Return of In-School Consolidation?

Sen. Edward Kennedy (D-MA) introduced the Student Debt Relief Act of 2007 (S. 359) along with Senators Durbin (D-IL), Lieberman (D-CT), Mikulski (D-MD), Obama (D-IL), and Schumer (D-NY) as cosponsors.
"A new day has now dawned in Congress, and last week, our colleagues in the House showed they have their priorities right on college costs by cutting student loan interest rates in half," Kennedy stated in the Congressional Record. "Now it’s our turn in the Senate, but we won’t stop there."

In addition to the interest rate cuts in H.R 5, S.359 offers increased Pell grants, and a return to in-school consolidation.

H.R.5; unintended consequences

As Senior Vice President of a FFELP Consolidation Lender and someone who has worked in Medical education in the past, I looked forward to this legislation. Unfortunately, the bill passed by the House yesterday leaves, as you are well aware, much to be desired.

Not only does the bill simply address the smallest loan group (Subsidized Stafford) it purports to assist paying for this by increasing fees/decreasing stipends to lenders, (and more specifically consolidation companies).

I am sure you are well aware that members of your association have been at the forefront of using consolidation as a means to temper the high costs of a medical education. Unfortunately, this bill will provide a direct hit to some of the incentives that smaller consolidation lenders are able to offer (See H.R.5; Items #7, #8). It is no wonder the larger lenders were lobbying for this portion of the legislation.

As of now, theLoanster.com is able offer a total of 2.25% in Rate Reductions for Auto-debit and on-time incentives. We are also able to make the 2% (On-Time) portion of the reduction permanent once it is earned (sans default). Throw in the ability to go into a residency deferment without losing borrower benefits and you can understand why larger lenders were interested in these details. After July 1st, all these benefits will need to be reassessed.

A medical student with $100,000 in Federal debt looking to consolidate stands to take a hit of approximately $25000 dollars over a 30 year consolidation.

This is a small first step indeed.

Regards,
Thomas

Dem's Move on Student Loans

The Democratic Majority in Congress announced legislation lowering the rates on some student loans to 3.4% by 2012.

Critics are clamoring for more, but from where theLoanster sits; it's better than a sharp stick in the eye.

The legislation is to be voted on tomorrow.

"House Democrats on Friday unveiled a bill that would cut interest rates on federally subsidized loans to college students by half over the next five years. They said they would finance the $6 billion measure by increasing costs that lenders pay to the government and reducing the largest lenders’ government-guaranteed profits."

Some in the student loan industry take issue with this approach;

“What we’re really seeing is Peter being robbed to pay Paul,” said Tom Joyce, a spokesman for Sallie Mae, the nation’s largest holder of student loans. “When you continue to cut and cut again, eventually who you’re hurting is not the banks but the students and the parents themselves,” said Mr. Joyce, suggesting that such reductions would ultimately impair services to borrowers."

Rally for Debt Relief

Student Groups joined with Democratic Leadership yesterday to lobby for rate breaks.-

Leaders of the House and Senate education committees joined college student groups on Thursday to rally support for the College Student Relief Act (H.R. 5) legislation that would cut the interest rate on subsidized Stafford loans in half over the next five years.
Speaking to a room crowded with press and college students, House Education and Labor Committee Chairman George Miller said the House would debate and "hopefully pass by an overwhelming bipartisan majority" the bill on Jan. 17. However, Miller did not offer any more clues about how he would offset the cost of the bill in order to comply with the "pay/go" budget provision the House approved. Democrats will reveal those details today when they formally introduce the bill in the House.
Miller noted that the interest rate cut was merely the beginning of Democrats' efforts to address the rising cost of college.
"It is not going to end with the first 100 hours; the first 100 hours is just the beginning," Miller said.
Miller added that Senate Health, Education, Labor and Pensions Committee Chairman Edward Kennedy (D-MA) and Democratic Whip Dick Durbin (D-IL) would introduce and get the bill passed in the Senate. Kennedy said his committee would hold hearings on the College Student Relief Act next week.
In addition to cutting student loan interest rates, Miller and Kennedy said Democrats hope to make it easier for students to attend college by:

1. Increasing the maximum Pell Grant
2. Capping student loan payments at 15 percent of monthly discretionary income
3. Granting loan forgiveness to any college student who serves in a public service profession for 10 years

Financial Aid Administrators endorse rate decreases

Dallas Martin, President of the National Association of Financial Aid Administrators released a letter today endorsing the proposed Democratic plan to lower fixed rates on student loans by half over the next five years.

"On behalf of the National Association of Student Financial Aid Administrators (NASFAA), representing student aid administrators at approximately 3,000 postsecondary institutions, I am pleased to inform you that NASFAA supports passage of H.R. 5 and we encourage all your colleagues to vote for the bill," Martin wrote. "Reducing total loan costs for subsidized Stafford loan borrowers is one of the most beneficial actions Congress can take. Cutting in half subsidized Stafford loan interest rates is a highly targeted policy providing financial relief to the neediest of our federal student loan borrowers."

Democrats look to decrease Student Loan Rates

On Wednesday, House Majority Leader Steny Hoyer (D-MD) released a calendar indicating when bills for the Democrats' well-publicized and ambitious first 100 legislative hours of the 110th Congress would be scheduled for consideration. Sandwiched between days dedicated to debating bills increasing the minimum wage and expanding stem cell research (among other issues) is Jan. 17, the day Congress will debate and, presumably, Democrats possibly with Republican votes, will pass a bill cutting student loan interest rates.
House Committee on Education and Labor Chairman George Miller (D-CA) this week circulated a Dear Colleague Letter soliciting cosponsors for his College Student Relief Act of 2007. The legislation is expected to be introduced soon. The College Student Relief Act of 2007 would reduce interest rates for undergraduate borrowers, beginning on July 1, 2007,on their NEW, SUBSIDIZED Stafford loans, phasing-in the reduction over the next five years from the current 6.8 percent fixed rate to 3.4 percent fixed rate when the reduction is fully implemented five years from now.