Debt deal would eliminate subsidized loans + IBR plans... Forum

[cayerjt]

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This is an interesting read.

[catlawl]

Actually, the deal would eliminate all subsidized loans and the origination fee rebate only for graduate students. The text of the document does not make any reference to changes in the income-based repayment plan. Information concerning all changes to the federal student loan program is found on pages five and six.

[cayerjt]

Thank you, Catlaw!

[firemed]

It doesn't mention IBR at all. the provision I think you misunderstood gets rid of the on time for one year rebate which is in no way IBR.

You are correct re: subsidized loans for grad students though.

[robotclubmember]

whoops lol!

[schooner]

Not to mention this elimnates the ability for students to take out Federal Stafford Loans. With those two things together, for someone taking out $50,000 in loans each year (and let's face it that's a ton of people on TLS), this new debt deal means you will graduate with over an extra $20,000 in debt from interest (assuming the 6.8% rate doesn't change).

Guess I need to rework my ROI spreadsheets. Overnight the decision to go to law school just ended up costing way more money.

Way to cave to the top 1%. Glad they could keep their tax breaks.

How did you get $20,000 extra debt as a result of the debt deal (vs. no changes)?

[robotclubmember]

Not to mention this elimnates the ability for students to take out Federal Stafford Loans. With those two things together, for someone taking out $50,000 in loans each year (and let's face it that's a ton of people on TLS), this new debt deal means you will graduate with over an extra $20,000 in debt from interest (assuming the 6.8% rate doesn't change).

Guess I need to rework my ROI spreadsheets. Overnight the decision to go to law school just ended up costing way more money.

Way to cave to the top 1%. Glad they could keep their tax breaks.

How did you get $20,000 extra debt as a result of the debt deal (vs. no changes)?

hungover math

[CanadianWolf]

Loan interest can be capitalized.

[robotclubmember]

you can still defer the payment of interest (though not the accrual), which will then be capitalized into principal upon graduation.

[CanadianWolf]

Hopefully you are correct, but there is talk of increasing federal loan amounts to cover the additional interest payments. Reports state that the now unsubsidized loans will offer a deferment option for the interest that accrues during law school.

[robotclubmember]

lol i was already incorrect before so how could i be wrong now?

at this point dems have basically proven themselves to not have any nuts though, so they are now at the point where they will bend over, grab their ankles, and take it to the hilt no lube at the mere suggestion that they do so.

[schooner]

you can still defer the payment of interest (though not the accrual), which will then be capitalized into principal upon graduation.

Oops - my calculations assume that the accruing interest is capitalized each year. You are right that the accrued interest won't be capitalized until your grace period ends. I didn't realize this.

I don't expect that would change the final amount by much, but sorry everyone. I would change the calculations again if I wasn't so tired.

[robotclubmember]

you can still defer the payment of interest (though not the accrual), which will then be capitalized into principal upon graduation.

Oops - my calculations assume that the accruing interest is capitalized each year. You are right that the accrued interest won't be capitalized until your grace period ends. I didn't realize this.

I don't expect that would change the final amount by much, but sorry everyone. I would change the calculations again if I wasn't so tired.

i like the crowdsourcing effect of checking numbers on TLS, sometimes a couple people gotta be wrong before you get the right answer. but your calc is far more accurate than mine, that impact won't change yours much

[schooner]

OK everyone, how does this look?

This page on staffordloan.com says that "If you choose not to pay the interest while in school then the interest is capitalized when the loan enters repayment after being in school, in your grace period, or after deferment." So I assume that the fed govt keeps a tally of the accruing interest, but doesn't capitalize anything until you're 6 months out from graduation.

Also, I caught another error (didn't grandfather in the original 8500 during the last six months), which I also corrected below.

-------------------
Scenario for a rising 1L under the debt ceiling deal, if he's planning to take out $8500 each year:

end of 1L: 8500 w/ no interest due from you

<the federal govt stops issuing subsidized Stafford loans, but continues to pay the interest on the subsidized Stafford loan you took out in 1L>

end of 2L: no interest due from grandfathered 8500 carried over from 1L + 8500 x 6.8% = $578 interest on $17,000 principal (not yet capitalized)

end of 3L: no interest due from grandfathered 8500 + (8500 x 6.8%) + (8500 x 6.8%) = $1156 interest on $25,550 principal accrued (not yet capitalized).

6 months after graduation: no interest due from grandfathered $8500 + ($17,000 x 6.8%/2) = $578 interest on $25,500 principal

Total interest accrued so far: $2,312
Total outstanding amount with interest capitalized: $27,812

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vs. if the subsidized Stafford program had been in effect all 3.5 years, none of the interest would have been capitalized to the principal, and the total amount outstanding would have been $25,500 at 6 months after graduation

Therefore, the debt ceiling deal's elimination of new subsidized Stafford loans (after July 1, 2012) will cost an 1L starting this year $2,312 (27,812 - 25,500).

*By the way, the 6.8% interest rate is in effect only (by law) through 2012-2013 school year. It will probably go up after that.

[ahduth]

Glad we locked the thread in the forum for potential students in favor of a forum that only current law school students read.

you can still defer the payment of interest (though not the accrual), which will then be capitalized into principal upon graduation.

So no loan interest is capitalized until you leave school?

I still have never found any information on how frequently these loans capitalize. I guess this is something my school's finaid office would know.

[robotclubmember]

Glad we locked the thread in the forum for potential students in favor of a forum that only current law school students read.

Lol. I mean, seeing that this takes effect in 2012 and impacts your total debt for new students, why would they care?

you can still defer the payment of interest (though not the accrual), which will then be capitalized into principal upon graduation.

So no loan interest is capitalized until you leave school?

I still have never found any information on how frequently these loans capitalize. I guess this is something my school's finaid office would know.

As far as I know, interest is capitalized after the grace period ends, and thereafter you are required to make payments. Payments made draw down the interest due in that period first, and the remainder draws down the capital, so there is no interest accumulating to capitalize. If you defer or go into forbearance, all unpaid interest is accrued and capitalized.

[vanwinkle]

Glad we locked the thread in the forum for potential students in favor of a forum that only current law school students read.

Actually, it should probably be discussed in Financial Aid, where both prospective and current students might go.

Oh wait, it already is. Look at that.

http://www.top-law-schools.com/forums/v ... 5&t=162177

(Also edited the other duplicate thread to point there too.)