Loans and the impending budget DOOM!

[EveyG]

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I have a question about loans that someone who is loan saavy (ie. not me) may be able to answer. Since the debt ceiling thing may not go through, there are talks about interest rates going up. Does anyone know if this applies to Direct Loans? If I don't accept my unsubsidized loan until next month, does anyone know if the interest rate is subject to change? If I accept it now, before Doomsday Aug 2nd, is the rate fixed? If there is one thing I don't want, it's an unsubsidized loan amount with a redonkulous interest rate. Any insight, even if it's speculative, will help. Thanks!

 

[LetItSnow]

If I don't accept my unsubsidized loan until next month, does anyone know if the interest rate is subject to change? If I accept it now, before Doomsday Aug 2nd, is the rate fixed?

I'm not quite sure what you're asking: are you wondering whether the loans are variable- or fixed-rate? Or are you wondering if the rate for the loans could change between now and sometime after a hypothetical meltdown because the U.S. quits paying its bills?

If it's the latter question, the answer is the federal government sets those rates every July 1st, so it shouldn't change between now and July 2012.

You should read that as speculation.I'm not a financial planner, and if you have loan questions you should talk to a school or a professional financial adviser.

 

[EveyG]

I'm not quite sure what you're asking: are you wondering whether the loans are variable- or fixed-rate? Or are you wondering if the rate for the loans could change between now and sometime after a hypothetical meltdown because the U.S. quits paying its bills?

If it's the latter question, the answer is the federal government sets those rates every July 1st, so it shouldn't change between now and July 2012.

You should read that as speculation.I'm not a financial planner, and if you have loan questions you should talk to a school or a professional financial adviser.

It was the latter question. The information that they set the rate on July 1 was what I needed to know. Thanks! 🙂

 

[LetItSnow]

It was the latter question. The information that they set the rate on July 1 was what I needed to know. Thanks! 🙂

Just keep in mind I'm not an expert. I know historically that's when they set the rates. What I don't know is if the law allows them to set them anytime and they've just done it then out of convenience, or if that date is particularly set in stone, or ... you get the idea.

Either way, I don't think things would change so fast after Aug. 2. Most of the big financial firms currently believe the U.S. wouldn't fail to pay any bills until Aug 8 to Aug 31 (depending on which firm you ask). And even then, nobody knows what bills we'd quit paying or what effect it would have. So while personally I agree wholeheartedly with Bernanke et al that it would be absolutely catastrophic to not raise the ceiling, it's probably not the kind of thing where the catastrophe will come flying out of nowhere immediately. It's more the kind of thing where we'll be paying horribly for that mistake for (literally) decades, with the overall quality of life in the U.S. declining tremendously.

Just my opinion. 🙂

 

[LetItSnow]

It occurs to me that there's another obvious angle to this that I didn't mention since your original question was focused on interest rates .....

..... but it's entirely possible that even if you sign for those loans, the federal government may not deliver the money to the universities. So you may still be stuck with a balance on your account.

I have no idea how schools would handle that; I imagine the *most likely* thing they'd do is let students carry a balance for some period of time under the assumption that the government would get things straightened out eventually. But that's just me guessing. And even if they do, I'm hard-pressed to see them transferring out the expected excess into your bank account for living expenses.

All in all .... not getting the debt ceiling raised could result in a huge amount of uncertainty. It's hard to imagine them not coming to SOME agreement, even if it's a short-term ceiling increase.

 

[StartingoverVet]

Kind of funny to speculate about.. .but really, what are the schools going to do... Kick out 80-100% of their classes while they try to line up private loans? I wouldn't waste too much time worrying about that.

 

[LetItSnow]

Kind of funny to speculate about.. .but really, what are the schools going to do... Kick out 80-100% of their classes while they try to line up private loans? I wouldn't waste too much time worrying about that.

I agree. That's why I mentioned the living expenses ... that part could be a major impact to the students who are relying on loans to cover more than just tuition, because while I can't see schools sending students away, I can see them not depositing money into students' personal accounts for living expenses.

Anyway.... I still find it hard to believe that some sort of deal won't be reached. That said, I know The Economist just ran a short "8 reasons the U.S. government might actually default" article last week.... 😉