Friday, September 18, 2009

Under Consideration - Private Loans Being Disbanded

This was not welcome news for many students who have exhausted their federal loan limits or already have a bachelor's and/or master's degrees.

I'm one of them. Wanting to be a rural family physician could come to a screeching halt.

Stay tuned - will post more later.

"Posting Later..."

It is entirely possible without a private loan, that I may not finish my pre-reqs for med school. Fully aware of the interest rates also tacked onto private loans and the repayments that start immediately, private loans are my only means of finishing (or selling house).

I hope the Senate shoots down the idea.

First, the US government has enough control over our lives as is and under Obama is continuing to get its tentacles in other places. MY education need not be one of them. MY ability to continue at some point to pay exorbitant taxes need not be one of them either.

Second, if those of us who are able, capable, willing and WANTING to serve the needs of the United States citizens for more family doctors, then there needs to be means for us to get the education required. Either raise the limits on federal subsidized loans or LET US take out our own private loans to do so.

Third, private loans for students alone means they have excellent credit. Excellent. Not fair, partly cloudy, mediocre, substandard. Excellent. IF they do not have excellent credit, they MUST have a co-signer. If those students who have poor credit are able to obtain someone with excellent credit, willing to sign on a dotted line and be responsible for these loans, then I believe there is limited, if any, risk. Someone will be paying them back.

Here it is from the Chicago Sun - Times:

House moves to cut back private student loans, expand government grants

September 17, 2009
Associated Press

WASHINGTON — The House is poised to vote to push private lenders out of the federal college loan business and massively expand the government's own lending program.

Following a day of debate, House lawmakers were expected to approve on Thursday a student aid bill that has widespread support, including from the White House. The measure will then go to the Senate, where its fate is somewhat less certain.

Putting the government in charge of all federal loans would save taxpayers an estimated $87 billion, according to the Congressional Budget Office. The CBO says the figure could be much lower, $47 billion, when administrative costs and market conditions are considered.

The money would boost Pell Grants for needy students, increasing the maximum grant by $1,400 to $6,900 over the next decade. It also would pay for a new college completion fund, community college reforms and more college aid for veterans.

"No student in this great country of ours should have to mortgage their future to pursue their dreams," said the bill's sponsor, California Democratic Rep. George Miller, chairman of the House Education and Labor Committee.

Yet the money also would be spent on things that don't help pay for college, such as construction at K-12 schools and new preschool programs.

And while the measure would increase Pell Grants, it would do nothing to curb college costs, which rise much faster than Pell Grants do.

As consumers, college students probably wouldn't notice much difference in their loans, which they would get through their schools. Broadly speaking, the bill doesn't do much to make loans cheaper or help pay them off.

It does keep interest rates for need-based federal loans from jumping from 3.4 percent currently to 6.8 percent as scheduled in 2012. Rates for most other loans would remain at 6.8 percent.

Still, the bill's changes to federal college aid programs would be the most sweeping since their creation in the 1960s and would fulfill a campaign promise by President Barack Obama.

The measure would end the subsidized loan program under which private lenders made $56 billion in government-backed loans to more than 6 million students last year, compared with $14 billion in direct loans from the government.

The bill would also shorten the labyrinthine college aid form, which Obama proposed to eliminate altogether when he ran for president.

Republican critics argue it is wrong to put the government in near-total control of student lending.

"Ask yourselves whether another government takeover is what we need right now," said Minnesota Rep. John Kline, senior Republican on the Education Committee.

Many also worry about job losses in their districts. Private lenders employ more than 30,000 people whose jobs depend on the subsidized loan program, and the industry says many would be laid off.

Employees of Sallie Mae, the biggest student lender, have been trying to involve local leaders in the issue and recently held a series of town hall meetings and petition drives in Pennsylvania, Florida, Delaware, New York and Indiana.

The Reston, Va.-based lender has about 8,500 employees in the program and probably would lay off about 30 percent of those workers. It still will have contracts to service federal loans.

Democratic Rep. David Wu of Oregon said lenders still could make all the loans they want. "What will not happen anymore is making those student loans with taxpayer subsidies," he said.

Under the measure, Pell Grants would rise slightly more than inflation over the next decade, increasing on average by about 2.6 percent yearly, according to the bill's sponsors.

However, the grants would still depend on annual spending bills and could rise less than promised, as has happened in the past.

Obama originally proposed to take Pell Grants out of lawmakers' hands entirely, making the program an entitlement like Social Security and Medicare, which would have cost an estimated $117 billion — more than lawmakers have to spend.
Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

1 comment:

Ella said...

I haven't heard about this... but frankly I think this would be fabulous.... because private loans do nothing but rip off students. I do realize that some private loans cater to students who have terrible credit histories or who want to attend non-accredited schools... so I understand that it would be bad for them. But as a US graduate student you have access to UNLIMITED graduate PLUS loans (no lifetime cap), which you can use to finance any graduate education. True you can't take more than your annual cost of education each year... but the rates are much safer than most private loans. Rest assured, there WILL be plenty of money for med school.

For undergrads I am not sure how things will work without private supplemental loans for those who've reached their "cap". I suppose they will be more affected than graduate students.