Generation Debt

Another story on H.R. 4283. After a cursory review of H.R. 4283, I've not seen anything in it that helps us on the refinancing front. As far as I can see, it contains no provisions on that issue. But the stories on the bill are interesting, if only for the dialogue they raise, and the almost anti-graduate sentiments that come out, like the following:

"Said Jim Boyle, College Parents of America's president: 'In a situation where there's a zero-sum game going on when it comes to budgets for higher education, our group wants to see money allocated to current and future college students, not to those who have already graduated.' "

Wonder if you'll be singing a different tune once your kids have been out a few years and can barely live off their salaries because of their exorbitant loan payments, pal.

Also note this MSN article urging borrowers to consolidate. As a nice change, the author actually talks about the one-time consolidation rule and how it screws us:

The bad news for the already-consolidated

Many borrowers locked in what seemed like great deals in 2000 -- only to see the prevailing rate drop by more than four percentage points since then.

'My daughter consolidated her $45,000 in debt just before (Federal Reserve Chairman Alan) Greenspan started lowering interest rates,' fumed Steve Lustig of Greenwood Village, Colo. 'Iíve called, written and e-mailed my congressional delegation (asking them to change the one-consolidation rule) . . . to no avail.'

Lustig said his daughter could save over $9,000 if she could refinance her loans at current rates, but chances for change are slim.

As Michael OíBrien of FinancialAid.com explains, major lenders have billions of dollars of loans in their portfolios that were consolidated at higher rates. Changing those rules would cost them a fortune and, some say, could even require a federal bailout, since the lenders count those loans as rock-solid assets.

The only way you can consolidate again under current rules is if you have another loan to wrap into the package. Even in that case, you wonít be able to lower the rate on the loans youíve already consolidated. Remember, the consolidated rate is based on a weighted average of the rates on the underlying loans.

Your best bet: pay your loans off as quickly as possible. An extra $100 a month could pay off that $20,000 loan in half the time and save you over $12,000 in interest.