House Passes Student Loan Bill, So What’s Next?
By Michael P. Tremoglie
NEW YORK (MainStreet)—The House of Representatives passed, May 23, the Smarter Solutions for Students Act (H.R. 1911). This would tie interest rates to prevailing market trends. It will end federal rate subsidies.
The Act sets the annual interest rate on Direct Stafford loans and Direct Unsubsidized Stafford loans at the rate of high-yield 10-year Treasury notes plus 2.5%, but caps that rate at 8.5%. The annual interest rate on Direct PLUS loans will be at the rate of high-yield 10-year Treasury notes and an additional 4.5%, but caps that rate at 10.5%.
The bill was passed in the House of Representatives by a vote of 221-198. The vote was primarily party line with 217 of 225 Republicans (eight did not vote) voting for it and only four of 194 Democrats voting in favor (seven not voting). The bill was introduced by Rep. John Kline (R.-MN).
According to Kline’s Education and the Workforce committee, organizations advocating passage include: the American Association of Community Colleges, the American Association of Collegiate Registrars and Admissions Officers, the American Association of State Colleges and Universities, the American Council on Education, Association of American Universities, Association of Jesuit Colleges and Universities Council for Christian Colleges & Universities, the Council of Graduate Schools Hispanic Association of Colleges and Universities, the National Association of Independent Colleges and Universities and the National Association of Student Financial Aid Administrators.
But not everyone thinks it is a smart idea.
Claire Law is the founder of Educational Avenues in Charleston, S.C. and an Independent Educational Consultant and a Certified Educational Planner (AICEP). She teaches courses about college admission and financial aid at the University California-Irvine and is the co-author Find the Perfect College for You (Supercollege, 2010).
“I think we have done this before,” Law said, regarding the recent bill. “I personally think it is a temporary patch.”
She elaborated by saying she thinks that the proposed interest rates were pegged to the highest market rates. She also considers the added-on fees of 2.5% for Stafford and 4.5% for graduate and parent PLUS loans too high. Furthermore, she deems the interest rate cap of 8.5% for Stafford and 10.5% for graduate and PLUS loans too high as well.
“I see this as a disservice to students, parents and graduate students,” Law asserted. “We need to have an educated populace and over the last 30 years most colleges have increased costs by 3 to 5% each year.”
She said that variable rates typically increase over time. She observed that there are parents who borrowed years ago and still carry $150,000 in PLUS loans at 8% – which was originated under FFELP at a 4.25% variable rate.
Law acknowledged that while the federal government furnishes assistance with getting an education beyond high school via the loan program much of the tuition for colleges via the loan program – and profits from it as well – she says parents have paid the largest share of costs to send their kids to college.
“They have used up their personal savings, home equity, sold assets to fund college, paid out of current income and taken on debt,” she emphasized. “This debt is not always a federally-guaranteed loan. They are private or alternative loans – such as refinancing a house. In some cases it is a retirement fund that was used to pay for college. We can’t calculate that debt burden. The Smarter Solutions for Students Act will not make it less expensive for students and parents to borrow.”
According to Law going to a variable rate is a mistake, because students and parents will not be able to calculate their future debt amount. Moreover, students do not often understand the impact that a rate change could have on their ability to repay, or the meaning of paying back a loan that has an 8.5% or 10.5% interest rate plus fees.
“The new loan terms are similar to what we have at present and through June 30, 2013,” she said. “The Unsubsidized Stafford has an interest rate of 6.8% and 1% origination fee. The Parent PLUS loan has an interest rate of 7.9% and a 4% origination fee.” That means, for example, a parent borrowing $40,000 to pay for college incurs a fee of $1,600 and pays an interest rate of 7.9%.
On July 1, the Stafford loan for undergraduate students will have a variable interest rate based on the 10-year Treasury note. Then, on top of whatever that rate will be, students will pay an additional 2.5% fee and parents will pay a 4.5% additional fee. These rates are nothing new, Law observed. They are a return to the variable rates that were in effect before the Obama administration eliminated the commercial lenders from making federal student loans under the FFELP program.
“Students who are saddled by debt can’t buy a car, rent an apartment or buy a house – and they become indentured servants,” Law said. “They cannot contribute to the economic growth of the country if they start out with the debt on their shoulders. Some students can’t get married. One of my students refused to marry another with $260,000 in debt from undergrad and law school loans.”
Law feels that the right college for students must include a financial aid review that imparts financial aid literacy to the student and parents. Both the return on investment and whether the institution fits the needs of the student have to be evaluated.
“If students put more skin into paying for college they would work harder and learn how to handle finances in the process, rather than graduating and then being faced with loans they never understood in the first place,” Law stressed.
Alex Pollock, a resident fellow at the American Enterprise Institute and a director of Great Lakes Higher Education Corporation, has reservations about the bill as well.
He believes that government loans allowed colleges to inflate their costs. Ultimately, he says, the taxpayers subsidize the loans for those who have defaulted or who are granted some forbearance such as unemployment. Because of this those who work their way through college or who borrow from other than the government get a double whammy. They have to pay back not only their own loans, but their taxes help provide for and also pay the loans of others.
“They are also ‘sticker price payers,'” Pollock noted. “They are often paying full price for college as opposed to those students who are getting a discounted rate via scholarships.”
If passed by the Senate, this law would prevent student loan interest rates doubling July 1. Absent any action from Congress, by law, the interest rates on Stafford loans are scheduled to increase from 3.4% to 6.8%.
The Senate received the legislation June 3. According to Roll Call, an aide to Senate Majority Leader Harry Reid (D-NV), said the Senate will likely vote on both the Senate Democratic bill – which extends the current 3.4% fixed interest rate for two additional years – and the House-passed Republican bill simultaneously.
Article from http://www.mainstreet.com/article/moneyinvesting/education-planning/house-passes-student-loan-bill-so-whats-next?puc=taboola&cm_ven=TABOOLA
In this article, we’re going to explore the happy middle ground – how to be assertive without fear and without going overboard.
Know what you want to say. Being assertive is all about your communication style. If you don’t have a crystal clear picture of the message you’re trying to send, how can you expect to communicate it with clarity?
Too often, people start talking before they really know what they want to say. If you haven’t already articulated something in your head, chances are pretty good that you won’t magically be able to articulate it when you open your mouth in front of others (unless you’re a very strong, on-your-feet thinker and speaker).
So take some time to map out your goals for the conversation before you start. What are you trying to communicate? Getting clear on WHAT you’re going to say ahead of time will let you focus more on HOW you’re saying it later.
Bottom line it. An easy way to kill your efforts is to clutter your message with unnecessary information. This just inspires others to tune out. If they sense you’ve transitioned into a pointless tangent, they’ll start thinking about what’s for dinner instead of listening to you. The more you can get to the point quickly and stay on point, the more forceful your message will be.
Practice and minimize filler. Speaking is quite different from simply thinking. You’ll often find that what seemed so clear in your head becomes a jumbled mess when you say it out loud.
If this is a particularly crucial discussion and being assertive is of the utmost importance, consider practicing out loud. As we all know, the first few times you talk about something new can be awkward. You may stumble, struggle to find the right word, repeat yourself or talk in circles a bit. That’s to be expected. The more you do it, the easier it gets.
This is also a great way to minimize filler – those distracting words that fill the air while you pause to think of your next word. Examples include “um,” “uh,” “ya know” and “well…” Most of us overuse these words and, as a result, our communication can appear wishy washy, unsophisticated or apprehensive. If you’ve never really listened to yourself, you may be shocked to hear how often you use filler. Improvement starts with making yourself aware.
Manage volume. Some people just naturally have quiet voices. Unfortunately, the volume at which you speak has a big impact on how people interpret your message. If you speak in a low, weak tone, you’ll appear timid, hesitant and fearful. If people are constantly asking you to repeat yourself, it can even suggest you’re hiding something.
Up the volume and you’ll immediately look more powerful and certain. You don’t have to yell (in fact, that can push you into aggressive territory), but you want to project your voice so everyone can hear you comfortably. If you find yourself running out of breath or getting hoarse, it’s perfectly fine to pause in silence for a moment or take a sip of water.
Avoid devaluing language. One of the worst things you can do for your communication is to use language that reduces the importance of what you’re saying. For example, the word “just” implies that something is insignificant: “I just thought…” or “This is just an idea…” Don’t these statements sound like the person saying them isn’t even interested? It’s like they’re giving the listener a warning that what’s to come is trivial and irrelevant.
Another way people do this is by prefacing their words with phrases like: “I could be wrong but…” or “This might sound crazy but…” Why give people a reason to think your contribution is wrong or crazy? That frames what they hear and makes them look for confirmation.
Finally, avoid the question mark sound at the end of your sentences (unless, of course, you’re asking a question). If you’re making a declarative statement, turning your voice up at the end makes it sound like you’re questioning yourself. And hey, if you’re not sure about what you’re saying, why would anyone else be?
Believe in yourself. Most importantly, to communicate assertively you have to believe in what you’re saying. The more passion and certainty you feel for the subject matter, the easier and more natural it will be to speak powerfully about it. If you want to see the assertive side of yourself, have a conversation about something you care deeply about and for which you have a strong conviction. Watch yourself. Listen to yourself. Take note of how you communicate and find ways to bring those same skills to the workplace.
Great Article http://money.usnews.com/money/blogs/outside-voices-careers/2013/06/20/how-to-be-assertive-and-get-what-you-want-at-work?src=usn_fb
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