Senate approves student loan reform Forum

[westbayguy]

Included in the health care reform modification bill that (finally) passed the Senate today was some much-needed student loan reform. The biggest impact this will have on law students is the elimination of federal backing for third-party lenders. No longer will you have to go to Discover or Chase Student Loans to get approved for high-interest 8.5% GradPLUS loans; instead, all schools starting this summer will offer "direct lending" which cuts out the corporate lending middleman and brings a lower interest rate. Loans are approved directly by the school's financial aid office and you don't need outside approval. This kicks in this summer, so everyone should benefit from it whether they're a new or continuing law student this fall.

Chase and Discover were not charging high rates, in fact they cahrged much lower prime based variable rates, AND did not charge the 4% government origination fee.

Read INR carefully and se what happens if you do PI for 5 years and then go foir private law.

Do the same thing and look how much you will pay over 25 years in IBR for non PI.

GRAD PLUS is at a higher rate than Staffords. Why?

Read this all carefully, you're being screwed.

[vanwinkle]

Chase and Discover were not charging high rates, in fact they cahrged much lower prime based variable rates, AND did not charge the 4% government origination fee.

For government loans eligible for consolidation and IBR, this is bluntly not true. Chase and Discover were charging flat 8.5% interest rates on the loans they were issuing, because they were required to by the PLUS program. Those lenders do lend money at variable rates that are based on the prime rate, but none of those loans have ever been backed by the federal government or were part of these programs that are affected.

If you doubt me, I have a statement from Discover indicating the fixed 8.5% interest they are charging me for my student loan through them. Thank God that mess is over now.

[westbayguy]

Chase and Discover charged you the same for Staffords and Grad PLUS. Sorry if I wasn't clear.

Their PRIVATE LOANS are much cheaper than GRAD PLUS. That was the point I was trying to make (inartfully I guess). Private loans are eligible under most LRAPS, but admittedly they are not eligible for the fed's IBR plan.

All I was saying was the government is gouging. That there is a much cheaper private alternative that they fail to recognize in IBR. They are taking your money to subsidize other government programs (like Pell)

You get to choose your poison.

[vanwinkle]

Chase and Discover charged you the same for Staffords and Grad PLUS. Sorry if I wasn;t clear.

Their PRIVATE LOANS are much cheaper than GRAD PLUS. That was the poiunt I was trying to make (inartfully I guess). Private loans are eligible under most LRAPS, but admittedly they are not eligible for the fed's IBR plan.

You get to choose your poison.

IBR makes GradPLUS loans a much easier pill to swallow. I wouldn't take private loans at all unless you were absolutely sure you could get a job working for a private law firm making bank and could pay those loans off quickly... But then, if your plan is to pay the loans off quickly, does the interest rate really matter that much? It's not going to make a huge difference over only a period of 4-5 years.

Plus, and this is a huge huge thing, interest does not compound under IBR. If your minimum payment does not pay the owed interest, the interest is added back onto how much you owe, but it is not compounded. You continue accruing interest only on the original capital. If you take a private loan and miss minimum payments, you will compound interest and that will swallow you quickly.

[Anonymous Loser]

Chase and Discover charged you the same for Staffords and Grad PLUS. Sorry if I wasn't clear.

Their PRIVATE LOANS are much cheaper than GRAD PLUS. That was the point I was trying to make (inartfully I guess). Private loans are eligible under most LRAPS, but admittedly they are not eligible for the fed's IBR plan.

All I was saying was the government is gouging. That there is a much cheaper private alternative that they fail to recognize in IBR. They are taking your money to subsidize other government programs (like Pell)

You get to choose your poison.

I hate to be the one to break it to you, but you get what you pay for.

The reason those alternatives are cheaper is because they offer less attractive benefits. In addition to being ineligible for the federal IBR program, private loans have much more restrictive deferment and forbearance provisions. In contrast, federal loans offer generous deferment and forbearance provisions, as well as greater flexibility in repayment. In other words, the government is not gouging, they are simply offering a product with more valuable options. If you don't like the price, go elsewhere.