The idea for the cuts originally came from the Republican-controlled House, but even Senate Majority Leader Harry Reid proposed cutting the graduate school subsidized loans in recent budget talks.

The money saved by the student loan cuts would help pay to keep Pell Grants, which so far are maintained at a maximum grant of $5,500 a year for some eight (8) million poor students.

Of the $22 billion saved, $17 billion will go to fund Pell Grants, which only leaves that program $1.3 billion short, said student aid groups. That’s why most groups can live with the cuts to graduate student loans.

The rest of the savings goes to deficit reduction.

“Full funding for Pell Grants is absolutely essential to fulfilling the President’s goal of the U.S. once again having the highest proportion of college graduates in the world by 2020,” said Pauline Abernathy, vice president of the Institute for College Access & Success.

The maximum a graduate student can borrow from the federal government is $20,500 a year, including $8,500 from subsidized loans where the federal government absorbs the interest rate while the student is in school. Over the course of a degree, graduate students can accrue up to $138,500 in direct federal loans, with $65,500 from subsidized loans.

A graduate student who borrows the maximum of $65,500 in subsidized loans would owe $207 a month in interest payments over the course of ten (10) years. But with a subsidized loan, the government pays that $207 each month the student attends school until six (6) months after graduation.

This change would shift some $125 billion in loan volume over to unsubsidized loans and would cost students $18.1 billion over the next decade, according to the Congressional Budget Office.

Graduate students would start accruing the interest rate payments while they’re in school, but they wouldn’t have to start making payments on the interest or the principal until after graduation. They can choose to pay the interest while they’re in school.

“With the elimination of the graduate interest subsidy, it is also clear that graduate and professional school students will be hard-hit in terms of their total indebtedness,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators. “Our members are disappointed to see the pullback in loan repayment incentives.”

The other big cut that Congress is targeting is a credit that all students get on the origination fee they pay the federal government to process their loans. Students pay 1% of a Stafford loan as an origination fee, but all students get half of that back unless they miss one of their first 12 payments.

The loss of that credit would cost a student who borrows $5,000 from the federal government $25. This would cost students $3.6 billion over the next decade, according to the budget office.

If you are having student loan issues or need help with any other consumer credit related issue, give us a call at (716) 831-1111 to discuss your case. Buffalo, NY consumer law attorneys Jason A. Shear and Carol A. Brent will be happy to speak with you.

The bank inexplicably decided that Wrenella Pierre was dead and notified other creditors of her purported demise, according to a lawsuit she has filed against Chase. By doing so the bank has ruined her credit, she alleges, and made it impossible for her to refinance the Seminole County house.

“There is no possible way to have credit extended when you’re deceased,” explains her lawyer. A spokeswoman for the bank says it is looking into the situation.

If you disputed mistakes on your credit report and the furnisher (the creditor) or the credit reporting agency fails to fix the wrong information we can help you. Our firm practices in helping consumers under the Fair Credit Reporting Act (FCRA). If you have errors on your credit report give us a call.