Federal Changes to Student Loans

[HandD42]

Well, I've been trying to do some research on what (if any) the changes passed in March to student loans means to us DVMers.

Link to msn article:
http://articles.moneycentral.msn.co...big-changes-come-to-student-loans.aspx?page=1

From what I have read the changes seem positive:
-Direct lending from Government
-Capping income-based repayment at 10% of income, maybe the biggest factor for us prevets with high debt to low income ratios
-Capping Gradplus loans at 7.9% (not sure if this is a change or not)
-This also interested me (not sure what the current law was)
from:https://studentloans.gov/myDirectLoan/index.action
25-YEAR CANCELLATION - If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be
cancelled.

Thoughts? Concerns?

I'm not super well educated on this subject (although I should be!!!)

Also are any DVM students eligible for Pell grants or is that undergrad only?

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[Crazy Hippos]

I think Pell Grants are only for undergrads. After I filled out my FAFSA, it said that I didn't qualify for any Pell Grants because I already had a bachelor's degree.

 

[jenniferblue]

Here is an article on how the Student Loan Reform impacts (or in my case doesn't impact) students:

"Eventually, students with federal loans will qualify for better repayment terms. Part of the legislation signed today also improves repayment terms first enacted last summer. Loan payments will be capped at 10 percent of a student’s disposable income (it’s currently 15 percent) and any debt remaining after 20 years will be forgiven (the current threshold is 25). For public servants – including teachers, nurses, or members of the armed forces – that cap is 10 years.
But, those repayment terms are only applicable for loans signed after July 1, 2014, and will not be retroactive, nor do they apply to private loans."

So for the class of 2014, this legislation will have no impact.
Bummer...

You can read the whole article here:
http://www.csmonitor.com/Money/2010/0330/Student-loan-reform-What-will-it-mean-for-students

 

[david594]

Thoughts? Concerns?

7.9% for grad plus is what the current rate is for direct loans. Federal Family Education Loans (FFEL) grad plus loans which are serviced through private banks had a rate of 8.5%. So the rate isn't really changing, its just that they are getting rid of all FFEL loans.

Until now the government had been subsidizing banks(and covering the risk of the loans) for banks to offer "federal" student loans like stafford and grad plus though the FFEL program.

So government pays the bank to loan out their own money to students. The banks earn money off the interest, and if the student defaults, the government picks up the tab. It was a pretty golden deal for the banks as they were exposed to essentially zero risk, and just had to go along with the government set terms.

The change is that the government has canned this program in favor of moving all schools to direct lending from the government. It saves them the many billions of dollars they were paying banks, and now the loans are coming from the federal treasury. The government then hires private companies (like sallie mae) to "service" the loans, taking care of customer support side of things. With this the government has placed a requirement on these servicing companies that a certain percentage of employees had to be in the US, to help keep the money paid to them in the US economy. The money saved by going to direct loans then goes to other programs in the US, the largest of which being Pell Grants.

 

[HandD42]

So for the class of 2014, this legislation will have no impact.
Bummer...

You can read the whole article here:
http://www.csmonitor.com/Money/2010/0330/Student-loan-reform-What-will-it-mean-for-students

Booo thumbs down

 

[david594]

The question is will it apply to loans consolidated in 2014?

 

[HandD42]

The question is will it apply to loans consolidated in 2014?

So the changes are positive but not going to be implemented in time for any of us?

What about the direct lending? Does that start right away or only after 2014

 

[dyachei]

So the changes are positive but not going to be implemented in time for any of us?

What about the direct lending? Does that start right away or only after 2014

I know at UTK, direct lending is going to effect for the next school year, so it will affect the class of 2014

 

[natalieises]

From the news articles I read it was mentioned that July of this year was the cut off for any further federal loans from the bank. So from my understanding class of 2014 will definitely be affected. Am I reading the wrong articles?

 

[david594]

From the news articles I read it was mentioned that July of this year was the cut off for any further federal loans from the bank. So from my understanding class of 2014 will definitely be affected. Am I reading the wrong articles?

You got it correct.

We already had direct lending here at OSU and there is no real downside to it.

 

[nyanko]

Same at UC Davis. My undergrad institutions had banks and it was so confusing after leaving to try to remember which banks I signed for loans with and try to piece it all together and notify EVERYBODY when I enrolled in grad school. Direct is soooooo much better!

 

[jenniferblue]

I found this on the web site for Income Based Repayment Program (i.e. the program which currently allows students to repay their loans at 15% and forgives the loan after 25 years)
"Please be aware than any time you consolidate your federal student loans, it creates a "new" loan"
So *perhaps* a refinanced loan in 2014 would qualify, but I wouldn't count on it.

You can read up on IBR here:
http://www.ibrinfo.org/faq.vp.html#_If_I_have_2