Credit downgrade: Effects on 0Ls?
Posted: Sat Aug 06, 2011 11:21 am
I am aware that the recent budget compromise cut subsidies for student loans; however, what direct effects, if any, will S&P's downgrade have on student loans?
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https://www.top-law-schools.com/forums/viewtopic.php?f=15&t=162565
Agreed, but will it affect the interest rates of those who choose to take out these loans?Aqualibrium wrote:Hopefully, less of you will be willing to take out six figure debt based on the "versatility" of a law degree and easily misunderstood numbers in glossy guide books.
+1. We lucked out here.joncrooshal wrote:The budget already killed subsidized student loans for the class of 2015. At least I got to take out a year's worth as a class of 2014-er.
What a shitty thing to luck out onthecilent wrote:+1. We lucked out here.joncrooshal wrote:The budget already killed subsidized student loans for the class of 2015. At least I got to take out a year's worth as a class of 2014-er.
That sounds like a reasonable ballpark number. The exact cost will depend on your repayment schedule.FeelTheHeat wrote:^^^ I saw the numbers in another topic and I think it works out to an extra $2700 for the c/o 2014
Yes.Br3v wrote:Do I understand it right, in regards to the recent cuts to sub. Loans, that they are basically the same as unsub. Loans in the sense that the only difference is you are responsible for the interest accrued during school instead of 6 months after graduation?
In the President's 2012-13 budget proposal in March 2011, he recommended the elimination of the interest subsidy of the Subsidized Federal Direct Loans for Graduate and Professional students. The savings would be used to bolster the Pell Grant program. Congress proposed the dissolution of the subsidy for ALL students. Section 502 of the new law eliminates the interest subsidy for graduate students beginning July 1, 2012 (next year). Our understanding is that eligible students will continue to be able to borrow $20,500 annually, but interest will accrue on the entire amount beginning at disbursement. The loss of the interest subsidy to a full time day student who borrows for the first time in 2012-13 and was eligible for $8,500 in the past would be about $2,800 term time and $900 in grace period (total $3,700). The additional interest costs for 4 year evening students would be about $4,800 term time and $1,200 in grace period ($6,000). The Department of Education is projected to save $18 billion over the next 10 years.
In addition, under Section 503 of the new law, students will lose the "origination fee rebate" on Direct and GradPLUS loans disbursed after July 1, 2012. Currently there is a 1% origination fee on direct loans (0.5% assessed at disbursement and 0.5% if the borrower fails to make the first 12 months on time). Borrowers would be charged the full 1% regardless of on time payments. For the GradPLUS, the total is 4% (2.5% on disbursement and 1.5% if the borrower fails to pay the first 12 months on time). Borrowers would be charged the full 4% regardless of on time payments.
The Department of Education is projected to save $3.6 billion over the next 10 years.
There is a possibility that borrowers may lose the 0.25% interest rate reduction for electronic loan payments, but it not clear at this point.
This is correct. The way the law is worded, it strips the government's ability to offer subsidized loans to grads but ups the unsubsidized amount offered to compensate. Basically, after July 1, 2012, they can offer the same amount of loans, but but they'll all be unsubsidized. (Any subsidized loans already received keep working like they're supposed to.)Br3v wrote:Do I understand it right, in regards to the recent cuts to sub. Loans, that they are basically the same as unsub. Loans in the sense that the only difference is you are responsible for the interest accrued during school instead of 6 months after graduation?
Thanks!vanwinkle wrote:This is correct. The way the law is worded, it strips the government's ability to offer subsidized loans to grads but ups the unsubsidized amount offered to compensate. Basically, after July 1, 2012, they can offer the same amount of loans, but but they'll all be unsubsidized. (Any subsidized loans already received keep working like they're supposed to.)Br3v wrote:Do I understand it right, in regards to the recent cuts to sub. Loans, that they are basically the same as unsub. Loans in the sense that the only difference is you are responsible for the interest accrued during school instead of 6 months after graduation?
This is helpful to see - thank you for posting. Wanted to point out that their email is talking about students who will start law school next year, not current 0Ls.OnceUponAMemo wrote:Excerpt of an email Fordham sent us about the loan changes:
The loss of the interest subsidy to a full time day student who borrows for the first time in 2012-13 and was eligible for $8,500 in the past would be about $2,800 term time and $900 in grace period (total $3,700). The additional interest costs for 4 year evening students would be about $4,800 term time and $1,200 in grace period ($6,000). The Department of Education is projected to save $18 billion over the next 10 years.
Agreed. You can deal with a few thousands of dollars in additional debt if you have a good paying job. It's not great, but you can still survive.Tanicius wrote:IMO the only thing that truly matters for us is the job market - we're already paying out the nose and we're not going to be any less screwed unless the job market improves or at the very least stays where is. If jobs shrink again, or if they get anywhere near to how low they were two years ago...
This is equivalent to saying you don't really care if tuition increases by $2,700. Or, to put it in an even broader sense, you don't care if the gov't taxes you an additional $2,700.Tanicius wrote:IMO the only thing that truly matters for us is the job market - we're already paying out the nose and we're not going to be any less screwed unless the job market improves or at the very least stays where is. If jobs shrink again, or if they get anywhere near to how low they were two years ago...
kapital98 wrote:The job market is clearly more important. However, that was free money for those that qualified. Now it's gone. I'm not a fan of paying/losing (same either way you look at it) $2,700.
*sigh*kapital98 wrote:This is equivalent to saying you don't really care if tuition increases by $2,700. Or, to put it in an even broader sense, you don't care if the gov't taxes you an additional $2,700.
The job market is clearly more important. However, that was free money for those that qualified. Now it's gone. I'm not a fan of paying/losing (same either way you look at it) $2,700.
Yeah, but honestly, it's not that big of a deal. Anyone do the calculations on it? The interest on it that accumulates while we're in school is going to add up to what, about a grand? Big picture, I don't see it as a big deal. There are way more important things than this.FeelTheHeat wrote:What a shitty thing to luck out onthecilent wrote:+1. We lucked out here.joncrooshal wrote:The budget already killed subsidized student loans for the class of 2015. At least I got to take out a year's worth as a class of 2014-er.
Thanks. What about sub loans for ug?vanwinkle wrote:This is correct. The way the law is worded, it strips the government's ability to offer subsidized loans to grads but ups the unsubsidized amount offered to compensate. Basically, after July 1, 2012, they can offer the same amount of loans, but but they'll all be unsubsidized. (Any subsidized loans already received keep working like they're supposed to.)Br3v wrote:Do I understand it right, in regards to the recent cuts to sub. Loans, that they are basically the same as unsub. Loans in the sense that the only difference is you are responsible for the interest accrued during school instead of 6 months after graduation?
This only affects graduate student loans, UG remains unchanged.Br3v wrote:Thanks. What about sub loans for ug?vanwinkle wrote:This is correct. The way the law is worded, it strips the government's ability to offer subsidized loans to grads but ups the unsubsidized amount offered to compensate. Basically, after July 1, 2012, they can offer the same amount of loans, but but they'll all be unsubsidized. (Any subsidized loans already received keep working like they're supposed to.)Br3v wrote:Do I understand it right, in regards to the recent cuts to sub. Loans, that they are basically the same as unsub. Loans in the sense that the only difference is you are responsible for the interest accrued during school instead of 6 months after graduation?