Trump grants student loan relief for coronavirus

The President of the United States, Donald Trump announced that he will grant an extension in the payment of student loans, following the emergency caused by the coronavirus.

“We have granted a moratorium on student loan payments, for six months. We will be discussing this issue later, it may (the moratorium) be extended,” Trump reported during a press conference at the White House.

In the absence of specific information on the subject, experts in student loans urged those who have outstanding accounts with financial institutions to communicate directly, to find out the details of the extension.

COVID-19 tests carried out on journalists at the White House

Elsewhere, the White House tested journalists on COVID-19 on Thursday ahead of the president’s press conference, a new move by the White House and the White House Correspondents Association to keep the virus out of the environment. .

The analyzes were carried out after a member of the White House group of journalists who came to the site on Tuesday was reported to have exhibited symptoms of the disease. The reporter tested negative for COVID-19 and his health is improving, Jonathan Karl, the association’s president, said in an email sent Thursday.

Officials from the White House Medical Unit performed a quick analysis of COVID-19, taking samples of both nostrils from each of the reporters.

President Donald Trump has been analyzed on at least two occasions, including once with the same rapid test that was performed on reporters. The White House reported that Trump’s results were negative.

The White House also revealed last week that anyone who would be “in close proximity” to Trump or Vice President Mike Pence would be scanned by COVID-19.

.

Cancel $ 10,000 in student loans due to Coronavirus

Joe Biden says it’s time to clear $ 10,000 of student loan debt for every American.

Here’s what you need to know.

Student loans

In the wake of the Coronavirus epidemic, the former vice president and presidential candidate of 2020 wants to help Americans manage their money, especially student loans. Biden tweeted Sunday, “In addition, we should forgive a minimum of $ 10,000 / person of federal student loans, as proposed by Senator Warren and colleagues. Young people and other student debt holders have borne the brunt of the latest crisis. It shouldn’t happen again. ” Biden refers to an economic aid plan proposed by Senators Chuck Schumer (D-NY), Patty Murray (D-WA), Sherrod Brown (D-OH) and Elizabeth Warren (D-MA) who would have:

  • forgive $ 10,000 of federal student loan debt for each borrower.
  • suspend student loan payments during the current coronavirus crisis; is
  • Suspend the attachment of wages, tax refunds and social security benefits to pay off student loans
  • Suspend all interest capitalization on student loans
  • Expand the president’s student loan interest waiver plan to FFEL loans, which are not federal student loans issued by the federal government

The plan, which requires congressional approval, would authorize the United States Department of Education, led by Secretary Betsy DeVos, to make monthly student loan payments on behalf of borrowers and forgive a minimum of $ 10,000 in student loans. for all borrowers. The plan comes against the background of borrowers seek how to pay off student loans faster and get answers to student loan questions up student loan repayment, student loan refinancing and forgiveness.

President Trump’s student loan plan

President Donald Trump has implemented several student loan aid plans following the Coronavirus epidemic. Trump has announced that it is waive interest on federal student loans. He also announced that you have an option for stop paying federal student loans for 60 days. can obtain a federal tolerance on student loans by contacting the student loan service. Alternatively, you can continue making federal student loan payments if you wish. Trump, however, does not support total student loan forgiveness. Last month, Trump called for an end to the public service loan forgiveness program in his annual budget. This does not mean that Trump does not support student loan forgiveness. Rather, Trump prefers to simplified income-based repayment plan which would offer forgiveness of student loan to borrowers. DeVos explained why he believes it is a good idea to do this forgiveness of the public service end student loan.

Forgiveness for student loan

Biden’s request for $ 10,000 student loan forgiveness is different from Warren’s original student loan forgiveness plan, what it would be cancel the student loan debt for more than 95% of the borrowers, and would completely cancel the student loan debt for more than 75% of Americans with student loan debt. Senator Bernie Sanders (I-VT) has he proposed to forgive all the $ 1.6 trillion student loan debt, including federal and private student loans. Biden has its own $ 750 billion student loan plan, focused on income-based reimbursement. Biden, Sanders and Warren all support the public service loan forgiveness program.

.

Trump suspends payments, interest on US student loans

WASHINGTON (Reuters) – Friday’s Trump administration temporarily suspended interest and payments on federal student loans for at least the next 60 days, US President Donald Trump told reporters at a press conference on Friday.

Trump also said that the United States Department of Education will not impose standardized tests on students due to the nation’s widespread school closings.

Reporting by Steve Holland and Lisa Lambert. Written by Susan Heavey

Our standards:Thomson Reuters’ principles of trust.

.

Forgive bankruptcy student loans

Joe Biden says that if he is elected president, student loans are forgiven in the event of bankruptcy.

Here’s what you need to know.

Student loans

Former Vice President Biden has said he will support Senator Elizabeth Warren’s plan to grant student loans in the event of bankruptcy. As a presidential candidate, Biden advocated bankruptcy student loans, although as a US senator, he opposed the student loan forgiveness in bankruptcy, such as when he voted for the Abuse Prevention Act. and consumer protection in 2005. In a virtual town hall in Illinois on Friday, Biden told voters that he would support Warren’s plan that Biden would also broaden his appeal to supporters of fellow presidential candidate Senator Bernie Sanders .

The Brunner test: financial difficulties

Traditionally, unlike mortgages or credit card debt, student loans cannot be liquidated in the event of bankruptcy. However, there are exceptions, particularly if certain conditions relating to financial difficulties occur. For example, a Navy veteran had $ 221,000 of student loans dumped in bankruptcy. These conditions are reflected in the Brunner test, which is the legal test in all fields of the circuit, except the eighth circuit and the 1st circuit. The eighth circuit uses a totality of circumstances, which is similar to Brunner, while the 1st circuit has yet to declare a standard.

Put simply, the Brunner the standard says:

  1. the borrower has mitigating circumstances that create difficulties;
  2. these circumstances are likely to continue for a term of the loan; is
  3. the borrower tried in good faith to repay the loan. (The borrower should not actually make payments, but simply attempt to make payments, such as trying to find a viable payment plan.)

Differences exist between federal districts, but this is the basic framework. To settle student loans in the event of bankruptcy, an adverse proceeding (a bankruptcy court case) must be filed, in which a debtor claims that paying the student loan would create undue suffering for the debtor.

Does this average biden support student loan forgiveness?

Unlike Sanders, who proposed to forgive all $ 1.6 trillion of student loan debt, Biden does not support the large-scale forgiveness of the student loan, but does have his own $ 750 billion student loan plan. Biden and Sanders both support the public service loan forgiveness program. Instead, President Donald Trump has called for an end to the public service loan forgiveness program in his annual budget for a simplified income-based repayment plan.

What can you do if you are struggling to make student loan payments?

If you are struggling to make student loan payments, the good news is that you have several options. Trump has temporarily waived interest payments on federal student loans to help borrowers who will be financially affected by the coronavirus.

Here are some steps:

1. Income-led reimbursement: For federal student loans, consider an income based repayment plan such as IBR, PAYE or REPAYE. Payment is based on discretionary income, family size and other factors, and you can receive student loan forgiveness after 20 or 25 years.

2. Payment of other debts: Pay off credit card debt first (particularly if the interest rate is higher than the student loan interest rate). Credit card consolidation is the process of paying off existing debt with a fixed rate credit card at a lower interest rate.

3. Contact your lender: If you are struggling financially because of coronavius ​​or something else, contact your lender to discuss alternative payment options. Don’t wait until the last minute to face your student loan debt.

4. Funding for refinancing students: Student loan refinancing rates are incredibly cheap right now and start at 1.9%. The Federal Reserve cut rates again yesterday (the second time this month), which has led to student loan refinancing rates falling to near-historic lows. To qualify, you will need a credit score of at least 650 and sufficient monthly income for living expenses and debt repayment. If you do not meet these requirements, contact a dealer for approval and to obtain a lower interest rate.

This student loan refinancing calculator shows how much you can save with student loan refinancing.

.

The bailout of Bernie Sanders’ student loan is under review

Don’t call it Crazy Bernie, at least in front of student-laden graduates.

Many of them rely on Democratic presidential candidate Bernie Sanders to honor his commitment to abolish the nation’s $ 1.7 trillion student debt by taxing Wall Street.

Sanders, whose prospects as a Democratic candidate are fading, has a controversial bailout proposal that could be responsible for a large portion of his support among 45 million Americans with student loans, political analysts say. And regardless of the November election result, the Senator from Vermont has shifted political goals: the student debt crisis is now a major campaign issue, in the foreground and center, these analysts add.

On Friday, nodding at the financial impact of the coronavirus pandemic on student loan borrowers, President Trump announced a waiver of interest on student loans owed to federal agencies until further notice.

“We are advocates for all programs that reduce student loan debt,” said Michael Bloch, a young businessman who runs the Pillar startup in New York, which helps people manage student loans. Remember the stress of the loan for education. Bloch’s wife has a law degree with over $ 300,000 in student loans – and she wasn’t too far behind.

“I was setting the prospect of $ 250,000 in student loans in addition to his loans,” Bloch told The Post. “So in the end I decided to drop out of the business school.”

Sanders’ student grant poster is a huge tax and spends giveaways for student loan borrowers like Bloch and his wife, analysts note.

But Sanders’ bold plan raised a mess on Wall Street and analysts questioned who would really benefit.

His campaign said the plan would be funded for $ 2.4 trillion in 10 years, with a 0.5% tax on stock trades, or 50 cents on every $ 100 of shares; a 0.1 percent commission on bond trades; and a 0.05 percent commission on derivative transactions.

“A decade ago, America pledged thousands of billions of dollars to save the Wall Street banks, whose greed had brought the economy down,” according to Sanders. “Now, it’s time to commit a fraction of this to erase the student debt that is crushing 45 million Americans and dragging our economy.”

In fact, says street veteran and industry consultant Bill Harts, the taxes imposed by the plan would be paid by customers. “The Sanders regime is actually a tax on pensions and pension plans for every single policeman, fireman and teacher in the country,” Harts told The Post. “It’s just a bad idea.”

Harts said it is the same principle when taxes are used for other apparently well-intended purposes. “When you buy a car, the dealer doesn’t pay the tax, you do it,” he said. “When you buy gas, the oil company doesn’t pay the tax, you do. And when your pension plan buys shares, Wall Street will definitely not pay the taxes.”

Sanders’ plan may actually exacerbate economic inequality, analysts say.

“Most of the benefits are for people with the highest amounts of debt, including doctors, lawyers, dentists and others, because they have the highest salaries,” said Travis Hornsby, CEO of Student Loan Planner. “Those with smaller balances and lower wages would benefit the least.”

There are other concerns.

“Forgiveness sounds great, but what about the student who gets a loan the day after forgiveness?” said Wes Shannon of SJK Financial Planning.

Bloch isn’t waiting for Sanders to resolve the student loan chaos. “We realized this was a big deal for millions of Americans,” explained Bloch, whose pillar recently launched an app to help users determine the cheapest way to pay off loans.

“Student loans are at the forefront of national conversation and among political candidates,” he added, “so I’m personally thrilled to see them speak at the level where they are.”

.

Here’s how my new student loan plan works

President Donald Trump waives interest payments on student loans.

Here’s what you need to know and how it works.

New student loan plan

Trump made a surprise announcement from the White House yesterday: he will waive interest payments on federal student loans. So what does this mean and how does it work? Although the full details have not been released, here is the latest:

  1. No interest payments will be made on federal student loans temporarily.
  2. This only applies to federal student loans, not private student loans.
  3. Interest waiver applies only to “student loans held by federal government agencies”. Therefore, some federal student loans may not be eligible.
  4. The waiver applies only to interest payments, not to the main payments.
  5. The waiver of interest will be effective “until further notice”.
  6. It is not necessary to register for an interest rebate. Interest should be automatically canceled.
  7. You still need to pay off student loans. A waiver of interest does not mean “no student loan payment”.
  8. Interest waivers could start as early as a week.
  9. Borrowers who are enrolled in an income-oriented repayment plan such as IBR, PAYE, REPAYE or ICR, for example, or tolerance for federal student loans are eligible.
  10. There is no indication of any interest limit, so borrowers with high-level federal student loans could potentially save more.

Importantly, waiving interest does not mean forgiving the student loan. This is not the student loan forgiveness plan proposed by Vice President Joe Biden or Senator Bernie Sanders. The balance of the federal student loan will not be exempted. That is why it is essential to continue paying student loans and not skip a payment during this interest exemption period. While Trump called for an end to the public service loan forgiveness program for several reasons in his annual budget, Trump also proposed a simplified income-based repayment plan that would offer forgiveness of the student loan.

The waiver of interest rates also comes through an aggressive rate cut by the Federal Reserve, which unexpectedly cut rates by 50 basis points earlier this month. The rate cut, supported by Trump, lowered mortgage rates to record levels and lowered student loan refinancing rates back to 1.89%.

.

That’s why we want to end the student loan forgiveness program

Education secretary Betsy DeVos repeated President Trump’s request to end this popular student loan forgiveness program.

Here’s what you need to know.

Forgiveness for student loan

DeVos was on Capitol Hill this week to discuss, among other topics, the president’s annual education budget. Trump’s new annual budget requires several changes to student loans, which are part of a $ 5.6 billion cut in funding from the United States Department of Education. As in previous years, Trump repeated his call to end the forgiveness of the public service loan.

The Public Service Loan Forgiveness Program is a federal program created in 2007 by President George W. Bush that forgives federal student loans for borrowers who work full time (more than 30 hours per week) in a federal, state public service. o eligible local job o 501 (c) (3) nonprofit job making 120 eligible payments in ten years. The program is intended for public officials such as members of the United States military, police officers, firefighters, first responders, prosecutors, public defenders and other public officials.

Why end the forgiveness of the public service student loan?

“The administration believes there is no need to incentivize one type of job and one type of job over another,” DeVos said this week during a hearing in the United States Senate. “And we have a demand in our over 7 million jobs that are not currently employed, and philosophically favoring one type of research over another type of research doesn’t align with our position.” In addition, DeVos said it wanted to balance the needs of both student loan borrowers and federal taxpayers. By eliminating this student loan forgiveness program, DeVos argues, it would save money on the federal government from not having to potentially forgive billions of dollars in federal student loans.

Bernie Sanders: cancels all student loans

The proposal to end this student loan forgiveness program differs drastically from several presidential candidates, including Senator Bernie Sanders (I-VT). Sanders wants to forgive all of the $ 1.6 trillion of outstanding student loans, including federal and private student loan payables. Sanders’ student loan forgiveness plan has no eligibility requirements; all 45 million student loan borrowers are eligible for student loan. Sanders says forgiving the student loan will make the economy grow by $ 1 trillion over the next 10 years and create up to 1.5 million new jobs every year. (Moody believes that the economic impact would be more contained). Former Vice President Joe Biden does not support the cancellation of all $ 1.6 trillion student loan debt and the charging of federal taxpayers. Biden detailed his student loan plan and why he believes his plan is better than the Sanders plan.

Silver lining: what Trump and DeVos offer

Importantly, Trump does not propose to eliminate all student loan forgiveness. Rather, it proposes to end the public service loan forgiveness program. Importantly, the proposal would have an impact on future borrowers who borrow federal student loans as of July 1, 2021. The budget proposal does not provide for existing borrowers who are already working in the public service and are currently paying student loans.

Here is what Trump proposes instead:

  • Simplify the repayment of the student loan: Reduce the number of student loan repayment plans to simplify the student loan repayment and help borrowers repay student loans more quickly. Federal student loan repayment plans can help you reduce your monthly payment (even if interest accrues on your balance), but don’t expect to get a lower interest rate on student loans.
  • Change in student loan forgiveness: Through an income-based repayment plan, federal student loans for college borrowers would be forgiven after 15 years of student loan payments. Currently, federal student loan forgiveness can be received after 20 years (bachelor’s degree) or 25 years (graduate school) under existing income-based repayment plans. Borrowers are likely to still have to pay income taxes for the forgiven amount.

Your next steps

It is important to remember this: Congress decides federal spending and then decides whether to finance or repay a federal program such as forgiving public service loans. In the meantime, act on the student loan repayment. Get started with these four options, all at no cost:

.

Student Loan Forgiveness: How Student Loan Forgiveness Could Have A Financial Impact

RALEIGH, N.C. (WTVD) – In February, President Donald Trump announced he would end a popular student loan forgiveness program, a program that has been a major topic of discussion among politicians.

Americans owe about $ 1.7 trillion in student loan debt. By perspective, this is about double the budget for the United States Department of Defense and about 22 times the budget for our country’s education programs.

RELATED: President Trump proposes to end student loan forgiveness program for the fourth time

However, forgiveness of mass student loan is the platform candidates are on today as they try to grab millennial grades.

But is it realistic? ABC11 asked expert economist Dr. Mike Walden.

“It’s not that we can’t do it. It’s ‘do we want to do it?'” Said Walden. “And then what message does he send? If you get into trouble, the government will save you.”

In other words, is it ethical? Vermont Senator Bernie Sander’s plan would tax Wall Street, while Massachusetts Senator Elizabeth Warren would tax the wealthy.

“We want to help people if they do things the right way, they will do pretty well economically over time. We want to help them unlike those people who won’t go to college and maybe have a hard time,” said Walden.

Studies have also found that mass debt cancellation could widen the wealth gap between black and white families while somehow slipping into a silver coating.

“So I think if we were to do it. It would accelerate the economy slightly, but once again the biggest problem is equity,” said Walden.

And for this, the answer may lie in education reform.

“What can we do to make college more efficient?”

President Trump has proposed several education reform programs. In particular a recent signed bill that would finance free education for some commercial programs.

Former Vice President Joe Biden also hopes to offer free university classes for two years.

Copyright © 2020 WTVD-TV. All rights reserved.

.

1 million New Yorkers are carrying $ 35 billion in student loan debt

If suffering loves company, the more than 1 million New Yorkers who collectively carry $ 35 billion in student loan debt can console themselves by not being alone.

According to his commissioner, Lorelei Salas, the New York Department of Consumer and Worker Protection (DCWP) says that about 14 percent of city residents with student debt have expired 90 days or more for loan payments.

“I really care about this,” said Salas. “I graduated from law school with $ 150,000 of student loan debt. So I know what it does to people’s finances and their stress level. “

“It’s a long process,” added Salas, who still has nearly $ 50,000 in student loan debt. “There have been times when I thought,” I’ll never stop paying until I die. “”

Borrowers turned to social media and defense organizations such as the nonprofit student debt crisis to share their trouble stories (and even the results if they managed to pay off or kill their debts).

“For the past three years, I have done fairly solid work in a high-level university,” wrote a New Yorker on studentdebtcrisis.org.

“I make a pretty decent salary and I’m getting a free MBA. I have a 401 (k) and a Roth IRA and every month I put 25 percent of my salary on my savings account. I have about $ 45,000 in student loan payables – $ 15,000 in private loans and $ 30,000 in federal loans. I try to contribute $ 600 a month to these loans.

“Last year I contributed $ 1,762.12 to a large portion of federal loans totaling 25,000. Over the past year, total debt has fallen by $ 415. I put $ 300 in seven days ago and I already owe $ 20. I burst into tears when I realized that realization. For years the debt to my student loan has been this shadow that hangs over me. “

In fact, a Moody report in January found that slow repayments have become a key factor in what was the fastest growing type of household debt in the past decade.

Student loan debt rose to $ 1.6 trillion in the fourth quarter of 2019, according to the Federal Reserve. One in five adults – 45 million Americans – are contributing to the total.

Over the past decade, the aggregate annual net repayment rate (or the amount of existing balances eliminated each year) for student loans in the United States has been on average only 3% “, and many recent graduates have not paid their sale, “discovered Moody.

Meanwhile, the student debt clock on FinAid.org has risen by over $ 1.7 trillion and the issue looms over the run-up to the presidential election.

Suffering student loans pushed education concerns ahead of fears of job losses and a market downturn to become the first financial destroyer in a recent Harris poll on behalf of TD Ameritrade.

The results came in a period of low inflation, record employment, a growing market (pre-coronavirus), observed Tom Butch, managing director of retail distribution at TD Ameritrade.

In five years, education concerns have increased modestly, as student debt has risen by more than 25 percent at that time, particularly for millennials.

Former Consumer Affairs Department of New York DCWP has published three student debt reports, one of which in 2017 with the Federal Reserve Bank of New York examining student loan default and default rates in different neighborhoods , a study that has been replicated in other cities.

DCWP conducted debt clinics in targeted areas in 2018 based on the results of the Fed’s joint report: insolvency and default rates are higher in neighborhoods with lower median incomes.

It offers advice to student loan borrowers at nyc.gov/studentloans and provides free advice from financial empowerment centers in all districts.

There are many resources available nationwide, but borrowers should be careful to find one that offers student loan experience, be it a financial adviser, CPA or attorney, said Bruce McClary, vice president of communications for the National Foundation for Credit Counseling, which manages studentloanhelp.org.

He tries to stay away from profit-making debt reduction companies, he warned.

“Customers pay a lot of money up front and in many cases they are left in a worse case than when they started,” he said.

.

Coronavirus could send student loan rates plummeting to record lows

  • undergraduates: $ 473 in interest expense on loans they take on in the 2020-21 period, based on an average annual debt of $ 6,660
  • Parents who take out PLUS loans: $ 1.303 based on $ 17.220 in average annual debt
  • Graduated students: $ 1,418 in interest expense on unsubsidized direct loans, on average, based on an annual debt of $ 19,250
  • Graduate students who take out PLUS loans: $ 1,963 based on an average annual debt of $ 25,950.

If 10-year Treasury yields remain below 2.48% (where they were last May), this will be the second consecutive year in which federal student loan rates will drop, potentially to record lows.

How parents get stuck with six-figure college debt

Spring is an exciting time of year for high school seniors who are eagerly waiting for the college acceptance letters they turned to in the fall.

But immediately after those letters arrive, the excitement vanishes and the real work begins. Students should sit with their families and evaluate the financial aid offers they have received from each school and try to figure out which ones offer the best value.

As these offers can be difficult to decipher, it is increasingly common for parents to take on large debts on behalf of their children, at much higher interest rates.

“Help gift” compared to loans

A well documented problem with financial aid recognition letters is that many universities do not clearly distinguish “gift aid” (such as scholarships and scholarships) from loans.

Gift help does not have to be refunded and every dollar you receive reduces the net cost of attending a school. Since loans must be repaid, they should not be part of the bottom line calculation of a school’s net price.

Not only can financial aid acknowledgment letters make it difficult to compare the net price, they often guide families to take tens of thousands of dollars in high-cost PLUS father loans.

Direct in PLUS loans

It is a fact these days that most students borrow for college. Among members of the 2018 class, two-thirds took out loans, with an average graduation debt approaching $ 30,000.

There are strict limits on how much federal debt college students can take on: $ 31,000 for students who depend on their parents and $ 57,500 for those who are independent.

But schools often expect students – and their families – to borrow much more. As federal debt limits for students have not increased in more than a decade, it has become more common for schools to offer loans to parents.

The only loan limit on PLUS loans is the cost of attendance, as determined by each school, minus other financial aid you receive.

In this detail, from a letter of assignment of effective financial aid, we recommend a freshman who has reached the annual debt limit of $ 5,500 on cheaper federal Stafford loans to take out $ 21,350 in parent PLUS loans to cover their costs “immediate” for autumn and spring terms.

Keep in mind that this is only one year of loans. At this rate, this family could end up with $ 80,000 or more in PLUS parent loan debt – and this is in addition to the loans that the student is making on his behalf.

This is not an extreme example. Of the 779,000 households that took out PLUS loans in 2017-2018, the average borrowed amount was $ 16,452.

Six-digit PLUS loan debt

Due to the loose loan limits on PLUS loans, it is not unheard of for parents to take on a six-figure debt to bring their children (or children) to school.

Worse still, there is no assessment of your ability to repay PLUS loans, which result in the highest rates and fees of any federal loan: 7.08% for loans taken during the 2019-2020 academic year, with a commission initial 4.236%. This means that many families will carry PLUS loan debt in their retirement years.

Explore loan options for private students

According to a recent study, most families learn about PLUS parent loans from college financial help offices or the free federal student aid app. But in many cases, families can qualify for private student loans at lower rates than PLUS loans.

The Department of Education recommends schools to inform students about their private student loan options. But the pattern of financial aid offerings suggested by the Department of Education does not allow students and their families to compare actual rates.

The interest rates on federal student loans are “all the same” and can be entered in the loan options box of the form. But the rates on private student loans depend on the creditworthiness of the borrower and will vary according to the lender. The only way to find out if it is possible to get better rates from a private lender is to request rates from several.

How safe is it to borrow?

There is more to choosing a college than deciding who offers the best financial aid package. But before borrowing for college, it’s a good idea to know how many debts it is reasonable to take on.

A good rule of thumb is to never borrow more than you expect your annual earnings to be after graduation. Your earnings will depend not only on the school you graduate from, but also on your degree. The Department of Education Scorecard is a good tool for assessing the debt and income of recent graduates by school and postgraduate.

“>

Concerns about the economic impact of coronavirus have slumped stocks and many investors have fled to bonds, which could push rates on federal student loans to record lows.

How does it work? After taking out a federal student loan, the interest rate is fixed for life. But you will pay different rates on the loans you take each year you go to school, which can make it difficult to understand what your real loan costs will be.

Federal student loan rates are recalibrated once a year to take account of changes in government loan costs. They are indexed to 10-year Treasury yields, which today hit an all-time low of 1.24% in an investor “safety flight”. When investors rush into bonds, the higher demand for them reduces their returns.

The Treasury auction that will determine interest rates on federal student loans for the 2020-21 academic year will take place on Tuesday 12 May. If that auction were at 1.24% today’s 10-year Treasury yields, here’s what the interest rates on federal student loans would look like as of July 1, 2020:

  • undergraduates: 3.29%, down from 4.53% today
  • Graduated students: 4.84% (unsubsidised direct loans), down from 6.08% today
  • PLUS loans and parent PLUS: 5.84%, down from 7.08% today

At these percentages, the average student could save $ 473 to $ 1,963 in interest on loans taken during the 2020-2021 academic year and repaid over 10 years.

The expected savings for each group of borrowers could be on average (see table):

  • undergraduates: $ 473 in interest expense on loans they take on in the 2020-21 period, based on an average annual debt of $ 6,660
  • Parents who take out PLUS loans: $ 1.303 based on $ 17.220 in average annual debt
  • Graduated students: $ 1,418 in interest expense on unsubsidized direct loans, on average, based on an annual debt of $ 19,250
  • Graduate students who take out PLUS loans: $ 1,963 based on an average annual debt of $ 25,950.

If 10-year Treasury yields remain below 2.48% (where they were last May), this will be the second consecutive year in which federal student loan rates will drop, potentially to record lows.

How parents get stuck with six-figure college debt

Spring is an exciting time of year for high school seniors who are eagerly waiting for the college acceptance letters they turned to in the fall.

But immediately after those letters arrive, the excitement vanishes and the real work begins. Students should sit with their families and evaluate the financial aid offers they have received from each school and try to figure out which ones offer the best value.

As these offers can be difficult to decipher, it is increasingly common for parents to take on large debts on behalf of their children, at much higher interest rates.

“Help gift” compared to loans

A well documented problem with financial aid recognition letters is that many universities do not clearly distinguish “gift aid” (such as scholarships and scholarships) from loans.

Gift help does not have to be refunded and every dollar you receive reduces the net cost of attending a school. Since loans must be repaid, they should not be part of the bottom line calculation of a school’s net price.

Not only can financial aid acknowledgment letters make it difficult to compare the net price, they often guide families to take tens of thousands of dollars in high-cost PLUS father loans.

Direct in PLUS loans

It is a fact these days that most students borrow for college. Among members of the 2018 class, two-thirds took out loans, with an average graduation debt approaching $ 30,000.

There are strict limits on how much federal debt college students can take on: $ 31,000 for students who depend on their parents and $ 57,500 for those who are independent.

But schools often expect students – and their families – to borrow much more. As federal debt limits for students have not increased in more than a decade, it has become more common for schools to offer loans to parents.

The only loan limit on PLUS loans is the cost of attendance, as determined by each school, minus other financial aid you receive.

In this detail, from a letter of assignment of effective financial aid, we recommend a freshman who has reached the annual debt limit of $ 5,500 on cheaper federal Stafford loans to take out $ 21,350 in parent PLUS loans to cover their costs “immediate” for autumn and spring terms.

Keep in mind that this is only one year of loans. At this rate, this family could end up with $ 80,000 or more in PLUS parent loan debt – and this is in addition to the loans that the student is making on his behalf.

This is not an extreme example. Of the 779,000 households that took out PLUS loans in 2017-2018, the average borrowed amount was $ 16,452.

Six-digit PLUS loan debt

Due to the loose loan limits on PLUS loans, it is not unheard of for parents to take on a six-figure debt to bring their children (or children) to school.

Worse still, there is no assessment of your ability to repay PLUS loans, which result in the highest rates and fees of any federal loan: 7.08% for loans taken during the 2019-2020 academic year, with a commission initial 4.236%. This means that many families will carry PLUS loan debt in their retirement years.

Explore loan options for private students

According to a recent study, most families learn about PLUS parent loans from college financial help offices or the free federal student aid app. But in many cases, families can qualify for private student loans at lower rates than PLUS loans.

The Department of Education recommends schools to inform students about their private student loan options. But the model of financial aid offerings suggested by the Department of Education does not allow students and their families to compare actual rates.

The interest rates on federal student loans are “all the same” and can be entered in the loan options box of the form. But the rates on private student loans depend on the creditworthiness of the borrower and will vary according to the lender. The only way to find out if it is possible to get better rates from a private lender is to request rates from several.

How safe is it to borrow?

There is more to choosing a college than deciding who offers the best financial aid package. But before borrowing for college, it’s a good idea to know how many debts it is reasonable to take on.

A good rule of thumb is to never borrow more than you expect your annual earnings to be after graduation. Your earnings will depend not only on the school you graduate from, but also on your degree. The Scorecard of the Department of Education is a good tool to evaluate the debt and income of recent graduates by school and specialization.

.