Will lower loan rates help that much?

<p>"Though clearly popular, the legislation sparked a debate over where to set the nation's education priorities -- helping college graduates pay off their debts or expanding federal grants for low-income students.</p>

<p>Democrats conceded Congress needs to do more to make college more affordable. But they said reducing the student loan rate was a significant step toward tuition relief."
<a href="http://tinyurl.com/ystubd%5B/url%5D"&gt;http://tinyurl.com/ystubd&lt;/a&gt;&lt;/p>

<p>Significant? The difference in payments on a $50,000 loan (to pick a round number) paid back over 10 years (isn't that the term for Stafford loans?) between 6.8% and 3.4% is $83.31 a month ($575.40 - $492.09) or $999.72 a year. Given the cost of tuition now and the annual rates of increase seen at public and private institutions, this appears to be a minor fix or no fix at all, especially for low income students.</p>

<p>$80 a month can be significant, particularly for low income working stiffs who were low income students repaying these loans. You can still buy your month's public transportation in NYC for that.</p>

<p>It would be nice if they could do more, but $80 a month, even $40 a month is a step in the right direction.</p>

<p>If you add the factor of inflation and the fact that 3.4% is very near the annual CPI inflation rate, a student would come tothe crossroad of either paying the loan off quickly or try not to pay the loan off.</p>

<p>During the aftermath of 9/11, We didn't sell our lowly, EE bonds to pay for tuition because the bond's had a nearly 2% greater yield than student loan rate. The old (prior 2006 student loan change) Loan Consolidations had a feature where you could fix the initial interest rate and then get a 1% discount on that rate when you make 4 years of ontime payments. </p>

<p>How long do you want to keep a 6.5% loan?
How fast can you pay off a 3.375% loan?
How fast do you want to pay off a 2.375% loan?</p>

<p>So How many students will make 4 years of ontime payments even with autopayment? The bankers say very few. I haven't read the details of this HR bill but I would suspect that there is a clause sayings "ontime and proper" payments, else the rate reverts to 6.5%. The Bankers will NOT lot lose money.</p>

<p>My husband and I both had loans that we paid until we were in our mid thirties. We simply paid the loans off on the schedule given. Didn't like them, complained, but did what we committed to do.</p>

<p>From what I have read, this applies only to Subsidized Staffords. The Republican Reps say that not enough help. I would guess that the eventual bill will include Unsubsidized Staffords since that would endear the middle class to the Republicans and the Dems won't say, no.</p>

<p>"I haven't read the details of this HR bill but I would suspect that there is a clause sayings "ontime and proper" payments, else the rate reverts to 6.5%. The Bankers will NOT lot lose money."</p>

<p>My understanding is that the loan rates are subsidized and guaranteed by the Feds anyway, so cutting the rate doesn't change the profitability as far as the banks are concerned. It just increases the costs to taxpayers. Under Congress's new Pay As You Go rules, what tax will be increased or program cut to pay for this?</p>

<p>2dsdad: What is being proposed:</p>

WASHINGTON (MarketWatch) -- Over the Bush administration's objections, the U.S. House on Wednesday voted 356 to 71 to reduce guaranteed margins and increase fees for student lenders, including Sallie Mae (SLM), Student Loan Corp. (STU) and Nelnet (NNI).
The bill would apply to loans made after June 30, 2007, and would raise $7.5 billion from lenders for the federal government through 2012.</p>

<p>Proceeds from the lender provisions would be used to offset the cost of cutting student loan interest rates for borrowers to 3.4% from 6.8%. The borrower rate cut would take effect gradually through 2011 and interest rates for borrowers would revert to 6.8% in 2012.</p>

<p>The fee increases and other lender-related provisions would be permanent.
House Education and Labor Committee Chairman George Miller, D-Calif., said that the bill would help 5.5 million student borrowers.


<a href="http://www.marketwatch.com/news/story/us-house-votes-tap-student/story.aspx?guid=%7BAD6DCF09-0328-4FED-B80D-4CF9B4ED1012%7D%5B/url%5D"&gt;http://www.marketwatch.com/news/story/us-house-votes-tap-student/story.aspx?guid=%7BAD6DCF09-0328-4FED-B80D-4CF9B4ED1012%7D&lt;/a&gt;&lt;/p>

<p>What about congress raising minimum wage? In theory students will be able to earn more money to help pay for college. But will the increase cause expected student contributions to jump as well? Undoubtedly. I am convinced that whatever 'assistance' the federal govenment provides will end up disproportionately in the pocket of the universities rather than students and parents.</p>

<p>Very few college age students work for minimum wage. Even Starbucks pays well above the minimum withy tips.</p>

<p>Can someone clarify...is this bill covering only Stafford Subsidized, or does it include Stafford Unsubsidized, too? I assume no provisions to reduce rate of Plus loans?</p>

"Our margin on a guaranteed student loan is 50 basis points, so it is a razor-thin margin," Joyce said. Congress cut $12 billion in student lender subsidies in 2006, and another $7.5 billion would push lenders dangerously close to the edge.</p>

<p>"Eventually when you cut and you cut and you cut ... this is going to hurt students and schools," Joyce said.</p>

<p>An Education and Labor Committee aide countered that the bill would ensure that lenders such as Sallie Mae can continue to participate in the federal guaranteed loan program while retaining "a reasonable rate of return."</p>

<p>Because excess profits from federally subsidized students loans are returned to the government, the rate cut is expected to cost the Treasury roughly $7.1 billion through 2012.


If they cut the banks' profits enough, the banks will stop making loans. And what about that $7.1 billion cost in the era of PayGo?</p>

<p>Why should taxpayers subsidize colleges charging exhorbitant prices to attend their schools? </p>

<p>What if the governement limited student loan subsidies to only to loans for schools that charge less than some specified maximum tuition? The upside is that it may force some institutions to decide between charging their high prices and have fewer students capable of attending them, or providing their own financial assistance. The downside is that it might shut out certain colleges from some people unless the college comes up with its own financial assistance offerings. </p>

<p>The law of supply and demand rules - as long as people figure out a way to attend the high-cost schools, the costs will continue to rise. Unfortunately many of these students will be paying for their choices for far too many years after graduation.</p>

<p>OTOH The White House (W's) plan is to give more money in terms of grants. I wonder who is gunna pay for that ?
I thought the era of free money went away in C's era.</p>