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President Obama Signs Law to Restore Lower Student Loan Rates


WASHINGTON, D.C. — Calling it a “sensible and reasonable approach” to student loans, President Barack Obama on Friday signed a bill into law that would make it more bearable to borrow student loans.

Flanked by Republican and Democratic lawmakers in the Oval Office, Obama praised the compromise to tackling the soaring student loan debt of $1 trillion and then cautioned that “our job is not done.”

The Obama administration theorizes that this law is a “good compromise” for all students through the 2015 academic year.

“Feels good signing bills. I haven’t done this in a while,” Obama said, alluding to the difficulty he’s faced getting Congress, particularly the Republican-controlled House, to approve his legislative priorities, such as gun control and budget deals.

“Hint, hint,” he added to laughter.

Without this new law, the rates on new subsidized Stafford loans would remain doubled at 6.8. There was an increase on  July 1 when Congress couldn’t agree on how to keep rates at the previous 3.4 percent.

But not everyone was happy. While Connecticut’s House delegation all voted to approve the House version of the student loan bill, Sens. Chris Murphy and Richard Blumenthal defiantly opposed the bill, saying they were concerned about the eventual increase in rates that would make it unaffordable.

Rep. Elizabeth Esty, D-5th District, said the bill’s  is not the end of the issue. She said she is looking forward to when Congress modifies the program again before there is another hike in the  interest rates.

Photo Credit: President Barack Obama signs the bipartisan bill to cut student loan interest rates, Friday, Aug. 9, 2013, in the Oval Office of the White House in Washington. The bill has been awaiting Obama’s signature since earlier this month, when the House gave it final congressional approval after a drawn-out process to reach a compromise in the Senate.

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Obama Signs Student Loan Deal, Says Job Isn’t Done

 

 

 

 

 

Charlotte Etier Central Connecticut State University

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New Federal Interest Rates: Will it Help or Hurt your Ability to Pay Student Loans?


By Al Krulick, Contributor

On July 31, the U.S. House of Representatives passed the Bipartisan Student Loan Certainty Act of 2013 by a 392-31 margin. The vote ratified the plan that had been approved by a similar large majority in the Senate (81-18) on July 24. President Obama is expected to sign the bill into law soon, overhauling how millions of new student borrowers will pay for their college education.

The new interest rates on federal student loans, which make up about 85 percent of all student borrowing nation-wide, will now be tied to the government’s 10-year Treasury note. The popular Stafford Loan program, which comprises over 60 percent of the government’s student loans, will carry a 3.86 percent interest rate this coming academic year.

So the question, “Will the new loan rates help or hurt your ability to pay for your student loans?” depends upon when you begin your college career and when you end it. The immediate effect for the approximately 11 million new student borrowers this year will be salutary. The new rate is a little over half what would have been in effect had Congress done nothing and allowed the rates to remain at their 6.8 percent level.

student-loan-debt-hartfordIt’s a good deal for the next few years – especially when compared to private loans which can have interest rates of 10 percent and above. However, the rates for all federal loans will likely begin to climb as the financial markets improve and the rates on Treasury bills rise accordingly.

This will potentially hurt future student loan borrowers who are now in middle and high school. Even though the interest rates on all federal loans will be capped (undergraduate loans at 8.25 percent, graduate loans at 9.5 percent, and PLUS Loans at 10.5 percent), and once a loan is taken out, its interest rate does not change, the prospect of paying over 8 percent for a student loan will add thousands of dollars to the cost of borrowing from the federal government.

Also, the new guidelines return the federal student loan program to a system of variable interest rates, meaning that planning for the repayment of college loans will now be less predictable, affecting all borrowers, both present and future. (For the past seven years, interest rates for subsidized Stafford loans were fixed by Congress – beginning at 6.8 percent in 2006 and then falling a little each year until they bottomed out at 3.4 percent through June 2013.)

Some lawmakers who opposed the rate change argued that the government should not be making money on the backs of college students. An analysis by the Congressional Budget Office estimates that the Department of Education stands to make a profit of $185 billion on the $1.4 trillion worth of student loans it expects to provide over the next ten years.

The bill’s opponents also pointed out that the new structure essentially pits future students against current ones, requiring those who are now young teenagers to pay for the financial break enjoyed by those who preceded them. Doing nothing, they averred, would be better in the long run as rates are expected to rise above 6.8 percent, eventually.

So, for now, and perhaps for the next two to five years, the new federal loan rates will help one’s ability to pay off student loans. But in future years, the cost of borrowing is likely going to go up, making a college education more and more expensive while limiting the options for a growing number of high school graduates who wish to further their education.

Al Krulick is an award-winning journalist with dozens of years of writing experience. He writes and blogs for Debt.org.

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Our National Educational Dilemma and Back Breaking Student Debt


By Glenn Mollette, Op-Ed Contributor

Every American must have the opportunity to pursue college or vocational training. We are living in an era during which even previously trained persons need to sharpen their skills or retool for the future.

Too many people are completing their education facing a massive dilemma of debt. Their next dilemma is trying to break into the job market saddled with backbreaking debt.

We must make education within reach of all American citizens. The following will help make college possible for all:

Colleges and all institutions of higher education must work as all businesses to guard against escalating costs.

The government should provide low interest college or vocational loans to students who must borrow money for their education.

Graduates should be given a three-year grace period before the payback begins.

The government should forgive up to 20% of the loan if paid back in 10 years.

the-hartford-guardian-OpinionColleges should be encouraged to develop three year college programs which could cut as much as 25% of the cost of education. Everyone who has attended a four-year college knows they had four or five courses along the way they did not need for their degree program. This would also save tremendously on housing, food and fuel costs.

Colleges are throwing extra courses at their students and keeping them longer to make more money. This means the students borrow more and end up financially crippled. Schools like all businesses must be financially competitive and non-traditional in their programs in order to survive this new era. The number of struggling colleges is growing.

Already I hear someone screaming, “How are we going to compete with the Chinese, Japan and other foreign countries if we are cutting classes from education?” Most college programs have required approximately 30, four-hour classes or 40, three-hour classes. Everyone’s degree program will vary as they add additional courses. I like education as well as the next person. Hurrah for anyone who has the luxury of spending the time obtaining a 150-hour degree! This means a much greater expense, but if you can afford it, then so what? School can be fun and with that many additional classes you are surely learning a lot! My beef is that most American families cannot afford the luxury of a four-year degree being crammed into five, six or more years. We must keep the general college experience to four years to complete. If the college can help students complete the degree in three or three and a half years it saves students, the families and even the government a lot of money.

College trustees, administrators and faculty you are being served notice. Start doing your part to be part of America’s solution and not a central part of our problem. The people in America do not need another dilemma.

glen mollettGlenn Mollette is the author of American Issues, Every American Has An Opinion. He can be reached at gmollette@aol.comIllustration courtesy of occupyforaccountability.org.

The Hartford Guardian values diversity of thought and therefore fosters and advance conversations about issues relevant to Greater Hartford residents. We  present opinions from all perspectives, including opinions NOT shared by our editorial staff.

 

 

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Rell: Low Interest Student Loans Available in CT


HARTFORD — As students prepare for the start of classes at state universities, Gov. M. Jodi Rell today announced that the state has a pool of funds to loan through the Connecticut Higher Education Supplemental Loan Authority (CHESLA) at low interest rates.

CHESLA loans are available at a fixed rate of 6.8 percent, well below the rates being offered by state-run higher education loan agencies in nearby states. Rates being offered by state-run higher education loan agencies include:

  • Massachusetts: between 6.89 and 8.19 percent
  • Rhode Island: between 7.25 and 8.49 percent
  • New Jersey: between 7.62 and 7.92 percent
  • New York: between 7.55 and 8.75 percent

“Our state is making it much more affordable to get a college education,” Rell said. “Connecticut is – once again – leading the nation in helping to make the goal of getting a college education a reality for more and more people. This pool of money continues Connecticut’s proud tradition of helping to ‘finance the future’ of our young people, our work force and our economy.  Equally important, our loan program is structured to give college students a much more flexible start.”

While they are in school, students need only make interest payments on their loans, and there is a six-month grace period after they graduate. Only then do they have to start making payments on both the principal and the interest on their loans, Rell said.

CHESLA loans are available to any Connecticut resident planning to attend a non-profit public or private college or university anywhere in the United States. In addition, a student from anywhere in the United States can apply for a CHESLA loan to attend any non-profit public or private college or university in Connecticut.

Applications are available on-line at www.chesla.org .

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