Debt Ceiling Deal on Loans

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FlanSolo
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Debt Ceiling Deal on Loans

Postby FlanSolo » Mon Aug 01, 2011 12:50 pm

Relevant text:

TITLE V—PELL GRANT AND STUDENT LOAN PROGRAM CHANGES
Sec. 501. Federal Pell Grants.

This section provides $17 billion in mandatory funds over two years to help fill the funding gap
in the Federal Pell Grant program. This additional funding is offset by reductions through reforms to
the student loan program in sections 502 and 503.


Sec. 502. Termination of Authority to Make Interest Subsidized Loans to Graduate
and Professional Students.

This section eliminates the ability of graduate and professional students to take out subsidized
Stafford loans, beginning on July 1, 2012. This elimination does not apply to students enrolled in a
program leading up to a degree or certificate or students enrolled in a program necessary for a
teaching credential or certification where such credential or certification is required by the state.

Sec. 503. Termination of Direct Loan Repayment Incentives.

This section sunsets the Secretary of Education’s authority to provide incentives
for on-time repayment of students loans on July 1, 2012. This section also explicitly
prohibits the Secretary of Education from creating any incentives for on-time
repayment of student loans.

Sec. 504. Inapplicability of Title IV Negotiated Rulemaking and Master Calendar
Exception.

This section clarifies that the negotiated rulemaking requirement included in
title IV and the master calendar requirements to not apply to the changes made in
this Act.



Am I reading this right that this suggests JDs will not lose access to subsidized Staffords? I'm a 0L, so I'm just making an educated guess, but you do need a JD to be admitted to the bar in most states, correct?

lawgod
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Re: Debt Ceiling Deal on Loans

Postby lawgod » Mon Aug 01, 2011 12:53 pm

I think not.
"necessary for a teaching credential or certification" I think the exception only applies to education degrees.

FlanSolo
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Re: Debt Ceiling Deal on Loans

Postby FlanSolo » Mon Aug 01, 2011 12:54 pm

lawgod wrote:I think not.
"necessary for a teaching credential or certification" I think the exception only applies to education degrees.


Ah, you're right. I'm an idiot - read through that in haste.

EDIT: Wait, are we sure? "This elimination does not apply to students enrolled in a program leading up to a degree or certificate...where such credential or certification is required by the state."

EDIT Again: Forgot the bar is a professional organization, not a body of the state.
Last edited by FlanSolo on Mon Aug 01, 2011 12:57 pm, edited 2 times in total.

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Verity
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Re: Debt Ceiling Deal on Loans

Postby Verity » Mon Aug 01, 2011 12:55 pm

You're not reading it right. Law students will have to start paying interest.

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beachbum
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Re: Debt Ceiling Deal on Loans

Postby beachbum » Mon Aug 01, 2011 1:00 pm

Were there any changes to Perkins loans?

schooner
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Re: Debt Ceiling Deal on Loans

Postby schooner » Mon Aug 01, 2011 4:33 pm

I'm not sure where the OP's description of the changes came from, but it is slightly misleading. According to a strict reading of that Sec 502 description, you could conclude that the federal govt will stop issuing subsidized Stafford loans starting next July, but that it would continue to pay interest on subsidized Stafford loans issued before then. I don't think this is correct.

According to the CBO description (PDF (LinkRemoved)), which I trust more since they have to account for the actual cost, the subsidized program will be totally kaput next July. That means the federal govt won't pay your interest payments on any of your loans, and the only types of Stafford loans they'll issue from then on is unsubsidized.

Eliminate the subsidized loan program for graduate students. Beginning July 1, 2012, the bill would eliminate the interest subsidy on subsidized student loans for almost all graduate students while a borrower is in school, in the post-school grace period, and during any authorized deferment period. (Certain post-baccalaureate students would still be eligible.) The current annual and cumulative loan limits for unsubsidized loans would be adjusted to permit students to borrow additional funds in the unsubsidized loan program. CBO projects that, over the 2012-2021 period, the provision would shift approximately $125 billion in loan volume from the subsidized to the unsubsidized loan program. Because borrowers would be responsible for the interest accrued on those loans while in school, CBO estimates that this provision would reduce direct spending by $8.2 billion over the 2012-2016 period and $18.1 billion over the 2012-2021 period.


Because this description doesn't specify Stafford, I'm not sure if Perkins loans are also affected.

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pjo
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Re: Debt Ceiling Deal on Loans

Postby pjo » Mon Aug 01, 2011 5:30 pm

Here's another article explaining it: http://money.cnn.com/2011/08/01/news/ec ... qus_thread

This is seriously bullshit.

HowdyYall
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Re: Debt Ceiling Deal on Loans

Postby HowdyYall » Mon Aug 01, 2011 5:36 pm

pjo wrote:
This is seriously bullshit.


Absolutely. It's time for a change.........Obama 2012

schooner
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Re: Debt Ceiling Deal on Loans

Postby schooner » Mon Aug 01, 2011 5:38 pm

pjo wrote:Here's another article explaining it: http://money.cnn.com/2011/08/01/news/ec ... qus_thread

This is seriously bullshit.


There's a discussion of this issue in this thread too: viewtopic.php?f=10&t=160386

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voltage88
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Re: Debt Ceiling Deal on Loans

Postby voltage88 » Tue Aug 02, 2011 9:49 am

So would we have to pay the interest while in school? Or would we still qualify for an in-school deferment? I've taken unsubsidized Stafford loans out and the interest just accrues without having to make payment while in school. These articles make it seem like we have to pay the interest while in school. Does anyone know?

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maxm2764
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Re: Debt Ceiling Deal on Loans

Postby maxm2764 » Tue Aug 02, 2011 9:51 am

voltage88 wrote:So would we have to pay the interest while in school? Or would we still qualify for an in-school deferment? I've taken unsubsidized Stafford loans out and the interest just accrues without having to make payment while in school. These articles make it seem like we have to pay the interest while in school. Does anyone know?


You got it. We'll have to pay interest while in school.

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voltage88
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Re: Debt Ceiling Deal on Loans

Postby voltage88 » Tue Aug 02, 2011 9:58 am

I think the interest will just accrue and be added on to the principal when it goes into repayment. That's how the unsubsidized loans work now anyway.

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vanwinkle
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Re: Debt Ceiling Deal on Loans

Postby vanwinkle » Tue Aug 02, 2011 10:01 am

voltage88 wrote:I think the interest will just accrue and be added on to the principal when it goes into repayment. That's how the unsubsidized loans work now anyway.

This. You'll just receive unsubsidized loans to replace the subsidized loans. The normal rules for unsubsidized loans will apply for those loans.

duckmoney
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Re: Debt Ceiling Deal on Loans

Postby duckmoney » Tue Aug 02, 2011 10:12 am

What's the deal with no incentives to repay loans on time? Does that affect anyone?

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albusdumbledore
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Re: Debt Ceiling Deal on Loans

Postby albusdumbledore » Tue Aug 02, 2011 10:19 am

duckmoney wrote:What's the deal with no incentives to repay loans on time? Does that affect anyone?

Yes. Part of it does. It gets rid of grad plus origination fee rebates, which bumps the fee up from 2.5% to 4.0%. Those are the only incentives that I'm aware of that would affect people.

Oban
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Re: Debt Ceiling Deal on Loans

Postby Oban » Tue Aug 02, 2011 10:33 am

How is that possible? To pay when you have no income? Loans to pay loans?

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vanwinkle
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Re: Debt Ceiling Deal on Loans

Postby vanwinkle » Tue Aug 02, 2011 10:34 am

Oban wrote:How is that possible? To pay when you have no income? Loans to pay loans?

If you can't pay the origination fee then it's added to your principal. It just means your loan is that much bigger.

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bgdddymtty
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Re: Debt Ceiling Deal on Loans

Postby bgdddymtty » Tue Aug 02, 2011 10:36 am

ITT we see a microcosm of the myopia of the debt ceiling debate, as law students worry about the effect of an extra $600 per year of interest on repayment of a six-figure debt.

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NCtoDC
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Re: Debt Ceiling Deal on Loans

Postby NCtoDC » Tue Aug 02, 2011 10:40 am

duckmoney wrote:What's the deal with no incentives to repay loans on time? Does that affect anyone?


I know some of my undergrad loans had an incentive that after making a certain number of payments online my interest rate went down. Also, I think that Direct Loans offer an interest reduction for auto-draft payments...

fakemoney
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Re: Debt Ceiling Deal on Loans

Postby fakemoney » Tue Aug 02, 2011 10:52 am

bgdddymtty wrote:ITT we see a microcosm of the myopia of the debt ceiling debate, as law students worry about the effect of an extra $600 per year of interest on repayment of a six-figure debt.


haha. TITCR.

I mean, yeah, this isn't good -- but as regards most people's debt haul, this is like resting a pebble on top of a boulder.

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albusdumbledore
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Re: Debt Ceiling Deal on Loans

Postby albusdumbledore » Tue Aug 02, 2011 10:55 am

fakemoney wrote:
bgdddymtty wrote:ITT we see a microcosm of the myopia of the debt ceiling debate, as law students worry about the effect of an extra $600 per year of interest on repayment of a six-figure debt.


haha. TITCR.

I mean, yeah, this isn't good -- but as regards most people's debt haul, this is like resting a pebble on top of a boulder.

Yeah. I mean who wants to keep their money right?

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minnbills
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Re: Debt Ceiling Deal on Loans

Postby minnbills » Wed Aug 03, 2011 11:56 am

albusdumbledore wrote:Yeah. I mean who wants to keep their money right?


The top 1% do.

areyouinsane
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Re: Debt Ceiling Deal on Loans

Postby areyouinsane » Wed Aug 03, 2011 12:20 pm

The real lesson here is that anyone counting on IBR or any other gov't programs to help with their debt is taking a huge gamble. They could eliminate IBR easily by simply burying it's repeal in another huge bill. Since most Americans are hellbent on "education" regardless of the risk/reward metrics, it's damn easy to crap all over students since the "millions more" they'll allegedly earn over a lifetime will more than make up for any and all tuition hikes, subsidized interest repeals, etc. 8)

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romothesavior
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Re: Debt Ceiling Deal on Loans

Postby romothesavior » Wed Aug 03, 2011 12:39 pm

1) This really is a pebble on top of a boulder. Most people already take out some amount of unsubsidized loan money for law school, so this whole "How am I supposed to pay interest while I'm in school!?!?" thing is kinda silly.

2) Shared sacrifice. If people are going to lose jobs, benefits, etc. to get the debt under control, then it is only fair that we do too.

This sucks, it really does, but its not the end of the world.

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bgdddymtty
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Re: Debt Ceiling Deal on Loans

Postby bgdddymtty » Wed Aug 03, 2011 1:07 pm

romothesavior wrote:1) This really is a pebble on top of a boulder. Most people already take out some amount of unsubsidized loan money for law school, so this whole "How am I supposed to pay interest while I'm in school!?!?" thing is kinda silly.

2) Shared sacrifice. If people are going to lose jobs, benefits, etc. to get the debt under control, then it is only fair that we do too.

This sucks, it really does, but its not the end of the world.
I'm with you until the last sentence. Does this really suck? I like money as much as the next guy, but do people in professional programs really need/deserve the government to give them reduced-cost loans? And is an extra <$2000 over the course of law school on top of your loan going to be a big deal one way or another?

If you say it is, let me ask you a question: did you scrutinize tuition costs this much when you decided where to go to school? How many of us looked at peer schools and cared much one way or another about tiny differences in COA between each school? Not many, I'd be willing to bet. If small differences in the cost of your legal education didn't matter then, why does this one matter so much now?




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