The Democrats in Congress just passed an overhaul of federal student aid. Signed by President Bush last month, the College Cost Reduction and Access Act of 2007 cuts interest rates on certain student loans in half, increases grants to poor students and creates a new loan -forgiveness program. The cost estimated at about $20 billion over the next five years is paid for largely by significant reductions in the subsidies to banks, other lenders and possibly students who do not qualify for need based aid.
Until the regulations for this new law are written anticipated changes are speculative. One thing is clear. There are going to be many changes on how student loans will be handled including the strong possibility that banks and other financial institutions will be eliminated and all college loans will be processed through the government. What comes first --- health care or student loans?
At the present time, millions of students and graduates have Stafford Loans. Both subsidized and unsubsidized Stafford's currently have the same interest rate. Subsidized Stafford's are for students who qualify for need based financial aid which the government pays the interest while the student is in college. Interest accrues in the case of Unsubsidized Stafford's with results being slightly higher balance and monthly payments after the student leaves college.
The new law clearly states that Subsidized Stafford loan interest rates will drop to 3.4% by 2011-12 from the current rate of 6.8% a very nice savings. Nothing is said about the Unsubsidized Stafford. Will the government also continue to subsidize students who do not qualify for need based aid? Or will these students be paying upwards to 8.25%
This brings up another question. Why even worry about college loans? There is a much better way called "The Magic $100,000." which is accomplished without refinancing your current mortgage, increasing your monthly payments or altering your current life style. Check us out at www.TheCollegePlan.org.
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