Fed student loans set to double 3.4% to 6.8%

[herbivor]

FYI she could still be fired for that kind of thing--my company will fire your ass in a second if they find out you have lied about your degree.

Obviously we knew that going in. But given the fact that she had no chance of getting the job in the first place, getting fired was still a better chance to take. This occurred several years ago. She ended up quitting because the job was too easy and dull for her. She wasn't applying for a nursing position where lying would've been dangerous. It was an HR position, so no I don't feel she was immoral for lying on a resume for a shitty job like that. Skills are skills whether you have a degree or not. A bachelor's degree just means you kinda know the basic technical language of the field you are getting into. The real learning starts on the job.

[z31maniac]

lulz at a Dem justifying lying to get ahead.

Not surprised.

[mrsleeve]

Lots of ways to make a good living with out the college degree, you just have shirk all that brain washing and open your eyes

[rwh11385]

On July 1st, the interest rate on new federal student loans is set to double from 3.4% to 6.8%.

Not entirely true... only subsidized loans are changing from 3.4% to 6.8%. (returning to what it was a few years ago) The unsubsidized loans, which more people have access to, don't change at all.

http://studentaid.ed.gov/types/loans/interest-rates (I'm glad someone like coldweatherblue thought to double-check the rates too)

Direct Subsizided Loan Interest Rates for Undergraduates

7/1/06-6/30/08: Fixed at 6.8%
7/1/08-6/30/09: Fixed at 6.0%
7/1/09-6/30/10: Fixed at 5.6%
7/1/10-6/30/11: Fixed at 4.5%
7/1/11-6/30/12: Fixed at 3.4%

Unsubsidized Loans for Undergraduates and Subsidized Loans for Graduates were "Fixed at 6.8%"

That is, after July 2006. Prior to that, it was "The interest rate is variable (adjusted annually on July 1st) and will not exceed 8.25%."

As others mentioned, throwing money at kids who could just drop out and have no real assets (like a house or car) to secure a loan with is risky. Just having the government guarantee the loans for students is a big help since many kids don't have any credit going into college nor much or any income. Private loans can be competitive (lower albeit variable rate) but don't have some of the benefits of federal loans (don't die with you, feds have several forgiveness programs) and you need credit to land them (or co-signer).

Students who would be impacted from moving 3.4% to 6.8% wouldn't collect any interest during school on those loans (benefit of subsidized loans).

True, but the avg student loan debt is closer to $30k

To add further detail to this point, it is $26K for the 2/3rds that even take out loans. Average in that other 1/3rd at 0... and the average student loan debt at graduation is ~$17K.

This was in the other student loan debt thread... http://economix.blogs.nytimes.com/20...who-are-the-1/

only three-tenths of 1 percent of bachelor’s degree recipients, accumulate more than $100,000 in undergraduate student debt. If you have more than $75,000 in undergraduate debt, you are the 1 percent – just not the 1 percent you might have been hoping for.

The majority of graduates have very manageable debt - especially if they majored in a growing and/or high-paying field.

Now if they rack up six figures in debt with a major selection that will lead to a job with a salary a fraction of that (or none at all) that is their fault. We can't be basing the entire system's policies on the outliers that have chosen a bad path for their lives. Everyone should learn to be responsible and stop expecting the government to fix the outcomes of their decisions.

Oh well, a bit of the problem as sort of mentioned by herbivor and sleeve is the push of Gen Y's parents of kids into college (any major) and disdain for technical training. Germany, Canada, and the UK have been a bit more supportive of apprenticeships and vocational training compared to our love of BA factories. It's one thing to find something you love, you're good at, and someone will pay you for... and a whole another thing to just to build a debt load you won't be able to dig yourself out of. Shorter training with a technical associates can pay itself back quickly and some schools have easy paths to completing a bachelors later. But the mentality of parents tend to speak ill of blue collar work, and then end up finding their kids in waiter jobs.

[bmwstephen]

Not entirely true... only subsidized loans are changing from 3.4% to 6.8%. (returning to what it was a few years ago) The unsubsidized loans, which more people have access to, don't change at all.

http://studentaid.ed.gov/types/loans/interest-rates (I'm glad someone like coldweatherblue thought to double-check the rates too)

Direct Subsizided Loan Interest Rates for Undergraduates


Unsubsidized Loans for Undergraduates and Subsidized Loans for Graduates were "Fixed at 6.8%"

That is, after July 2006. Prior to that, it was "The interest rate is variable (adjusted annually on July 1st) and will not exceed 8.25%."

As others mentioned, throwing money at kids who could just drop out and have no real assets (like a house or car) to secure a loan with is risky. Just having the government guarantee the loans for students is a big help since many kids don't have any credit going into college nor much or any income. Private loans can be competitive (lower albeit variable rate) but don't have some of the benefits of federal loans (don't die with you, feds have several forgiveness programs) and you need credit to land them (or co-signer).

Students who would be impacted from moving 3.4% to 6.8% wouldn't collect any interest during school on those loans (benefit of subsidized loans).



To add further detail to this point, it is $26K for the 2/3rds that even take out loans. Average in that other 1/3rd at 0... and the average student loan debt at graduation is ~$17K.

This was in the other student loan debt thread... http://economix.blogs.nytimes.com/20...who-are-the-1/





The majority of graduates have very manageable debt - especially if they majored in a growing and/or high-paying field.

Now if they rack up six figures in debt with a major selection that will lead to a job with a salary a fraction of that (or none at all) that is their fault. We can't be basing the entire system's policies on the outliers that have chosen a bad path for their lives. Everyone should learn to be responsible and stop expecting the government to fix the outcomes of their decisions.

Oh well, a bit of the problem as sort of mentioned by herbivor and sleeve is the push of Gen Y's parents of kids into college (any major) and disdain for technical training. Germany, Canada, and the UK have been a bit more supportive of apprenticeships and vocational training compared to our love of BA factories. It's one thing to find something you love, you're good at, and someone will pay you for... and a whole another thing to just to build a debt load you won't be able to dig yourself out of. Shorter training with a technical associates can pay itself back quickly and some schools have easy paths to completing a bachelors later. But the mentality of parents tend to speak ill of blue collar work, and then end up finding their kids in waiter jobs.

THIS, I was definitely a product of it and I regret it every day. If I have kids, I'll be damn sure they can choose what they see fit and not chastise them for doing actual real work

[rwh11385]

I forgot to include as well, that the rates returning to where they were may help to resolve Pell Grant funding. (which should be the priority) The reform out of the deficit-reduction / debt-ceiling deal of 2011 eliminated subsidized graduate loans altogether and saved $21.6 billion ("out of the pockets of students", errrr.... grad school graduates) and $17 billion went to help fund Pell Grants. Similarly, the reversion to 6.8% could finance Pell Grants instead of a policy that doesn't really make sense.

http://www.nytimes.com/2012/05/10/opinion/much-ado-about-students-loans.html

The Stafford debate is more rhetoric than substance. If the rate on the subsidized Stafford loan program does double, as scheduled, to 6.8 percent this summer, very little will happen.

In fact, students who borrow through this program will ultimately end up paying only about $6 a month extra for one year of loans. And the rate increase won’t affect previous loans, only new loans borrowed for the 2012-13 school year.

Let’s look more closely at what’s on the table. The proposals that Congress has been debating would extend the 3.4 percent interest rate for only one year. If a student borrowed the average subsidized Stafford loan ($3,357) at 6.8 percent for the next school year, the higher interest rate would boost the borrower’s debt burden by $761 over a 10-year repayment period. Even if the interest rate doubles, the monthly payment on the subsidized Stafford loan would increase by only about one-sixth.

What few observers seem to appreciate is that the low rate of 3.4 percent took effect only last July. As recently as 2007, the rate was 6.8 percent. The Democrats made reducing the interest rate on student loans into a winning campaign issue in 2006 and they fulfilled their campaign promise by ushering through the College Cost Reduction and Access Act of 2007, which gradually reduced the subsidized Stafford rate over a four-year period.

Congress has starved the Pell grant program, an educational lifeline for low-income families. This year Congress made it even tougher for poor students to qualify for the full Pell grant ($5,550, hardly a princely sum). This past academic year, families that made $32,000 or less automatically qualified for the maximum Pell grant, but for the coming year a household can make no more than $23,000 to qualify.

The Pell grant program helps currently enrolled low-income students pay college bills, reduces debt and increases graduation rates. The interest rates on the subsidized Stafford loan, on the other hand, don’t kick in until after the student has already graduated.

Keeping the rate at 3.4% for subsidized Stafford loans does nothing for those who already have the debt, doesn't really improve access to college for the poor (rather than better financing after graduation), and does not provide as significant of a benefit as people assume. It doesn't change the interest rate on the unsubidized loans you take out. It doesn't make college any cheaper. It doesn't change the disconnect between labor market demand and our college graduate supply. We need students making logical and sensible decisions on which their future will depend, need university leaders to look for ways to not just tick up tuition, we need creation or improvement of technical training programs, we need more students to realize that work study is a possible financial option, and better communication of the issues other than simplistic articles, emails, or Facebook shares. We have complex issues in our world and the repeating of simple rhetoric won't get us very far.

6.8% might not seem great compared to 3.4% but if people can get better on the market, that's an option... just not likely to be that way:

http://www.insidehighered.com/news/2011/07/18/increased_student_loan_interest_rates_to_reduce_deficit_and_probably_not_expand_grants

Even if interest subsidies were to be eliminated, he added, the loans are still a better deal for students than what they might get on the private market. They often go to students with poor credit and no qualified co-signer; if they were borrowing from banks, these students might not be able to get loans at all, or would have to pay high interest rates.

The same is true for the interest rate's increase to 6.8 percent, he said, adding that by a conservative estimate it will save the government $15 billion to $20 billion over 10 years. “That’s a big subsidy when you’re lending to a student at that kind of rate,” Delisle said. “It’s a subsidy the taxpayers are being asked to bear by effectively saying, 'Given the loan, given the risks, given the going rate, we’re going to lend at less than that.' ”

The goal is to enable access to college. It is up to students to decide how much debt they take on to get there. Community colleges are starting to dual enroll with partner traditional schools so you get all the gen eds out of the way and then switch to the big campus for the bachelors and save a lot. Or work, or get scholarships, or do a lot of AP credits, or go to a public school in-state, or graduate on time, etc. etc. Arguing about interest rates only affects new debt taken on my students who ought to damn well know better after all of this.

[BethH]

It sounds like education is not on the priority list for the government.

[Beastolizer]

I'm sorry, and maybe I'm wrong, but lying is both immoral, and wrong, not to mention lying on an application can be punishable by immediate termination in most fields/careers. Right?

Kinda shows what type of person you are, and causes me to have a bad picture painted of people who think like you think.

So how do you you feel about politicians then? ;)

[slaterd]

The cost of tuition should NOT be at a constant $$$/per credit hour.
It needs to be priced on $$$/per credit hour in a certain degree program. Like mentioned before charging $10k a year for tuition for an art history degree program is THEFT. Charging $10k a year for tuition for an engineering or medical degree program is JUSTIFIED. Colleges need to start charging tuition fees based on the degree and field the person is wanting to educate themselves in.

[nando]

I think the interest of my loans was about 8%.. but I worked full time through college and started paying right away, and I think I only borrowed about $7k which was paid off ages ago.

anyway, I never did finish my BA. But, I didn't need to. There is nothing that I do here that is taught in a school anyway...

[rwh11385]

http://www.forbes.com/sites/troyonink/2013/07/31/new-student-loan-rates-3-9-for-students-6-4-for-parents/

new rates for federal loans that will allow undergraduates to borrow at a 3.9 percent interest rate for subsidized and unsubsidized loans. Graduate students will be able to borrow at 5.4 percent, and parents can borrow at 6.4 percent, at least for this year.

These rates will be locked in for this academic year’s loans, but under the bill interest rates are tied to the rate of the ten-year Treasury note, so as loan rates reset each July, the cost of borrowing for college could rise each year if the rate on the ten-year Treasury note rises.


Student Loan Rates Drop, For Now

Interest rates will be capped at 8.25 percent for undergraduates, 9.5% for graduates and 10.5% for parents (PLUS Loans).

Well, at least they resolved it with a hopeful long-term solution rather than dropping the rates temporarily and then having everyone freak out when the period of cheap rates was ending. However, students still need to do math and realize the principal matters a lot and they shouldn't consider how to repay the loan only after they graduate.

I guess the biggest change is that subsidized and unsubsidized share the same rate now, which is a big benefit for middle class students who were paying more for their loans than kids who got some need-based subsidized loans at half the interest.

[evandael]

i'm not too concerned, because as covered in this thread, the possible rate hike only applied to subsidized loans. because the interest was covered during my time in school and merely added to the principle, it hasn't compounded, and 3.4% won't get out of control as i pay it off on time.

i do however have a shit-ton of unsubsized loans, which i've always known were going to be 6.8%, and which have accrued a healthy chunk of interest already because i was stupid in school and didn't actively pay it down. =[