Student Loans and other stuff

Recently some legislation was signed into law that affects student loan borrowers. For the record I hate it when the sign stuff that takes affec immediately as it tends to start a panic rather than solve anything in the short term. I'm talking abou the College Cost Reduction and Access Act (CCRAA for short).

First: Two types of way schools can get you loan money: Direct, government is the lender (maybe 10% of the volume currently) and FFELP, lenders and banks lend you the money. FFELP is the msot affected.

Second: The benefits for banks and lenders to participate in the Stafford Loan Program have been cut as part of the legislation, the savings the government gets from this is going to Pell Grants, it's a short term thing, but that's another topic.

Third: As a result pretty much most banks and lenders are cutting back on the services they offer to borrowers. Basically lenders would offer students benefits to picking them lender as oppose to somebody else. Sometimes they would wave processing fees (between 1.5 and 3%), offer reduction in interest rate during repayment, offer principle reduction after so many on time payments, the list goes on and on. If a student paid attention, or if they had a kickass counselor (like...me) that could explain the time value of money to an incoming freshman, they could save a couple thousand off of the loans they take.

Yeah, that's going away, lenders are getting less from the government when loans default and less on the basis points they used to get on these loans. Now I'm not feeling sorry for the banks...its the borrowers who are seeing borrower benefits change on them over night. These benefits ARE NOT part of the promissory note you sign with your lender so you can lose them. (CRAP, I hit submit and I wasn't even done....).  Some lenders aren't making any changes so if you or your kid is thinking about taking out a student loan now, hammer that counselor with questions about these benefits as the whole situation can change over night. The work from the lenders I know is that this legislation is affecting new loans...that's the word now...but when legislation is passed mid-stream like this that stance could change.

What bugs me is that the students I see taking out their maximum amount in stafford loans are not the ones getting the Pell grant. So even though some politician will take credit for increasing Pell grants, it came (at least partially) at the expense of borrowers, since at this point no additional appropriations to the Pell program have been made in federal budgets that are years away.  The increase is able to be made because they are moving money from the stafford loan program to the Pell program.  Sure the legislation also says they are going drop interest rates...but if you are being charged a 1.5 or 3% processing fee on a 4.5% loan you aren't really getting 4.5% are you?

Oh, and the dry heaving I mentioned the other day...it's happening every morning. I found out it's not the bathroom my office shares a wall with, It is the lady a couple of office down. WTF? I found this out when I came out of my office and asked what the hell was with the dry heaving every damn day...the office staff looked at me in shock and pointed a couple of office down. Oops. I'll get her som Halls or something. She's a smoker, you know, one of those people that take breaks 8 times a day and complains about how busy they are....yeah.