OT- No More Grace Periods on Student Loans

Submitted by TXWolverine44 on June 30th, 2012 at 2:29 PM

Article in Chicago Tribune says that there will no longer be a 6 month grace period after students finish school. Will earn interest on loans even if in Grad school. If I read the article correctly, will only be applicable to loans taken out from starting tomorrow and on (or July 2014?)

I'm not sure on how this affects this years grad or current grad students.




Mod Edit: Relevant topic to many on the board, but too much politics. That's why we can't have nice things. [zl]



June 30th, 2012 at 4:02 PM ^

However it is tough the first few years. 15% of my income (which is pretty modest as a resident) is managable. However, my wife and I have to file taxes separately (losing out on all the tax breaks from student loan payments, mortgage payments, etc..) specifically to avoid haivng the income based repayment plan be based upon our cummulative salaries. There is no question medicine provides a solid financial future, but I have pretty much lived like a med student the first few years


/weep for the poor MD   /s


June 30th, 2012 at 2:54 PM ^

I think this is an important topic that can hopefully get discussed without getting political (it was a bipartisan legislation anyway).

This is not good for students.  The short term seems nice: $1k less in interest rates or whatever.  But really, it's tough to have a job immediately.  Even those that do get a job quickly may have a 1-2 month post-grad job search.  I was lucky and only had a 2 week post-grad search, but I didn't receive my first pay check until about 3 months after graduation.  By that time I had nearly exhausted all my student loan money and was very close to having to find money elsewhere.  Once the paychecks started coming in, things were ok.  However, that grace period is essential.

Now that I write that, however, I'm slightly confused.  Does this mean that students will need to immediately start paying the loans, or just that they'll start accruing interest immediately and the first bill still won't be for 6 months?  If the later, then it's not as big a deal as I originally thought.


June 30th, 2012 at 6:52 PM ^

This is not good for students.

It depends. If changes in government lending practices force colleges to finally take a hard look at their finances, instead of splurging on frivolous things like putting jacuzzis in dormitories (which MSU actually did recently) and passing the costs onto the students, that would be certainly a good thing for students. For years, easily-available loans have been giving universities cover to jack up tuition rates far above the rate of inflation.

(EDIT: Farnn summed this up very well a little further down in the thread.)


June 30th, 2012 at 3:27 PM ^

You're offered up to 36 months (needs to be renewed every six months) of umemployment deferment on student loans. Though, interest accumulates during this time. You'll still have time to find a job, but interest will accumulate during those first six months instead.


June 30th, 2012 at 4:35 PM ^

I was just going to ask that.  When I went from med school to residency, I was able to use the "hardship deferment" to defer going into repayment since residents make crap... wondered if something like that was still around.

As a side note, I went ot med school late enough that I will be paying off my loans into retirement.  But I'm not complaining... the loans themselves were good deals, and I have a well-paying job that's probably not going anywhere.


June 30th, 2012 at 3:30 PM ^


Well yeah, we all know the best way out of a depression is to lessen the incentive for people to go to (or go back to) school.


I hate both sides of the aisle right now.  They can all sit and spin.


June 30th, 2012 at 3:30 PM ^


Well yeah, we all know the best way out of a depression is to lessen the incentive for people to go to (or go back to) school.


I hate both sides of the aisle right now.  They can all sit and spin.


June 30th, 2012 at 3:55 PM ^

Unfortunately, cheap student loans are also driving up the cost of college, requiring more people to take out loans, and people to take out ever larger loans.   The cost of college has increased faster than inflation for the last few decades because schools compete for students and places in the rankings based on some of the dumb statistics that US News and World uses.  These cost increases are often for things that have little impact on actuall quality of education, but rather for perks that entice students to the school such as new dorms.

The only reason schools can get away with these cost increases without pricing out most of their applicants is because of the easy availability of low interest student loans.  These loans lure in students because they have been led to believe that they must go to the best ranked school to have a happy life, and the loans seems like great deals.   Pretty low rates, no need to pay back until after school, and the idea that you will make plenty after school to pay off the debt. 

I don't know what the solution to the issue is because I think everyone deserves a shot at a great education if they have worked for it.  But the steady increase of costs at double the rate of inflation has to stop.  If student loans stay cheap, we will have recent graduates with ever increasing debt burdens as college costs keep soaring. 


My name ... is Tim

June 30th, 2012 at 4:29 PM ^

Interesting theory but I haven't seen any data to back this up. So because loans are available people just abandon cost-benefit analysis and don't favor schools that will leave them less in debt? There is still reason for schools to offer competetive tuition. I, for one, chose my law school, in part, because I was offered scholarship money to reduce the cost. I chose it over schools that were maybe ranked slightly higher. I think a large majority of potential students think that way, which would debunk your theory. Low interest loans certainly make tuition increases possible - in that otherwise no one could afford the tuition in the first place - but it doesn't necessarily mean it's the cause of the increase.

Indiana Blue

June 30th, 2012 at 5:21 PM ^

as the "housing crisis" schemed up by "our" government.  Everbody deserved to buy a house, right?  So here comes cheap money to anyone that wants it ... no proof of income needed.  Just say you want the money and like magic you had Fannie loans.  This created an unjustifyible increase in the market  to purchase price of a home.  The market shot up 30 - 50% in almost no time at all, c'mon everybody deserves a home .... uh, then they discovered a problem.  People with no income could not make mortgage payments ... so we get "Housing Bubble" and a financial collapse.   So college costs are now (and have been) also rising beyong what the market should be .... 

Bottom line ... the Easiest money anyone can spend is somebody else's money!

Go Blue !


June 30th, 2012 at 5:58 PM ^

I think and interesting solution would be to link interest rates to HS GPA and SAT/ACT scores(worse scores, high interest rate). It would encourage kids to work harder in school and make kids who may be less competitive in college to strongly consider what will be the option for their future. 

The flip side to this is that kids with higher GPA/test scores usually go to be better schools and are probably more likely to pay off their loans more easily, while the kids who are being charged the higher interest rates are already less likely to easily pay off their loans. 


June 30th, 2012 at 4:12 PM ^

if you will, just how much less college or university would cost if you could jump in, freshman year, with both feet into your major. 


June 30th, 2012 at 7:01 PM ^

I'm in education for a living, so I'll admit a bias...

But that year of "well-roundedness" in your classes is very important.  If for no other reason than to prepare you for success in your "important" classes that more directly relate to what you'll do after college.

Indirectly, those classes:

  • Make you a better, more critical writer
  • Make you a better, more critical reader
  • May challenge you to the point where you have to explore many study styles and ways to show your knowledge(weeder classes)
  • Teach you another language
  • Allow you the opportunity to become educated about something other than your future expertise area, which is important*

And then there's learning for learning's sake.  Man I would love to just learn and enjoy it - take some evolution of culture classes or history classes or astronomy classes.  And you never know when you'll learn something that will be applicable to your future employment (hell, or even a throwaway fact you'll mention in an interview).

*For me, I discovered a love of the study of  film thanks to my LSA "random" reqs.  Ended up minoring in film study and I bring that up in interviews a lot.  I might even get the chance to teach a high school elective on film next year. So you never know.


June 30th, 2012 at 4:39 PM ^

I still say that if they want to get tuition back in line with the reality of what a degree gets you after school, they should do a 3 year ban on all student loans. In the new economy, a degree is worth way less than it was when we had a growing corporate job base 30 years ago and earlier.

Schools charge up the ying yang because they know anybody who wants to go into debt to pay their price can do so without much more work than filling out a form.  

panthera leo fututio

June 30th, 2012 at 5:19 PM ^

The returns to a college degree (measured in income relative to non-college graduates) have been increasing, at least for dudes, for a while (these numbers end at 2000, but I'm under the strong impression that the trend is continuing):

That said, increases in the costs of college attendance have also been outstripping total increases in expected earnings for a while:


June 30th, 2012 at 6:00 PM ^

This sucks for students in the short term, but I'm glad congress is finally realizing an extreme need to reign in the current lending practices. With income based repayment and loan forgiveness, it's necessary. Besides, the job situation for grads is a lot better than it was 2-3 years ago, and giving these grads a 6 month vacation is probably doing them a disservice.


June 30th, 2012 at 6:01 PM ^

That (policy in the OP) is.... absolutely insane.  Gives no time to look for work or accumulate any kind of money to begin paying those.  It's like forcing people into delinquency immediately after graduation.  


WOW is that a bad policy in my opinion. 

MMB 82

June 30th, 2012 at 6:17 PM ^

Need to bring you up to speed on this- physician incomes have been dropping steadily (vs inflation, etc.) since the mid-80's, and without getting political it is about to take a significant turn for the worse. I just got off the phone last week with a newly minted radiologist (UM grad, no less) who can't find a position with a group and is currently working for an insuarance company doing peer-to-peer consults for authorization of treatment. Likewise with lawyers, unless you can find a firm that is hiring for bankruptcy law, job prospects for most new attorneys are pretty grim.