Beauty Link - Volume 5, Issue 4 - (Page 26)

Student Loans’ New Interest Rate Structure AND THEN THERE’S COMPLIANCE “Congress reaches agreement on a new interest rate structure for Federal Direct Student Loan...” made the headlines across the country. After months of political back and forth, both houses of Congress have come to a resolution on the student loan interest rate debate. July 31, 2013, the House passed the Senate-amended version of House Bill HR 1911. It now awaits the President’s signature, which is anticipated to happen without delay. The new interest rate structure will be applied retroactively to all Federal Direct Loans with a first disbursement on or after July 1, 2013. The current version of the bill awaiting the signature of the president puts the interest rate structure to be set using the following formulas: • Undergraduate Stafford loans (subsidized and unsubsidized): 10-year Treasury Note plus 2.05 percent, capped at 8.25 percent. • Graduate Stafford loans: 10-year Treasury Note plus 3.6 percent, capped at 9.5 percent. • PLUS loans (graduate and parent): 10-year Treasury Note plus 4.6 percent, capped at 10.5 percent. It is important to note that there is no longer a difference in the interest rates for undergraduate subsidized and unsubsidized Direct Loans as there has been since 2006. The interest rate for both subsidized and unsubsidized loans for undergraduate borrowers will be the same. Current forecasts for the 10-year Treasury Note are highlighted below. These are the rates that were used in determining the cost and budget savings over a 10-year period. It is good to keep in mind that, as anyone knows, these forecasts for future years’ Treasury Note yields depend upon numerous factors in the economy and may vary from what has currently been forecast (other than for 2013, which is now actual and will set the 2013-2014 interest rates). The current forecasts for “the high yield of the 10-year Treasury Note auctioned at the final auction held prior to” June 1 preceding the July 1 start date of the new award year are: • 2013 – 1.81 percent • 2014 – 2.6 percent • 2015 – 3.45 percent • 2016 – 4.2 percent • 2017 – 4.95 percent • 2018 through 2023 – 5.2 percent With these forecasts, we can see that the following interest rates will be in effect for 2013-2014: • Undergraduate Direct Loans (subsidized and unsubsidized) 1.81 percent Treasury Note yield + 2.05 percent = 3.86% • Graduate Direct Loans (subsidized and unsubsidized) THIS NEWS FLASH It is important to note that there is no longer a difference in the interest rates for undergraduate subsidized and unsubsidized Direct Loans as there has been since 2006. The interest rate for both subsidized and unsubsidized loans for undergraduate borrowers will be the same. BY D. SHERWIN HIBBETS 26 | B E A U T Y L I NK | C AN YO U HEAR ME NOW? | 2013 1.81 percent Treasury Note yield + 3.6 percent = 5.41% • PLUS Loans (graduate and parent borrowers) 1.81 percent Treasury Note yield + 4.6 percent = 6.41% Keep in mind that the president must sign this bill. But, since both the House and Senate have passed the amended HR 1911, and the bill is very similar to what the president has also promoted, it is anticipated that he will sign the bill into law without delay. However, until such time, the above rates are not official, but it is anticipated that they will be very soon! From an operational standpoint, the Department of Education (ED) has stated at a recent conference that, should an interest rate change be enacted with a retroactive application of this interest rate to all loans with a first disbursement on or after July 1, 2013, simply a change in the interest rate will not require schools to do any reprocessing. Also, new Master Promissory Notes (MPNs) will not be required since the MPNs do not list the interest rate anywhere. However, we will keep you informed of any latebreaking guidance from ED. Important Recent Additions to Two Separate ED Publications The first is a new Volume 8, “The Direct Loan Program,” added to the 2013 updated edition of the Blue Book. The 2013 volumes released this year provide the first updates to the Blue Book since 2005. Although typically the Blue Book is geared to those individuals responsible for managing, accounting for, and reporting on the use of Title IV funds at an institution (e.g. fiscal office personnel), this volume will be of interest to anyone wanting to have a more comprehensive knowledge of the Direct Loan (DL) program. This volume covers the whole gamut of the DL program, from loan limits, the Master Promissory Note and required counseling, to disbursements and reconciliation. It gives ample opportunity in the material covered to either learn of the DL program initially, or to receive a refresher on items that a particular staff member may not work with on a daily basis, but would like to know more about. ED also released Volume 2 of the 2013-2014 Federal Student Aid Handbook. This volume is the one that addresses “School Eligibility and Operations” and should be of specific interest to school owners and directors. A number of changes and/or enhanced explanations are provided in this edition of Volume 2. Some items addressed for the first time or that are more thoroughly covered include a discussion of direct assessment programs, an example of

Table of Contents for the Digital Edition of Beauty Link - Volume 5, Issue 4

message from the aacs president and cea co-chairs
the workings of washington
Rejuvenate Your Passion for Business
The AACS Affi nity Program
Mobilizing Your Business Is a Thing of Beauty
Open Door Leaders
and then there’s compliance
Motivating Your Students
Use Your Resources
step by step
Taking Out the Mystery
beauty changes lives
Beauty School Insurance
a student’s perspective
skin care council
aacs listserve q & a
Beyond 2014
voices from the classroom
Work Smart
superstar graduates
Celebrate the Power of Being an Educator
people & places
new products & services
associate member profiles: salons
new school members
upcoming 2013-14 events
In Memory
index to advertisers

Beauty Link - Volume 5, Issue 4