Best Education loan : Student Loan Act Could Mean Higher Federal Profits

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Best Education loan
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Student Loan Act Could Mean Higher Federal
Profits
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• The new law offers a moderate amount of help to
  current students at the expense of future ones.
• And it does nothing to address what the Student
  Loan Ranger sees as a fundamental problem in the
  student loan system the huge profit the federal
  government is making at the expense of students.
• The legislation moves student loan interest rates
  to a new market-based fixed rate based each
  academic year on the rate on the 10-year Treasury
  note, plus a set amount that varies depending on
  the loan.

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• The amount added to subsidized and unsubsidized
  direct loans for undergraduates is 2.05
  percentage points.
• Unsubsidized direct loans for graduate and
  professional students have 3.6 percentage points
  added to the 10-year Treasury note rate and 4.6
  percentage points are added to PLUS loans for
  graduate and professional students.
• By itself, this is not so bad. When interest
  rates are low, as they are now, students will by
  and large benefit.

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• This academic year, for example, undergraduate
  students will pay 3.86 percent, higher than the
  3.4 percent they were paying for subsidized
  direct loans but lower than the 6.8 percent rate
  for unsubsidized direct loans.
• Graduate students will pay 5.41 percent interest
  for unsubsidized loans and 6.41 percent for PLUS
  loans, both of which are lower than current
  rates.
• Unfortunately, the new law combines this market
  rate with different and much higher interest
  rate caps.
• Undergraduates can now pay a maximum interest
  rate of 8.25 percent compared with the previous
  maximums of 6.8 and 3.4 percent for unsubsidized
  and subsidized direct loans.

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• The maximum rate for unsubsidized direct loans
  for graduate and professional students is now 9.5
  percent and the rate for PLUS loans is a whopping
  10.5 percent.
• Those are much higher than the previous rates of
  6.8 percent for unsubsidized direct loans and 7.9
  percent for PLUS loans. When interest rates go up
  and they will in the near future students
  will pay much higher rates.
• Take a look at the Congressional Budget Office's
  estimate of the budgetary effects of the
  legislation to see how this may happen.
• Relative to a May 2013 baseline, the office
  projects increased costs to the government from
  2013 through 2016. By 2017 though, the CBO
  projects interest rates will rise high enough so
  that the federal government will have increased
  profits that will last through 2023.

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• The CBO projections are not likely to be exact
  the federal government may profit a bit less or a
  bit more off student loans over the next decade.
• But in kicking the can down the road, the Best
  Education Loan thinks Congress has ensured future
  students will be burdened by extremely high
  interest rates on what are likely to be large
  student loans.
• And, absent reform, it has ensured the federal
  government will make massive profits off of
  students for the foreseeable future.
• Source http//bit.ly/1Uy97VB

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