So who do we talk to about getting the 6.8% stafford rate reduced?

[tapir]

The idea of a fixed stafford rate looked reasonable as broader interest rates were rising, but the current 6.8% fixed rates (for grad/prof) is looking worse and worse as the fed rate comes down (now 3.75%!).

Should I presume that some student lobbying group is on the case?

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[Doctor Bagel]

Theoretically, the student groups are lobbying for this, but the problem is that we're a really unimportant group politically. Do vet students have a group like AMSA? If so, it might be good to join and see about legislative updates. Also, why not just write to your representatives?

 

[p9142]

The idea of a fixed stafford rate looked reasonable as broader interest rates were rising, but the current 6.8% fixed rates (for grad/prof) is looking worse and worse as the fed rate comes down (now 3.75%!).

Should I presume that some student lobbying group is on the case?

I don't know about vet students, but medical students have AMSA. Unfortunately, AMSA is quite possibly the biggest group of incompetent clowns lobbying Congress. This is the same group that told us to write our Congressman asking him/her to support the latest fiasco in Congress http://forums.studentdoctor.net/showthread.php?t=357778

I seriously doubt that our interest rates are going anywhere. Our future incomes on the other hand, are almost guaranteed to go down.

 

[UserNameNeeded]

I'm pretty sure, in regards to education financing, the only winner of the Fed's interest rate cuts will be Sallie Mae (and other lenders).

As a rule of thumb: everything benefits big business (especially financial institutions), little people get jacked.

 

[p9142]

I'm pretty sure, in regards to education financing, the only winner of the Fed's interest rate cuts will be Sallie Mae (and other lenders).

As a rule of thumb: everything benefits big business (especially financial institutions), little people get jacked.

While I agree with you that this was the case when this policy was changed, it is looking more and more like our government will have a solid democratic majority in Congress to go along with a democratic president.

This should bode well for student loans in the future. Unfortunately, as far as our future income, it will probably make it even worse.

 

[Doctor Bagel]

I'm pretty sure, in regards to education financing, the only winner of the Fed's interest rate cuts will be Sallie Mae (and other lenders).

As a rule of thumb: everything benefits big business (especially financial institutions), little people get jacked.

Too true unfortunately.

 

[edubbs5]

The interest rate reductions as expected through the new legislation (CCRAA) - is ONLY for SUBSIDIZED Stafford loan for UNDERGRADUATE Students. The fixed 6.8% interest rate remains in tact for all loans for graduate students - and will remain in tact for the life of the loan based on the terms/conditions when the loan was first disbursed.

I hope that helps.

 

[tapir]

The interest rate reductions as expected through the new legislation (CCRAA) - is ONLY for SUBSIDIZED Stafford loan for UNDERGRADUATE Students. The fixed 6.8% interest rate remains in tact for all loans for graduate students - and will remain in tact for the life of the loan based on the terms/conditions when the loan was first disbursed.

I hope that helps.

Yes, the loans are fixed at the disbursement rate (so 2007-08 loans will always be at 6.8%). The question is whether federal regulators will see fit to lower that fixed rate, such that our 2008-09 loans might be at 5%, for example.

 

[chris03333]

Yes, the loans are fixed at the disbursement rate (so 2007-08 loans will always be at 6.8%). The question is whether federal regulators will see fit to lower that fixed rate, such that our 2008-09 loans might be at 5%, for example.

What about '06-'07 loans?

 

[Doctor Bagel]

What about '06-'07 loans?

They're fixed, too. Loans prior to that are at variable rates.

 

[AMDFAO]

I wouldn't be holding your breath for a reduction anytime too soon on federal education loans after 2006. As the system is set up, lenders make loans (basically spend their cash) with the government backing it in case you forget to pay (they get their cash back either way). In order to keep the banks in the game, the feds have guaranteed them a rate of return basically, part from you and part from the taxpayer. All the lenders are hurting since they lent to a lot of people (sub prime borrowers) who are not having trouble paying their mortgages mostly as well as non federally backed education loans as well so you may see the ability to borrow those tighten up in future since I could take your house with a mortgage but not your education so that loan, unsecured, is worth a lot less to me). Since property values have taken a hit, the lenders can't simply sell the property and make their money back-- a horrible place to be as a lender. On top of which, the feds cut the extra allowance they pay to the lender for each federal student borrower for the life of the loan... It was a double whammy to lenders. To make matters worse for those like PHEAA, the Feds have decided to attempt to recoup some money from lenders who have older consolidations (think 2.875% fixed) who had a guarantee of 9.5%. In short, the kids paying the 2.875 fixed are also helping to pay the difference to the lender out of their taxes-- nothing in life is free and banks don't give money away. Lenders who were able to keep the extra from the 9.5% included NELNET (older borrowers should now understand why NELNET mailed them so many flyers, emails, calls etc...)
When the Feds cut the rate for undegrads only it was because it was all they could afford. I like to think if you removed the lenders from the equation entirely, you might see rates fall. All lenders need to make a profit (non-profit as well) to keep afloat and it comes from you as a borrower and you as a taxpayer. If you eliminated the profit from federal student loans, would you most likely see the rate decrease, even slightly? Perhaps. I would also like to believe it would make your lives easier managing the mess you graduate with and eliminate the confusion entirely since most of you don't understand a lender from a servicer from a guarantor from a consolidation broker etc... (totally normal by the way since it's the most convoluted lending system set up by any government on the planet and your lack of understanding is in no way tied to your intellect trust me: none of you really get it).
It would be revolutionary to see students lobbying for the gov't to actually make the loan (put up the cash) and eliminate the middle men and the profit and the confusion: one lender, 1 payment, 1 type of loan with all the same rules which is what I think you all really want (or at least the 100's of kids I have met over the course of my career). There is a program in place already called Federal Direct Lending but it seems to get slammed since borrowers don't have a choice of lender (I'm not sure why "choice" is the center of the debate about a social program-- I don't see choice in foodstamps, subsidized housing, welfare, but for some reason "choice" seems to be the buzzword and everyone is clinging to it for various reasons that I don't think are really a benefit for any of you... correct me if I am wrong since I have spent the better part of the last year and a half trying to figure out why having banks in a federal loan program is beneficial and haven't come up with a compelling enough reason to sway me).
It is going to get worse before it gets better and the 6.8 is here for a while in my book. If you do have older variable rate loans you will most likely see the rates fall on those since they are loosely tied to the rates getting cut now. Borrowers may see private loan rates fall but as the credit market tightens, borrowers with less than good credit may see a higher rate or a denial or need a co-signer.

 

[p9142]

As the system is set up, lenders make loans (basically spend their cash) with the government backing it in case you forget to pay (they get their cash back either way). In order to keep the banks in the game, the feds have guaranteed them a rate of return basically, part from you and part from the taxpayer. All the lenders are hurting since they lent to a lot of people (sub prime borrowers) who are not having trouble paying their mortgages mostly as well as non federally backed education loans as well so you may see the ability to borrow those tighten up in future since I could take your house with a mortgage but not your education so that loan, unsecured, is worth a lot less to me).

I am not disagreeing with what you are saying, but this really makes me angry. Why should we have to subsidize these greedy lenders for making stupid decisions in the subprime market?

Also, 6.8% guaranteed is one heck of a return right now when CDs are averaging about 3.5%

 

[AMDFAO]

In short because the world of federally backed lenders did not think they would see the end of the gravy train they had been riding nor did the consolidation brokers etc. Once they realized the profits they had been seeing for years were eroding through the College Cost Reduction Act (CCRA), they started cutting back on borrower benefits to shore up the profits and keep afloat (see the other postings here about that). They also started advertising to you all directly and on TV to increase their market share since schools are now in a battle over having a preferred lender list (the cheapest way for any lender to secure a 98% market share at any school).
Keep in mind most bank are not just funding federally backed ed loans but a host of other ventures: private loans, mortgages etc...using the security of the fed backed loans to secure financing for other ventures. It's all colliding at once which was not in the plan and the pyramid is not stable.
I got slammed for mentioning Direct Lending at a conference last week by a number of colleagues convinced you all want "choice." When I point out you don't really know what you are choosing for the most part (understanding how the whole system works as well as understanding your rights and responsibilities) I get laughed at or I get the "it's the students responsibility to read the paperwork". I don't find that to be very hepful in the debate since most (even finance majors) understand the ins and outs of federal education loans (nor do your parents) much beyond the rate and the subsidy (even then most think it's interest free but that's another topic since lenders aren't giving it away for 4 years to help poor students). I've posted in other forums that I am fortunate enough to inherit the stupidest borrowers consistenty from year to year who are all dumb enough to choose Direct Lending instead of Sillie Moo or any of the other 100's of lenders promising shiney pennies if you borrow from them...

 

[p9142]

In short because the world of federally backed lenders did not think they would see the end of the gravy train they had been riding nor did the consolidation brokers etc. Once they realized the profits they had been seeing for years were eroding through the College Cost Reduction Act (CCRA), they started cutting back on borrower benefits to shore up the profits and keep afloat (see the other postings here about that). They also started advertising to you all directly and on TV to increase their market share since schools are now in a battle over having a preferred lender list (the cheapest way for any lender to secure a 98% market share at any school).
Keep in mind most bank are not just funding federally backed ed loans but a host of other ventures: private loans, mortgages etc...using the security of the fed backed loans to secure financing for other ventures. It's all colliding at once which was not in the plan and the pyramid is not stable.
I got slammed for mentioning Direct Lending at a conference last week by a number of colleagues convinced you all want "choice." When I point out you don't really know what you are choosing for the most part (understanding how the whole system works as well as understanding your rights and responsibilities) I get laughed at or I get the "it's the students responsibility to read the paperwork". I don't find that to be very hepful in the debate since most (even finance majors) understand the ins and outs of federal education loans (nor do your parents) much beyond the rate and the subsidy (even then most think it's interest free but that's another topic since lenders aren't giving it away for 4 years to help poor students). I've posted in other forums that I am fortunate enough to inherit the stupidest borrowers consistenty from year to year who are all dumb enough to choose Direct Lending instead of Sillie Moo or any of the other 100's of lenders promising shiney pennies if you borrow from them...

Good point. I always find it surprising that when I discuss this issue with my classmates they have no idea about any details. Half of them think that the loan is interest free until you enter residency. You would think that people would try to understand the terms of a loan for $200k. I guess that is what got us in this huge subprime mess.

 

[AMDFAO]

The way I see it (and I'm kind of the anti-christ in FA for some reason in a lot of my colleagues eyes) students have no idea because they by in large feel ashamed they don't have a clue of the basics... If you have spent your life studying for biology tests (by the way, thank you for doing that since I couldn't--boring), when did you have time to ask real life questions: taxes, loans, life etc? Your classmate are all feeling like "I'm 23, wicked smaaaat but I don't understand any of this and I'm the only one." As I tell my kids, the folks in an FA Office don't grade you, write letters of rec etc. In fact most have no clue how ignorant you all are since you simply nod when we say "did you understand?" out of shame. Get over the embarassment.
Thankfully my more intelligent kids are well beyond the embarassment of asking me just about anything; it's the dopey ones who decide they are too busy (everyone else finds the time funnily enough). It was my own embarassment asking what "capitalization" meant years ago while at an elite private women's college that I got the following reply from the helpful lady I met because I did not have 18 bucks to my name to pay the fee to reapply for aid the next year (keep in mind I was 27). She looked at me and said the most useless reply: "Can you pay it now?" Well, duh-- I'm crying in your office because I don't have 18 bucks... Can I pay it now-- it still makes me angry... someday I'll pay a visit and tell them in person how truly crappy their operation was. The loan I had capitalized every 4 months and had no grace but all they kept saying was repayment began 6 months after graduation. Not quite true on this loan (it was replaced with the Unsubs you have now so be thankful it's that and not the precurser). I did nothing for 6 months and waited for a bill. None arrived-- they didn't have my address and the lender on my note had sold them every year to Sallie Mae (who the frig' is Sallie Mae I asked when I finally figured it out). To make a long story short, I was 180 days in arrears, reported to the credit reporting bureas etc. When I finally figured it out, I was pissed and when I reentered the field decided that I would never make anyone feel stupid for not understanding.
It is through countless interactions with my students that I can confirm to the rest of the forum that it's OK not to know and ask someone to explain it to you (twice if you need it is totally normal: you didn't get the Krebs Cycle on the first go and this is no different). Those that have met me during their interview will recognize the following advice: "Get off your *** and break through the velevet ropes and start demending better service from FA beyond the 'this office sucks, where's my check' because if that is all you do for 4 years, I pity you but I (FA) don't pay the piper or have my credit ruined by my own ignorance; that is you. Your life, your money, your practice loan denied, your mortgage rate 2 points higher; not me." And yes, I know I'm the only one who would dare utter "***" to an interviewee...
I also add that if all you can do is add up the total, you've missed what was important and a monkey can add.
As I said, I'm pretty much alone in my views amongst my colleagues but not with my students who agree with my position and aren't swayed by pretty flyers to consolidate or listen to speakers professing they are fellow students from an important business school "just trying to help" (no one goes to a business school to ""help") Consider us all jaded but I like to think the ones who go on to other schools really give their new FA's a run for their money... They also call me when they get some lame answer to explain in terms that make sense and not FA speak (that's our secret language you know we think you all speak as well).
I have met kids who were told to consolidate after Sept 11 when the markets crashed along with the Trade Center because the FA person said the rates were going up. I have 2 now who missed consolidation all together even though they received the 100's of mailers but got nothing from the FA Office about it and figured if it was important, the office would have said something (not one but TWO this year). The next time a classmate asks you a question about this, don't laugh at them or make them feel dumb. Tell them to read this blurb from me and take it to heart. Most kids think their loans are interest free because that's what we tell them on my side of the desk (well not mine, my kids get another hour on interest subsidies, special allowances and what a deferment really means).

 

[flyingkao]

Thanks for this thread, I'm learning little by little.

 

[Twitch]

With elections coming up, one would think this would be prime time to put our concern of lowering the student loan interest rate out.

WRT to OP's main concern: If no one else does it we should write something up, but I'm not sure who to send it to.

 

[genesis09]

You do realize even if they do change the interest rate; your old loans will still be fixed at 6.8%. I also have an old floating loan, from 05-06 school year. I have one chance to get the loans at a lower interest rate, and that is if I refinance after I graduate next year.
Overall, when compared to other loans historically, 6.8% is not that bad.

 

[logos]

Its looking to me like like private loans are nearly a better option than the federal grad PLUS loans, we may see that extend to federal staffords in the future if rates continue to drop. Granted, you give up the death advantage and a few repayment options by going private.

Looks like right now Grad Plus would be 7.9% + 4% origination fee. Looks like Chase bank right now would probably offer 7.5% and no origination fee. Of course, I suppose the extra .4% is probably still not too much of a premium for the fixed rate, but in the past the PLUS loans were the outright better choice, now that is questionable.

Trends in interest rates ought to improve private rates even more in the near term.