The student loan landscape is changing rapidly, with the Obama administration pushing through some significant changes. Some of these will benefit the students, and some will only serve to make the lending institutions richer but it’s important to know what is happening and how it will affect you and your college tuition.
Below are 5 important changes taking place and how they will affect current and future college students. We’ve also included a search widget at the end of the article for those that need help finding the right student loan.
#1 – Public Access to Lender Rules Now Limited
The US Department of Education has moved against students in regards to access to the rules of the student loan game. In a huge step backwards, the Obama administration has reversed years of common practice in which students were able to view the rules and regulations that student loan companies use while loaning them money for college. They used to allow the public to view changes to rules and practices used by the student loan banks that you can’t find anywhere else. This new move goes directly against the so-called “openness” we were lead to believe would be a hallmark of the Obama administration. Of course we were able to obtain a copy of the Rulebook for PCA’s (Private Collection Agencies). That guide includes info on how to settle your student loan for less than is owed, amongst other things.
#2 – Federal Government Now Runs 100% of Student Loan Program
Starting on July 1st, the federal government took over the entire student loan program. For the last 45 years, banks and other private sector lenders like Sallie Mae received a significant federal subsidy for making what were essentially government guaranteed loans to college students. Of course, much like the housing bubble, once the banks realized their loans were guaranteed by the government, they stopped worrying about how much they loaned and to whom. The feds had already been making 1/3 of the loans, but now they will make them all directly. Stafford Loans and PLUS loans will still be unaffected, and private banks can still make loans, although they tend to be more expensive.
#3 – New Rules Regarding Repayment of Loans
Repayment of these student loans will also be impacted greatly. The new law restricts payments to 10 percent of a student’s discretionary income and will forgive any balances after 20 years. These changes will only apply to loans taken out by new borrowers on or after July 1, 2014 and they are not retroactive. For those loans taken out prior to July 1, 2014, loans payments are limited to 15 percent of discretionary income and balances forgiven after 25 years. Public-service workers on the income-based repayment plan will still be able to have their remaining balances forgiven after only 10 years.
#4 – Online Schools Financial Aid Packages Greatly Impacted
For-Profit Universities, more commonly known as online schools, such as University of Phoenix, Everest, Kaplan and ITT Tech just to name a few will have their access to financial aid packages impacted greatly. The federal government is considering a move to tie their student loan packages to the salaries and repayment history of the students from those schools. The concern arises from the higher debt level of graduates of online schools, and is the administration’s attempt to force some of the shadier online schools to step their game up. Schools like those named above are generally considered to be among the more reputable in the distance learning arena, but the shockwaves from the new rules will be felt at all of them nonetheless.
#5 – Some College Degrees Now Cost More Than They Will Earn You
Finally, as previously uncovered in our expose on student loan scams, some degrees just aren’t worth the cost if you’re forced to take out student loans to get the degree. Many students assume they will get a great job and be able to pay the debt off quickly, but the reality is that almost never happens, so students need to factor in the long-term debt burden of a degree when determining whether or not to take out those student loans. With the new bankruptcy laws, it is almost impossible to have your student loan debts forgiven, so you might end up paying off your loans until you’re 50 if you’re not careful…
If you’re still interested in a student loan, and you understand the new rules, use the search widget below to find the student loan that is right for you.
If you found the previous article informative, you should check out more in our college life section, or read some of these articles below:
- College Textbooks Search Tool
- The Next Financial Bubble – Student Loans
- The Real Cost of Tuition and How To Pay Less
- Financial Aid For Military – GI Bill and Beyond
- Scholarship Fraud on a Massive Scale
- College Review – University of Phoenix
- The College Board and Corruption in College Testing
- Bet You $100 You Can’t Get an A
- Deceptive Practices by Credit Card Companies on Campus
- 18 of the Weirdest Scholarships for College
- Bullshit Your Way to an “A”
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