08.07.13 | Student Loan Servicer Transfer

Posted in Financial Aid, News, Repayment, Student Loans by Student Loan Network Staff

Federal Student Loan Servicer Transfer

Last week, the United States Department of Education released a newsletter informing students and their schools that federal student loans handled by four nonprofit servicers would soon be transferred to new servicers. Over the next two months, the majority of loans that are currently serviced by COSTEP, EDGEucation, and EdManage will be transferred to MOHELA, while those serviced by KSA Servicing will be transferred to Aspire Resources Inc.

What is a Loan Servicer?

To provide a little background, your loan servicer is assigned to you by the Department of Education after your loan has been fully disbursed. This company processes your payments and works as your customer service representative while you repay your student loans. For additional information on loan servicers, try visiting StudentAid.ed.gov.

Transfer Process

You will receive either an email or a letter in the mail prior to the transfer to inform you if your servicer will change, as well as an additional notification once the transfer is complete. These notifications will provide information on your new servicer, along with a statement that they will be servicing the loan on behalf of the the Department of Education.

You will need to contact the new servicer to activate features such as electronic billing and automatic loan payments. In addition, both MOHELA and Aspire Resources claim that students will not need to reapply for deferment or forbearance if their previous servicer already reviewed their application, but you should contact your new servicer just to make sure that this information carries over. (more…)

08.02.13 | The Usual Mistrust or a Preview of More Bipartisanship?

Posted in Financial Aid, News, Stafford Loan, Student Loans by David Levy

Federal Student Loan Compromise

This content was updated on 7/9 to reflect the passage of the Smarter Solutions for Students Act

With bipartisan support, on July 31, 2013, the House of Representatives passed H.R. 1911, the Smarter Solutions for Students Act (also known as the Bipartisan Student Loan Certainty Act, as amended by the Senate), by a vote of 392 to 31.

President Obama  signed the legislation into law on August 9, 2013.

Under the new law, interest rates on new loans each July 1 will be based on the last 10-year Treasury auction in the previous May. The specific interest rates will be as follows:

  • Undergraduate Students (Subsidized and Unsubsidized Federal Stafford Loans): 10-year Treasury + 2.05% with an 8.25% cap
  • Graduate and Professional School Students ( Federal Stafford Loans): 10-year Treasury + 3.6% with a 9.5% cap
  • Parents and Graduate/Professional School Students (Federal Parent and Federal Grad PLUS Loans): 10-year Treasury + 4.6% with a 10.5% cap

Based on the current 10-year Treasury rate, this will yield interest rates of 3.86%, 5.41% and 6.41%, respectively, for new loans this year, made after July 1, 2013. (more…)

07.25.13 | Doubling Interest Rates: The Devil is in the Details

Last night, the Senate passed a bill to address the doubling of the interest rate on new subsidized Federal Stafford loans.

The Congressional Budget Office (CBO) estimated that the legislation will save the federal government $715 million over ten years, which would be applied to deficit reduction. Many feared that the multi-partisan Senate deal would fall apart because the CBO found that an earlier version would cost $22 billion over ten years.

Under the Senate-approved legislation, interest rates on new loans each July 1 would be based on the last 10-year Treasury auction in the previous May. The specific interest rates would be as follows:

  • Undergraduate Students (Subsidized and Unsubsidized Federal Stafford Loans): 10-year Treasury + 2.05% with an 8.25% cap
  • Graduate and Professional School Students ( Federal Stafford Loans and Federal Grad PLUS Loans): 10-year Treasury + 3.6% with a 9.5% cap
  • Parents (Federal Parent PLUS Loan): 10-year Treasury + 4.6% with a 10.5% cap

Based on the current 10-year Treasury rate, this would yield interest rates of 3.9%, 5.4% and 6.4%, respectively, for new loans this year, made after July 1, 2013.

According to Mark Kantrowitz, publisher of Edvisors, “This is still an interest rate increase masquerading as a decrease. Interest rates are at historically low levels and have nowhere to go but up. We can expect interest rates to start increasing by about 1.5% per year in 2015.” These federal educational loan rates are expected to climb as the economy improves and it becomes more expensive for the government to borrow money. Thus, interest rates on new loans will probably exceed the current 6.8% rate in 2017 and certainly by 2020. “So, while students enrolling in college now will save money on their student loans, their younger siblings will pay a lot more. A few years from now students and parents will be demanding a return to fixed 6.8% interest rates.”
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07.24.13 | 5 Ways to Cover College Costs

Posted in College Life, FAFSA, financial aid tips, Scholarships, Student Loans by Student Loan Network Staff

Paying for CollegeWhether you’re a soon-to-be freshman or second semester senior, it is never easy to figure out how to cover the costs of college. With tuition and hidden fees of private colleges averaging out to about $40,000 per year, many of you are still wondering how your family is expected to pay for $35,000 of your education, even after having received your Student Aid Report (SAR) three months ago. To help you out in your pursuit of a college degree, here are 5 ideas for paying for college when Federal aid comes up short.

Befriend the Financial Aid Office

If you are disappointed by the amount of financial aid that you receive, try talking to your financial aid office. Many colleges have an appeal process for financial aid, so get on a first-name basis with someone in the financial aid office and see what else can be done.

Search for Scholarships

There are millions of dollars in scholarships that go unclaimed every year, so why not spend a few days this summer searching and applying for as many scholarships as you can find? On average, you will win 1 out of every 10 scholarships that you apply for, so don’t get discouraged. For starters, try visiting our recommended scholarship search website, or try winning scholarships through the ScholarshipPoints program. (more…)

07.19.13 | College Costs Out of Control

Posted in Private Student Loans, Student Loans, Uncategorized by Student Loan Network Staff

Today, 20% of adults owe money on student loans, and 57% are worried about repaying these loans. Many have expressed concern about the recent legislation which increased the interest rate of subsidized loans to 6.8%, but the problem is not the cost of student loans. As stated by Mark Kantrowitz in a recent article published by MarketWatch, this will not double loan payments, but rather, will lead to about a 17% increase in monthly payments.

The real problem is the rising cost of college, and decline in government grants. A recent study by Gallup indicates that only 15% of Americans think that it would be reasonable for colleges to charge students more than $20,000 per year. Yet, many schools, such as MIT, Cornell, and Harvard, charge over $50,000 per year, after tuition and living expenses are taken into account. (more…)

07.01.13 | 3 Things You Should Know About the Stafford Loan Interest Rate Increase

Posted in News, Stafford Loan, Student Loans by Student Loan Network Staff

As you may have heard, the interest rate on subsidized Stafford loans just increased from 3.4% to 6.8%, effective July 1, 2013. Congress wanted to keep rates down, but the deadline hit before all parties could agree on a course of action. Here’s what you need to know about these changes.

1. It only affects new loans

I’ve received a lot of questions lately about the impact of this rate increase. It seems like graduates everywhere are concerned that their student loan payments will soon be skyrocketing. The good news is, it’s not retroactive — meaning it won’t affect any subsidized loans originated before July 1, 2013. So for borrowers who are currently repaying older loans, don’t worry, you’re in the clear.

However, the new rate will impact loans originated after July 1, 2013. This means any new subsidized loans will have the 6.8% rate. Despite this rate hike, subsidized loans are still a better deal for borrowers because the interest subsidy remains intact.
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06.14.13 | 5 Solutions to the Subsidized Student Loan Debate

Posted in Financial Aid, News, Stafford Loan, Student Loans by Student Loan Network Staff

Over the past month, you may have heard about the impending subsidized student loan interest rate increase, as politicians frantically work to come to a consensus before July 1. Right now, subsidized student loans interest rates currently stand at 3.4%, but will increase to 6.8% unless a new bill is passed by July 1.

With this decision having a major impact on your future, it is important to stay up to date with the issue and the suggested solutions.

1. Default Solution: Increase to 6.8%

As stated above, if politicians fail to come to an agreement, the interest rate for subsidized loans will increase to 6.8%.

2. Democratic Solution: Student Loan Affordability Act

Most Democrats in the House of Representatives argued for a two-year extension on the 3.4% interest rate, which would maintain the current interest rate and bring the question to Congress again in two years. However, this bill was rejected in the Senate on earlier this month.

3. Senator Elizabeth Warren’s Solution: Student Loan Fairness Act

Senator Warren proposed a bill which would dramatically cut the interest rate on subsidized loans. Citing the fact that the student loan debt now exceeds $1 trillion, Warren proposed cutting the interest rate to 0.75%, which is the same rate that banks are able to get from the government. For more information, please see our recent article on the details of Warren’s bill.
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06.11.13 | Impacts of the Potential Stafford Loan Rate Increase

Posted in Financial Aid, News, Stafford Loan, Student Loans by Student Loan Network Staff

Student Loans in the MediaWith the recent legislation involving the subsidized student loan interest rate, many have begun to express concern towards the fact that if Congress is not able to reach an agreement by July 1, subsidized Stafford loan interest rates will automatically increase from 3.4% to 6.8%.  In the process, many news sources have erroneously been reporting that this increased interest rate would yield an additional $1,000 in annual debt for the average borrower. However, this figure is much lower in reality.

Using the loan repayment calculator from Finaid.org, we can begin to calculate more-accurate rates (though still estimates). Assuming a student borrows $23,000 over the course of four years—the maximum amount that can be taken out for undergraduate studies—the annual increase will be less than half of what has been reported.
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05.23.13 | Smarter Solutions for Students Act

Posted in Financial Aid, financial aid tips, News, Stafford Loan, Student Loans by Student Loan Network Staff

As you may recall, last year, Congress voted on whether to raise the subsidized Stafford loan interest rate to 6.8%, or keep it at 3.4%.  Congress decided to prolong the decision for another year and keep the subsidized interest rate at 3.4%.  However, a year has gone by, and it is once again time for Congress to vote.  If Congress fails to come to a consensus by July 1, the interest rate on subsidized loans will automatically double to 6.8%.

In response to this impending decision, several politicians have put forth ideas of what they deem to be the best solution.  On May 1, Senator Elizabeth Warren proposed the Bank on Students Loan Fairness Act, which sought to lower the interest rate on subsidized loans to just under 1%, which she described as the equivalent rate for which banks qualify.
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05.16.13 | Elizabeth Warren Calls for Student Loan Changes

Posted in Financial Aid, News, Stafford Loan, Student Loans by Student Loan Network Staff

Last year at this time, the big issue in the news was the impending doubling of student loan interest rates. The interest rates of Subsidized Stafford Loans were set to double from 3.4% to 6.8%. Before this could happen, Congress stepped in, temporarily lowering them for another full year.

That extra year of low rates is now coming to a close, and rates are once again set to double. This is why Senator Elizabeth Warren has introduced the Bank on Students Loan Fairness Act. This act would allow students to borrow at the same rate as banks, which is about “one-ninth the amount that students are asked to pay”.

Here is a quick list of what this bill seeks to do:

  • The bill would charge students a rate equal to the rates banks are getting from the government (for subsidized loans only)—a rate of less than 1%.
  • Loans would be funded through the federal reserve, with administration by the Department of Education

Senator Warren gives an excellent overview in her introduction of the bill to the Senate Committee. Watch it below.