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    The McMaster Department of Philosophy has now put together the following notice commemorating Barry: Barry Allen: A Philosophical Life Barry…

Changes to Federal Subsidized Direct Loans for Graduate Students

Brian Leiter

A philosophy graduate student writes:

Many undergraduate students who read your blog may be interested to learn about a significant change in the regulations of the Federal Student Loan Program for Graduate Students.  I found the following email in my inbox this afternoon: 

"We are writing to advise you of an important change in Federal regulations that affects your ability to obtain a Federal Subsidized Direct Loan.  Starting July 1, 2012, the Subsidized Direct Loan will no longer be available to Graduate students.  This change was made at the Federal level and will affect all Graduate/Professional students nation-wide not just here at  XXXXXX University. .This change in Financial Aid will not effect the Un-Subsidized Direct Loan program. The Budget Control Act (BCA) of 2011 (Pub. L. 112-25) was signed into law on
August 2, 2011"

 Many graduate students rely on loans throughout their graduate careers to supplement the generally low (liquid) incomes they receive. Students considering graduate school in philosophy and who are thinking they may need to take out loans to get by, should pay careful attention this, Unsubsidized loans carry higher interest making them more difficult to repay. I have to say i am quite surprised that I have not heard anything about this change in the regulations previously.

I had also not heard about this.  Readers, any more information, links, insight into the consequences of the change, etc.?

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7 responses to “Changes to Federal Subsidized Direct Loans for Graduate Students”

  1. Nick

    I remember reading about this during the summer. I think I read it here: http://www.forbes.com/sites/janetnovack/2011/07/27/debt-ceiling-plans-take-aim-at-graduate-student-loans/. Unfortunate news.

    Reply
  2. John Protevi

    The last article in this PDF pamphlet treats this issue as "John Boehner's revenge": http://reclamationsjournal.org/pdfs/pamphlet%20debt%20pdf.pdf

    The whole pamphlet is very useful.

    Reply
  3. Jennifer White

    This was covered here back in August:

    http://leiterreports.typepad.com/blog/2011/08/debt-ceiling-deal-will-also-screw-over-students-with-loans.html#tp

    http://leiterreports.typepad.com/blog/2011/08/the-debt-deal-and-grad-students-and-student-loans-again.html

    I also posted some thoughts about the BCA immediately after it was passed, on SFSU's graduate student blog here:

    http://sfsuphil.blogspot.com/2011/08/debt-deal-very-bad-news-for-graduate.html

    Reply
  4. Graham Smith

    This unfortunate news may be somewhat mitigated through the Public Servie Loan Forgiveness Program for some students who enter public service. Working for a public university appears to count as public service. See below:

    http://studentaid.ed.gov/PORTALSWebApp/students/english/PSF.jsp
    http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv5_051511.pdf

    Note that the second document states that: "For purposes of the Public Service Loan Forgiveness Program, the term “public service organization” means – A federal, state, local, or Tribal government organization, agency, or entity (includes most public schools, colleges and
    universities)"

    Reply
  5. Concerned Philosophy Undergrad

    I am totally astonished that the United States continuously tries to dissuade undergrads (like myself) from aspiring for grad degrees; why is this? Certainly it cannot ONLY be a matter of cost. Is there some other reason? Maybe some of the more politically inclined on this blog could answer this question.

    Reply
  6. Josh May

    I just consolidated my federal student loans and read up on the details of the Public Servie Loan Forgiveness Program. And I'm glad I did, since which repayment plan you choose is very important! (Note well.)

    The shorter version:
    The program sounds great. Pay for 10 years, then have the rest of the loan debt eliminated? Count me in! But it can be difficult to really take advantage of the program—not to qualify, but just to have it eliminate a large portion of one's loan debt. In other words, it's not as great as it seems at first. Nevertheless, it's better than nothing.

    The longer story:
    Of course we'd all like to take advantage of the loan forgiveness program by setting a long repayment term (like 30 years, or even just 20) and then working at a university for 10 and kissing the rest of the debt goodbye. It's not so simple. As far as I can tell, there is no way to get a 30 year repayment term that qualifies for the program. Basically, you must choose an income-based repayment plan in order to take advantage of the program at all. And, while these can have repayment terms of up to 25 years, you can't just choose that term-length at will. It's determined automatically by your income (along with your spouse's if you file your taxes jointly). For some, this will amount to something like a 12 year repayment plan, for example, and paying a higher amount during that time than a longer standard plan with a fixed rate throughout (e.g. the Standard repayment plan over 30 years). I messed around with the Fed's calculator a bit, and it looks like income-based terms are much closer to 10 years than 25 given the normal salaries professor's make.

    I'm no expert on this, so definitely check it out yourself. But I did study the rules and regulations recently, so I figured I'd share my reaction to it.

    (Final note: Some documentation out there seems out-dated. In particular, I found some things about the plan that looked like they were on government or otherwise reliable sources, but they claimed that the Standard Repayment Plan can't exceed a 10 year term. That's not true. And the latest from the Dept. of Ed.'s website says as much, including their online consolidation application. The Standard Repayment Plan I got offered on the online app, was for 30 years.)

    Reply
  7. Kathryn Norlock

    Yes, I was rather dismayed to find that almost none of my student loan payments, while I was serving the state of Maryland, qualified as counting toward forgiveness; some did, which is confusing, as it implies I was on a qualifying program (else why did some payments qualify?), but it also implies that even when one is on it, many of one's payments don't qualify. And the hitch in the forgiveness program is that you need to make ten years' worth of qualifying payments, so serving ten years, even on the right repayment program, doesn't generate ten years' worth of payments, if that makes sense. I found it all most dispiriting. I am glad I live in Canada now.

    Concerned Undergrad, I suspect the government isn't intending to dissuade or to not dissuade. As far as I can tell, loan recipients with advanced degrees are actually more likely to pay back loans; those who aim to make more interest off of us are keen to indebt good earners, it seems. When I think about it that way, it is rather clever, really. We'll pay much more out of our likely salaries to the government in interest payments, and then also pay taxes. What a treasure-trove we loan recipients turn out to be! And when we attempt to claim student-loan interest deductions on our taxes, we find that deduction is capped at %2,500, far, far less than we pay each year. Yep, it hurts.

    Reply

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