am most concerned about the needless increase in owed interest when we are unable to have any substantial income to start paying off the loans while in school.

Personally I would not want a more abbreviated experience in vet school. I agree that the clinical rotations are important, especially since not everyone walks in with the same amount/quality of experience as others. ... I feel at some point if there was serious consideration to amend the current structure of vet school for the various reasons out there, then that is where I stand.

This thread is more me griping about the added financial stress this puts on students.

I am not surprised to hear that Penn emphasizing experience, I have heard from a lot of vet students and veterinarians that they produce stellar professionals... anyone accepted should be thrilled to attended there.

 

[CorporateFatCat]

Bumping this thread to ask a question. Since the federal loans are now unsubsidized and at a ridiculous interest, are more people turning to private loans? Even if they can adjust the interest, at least they don't have to be paid until graduation....

 

[Minnerbelle]

Bumping this thread to ask a question. Since the federal loans are now unsubsidized and at a ridiculous interest, are more people turning to private loans? Even if they can adjust the interest, at least they don't have to be paid until graduation....

I think the prob with private loans is that you can't do IBR on them (right?), and that you wouldn't qualify for any federal loan forgiveness.

But wait... what is this about not paying until graduation? Do you mean they don't accrue interest until you graduate?

 

[GreennWhite]

I think the prob with private loans is that you can't do IBR on them (right?), and that you wouldn't qualify for any federal loan forgiveness.

But wait... what is this about not paying until graduation? Do you mean they don't accrue interest until you graduate?

You're right, you can't do IBR with them (unless the private loan company has their own plan) and you wouldn't qualify for forgiveness.

They most certainly DO accrue interest while you're in school, and some of them you have to pay the interest while you're in school, just don't have to pay on the principal. Others you don't have to make payments until you graduate, like gov't loans, but they definitely accrue interest.

You may be able to get a lower interest rate through a private loan, but would likely need a cosigner. The last private loan I took out before I started vet school is at 10.275%. What a stupid decision! I'm working part time during vet school just so I can pay it off.

 

[CorporateFatCat]

I think the prob with private loans is that you can't do IBR on them (right?), and that you wouldn't qualify for any federal loan forgiveness.

But wait... what is this about not paying until graduation? Do you mean they don't accrue interest until you graduate?

What's IBR? Repayments are not required while in school, you're still accruing interest though. But if the higher-end interest rate is 7.25%, does that sound like a good alternative to federal loans?

 

[Minnerbelle]

What's IBR?

IBR = income based repayment plan. Even if you owe like $2-3k/month in student loans as a new grad based on your borrowed amount on even an extended 25 yr repayment schedule, IBR it caps the monthly repayment based on your income (something between 10-15%. I can't keep track of which it is at the moment). When you don't have a high starting income, only needing to pay like $800/month instead of the $2-3k is a lifesaver.

Repayments are not required while in school, you're still accruing interest though.

Even with unsubsidized loans, you don't need to start repayment until 6 months after you graduate. I'm not sure where you're getting the impression that you do... Cause... I'd be super f***ed if that was the case, along with a vast majority of other vet students. Actually, that would mean I've already defaulted. Please tell me that's not the case.

But if the higher-end interest rate is 7.25%, does that sound like a good alternative to federal loans?

I don't know enough about private loans to know how much their interest rates fluctuate, so I have no idea if it's better or worse than federal loans once you go into repayment. I could be totally wrong, but my impression was that with private loans, the interest rate isn't fixed? It could be totally out of ignorance though. I've always heard the mantra, DON'T DO PRIVATE LOANS, and never thought about it. Even if it's at a fixed 7.25%, I'm not sure that the benefit outweighs the risks for me... with the loss of IBR and possible forgiveness

 

[Abnerrs]

All I gotta say is when I started reading this thread I said (out loud) "Oh f***".

From what I can tell gov't loans are still the better option (for me) because I would need a cosigner and my parents are not that generous....

 

[Psittacidae]

IBR = income based repayment plan. Even if you owe like $2-3k/month in student loans as a new grad based on your borrowed amount on even an extended 25 yr repayment schedule, IBR it caps the monthly repayment based on your income (something between 10-15%. I can't keep track of which it is at the moment). When you don't have a high starting income, only needing to pay like $800/month instead of the $2-3k is a lifesaver.

I don't have any additional information to add, as I've been lucky enough to avoid any loans for my undergrad so far, and am unfamiliar with the process. However, the thought of a 2-3k a month loan payment makes me want to puke.

Does anyone know if the IBR is based on your gross or your net income after taxes? Hypothetically, if someone landed a 60k a year job right outta vet school, 15% of their income would be $9750, or $812.50 a month. That same 60k a year job would realistically only bring home about $45,000 (worst case scenario) of which $6750 is 15%, leaving the monthly payment around $562.50. Not a HUGE difference, but I'm curious. I'm only a first year undergrad and I do the math for my hypothetical salary upon graduation and hypothetical student loan payment almost every day, I just keep looking at the numbers hoping they go down.

Also, how long has IBR been around? Has there ever been any chatter about it being repealed? If my loans reach the "average" levels of $120,000, I'll be making a $961.14 ( estimate based on finaid.com ) payment every month, and any and all information to help me wrap my brain around a smaller number would be appreciated.

 

[Psittacidae]

All I gotta say is when I started reading this thread I said (out loud) "Oh f***".

You're not alone.

 

[Minnerbelle]

There's been multiple threads on IBR and such with really in-depth discussion about how it works, it's pros and cons and such, so I would go ahead and do a search to get all the info you need. Google is also very good too . You can also find loan repayment calculators online that will tell you exactly what your payments will look like based on all the different repayment plans, and how much you'll pay total in your lifetime for each plan.

I'm personally not as worried about IBR being repealed, but I'm very worried about the loan forgiveness programs getting repealed.

 

[Psittacidae]

There's been multiple threads on IBR and such with really in-depth discussion about how it works, it's pros and cons and such, so I would go ahead and do a search to get all the info you need. Google is also very good too . You can also find loan repayment calculators online that will tell you exactly what your payments will look like based on all the different repayment plans, and how much you'll pay total in your lifetime for each plan.

I'm personally not as worried about IBR being repealed, but I'm very worried about the loan forgiveness programs getting repealed.

Thanks Minnerbelle! Always forgetting that "search" button

 

[mooshagen]

I'm freaking out too. Some of our loans will be at that unsubsidized 6.8 percent, but the rest will be at the Direct PLUS rate of 7.9 percent. These loans are capped at 9.0 percent, but with this economy, who's putting it past our government to not reach that 9.0 percent?! It might not hurt to at least see what our banks have to offer. At this point, we're kind of being screwed no matter how we look at it.