Student Loan Deal Passes Senate

The mortgage-style loans, which were taken out by students who began courses between 1990 and 1998, have been sold to a debt management consortium for 160 million. Universities Minister David Willetts said the private sector was best placed to collect the outstanding debt Credit: PA Wire Universities Minister David Willetts said the move represents “good value for money”, and would enable the Student Loans Company to concentrate on administering more recent loans. NUS president Toni Pearce said it was “extremely concerning” that the public would be subsidising a private company to make a profit from public debt. More top news

“The private sector is well placed to maximise returns from the book which has a deteriorating value. The sale will allow the Student Loans Company to focus on supplying loans to current students and collecting repayments on newer loans. Borrowers will remain protected and there will be no change to their terms and conditions, including the calculation of interest rates for loans. But as noted in a HuffPost UK blog earlier this week, speaking to a parliamentary select committee last June, universities minister David Willetts told MPs: “In the letter that every student gets there are some words to the effect that governments reserve the right to change the terms of the loans.” Toni Pearce, President of NUS, said the move was “incredibly problematic” and would affect everyone who had taken out a student loan. This announcement is extremely concerning and is one that will see the public subsidising a private company making a profit from public debt, which is incredibly problematic,” she said. The impact of this sale wont only affect borrowers, but will affect everybody. “The simple fact is that having these loans on the public books would be better off for the government in the long run.

“The private sector’s expertise makes it well-placed to collect this debt and the sale will also help the Student Loans Company (SLC) to concentrate on providing loans to current students.” The low recovery rate on the 1990s loans means the sale price is likely to be only in the tens of millions of pounds, reflecting the distressed nature of the debts, people close to the situation said on Sunday. The deal will come at a sensitive time, just weeks after Royal Mail was floated with a valuation of 3.3bn. On Wednesday, Royal Mail will present its maiden results as a listed company, while Vince Cable, the Business Secretary, will make a further appearance before the BIS Select Committee amid allegations that the postal operator was sold too cheaply. The Government insisted that bidders for the 900m loan portfolio, which was given the codename Project Ariel, would be assessed against a strict set of criteria, although it did not say publicly what these would be. It added that the terms and conditions for borrowers whose loans were included in the sale would not change.

But there are those who say this is a bad way to measure and predict what loans cost the government. They like something called “fair This summer, Congress directed the Government Accountability Office to conduct a study on the true cost of the federal student loan programs.value accounting,” which they say does a better job of factoring in the cost of collecting delinquent or defaulted loans and looking at the risk taken by the government when it lends out money. They say there is actually little to no profit. In his call with reporters this summer, Duncan did not get into which method of accounting he prefers, just that he believes the government isn’t running the student loan system in order to make money, but rather to help students afford college. Debt’s effect on economy Prospective students tour Georgetown University’s campus in Washington, D.C., in July. (Photo: File photo by Jacquelyn Martin, AP) The large debt numbers have sparked concerns about impact that debt is having on the nation’s economy.

The loans, which were taken out between 1990 and 1998, are likely to be sold for significantly lower than their market rate. Universities Minister David Willetts announced plans to sell the loans in March, saying the “mortgage-style” student loans will “allow us to reduce public debt and maximise the value of one of the government’s assets. A fresher at Manchester university browses books at a secondhand stall. Student loans from 1990 to 1998 will be sold to a private debt collection agency on Monday “The private sector’s expertise makes it well placed to collect this debt and the sale will also help the Student Loans Company to concentrate on providing loans to current students.” Many whose loans will be included in the sell-off took to Twitter on Sunday evening to voice concern about the plans to sell the loans to a debt collection agency. I wish there was a way I could stop them selling off the student loan book, it’s lunacy. Loooooooonacy!

What many borrowers don’t realize is that credit card debt, even gambling debt, can be discharged in bankruptcy, but not student loans. The government will take your tax return, disability check, even your social security to get that money back. “Over 120,000 individuals did not get their social security checks because of their student loan debt,” said Cathy DeWitt Dunn, a financial planner. She advises students to look at community college, stay in state and take online courses to save money. “No one has sat down with these kids to tell them this is the impact of what is going to happen to you,” DeWitt Dunn said.”This money is so easy to come by.” The Striblings are taking advantage of one government option — an income-based repayment program where they pay a percentage of their salary for the next 25 years. In the end, they will pay taxes on the balance.

Full-time students starting at a publicly funded university in the U.K. for the 2013-2014 academic year paid an average of almost 8,500 pounds , or close to $13,500, according to the U.K.’s Office for Fair Access. Students in the U.K. can borrow loans for both tuition and living expenses from the government-run Student Loans Company, and approximately 958,000 students did during the 2011-2012 school year, according to an annual report from the company. On average, students borrowed close to $10,200 during that time frame.

The Responsible StudentLoan Solutions Act was primarily designed to reset student-loan interest rates at the 91-dayTreasury bill level, with an add-on percentage determined by the secretary of educationto cover program administration and borrower benefits. Under the plan, interest rates forneed-based, subsidized federal loans would be capped at a maximum of 6.8 percent. Ratesfor unsubsidized and parent loans would be capped at a maximum of 8.25 percent. The Responsible Student Loan Solutions Act would also give the secretary of educationthe authority to reissue federal Stafford and PLUS loans at the same lower interest rateplus a markup for the cost of servicing. Under the bill, administrative costs can equal amaximum of 0.5 percent of the loan principal. Federal Student Loan Refinancing Act, proposed by Sen.

government to help finance a college education. Students can apply through their university financial aid office. The loans are limited to no more than $5,500, for a mix of subsidized and unsubsidized loans for the freshmen year and $7,500 for juniors and above. On July 1, the interest rate on subsidized Stafford loans doubled from 3.4% to 6.8%. The rate hike affected 7.4 million students.


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