Submitted by Jimmy on February 16, 2008 - 11:28am.
How have loan costs increased? Borrowers with variable rate loans will see a significant interest rate decrease on July 1, 2008. Loans issued since 2006 still have the same fixed interest rate they did last month; the law hasn't changed. Borrower origination fees continue to decrease each July 1 as laid out in the Higher Ed Reconciliation Act of 2006. State agencies which have benefited from tax exemptions and "950" subsidies over the years are still offering zero fee loans, reduced-fee loans, interest rate reductions and principal reductions -- many of which do not require any on-time payments. Even on the new CCRAA loans, the "socialist" state agencies used their influence in Washington to get a higher subsidy than the banks. Rewarding the most inefficient players . . . The amazing thing is the state agencies arguing they are more capitalist than direct lending. Chutzpah!
Access to deposits? Why don't lenders have access to deposits? Regulators have warned for years about Americans' low savings rates and our resultant reliance on European and Asian capital for our consumer and business borrowing needs. Yet, there are still some deposits in our domestic bank accounts. FFELP is a federal program. It is fine for lenders to obtain the capital for their non-federal lending (car loans, personal loans, mortgages, business loans, etc.) from Europe and Asia, but we could put in a law requiring that capital for FFELP loans has to come from deposits. Otherwise, we would be saying that FFELP is basically a defunct model whose demise had been temporarily delayed by the development of securitization markets in the early 1990s. Now that these markets are hitting their second bout of turbulence (the first was 1997 Thai/Russian crisis), they want some handholding? If traditional financial markets (domestic deposits and traditional domestic secondary markets) cannot supply the needs for federal and alternative loans then the colleges will have to reduce their prices. Not all of life's problems can be solved by increasing student loan subsidies.
The sanctity of individual choice is not guaranteed by the Constitution, but, if it were, it would only include private transactions. Where in the Constitution does it say that the educated elites can reach into the pockets of the working class to increase lender/guarantor subsidies so that the elites can have taxpayer-funded "choice" in a federal government program like FFELP? Where does it say that taxpayers should fund hugely-excessive subsidies in government guaranteed lending, so that some of the excess can be sloughed off to provide additional "choice" in the purely-private alternative loan market? Who says CLC was providing good customer service? Service to whom? Not to the taxpayer. Everybody loves Santa Claus. If I came to you and said that I could cut your monthly payment by 60 percent (by stretching your payments over a longer timeframe) and Uncle Sam would pay for it, would you say no? Of course not! CLC should have been telling its customers where the money was going (and the extra interest they would be paying over 30 years). If a borrower with federal loans from med school or law school called CLC, would CLC ever say, sorry we can't accept your business because (1) all your loans are from Wells Fargo or (2) all your loans are direct loans? (And now some of the same folks are saying, what happened to all the interest projected on those direct loans that are now gone?; can't have it both ways.) History will have to be the judge of that, because, unlike 9.5, there have not been any investigations. Why investigate? If the borrower is happy, who cares, right? Well, we should care. Shouldn't we worry about raising a whole generation of individuals who only care that they are getting a good deal but don't care if it is legit or who is paying for it? Well, we will begin to worry when they decide that paying for our social security is not a "good deal" for them.
Loan Costs Dropping
How have loan costs increased? Borrowers with variable rate loans will see a significant interest rate decrease on July 1, 2008. Loans issued since 2006 still have the same fixed interest rate they did last month; the law hasn't changed. Borrower origination fees continue to decrease each July 1 as laid out in the Higher Ed Reconciliation Act of 2006. State agencies which have benefited from tax exemptions and "950" subsidies over the years are still offering zero fee loans, reduced-fee loans, interest rate reductions and principal reductions -- many of which do not require any on-time payments. Even on the new CCRAA loans, the "socialist" state agencies used their influence in Washington to get a higher subsidy than the banks. Rewarding the most inefficient players . . . The amazing thing is the state agencies arguing they are more capitalist than direct lending. Chutzpah!
Access to deposits? Why don't lenders have access to deposits? Regulators have warned for years about Americans' low savings rates and our resultant reliance on European and Asian capital for our consumer and business borrowing needs. Yet, there are still some deposits in our domestic bank accounts. FFELP is a federal program. It is fine for lenders to obtain the capital for their non-federal lending (car loans, personal loans, mortgages, business loans, etc.) from Europe and Asia, but we could put in a law requiring that capital for FFELP loans has to come from deposits. Otherwise, we would be saying that FFELP is basically a defunct model whose demise had been temporarily delayed by the development of securitization markets in the early 1990s. Now that these markets are hitting their second bout of turbulence (the first was 1997 Thai/Russian crisis), they want some handholding? If traditional financial markets (domestic deposits and traditional domestic secondary markets) cannot supply the needs for federal and alternative loans then the colleges will have to reduce their prices. Not all of life's problems can be solved by increasing student loan subsidies.
The sanctity of individual choice is not guaranteed by the Constitution, but, if it were, it would only include private transactions. Where in the Constitution does it say that the educated elites can reach into the pockets of the working class to increase lender/guarantor subsidies so that the elites can have taxpayer-funded "choice" in a federal government program like FFELP? Where does it say that taxpayers should fund hugely-excessive subsidies in government guaranteed lending, so that some of the excess can be sloughed off to provide additional "choice" in the purely-private alternative loan market? Who says CLC was providing good customer service? Service to whom? Not to the taxpayer. Everybody loves Santa Claus. If I came to you and said that I could cut your monthly payment by 60 percent (by stretching your payments over a longer timeframe) and Uncle Sam would pay for it, would you say no? Of course not! CLC should have been telling its customers where the money was going (and the extra interest they would be paying over 30 years). If a borrower with federal loans from med school or law school called CLC, would CLC ever say, sorry we can't accept your business because (1) all your loans are from Wells Fargo or (2) all your loans are direct loans? (And now some of the same folks are saying, what happened to all the interest projected on those direct loans that are now gone?; can't have it both ways.) History will have to be the judge of that, because, unlike 9.5, there have not been any investigations. Why investigate? If the borrower is happy, who cares, right? Well, we should care. Shouldn't we worry about raising a whole generation of individuals who only care that they are getting a good deal but don't care if it is legit or who is paying for it? Well, we will begin to worry when they decide that paying for our social security is not a "good deal" for them.