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Starting July 1st, when the government issues student loans, it will bypass the banks who have traditionally provided them, and directly target borrowers.

A White House press release spells it out this way, “[A]ll new federal student loans will be direct loans, delivered and collected by private companies under performance-based contracts with the Department of Education. According to the non-partisan Congressional Budget Office, ending these wasteful subsidies will free up nearly $68 billion for college affordability and deficit reduction over the next 11 years.”

But some in the President’s own party say eliminating the middle man also equals eliminating jobs.

But the President’s focus today will be more about what the bill does than what it does not.

He will also talk about the provision’s less controversial expansion of Pell Grants, as well as supporting historically black and minority institutions and caps on student loan repayments.

According to the White House, “New borrowers who assume loans after July 1, 2014, will be able to cap their student loan repayments at 10 percent of their discretionary income and, if they keep up with their payments over time, will have the balance forgiven after 20 years.”
:hand:
 

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I don't read gift anywhere in any of that.

If you pay on the loans for 20 years at 10% of discretionary income (presuming that in that 20 years your income grows) you should not have all that much of a balance left (for the average college debt). Now - those with 6 figure debt - that may not be gone in 20 years. I think that this is trying to make loan repayment more affordable and make the defaults less frequent.
 

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I'd love to know what it was doing riding along in the HEALTH CARE bill!
 

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A White House press release spells it out this way, “[A]ll new federal student loans will be direct loans, delivered and collected by private companies under performance-based contracts with the Department of Education.
:hand:
Am I to assume that this new private company will not make any profit on delivering and collecting student loans? And if so, where the #### are they going to find a private company that is willing to expend the manpower to do this for free? Something in this does not smell right.
 

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Am I to assume that this new private company will not make any profit on delivering and collecting student loans? And if so, where the #### are they going to find a private company that is willing to expend the manpower to do this for free? Something in this does not smell right.
This is very weird. I have a bunch of questions. I can't imagine what a "performance based contract " would look like. This whole thing reminds me of the SNL skit about the bank of change. It's sole purpose was to make change. When asked how it could profit from making change it stated by volume . Another question, what and who determines descretionary income? Seems extremely vague. Admitedly I need to read up on this. Something smells like ovedue seafood.
 

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Something smells like ovedue seafood.
Well I think it smells worse, more like a bloated cow that has been in the creek for a week in July.
 

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This is very weird. I have a bunch of questions. I can't imagine what a "performance based contract " would look like. This whole thing reminds me of the SNL skit about the bank of change. It's sole purpose was to make change. When asked how it could profit from making change it stated by volume . Another question, what and who determines descretionary income? Seems extremely vague. Admitedly I need to read up on this. Something smells like ovedue seafood.
Yeah - the discretionary income thing is a big question. Is everyone going to be required to submit an annual budget and have their payment determined by the bank based on what is left over after all the bills are paid?
 

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Yeah - the discretionary income thing is a big question. Is everyone going to be required to submit an annual budget and have their payment determined by the bank based on what is left over after all the bills are paid?
Descretionary income is too subjective. If I feel that part of my budget and life is to have 7 double latte's from Starbucks everyday 365 days a year with daily expense of $30.00 Who is to determine that I am using my descretionary income to pay for this or it it part of my household/work expenditures.

One last thing. I have bought several homes over my life and never got a %#^&$ tax credit for buyin a home. I never mortagaged my house for a value higher than it's worth and never asked for new mortgage based on a lower value(backed by the government). I paid back several gazzilion dollars in student loans and was never forgiven any frickin' portion of the note. Why oh why,are all these breaks for everyone? How 'bout some retroactive breaks/credits? Everytime I turn around there seems to be a program or credit for somthing I can't qualify for. Seems like a pretty hard slap in the face for those who played by the rules
 

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Descretionary income is too subjective. If I feel that part of my budget and life is to have 7 double latte's from Starbucks everyday 365 days a year with daily expense of $30.00 Who is to determine that I am using my descretionary income to pay for this or it it part of my household/work expenditures.
I would imagine it will be a set amount based on location. The bankruptcy code uses this, and the IRS uses this method when you try to apply for an installment method of paying your tax bill. You get a certain amount for housing, food, clothing and other necessaries. There's no way they're going to leave that to the individual. It would make sense to use formulas and numbers they already have, although I wouldn't put it past the government to try and reinvent the wheel.
 

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From the posts, sounds like most of you have no idea how the student loan program was set up before these recent changes. For those of you who didn't know, the government was already bearing all the risk of the student loan program.


Some info on the changes:

Moving exclusively to direct lending is expected to save $61 billion over 10 years, according to the Congressional Budget Office, mainly by eliminating subsidies to banks and other lenders. Most of the savings will be used to expand the Pell Grant program, the main financial aid program for low-income students.

Bankers, Republicans and some Democrats oppose the change, saying it amounts to a government takeover of the loan program and will force bank layoffs. Supporters note that the government already had assumed all risk, since it guaranteed loans made by private lenders, as well as providing subsidies.

Students still will be able to get private loans, said Sal Loria, executive director of scholarships and financial aid at the University of Houston. They won't be subsidized and guaranteed by the government, however.

Loans also will be forgiven after 10 years for people who take certain jobs, which Goodall said include law enforcement and nursing.
 

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From the posts, sounds like most of you have no idea how the student loan program was set up before these recent changes. For those of you who didn't know, the government was already bearing all the risk of the student loan program.


Some info on the changes:

Moving exclusively to direct lending is expected to save $61 billion over 10 years, according to the Congressional Budget Office, mainly by eliminating subsidies to banks and other lenders. Most of the savings will be used to expand the Pell Grant program, the main financial aid program for low-income students.

Bankers, Republicans and some Democrats oppose the change, saying it amounts to a government takeover of the loan program and will force bank layoffs. Supporters note that the government already had assumed all risk, since it guaranteed loans made by private lenders, as well as providing subsidies.

Students still will be able to get private loans, said Sal Loria, executive director of scholarships and financial aid at the University of Houston. They won't be subsidized and guaranteed by the government, however.

Loans also will be forgiven after 10 years for people who take certain jobs, which Goodall said include law enforcement and nursing.
I get that part. What I don't get is how a private company doing what the banks are doing now will save money. A private company is going to want to make a profit. No?
 

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Descretionary income is too subjective. If I feel that part of my budget and life is to have 7 double latte's from Starbucks everyday 365 days a year with daily expense of $30.00 Who is to determine that I am using my descretionary income to pay for this or it it part of my household/work expenditures.

One last thing. I have bought several homes over my life and never got a %#^&$ tax credit for buyin a home. I never mortagaged my house for a value higher than it's worth and never asked for new mortgage based on a lower value(backed by the government). I paid back several gazzilion dollars in student loans and was never forgiven any frickin' portion of the note. Why oh why,are all these breaks for everyone? How 'bout some retroactive breaks/credits? Everytime I turn around there seems to be a program or credit for somthing I can't qualify for. Seems like a pretty hard slap in the face for those who played by the rules
Did you ever have a mortgage and deduct interest and taxes? Or origination points? If so, you got a tax benefit/incentive.
 

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I just now filled out a FAFSA for my middle son. Up to this point I've paid tuition for 6 years for first one and now both college students - but son # 2 is looking to go to a music school where loans will be required. It's way more expense than we can swing.

So - we'll see how that goes.
 

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There is a differernce between a government subsidized/unsubsidized student loan and a student loan directly from a bank. I had a government loand paid it ofdf in less than 10 years thankyouverymuch! IF you don't know on a subsidized load interest doesn't occur until you are required to start to pay it back. Unsubsidized the interst starts accruing when you get the loan but can pay the interest before you pay the loan. I had both kids and paid interest on the unsub one before I even made an actual payment.
 

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I get that part. What I don't get is how a private company doing what the banks are doing now will save money. A private company is going to want to make a profit. No?
From what I understand, the government will take bids from private banks to service the loans, so they'll still be paid. The savings will come from the fact that the federal government is now originating all of the loans instead of private lenders (which in the past were subsidized to meet the terms the government dictates) all while the originators keep the profits and the federal government keeps the risk of default.

The alleged savings are largely based on a Bush report from 2006:
President Bush’s budget reports that in 2006 for every $100 lent by private lenders, the cost to the government of subsidies, defaults and other items was $13.81, while the same amount lent through the direct loan program cost the government $3.85.
http://www.nytimes.com/2007/04/15/education/15direct.html?_r=2
 

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From the posts, sounds like most of you have no idea how the student loan program was set up before these recent changes.
I understand how it operates, just not how this is health care.

Makes me wonder what *else* was in those 2,000+ pages.

But I fear not. Nancy Pelosi will figure it all out, now that it's been passed. God love her!
 
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