WH unveils student loan/aid reform proposals

[Velar Fricative]

I know this could go into the Trump thread but the class rage thread has some discussion about this, so figured it would get more attention as a standalone thread.

abcnews.go.com/Politics/trump-administration-congress-put-limit-loans-grad-students/story?id=61760977

Believe it or not, I'm actually torn on capping student loans. Stafford loans, for example, have caps (or had, at least when I went to college/grad school). But it seems like the administration wants to put more of the burden on individual families, particularly those that cannot afford to send their kids to college without loans. But, I do feel where there may be room to rein in spending on the part of colleges, they should; it just seems overly simplistic to me and there is a divide in the theory that fewer loans available = lower costs of college. Not to mention, public colleges in many states are seeing less funding so of course they may have to increase costs regardless of loan availability.

There is also talk about increasing grants tied to "high-demand" fields, which is yet another bullshit way to turn away people from the liberal arts. Even so, "high-demand" fields change left and right because of saturation or recessions even during the four years of college where a student is pursuing whatever that high-demand field is. 

Having said all that, student loan debt has become a huge black mark on our economy and will be for some time (I think I heard on ABC News' Start Here podcast today that about 400,000 fewer homes are being bought nationally because of SL debt, as one example). I don't know what the solution is.

[glw]

State and federal funding for higher ed is a really important piece of this, as you mentioned. We have bounced back to record numbers since 2012, but costs have ballooned also:



ETA: The Y axis of that graph is total revenue per public college student.

[karinothing]

They are just discussing capping federal loans right? I never took private loans so I do not really understand the difference between the two. Wouldn't private lenders pick up where the federal lenders left off.

[Velar Fricative]

Mar 19, 2019 10:19:19 GMT -5 karinothing said:

They are just discussing capping federal loans right? I never took private loans so I do not really understand the difference between the two. Wouldn't private lenders pick up where the federal lenders left off.

Yes, and I forgot to mention that podcast briefly mentioned another con to this - there is some fear that even more private lenders will be out there taking advantage of those without the means to go through college without loans. Think payday lenders, etc. 

[Velar Fricative]

I do often wonder if eventually, we'll see more private colleges (and possibly even public in states where they're just not appropriating enough) just outright closing their doors. I know student loan borrowers over 60 are the fastest-growing demographic of student borrowers, but overall this is an issue that more deeply affects Gen X and younger. And when it comes time for members of these generations to pay for dependents' college costs, student loan experiences will likely play a role in where they are willing to pay a certain amount for certain schools. Like, even as someone who attended a well-regarded private university for undergrad and have no regrets even with some SL debt (most of my debt came from grad school), right now I am allllllll about SUNY/CUNY for the future. Is a degree from a middle-of-the-road private college worth it if it will require SL debt, especially with grad school as a possibility? I think more and more people are probably thinking not, which may affect the ability of some colleges to keep open their doors. Admittedly I have to check and see how many colleges are seeing declining enrollment already first.

[wildrice]

I am still waiting for someone to come up with a plan to reduce SL interest rates, and also to allow for refinance.

Curbing college tuition rates is a huge issue as well but at the very least, when someone borrows government money to pay for their education, they should have a prayer of paying it off someday. With current interest rates it is very, very hard.

My husband's loans have gained like 25k in interest while in deferment during his PhD program. I've been paying $350 a month for over 10 years on mine, and I've paid off like 5k - most of which was interest that accrued while I was in graduate school anyway. I think I'm finally at a point where my undergrad and grad loan original balance is what I currently owe. It's criminal.

I don't know about capping loans. I think maybe this should vary by school? I think students should be able to borrow enough to pay for tuition. I remember in my last year of undergrad when my tuition was like $500 more than what my loans would cover and how it was really hard to come up with that extra. I know now that many schools have a larger gap. I don't love the idea that students can borrow thousands more than what they absolutely need to pay tuition and some living expenses, though. I don't know how common that is anymore, but when I was in school it was pretty popular. Again with interest rates being so high, I want students to be able to get what they need but not any more than they NEED, if that makes sense. I struggled a lot with money management when I was younger and it was not easy to truly comprehend what borrowing extra money really would mean for my future payment.

[Velar Fricative]

Mar 19, 2019 10:45:12 GMT -5 wildrice said:

I am still waiting for someone to come up with a plan to reduce SL interest rates, and also to allow for refinance.

Curbing college tuition rates is a huge issue as well but at the very least, when someone borrows government money to pay for their education, they should have a prayer of paying it off someday. With current interest rates it is very, very hard.

My husband's loans have gained like 25k in interest while in deferment during his PhD program. I've been paying $350 a month for over 10 years on mine, and I've paid off like 5k - most of which was interest that accrued while I was in graduate school anyway. I think I'm finally at a point where my undergrad and grad loan original balance is what I currently owe. It's criminal.

I don't know about capping loans. I think maybe this should vary by school? I think students should be able to borrow enough to pay for tuition. I remember in my last year of undergrad when my tuition was like $500 more than what my loans would cover and how it was really hard to come up with that extra. I know now that many schools have a larger gap. I don't love the idea that students can borrow thousands more than what they absolutely need to pay tuition and some living expenses, though. I don't know how common that is anymore, but when I was in school it was pretty popular. Again with interest rates being so high, I want students to be able to get what they need but not any more than they NEED, if that makes sense. I struggled a lot with money management when I was younger and it was not easy to truly comprehend what borrowing extra money really would mean for my future payment.

This now exists more than it ever did, although with refinancing you lose some of the federal SL protections. We decided it was worth it since we don't have that much more to pay off of the particular loans that had high interest rates, but that matters a lot more to many others, I'm sure. 

[wildrice]

Mar 19, 2019 12:20:56 GMT -5 Velar Fricative said:

Mar 19, 2019 10:45:12 GMT -5 wildrice said:

I am still waiting for someone to come up with a plan to reduce SL interest rates, and also to allow for refinance.

Curbing college tuition rates is a huge issue as well but at the very least, when someone borrows government money to pay for their education, they should have a prayer of paying it off someday. With current interest rates it is very, very hard.

My husband's loans have gained like 25k in interest while in deferment during his PhD program. I've been paying $350 a month for over 10 years on mine, and I've paid off like 5k - most of which was interest that accrued while I was in graduate school anyway. I think I'm finally at a point where my undergrad and grad loan original balance is what I currently owe. It's criminal.

I don't know about capping loans. I think maybe this should vary by school? I think students should be able to borrow enough to pay for tuition. I remember in my last year of undergrad when my tuition was like $500 more than what my loans would cover and how it was really hard to come up with that extra. I know now that many schools have a larger gap. I don't love the idea that students can borrow thousands more than what they absolutely need to pay tuition and some living expenses, though. I don't know how common that is anymore, but when I was in school it was pretty popular. Again with interest rates being so high, I want students to be able to get what they need but not any more than they NEED, if that makes sense. I struggled a lot with money management when I was younger and it was not easy to truly comprehend what borrowing extra money really would mean for my future payment.

This now exists more than it ever did, although with refinancing you lose some of the federal SL protections. We decided it was worth it since we don't have that much more to pay off of the particular loans that had high interest rates, but that matters a lot more to many others, I'm sure. 

From what I can tell, though, the refinance rates are still not great. Unless you can throw a ton of money into them every month and get a short payment plan, they are still in the 5.5-6%+ range when I've looked into them. My own loans are currently at 5.65%, so there is no advantage to refinancing. I may look into it when H's loans go into repayment because I know he has a couple at almost 8% (barf). 

I think student loans should be at least comparable to what you can get for a car or house loan. For a while there people were paying 4% on mortgages and 0% on  car loans I was over here paying over $300 a month in interest on my education. Not sure how they compare currently I guess.

[Velar Fricative]

wildrice, we were able to refinance a pair of loans to 3.5% and 4.25% (both were more than 6% originally, no change in term length). BUT, that was a year ago and I know rates have generally increased since then, so you are probably right in that it's hard to find ideal rates now.

The argument I've generally heard re: interest rates is that lenders can take back a house or a car. In education, they can't take your degree. I understand that, but if that were truly a bona fide reason to increase rates, I'd assume they would go far higher than 8%!

[isabel]

Velar Fricative, can I ask who you refinanced through? We are closing on a house in two weeks and as soon as that is done, we want to consolidate DH's loans and try to get them down to a more reasonable interest rate.

[seeyalater52]

Mar 19, 2019 10:19:19 GMT -5 karinothing said:

They are just discussing capping federal loans right? I never took private loans so I do not really understand the difference between the two. Wouldn't private lenders pick up where the federal lenders left off.

There is a huge difference. Interest rates are usually higher for private loans, and lenders are notoriously inflexible when it comes to repayment plans or changed circumstances during the loan repayment period. Unlike federal loans where the government lenders have programs they are required to offer for repayment (income based, 10 year, 25 year etc.) the private lenders have basically full-reign and borrowers have much less ability to set things up in a way that is realistic for them to re-pay. Add to that that the federal lenders are much more willing to work with the borrower for things like job loss, changed financial circumstances, and even adjusted payment plans to avoid the borrower defaulting, private lenders are so much less flexible and often end up just suing for the full balance of the loan. Private lending is absolutely predatory, and with this administration pushing for even less regulation, I can't see that getting any better, only worse. 

[Velar Fricative]

Mar 19, 2019 12:39:48 GMT -5 isabel said:

Velar Fricative , can I ask who you refinanced through? We are closing on a house in two weeks and as soon as that is done, we want to consolidate DH's loans and try to get them down to a more reasonable interest rate.

We went through Earnest. At the time, they provided slightly better rates and options than SoFI (I liked that Earnest let you choose your own repayment timeline). If you end up going through them, there is a referral bonus for both the existing customer and new customer, so send me a message down the road!

[isabel]

Mar 19, 2019 12:44:21 GMT -5 Velar Fricative said:

Mar 19, 2019 12:39:48 GMT -5 isabel said:

Velar Fricative , can I ask who you refinanced through? We are closing on a house in two weeks and as soon as that is done, we want to consolidate DH's loans and try to get them down to a more reasonable interest rate.

We went through Earnest. At the time, they provided slightly better rates and options than SoFI (I liked that Earnest let you choose your own repayment timeline). If you end up going through them, there is a referral bonus for both the existing customer and new customer, so send me a message down the road!

Absolutely. Expect to hear from me next month. Thanks!

[shortstax]

Mar 19, 2019 12:42:00 GMT -5 seeyalater52 said:

Mar 19, 2019 10:19:19 GMT -5 karinothing said:

They are just discussing capping federal loans right? I never took private loans so I do not really understand the difference between the two. Wouldn't private lenders pick up where the federal lenders left off.

There is a huge difference. Interest rates are usually higher for private loans, and lenders are notoriously inflexible when it comes to repayment plans or changed circumstances during the loan repayment period. Unlike federal loans where the government lenders have programs they are required to offer for repayment (income based, 10 year, 25 year etc.) the private lenders have basically full-reign and borrowers have much less ability to set things up in a way that is realistic for them to re-pay. Add to that that the federal lenders are much more willing to work with the borrower for things like job loss, changed financial circumstances, and even adjusted payment plans to avoid the borrower defaulting, private lenders are so much less flexible and often end up just suing for the full balance of the loan. Private lending is absolutely predatory, and with this administration pushing for even less regulation, I can't see that getting any better, only worse. 

Absolutely.  Throw in the fact that most college students need a co-signer for them as well, then they end up hurting more people than just the borrower.

I will say, I find Federal Parent PLUS loans to be predatory as well.  As of today, they have a fixed interest rate of 7.6%, a loan fee of approx 4%, and there is no aggregate maximum.  They also don't factor in a parent's ability to repay the loan during review for approval. They only look for adverse credit history.  That leads to the ability for well-meaning parents to dig some pretty deep holes from which they may never recover. 

[seeyalater52]

Mar 19, 2019 12:54:52 GMT -5 shortstax said:

Mar 19, 2019 12:42:00 GMT -5 seeyalater52 said:

There is a huge difference. Interest rates are usually higher for private loans, and lenders are notoriously inflexible when it comes to repayment plans or changed circumstances during the loan repayment period. Unlike federal loans where the government lenders have programs they are required to offer for repayment (income based, 10 year, 25 year etc.) the private lenders have basically full-reign and borrowers have much less ability to set things up in a way that is realistic for them to re-pay. Add to that that the federal lenders are much more willing to work with the borrower for things like job loss, changed financial circumstances, and even adjusted payment plans to avoid the borrower defaulting, private lenders are so much less flexible and often end up just suing for the full balance of the loan. Private lending is absolutely predatory, and with this administration pushing for even less regulation, I can't see that getting any better, only worse. 

Absolutely.  Throw in the fact that most college students need a co-signer for them as well, then they end up hurting more people than just the borrower.

I will say, I find Federal Parent PLUS loans to be predatory as well.  As of today, they have a fixed interest rate of 7.6%, a loan fee of approx 4%, and there is no aggregate maximum.  They also don't factor in a parent's ability to repay the loan during review for approval. They only look for adverse credit history.  That leads to the ability for well-meaning parents to dig some pretty deep holes from which they may never recover. 

And to riff off the other thread about class warfare, students that come from low-income families often don’t have access to a qualifying co-borrower.

Totally agreed on the PLUS loans too, although my (federal) student loan interest rates for my grad school loans are nearly the same interest rate. :/ The rates have gotten SO bad.

[Deleted]

My private loans actually have a significantly lower interest rate than my federal loans. BUT private loans aren’t considered when calculating income based repayment. So I pay like $540/month for my federal loans on an IBR plan. But I pay an extra $250/month on my private loans. If my private loans could be included when determining my IBR payment, I’d be paying under $600/month for all of them, which would be pretty pretty great.

[Susie]

Mar 19, 2019 12:39:48 GMT -5 isabel said:

Velar Fricative , can I ask who you refinanced through? We are closing on a house in two weeks and as soon as that is done, we want to consolidate DH's loans and try to get them down to a more reasonable interest rate.

Calvin and I did a couple refi's through Earnest last year, we each did one in the spring and then I did another one of his loans 6 months later.  If you do one through Earnest, 6 months is their minimum mandatory waiting period (with on time payments of course) to refi another loan.  We have been snowballing our law school debt since we got out, so I hadn't wanted to refi too many smaller loans into one big one that would be difficult to snowball, so now he has two separate loans with Earnest.  Earnest's rates were far and away lower than SoFi or Citizen's Bank.

His sailed through pretty quickly, and his first one was basically approved instantly.  Mine took longer because I am self employed and get a K-1 instead of a W-2, but ultimately went through just fine.  We were generally able to get rates <4% for variable and I did a larger one at 4.24% fixed.  They give you sliding bars to pick your desired trifecta of rate, term, and monthly payment.  It's almost hard to settle on the terms because there are so many options.

I think we've only refi'ed private loans.  All of our federal loans either had shitty rates so we paid them off fast (I had a Grad Plus loan at 8.5% when I first graduated... it was first on the list to pay off), or they have amazing rates and we're paying them as slowly as possible (like a consolidation loan that I have at 2.625% from 2005-ish).  I think federal loans have greater protections in the event of financial hardship but I have been fortunate not to have to figure it out too much.  On average my private loans have been at lower rates.  I took out a heavy mix of both to pay for law school and have never really seen them all that differently.

cc: wildrice

[suzyp]

Mar 19, 2019 13:18:47 GMT -5 seeyalater52 said:

Mar 19, 2019 12:54:52 GMT -5 shortstax said:

Absolutely.  Throw in the fact that most college students need a co-signer for them as well, then they end up hurting more people than just the borrower.

I will say, I find Federal Parent PLUS loans to be predatory as well.  As of today, they have a fixed interest rate of 7.6%, a loan fee of approx 4%, and there is no aggregate maximum.  They also don't factor in a parent's ability to repay the loan during review for approval. They only look for adverse credit history.  That leads to the ability for well-meaning parents to dig some pretty deep holes from which they may never recover. 

And to riff off the other thread about class warfare, students that come from low-income families often don’t have access to a qualifying co-borrower.

Totally agreed on the PLUS loans too, although my (federal) student loan interest rates for my grad school loans are nearly the same interest rate. :/ The rates have gotten SO bad.

Exactly.  I could only go to school on federal loans. I had no one who would qualify for a private loan so that was it. I used to have to request that my mother be denied for the PLUS loans because she would qualify but could not afford it, so I could get to the unsubsidized Stafford loan.  (This was 20 years ago, not sure what the situation is now).

I wish we'd focus on the cost of college. This seems all well and good from the onset, but as someone who had to get very creative to get through school (including having the school just give me $1500/write off that balance my senior year because I had literally no way to pay for it), I think this will only work to make college more out of reach for certain populations unless something seriously changes.

[LoveTrains]

College costs will only continue to rise with things like the tax on large endowments and the most recent proposal to no longer allow tax deductions for gifts from parents to higher ed. Taxing endowments = less money for financial aid and more money needed from tuition! So short sighted.

[NitaX]

Before I delve into all of this, this is where I do a shameless plug for my new life in University Development/Advancement.

If you love your alma mater, please, please donate to your university/college's scholarship fund. I know at university, funding is the main reasons students drop/stop out. 

If you can give even $500 a year to a urgent/immediate need fund, please do so. It makes a world of difference.

*now off to read*

[Deleted]

Mar 19, 2019 15:46:04 GMT -5 BirdGirl said:

What happened to student loan rates in the 2005-2008 time frame? I consolidated my graduate loans — all federal — at 1.8% over 30 years. My SIL graduated in 2010 and I know her fed loans were much higher and could not be consolidated to a lower rate. I don’t understand why rates went up so much.

IDK.

I graduated in 2007. I consolidated my undergrad and law school loans in 2008. After my consecutive payment and auto debit discounts, I think my interest rate is 6.32 percent. I’m 12 years out of law school and am basically now back down to my original loan amount. It’s BANANAS.

My private loans are variable, at like prime + .25 percent.

Imagine how much further along I’d be and how much greater my purchasing power would be if my federal loan interest rate were 2 percent. The stimulus to the economy would be huge!

[eclaires]

I have the majority of my loans from before 2006 and they are all in the 1-2% range. The ones from the 2007-2008 school year were like 6.8 and we paid those off first. I feel like there was some bullshit legislation that caused that but I don’t remember details. But there was definitely a change and it was federal loans because mine are all federal.

[wildrice]

Mar 19, 2019 15:51:58 GMT -5 @angryharpy said:

Mar 19, 2019 15:46:04 GMT -5 BirdGirl said:

What happened to student loan rates in the 2005-2008 time frame? I consolidated my graduate loans — all federal — at 1.8% over 30 years. My SIL graduated in 2010 and I know her fed loans were much higher and could not be consolidated to a lower rate. I don’t understand why rates went up so much.

IDK.

I graduated in 2007. I consolidated my undergrad and law school loans in 2008. After my consecutive payment and auto debit discounts, I think my interest rate is 6.32 percent. I’m 12 years out of law school and am basically now back down to my original loan amount. It’s BANANAS.

My private loans are variable, at like prime + .25 percent.

Imagine how much further along I’d be and how much greater my purchasing power would be if my federal loan interest rate were 2 percent. The stimulus to the economy would be huge!

It really is bananas.

I took out about 47k in loans between undergrad and grad school. I've paid approximately 44k in student loan payments. I owe...47k. 

At my current payment rate my loans would still not be paid off if they were at 2%, but they would be soooo much closer. I also honestly probably would have made larger payments over time, too - even an extra $100 a month would have made a big difference. As it is, it just seems hopeless. That extra $100 a month with my current rates would still mean I'm paying for another 15+ years.

I don't really know how it works but I am guessing it has something to do with the financial crisis. I graduated in 2008 but were there troubles leading up to the recession that interest rates were trying to counteract? Though it seems they have only gotten worse since. None of my H's loans (taken out between 2011 and 2014) are at reasonable interest rates either. IIRC the lowest is around 5.5% and the highest is 8%. 

[dontlook]

Mar 19, 2019 10:31:19 GMT -5 Velar Fricative said:

I do often wonder if eventually, we'll see more private colleges (and possibly even public in states where they're just not appropriating enough) just outright closing their doors. I know student loan borrowers over 60 are the fastest-growing demographic of student borrowers, but overall this is an issue that more deeply affects Gen X and younger. And when it comes time for members of these generations to pay for dependents' college costs, student loan experiences will likely play a role in where they are willing to pay a certain amount for certain schools. Like, even as someone who attended a well-regarded private university for undergrad and have no regrets even with some SL debt (most of my debt came from grad school), right now I am allllllll about SUNY/CUNY for the future. Is a degree from a middle-of-the-road private college worth it if it will require SL debt, especially with grad school as a possibility? I think more and more people are probably thinking not, which may affect the ability of some colleges to keep open their doors. Admittedly I have to check and see how many colleges are seeing declining enrollment already first.

This is where my H is. He said the route he will try to guide our kids down will be significantly different than previously thought strictly due to cost. There is no way we could foot the bill for the private college I went to. If they want our help it will need to be to a low cost state school with scholarships included. I’m lucky I made it out with only $30,000 in student loans. I paid mine off in 10 years by throwing every dollar I made for about a year at it. My mom is still paying off her $16k parent portion :/

[aliciabella]

Is there a good place to call about your federal loans? I was sure I was on a 10 year plan for undergrad. My fucking interest rate lock was 7.2. Yup. And that was good. I am on year 15 and I am still paying them back monthly. They have sold my loans so many times and I should have been on top of it but am so fucking confused. Ugh.

[wildrice]

Mar 19, 2019 17:17:36 GMT -5 aliciabella said:

Is there a good place to call about your federal loans? I was sure I was on a 10 year plan for undergrad. My fucking interest rate lock was 7.2. Yup. And that was good. I am on year 15 and I am still paying them back monthly. They have sold my loans so many times and I should have been on top of it but am so fucking confused. Ugh.

I think the best you can do is call your current servicer. If you need to track down past servicers, they should be listed on your credit report. Not sure how helpful they will be but maybe they can verify what you have paid?

There is no 1 stop servicer because they are all literally different companies.

[aliciabella]

Mar 19, 2019 15:51:58 GMT -5 @angryharpy said:

Mar 19, 2019 15:46:04 GMT -5 BirdGirl said:

What happened to student loan rates in the 2005-2008 time frame? I consolidated my graduate loans — all federal — at 1.8% over 30 years. My SIL graduated in 2010 and I know her fed loans were much higher and could not be consolidated to a lower rate. I don’t understand why rates went up so much.

IDK.

I graduated in 2007. I consolidated my undergrad and law school loans in 2008. After my consecutive payment and auto debit discounts, I think my interest rate is 6.32 percent. I’m 12 years out of law school and am basically now back down to my original loan amount. It’s BANANAS.

My private loans are variable, at like prime + .25 percent.

Imagine how much further along I’d be and how much greater my purchasing power would be if my federal loan interest rate were 2 percent. The stimulus to the economy would be huge!

Yup, mine were 7.2 interest rate in 2005 I had no luck lowering the interest rate.

[mssaint]

Mar 19, 2019 17:17:36 GMT -5 aliciabella said:

Is there a good place to call about your federal loans? I was sure I was on a 10 year plan for undergrad. My fucking interest rate lock was 7.2. Yup. And that was good. I am on year 15 and I am still paying them back monthly. They have sold my loans so many times and I should have been on top of it but am so fucking confused. Ugh.

There is a website that shows you the past history of your federal loans. I used it to get loan history when I applied for a student loan tax credit this fall. I think it’s studentloans.gov. It had my full history in there.

[jigsy]

I was working at a federal loan servicer in 2005-ish. IIRC, prior to 2006, loans were at a variable rate and it was tied to the prime interest rate - so there was a time were interest rates were rock bottom, so a lot of people were able to re-finance to lock in a low rate. In 2006, Fed loans were only offered at a fixed interest rate that was in the 6% range, and that has only increased.

I understand the theory behind secured debt holding lower interest rates than unsecured debt, but SL's should be classified more like secured debt - you can't discharge them in bankruptcy like a CC. They can garnish your wages to get repaid. Its a racket.

[klee23]

Mar 19, 2019 15:46:04 GMT -5 BirdGirl said:

What happened to student loan rates in the 2005-2008 time frame? I consolidated my graduate loans — all federal — at 1.8% over 30 years. My SIL graduated in 2010 and I know her fed loans were much higher and could not be consolidated to a lower rate. I don’t understand why rates went up so much.

This doesn't answer a question of why but they skyrocketed quickly. I was in undergrad from 2003-2007 & grad school 2007-2010. My federal loans consolidated at 6.8%. I don't remember the break down but I feel like they were ~2% until 2005 and then jumped my last years there.