DireWolf said:
I disagree. This bill has been dead in the water for quite a while now. You can almost guarantee that the classes of 2006-2007 are safe.
http://forums.studentdoctor.net/showthread.php?t=121216&highlight=consolidation
Aside from the fact that your thread is several months old, I don't think some random SDN poster with only 10+ posts is a super credible source. And they're especially not when it seems like from his post that he's just speculating!
Here's an article published recently that details what is really going on. It's from the chronicle of higher education:
Combatants Alter Tactics in Fight Over Student-Loan Consolidation
With interest rates expected to rise in July, loan industry pushes for
change this year
By STEPHEN BURD
Washington
A looming increase in the interest rates that borrowers must pay on
federal student loans is forcing the combatants in a fierce fight on
Capitol Hill to reconsider their tactics.
The battle, which has been raging in Congress for the past two years, is
over the future of a government program that allows borrowers to
refinance their student loans. No other student-aid issue has been as
contentious as lawmakers consider legislation to extend the Higher
Education Act, the law that governs most federal student-aid programs.
On one side of the debate are the Republican leaders of the U.S. House
of Representatives Committee on Education and the Workforce. They have
been pushing a proposal that would change how the interest rate is
calculated for student-loan borrowers who consolidate their debt. The
government, they say, has made the federal loan-consolidation program
too attractive to borrowers -- and too costly to taxpayers -- by
allowing borrowers to lock in low, fixed interest rates for up to 30
years. Instead, the legislators have pushed a proposal, championed by
the student-loan industry, that would shift the rate to one that varies
from year to year based on market conditions but is capped at 8.25 percent.
On the other side are the panel's top Democrats, as well as student
advocates and companies that specialize in refinancing loans. They argue
that Congress should not make it harder for borrowers to repay their
loans when so many students are buried in debt.
The debate has been occurring at a time when the consolidation program
is more popular than ever. In order to lock in interest rates of about
3.5 percent for the life of their loans and save thousands of dollars
each, borrowers consolidated about $44-billion worth of loans in 2004,
almost four times as much as in 2000.
But in July, interest rates on student loans are expected to rise for
the first time in five years. The Congressional Budget Office projects
that the rate will jump by at least two percentage points, to about 5.5
percent, and will continue to grow for the foreseeable future. That
change could significantly alter the terms of the debate. "This is no
longer going to be such a black-and-white issue," says John Dean, a
lawyer for the Consumer Bankers Association, which supports a shift to a
variable rate.
Rising Rates
As rates rise, it will become increasingly difficult for Democrats and
their supporters to argue solely for the fixed-rate option. They
acknowledge that borrowers who wish to consolidate their loans will be
worse off if they have no other choice but to lock in higher interest rates.
With that in mind, student advocates and consolidation-company officials
are shifting their stance. Having the government offer variable-rate
loans is not a bad idea, they say, as long as it also maintains a
fixed-rate option for borrowers. "People should be able to choose the
option they want," says Alik Widge, an advocate for the National
Association of Graduate-Professional Students. "Chances are they will be
able to figure out which one fits their needs better."
At the same time, the prospect of rising rates threatens to undercut the
Republicans' central argument for making the shift: that it is too
expensive for the government to continue to offer fixed-rate
consolidation loans. As interest rates grow, the savings that the
government would see from shifting to a variable rate diminish. That is
because the government makes up the difference to lenders when interest
rates exceed those which borrowers have locked in. As more and more
borrowers lock in higher rates, the amount that the government must make
up for these loans shrinks.
As a result, loan-industry officials are scrambling to get the proposal
on a faster-moving vehicle than the reauthorization bill, which is
unlikely to be completed this year. Lenders hope that lawmakers will
consider making the change as part of "budget reconciliation"
legislation -- a measure in which legislators propose cuts in federal
mandatory programs, such as Medicare, Social Security, and student
loans, to reduce the government's budget deficit -- if Congress moves
forward with that process this year.
"Given the availability of large savings from moving to a variable rate
as soon as possible," Mr. Dean says, "we would hope that Congress would
explore that option."
Seeking a Compromise
With the dispute in Congress over the consolidation program heating up,
some lawmakers and college groups have offered proposals designed to
find a compromise. (See table below.)
The one with most promise has been floated by Rep. Thomas E. Petri, a
Wisconsin Republican. Under that plan, borrowers would be given the
option of consolidating with a fixed or a variable rate, capped at 8.25
percent. The fixed rate would be indexed to a longer-term Treasury
instrument that would produce a higher rate than borrowers pay now. In
fact, those who refinance would almost always pay less if they chose a
variable rate.
Borrowers are in the best position to know what type of plan works for
them, Mr. Petri says. He wants to model the consolidation program on the
mortgage market, where borrowers must pay a little more to lock in an
interest rate and have the advantage of knowing what their monthly
payments will be.
"I believe that most citizens would be comfortable having similar
choices when refinancing their student-loan obligations," he says.
The plan has won the backing of some of the major loan-consolidation
companies. Those officials, who until now fought almost exclusively to
save the fixed rate, acknowledge that their position has evolved. Given
the "economic conditions we are likely to see in the future, we think
the opportunity to choose between fixed and variable consolidation-loan
interest rates should be given to borrowers," says Jim Newell, vice
president of government relations for Collegiate Funding Services.
Members of groups representing graduate and professional students are
also likely to support the congressman's plans, as they have made a
similar proposal.
Mr. Petri says that both Republican and Democratic lawmakers have
expressed interest in his plan. With the change in the way the fixed
rate is calculated, and another provision that eliminates some "excess
earnings" of lenders, Mr. Petri says his plan would produce as much, or
even more, savings for the government than the provision in the House
bill. The Congressional Budget Office has not yet estimated the cost of
Mr. Petri's plan.
But requiring borrowers to pay more for a fixed-rate loan may be a deal
killer for groups that lobby for undergraduate students.
Kate L. Rube, higher-education adviser to the State Public Interest
Research Groups, says her organization supports giving borrowers who
seek to refinance the choice of a fixed or a variable rate, but doesn't
want to see the terms become less generous. "We shouldn't go backwards
in terms of the benefits borrowers are receiving now," she says.
The student groups would also like to see the cap on variable-rate loans
reduced to 6.8 percent.
Still, student advocates' primary goal is to preserve the fixed-rate
option, says Jasmine Harris, the legislative director for the United
States Student Association: "It's a great benefit for borrowers."
