Guide to Education Grants

Another Student Loan Resource:
So,
the time has finally come, it is Wednesday Jan. 17, 2007, and congress is set to
start debate on the “College Student Relief Act of 2007.” Yesterday, Tuesday,
Jan. 16, The National Council of Higher
Education Loan Programs, Inc.’s “NCHelp” published a “Special Edition” of
their Daily Briefing “dedicated to
H.R. 5, the College Student Relief Act of
2007.

According
to the briefing, “It is expected that the bill will pass the House by a large
margin when it is considered tomorrow.” Additionally, “It should be noted that
the final rate reductions only apply for those loans first disbursed on or
after July 1, 2011
and before January
1, 2012. Loans disbursed thereafter would continue to carry the
current 6.8 percent interest rate.” And that, “At this time we are uncertain
about Senate action on their version of H.R. 5. It is not inconceivable that
the savings identified in H.R. 5 could be spent differently if contained within
a Senate HEA reauthorization bill. This bill would then go back to the House
for conference. Needless to say, we are entering a period of interesting
times.”

Student Loan Relief Act Introduced

According
to the article, H.R. 5 is trying to enable the following reductions in interest
rates on new “subsidized Stafford loans to
undergraduate students under both the FFEL and Direct Loan programs”:

 â€œthe rate will be 6.12%
for loans first disbursed on or after July 1, 2007 and before July 1, 2008;the rate will be 5.44% for
loans first disbursed on or after July 1, 2008 and before July 1, 2009;the rate will be 4.76% for
loans first disbursed on or after July 1, 2009 and before July 1, 2010;the rate will be 4.08% for
loans first disbursed on or after July 1, 2010 and before July 1, 2011;
andthe rate will be 3.40% for
loans first disbursed on or after July 1, 2011 and before January 1, 2012.

Under
the bill, the rate reductions would sunset beginning with new loans first
disbursed on or after January
1, 2012 (these loans would carry the current 6.8% interest rate).”

Pay-As-You-Go Rule

On
Friday Jan. 6,
2007, House Democrats renewed the “pay-as-you-go-rule,” which
requires that tax cuts have corresponding cuts in government spending or
increases in taxes elsewhere to cover its costs. The “College Student Relief
Act of 2007” includes “a number of reductions in payments made
to FFEL program participants in order to offset the projected $7 billion cost
of the interest rate reductions.”

The
briefing goes on to specifically
list these cuts as the following:

 â€œReduce lender insurance
from 97% to 95% for loans made on or after July 1, 2007 (lender-of-last
resort and exempt claims would continue to receive 100% insurance).Repeal ‘exceptional
performer’ status in the FFEL program effective July 1, 2007.Increase the lender-paid
origination fee on Stafford, PLUS and
Consolidation loans from 0.5% to 1.0% for loans first disbursed on or
after July 1,
2007.Incrementally reduce
guaranty agency collection retention from the current 23% to the
following:20% beginning October 1, 2007
and ending September
30, 2008;18% beginning October 1, 2008
and ending September
30, 2010; andBeginning October 1, 2010,
“a percentage determined in accordance with the regulations of the Secretary
and equal to the average rate paid to collection agencies that have
contracts with the Secretary.”Reduce the special
allowance payment by 10 basis points on Stafford, PLUS and Consolidation
loans first disbursed on or after July 1, 2007, except that loans held by
lenders designated by the Secretary as small lenders are excluded. Small
lenders are the lenders with the smallest holdings of FFEL program loans that,
as a group, hold 10% of the total principal amount of all loans.
Affiliated entities are considered to be one entity in making this
determination.Increase from 1.05% to
1.30% the interest payment rebate fee on consolidation loans based on applications
received on or after July 1, 2007 if 90% or more of the outstanding
principal and interest on loans directly or indirectly held by the lender
is comprised of principal and interest on consolidation loans.The reduction in payment
to FFELP participants, unlike the interest rate reductions, do not sunset
on January 1,
2012.”

It is important to keep up to date on the effects of the
U.S. Department of Education and news on student loans and education. What goes
on in government and in your state can have a great impact on your student
loans and your college education.

 For all the information you need about student loans, go to www.nextstudent.com.

Be
sure to visit my blog tomorrow to see the latest news on the “College Student
Relief Act of 2007” congressional debate.Student Loan Girl

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