Student Loan Overhaul Approved by Congress

[opinterph]

Stafford loans and Perkins loans.

I don't know if it was Obama, but I do know that back in '07 someone wanted to end Stafford loans; it was supposed to save something like six cents on the dollar per loan per year....

Stafford loans can be either FFEL or Direct Loans. The subsidized variety was formerly known as Guaranteed Student Loan. If the funds for your loan came from the federal government, it was a Direct Loan. The overall program was renamed in honor of Senator and former Vermont Governor Robert Stafford whose accolades include his advocacy for same-sex couples to gain a legal right to enjoy Civil Unions in his home State of Vermont almost 10 years ago. (Vermont recently legalized same-sex marriage.)

A Perkins loan is also known as a National Direct Student Loan or National Defense Student Loan and you are correct that the funds for those loans come from the federal government.

I had one NDSL and several guaranteed loans and was also fortunate to be awarded a couple academic scholarships. The school administered the NDSL until I began repayment, at which time it was transferred to a commercial bank.

The projected billions in “savings” to be achieved via cancellation of the FFEL program is somewhat of a misnomer. Though the savings will be genuine, the mechanism of its realization is in some respects multifaceted and convoluted.

Obama did pledge to end the FFEL during his presidential campaign, but his initial proposal preceded that event.

 

[Kulindahr]

From what I gathered from this article, my generation will be thronging to the polls in 2012 for Obama's reelection.

Nothing like starting corruption at an early age.

The projected billions in “savings” to be achieved via cancellation of the FFEL program is somewhat of a misnomer. Though the savings will be genuine, the mechanism of its realization is in some respects multifaceted and convoluted.

I recall fees of various kinds, but those would be savings to the students. What is there besides the interest that won't be getting paid?

Obama did pledge to end the FFEL during his presidential campaign, but his initial proposal preceded that event.

So was that him in '07?

 

[Kulindahr]

Corruption?

They'll be showing they can be bought.

 

[Miraclemakr]

Corruption?

Do you not realize the importance of access to education across all socioeconomic levels?

Do you not realize that the cost of higher education is disproportionately higher now now compared to when you were in college?

Agreed. If I take the time, I could find an article that showed the ROI from higher education in a case study over the last few decades. The returns have been declining for a while. People are blinded by party hatred, even when the government seems to be making strides to improve things. Take advantage of it and keep moving is what I say. No more origination fees! The best thing to ever happen to my government mathematical statistician salary was this ---> http://www.finaid.org/loans/publicservice.phtml
I have my love-hate moments with the government but as of late, there's less hate and more love. For now...

Welp, adding that to the health care bill just put one more point in the "Go back to Grad bag." Anything the government can do to increase US participation in higher education, the better we are for it. A master's degree has pretty much solidified itself as a necessity. Allowing it to be more accessible only makes sense. Just thinking about how many of my peers were on student visas in both ugrad and grad school always surprised me and still does.

 

[maxpowr9]

Corruption?

Do you not realize the importance of access to education across all socioeconomic levels?

Do you not realize that the cost of higher education is disproportionately higher now now compared to when you were in college?

Colleges are just as corrupt as those "big banks" that people hate. Here's a secret not many people know about. Private Colleges are actually incorporated. If you don't believe me just check out any school's annual report. Any investor (aka student) can get a hold of a school's "financials". It may not be detailed or glossy like a regular company's10-K though (because it's privately traded and therefore not subject to all SEC regs) but they are still required to publish the statements.

Education is important; yes, but at the same token, "it pays to play". It is a bitter pill to swallow. Having working in an admissions office, international students and people not requesting financial aid get rubber stamped through and have a higher chance to get in, than those requesting aid. Why? Because the school gets the money faster and they are much more likely to donate back to the school post-grad.

As for the whole Student Loan Overhaul, it's somewhat of a farce. Sure they may have loans more accessable for lower income families, but doing so is a catalyst. You talk about disporportion now, wait till after when the tuition rates keep getting higher. I could see the income ceiling be even lower now so those "fringe" incomes will actually get denied aid or a reduced amount.
On a side note, by reducing the required payment on the loan, you drag out the period and you end up paying more anyways through interest given the principal as a constant. I personally wouldn't want to have student loans when I'm 30 or when I go to buy a home.

 

[palemale]

They'll be showing they can be bought.

Your analysis is very backward Kuli. Obama will be saving students and their families from being ripped off by the banks and will show their appreciation by voting him back into office. It's akin to residents of a city where a mayor improves policing and drives the crime rate down. The voters are grateful that they are no longer being held up at gun point in the streets and reward the mayor by voting for him. Same concept here.

 

[JB3]

Your analysis is very backward Kuli. Obama will be saving students and their families from being ripped off by the banks and will show their appreciation by voting him back into office. It's akin to residents of a city where a mayor improves policing and drives the crime rate down. The voters are grateful that they are no longer being held up at gun point in the streets and reward the mayor by voting for him. Same concept here.

Who's being held at gun point? They agreed to the terms when they signed at the dotted line.

 

[JB3]

The burden today's students have to carry now is nothing compared to what you had to carry years ago. It's called getting a fair deal.

The issue of affordable education in this country is as serious as a heart attack and it is increasingly hard to get, and might I say we cannot afford as a country to become less educated in a competitive globalized World.
.

Blame it on the states. Their budgets are so fucked up its no surprise that the cost of education has risen so precipitously. The largest universities in this nation are public and receive the bulk of their funding from the states they reside in; if the state isn't paying the bills, where do you think they're going to go for the money?

The new loan set-up is only going to be throwing fuel (money) onto the fire. (rising tuition costs) 'Fixing' the loan system doesn't do jack shit to actually fix the problems.

 

[maxpowr9]

Hardly the point.

We are trying to get America educated here...

Education is a two-way street. The dumbing down of our public schools so "everybody gets educated" is not the way to go in an international environment. It's the reason America keeps falling further and further behind compared to the rest of the world in subjects like math and science. You can pass the blame around to everyone but it ultimately comes down to the student. If you want to be competitive, there has to be some winners and loser in education.

 

[Kulindahr]

Blame it on the states. Their budgets are so fucked up its no surprise that the cost of education has risen so precipitously. The largest universities in this nation are public and receive the bulk of their funding from the states they reside in; if the state isn't paying the bills, where do you think they're going to go for the money?

The states?

It isn't the states which have imposed obscene expansions of bureaucracy on universities, requiring them to maintain bureaucrats and other paper-pushers at high salaries in numbers that have grown twenty times as fast as the student bodies.

Nor is it the states which slap taxes onto people so heavily, leaving little room for increasing them.

I'll grant that many state governments just love to expand (Oregon is a disgusting example), but it's the FedGov that's sucking money out of the system.

Though I read about an interesting approach to a solution; don't know if it got implemented, though: ten percent of all donations to a school's athletics got skimmed off into an endowment to provide scholarships from the income.

 

[Kulindahr]

Hardly the point.

We are trying to get America educated here...

Start by getting government out of the schools.

In several cities where I lived, private schools got better results with less money and less in-school time than did public schools -- and they were taking the students the public school threw out or considered hopeless.

Why? Because they weren't afraid to try anything different. One was a "packet" school, where there were no grade-levels, only subjects and packets of lessons; students proceeded at their own pace as they wished, so long as they didn't let one or more subjects lapse while they concentrated on others. Another was a "one-room schoolhouse", where again there were no grade levels; when the teacher was talking about something ahead of where a student was, the student would go off and work on something else. Students got help from other students more often than from a teacher, and it wasn't always older helping younger, either. The third was project-oriented; the class would choose a project, then work together to learn what was needed to complete it, whether that meant better communications skills, algebra, chemistry, or whatever.

 

[Kulindahr]

^^^

That's a fine theory which I'm not necessarily ideologically opposed to.

But feasibility studies?

Let's get practical. We both know that's not really how the World works.

What feasibility? Those were schools which actually worked.

Of course (contrary to my ivory-tower libertarian purist friends) you can't just dump government schools overnight and expect clones of those three to spring up by the end of the weekend. Nor should you expect for-profit schools to be so daring. But where there already are such schools, inviting them to help start new ones to take over from public schools would be the way to go.

Of course, first we need to ditch all the laws that restrict creativity in education.

Besides that, a multiple array of different approaches to schooling in the same community would be a bonus -- some of those schools' stars were kids who had repeatedly flunked grades in government schools, but who fit with the new learning style so well they caught up two or three years' worth of work in a single year. I learned something of that when in the education program at OSU: everyone emphasizes taking notes, but there were some high school students for whom taking notes meant they got nothing at all out of the session, and that was just one interesting difference in how people learn that I ran into.

 

[JB3]

The states?

It isn't the states which have imposed obscene expansions of bureaucracy on universities, requiring them to maintain bureaucrats and other paper-pushers at high salaries in numbers that have grown twenty times as fast as the student bodies.

Nor is it the states which slap taxes onto people so heavily, leaving little room for increasing them.

I'll grant that many state governments just love to expand (Oregon is a disgusting example), but it's the FedGov that's sucking money out of the system.

Though I read about an interesting approach to a solution; don't know if it got implemented, though: ten percent of all donations to a school's athletics got skimmed off into an endowment to provide scholarships from the income.

Hell yeah the states. In Illinois the state owes the university system $840 million dollars. As a result, they're cutting budgets and cutting aid for students. Granted, bureaucracy is a part of it, but if they're not getting the money in the first place because the state's budget is so messed up, no amount of cutting is going to plug the holes.

 

[JB3]

Hardly the point.

We are trying to get America educated here...

That is very much the point. Education isn't free, and no amount of 'fixing' by the federal government will do that. Making education affordable as an admirable goal, but let's get real here. The budgets of ALL of these contributing entities need to be worked out before any of that can work, and before anyone even considers a public subsidization on the scale certain people want.

 

[opinterph]

… this is what the Republican Senator from Tennessee, Lamar Alexander had to say:

“The Democratic majority decided, well look, while we’re at it, let’s have another Washington takeover, let’s take over the federal student loan program.”

… The non-partisan Congressional Budget Office calculates that this will save us $61 billion in the next 10 years, …

Quiz:

1) How does ending the FFEL program save the federal government billions of dollars?​

Answering this question is important in determining whether ending the FFEL program truly represents a government takeover of the federal student loan program.


With some exceptions, including federal advances to fund so-called “loans of last resort” (for students who could not otherwise obtain a guaranteed loan) and a recent stopgap measure enacted to provide direct government funding for new guaranteed loans along with the purchase of already existing guaranteed loans (to avert a loan crisis caused by banks’ inability to raise money to fund new loans in the recently tightened credit markets), historically almost all FFEL loans have been funded privately. The loans were lucrative for banks and other financial institutions (including some non-profits), due primarily to the government interest subsidies and guarantees of repayment.

Savings from eliminating FFELP … comes from the income that the government will make from having a low cost of funds (close to 1 or 2 percent) and being able to get loan payments from borrowers at 5.6, 6.8, and 7.8 percent. [ASLP]

Regardless, Alexander is still correct. Previously, the government farmed out administration of the loans to the private banks. With this bill, the government IS taking over the loan program.

Previously the government “farmed out” the application and origination process associated with the loans. The government will now handle that part of the process. The government will also provide the funding [capitalization] for the loans.

Under the new plan, the ongoing administration [Direct Loans executed on or after July 1] will continue to be outsourced to private firms, but all of the interest earned [so-called “savings”] will accrue to the government.

Of course, banks can continue to make student loans, but none of these new [privately funded] loans will be subsidized or guaranteed by the government.

So, the question is still open~ Does this new plan represent a takeover of the federal student loan program?

 

[JB3]

Answering this question is important in determining whether ending the FFEL program truly represents a government takeover of the federal student loan program.


With some exceptions, including federal advances to fund so-called “loans of last resort” (for students who could not otherwise obtain a guaranteed loan) and a recent stopgap measure enacted to provide direct government funding for new guaranteed loans along with the purchase of already existing guaranteed loans (to avert a loan crisis caused by banks’ inability to raise money to fund new loans in the recently tightened credit markets), historically almost all FFEL loans have been funded privately. The loans were lucrative for banks and other financial institutions (including some non-profits), due primarily to the government interest subsidies and guarantees of repayment.






Previously the government “farmed out” the application and origination process associated with the loans. The government will now handle that part of the process. The government will also provide the funding [capitalization] for the loans.

Under the new plan, the ongoing administration [Direct Loans executed on or after July 1] will continue to be outsourced to private firms, but all of the interest earned [so-called “savings”] will accrue to the government.

Of course, banks can continue to make student loans, but none of these new [privately funded] loans will be subsidized or guaranteed by the government.

So, the question is still open~ Does this new plan represent a takeover of the federal student loan program?

If what you described is what they're doing, then yes, they are. They're removing any incentive for private institutions to be involved in the process, as well as removing the roles of private banks in the application and origination process. So basically, they're taking what was previously done externally, and making it a part of the government's role going forward. If that isn't a takeover, I'm not sure what would be.

 

[Kulindahr]

Hell yeah the states. In Illinois the state owes the university system $840 million dollars. As a result, they're cutting budgets and cutting aid for students. Granted, bureaucracy is a part of it, but if they're not getting the money in the first place because the state's budget is so messed up, no amount of cutting is going to plug the holes.

But the state's don't have the money because so much is being sucked up by the FedGov.

The federal government should not be allowed to directly tax the people. It's income should be 20% of what the states' revenues, i.e. one fifth of each state's income should be forwarded to Washington.

As for Illinois... well, who's been in charge there and for how long?