Government Takes Over Student Loans

[Guest ALWAYS RED]

Government has now taken over the Student Loan system. Taken from the Congressional Record:

 

U.S. Senator Lamar Alexander

 

We stick into the health care bill another Washington takeover, this time of 19 million student loans. On top of it: Congratulations, Mr. and Mrs. Working Student, you are going to get to be overcharged on your loan to help pay for the health care bill and other government programs.

 

I hope my friends in the Senate, on both sides of the aisle, will see the injustice of this and say: OK, you are right, Senator Alexander. If we are going to take it over, and if we are going to create $61 billion in savings, at least let's give the students the savings. Let's not give it to the government. Let's not overcharge the students, on an average $25,000 student debt, $1,700 or $1,800 over 10 years.

 

I think we need to have a truth-and-lending stamp that goes on every single student loan starting July 1 that says: Warning. Your government is overcharging you in order to help pay for other government programs.

 

We will let the single mom who has a job, who is going to school to help improve her circumstances, see what she thinks about the idea of her being overcharged to help pay for other government programs.

 

So my motion, when it is voted on, will do a very simple thing. It will say to the 19 million students in the country: We are going to reduce your interest rate on your student loan from a typical 6.8 percent to 5.3 percent. That is going to save you $1,700 or $1,800 on an average loan over ten years. It says: We are not going to overcharge 19 million students to help pay for the health care bill.

[Guest ALWAYS RED]

Mr. GREGG. First, they nationalized the auto industry. Now, they are in the process of quasi-nationalizing the health care industry. Now they are going to nationalize the educational industry. If the House final reform bill passes, they will essentially be nationalizing the financial industry--or having the capacity to--because they can break up any company, whether they are healthy or not, under the Kanjorski amendment.

 

So my question is: They threw this proposal on the train, nationalizing the student loan industry, in order to use student loan money to finance the health care bill because this bill would have violated the budget rules if it did not have the student loan money basically paying for it?

 

Mr. ALEXANDER. Mr. President, I am afraid the Senator from New Hampshire is exactly right. According to the Congressional Budget Office's updated estimate, $8.7 billion of this money that is being overcharged to students will be used to help pay for the health care bill.

 

The other money, except for a small part, will be used for other government programs. So you are right on both counts--one Washington takeover after another. That is why I am saying, I think we ought to hide the Yellow Pages from these fellows because if they find something in there that is being done in the private sector, they are going to say: Oh, we can cut out the profit, we can cut out the business; why does not the government do it?

 

Then, second, I mean this is astonishing to me. These are not Wall Street financiers going to community colleges in New Hampshire and Tennessee, these are people with jobs who are trying to improve their lot. Their student loan levels are already too high. We are worried about that. So we are going to take another $1,700 or $1,800 on a $25,000 average loan over 10 years. We are just going to say: Well, we will overcharge you. We are going to use that in government. The answer is, yes, to your question, Senator; $8.7 billion of the money taken from students by overcharging them on their student loans will go to help pay for the health care bill.

 

If they did not have that $8.7 billion of student loan money being used to finance the health care bill, this reconciliation bill would fall; would it not? Because it would not meet the budget instructions of having $1 billion of savings.

[Guest CBSNewsOnline]

An overshadowed aspect of congressional health care bills involves new provisions for student loans. As Ben Tracy reports, sweeping changes are in store throughout the U.S. for college lending.

 

[Guest Keith]

The student lending business was already run by the government. The FFELP, product was loans banks made $$$ of off that the federal government guaranteed.

[JT Allen]

The student lending business was already run by the government. The FFELP, product was loans banks made $$$ of off that the federal government guaranteed.

 

That is the precise interpretation I have of the "government takeover" of the student loan program: that the government already guaranteed all student loans anyway, and the government was cutting out the middle-man. Is this incorrect? Anyone?

[Guest Yasul]

As someone who has had loans managed by both systems over the years, I much prefer dealing directly with the Department of Education. Despite plummeting interest rates in recent years, my loans managed by private banks were MUCH higher than those managed by the federal government directly. When I graduated I made a point to consolidate my loans directly through the Direct Loan program just to get out of the crazy interest rate system the bank was using!

[Guest Stephanie]

As someone who has had loans managed by both systems over the years, I much prefer dealing directly with the Department of Education. Despite plummeting interest rates in recent years, my loans managed by private banks were MUCH higher than those managed by the federal government directly. When I graduated I made a point to consolidate my loans directly through the Direct Loan program just to get out of the crazy interest rate system the bank was using!

 

 

 

The government allows private banks to lend federal student loans and make a small profit off the origination fee for the loans. (This will change July 1, 2010, when student loan money will come directly from the government, and you don't get to pick your lender. This is called the Direct Loan Program and was lumped in with the healthcare reform legislation Obama signed in March.) The government has always set the interest rates for all federal student loans. The interest rate is NOT set by the lender. It will NOT vary between lenders.

 

There are some schools that have been using the Direct Loan Program already. Basically, students who attend these schools don't have the option of picking their lender. Their money comes directly from the government to the school. Again, the government is forcing all schools to go Direct this fall.

 

Regardless of whether you got your loan from a lender or from the government, you will have the same interest rate that was set by the government for federal student loans that year.

 

The only reasons your loans would have different interest rates would be...

 

1. Your loans were disbursed in different years. Rates are set yearly by the government.

 

2. Some of your loans are not federal loans (that you pay back to the government). They are private loans, taken out from private lenders, and paid back to private lenders, not the government. These loans are still allowed by private lenders and are not the same kind of student loans that we have been talking about on this board.

[Guest Karen]

Can anyone tell me why schools are not accepting loans form Direct Loans? As soon as the gov't took away fed load from private lenders....kids are finding it difficult to get loans.

I have 2 kids that were floored to find out almost too late that the schools they attend would no longer participate in federal loans. It's as if they don't trust the gov't to handle them. At least that is the buzz at the schools also that the gov't will take away funding from the schools if students default? I don't know. Very frustrating though. Both schools my kids attend said we had to get a private loan. Oh yeah right...that will happen

 

Any insite would be appreciated.

[Guest jojo]

This is exactly why fed does it and they cant lose, they are bailing out banks too since laws prohibit their past lending practices! They also want students to enter IRB income based repayment, where only federal loans can be used, its basically a 15% tax on income for 25 years, only doesnt work unless you are making 200k a year. For most it will make sense

 

the fed now gives student loans and keeps the variable low, lowest ever and hasnt changed since 2008, to make profit difference between rates/fees for themselves and banks. Banks dont have to compete for student money, even though credits tight, and in the future Federal loans can only be consolidated by the fed so no bank competition when students do make money. See how low a rate private loans are, and these give banks a federal insurance, even though student loans are the hardest to escape

 

The variable has been its lowest ever and not moved since 2008. You think theyd let these fixed loans ever get higher when they set the variable and it would cripple them and banks? These loans are federally backed yet still get rates of 6.8,7.9. A lone citizen with cosignor with moderate income and decent credit can do way better, plus no consolidation limits

 

Its a way the fed government, and state/city/university, can tax students/fill their deficits/take a piece of students tuition while they only worry about inflation and variable. how much money is that? you can not go into bankruptcy for student loans which forgives debt on credit report after 10 years, only way to escape is die, do a government repayment, or IRB which is still like a tax of 15% of income for 25 years if you dont make 6 figures this is the route most people will be going, so the government gets a 15% tax plus your regular income tax. This income based repayment plan is getting alot of fed attention

 

they wont lose on deal, not a coincidence that fed does this at same time variable lowest ever and set by them since 2008 this low.

 

Also its a way for state/city/healthcare bailouts and corporate profit, why your tuition rate really goes up at public schools all about buying each others bonds:

 

public colleges/universities in states use education building bonds (selling a bond is basically getting a loan from buyer), see NJEFA site example, to collect money and at the same time they buy state/city government bonds, a way to kickback money to them from tuition I bet, and corporate, banks that buy their own school bonds.

 

Bonds with a fixed rate, as only public school converted their variable too on njefa, have a predicable payout of interest and return for ones bought so when they give annual report the bottom line ends evenish. they choose the amount, term, and then its rated by wall street based on that and who they are. its crazy bailing out states and hospitals with student money from loans they pay the federal government interest on,

 

much higher than the variable and all state/university/city/corporate bonds return, so they end up making money. the one umdnj is only one higher than 6.8 but still higher than plus loans, either way the fed is safe because the variable has been stuck at .25 or whatever since 2008, which they set. The exact same time njefa shows public school abandoning their variable rate bond

 

see how a school like umdnj uses to bailout medicaid debt and healthcare costs:

 

this situation meets fraud definition:

 

The law has a specific definition what constitutes actionable legal fraud. "Although the word 'fraud' maybe used in common parlance to connote any practice involving shady or underhanded dealing, in law it is a term of art with a precise definition." Banco Popular N. Am. v. Gandi, 184 N.J. 161, 175 (2005). In order to assert a legal fraud claim the moving party must establish the following five elements by clear and convincing evidence: “(1) [a] material misrepresentation of a presently existing or past fact; (2) knowledge or belief by defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting harm.” Jewish Ctr. of Sussex Cty v. Whale, 86 N.J. 619, 624-625 (1991); see also Simpson v. Widger, 311 N.J. Super. 379, 392 (App. Div. 1998) (holding that “fraud must be proven by clear and convincing evidence”).

 

education building only bond used to pay medicaid debt, fraud charge by medicaid and other UH non educational debt, as well as tuition/fees revenue to pay interest rate of 7.47% and state education funds as locked up collateral in a bank and I doubt interest paid on it

 

http://www.umdnj.edu/about/board/pdf/1_27_09_BOT_res.pdf

 

see above link

 

essentially University hospital is broke and always in debt to state and others so they use a bond/loan thats for educational buildings only from NJEFA, to wipe non education debt. the state also gets money they are owed.

 

school says its budget cuts reason for 18% tuition hike last year and all others, no mention of this. State gave same budget next year but we will still get a hike, always do

 

The state forgives half their medicaid debt, $46 mill, $9 of which is a charge for fraud. UMDNJ pays the rest from 2013-2028. They get some debt service fund.

 

And the to pay the woping 7.47% on the $260 million dollar bond, for non-educational use, as well as other bonds with they use any revenue, inlcuding tuition/fees, and use our state tution aid at least as collateral and some bank holds all this maybe without paying federally required interest on it. Thats like $12.7 mill a year in interest for just that one bond

 

The lien on the state money is kept in an actual lockbox in a bank, 70% of umdnj bond portfolio have this crazy lien, and state money thats restricted like charity care is held as well till bond interest is paid.

 

This is the only reason that 2009 was first year UH didnt lose 20-30 million that year in at least a decade, I bet the CEO makes their bonus. Same Year they sold bonds, 3 months before annual report, see board meeting 4/28/10 online 2 days beforebonds sold with great news of fiscal turnaround

 

its not the students job to bailout UH and the state through tuition/fees/state subsidy

 

There was an 18% hike in tuition last year, another this year despite no state budget difference, they make $100 mill from tuition alone then fees, $170 mill from state for education, grants, contracts, housing fees, and $30 billion a year of state money goes to UMDNJ as a whole

 

They also buy state/ city government/corporate, the banks that buy their bonds I assume, bonds that return a much worse interest than 7.47%. This allows their consolidated report to yield predictable even bottom lines as well as a public disclosure. With only fixed interest rates being used, they choose the bond amount and period, they never have surprises that would raise an eyebrow about their "investments"

 

Part of this $260 million paid old education bonds, 1999 and 1995, and I bet my eye the rate was better than 7.47%. Further increasing burden to students.

 

They can take another $215 mill per the attached. I have other resources if any gaps missing, see 4/28/10 umdnj board meeting for report of miraculous turn of fiscal events by CEO, bonds went on sale 2 days later. She gets millions for such a fiscal turn around that is just a new loan that students foot the bill for

 

why else they so scared of losing RWJ and school of public health?

 

sources

http://www.njefa.com/njefa/activity/recent/2009/

 

http://www.bondsonline.com/Todays_Market/Credit_Rating_News_.php?DA=view&RID=2977

 

http://www.theuniversityhospital.com/about/minutes/UHBODminutes_4_28_10.pdf

 

http://keepcaliforniaspromise.org/404/they-pledged-your-tuition-to-wall-street-summary/comment-page-1

[Guest td]

oh sorry you cant give home loans, how about you take their kids college money instead

[Guest Dacey]

Government is providing the student loans.Since every student is proceeding for doing higher studies therefore government has decided to give student loans at 9 to 10 percent interest rate.