Monday, November 14, 2005

federal budget update: those phone calls work!

A quick update on the 2006 Budget Reconcilliation Process:
Last week Thursday House Republicans cancelled a vote on proposed $54 billion in spending cuts on programs such as Medicaid, Food Stamps, TANF, and student loans.

Though the budget fight isn't over (gov can't run without a budget) it's good to see we can make a difference.


Mary said...

Regarding the student loan part of the budget, check out the following post that was on The Turner Report.

This blogger sent in excerpts from news stories.

From the (California) Valley News
October, 2005
No Competition for Student Loans

The largest lenders in America have a plan to improve the federally guaranteed student loan program. They want to 1) eliminate competition; 2) raise prices; and 3) hope no one notices.

From The Street.Com
By Terry Savage
November 14, 2005

If the House bill passes, the vast majority of borrowers, who have already "refinanced" or "consolidated" student loans one time will never be able to do so again.

Not only is that a rotten deal, but the House is in the process of making it worse. New legislation proposed by the House would prohibit students who are in school from locking in their current rate of 4.75%. Instead, the rate would jump to 6.3% for this year's graduates, then to 7.9% for those graduating after this coming June.

A bill now pending in the Senate has similar, but less onerous, changes proposed. While the Senate bill would raise rates for new Stafford loans to 6.8% beginning next July, it doesn't prohibit in-school consolidation or charge the much higher consolidation rates that the House bill proposes. Instead, it continues to allow borrowers to consolidate at the weighted average of their current loans.


Just at the time when our country needs college graduates to keep up with technology changes in this competitive world, we're punishing students who borrow to finance their education. Why? In two simple words: money and politics. With over $300 billion in student loans outstanding, there's big money to be made by the relatively few lenders who dominate the market for student loans.
In fact, for years a quasi-governmental organization called Sallie Mae (Student Loan Marketing Association) dominated the entire market. Awhile back, the organization dropped its federal charter and morphed into a non-governmental, profit-making company that still uses the Sallie Mae nickname but is now officially SLM Corp). It controls so much of the student loan market -- nearly 25% of loans outstanding -- that in 2004 SLM was among the most profitable companies in the country.

Profit isn't a dirty word in this column. But these lenders get a guarantee against default on 98% of the student loan balance, as well as a guaranteed yield of 2.34% over the commercial paper rate on consolidation loans. That and other yield guarantees on in-school loans, have resulted in a net profit of over 1% of loan volume. You do the math. On a portfolio of nearly $100 billion, that's over $1 billion in profit!
Now SLM -- the old "Sallie Mae" -- is strongly behind the current proposals to make it more difficult and expensive for students and graduates to refinance the loans that Sallie Mae and big banks currently hold. If you're a student, graduate, or parent, it's time to make your voice heard as the proposals are currently before Congress. Making a college education more expensive is no way to solve our nation's global competitive problems. And that's The Savage Truth.

From the Madison (Wisconsin) Star
Congress Let’s Sallie Mae Squash Competition

There's more: Sallie Mae convinced Congress that too much competition to refinance student loans would be very messy and very inefficient. Once you refinanced your loans once, you were done. No matter if interest rates plunged and you were holding a loan at several points above market rates, there was nothing you could do about it.

Think of what would happen if America's largest mortgage lenders tried to pull a stunt like that: They'd either go to jail, or out of business or both. With Sallie Mae, the stock went up.

These and other legislative edges gave Sallie Mae an enormous advantage in the market place.

From the Chronicle of Higher Education
By Stephen Burd

Meanwhile, loan-industry officials have been pressing Congress to make a significant change to the federal loan-consolidation program, which allows borrowers to combine and refinance their federal student loans. If the industry gets its way, borrowers who seek such consolidation loans would no longer be able to lock in a low, fixed interest rate for up to 30 years, as they are able to now.

Lenders, like Sallie Mae and Citibank, which have lost a growing share of the market to new companies that specialize in refinancing, have pushed for a shift to variable rates for several years, to make the loan-consolidation program less attractive to borrowers.

From MSNBC.Com
By Liz Weston

"What's more, powerful lenders are pushing for a big change in the way consolidation loans work. If these lenders succeed -- and the odds are with them -- interest rates on future consolidations will be variable, rather than fixed, starting in July 2006. (Loans consolidated before then would not be affected.)

The proposal could add considerably to the cost of getting an education. The nonpartisan Congressional Research Service estimates variable rates on consolidated loans could add $3,000 to $5,500 to the average loan cost over 15 years. The U.S. Public Interest Research Group, a consumer advocate, thinks the potential cost could be closer to $8,000.

# posted by Fred : 10:04 PM

geldlening said...

Hi Blogger! Ik ben op zoek naar een geldlening Zou Afab echt zo goed zijn als iedereen beweert? Of kan ik beter zoiets als Geldshop proberen?

Groetjes Albert

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