Student loan consolidation

The Student Loan Corporation Announces Second Quarter Earnings

2010-07-23T05:55:00.000+08:00

The Student Loan Corporation (STU 22.06, +0.90, +4.25%) today reported net income of $20.8 million, or $1.04 per share, for the quarter ended June 30, 2010, a decrease of $4.4 million compared to net income of $25.3 million, or $1.26 per share, reported for the same quarter of 2009. This decrease reflects higher funding costs and the Company's decision to defer planned loan sales to the Department of Education (the Department) through the Loan Purchase Commitment Program (the Purchase Program) until later in the year, which more than offset the positive impact of the consolidation of the Company's previously unconsolidated securitization trusts.

"Following the passage of H.R. 4872, the Health Care and Education Reconciliation Act of 2010, this quarter marks the end of the FFEL Program, a change which we anticipated and for which we believe we have fully prepared. In moving forward, we will continue to focus on our private education loan business. We believe the progress we've made in strengthening our balance sheet through securing long-term funding that is aligned with the tenor of our assets and refining our origination strategy to ensure profitable loan originations, have positioned us for success as we continue making this transition," said The Student Loan Corporation's Chairman, President and Chief Executive Officer, Michael Reardon.

Net interest income of $94.5 million for the quarter ended June 30, 2010 was $23.6 million (33%) higher than the same quarter of 2009. This increase reflects a net increase of $44.4 million related to the consolidation of the Company's previously unconsolidated securitization trusts, $26.6 million for the impact of favorable changes in the spreads between Commercial Paper and the London Interbank Offered Rate (LIBOR) and the Prime rate and LIBOR, $11.0 million for pricing changes on the Company's private education loans, and $8.3 million for higher loan balances. These increases were partially offset by higher funding costs which decreased net interest income by $37.5 million, amortization of the upfront commitment fee on the Company's Amended and Restated Omnibus Credit Agreement (Omnibus Credit Agreement) of $11.8 million and fees on the undrawn balance of $17.4 million.

Net interest margin of 0.86% was 14 basis points lower than the same period of 2009. Net interest margin excluding the amortization of the Omnibus Credit Agreement upfront commitment fee and fees on the undrawn balance was 1.13% for the second quarter of 2010, 13 basis points higher than the second quarter of 2009 reflecting the consolidation of the Company's previously unconsolidated securitization trusts.
During the twelve-month period ended June 30, 2010, the Company's managed student loan portfolio increased by $1.2 billion (3%) to $44.2 billion. The managed portfolio includes $43.9 billion of the Company's owned loan assets of which $37.9 billion has been pledged as collateral against secured borrowings, approximately $4.7 billion of which is expected to be sold to the Department later in the year. Originations for the quarter ended June 30, 2010 included FFEL Program Stafford and PLUS loan originations of $0.5 billion, a decrease of 29% as compared to the second quarter of 2009 due primarily to schools moving to the Direct Loan Program following the passage of H.R. 4872. The Company also made new private education loan commitments of $0.1 billion during the second quarter of 2010, which was 40% lower than the same period in 2009, reflecting the Company's refined origination strategy.

The Company's other income of $8.8 million for the quarter ended June 30, 2010 was $39.9 million lower than the same period in 2009. This decrease primarily reflects changes in the Company's fee and other income related to the Company's securitization activities largely as a result of the consolidation of the Company's previously unconsolidated securitization trusts. In addition, the Company did not have any loan sales in the second quarter of 2010, reflecting its decision to defer expected loan sales through the Purchase Program until later in the year.

Total operating expenses of $34.3 million for the quarter ended June 30, 2010 were $0.9 million lower than the same period in 2009, reflecting decreases in the Company's salaries and employee benefits expenses as a result of the Company's cost reduction initiatives. The Company's operating expense ratio (total operating expenses as a percentage of average managed student loans) for the second quarter of 2010 was 0.31%, one basis point lower than the same quarter of 2009.

The Company's allowance for loan losses at June 30, 2010 was $173.6 million, an increase of $24.5 million compared to $149.1 million at December 31, 2009. This increase primarily reflects $18.7 million associated with private education loan forbearance policy changes and $6.3 million related to newly consolidated securitization loan assets. These forbearance policy changes will result in the Company limiting its borrower assistance programs and are expected to increase credit losses beginning in the fourth quarter of 2010. Net credit losses increased by $13.6 million (50%) during the second quarter as compared to the same period in 2009, primarily due to performance deterioration caused by the economic environment and seasoning of the Uninsured CitiAssist Standard and Custom portfolios.

On July 14, 2010, the Company's Board of Directors declared a regular quarterly dividend on the Company's common stock of $0.35 per share. The dividend will be paid on September 1, 2010 to shareholders of record on August 16, 2010.

The Student Loan Corporation (STU 22.06, +0.90, +4.25%) is one of the nation's leading originators and holders of student loans providing a full range of education financing products and services to meet the needs of students, parents, schools and lenders. The company was previously a division of Citibank and became a NYSE-listed corporation in 1992. Citibank, N.A. is the majority shareholder. Citibank was one of the first banks to finance higher education, beginning in 1958.

For information or inquiries regarding student loans, please call 1-800-STUDENT. Customers with Telecommunication Devices for the Deaf (TDD) may call 1-800-846-1298. College planning and financing information is also available at www.studentloan.com.

FORWARD-LOOKING STATEMENTS
Certain statements in this document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in the Company's filings with the U.S. Securities and Exchange Commission.

THE STUDENT LOAN CORPORATION
                                                       CONSOLIDATED STATEMENTS OF INCOME
                                          (Dollars in thousands, except share and per share amounts)
                                                                               Three months ended                   Six months ended
                                                                                    June 30,                            June 30,
                                                                       ----------------------------------- -----------------------------------
                                                                             2010              2009              2010              2009
                                                                       ----------------- ----------------- ----------------- -----------------
                                                                                    Unaudited                           Unaudited
                                                                       ----------------------------------- -----------------------------------
NET INTEREST INCOME
   Interest income                                                       $  283,323        $  187,224        $  540,144        $  391,420
   Interest expense                                                        (188,864 )        (116,340 )        (360,712 )        (262,458 )
                                                                           -------- ---      -------- ---      -------- ---      -------- ---
   Net interest income                                                       94,459            70,884           179,432           128,962
   Provision for loan losses                                                (41,397 )         (44,826 )         (85,287 )         (65,968 )
                                                                           -------- ---      -------- ---      -------- ---      -------- ---
   Net interest income after provision for loan losses                       53,062            26,058            94,145            62,994
                                                                           --------          --------          --------          --------
OTHER INCOME
   Gains on loans sold                                                            -            17,864                 -            17,864
   Fee and other income                                                       8,811            30,851             9,396            37,809
                                                                           --------          --------          --------          --------
      Total other income                                                      8,811            48,715             9,396            55,673
                                                                           --------          --------          --------          --------
OPERATING EXPENSES
    Salaries and employee benefits                                            7,620             8,428            15,565            17,406
    Write-off of funding commitment fee paid to principal stockholder             -                 -             7,500                 -
    Other expenses                                                           26,728            26,783            52,617            52,664
                                                                           --------          --------          --------          --------
      Total operating expenses                                               34,348            35,211            75,682            70,070
                                                                           --------          --------          --------          --------
   Income before income taxes                                                27,525            39,562            27,859            48,597
   Provision for income taxes                                                 6,704            14,300             6,579            15,813
                                                                           --------          --------          --------          --------
NET INCOME                                                               $   20,821        $   25,262        $   21,280        $   32,784
                                                                       === ========      === ========      === ========      === ========
DIVIDENDS DECLARED AND PAID                                              $    7,000        $    7,000        $   14,000        $   35,600
                                                                       === ========      === ========      === ========      === ========
BASIC AND DILUTED EARNINGS
   PER COMMON SHARE                                                      $     1.04        $     1.26        $     1.06        $     1.64
                                                                       === ========      === ========      === ========      === ========
      (based on 20,000,000 average shares outstanding)
DIVIDENDS DECLARED AND PAID PER COMMON SHARE                             $     0.35        $     0.35        $     0.70        $     1.78
                                                                       === ========      === ========      === ========      === ========

THE STUDENT LOAN CORPORATION
                                                 CONSOLIDATED BALANCE SHEETS
                                 (Dollars in thousands, except share and per share amounts)
                                                                                           June 30,          December 31,
                                                                                             2010                2009
                                                                                      ------------------- -------------------
                                                                                           Unaudited
                                                                                      -------------------
ASSETS
                   Federally insured student loans                                        $ 28,574,666        $ 17,948,706
                   Private education loans                                                   9,877,200           7,432,471
                   Deferred origination and premium costs                                      714,830             548,083
                   Allowance for loan losses                                                  (173,565 )          (149,098 )
                                                                                            ---------- -        ---------- -
                   Student loans, net                                                       38,993,131          25,780,162
                   Loans held for sale                                                       4,713,030           2,409,267
                   Cash                                                                            876              17,998
                   Residual interests in securitized loans                                           -             820,291
                   Other assets                                                              2,492,167           1,990,523
                                                                                            ----------          ----------
                   Total Assets                                                           $ 46,199,204        $ 31,018,241
                                                                                      ===== ==========    ===== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
                   Short-term borrowings, payable to principal stockholder                $  4,566,600        $  5,131,000
                   Short-term secured borrowings, payable to Department of Education         4,594,795           2,066,686
                   Long-term borrowings, payable to principal stockholder                    3,541,000           4,391,000
                   Long-term secured borrowings                                             31,675,596          16,999,976
                   Deferred income taxes                                                       165,569             410,546
                   Other liabilities                                                           340,784             348,612
                                                                                            ----------          ----------
                   Total Liabilities                                                        44,884,344          29,347,820
                                                                                            ----------          ----------
                   Common stock, $0.01 par value; authorized 50,000,000 shares;
                     20,000,000 shares issued and outstanding                                      200                 200
                   Additional paid-in capital                                                  143,136             141,869
                   Retained earnings                                                         1,171,524           1,528,352
                                                                                            ----------          ----------
                   Total Stockholders' Equity                                                1,314,860           1,670,421
                                                                                            ----------          ----------
                   Total Liabilities and Stockholders' Equity                             $ 46,199,204        $ 31,018,241
                                                                                      ===== ==========    ===== ==========

APPENDIX A
 Impact of the Adoption of New Accounting Standards on the
 Company's Financial Statements
 Changes in accounting standards that were effective January 1, 2010
 have significantly impacted the
 Company's balance sheet and results of operations as of and for the
 period ended June 30, 2010. These
 changes resulted in the consolidation of assets previously sold to
 unconsolidated securitization trusts and
 the debt issued by those trusts. This also resulted in the
 elimination of retained interests related to those
 securitizations along with the related mark-to-market gains and
 losses. The cumulative effect of adopting
 these new accounting standards on January 1, 2010 resulted in an
 aggregate after tax charge to retained
 earnings of $364 million.
 In addition, the Company now recognizes in its financial statements
 the net interest income of these
 trusts along with loan loss provisions, mark-to-market gains and
 losses on derivatives held by the trusts
 and trust operating expenses. The tables below highlight the
 significant amounts related to these newly
 consolidated securitization trusts that have been included in the
 Company's financial results as of June
 30, 2010 and for the three and six months ended June 30, 2010:

BALANCE SHEET
------------------------------------------------------------------------
                                                                June 30,
                                                                  2010
                                                           -------------------
(Amounts reported in thousands)                                (Unaudited)
---------------------------------------------------------- -------------------
ASSETS
                   Federally insured student loans           $ 11,344,376
                   Private education loans                      1,945,915
                   Deferred origination and premium costs         225,030
                   Allowance for loan losses                       (6,344 )
                   Other assets                                   473,535
LIABILITIES AND STOCKHOLDER'S EQUITY
                   Long-term secured borrowings              $ 13,548,491
                   Other liabilities                               29,694

STATEMENT OF INCOME
------------------------------------------------------------
                                 Three months ended  Six months ended
                                    June 30, 2010      June 30, 2010
                                 ------------------- ----------------
(Amounts reported in thousands)      (Unaudited)        (Unaudited)
-------------------------------  ------------------- ----------------
 Interest income                      $  81,688          $ 159,350
 Interest expense                       (20,210 )          (38,773 )
                                        ------- ---        ------- -
 Net interest income                     61,478            120,577
 Provision for loan losses               (2,067 )           (4,482 )
 Fee and other income (loss)              5,440              2,637

In 2009, the Company's statement of income included certain income
 items which were not recorded in
 2010 due to the change in accounting standards. The table below
 represents these amounts for the three
 and six months ended June 30, 2009:

STATEMENT OF INCOME
--------------------------------------------------------------------------
                                              Three months ended  Six months ended
                                                 June 30, 2009      June 30, 2009
                                             -------------------- ----------------
(Amounts reported in thousands)                   (Unaudited)        (Unaudited)
-------------------------------------------  -------------------- ----------------
 Interest income:
    Accreted interest on residual interests          $    17,059      $  34,851
 Fee and other income:
    Servicing fee revenue                                 19,519         39,462
    Net mark-to-market gains (losses) on
      retained interests and derivatives                   9,201        (10,215 )


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Low Interest Student Loan Consolidation Helps Manage College Debt And Repayment Of Loans

2010-07-23T05:47:00.000+08:00

Student loan consolidations with a low interest rate may be available for certain individuals who have a specific type of student loan debt. Private student loan consolidations can be available for those who have these types of student loans, but typically, a federal student loan consolidation for federal student loan debt will come at a more affordable interest rate than many private lenders. However, a student must check with their student loan lender to see which interest rate might be available for their situation were they to choose consolidation.

However, federal student loan consolidation rates can be quite affordable for anyone who is having trouble managing various forms of federal student loan debt and needs a way to compile this debt into one location so that they can make one, easy monthly payment. Consolidating federal student loan debt, or any debt for that matter, is something that shouldn’t be done without consideration as there are many financial advisers would warn against doing so.

When someone consolidates a student loan they are essentially taking the total amount that they owe and placing it on one interest rate. Despite the fact that this interest rate can be quite low, a larger principle amount will take longer to pay off and the more time someone must pay on their student consolidation loan the more that interest can build and, obviously, the more that individual may end up paying.

Some advisers believe that paying student loan debt separately will be more cost-efficient, but this will be a case where a student must sit down and look at their debt to make sure that consolidating is the right path for them or if they will fare better if they simply form their own repayment budget and attack their student loan debt separately.

While some people may be able to handle paying off a few student loans if they are kept separate, those who have a large amount of debt or who may have high interest rates attached to their debt may benefit from consolidating. After graduation, and a grace period where there are no payments required in some cases, students often contact their college loan lenders to talk over interest rates, repayment options, and consolidation loans, and only after doing this will they be able to better formulate a repayment plan that will fit their personal student loan situation.

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How to tackle a pile of overdue loans and bills

2010-07-23T05:44:00.000+08:00

Dear Liz: My finances have been on the rocks for six years. I have a defaulted student loan, credit card debt, bounce fees from checking account overdrafts and money owed for utilities. I'm a single mom and recently moved back in with my parents. I finally saved enough money to buy a car with cash, because whoever looks up my credit laughs. It's so bad, I wouldn't give myself a loan.
I finally feel like I'm in a position to start paying down all this debt; however, when I look at it I get anxious because I don't know where to start. I want to get an apartment within in the next year, and I know my credit will have a major impact on my ability to get a decent place. How should I prioritize my debt when it has all gone to collections?

Answer: You got yourself in a muddle, all right, but the fact that you could save cash for a car bodes well for your future. If you have the discipline to do that, you have the discipline to fix your finances.
Your defaulted student loan probably should be your priority. Student loan debt typically can't be erased in bankruptcy, and collectors of this debt have the power to garnish your wages and seize your tax refunds.

If yours is a federal student loan, you'll have plenty of payment options and the ability to "rehabilitate" your loans. If you're accepted for rehabilitation, your default would be removed from your credit reports after making nine on-time payments. Private loans typically don't have rehabilitation options, but you may be able to work out an acceptable repayment plan with your lender.
Since the rest of your debt is already in collections, your best bet may be to negotiate settlements. You'll get the best deal if you can offer a lump sum, but many collectors will accept 50 cents or so on the dollar if you can pay off the agreed amount within a few months. Don't agree to any payment plan you can't stick with or that precludes you from paying other debts.

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Student Loan Debt Consolidation: Have You Heard?

2009-08-16T19:01:00.001+08:00

There are very few individuals today who can afford to pay for their education without any financial aid whatsoever. It is almost impossible to make it through to graduation without any financial assistance. This is the reason why almost all educational institutions offer scholarships and grants to their students. However, this often falls short and the individual opts for student loans. The biggest disadvantage with such loans is that they have to be repaid and this is where student debt consolidation loans helps.

You may have to obtain numerous student loans to complete your education. By the time you graduate and get a good job, you may have multiple creditors based on different terms and conditions. Starting off with such a huge financial disadvantage can be a very frustrating experience. The future may be provided for but you must handle your present well. If you are not sure about handling multiple creditors at once, you should opt for consolidation after your graduation.

What is consolidation?

Look at it from this point of view - you hand over of all your school loans to a single lender who repays them. This is done on your behalf and you now have to repay the debt to the individual lender.

You become eligible for consolidation loans as soon as you finish your education. Some consolidation lenders require the borrower to owe a minimum amount to become eligible. However, this is not a universal requirement.

The law is very flexible as far as consolidation is concerned. You can consolidate your loan from any other lender as well. You may want to start by looking at your original lender as you have dealt with them in the past. However, there is a lot of choice available.

Irrespective of whether you opt for new lender or continue with the same one, make it a point to avoid paying any consolidation fee in the very beginning. Charging for consolidation of federal loan is illegal. Debt consolidation is very risky as there are many cheats working in the field. Do not end up increasing your financial worries in a bid to end the same.

There is no compulsion that you should consolidate all your loans in one go. In fact, you can choose to consolidate even a single loan if it helps you save money. However, keep in mind that you cannot consolidate a loan which has already been consolidated.

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Student Debt Consolidation Loans: A+

2009-08-15T19:04:00.000+08:00

The key to effective student loan debt consolidation, of course, is savvy budgeting. Pay your bills on time, limit your use of credit cards, and ask for financial help from other sources to reduce the burdens on your future earning years. If your parents or guardians do not have money available to finance your education, you can look to private investors to take care of at least some of the burden in exchange of a percentage of equity in your earnings (as discussed above).

All this said, you want to maintain some credit to your name, so you can begin to build a reputation with the bureaus as a trustworthy borrower to qualify for low interest credit cards and other loans and leases.

In addition to actively taking steps to student loan debt consolidation, acquire health insurance as soon as possible. If you are young and healthy, you might opt for high deductible insurance in coordination with a health savings plan to cover emergency contingencies. This way, you won’t have to pay out of pocket for hospital visits, and you can reduce a means of uncertainty in your life. If you’re still in school, try to graduate within four years to avoid taking on more debt.

Student loan debt consolidation tacticians often need to remind borrowers that student loans cannot be expunged — even during bankruptcy (except under truly extraordinary conditions). In other words, once you take out student loans and spend the money, they are yours to manage, for a lifetime or until they’re paid off.

If you are running really short on cash, you may be able to defer or forbear some loan payments, but be aware that your options in terms of kicking the can with respect to your student loan debt consolidation plan are limited. Another tactic might be to consolidate your other bills onto a debt consolidation loan, thus freeing up money in your budget to pay for your standard student loan monthly charges.

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Find Out How Student Loan Consolidation Can Help You

2009-08-14T19:00:00.000+08:00

College education as we all know can get expensive, which is why many students pursuing higher education turn to student loans for funds. Although this will get you through college, the bad news is that once you graduate you have to pay all the loans back. This is where student loan consolidation can help you.

After graduation, you will have to put all your energy into finding a job that is preferably in your major area of study. You might even need to relocate for that new job which means more work including finding a proper place to stay. And it might become difficult for you to focus on your work, when at the back of your mind you know that you will need to pay back your student loan.

When you are still in college, you need not worry about paying back the loans but it is always wise to have an idea about how you can repay the loans once you are out of college.

For those who are thinking about filing for bankruptcy, well you might want to think again. Federal student loans are excused from being discharged when the borrower files for bankruptcy. Your student loans are still going to exist after declaring bankruptcy and you will need to pay them back one way or the other.

A student loan consolidation program will take your student loans as well as any other bills such as outstanding credit card bills and put them into a lump sum, which you can take to a student loan consolidation company. This is also referred to as debt consolidation. The company then will work out a definite payment plan according to your present budget. If you dont already have a proper budget, they will help you make one.

You will have to make one payment to the company every month and the company will in turn make the payments to your creditors as well as towards your student loans. When you are considering consolidation, keep in mind that its always wiser to go for fixed rate interests rather than floating rate.

Doing this will help reduce the risk of uncertainty and this way you will have a clear idea about the amount of money you will have to repay. This is why you should always find a lender who is offering low fixed prices. It is also important to fix proper payment periods that will not put any pressures on you.

It is recommended that a student who has already paid half their debts should refrain from opting for a consolidation as it can reset the loan process and can make him pay more than what was preplanned. If you are uncertain about this aspect of it, you should contact the source of your student loan to find out how this might work with your current loan and situation.

Student loan consolidation is not exactly a loan; they dont give you a lump sum to pay off your student loans. What they do is to distribute the money you send every month to make the necessary payments. However, it is important not to miss payments because this will put in an even worse state than before.

So, to conclude, consider a student loan consolidation program, especially if you are still in college, so that when you graduate, you can plan your future without having to deal with any messy loan repayment hassles.

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Student Loans Consolidation Advice; Consolidate And Save Money

2009-08-13T18:43:00.000+08:00

Completing a college education is very expensive. Even with scholarships and grants most students and or their parents will have seek student loans to pay all the education expenses. The average American college or university graduate will have a student loan debt in excess of $18,000 and a good many will incur more than $40,000 in student loan debt.

In many cases a student will receive several student loans during their collegiate career. These will include both public and private funded loans with different interest rates. Shortly after graduation you will be expected to begin making payments on your student loans Many people are surprised at how much the monthly payments will be. All at a time when a new graduates income levels are relatively low. One possible solution to this problem is a student loan consolidation.

A student loan consolidation will combine all the eligible student loans In most cases you will be required to apply for a loan consolidation package from the lender that first provided your federal student loan There are some exceptions to this requirement. If the interest rate is too high or you are unable to combine all your student loans with the lender then you have the option to shop around for a better loan package,

Not all student loans are eligible to be combined into a loan consolidation. It would be a good idea to visit the university financial aid office for student loan consolidation advice prior to making any loan application. In many cases they will be able to tell what the best approach is for combining all your student loans Contacting several different student loan providers that offer student loan consolidation packages is also a wise investment in time and effort.

The points that need to be considered when comparing student loan consolidation packages include amortization period, interest rates, income sensitive payment options and payment grace periods. Most student loans must be repaid within 10 years of graduation. Lengthening out your payment period or amortization to 20 or more years will greatly lower your monthly payments. However you will pay more in interest over the life of the loan An income sensitive payment option will tie payment amounts to your level of income. This feature will give you lower initial payments when you need them most.

Ignoring or failing to pay your student loans can result in serious long term problems including a reduced credit score, dealing with online debt collection agencies and even the IRS. Not dealing with your student loan debt problem is really not a sensible option. Seek good financial advice and take take the steps necessary to manage your student loans.

Doing your homework and seeking good student loan consolidation advice before applying for a consolidation loan may save you considerable amount of money over the length of the loan In many cases you may find loan packages that have lower interest rates as well. Using a consolidation loan to bring all your student loans into a single loan package is a wise choice for most recent college graduates.

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Discover How Student Loan Consolidation Can Help You

2009-08-12T18:41:00.000+08:00

When you are going to college, especially with the huge cost of a college education these days, you probably got a student loan and perhaps even multiple student loans. This gets you through college but the bad news is that at some rapidly-approaching point in the future, you are going to have to start paying those loans back.

After you have graduated from college, it is a busy time for you as you are getting started looking for the right job, hopefully a job that is within your major area of study. You might also be looking to relocate for that job, so finding a house or a new apartment also plays into everything you have going on. With all these moving parts, it can make it very difficult to focus on your new job and everything else when you know that you need to start paying back those student loans.

If you are still in college, you are in good shape because you are not yet at the point of needing to start paying back those student loans, but very prudent advice would be to not wait until you graduate before you start thinking about how you are going to be able to take care of that huge financial burden.

Do you think you might have to file for bankruptcy? Think again. Federal student loans are exempt from being discharged by bankruptcy of any chapter, so even if you declare bankruptcy to get your fresh start in life, your student loans are still going to exist and need to be paid back.

A student loan consolidation will take your student loans, as well as other bills you might have racked up like credit card bills, and put them all into a lump sum that you can take to a student loan consolidation company. This is also known as debt consolidation but the whole process makes incredible financial sense for you. What the company does is to work out a payment plan with you depending on your budget, and they will even help you to establish a budget if you don't already have one. Then you will make one payment to the student loan consolidation company every month, and they will in turn make payments to your creditors and also towards your student loans.

Note that this is not a loan in the traditional sense of the word. They do not give you a lump sum of money to pay off your student loan. Rather, they distribute money that you send them every month to make payments to your creditors. This is an important point, since if you miss your payment to them in a given month, then they are not going to make the payments to your creditors, which puts you in even worse shape than you are now.

Why do this at all? Because it can give you the financial breathing room you need right now as you get yourself established. For example, if the sum total of your credit card payments and student loan payments is say $2500 per month, after getting setup with the student loan consolidation company, your payments to cover those same bills might only be $1500 per month. It also keeps your credit report intact, without all the long-term negative things that a bankruptcy filing would do to your credit report.

Consider a student loan consolidation program today, even if you are still in college, so that you can be prepared to hit the ground running when you graduate.

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Payment relief in sight for those struggling with student loans

2009-08-04T19:30:00.001+08:00

People struggling to make student loan payments may find welcome relief beginning July 1, when a new income-based repayment option becomes available. This new option allows certain lower income borrowers with federal student loans, regardless of when they first borrowed, to make monthly payments based on how much they earn, rather than the amount they owe.

Under the income-based repayment option, borrowers who demonstrate partial financial hardship can cap their monthly payment at 15 percent of their discretionary income. Discretionary income is defined as the amount by which income exceeds 150 percent of the federal poverty level, taking family size into account. Those whose income falls below 150 percent of the federally defined poverty level will be allowed to suspend payments.

For example, an individual with an adjusted gross income of $25,000 and the same amount in student loan debt would expect to pay about $288 with a standard repayment plan. But under the income based repayment option, their payment would drop to around $110 per month.

Although the monthly payments will be lowered under the income-based repayment option, the interest rate will not drop. Therefore, borrowers should weigh the benefit of a lower payment against the increase in accumulated interest associated with stretching out the length of their payment terms.

“One of our goals as a borrower advocate is to counsel borrowers on all of their repayment options and help them succeed in repayment” says Richard D. George, president and chief executive officer of Great Lakes Higher Education Guaranty Corporation. “Given the current state of the economy, this option provides borrowers with high debt and low income who may be struggling to make payments the opportunity to substantially reduce their monthly payments.”

The new income-based repayment option is available to all qualifying borrowers with federal Stafford, Grad PLUS, and consolidation loans that are in good standing. Eligibility is set by the federal government based on income information the borrower is required to provide their lender each year. For those who do qualify, as their income rises, so too will their monthly payments.

Source

Two men plead guilty to abusing federal student loan database

2009-07-28T19:51:00.000+08:00

A Palm Harbor man and a New Port Richey man have pleaded guilty in federal court to illegally accessing a restricted national student loan database and violating the Privacy Act, according to the U.S. Attorney's Office.

Len R. Breidert, 47, of New Port Richey, pleaded guilty Wednesday morning before U.S. Magistrate Elizabeth Jenkins. David M. Brabson, 54, of Palm Harbor, pleaded guilty on July 8. Both men face up to one year in federal prison, a fine of up to $10,000 and one year of supervised release.

Both men worked at loan consolidation companies in Pinellas County, according to the U.S. Attorney's Office. Both were accused of abusing their access to the National Student Loan Data System, a database kept by the U.S. Department of Education that contains clients' personal and financial information.

Access to the database is restricted by the Privacy Act of 1974 but is allowed for lenders, school financial aid officials and loan consolidation companies.

Brabson abused access to the database as marketing director of University Financial Lending Services in 2007. When the Department of Education terminated certain managers' access to the database, Brabson gave those managers the passwords and user I.D.s of other employees.

Breidert was a senior financial specialist at Student Funding Services in Largo when he used the database to obtain borrowers' personal data without their consent from 2005 to 2007. He also abused other employees' passwords.

Source

Lower cost of your federal student loans

2009-07-27T20:06:00.001+08:00

The Department of Education recently lowered interest rates charged on variable federal student loans to their lowest rates in the history of the federal student loan program. The new rates apply to variable-rate federal Stafford and PLUS loans issued between July 1, 1998 and June 30, 2006.

The rates are set annually, based on the May auction of three-month Treasury bills. The rate charged on a federal student loan depends upon the type of loan, when it was issued, whether you are still in school, in the grace period or deferment status, or have already begun repayment. For example, the new rate on both subsidized and unsubsidized Stafford loans already in repayment status is now 2.48 percent, a significant reduction from last year's rate of 4.21 percent. Stafford loans for in-school students and loans in grace period or deferment status will be charged 1.88 percent, down from 3.61 percent. PLUS loans, which were charged 5.01 percent in 2008-09, are being charged 3.28 percent from July 1, 2009 to June 30, 2010.

If you have more than one variable-rate loan issued between July 1, 1998, and June 30, 2006, you might be able to convert them to a fixed interest rate by consolidating the loans through the federal government's loan consolidation program. The interest rate on the consolidation loan will be equal to the weighted average of the current applicable rates on the loans being consolidated, rounded up to the nearest 1/8 percent. The interest rate is capped at a maximum of 8.25 percent.

Consolidating your loans could potentially save you tens of thousands of dollars in interest. For example, if you currently have a total of $50,000 in unsubsidized Stafford loans at an interest rate of 6.8 percent and you're paying them over a 10-year period, your monthly payment will be $575.40 and the total interest paid will be $19,048. If you consolidate all of the loans, today's rate will be 2.5 percent (2.48 percent rounded up). Your monthly payment will be $471.35, and your cumulative interest will be only $6,562, a 66 percent savings.

Unfortunately, Stafford and PLUS loans issued on or after July 1, 2006, aren't eligible for the new rates or consolidation. These loans will have fixed interest rates, which will vary depending on the type of loan.

Stafford loans are federal student loans that may be subsidized (need-based) or unsubsidized. PLUS loans are unsubsidized federal loans available to credit-worthy parents of dependent children. For subsidized loans, the federal government pays the interest from the date the funds are disbursed until you are required to begin repayment (typically six months after the student graduates or ceases at least half-time enrollment). With unsubsidized loans, interest begins to accrue immediately, although repayment may be deferred.

Perkins loans are federally subsidized need-based student loans that carry a fixed interest rate of 5 percent. Perkins loans are eligible for consolidation if a student also has other types of federal loans, but a consolidated Perkins loan balance is added to the unsubsidized portion of the loan. For this reason, and because of other special benefits associated with Perkins loans that would be lost by consolidating them, carefully weigh all of the potential consequences before consolidating a Perkins loan.

Source

Student Aid

2009-07-26T20:05:00.000+08:00

A new law that would forgive student loan debt for those who spend a decade in public service contains some important fine print.

The benefit, which is part of the 2007 College Cost Reduction Act and took effect this month, does not apply to a large pool of borrowers: those who have received government-backed private loans, as well as folks who have loans that are not guaranteed by the federal government. Oh, and provided they're eligible, borrowers actually won't be able to qualify for the benefit until October 2017.

Those eligible public servants must carry student debt borrowed either directly from the government to pay for school, or have participated in the Federal Family Education Loan Program and consolidated their loans via the government's Direct Loan program, a process that observers say is similar to refinancing a home mortgage. Only payments made to the new, consolidated loan count toward the minimum 120 monthly payments needed to qualify for the loan forgiveness program, although those payments do not have to be consecutive. The clock starts the day the law was passed -- Oct. 1, 2007 -- making the earliest date for eligibility Oct. 1, 2017.

So, what are the pros and cons of consolidating your student loans to qualify for the public service loan forgiveness benefit?

A consolidated loan can lock down a low interest rate and simplify debt if a borrower has several lenders. "Generally, the benefit outweighs the drawback," said Haley Chitty, spokesman for the National Association of Student Financial Aid Administrators, of loan consolidation. "Unfortunately, it can be kind of complicated."

Another benefit contained in the 2007 law is an income-based repayment plan, which could be used in conjunction with the public service loan forgiveness option. The approach would limit borrower payments to about 10 percent of a borrower's income, or lower if the borrower qualified. The public service forgiveness plan would then forgive the loan, if the borrower made those 120 monthly payments while working in a public service job.

But how can young students know where they're going to be in 10 years?

"That's a weakness in the program," said Chitty. "It offers this public loan forgiveness, but it could be difficult to be eligible. Who knows over 10 years, if your employment will change? Unfortunately, that's something you have to consider."

Mark Kantrowitz, publisher of FinAid.org, noted that some private lenders offer benefits not available in the Direct Loan program, and those benefits could be denied if a borrower consolidates her loans. According to Sallie Mae, the country's major private provider of student loans, some of the benefits it offers include interest rate reductions and credit toward the loan for timely payments.

A consolidated loan also can change a borrower's interest rate -- favorably or unfavorably, depending on whether the borrower has a fixed or variable rate and how the loan is structured. For those with variable rates, it could benefit the borrower to lock down a low interest rate through consolidation.

More information about the public service loan forgiveness program is at http://www.ibrinfo.org. The Education Department has not yet created an application process for the benefit.

To find out more about consolidating a FFEL loan, borrowers can contact Education's Student Loan Office, or its loan consolidation site, which has additional information about the pros and cons of consolidation.

Source

Legislation Introduced to Eliminate FFEL

2009-07-25T20:00:00.001+08:00

Legislation introduced by a key House lawmaker to require all federally guaranteed student loans to be issued directly by the federal government includes provisions that may impact the market for existing debt backed by student loans, market participants said yesterday.

The legislation, which was introduced Wednesday by Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee, would eliminate the Federal Family Education Loan, or FFEL program, building upon President Obama’s fiscal 2010 budget proposal.

But the bill, which is expected to be voted on by committee members Tuesday, would preserve a role for some of the existing FFEL lenders, including state-level nonprofits that issue municipal debt, by allowing them to service direct federal loans.

At least two provisions in the bill may have implications for the existing market of debt backed by student loans, according to the muni market participants.

One provision would allow lenders, beginning Jan. 1, 2010, to select an alternative index — based on the one-month London Interbank Offered Rate — to be used to determine the subsidy rates for their loans. The Libor-based index would replace a commercial paper-based index that has caused problems for lenders during the past year.

The other provision would allow borrowers to reconsolidate their FFEL loans into consolidated direct loans, which could increase the amount of prepayments on existing FFEL loans, sources predicted.

The provision allowing lenders to switch to a Libor-based index comes amid tremendous federal intervention since late last year that has caused the CP index that loan subsidies have been based on to fall out of kilter from the rates lenders must pay to finance their loans, which typically are based on Libor, one student loan lender official said. Specifically, CP rates have been extremely low during the past three quarters because of Fed guarantees designed to prop up the CP market, the official said.

If lenders elect to adopt Libor-based formulas, the switch may require bondholder approval if it is deemed to be a materially different value than the CP-based index, according to market participants.

Meanwhile, prepayments of existing FFEL loans may increase under the consolidation provision, said Paul Wozniak, chairman of San Diego-based College Loan Corp., who added it is not clear how many borrowers would take advantage of the opportunity, because it is not yet clear if they would benefit from a lower rate by switching. The consolidation provision would not take affect until after June 30, 2010.

If there is a benefit and borrowers opt to consolidate into the direct loan program, the switch could bring in cash to the trusts of the existing FFEL loans, leading to the redemption of, among other things, some auction-rate securities that remain illiquid, he said.

Source

Federal student loan rates at historical lows

2009-07-24T19:58:00.000+08:00

Those of you who have Stafford and Plus loans, there's some good news that's just been released -- they are at their lowest rates since the federal student loan program was put in place.

Loans issued after July 1, 1998 through June 30, 2006 can now be consolidated and changed to one loan with a fixed rate.

"Stafford loans in repayment status is now at a fixed rate of 2.48 percent, down from 4.21 percent last year," Landon Vick of Cravens and Company wealth management said. "The in-school grace period or deferment status loan's new rate is 1.88 percent, down from 3.61 percent last year. The new rate for the Plus loan is 3.28 percent, down from 5.01 percent."

These new rates only apply to Stafford and Plus loans.

Source

Federal government changes rules for repayment of student loans

2009-07-12T19:20:00.000+08:00

The federal government this week began offering some students financial relief by allowing them to pay back loans based on their income.

The new Income-Based Repayment Plan started Wednesday and caps monthly payments depending on income and family size.

The government also will cancel the remaining balance on the loan after 25 years and forgive loans for people who work in public service after 10 years.

Tips for student loans

• Be conscious of how much you borrow.

• Understand how much each additional loan will add to your monthly payment.

• Remember this line: "The longer you pay, the more you pay."

• Discuss all repayment options with your lender.

Eligible loans include Stafford, Grad PLUS or Consolidation loans made under Direct Loan or Federal Family Education Loan programs.

"It's exciting that there's going to be some balance between what they're able to make right now in the economy and what their repayment obligations are," said Charlotte Finnegan, Jackson Community College's dean of student services.

About 78 percent of new full-time students in 2007-08 at JCC used financial aid; 43 percent of those had loans.

About 69 percent of the total student population that year with financial aid used loans.

"There are pros and there are cons," John Nickless, assistant director of financial aid at Albion College, said of the new program.

The government has offered income-sensitive repayment plans in the past that considered how long it would take to pay off the loan.

But the new program disregards the amount of the loan and interest accrued, he said.

The upside, Nickless said, is students can maintain a good repayment history even if they take a low-income job.

The downside, however, is that they could be in the program a long time, instead of the typical 10 years it takes to pay off a student loan.

That means the interest continues to grow. Although the government will forgive the loan after 25 years, the Internal Revenue Service might not, Nickless said.

Forgiven debts are generally considered taxable income, according to the IRS.

At Albion, about 61 percent of students receive financial aid, 52 percent of whom use student loans.

Nickless, who previously worked on the lender side, found it interesting when he started at Albion that many students didn't know which lender they had or how much they borrowed.

"It's my responsibility to make sure that they don't just keep blinders on and take all the loans they're eligible for and worry about paying it back later," he said.

Source

New program offers break on student loans

2009-07-11T19:19:00.000+08:00

There's some good news for college graduates who have big student loans to pay off. You may be able to get some help from Uncle Sam.

This could be a big stress-reducer for many people. The U.S. Department of Education launched its new repayment plan on Wednesday. It lets college graduates reduce their student loan based on their income.

Many graduates accumulate a staggering amount debt in order to get that diploma. Some student borrowers owe $80,000 to $100,000 or more when they leave school. And with the current economy, it may be hard for some to repay their student loans.

The "income-based repayment program" is available to those who took out a federal loan or federal consolidation loan. If you qualify for the program, you can get your monthly payments dramatically lowered.

Make timely payments for 25 years and the balance of the loan is forgiven.

If you go into public service - that is, work for a government agency, a nonprofit agency or join AmeriCorps - your debt will be forgiven in ten years.

The new program is not limited to low-income individuals. Generally, you qualify for the program if your federal student-loan debt is equal to or greater than your annual income.

If you are accepted into the program, you will be required to document your income and your family size each year to set your new payment amount.

So do you qualify for this program? The Department of Education has a calculator on its Web site that will help you answer that question.

One other bit of good news. the interest rate on new Stafford loans - the most popular federally guaranteed student loan - dropped on Wednesday from 6 percent to 5.6 percent, and it will keep going down, according to an order by Congress. By 2012, the interest rate on new Stafford loans will be 3.4 percent.

Source

New student loan repayment plan is based on borrower's income

2009-07-10T19:18:00.000+08:00

The federal program is complex and won't apply to every borrower, but it could dramatically reduce monthly payments for some.

New student loan repayment options came just in time for Jeff Zollinger.

The 32-year-old father of two just graduated from architecture school with $125,000 in debt. He and his wife, an audiologist, expect to make good money someday -- more than enough to pay the loans. But between the rotten economy and a new baby, the Savannah, Ga., couple have only been able to find part-time work. They're struggling to make ends meet, so the $1,200 a month that Jeff's lenders want on his loans doesn't seem feasible.

Fortunately for the Zollingers, a new federal student loan repayment plan goes into effect this month that could dramatically reduce payments for highly indebted borrowers. Called "income-based repayment," the plan limits the monthly payments to a percentage of the borrower's monthly income.

The program is complex and won't apply to every borrower. But those who have federal student loan balances that exceed their annual income almost certainly qualify, said Edie Irons, communications director for the Institute for College Access and Success in Berkeley. In many cases, loan payments could be sliced in half.

How does it work, and how can you apply? Here's a look.

What's income-based repayment?

It's the newest of six repayment options for federal student loans. It differs from most options in that the other loan payment plans are designed to repay the balance over a set period of time, such as 10 years. Income-based repayment doesn't base payments on a set payoff date. Instead, the payments are based on the borrower's discretionary income. That's calculated by determining how much the borrower's income exceeds federal poverty guidelines for his or her family size and location. The less you earn, the less you pay.

If you pay less each month, doesn't that mean you'll pay for more years and end up paying more interest, too?

Yes. Interest accrues on student loan balances each month and if you're paying less than the interest that's accruing, the balance of your loan could actually rise. For that reason, anyone who could afford to pay more would be advised to, Irons said. But if the loan payments are making it impossible to pay other bills, this gives you the flexibility to help your cash flow without hurting your credit.

Does that mean I'll be paying on my student loans forever?

No. This plan says that any borrower who has faithfully made payments for 25 years can have his or her remaining loan balance forgiven or wiped away at the end of that time.

In addition, if you work for government or a nonprofit and repay your debts under the direct loan program for 10 years, you could have your loan balance wiped out faster under another federal program called Public Service Debt Forgiveness.

How much would I have to pay each month?

That depends on your income, your debt and the number of people in your household. However, the Education Department says if you are single and earning $20,000 annually, the most you'd have to pay against student loans is $47 a month. If you earned $25,000, the required payment would be $109. If you earned $35,000, the required payment would be capped at $234.

Comparatively, if you had $50,000 in student debt at a 6.8% interest rate, you'd have to pay $575.40 a month under the standard repayment plan, no matter how much you earned.

Am I going to be locked out of the program if I earn more?

No. The formula determining whether you qualify looks at your loan payments versus your discretionary income. You could have a substantial income and still qualify if you also have a lot of debt. Borrower's payments are adjusted once annually to reflect changes in income and family size.

Can I do this with all my loans?

The program is only available for federal student loans under the Stafford, Grad Plus and federal consolidation loan programs. It does not apply to parent's loans for students (called Plus Loans), and only applies to Perkins Loans if they're consolidated into the Federal Family Education Loan or Direct Loan programs. It also does not apply to private loans, state loans and loans that are not backed by the federal government.

How do I figure out if I qualify and how much my payments might be?

The Project on Student Debt has set up a website dedicated to answering questions about income-based repayment at www.ibrinfo.org. The site has a calculator that estimates whether you'll qualify for the program and roughly what your payment amount will be.

The Education Department also offers a Web-based calculator on its site that explains all the repayment options for student borrowers. That site is at www.studentaid.ed.gov. (Scroll down and look for "repaying your loans" on the left side of the page. After you click on that, you'll see "repayment plans and calculators." Click again and it will link to repayment calculators for the various options, including standard and extended repayment.)

How do I apply?

Gather your loan information, showing balances, type of loans and lenders. Then contact your lenders. If your lender will not offer income-based repayment, call the Education Department at 1-800-4-FED-AID and look into consolidating your qualifying loans into the Direct Loan program, which is administered by the federal government.

Source

New program may help you repay federal student loans

2009-07-09T19:16:00.000+08:00

Consumers struggling with federal student loans have a new option open to them in the form of an income-based repayment program – but it's not for everyone.

Under Income-Based Repayment, your required monthly payment is capped at an amount that's intended to be affordable based on your income and family size.

Federal student loans eligible under the plan:

• Stafford loans – the main federal loan for students.

• Grad PLUS loans.

• Most federal consolidation loans.

Loans not eligible:

• Parent PLUS [Parent Loan for Undergraduate Students] loans.

• Federal consolidation loans that include Parent PLUS loans.

• Private loans.

All eligible loans must be in good standing.

"We know many graduates are concerned about their ability to repay student loans in the current economic environment," said Secretary of Education Arne Duncan. "This new plan addresses the issue head-on by giving them the option of a monthly payment tied to their income."

The new repayment plan caps the monthly payments at a percentage of a borrower's discretionary income. The payment amount is adjusted yearly, based on changes in annual income and family size.

Specifically, the program caps payments at 15 percent of the amount by which your adjusted gross income exceeds 150 percent of the federal poverty line for your family size.

Here's an example from Mark Kantrowitz, a national expert on student financial aid and publisher of FinAid.org and FastWeb.com:

Say a single borrower has $40,000 in federal education loans and an adjusted gross income of $30,000 a year. The 2009 poverty line for a single person is $10,830, and 150 percent of that is $16,245.

The repayment cap on monthly payments would be 15 percent of $13,755 ($30,000 minus $16,245) divided by 12 months, or $171.94 a month.

"This is considerably lower than the $460.32 a month which would be required under standard 10-year repayment or the $277.63 a month which would be required under extended 25-year repayment," Kantrowitz said.

Income-based repayment is best for borrowers who have high debt relative to their income, but even borrowers with a lower debt-to-income ratio may benefit.

Even though the program is a good deal for financially strapped borrowers, you should understand other effects of the plan.

"It increases the repayment term up to 25 years, which increases the total interest paid over the life of the loan," Kantrowitz said.

However, after 25 years of making the lower payments, borrowers' remaining loan balances, including interest, will be completely forgiven.

For borrowers who enter public service fields, such as nursing, public interest law or nonprofit work, their debts will be forgiven after 10 years of service and loan payments.

"This is the first time in the Federal Family Education Loan Program that there is forgiveness for a borrower's unpaid balance after the 25 years of payments," said Patricia Scherschel, vice president at Sallie Mae, the nation's largest student loan lender. "The plan has the ability to offer a low payment – a payment as low as zero dollars for those folks who really have low income compared to what their monthly debt burden would be for those loans."

Source

The 4 Benefits Of Student Loan Consolidation

2009-07-08T19:14:00.000+08:00

If you haven’t noticed it, education costs don’t come cheap nowadays. Many students are taking loans to support their way through college. It seems to settle their problem for the time being but things will start to get difficult when they graduate. They are already in debt before they even earn their first dollar. The tips below are to show you why you should consider the student loan consolidation.

1. Lower payment

This is by far the best reason for you to consider taking the loan consolidation. It is possible to reduce your monthly payment by 40% - 50% when you make a research on the lenders. Imagine freeing half of the financial load being lifted off your shoulders. You will feel that the air is lighter and your life is not just about paying for loans.

2. Lower rates

Besides lowering your payment, you can also lower your interest rates by looking for the right lenders. Again, it will prove beneficial to you when you run some researches on the various lenders’ offers.

And be careful for the fine prints and remember to ask for any hidden cost. You don’t want to suffer any extra payment when you are trying to manage your loan. And to help you on that, you can look for online consolidators to calculate your future student consolidation loan base on the current rate of your student loan.

3. Only one payment

Let’s say you have acquired a housing loan and other possible loans during your studies. And imagine you have to bank in different payments to different companies at different time. Isn’t that a lot of works to do? Wouldn’t it be great that you can make one payment and be free from all the annoying reminders? You can do that when you consolidate the student loan and get your loans taken care of.

4. Relieve stress

Please know that the financial companies will punish you for paying late and surely you don’t want that. It is a stressful job to remember the various due dates for the payments. What if you have more important tasks to attend to?

It is very possible that you will forget to pay the loan. And when you sign up for student loan consolidation, you only pay once to the company to cover all your loans. This frees your mind so that you can focus on your job or something more rewarding.

Source

Get a Break on Student-Loan Payments

2009-07-04T23:35:00.000+08:00

You have a mountain of student debt and a job you love in a low-paying field. Lately, you've considered ditching that job for a higher-paying gig just to get out from under.

Hang tight. As of July 2009, a new repayment plan for federal student loans, called income-based repayment, rescues borrowers buried in debt by slashing or even waiving monthly payments and forgiving any remaining debt after 25 years. "This is a big deal," says Edie Irons, of the Project on Student Debt, an advocacy group. "It's going to help a lot of people."

You probably qualify for the plan if your federal student-loan debt equals or exceeds your annual income. The new program caps monthly payments at 15% of the difference between adjusted gross income and 150% of the federal poverty level for your family size ($10,830 for singles in 2009). If you make less than 150% of the poverty level, you pay nothing at all.

Also, to qualify for the program, your new monthly payments must be lower than the amount you would pay under a standard ten-year repayment plan for federal loans. You can compare the two by using the calculators at IBRinfo and FinAid.

The 25-year plan

Say you are single, have $30,000 in Stafford loans with a 6.8% interest rate and make $20,000 this year. Under the standard repayment plan for Staffords, you would pay about $345 a month. In the income-based repayment plan, you would pay a much more manageable $50. Payments adjust annually according to income but never exceed the monthly amount you would pay in the standard plan. Whatever debt remains after 25 years disappears.

If your payments are too low to cover the interest, Uncle Sam picks it up for you for up to three years on subsidized Staffords (awarded to students with need). After three years, and on other loans, the interest builds but does not compound. Because the debt goes away at the 25-year mark, you don't have to worry that the accrued interest will extend your repayments into your old age.

Income-based repayment improves on but does not replace a couple of other income-related repayment plans, the most comparable of which is the income-contingent plan, for loans offered through the Federal Direct Loan program. You can see about switching to the new repayment plan by contacting your lender. (For a rundown of all the repayment options for federal student loans, see How to Repay Student Loans.)

A quicker way to delete debt

You may not have to wait 25 years for loan forgiveness. Thanks to the same legislation that created income-based repayment, anyone who works for a government agency, a nonprofit organization or AmeriCorps can qualify for forgiveness after making 120 payments over ten years. Only payments made after October 2007 count toward the ten-year time frame.

To get in on this deal, you must be in the standard, income-based or income-contingent program and have received your loans through the Direct Loan program. If you received your loans through a private lender participating in the Federal Family Education Loan (FFEL) program, as most borrowers do, you can switch to the federal program by consolidating your loans. To find out more, go to Federal Direct Consolidation Loans Web site.

Source

Private Student Loan Consolidation, Is There A Best One?

2009-07-02T23:33:00.000+08:00

Private student loan consolidation cannot be generally mixed with federal student loans due to the low interest rate on the latter. However, there are several options open to refinance the private student loans by replacing them with another.

The main advantage of doing this is that instead of making several monthly payments, only a single payment is made every month that may be reduced although this will cost one in terms of higher interest amount paid because the single loan may be for a longer period of time.

There is a way to secure a lower interest rate. The private student loan is based on the credit score. If the credit score has improved by 50 to 100 points due to the fact that you have graduated and have a job, then you will be rewarded with a low interest rate.

Another way of getting a better deal when considering a private student loan consolidation is to talk to the holders of your debts. They may be willing to negotiate with you and cut down your interest rate so that they can keep you as their customer.

This type of loan also incurs the same interest that the home equity loan has. You can have a home equity loan at a fixed rate, thus locking in the low interest rate. However sometimes a variable rate looks attractive as long as you can watch it and lock it the moment it is on an upward trend.

Study carefully the terms of the agreement. Find out if the interest rate is variable or fixed. Ask also about fees and if there are prepayment penalties. Find out how much they are for each of the following lenders. Write them down so you can get the best deal from among the following list and whatever other companies willing to do the private student consolidation loan with you:

Key Education Consolidation Loan - $75,000 maximum for non-key debt, $7500 minimum, 10, 15, 30 year repayment term, no prepayment penalty and no fees

Citi Student Loans - $75,000 maximum, $7500 minimum, choose fixed or variable rate, up to 30 year term rate, rate reduction after 48 monthly on time payments, no prepayment penalty

Educated Borrower Private Consolidation Loan - $300,000 maximum, $7500 minimum, up to 30 year repayment term, no prepayment penalty and 0 to 5% origination fees

Sallie Mae Private Consolidation Loan - $275,000 maximum, $5000 minimum, 15 to 30 year repayment term, choose between fixed and variable rate, no prepayment penalty and no fees

SC Student Loan - PAL Consolidation Loan - $150,000 maximum, $5000 minimum, 10 to 30 year repayment term, choose between fixed and variable rate, no prepayment penalty and no fees

Next Student Private Consolidation Loan - $300,000 maximum, $7500 minimum, up to 30 year repayment term, no prepayment penalty and 0 to 5% origination fees

Make sure when you are considering to go this route that you clarify all the terms of the agreement as the above may have changed and that all are put in writing and signed by both parties. The best one is the one that fits your needs. There you have some of the possible lenders and the other options when considering to do the private student loan consolidation.

Source

Starting in July, new ways to cut your student debt

2009-07-01T23:31:00.000+08:00

July 1 is shaping up as a big celebration day for college students and recent graduates. That’s when several perks for federal student loanholders take effect.

If you have student loans from the federal government, here’s how you may be able to lower your payments and, potentially, your interest costs.

Cut monthly payments

One of the big perks of the 2007 College Cost Reduction and Access Act is the Income-Based Repayment program. Taking effect next Wednesday, the IBR allows college graduates with federal loans, including Staffords, Grad Plus, and Perkins, to lower their loan payments if they have enough debt compared to their incomes. (If it takes more than 15 percent of what you earn above 150 percent of the poverty level to pay your loans off in a standard ten years, you’re in.) For most borrowers, the program reduces payments no more than 10 percent of their earnings.

For example, a single person earning $40,000 a year can expect to repay no more than $3,680 a year (9.2 percent) on their loans, according to IBRinfo.org. Here’s where it gets tricky. If those payments aren’t enough to cover interest costs, the unpaid interest will be added to the total amount owed. That would increase your debt. If you have Subsidized Stafford Loans, the federal government will pay the interest shortfall, but only for three years.

One of the big advantages of the program is that the term of the loan is capped. So as long as you make qualifying payments under IBR for 25 years, the rest of your debt is forgiven, no matter how big it is. If you work in public service – say, as a teacher or in a government job – the balance of the loan is forgiven after only 10 years.

Want more details? IBRinfo.org has more information, including a calculator to see if you meet the debt-income ratio.

Ready to switch? Contact your lender directly.

Lower interest rates

In addition to the new IBR program, other federal loan changes taking effect July 1 will increase the amount of grants available to needy students and reduce the interest rates on student loans.

For students who qualify for Pell Grants — usually reserved for families with incomes under $50,000 — the government is raising the maximum award from $4,731 to $5,350 for the upcoming school year.

Also, interest rates on new Subsidized Stafford loans (generally for families making under $80,000) drop nearly half a percentage point to 5.6 percent, starting Wednesday. Fill out the Free Application for Student Aid to see if you qualify for these forms of financial aid.

Consolidate, consolidate

Already graduated and have federal loans? Wait until July 1 to consolidate any variable-interest Stafford loans taken out before July 2006 — interest rates drop from the current 4.21 percent to as low as 1.88 percent for recent graduates still in their six-month grace period. The rate will be 2.48 percent for those who consolidate loans already in repayment.

Consolidation can make payments simpler and, sometimes, lower. For example, the financial aid site Fastweb calculates that a student who borrows a Stafford loan of $20,000 at a 6.8 percent interest rate with a standard 10-year repayment plan can expect to pay $7,619 in interest over the life of the loan; consolidating at a 2 percent rate would bring that down to $2,083.

To consolidate, fill out an online application at the Federal Direct Consolidation Loans site.

The caveat, of course, is that these new repayment options are for students with federal loans — not private ones, which an increasing number of students are using. According to the Project on Student Debt, 14 percent of undergraduates nationwide took out private loans in the 2007-2008 school year, up from 5 percent just four years earlier.

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Drowning in student loan debt?

2009-06-30T23:29:00.000+08:00

Starting next week, there will be a new student-loan refinancing program targeting grads with large student loan debt and low incomes.

1. Get the details

Starting July 1st, some college grads will be making lower loan payments thanks to the government's new Income Based Repayment Plan. This program calculates your monthly payments based on your income and your family size.

You may qualify if you have a Stafford, Graduate PLUS, or consolidation loans made under either the Direct Loan or Federal Family Education Loan programs. You don't qualify if you have a Parent PLUS loan. Your debt must be 1.5 times more than gross income.

You can calculate your eligibility at finaid.org/calculators/ibr.phtml. The loans can be new or old, and for any type of education, including undergraduate, graduate or professional job training.

2. How it works

If you qualify for Income Based Repayment, your monthly payments will be pegged to how much you can afford each month.

Typically your loan payments will be less than 10% of your monthly gross income. If you make 150% or less of the federal poverty line (which is about $16,245 for a single person) you won't pay anything until your salary increases.

So, the people who will really benefit from this program: grads with a lot of student loan debt who can't find jobs, college grads that have a lot of debt compared to income. And people who are going into public service. That's because if you're in this plan, you're eligible for the Public Service Loan Forgiveness Program that wipes out your debt if you've worked full time in the public sector for 10 years. Income Based Repayment also will forgive student-loan debt that remains after 25 years of payments.

But ... there are downsides to this program. You pay more in interest over the life of your loan. A reduced payment in Income Based Repayment usually extends how long you have to pay your loan back.

3. Get started now

Talk to your lender if you think you're a candidate. The lender may ask for a copy of last year's tax return. More likely they will have you complete IRS Form 4506-T to have the IRS send them a tax transcript of your federal income tax return as filed with the IRS says Mark Kantrowitz of finaid.org.

So, if you've lost a job since then or endured some other financial hardship, make sure you document that and let your lender know. The Department of Education has more information. Go to studentaid.ed.gov.

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Finance Your College Education With A College Consolidation Debt Loan

2009-06-30T23:27:00.000+08:00

Many people drop out of school because they do not have the necessary financing to complete their college education. Nonetheless, there are some very strong-minded students who want to have a degree with their names on it, and they struggle to find ways to pay for their own college education.

Some of these students find jobs to pay for their college expenses. Nevertheless there are also students who have a hard time balancing their studies and work, and they would rather get loans from the federal government and other financial institutions in order to finance their education.

Due to a limited budget, students may have a hard time repaying all the loans they got in order to pay for their education, and this is where a college consolidation debt loan will considerably help. A college consolidation debt loan is specifically designed to help students manage their finances while they are still in school.

Thinking about loan repayments while studying for exams can be very disturbing. That is why getting a college consolidation debt loan is the ideal way out for students who wish to focus on their studies and at the same time, manage their budgets effectively. The way a college consolidation debt loan works is just like any other debt consolidation loan. All the student’s loans will be rolled into one big loan which will be paid with a single monthly installment with a much lower interest rate and longer repayment period.

In order to get a college consolidation debt loan, the student must get in touch with a debt consolidation company and submit the necessary requirements for eligibility. One good thing about a college consolidation debt loan is that there are no fees involved. Students can continue to pay their loans after they have graduated from school and started their own careers. Such a loan even gives the students flexibility to increase the amount of monthly payments after they have already established themselves in the professional world.

Students who are in the process of getting a college degree can also get a college consolidation debt loan and use the money for other expenses such as accommodation, food, travel, books, etc. The benefits of getting a college consolidation debt loan goes beyond the financial solutions it can give to the students, because it actually gives them the chance to improve themselves by completing an education.

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Pay Off Debt - 3 Secrets To Speedy Debt Payoff

2009-06-26T19:42:00.000+08:00

Today’s debt load is killing the average American family. They have an average of over $9,000 in credit card debt accrues huge amounts of interest each month And when folks pay off debt, the savings would amount to thousands of dollars - not to mention reduced stress levels. Car loans, department store revolving credit, student loans and other non-secured debt add to this load, making it very difficult to survive if household income drops, due to job loss, illness or a variety of reasons.

Pay Off That Debt
Paying off this debt should be the priority one for anyone with debt, then your lifestyle should be changed to reflect the level of income. In short - live beneath your means. To accomplish the first priority, here are three techniques that can help those in debt pay off their debts a little more quickly, if used properly.

Cut Your Interest Rate
Interest rates on credit card debt usually are ridiculously high - often as high as 25%, sometimes higher, depending on your credit rating. Go and check what interest rate you’re paying now - you may be shocked.

If your credit is still in decent shape at this point, you may be able to transfer your high-interest rate balances to a lower rate account. Many credit card companies offer a very low rate for three or six months - as a come-on to get your business.

After the grace period expires, the interest rates will skyrocket to the normal amount for your situation. The key to making this strategy work is that you must be willing to move your balances to a new low introductory rate card when the special rate expires. If you don’t move your balances to a lower rate, then you’ll save no money.

To work this strategy to its full effectiveness, you must take the money saved by the temporary low payment and pay down the principal. Just keep repeating this process until your credit card debt is paid off.

Pay More Principal Every Month
If you were to make the minimum monthly payment on a $10,000 debt with 21% interest rate, it could take 16 years and 10 months to pay that debt off at $180 per month. payment amount to $220, you could have that debt paid off in 7 years and 8 months - in less that half the time if you add $40 per month! Plus, you’d save thousands in interest!

This is easy - skip the Starbucks, give up smoking or go out to eat less, but pay extra on your debt - the difference could be huge!

Consolidate Your Debt Into One Large Bundle
There is a possibility to save big on consolidating your debt. What is debt consolidation? That’s where you gather all of your small, high-interest debt into one big pile. Then, you take out one large personal loan. The benefit to debt consolidation is that the new loan usually carries a much smaller interest rate that any of the smaller debts.

This lower interest rate will make for a lower monthly payment, and this lower payment then allows the debt holder to make additional payments, thus paying off the debt sooner. As shown above, there are huge advantages to paying off debt sooner, and that’s the goal - to eventually become debt free.

These three tips are only several ways that can help speed up the process of your debt reduction. To stay out of debt once the debt has been eliminated, your lifestyle will have to change. Spend no more than is made - live within one’s means and never become hopelessly in debt ever again!

Don’t give up on your dream of becoming debt free! Government bailouts won’t help families in debt - only you can help yourself.

Take action now!

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Student debt grows as tuition increases

2009-06-25T19:39:00.000+08:00

And as tuition goes up, so does debt.

Clemson University increased tuition 4.5 percent for in-state students and 7.5 percent for out-of-state students Thursday as it grappled with a loss of $45.7 million in state and endowment funds. Also, the university cut 452 positions to help offset its budget loss.

The university's board of trustees adopted a strategic plan after months of trying to find methods of keeping tuition hikes reasonable for students while maintaining the quality of academic programs, Clemson President James Barker said.

The increased tuition — $234 more a semester for in-state students — will offset about a third of the lost funding, the school said. Total tuition for residents will be $11,576 a year, while non-residents will pay $25,886.

Abby Daniel, undergraduate student body president, said students “appreciate that the (tuition) number has been kept as low as it has.” She said she also is pleased that students next year won't have to worry about classes being cut or teachers being gone.

Russ Williams, a Greenville resident and a senior in mechanical engineering, said, “Fortunately it's just a single-digit increase. That's a month of rent.”

He said the increase wasn't a huge deal, and “I won't stress over it.”

He pays for his tuition with two scholarships, including the Life Scholarship, with an engineering bonus, and a pre-paid college fund, which ran out in two years.

Courtney Dixon, a sophomore from Lexington, said she is lucky to have scholarships and student grants, but she also needs student loans as well as her parents' help to have money for college.

“A tuition increase is not something to be happy about,” she said, especially with the weak economy.

South Carolina graduates now leave college with an average of between $18,000 and $19,000 in debt, a little lower than the national average of about $22,500, said Chuck Sanders, president of the state-created non-profit South Carolina Student Loan Association.

He said his organization, which provides about 75 percent of the student loans in the state, urges students and their families to go after scholarships and grants first. But student indebtedness has increased over the years, he said.

“It's a natural evolution. As tuition goes up, they have more debt,” he said.

The organization “is continuing to make federal student loans,” he said. “We make sure students max those out.”

Although the group ran out of funds for private loans in December, he is hoping to restart the private loan programs, which fill in the gaps left after scholarships, grants and federal loans are obtained.

The problem last year was that credit markets dried up and some banks and other lenders left the student loan business, he said. This year, the credit market isn't as tight as it was.

Also, he is working with the state to try to tap into the state tax-exempt market, which would allow lower-interest fixed-rate loans to be offered to students. He hopes to have the program operational in about six weeks.

“The alternatives are mostly variable-rate loans,” often with an interest rate in the mid-teens, he said.

Students and parents will work out a way to finance an education, Daniel said.

“It is worth the investment,” she said. “It is an investment that should pay off for you.”

She pays for school with scholarships, student loans and parental help, she said, and most students have to cobble together several sources of revenue to pay their college costs, which includes room and board and fees as well as tuition.

“We'll all be working out options,” she said.

Dixon agreed that her family will handle the tuition increase.

“If classes are there and teachers are there, the rest will work itself out,” she said.

That's the message Barker said he plans to spread at Clemson: “Let's don't keep looking over our shoulder. Let's look ahead.”

The University of South Carolina has taken an initial step toward raising tuition by 3.6 percent — $159 a semester for in-state students. The increase approved by the executive committee of USC's board of trustees is the lowest hike in eight years and follows the deepest state funding cut in the university's history, said the school's president, Harris Pastides.

The increase will go before the full board June 26, and Pastides said it is expected to be approved.

South Carolina schools aren't alone in their struggle to contain tuition increases.

Published tuition rates increased an average of 6.4 percent for the 2008-2009 year, and a similar increase is expected for the coming academic year, according to the College Board.

The South Carolina Commission on Higher Education has no voice in setting tuition at the individual universities and colleges in South Carolina, said Rita Allison, director of communications. But the commission is an advocate for considering the overall funding of higher education.

A higher education action plan sponsored by the commission calls for the affordability of higher education to be ensured through increased state funding — increased appropriations, a recurring capital bond bill and increased need-based student aid.

“That state portion has been cut in these difficult times,” Allison said.

Barker said Clemson's administration worked hard to keep the tuition increase at a reasonable level.

“We had the task of maintaining academic quality, maintaining our enrollment yet dealing with an unbelievable deficit of $45.7 million,” including the drop in the university's endowment funds, he said. “We found all the ways in which we could keep our tuition as low as possible.”

The major source of savings was the reduction in positions, he said.

“We lost the positions but protected the people,” Barker said, adding the positions were eliminated through early retirements, vacancies that weren't filled and retirements where people weren't replaced.

The eliminated positions, the reorganization and consolidation of some departments, moving programs to self-generated funding and other measures totaled about $30 million in internal budget cuts and reallocations.

“We have not taken this out of the academic enterprise,” Barker said. But “we will be asking all our faculty and staff to work a bit harder” to take up the slack from those lost positions.

Although auxiliary units, such as housing, athletics and dining services, weren't affected by the cuts, they will increase contributions to cover centrally provided support services.

Bill Hendrix Jr., chairman of the board, said Clemson is covering about two-thirds of its lost revenues through “aggressive and sometimes painful internal budget cuts and reallocations. Without this cost-cutting and the use of federal stimulus funds, we would have needed a tuition increase of 26 percent to cover the shortfall.”

Stimulus funds of about $14.7 million were budgeted to keep tuition lower and to fund a long-planned renovation of Lee Hall, a 51-year-old classroom and studio building that houses the architecture and visual arts program.

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Consolidation for Private Student Loans: Basic Information

2009-06-24T19:37:00.000+08:00

Consolidation for private student loans are a great help for self-supporting students. Student loans consolidation programs generally will help you in refinancing your student loans right after graduation. But if you still have private student loans to refinance, then where do you go? Don’t worry. Now, there are many companies that offer private student loans consolidation as part of their programs.

Consolidation of Federal Student Loan - If you have applied for federal student loan consolidation before, but weren’t able to include your private student loans, then you’ve come to the right place. This article will give you a brief background on student loans consolidation, consolidation for private student loans, and how and where you can apply for one.

Student Loans Consolidation

What can it do? With student loans consolidation, you can save up to 50% of even more on the life of your student loans. This is because with it, all your student loans are bundled into a single loan with one lender and one repayment plan. You will be able to lock in a low monthly payment with a fixed interest rate for the life of your loan. All this without incurring unnecessary fees like application fees, origination fees, credit checks, income verifications, or repayment penalties.

Interest Rates - With a low interest rate and minus all these fees, you can really reduce your monthly payments. Not only that, it will also extend your repaying time for up to 20 more years.

Federal Student Loan Consolidation

You can lower your monthly payments for as much as 60% with the federal consolidation loan programs that are offered by many companies. This is for applicants who have federal loans, such as PLUS and Stafford. However, in most cases, you wouldn’t be able to include your private educational loans for this. That is why you get private student loan consolidation.

Private Student Loan Consolidation

Private student loans are another thing. For those private student loans that you cannot include in a federal student consolidation loan, you can apply under the private loan consolidation program. This is so you can consolidate your eligible private education loans into one easy-to-pay loan at low rates. Depending on the company you choose, you will also be able to extend your repaying time up to 30 years. This will really help in decreasing your monthly payments.

How and Where you Can Apply for One

The easiest way is to go online. Now, there are many companies that offer online application that you can accomplish in just a matter of minutes. The requirements vary with the company you choose, so make sure you give this some thought. Others would require you collateral and a co-signor, while others would not. It really depends with what program you opt for.

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Students May Get Financial Windfall After July 1

2009-06-23T19:32:00.001+08:00

Low-income students and recent college graduates may reap dramatic gains beginning July 1 as a result of far-reaching changes in financial aid grant and loan programs.

While some of the gains such as a significant hike in Pell Grants have received attention, others that affect interest rates and student loan repayment schedules are just getting on the radar screens of policymakers and students. One of the most significant changes is the introduction of income-based repayment, through which students can reduce their monthly payments based on their earnings a move of particular help to graduates in low-paying public service jobs.

We estimate hundreds of thousands will take advantage of this, said Edie Irons, spokeswoman for the Project on Student Debt in Berkeley, Calif. But it's not automatic. You have to apply for this.

Students seeking income-based repayment must contact their lenders. But the switch should be easy to make, said Mark Kantrowitz, publisher of FinAid.org, a web site focused on the federal financial aid system. If you're in a public service job, it's best to start sooner rather than later, he told Diverse.

The U.S. Education Department has published a detailed chart of how income-based repayment, or IBR for short, may affect certain borrowers. For example, a single person earning $20,000 a year would face a monthly repayment of only $47. Adjustments may occur each year based on earnings and debt. (The chart is at http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp#content).

The main goal of IBR is to make sure that your student loan repayment doesn't ruin you financially, Irons told Diverse.

Another major change involves consolidation loans. Borrowers with variable-rate loans before July 2006 could convert to consolidation loans with interest rates as low as 2 percent, Kantrowitz said. Such changes apply to those with variable Stafford or PLUS loans.

It's extremely unlikely that interest rates will ever get lower, he said. With interest rates starting to rise again, the next adjustment in 2010 is likely to carry a higher rate.

Here is a look at other financial aid changes taking place next month:

1. Pell Grants: The maximum grant for needy students will increase from $4,731 to $5,350 a jump of more than $500. Legislation approved by Congress also will allow for year-round grants to students seeking to accelerate their education. The minimum Pell Grant will increase from $400 to an annual rate equal to 10 percent of the maximum grant.
2. New student loans: New fixed-rate Stafford Loans will see their interest rate drop from 6 percent to 5.6 percent. Origination fees on Stafford Loans also will drop by half-a-percentage point.
3. Part-time students: Students enrolled at least half time will get access to the Academic Competitiveness and SMART Grant programs, which provide additional aid to Pell-eligible students who have completed a rigorous high school program.

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Forgive Student Loan Debt Asks For Consolidation Bailout

2009-06-19T15:09:00.000+08:00

More and more people, faced with massive debt from student loans and the urgent need for student loan debt consolidation, are proposing that the government forgive student loan debt in order to help out the average consumer and thereby give a strong boost the the Nation's economy. I think it's a very good idea to forgive student loan debt, and the government ought to consider this issue with student loans very seriously.

As a Ph.D. student working on my dissertation, I have spent now 15 years in college and grad school. During that time I have amassed over 100,000 dollars in student loan debt. I am not alone. It is very common for individuals, particularly those who attend graduate school to rack up a massive amount of debt. What we typically do is consolidate that debt so that monthly payments are as slim as possible. But we are still burdened by the crushing costs of our debt. What we need is student loan debt forgiveness. That's what the Forgive Student Loan Debt has started at www.forgivestudentloandebt.com, where 193,500 members want the government to spend $550-$600 billion necessary 2 completely cancel all student debt.

The issue of forgiving the debt of student loans has in fact become far more pressing. Because of the horrible nature of our economy debt consolidation has become rare.

Fewer and fewer companies are consolidating student loan debt, and the consolidations offered are doing less for the person in debt. This is rather crippling. Because of the absurdly high cost of a college education in the United States, the vast majority of students must take out many loans of very large amounts. Their only hope of avoiding financial ruin when they finish school is to get a very good debt consolidation deal.

This is were it would make sense to forgive student loan debt and make it beneficial. If debt consolidation for student loans continues to wane, more and more people will go bankrupt, lose homes, and face utter financial ruin. This is not merely a matter of pain and suffering for these unfortunate individuals either. The more individuals that fail financially, the more the country fails. And since the vast majority of Americans now attend some form of college and the vast majority of college students have to take out a very high amount of loans, it follows that a large number of people are effected by this.

In light of all of this, I submit that it is for the economic good of the nation that Forgiveness of student loan debt is a key element in saving the economic fate of the nation. With Consolidation at a low point, student loan forgiveness is essential to helping your average person who may buy a home, a car, or luxury goods on the market. Student Loan forgiveness will empower the average buyer to purchase, the economy will be on its way to healing. Therefore, it does make sense to forgive student loan debt as part of the bailouts that are occurring to help the economy.

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3 Ways to Make College More Affordable

2009-06-18T15:07:00.000+08:00

Affording college these days can seem almost as tough as gaining admission to your dream school. Over the past year, the credit crunch has forced dozens of private student loan lenders to abandon the marketplace and has made it much harder for a growing number of parents to qualify for loans. Making matters worse: With unemployment at a 26-year high, many new grads are having a tough time finding work -- let alone affording their loan payments.

Yet, despite the fact that the credit crunch shows few signs of easing, things are getting a little easier for students and their parents. As part of the College Cost Reduction and Access Act signed into law last September, a new repayment plan will be available to grads on July 1 that will make it easier for them to afford their federal loans by basing monthly payments on their income as opposed to their outstanding federal loan balance. Also starting next month, those who decide to consolidate their variable-rate Stafford and Plus loans will be able to do so at a rate of as low as 2% -- a historic low.

“They’re helpful for the many students and their families who have difficulty affording college and [who are] faced with a real dilemma when [it comes to] paying these loans,” says Peter Mazareas, vice chairman of the College Savings Foundation, a nonprofit focused on college savings strategies.

To help you better afford your college bill, here are three methods worth investigating:
Sign up for an income-based repayment plan

On July 1, income-based repayment (IBR) plans will become available to grads repaying federal Stafford loans, Graduate Plus loans (loans given to graduate students) and federal consolidation loans that are doled out through the direct loan and the federal family education loan programs.

The new plan requires borrowers to pay up to 15% of their discretionary income, says Mark Kantrowitz, a college planning expert with FastWeb.com, a free scholarship matching service. With this plan, discretionary income is defined as the amount by which your income exceeds 150% of the poverty line, which for a single person is $10,380. So, a college graduate making $30,000 will pay $2,063.25 a year, or $171.94 a month. A college graduate with a Stafford loan totaling $30,000 and a fixed rate of 6.8%, would pay twice that amount, or $342.48 per month, according to StudentLoanConsolidator.com, which is part of the Student Loan Network, a student loan provider.

(Another plan, called the income-contingent payment plan, requires borrowers to pay 20% of their discretionary income, says Kalman Chany, president of New York-based Campus Consultants, which provides financial aid assistance. A borrower making $30,000 a year would pay $319.50 per month, or 46% more, on the plan. With this plan, discretionary income is defined as the amount by which your income exceeds 100% of the poverty line.)

Besides making payments more affordable, the income-based repayment plan (as well as the income-contingent plan) also offers another perk: After being on the plan for 10 years, public sector employers are forgiven of any remaining debt.

There is a catch, though. In some cases, a borrower could make payments that are less than what they owe in interest – making it that much harder to ultimately pay off their tab. The federal government will pay for the amount of interest that accrues (that your required monthly payment doesn’t cover) on your subsidized Stafford loans during the first three years of repayment, says Kantrowitz. But for unsubsidized loans, the total accrued unpaid interest will get tacked onto your loan balance should you no longer qualify for IBR and end up in standard repayment, he says.

Borrowers no longer qualify for the IBR plan when their monthly payments start to exceed the amount their regular student loan payments would be. At that point, borrowers are switched to a traditional payment plan.
Consolidate loans at historically-low rates

If you have yet to consolidate your variable rate Stafford and Plus loans (the last time variable rate loans were issued were in 2006), you can take advantage of some historically low rates come July 1, says Chany.

At that point, when you consolidate, you could lock in fixed rates on Stafford loans of between 2% (for those in the grace period, which is the six months after graduation) and 2.5% (for those later in the repayment process) -- down from 3.61% and 4.21%, respectively, which are the current unconsolidated rates. Those who consolidate parent Plus loans would receive an interest rate of 3.38%, down from 5.01%.

If you're thinking about consolidating, these fixed rates will only be available between July 1, 2009, and June 30, 2010. At that point, rates will reset and likely move higher, says Kantrowitz.
Sign up for a tuition payment plan

Tuition payment plans (also called installment plans), which allow borrowers to evenly split up college tuition costs often over the course of nine to 12 months, have been available for decades, says Mazareas.

These plans don't carry an interest rate or require a credit check. To sign up, families pay an enrollment fee of about $50 to $75 per year. Universities usually administer these programs or hire third parties, like Sallie Mae, Facts Management (a Nelnet company), or Tuition Management Systems, a division of KeyBank, to do so.

While payment plans can help fill in the financial aid gap, they are only worthwhile if parents have enough money to make the monthly payments, says Craig Lockwood, a senior vice president at Tuition Management Systems, which administers these plans. If a parent falls short, their child can get dropped from the program or may encounter difficulty signing up for next semester’s classes, he says.

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Government Buys Student Loan: What to Do?

2009-06-17T15:06:00.000+08:00

In addition to receiving housing information and their class schedules, students heading back to campus this fall should look out for one more crucial piece of mail this summer.

Beginning July 1, the majority of families who hold federal Stafford, Grad PLUS or Parent PLUS loans will receive notices that their loans have been bought by the Department of Education, says Sam Nelson, director of client relations for the Illinois Student Assistance Commission.

"To help lenders stay in the student loan market, the federal government is buying on the secondary market and servicing the loans themselves," says Nelson. "Six out of every 10 student loan dollars are now made with federal money instead of with private capital."

Although the change is no cause for alarm, students should be aware that the switch in loan servicers could affect certain borrower incentives and will affect where payments should be sent. Here's what to do if the federal government scoops up your student loan.

Consider your incentives
"Having your student loan purchased by the Department of Education doesn't really change much for the student borrower," says Jason Delisle, director of the federal education budget project at the New America Foundation, a think tank in Washington, D.C. "The terms and conditions of the loan are already spelled out by the federal government. They won't change at all. The only thing that changes is who's servicing the loan."

Delisle adds that while interest rates, loan limits, fees, repayment conditions and default options will stay the same for new loans and old ones currently in repayment, borrowers who took out student loans before the Department of Education started purchasing them in 2007 could lose certain borrower incentives.

"Before 2007, when the Department of Education started buying loans under ECASLA (Ensuring Continued Access to Student Loans Act), lenders offered certain discounts. For example, you might get a fee waiver before you start payments, or you might get 2 percent off of your remaining principal after making two years of consecutive payments," says Mark Kantrowitz, publisher of the financial aid Web site Finaid.org. "When ECASLA took effect, lenders who wanted their loans to be purchased by the Department of Education had to stop offering almost all of those incentives."

Most large student lenders -- including Wachovia, JPMorgan Chase, KeyBank, Edamerica and the National Education Loan Network, or Nelnet -- switched to the ECASLA program and dropped all borrower incentives except one: ECASLA gives borrowers who set up automatic payments on their accounts a 0.25 percent interest rate reduction.

A few lenders, such as Wells Fargo, service loans outside the ECASLA program and still offer a broad range of incentives. Although students who took out loans before 2007 with lenders who switched to ECASLA have already lost their incentives, those who have stuck with non-ECASLA lenders could lose their current incentives if they consolidate non-ECASLA loans with those sold to the Department of Education.

"That means that if you received any front-end discounts, like a cash principal reduction after you graduated, you could get a letter saying, 'Please pay that back,'" says Kantrowitz. "It may be worthwhile to keep a loan out of consolidation just to keep the discounts."

To figure out if consolidation will mean losing lucrative benefits, Kantrowitz recommends that students considering consolidation ask their lenders about benefit loss before combining loans.

Stay in contact
On top of consolidation woes, a change in loan servicers could also affect where and when students should send in payments.

"The biggest thing borrowers need to know if their loan is sold is that they may need to send payments to a different address and to notify the new servicer if they move," says Nelson. "One of the easiest ways that students end up in default is that the mail never gets to them because the student never tells them where they're moving. If a borrower wants to be proactive, stay on top of that issue."

Sending payments to a different address is no big deal for borrowers whose loans were all bought by the Department of Education. However, borrowers who hold multiple loans, some dating prior to 2007, may find that some of their loans have been bought under ECASLA and others haven't. In that case, students may need to send payments to two different loan-servicing agencies.

To ensure that they're on top of payments, students should contact their lenders as soon as possible to verify where to send payments and to which servicers, especially if multiple lenders are involved, says Frank Gittens, CEO and co-founder of Advance Your Institution, a Goodyear, Ariz., company that provides liquidity for school-sponsored student loans.

"If I have a Bank of America loan from last year and a Citibank from this year and both entities are selling to the Department (of Education), I would call and ask, 'How is that going to get reconciled when it comes to paying back my loans?'" says Gittens. "Are they going to combine payments? If not, I'd think about consolidating those loans. When you graduate, you're not going to want several different bills to pay."

Students can bypass the change-of-address problem and save a little on interest by enrolling in an automatic payment system that directly withdraws from a bank account each month. Students and parents can also pay loans online at www.dl.ed.gov.

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5 easy tips will help you master your student loans

2009-06-16T14:54:00.000+08:00

Graduating into a barren job market is stressful enough. When massive student loans await, the rite of passage can be downright terrifying.
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"A lot of people are coming out of college with more debt than ever before, and they're graduating at a time when it's going to be harder to get job," said Lauren Asher, president of the Institute for College Access & Success, a California-based nonprofit agency that runs the Project on Student Debt.

The group estimates that two-thirds of graduates from four-year universities have student loans, with an average debt of $22,000.

Still, Asher says that knowing your options can ease the burden.

Here are five steps to help master your student loans.

Know what you owe

The first step is understanding how a student loan works. Although the interest rate on federal loans tends to be favorable, it kicks into gear as soon as the loan is taken out. That means you've got four years of interest on top of your loans by the time you graduate.

And the meter on interest doesn't stop running during the grace period before repayment begins. The exception is with subsidized federal loans, in which the government picks up the interest until the loan becomes due. Students need to demonstrate financial need to qualify for subsidized loans. Interest on unsubsidized loans begins accruing right away.

Pick a plan

The standard repayment plan for federal loans is typically 10 years.

Extended plans can be tempting because they require smaller monthly payments. But it also means you're paying interest over a longer period, which pushes up the total cost.

"Use as short a loan term as possible. You don't want to be paying your own student loans when your kids are graduating," said Mark Kantrowitz, publisher of FinAid.org.

If you can't keep up with the payment schedule, you can always switch plans. You're allowed at least one change a year with federal loans.

A new option for federal loans starting in July is the Income-Based Repayment program. Eligibility is determined by weighing your debt level against your income.

There may be no monthly payments required for those who earn less than a certain threshold, currently about $16,000 a year. Otherwise, your monthly payment is generally capped at 15 percent of your earnings above that amount.

Any debt remaining after 25 years is forgiven, unless you start making enough money that you no longer qualify for the program.

Try deferring payment

You can defer payment on federal loans under select circumstances, including military service, unemployment and economic hardship. With private loans, the rules on postponing payment (called "forbearance") are set by the lender.

Try to avoid delaying payment if you can because interest continues accruing unless you have a subsidized federal loan.

Graduate school is one way to defer payment on most federal or private loans, but that can backfire.

"It could add to your loan amount. And at some point, your loans will come due," said Deanne Loonin, director of the National Consumer Law Center's Student Loan Borrower Assistance Project.

To qualify for unemployment deferment on federal loans, you need to demonstrate that you're looking for work.

You could also qualify for economic-hardship deferment if your income is below about $16,000, you get public assistance or you work in public service.

Deferment for unemployment and economic hardship are each limited to three years.

Consider consolidating

A consolidation loan lets you combine loans to make a single monthly payment. You also get a fixed interest rate for the life of the new loan.

This might benefit those who got federal loans before July 2006, when interest rates were variable. You might even want to "consolidate" a single federal loan if it has a higher, variable interest rate.

If you've been out of school for a while and are running into trouble making payments, a consolidation loan is a way to get renewed deferment rights. Most federal loans can be consolidated under the Federal Direct Loan Consolidation program.

One drawback is that consolidation usually extends repayment, meaning the overall cost of the loan will be higher. A calculator on loanconsolida tion.ed.gov can help determine whether a consolidation loan will save you money.

There is no fee or cost to consolidate. Some federal loans, such as the Stafford and PLUS loans, might charge a fee that is deducted from the disbursement check, but there should never be an upfront fee.

Consolidation might not be an option if you have private loans because most private lenders are getting out of the federal loan business and generally trying to reduce risk.

Avoid default

Defaulting on a student loan comes with some ugly consequences.

To start, the default will go on your credit profile and likely obliterate your chances of getting any other type of loan, such as a credit card or mortgage.

That's because federal loans, with their favorable interest rates, are regarded as among the easiest to repay, said Kantrowitz of FinAid.org.

The cost of your loan will jump too. On top of late fees, you'll also be liable for collection costs, including court and attorney fees.

The government can also garnishee wages up to 15 percent, a practice that can follow you late into life. Student loans typically aren't discharged in bankruptcy filing either.

COMMON STUDENT LOANS

STAFFORD – This is the primary federal loan for students. Students can get them either direct from the government (through "direct lending schools") or from private lenders such as banks and credit unions.

SUBSIDIZED VS. UNSUBSIDIZED –Students who demonstrate financial need can get subsidized Stafford loans, in which the government pays the interest on the loan while they're in school. Otherwise, Stafford loans accrue interest while students are in school.

PERKINS – This is a federal loan for undergraduate and graduate students with exceptional financial need. The school acts as the lender, tapping a pool of funds provided by the federal government. The interest rate is lower than with Stafford loans and the government pays the interest while the student is in school.

PLUS – Parents can take out federal loans to supplement children's aid packages. As with Stafford loans, PLUS loans can be either direct loans or through a private lender. PLUS loans are the responsibility of the parent, not the student. Graduate and professional students can also take out PLUS loans.

PRIVATE –Loans from banks, credit unions and other private lenders typically come with significantly higher interest rates than federal loans. Eligibility and loan terms depend on your credit score.

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Federal Student Loan Interest Rates To Reach Record Low

2009-06-11T19:10:00.000+08:00

Students who wait until July 1 this year to consolidate their variable-rate federal student loans will benefit from the lowest fixed interest rates in the history of the federal loan system.

Mark Kantrowitz, the financial aid expert who founded FinAid.org, and FastWeb.com, writes that beginning July 1, the interest rate for a consolidated Stafford loan while a student is still in school will be 2 percent, and during the repayment period it will be 2.5 percent. The interest rate for consolidating PLUS loans will be 3.38 percent.

"Borrowers who wait until July 1, 2009 to consolidate will save big over the life of the loan," he notes.

A $20,000 Stafford loan with a standard 10-year repayment plan at 6.8 percent would typically cost $230 monthly and nearly $8,000 in interest over the life of the loan. The new 2 percent rate would allow students to pay $184 a month for the same loan, with just over $2,000 in interest over the life of the loan--a whopping 73 percent savings in interest.

Kantrowitz said that consolidating loans can cut back on paperwork by combining all loans into one, he told Rochester, New York's Democrat and Chronicle. Additionally, consolidation can make it easier to borrowers to take advantage of different repayment options, including the new Income-Based Repayment program, which allows smaller monthly payments based on the amount of one's loans, income and family size.

Kantrowitz added that consolidation also lets some borrowers to take advantage of public service loan forgiveness, which allows workers to have their loans forgiven after 10 years of employment in public service. He noted that the government's definition of "public service" includes anything from teaching to working for a nonprofit.

There are some caveats: Borrowers who already consolidated their loans cannot take advantage of the new interest rate, and loans originated after July 1, 2006 are also not eligible. The federal consolidated loan cannot include private loans, and students still in school cannot consolidate loans until after they graduate.

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Bargain Babe: Student loan payments get a little easier

2009-06-10T19:08:00.000+08:00

Two major changes that will allow students to drastically reduce their loan payments are coming soon. To get the details, I spoke with Bill Penn, a non-practicing lawyer who gives career advice to students at Lewis & Clark Law School in Portland, Ore. The changes are for Perkins, Stafford and Grad Plus student loans and take effect July 1.

The first change, called income-based repayment, allows lenders to cap payments at 15 percent of the borrower's income.

The old system had most students on a standard, 10-year repayment plan. If you consolidated, you could lower your payment and extend the life of the loan to 15, 20 or 30 years.

The new repayment plan is based on income and is especially helpful for people who go into relatively low-paying jobs, like teaching, or for people who take positions at nonprofits or with the government.

To get into the 15 percent program, ask your lender for income-based repayment. For many people, this program will be your lowest payment option, Penn said.

The second change is for people who take public-service jobs for the government or a nonprofit. The program is called public service loan forgiveness, and federal direct loans qualify. You may need to consolidate your loans to participate.

If you work at a full-time public-service job while making your student loan payments, (including if you use the 15 percent program), after 10 years (120 payments) whatever you have not paid off is forgiven.

"It turns into real big dollar signs at that point," Penn said.

If you do not have a public-service job, then you have to pay the loans for 25 years before your remaining balance is forgiven. Payments going back to Oct. 1, 2007, count toward the 10- or 25-year payback period, but periods of deferment or forbearance do not count.

Public service jobs include military service, law enforcement, nursing, teachers, social workers, public defenders, librarians and employees of tax-exempt 501(c)(3) organizations.

The big caveat is that to qualify for the second program, you have to be paying your loan using the 15 percent program or an older income contingent program that is similar to the new one but more complicated.

And you have to be paying off your loans through the department of education. If you are not currently paying the department of education, you can consolidate your loans through them with forms available at https://loanconsolidation.ed.gov/AppEntry/apply-online/appindex.jsp.
For more details on the public-service repayment program, check out FinAid.org. The two changes are part of the College Cost Reduction and Access Act, enacted in 2007

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Consolidate School Loan

2009-06-09T19:03:00.000+08:00

Looking to debt negotiation OR a debt settlement program expenses, countless former students have looked for various sources and means to cut down both on the number of loans being paid each month and to perhaps cut the amount paid on all of the loans to a lower single payment. In many students’ cases, loan amounts today for student educational expenses can easily be beyond fifty thousand dollars. In some cases the sum may be double that amount.

The students of the 21st century are looking at very high debt amounts for their training and bankruptcy laws have gotten much tougher, not allowing students to so easily disengage from fiduciary responsibilities. There are really two types of student loans, federal and private. Each one has peculiarities and requirements that must be met in order for them to be able to have any chance to school loan consolidation.

The first are the federal student loans that are eligible for federal loan consolidation. If a student has federal Stafford loans, PLUS loans, Perkins loans, HEAL loans, Federal FFELP and Direct loans, he has lending agreements that are eligible under Department of Education guidelines to consolidate school loan expenses into one payment. When a college student first leaves school, federal student loans are due in ten years.

Monthly payments are figured on a ten year pay back schedule. With often very high balances, a payment on a single loan can be high but three or four separate accounts due each month can be breathtaking for a young person. Debt settlement or debt negotiation services helps you to consolidate of all the accounts allows the student to stretch loan liability out to as far as thirty years, often cutting in half the monthly ten year obligations. But it does mean that by doing the federal loan consolidation over the thirty year time span, a lot more interest will be paid.

There are some guidelines and requirements of debt settlement company for federal student loan consolidation expenses from the federal government and the first is that, consolidation will only occur with federal loans amounting to more than twenty thousand dollars. Additionally, a student must not be in default on any of the loans and must be less than a half time student.

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Don’t Get Swamped by Student Loan Debt

2009-06-07T18:30:00.000+08:00

Steps for recent graduates to take to manage weighty debt

Are you or someone in your family facing heavy student loan debt? Recent graduates left college with an average of $19,646 in student loan obligations, according to a study by the Project on Student Debt. This was up 8 percent from a year earlier, while average-starting salaries rose only 4 percent from the previous year. The conclusion: the debt graduates are carrying is growing faster than their initial chances to earn the money to repay it.

Lower your payments
If your monthly loan costs are simply too much, one simple and immediate solution is to reduce them by finding out if you can lengthen the amount of time you have to pay the loan – from 10 years to 20 years, for example. You should be aware that extending the loan term means you will end up paying more interest over time, but lowering the monthly payment amount may be your top priority right now. Remember, you can always increase your monthly payments later – and thereby shorten the length of the loan – if your financial situation improves in the future.

Consider consolidation
Students often sign up for a number of different loans to finance their education. This may mean you end up writing several checks to different lenders at various points in the month. When you consolidate, you take out a new loan, which is equal to your total debt, and use it to pay off all your existing balances. You then can pay just one student loan bill each month.

This will make life easier, but it may not necessarily lower your overall monthly outlay, depending on the new loan terms. If you do find a consolidation loan to reduce your monthly payments, make sure you examine the loan terms carefully. And remember if you will be paying off the consolidation loan over a longer period, the loan will cost you more in the end, so it may not be the best choice.

Do well by doing good
Do you wish you could make a difference in the world? It’s possible to cancel some or all of your federal student loan balance by signing up for any one of a number of programs aimed at making positive change. For example, teaching in an elementary or secondary school in a low-income area can reduce some federal loan totals, while serving a two-year term in the Peace Corps can also lead to ... a reduction in your loan balance.

Volunteers for AmeriCorps and VISTA may qualify to postpone loan payments while they are involved in the program and receive stipends, which can be used to pay off student loan debt. Health professionals who spend two years working with the National Health Service Corps serving communities who have a shortage of medical help can qualify for loan forgiveness of up to $25,000 a year. In addition, many law schools have loan forgiveness programs for newly minted attorneys who take jobs in public interest law. If you have a strong interest in making a difference, the commitment can also help you relieve some of your student loan obligations.

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Repaying Student Loans In Tough Times

2009-06-06T18:25:00.000+08:00

(CBS) If you're having trouble with student loan payments, you're hardly alone. Default rates on such debt are skyrocketing as the recession continues to take its toll. But in this column, Early Show money maven Ray Martin spells out numerous possible approaches to copping with the problem.

Student Loans: How to Pay Back When Struggling

As the recession drags on, folks with student loans are being hit especially hard.

Student loan defaults are at their highest rate in over a decade and are likely to head higher.

At the center of this “perfect storm” are high unemployment, lower-paying jobs and cutbacks in states' programs that had offered loan forgiveness.

And while federal student loans offer some payment relief and modification options, private loans offer fewer options and require repayment immediately.

Most students (65.7 percent) turn to loans to pay for some or all of their college costs. Studies report that undergraduate seniors at four-year institutions carry loans averaging about $22,500 for the four years.

One last-ditch option available for many other forms of debt -- discharge relief through bankruptcy - is not easily available for student loans. Folks at the end of their financial rope who have student loans must claim an “undue hardship” to seek bankruptcy protection from those loans. According to reports, there is a 50 percent chance of such a claim succeeding.

There is no statute of limitations for collection of student loan debt, and lenders have very strong powers to collect on defaulted student loans. For instance, lenders can garnish up to 15 percent of your take-home pay, seize your federal and state tax refunds and prevent renewal of professional licenses. For these reasons, paying back student loan debt is a financial priority.

There are also financial incentives for paying back student loans: You can deduct up to $2,500 in student loan interest even if you do not itemize deductions on your income tax return.

Folks having difficulty paying their student loans should not simply give up. Student loans offer more flexibility, delay and repayment options than any other debt and credit obligations. For example, folks with student loans can apply for deferment or forbearance (in which loan payments can be temporarily suspended due to hardship situations, such as unemployment). There are steps individuals can take to make the process of student loan repayment more manageable:

Talk to Your Lender: If you are struggling to repay your loans, speak to your lender before you stop making payments. If you default before contacting your lender, you may become ineligible for deferments or forbearance. Just ignoring the problem will make it worse, as interest will continue to accrue.

Consider Deferments or Forbearance: Lenders may offer deferments (for up to three years for federal loans and one year for private loans) or forbearance. For example, while in deferment, the interest on subsidized federal loans does not have to be repaid, but continues to accrue for unsubsidized loans. Under forbearance, you may be permitted to reduce or stop making payments for a set period of time, but the interest continues to accrue. These options should only be used for short periods.

Consider Income-Based Repayment: A new option, available July 1, 2009 for federal loans is the income-based repayment plan. Under this option, your payment is capped at 15 percent of discretionary income (defined as your income that exceeds 150 percent of the poverty line). Under this option, any loan balance that remains after 25 years of payments is forgiven. This option may be available even if you have already defaulted on your loans. This option may be suitable for borrowers with high debt, low incomes and very little possibility of ever getting a higher-paying job.

Consolidation Loan: One way to make your student loan payments more manageable is to consider a transaction called “loan consolidation,” in which individuals with qualifying student loans can combine all their loans from various lenders into one single loan with a single lender. One of the main benefits of “student loan consolidation” is a smaller monthly payment, which is typically the result of stretching out payments over a longer period of time and receiving discounts provided by lenders competing for your loan.

Loan consolidation also provides for simplicity: You go from having to make payments to multiple lenders to making a single payment to a single lender on a single loan. Finally, you can also gain some certainty: When you replace all of your variable rate student loans with one single loan with a fixed interest rate, you’ll have the certainty that your rate and payment will be fixed and will not change for the life of the loan.

Before you shop around for a consolidation loan, you’ll want to check to see if this will save you on the interest rate - the rate of the consolidation loan is the weighted average of the variable rates on your existing loans, typically rounded up by the next eighth of a percentage point. Use the calculator tool at the Federal Direct Consolidations loan Web site to run the numbers for your situation.

Under consolidation loans, you will need to choose a repayment plan. There are four categories of repayment options that apply to most consolidation loan programs:

Standard Repayment Plan: This payment schedule provides for a fixed monthly payment for a maximum of ten years. This option has the largest monthly payment.

Graduated Repayment Plan: Monthly payments are initially set at a lower amount for the first several years (typically two-to-five years). After that, payments increase to provide for repayment over ten years. The concept is that you can begin with a lower payment, and after your income increases, your payments will rise. You will pay more interest over the life of the loan compared to the standard repayment plan.

Extended Repayment Plan: This provides for a fixed monthly payment schedule ranging from 12-to-30 years, depending on the amount borrowed. The monthly payment will be smaller than the standard repayment plan, but you will pay more interest over the life of the loan.

Income Contingent Repayment Plan: Monthly payments are based on the borrower’s income, family size and total loan amount, and can be repaid over up to 25 years.

While loan consolidation for many may seem like a no-brainer, the repayment plan requires a little more thought. When deciding, consider this advice: Commit to a repayment schedule that allows for the payments to be no more that 15 percent of your monthly gross income. For folks with a high debt burden and low initial earnings - such as lawyers or doctors - this may be impossible. But also consider the possibility of rising income in your choice of repayment schedule.

If the higher payment of the standard repayment schedule cramps your cash flow, leaving nothing with which to pay down credit card debt or to contribute to an employer’s retirement plan, consider the lower payments offered by the graduated or extended repayment schedules. The downside is that, if you never make additional payments on these extended schedules, you will have paid several thousand dollars in additional interest over the life of the repayment on a typical amount of student loans. But if your income rises later on and there is extra cash flow, you can make extra payments on your student loans early without any penalty, and save on additional interest.

The graduated and extended payment plans offer the payment relief of lower payments early on and the flexibility later to pay more when it may be more affordable to do so. But if you do not make larger payments later, know that while the extended payment option can make your payments more manageable now, it will ultimately cost more interest over the life of the loan.

Finally, if you cannot handle your current student loan debt, try to resist the temptation to delay dealing with your loans by going to graduate school and taking out even more debt to do it. Consider the economics of repaying more loans for graduate school on top of your existing loans and the amount of income you’ll need to earn to be able to afford a reasonable repayment plan. And remember this -- an advanced degree does not always result in a higher paying job.

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State student loan agency falls under IRS scrutiny

2009-06-05T18:21:00.000+08:00

The state's student loan agency today acknowledged it is being audited by the Internal Revenue Service on $150 million of student loan revenue bonds issued in 1997.

"Just stay tuned," said Mike Reiber, spokesman for the Pennsylvania Higher Education Assistance Agency, known as PHEAA. "I can't say what the ramifications may or may not be, or what the IRS may or may not be looking at.

"For the average John Q. Public this is not something they ought to be concerned about," Reiber said.

The IRS audit was reported earlier this month by the Bond Buyer, an industry publication.

One of the issues is consolidation loan rebate fees paid to the federal government and why they reduced bond yields, according to the Bond Buyer.

Reiber said PHEAA's outside counsel Stevens & Lee, a Reading firm, is handling the audit.

PHEAA reported the audit to bond regulators in June 2008, Reiber said.

The Bond Buyer reported that PHEAA again reported the audit two weeks ago as a "material event" with the municipal securities information reposititories.

The publication reported the IRS also is auditing Vermont Student Assistance Corp.

Source

Crushed by Student Loans? Help's Coming!

2009-06-04T18:18:00.000+08:00

College graduates, who have an average of $22,000 in student-loan debt and face a bleak job market, are learning that a degree doesn't always pay for itself.

If you're a recent graduate who's struggling to repay your
loans, help is on the way. Starting July 1, the new Income-Based Repayment program can reduce the loan payments of grads with high debt and low incomes to a little as zero. If you owe more than you earn in a year, you will probably qualify.

Income qualifications: The program considers any income earned above 150% of the federal poverty level discretionary. For single people in the continental U.S., that amount is $16,245. It's higher for people with dependents and residents of Alaska and Hawaii.

Of that amount, no more than 15% should go to student loans. If you make less than 150 % of the poverty level, meaning you have no discretionary income, your payment would be zero.

For people earning more, payments would be calculated based on a sliding scale. For example, the traditional 10-year repayment plan might call for $350 a month on $30,000 debt. Under the Income-Based Repayment program, a person who makes $30,000 would pay only $170. The program offers a calculator on its Web site.

If your payments don't cover your loan interest, the unpaid interest will accrue but it won't compound as it would in traditional deferral programs. In other words, interest will not be charged on interest.

Any balances will be forgiven after 25 years. If you enter certain public service fields, the program forgives balances after 10 years.

What to do: Applications will be available July 1. While you can check your eligibility, the Internal Revenue Service will verify your income for the previous year.

If you have multiple fixed-rate loans that charge 6.8 %, you'll probably want to consolidate them. However, if you have variable-rate loans from before 2006, you might qualify for a lower rate in July under a consolidation rate set by Treasury auctions. You can find out more through the Federal Direct Consolidation Loan's Web site.

If you have older, consolidated loans but can't afford the payments because you lost your job, you might qualify based on your current income. For older loans, the new payments would be based on how much you owed when you started repaying the loan.

You might qualify for the Income-Based Repayment program even if you've defaulted on your student loans. If you've filed for bankruptcy protection, this might be the best way to repay your loans. Bankruptcy doesn't erase student loans.

The program is still a work in progress, but it aims to make loan payments less of a burden and encourage public service. Eventually, your education will help you land a better job and repaying will become easier. And that's the Savage Truth.

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Loan to Consolidate Your Student Loan Student Loans can sometimes be a tough thing to handle when you

2009-06-03T18:14:00.000+08:00

Student Loans can sometimes be a tough thing to handle when you get around to it. When a student loan rates themselves can continue on being a ever growing problem for many students out there. If you end up defaulting on a student loan it could mean disaster for your credit score as a young person who is starting out building up there credit profile.

So what might be school loan consolidation and how can it help you? Well loan consolidation for your student loan can help you by avoiding defaulting your loan as well as allowing you to make your monthly payments to the loan a lot more manageable for yourself. Just about every type of loan you can take out as a student can be allowed to be consolidated according to the higher education act. This goes for those students that are in undergraduate or even graduate school programs, as they all are able to qualify for them. There are quite a few different examples available for this.

These programs make federal government student loan consolidation quite easier by allowing you to combine a lot of different types of federal education student loans even if they have different terms and conditions or payment schemes as well as if they need to be paid to different lending institutions. It all gets consolidated into one lower interest loan that makes things a lot easier to manage and budget for. Additionally, the amount that you are required to pay is typically lower than you normally would be and as a result the payment cycle is extended to account for these lower payments. These things are put in place to allow for you to make things a lot easier on yourself in order to not have to worry about defaulting on your loans and as a result screwing up your credit for many years in the future.

Just about any single person that has a student loan can benefit from having to consolidate it. You really should think about it especially if your monthly payments are becoming too mouch of a burden for yourself. If you are close to defaulting on your loan because you are having trouble with making your monthly payments then student debt loan consolidation needs to seriously be considered. There are a lot of different research tools online that include calculators that can help you figure out exactly what your new payments would be with the various programs that are available. This will help you figure out if it’s perfect for you. You could have a lot of different payments that are needing to be paid to many different lenders. If you want to find yourself a simple way of managing these multiple payments to these different lenders each month then again student loan consolidation or debt settlement program can be a great solution for you to only have to make one lump sump payment each month that will in turn be disbursed to each of your outstanding lenders and their loans.

If you happen to also have a variable rate interest student loan the interest rate for the typical student loan consolidation program is fixed for the duration of the loan itself. This can make it a lot more manageable for you knowing exactly what will have to be paid for the duration of the student loan consolidation. These rates are easily calculated by using the weighted averages of interest rate loans are similar.

There are several ways of going about getting yourself a federal direct student loan consolidation. You can get a free one through the united states department of education by simply applying for it. Although if you are serious about it you would be best off going with a professional lender that specializes in these types of student consolidation loans. They can quickly figure out your situation and come up with the absolutely best debt consolidation loan that will work perfectly for you and your financial situation. As with any product or service, it is best to seek out the knowledge from multiple lenders in order to find the best fit for you. It will help you in the long run in many more ways then one and will allow you to save yourself from falling into the trap of defaulting your loans and ending up with a poor credit mark on your credit profile.

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PersonalFinance: Student loans & career building 101

2009-05-31T22:18:00.000+08:00

This is a tough time to be graduating from college. Your student loan bills, averaging over $22,000, are likely to arrive before a job does. And once it does, that job may not come with benefits.

The career you went to school for may not seem a reasonable path right now -- companies that typically recruit on campus have spent the last few months rescinding offers and hiding from the resumes piling up in their mailrooms.

The unemployment rate among 20- to 24-year-olds is pushing 14 percent, almost double the overall unemployment rate. That whole 20-something task -- figuring out what you want to do with your life -- may seem like a luxury you can't afford.

But hang on -- there are worse situations to be in than young, smart and educated. New programs will make those college debts easier to manage, and employers will eventually want to hire a new generation of workers. You can use the slow economy as an opportunity to prepare for your next stage. Avoid the debt-and-discouragement abyss by organizing your own finances and building a job-search strategy. Here's a checklist for the new grad.

-- Consider consolidating your student loans -- but don't rush into it. For most borrowers, loan consolidation isn't the great, low-cost deal it used to be, though it does offer some advantages. New government programs will allow you to stretch out your payments as long as 30 years. The Education Department also offers a new plan that will make the size of your loan payments contingent on your salary -- a boon to graduates who have trouble finding work or who want to enter low-paying fields or do internships and volunteer work. (see www.IBRinfo.org for details.)

The minority of students who still have pre-2007 variable-rate loans should move to consolidate right after July 1, suggests financial aid consultant Mark Kantrowitz. Others should check the calculators on his website here to see whether consolidating makes sense for them. One reminder: The longer you stretch out the loan, the lower your monthly payments will be, but the more interest you'll pay over the long term.

-- Get educated. Now that you no longer have to memorize Beowulf, the periodic table or Latin verbs, use those study habits to get smart about money. Read as much as possible about credit, investing, saving and taxes. Start, if you haven't already, to keep track of your money; just keeping those records will help you understand the big picture. You can use free online financial websites like mint.com and wesabe.com to track your expenses.

-- Get health insurance. Industry pros sometimes call new graduates the "young invincibles" because of their belief that nothing can happen to them. Young people are healthy, but even a surfing accident can push you over into bankruptcy if you're not protected. Allergy medication, birth-control pills, physical therapy for sports injuries -- they're all expensive if you're not covered. Some states and professional organizations (such as the freelancers union, www.freelancersunion.org) offer programs specifically aimed at the young, poor and healthy. Check out online broker ehealthinsurance.com, but also get competing offers from a broker in your state who may know of local regulations and programs that work for you. You can also buy a short-term, six-month program to bridge the post-graduation gap from Golden Rule (www.goldenrule.com).

-- Avoid taking on debt just to live -- even if you have to move back home for a while. Piling everyday expenses on the Visa or MasterCard will just limit your freedom to do what you want. Live like a starving student for a little while longer; it will allow you to do that extra internship or take that post-college trip.

-- Set financial goals. A car? A job-interview suit? Spring break 2010? A house? Do the legwork so you know what you really want and how much it costs. Just having the goal will help you earn and save to meet it. Use an FDIC-insured bank account to build up some savings for these short-term goals.

-- Go after the career you want, not the one you think you should have. Job placement powerhouse Adecco is telling grads to pursue careers they care about. Just looking for jobs you think are lucrative doesn't really work; ask all the newly unemployed Wall Street wunderkind from the Class of 2007.

-- Fill gaps. Beef up job skills you didn't get in college by learning the computer programs, procedures and lingo used in your chosen industry.

-- Network like crazy. Hunt for a job by telling everyone, especially former professors in your department and past bosses, that you are looking, says John Challenger of outplacement firm Challenger, Gray & Christmas. "The current job market requires a much more aggressive approach, as well as some creativity." He also tells newly minted graduates to use their social networking skills to research jobs and possible employers via FaceBook (www.facebook.com), Twitter (www.twitter.com) and LinkedIn (www.linkedin.com). Join the professional association that fits the career you want to have, and go to meetings. Find a mentor -- or two -- in the career you want and soak up all they have to share.

-- Avoid the angst. Stress about money, work and life are a typical part of the post-graduate experience, so use proven techniques to calm yourself. Exercise, get together with friends and think about the bright side: No more term papers and tests.

Money-Saving Tips for New Grads With Student Loans

2009-05-30T22:10:00.000+08:00

May is typically that happy time of year when college grads everywhere shed the cap and gown for a suit and prepare to start their professional careers.

But this year, graduation is a little more stressful for college seniors everywhere. Fewer graduates have jobs lined up, and most undergraduates have close to $20,000 in student loan debt when they leave college, which means the six-month grace period between the end of college and the date when student loans need to start being repaid is going to seem shorter than ever for many grads.

Combine the weak job market with the sudden burden of new financial drains on income that many grads face, and paying off those student loans can seem like the last thing a borrower needs to worry about. But making those loans a priority now will prevent a lot of headaches later.

Here are a few tips from some student loan experts to help new grads land on their financial feet.

Find Out How Much You Owe
As soon as the graduation festivities die down, Rebecca Schreiber, a fee-only certified financial planner that specializes in helping clients under 35, said new grads should assess their financial situation and determine how much they actually owe after college.

“A lot of students, if they’re like me, signed whatever the [financial] aid department put in front of them and a lot of people have no idea what they owe,” Schreiber said.

Schreiber also suggests grads pull all three of their credit reports if they’ve checked one before to make certain that all three have the correct address on file and to verify they don’t have any unauthorized entries or lines of credit open.

Once the amount of debt owed is established, Schreiber says grads should take steps to set up a budget so they know how much they will have to earn in order to meet the minimum payment levels on the loans. Sometimes this means taking a job that is not exactly what you want to meet your debt obligations.

“You’ve gotta find income,” Schreiber said. “You need to show not only lenders but potential employers that you’ve got a handle on things in your personal life -- and employers look at credit scores.”

Even though members of the class of 2009 may not get their dream jobs right after graduation, it is important that they get jobs that allow them to stay on top of their debts and start building strong credit histories.

Grads can also put some of that graduation money to good use by making a few payments during that six-month grace period after college before you have to set up your payment plan, and students that have loans that accumulate interest while attending school should try and pay the interest while they are still in school.

“Even if it’s $30 or $40 a month tacked onto the loan, if you can divert that number in college you’ll cut down on the sticker shock and will save you a couple thousand and a lot of the things that you would have spend the money on you won’t remember,” said Ken Clark, a certified financial planner and a college savings guide with About.com.

Pay More than the Minimum
Clark also advises grads to be proactive and try to pay more than what’s required, because any payment that’s above the minimum monthly requirement can really help lower their debt burdens over the long haul.

Clark estimates that a student with a $20,000 loan at 6.6% interest would end up paying $27,463 if he paid the standard $228 a month for 10 years. If that same student tacks on an additional $50 to each payment, the loan will be paid off in just 8 years, with a total cost of just $25,655. That’s a savings to the student of almost $2,000.

Consolidation
Although it is sometimes overrated, loan consolidation, which creates a weighted average of a student’s interest rates, is also something new grads should consider. Experts say wait until July when the new rates are set, since they’re likely to be lower than the current rates. Clark said parents who took out PLUS loans should definitely consider consolidating.

“Some people [with PLUS loans] are getting an 8.5% rate, and the maximum rate under a consolidation is 8.25%,” said Clark, “So if you go from 8.5% to 8.25%, it’s probably going to save you $1,000 over the long haul.”

Look Into Loan Forgiveness Programs
Grads who have loans in excess of $20,000 should also consider loan forgiveness programs. Nurses, teachers, engineers and other in-demand fields may be able to have an employer pay back their loans if they agree to work in an area for several years where there is a need for their expertise.

New legislation also goes into effect in July of this year that will launch the Income-Based Repayment [IBR] program, which will cap some borrowers’ student loan payments to a low percentage of their income, and offers student loan forgiveness to people who work in public service jobs, including jobs in nonprofit and government, for more than 10 years. The new legislation sounds promising, but not everyone qualifies and these programs won’t necessarily pay back everything you owe just because you work in public service.

“Over 50% of the money people use for college comes from student loans, but not all of that money comes from federal student loans and private loans for students are not subject to this particular program -- so it won’t cover everything,” said Felicia Caldwell Gopaul, a certified financial planner and spokesperson for College Funding Resource, a Web site that offers college funding information to students and parents.

Look into Little Savings Programs
There are also free programs such as UPromise, a company that runs several 529 college-fund programs nationwide. UPromise allows you to set up an account and register your credit cards with that account so participating retailers can contribute small amounts of money to your account when you shop in their stores. That money can be used to pay down Sallie Mae student loans.

Another small money-saving program that many private lenders offer is an interest rate reduction -- usually a reduction of about 0.25 percentage points -- when recent graduates pay their loans on time for six months. Federal student loan rates are also typically reduced by the same amount when students set up automatic payment plans that withdraw directly from a checking or savings account.

“These are cool little random things you can do,” Clark said. “But add them all up you might save a couple thousand bucks.”

Source

The Future of Student Loans

2009-05-29T22:05:00.004+08:00

How Thursday's House of Representatives hearing on the future of the federal student loan programs looked to a particular observer probably comes down to where he or she falls on the cynicism continuum. Taking the session at face value, you'd be inclined to walk away fairly impressed by the genuine multiplicity of viewpoints expressed and the stated willingness of the Democrats running the House Education and Labor Committee to consider various possible approaches to reshaping the loan programs.

Then again, if you've watched a decade and a half of battling between the political parties over the federal government's two loan programs and have watched House Democrats largely cater to the wishes of President Obama so far, you'd probably harbor serious doubts about Thursday's promises that the committee's Democratic leaders will thoroughly consider alternatives to the administration's plan to end the lender-based guaranteed loan program and use the savings to ensure a permanent and growing source of Pell Grant funds.

Rep. George Miller, the California Democrat who heads the education committee and whose views loom large over it, made clear in his statements Thursday that major change is coming to the loan programs, one way or the other, because the financial markets have forever altered the economics of student lending.

"The administration has given us a proposal for where they want to go," a proposal, he said, that "sets the bar high" by promising tens of billions of dollars in savings that could be used to make college more affordable for students from low-income families.

"There has been a suggestion that this is all a 'done deal,' " Miller said, in a nod to the more cynical. "There is agreement that there is a serious cost to the way this program has been run, but what we do about that is an open question for members of this committee."

Almost as an afterthought, Miller added: "Of course, I haven't gotten in the habit of telling President Obama no yet...."

And that's no small thing, given that the student loan proposal, and its ancillary promise of as much as $94 billion in savings, has soared to the top of the higher education agenda of the new president, along with Education Secretary Arne Duncan. The administration has trumpeted at every turn the possibility of achieving the financial aid officers' holy grail of a Pell Grant entitlement (which the Education Department is now calling an "appropriated entitlement"), a major expansion of the Perkins Loan Program, and the creation of a $500 million a year fund to encourage college completion -- all with the money generated by essentially shifting all federal student lending out of the bank-based FFEL program and entirely into the competing Direct Student Loan program. (The administration's proposal would allow lenders to compete for the right to service loans, and envisions some role, financed through states, for guarantee agencies and other lenders that help students avert defaults and provide other support to students and colleges.)

While the prospect of generating boatloads of new funds is the administration's primary tool for enticing support for its proposal, its officials argue that it is necessary, too, to ensure the continued availability of loan funds to students, given the seizing of the credit markets that required emergency government action last year. Administration officials note that because of that action, many loans being made through the lender-based program now are, in fact, financed with government funds.

And Education Department leaders repeatedly describe the guaranteed loan program as being "on life support," which strikes some loan industry officials as hypocritical since the White House boasts in many other settings that its efforts to shore up the financial industry have been hugely successful.

Democratic leaders in Congress have cautiously backed the administration's plan thus far, giving the Congressional education committees until October to craft legislation to reform the loan programs that could be considered on a "fast track" through the budget reconciliation process. But in a nod to supporters of the bank-based loan program, the compromise budget blueprint also included a resolution praising the role of lenders and guarantee agencies and requiring that "any reform of the federal student loan programs ... include some future role for the currently involved private and non-profit entities."

Thursday's hearing, which aides to the House Education and Labor Committee said might be the panel's only formal, public discussion this year of possible changes in the federal student loan and financial aid systems, sent conflicting signals about how locked in the panel is to the Obama proposal, in everything from its choice of language to its witness list. The committee's Web page about the hearing said it would examine "proposals that will make historic increases in college aid by enacting reforms that will make the nation’s federal student loan programs more reliable, effective and efficient for students, families and taxpayers" -- no conditional tense there.

Photo: House Education and Labor Committee Robert Shireman

To the committee's credit, the witness list for the hearing was balanced between supporters of the administration's proposal (including the Education Department's Robert Shireman, who is the architect of the loan proposal, Chancellor Charles Reed of California State University, and Anna M. Griswold of Pennsylvania State University, which abandoned the FFEL program for the direct loan program last year amid the credit crunch) and student loan providers and guarantors, including representatives of Sallie Mae, New Hampshire Higher Education Assistance Foundation, and the Access Group. (Presumably it was an oversight that John F. Remondi, the vice chairman and chief financial officer of Sallie Mae, was left off the printed list of witnesses distributed to reporters at the hearing.)

Those who attended the meeting expecting the sort of histrionics that has long attended Congressional discussions about the two student loan programs would generally have been disappointed, at least by the witnesses (one or two lawmakers on each side of the aisle, including Reps. Mark Souder (R-Ind.) and Rob Andrews (D-N.J.), played their traditional roles of sharp-elbowed partisans).

All of the loan industry types, to some extent, accepted the idea that, as Miller put it, "there needs to be fundamental change" in the loan programs, and that business as usual in the guaranteed loan program would not stand. "There's sometimes a characterization that you're saying, 'No, we want to go back to where we are,' " Miller said in an almost coaching manner to Sallie Mae's Remondi. "But that's not what you're saying."

"That's right," Remondi said. He said that a proposed alternative that Sallie Mae has been circulating would "build from the foundation of the president's proposal" and "make that proposal even better," by using government funds for all loans (capitalizing on the federal treasury's ability to borrow money cheaply) but leaving a role for lenders to originate and service loans (on a "fee for service" basis), building in the sort of choice and competition that many financial aid experts see as strengths of the current two-program system.

Photo: House Education and Labor Committee John F. Remondi of Sallie Mae

"We are not trying to preserve lender subsidies, nor are we trying to preserve the FFEL program as we know it," Remondi said.

The idea that lenders recognize that the current bank-based system is unsustainable, and that there were a range of options for remaking the loan programs to incorporate elements of the two existing programs into a single, better one loan system, was echoed by Christopher Chapman, president and chief executive officer of the Access Group, a nonprofit lender mostly to graduate students. "There aren't two choices here -- it's not a choice of 100 percent direct lending or the status quo," he said. "We encourage the committee to look at [the options] closely, and retain the option that ensures that choice of competition, flexibility and freedom of service remain in the program."

To the extent that members of Congress remain open to considering alternatives to the Obama administration's proposal, the major question going forward is whether any of the other options will save enough money to approach the benefits of the Obama plan.

If they would -- and a spokeswoman for Miller confirmed that the House panel is awaiting a Congressional Budget Office analysis of the Sallie Mae proposal -- it is possible that senators and House members will be interested enough in protecting the roles of state loan agencies and attracted enough to the continued competition and choice to break with the administration.

Source

Student Loan Debt Consolidation - 10 Good Reasons Why It Can Benefit You

2009-05-28T22:01:00.000+08:00

Student loan debt consolidation works by taking out a new loan to pay off your existing student loans and may be the best course of action to take if a student has several unpaid debts. Student loan consolidation is different from other debt consolidation loans because they do not require immediate payment. Loan debt consolidation has a lot of potential benefits:

1) You only have to repay the one who offered you debt consolidation instead of paying multiple creditors.

2) The interest rate is much lower than other types of loans.

3) The terms and conditions are tailored to suit your needs

4) Repayment can be made when you get employed

5) Repayment term can be extended from 10 to 30 years

6) There are no extra or hidden charges

7) You can apply online without the need to meet lenders

8) Reduce your monthly payments by up to 60%

9) Flexible repayment options

10) The immediate effect of the consolidation is that the debt burden is relieved. The instalments to be paid on the student loan debt consolidation are also significantly smaller and therefore more manageable.

If you are struggling to make multiple student loan payments, you can reduce your hassle and your monthly payments by bundling your loans with consolidation. Debt consolidation can make your adjustment to post-college life much easier and much more economical.

You can lock in a low, fixed interest rate for the life of your consolidation loan. Here are some of the benefits of student loan consolidation services:

Keep all federal borrower benefits

No credit checks or co-signers required for federal consolidation

No prepayment penalties

No fees or charges for federal loan holders

Payments on the debt consolidation may either be taken directly from the salary of the student, or repaid through self-assessment tax returns as in the case of self-employed people.

You should consider that over time you will end up paying a larger amount, although the monthly payments will be easier to manage. The interest incurred on federal loans is tax deductible, the loan may sometimes be forgiven, and payments can be deferred if you return to full time education.

In the case of federal loan holders consolidation is a free government-sponsored program.

Debt consolidation can have lot of benefits for those entering the work place. Student loan debt consolidation may be just what you need to effectively manage your finances and pay off your student loan.

Source

Why You Should Use Student Loan Consolidation Services

2009-05-27T21:58:00.000+08:00

Student loan consolidation. Wow, you acknowledged it would be following one of these days due to of all the student loans you took out while you were going to college, but now that you are a graduate, this situation will inevitably rear its ugly head and it is now time to face the music of needing to repay all those student loans.

Of course, it feels good to have finally graduated from college and have your diploma in hand so you can now put all those years of studying and cramming behind you, or perhaps even put that knowledge to use immediately in your new job. But before you get too excited about being free from college, don’t forget about the responsibilities you have in regard to the methods you used to really finance your education. Even if you happen to forget about it, rest assured that they will not!

You are very likely in the position now of finding a job, hopefully one within your field of study, but if that job is pretty much entry level, chances are excellent that you are not going to have the financial resources to pay off your student loans. This is where student loan consolidation can be a life saver to keep those creditors off your back while you are still trying to make ends meet.

You probably have several student loans outstanding and scanning through the fine print on each one of them becomes a very daunting task. What you need to see however is that you can combine all of these into one lump sum and make a single payment each month until they are all paid off.

Remember that this is typically not a loan in the traditional sense of the word. When you get a loan, you more often than not state the purpose that you need it for, but the company rarely if ever ensures that that is what you really used it for. And without any credit established, you are likely going to have issues in qualifying for a personal loan so you can pay off your student loan obligations. To make matters worse, the total amount you owe is probably very high, much higher than what you would be able to get at reasonable interest rates in a personal traditional loan.

Enter a student loan consolidation program. This is where you lump all your obligations into a single bundle and the program will allow you to make a single payment each month to get them paid off. This is not a loan in itself; as a matter of fact, if you do not give your monthly payment to the program company, then they will not make your payments that month to your debtors.

The advantage to you in doing this is that the amount of total money you are paying out is a great deal less than if you were paying on each one separately, even if you had the financial resources to do that, which you likely don’t. In addition, you are only paying one interest rate, normally very reasonable, instead of interest on multiple loans at the same time. Another advantage is that you can oftentimes reduce the amount of your total student loan debts as much as 50% or more.

Consider a student loan consolidation program so that you can get that tension off your plate and concentrate on getting a good start in the working world!

Source

Student Loan Consolidation Find Out More Info Here

2009-05-25T23:06:00.000+08:00

A student loan is a kind of loan that students can avail of to assistance them in using for their professional education. Student loans are guaranteed by the government and typically have moderated loan rates than other kinds of loans.

Sometimes, one funding is not an adequate amount of to financing all of your educational expenses, including tuition, books and class supplies. This can force you to borrow many student mortgages based on information from different lenders, which can be quite confusing and even a good deal more expensive. To avert this, you serves to contemplate student loan consolidation.

Student Loan Consolidation Find Out More Info Here

WHAT IS STUDENT LOAN CONSOLIDATION

Student Loan Consolidation is the process of combining all of your student loans to a single new loan in on one repayment program given by one lender. The balances from all your previous student loans are paid off by the new loan. This allows you to pay only one loan instead of multiple loans. The interest monkey for the consolidated student loans is computed by averaging the interest rates of your recent loans.

You can also consolidate your student financing options amongst the loans of a new person, such as your spouse. However, this is not advisable. This is because if you ask for deferment, both of you have to balance the necessary criteria. Also, you will continuing to have to repay the loan nonetheless if you separate or divorce.

Most government loans, such as FFELP and FISL loans, can be consolidated. Some private loans can too be consolidated. Various banks and student loan lenders typically offer financing consolidation options. You can also go directly to the Department of Education to consolidate. Both classmen and their parents can avail of loan consolidation.

ADVANTAGES OF CONSOLIDATION

Aside from simplifying your payment responsibilities, another boon of student loan consolidation is that you are able to decide on the structure of your loan. Typically, consolidated student loans require lessened monthly payments as opposed to the original loans. If you’re having trouble making your monthly payments, consequently this option may just be for you. You can also translate your variable interest rate to a lower fixed rate, which can save you a lot of money.

You can also extend your repayment term from the standard 10 years for government financing options to reach up to 30 years. There is no maximum lonely time which you can consolidate, and loan you pay may be tax deductible. Consolidated student loans too have flexible repayment options, not excluding no prepayment penalties, allowing you to pay more as opposed to your monthly payments.

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Retire student loan before retiring

2009-05-24T23:05:00.000+08:00

Dear Debt Adviser,
I am 56 years old and have about $80,000 in student loans from my master's degree, which I completed about eight years ago. The monthly payments are a huge pain now but will be impossible when I stop working. Is there any way to get the balance forgiven by being a senior citizen?
-- Nancy

Dear Nancy,
Senior citizen? Not even close at 56! Congratulations on completing your master's degree when you were 48. Unfortunately, you, like so many younger people, also accumulated a large student debt load in the process.

Your question is whether or not your loan balance would be eligible for forgiveness. The short answer: It depends, but it's not going to be easy. I can tell you, however, that the fact that you are or may become a senior citizen is not one of the avenues for loan forgiveness that I have found in my research of the topic.

The easiest course of action is to keep working until you can't afford to. Looking for someone else -- your taxpayer friends and neighbors -- to pay for your education is not something I can easily endorse. If you can't afford to retire and pay your expenses, then it is hoped your good health and employment will continue until you can.

To answer your question, the first thing you need to check is if the loans are federal loans or private loans. Most forgiveness programs are for federal loans. In general, to qualify for federal loan forgiveness, you must volunteer with a participating organization, perform military service, teach, practice medicine in qualifying communities and circumstances, or meet other specific guidelines of a particular loan forgiveness program. You can find more information by going to finaid.org.

In addition, many companies offer student loan repayment programs for their employees. I would start with your own company and ask what might be available. You also might consider seeking employment elsewhere if your degree does not play an integral part in your job duties at your current employer. Since you went through the effort to obtain your degree, you might be able to find work using the skills you learned and get some of your loan repaid as a bonus.

Keep in mind, none of the forgiveness programs that I have found will forgive an amount as high as $80,000.

To help you get started with developing a plan to repay the loans before you retire, here are a couple of suggestions. Begin by making sure you are paying the lowest interest rate on the loans as possible. If you have not consolidated your loans, I would recommend starting the process by shopping around for the best consolidation deal.

Next, take a realistic look at your finances and determine how much you will need to pay monthly to retire your debt before you want retire. Notice I said "want" to retire. You may have to work a little longer than planned if you don't have enough income to pay off your loans before you reach retirement age.

One other thought is the new federal Income Based Repayment, or IBR, plan that will be available July 1, 2009. You need to meet certain income standards to qualify. The maximum repayment period is 25 years. After 25 years, any remaining debt will be discharged, or forgiven. Under current law, the amount of debt discharged is treated as taxable income, so you will have to pay income taxes 25 years from now -- when you are a spry 81-year-old -- on the amount discharged that year.

Another item to check is the College Cost Reduction and Access Act of 2007. This program discharges any remaining debt after 10 years of full-time employment in public service. The borrower must have made 120 payments as part of the U.S. Department of Education's Direct Loan Program to obtain this benefit. Only payments made on or after Oct. 1, 2007, count toward the required 120 monthly payments.

Obama has big plans to expand student aid

2009-05-23T23:00:00.001+08:00

President Barack Obama's health-care goals may be garnering attention, but his higher education proposals are no less ambitious.
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If adopted, they could transform the financial aid landscape for millions of students while expanding federal authority to a degree that even Democrats concede is controversial.

At stake is a plan to expand the Pell Grant program, making it an entitlement akin to Medicare and Social Security. Key to the effort is a consolidation of student lending that would give the U.S. Department of Education a near monopoly over the practice — a proposal that has mobilized the private loan industry, which lent $55.3 billion to 6.4 million students in the 2007-08 school year.

Obama outlined his initiatives, which also include incentives for colleges to cut costs and to raise graduation rates, in the fiscal 2010 budget that Congress approved late last month, and Democratic leaders said they hope to make them law by October.

The aim is to improve access to post-secondary school for those who need it most: lower-income students for whom college or vocational training can be the decisive factor in their economic future. The president has said he wants the United States to lead the world by 2020 in the proportion of college graduates, a position the country had long held; it now ranks seventh for the 25-34 age group. He also has called for every American to attend a post-secondary institution.

Neither goal will be met if students can't afford the cost.
Tuition crisis builds

The administration's plans are "the most fundamental rewriting of federal student aid policy in 35 years," said Terry Hartle, senior vice president of the American Council on Education. "These are big changes. They are painted with a broad brush. ... It's easy for this to be overshadowed by health-care proposals, but for many families, these discussions will be equally important."

Even critics of the plan say the status quo is unsustainable.

Students are amassing debt on a scale that approximates a home mortgage. The economic downturn has meant rising rates for defaults on loans, as well as for students dropping out. Private schools face shrinking endowments, and public universities face state budget cuts.

The tuition crisis has built over many years, however, and until recently Congress did little to address it. The maximum Pell Grant award was frozen at $4,050 from 2003 through 2007. When Democrats came to power that year, they laid the groundwork for many of the changes on the table, including raising Pell Grants to the current amount of $4,731. They also began to curb federally subsidized private loans.

But Obama would go much further. He wants to terminate the private Federal Family Education Loan program, the primary source of student loans. Advocates say the move is a formality: The government already effectively controls the program by guaranteeing the loans, paying a special allowance to lenders, and in recent months, buying back loans by the billions from struggling firms.

Shifting all lending authority to the government through its Direct Loan program would save $94 billion over 10 years, according to the Congressional Budget Office. Obama would use that windfall to expand the Pell Grant program, created in 1965 to cover most tuition costs for low-income students.

Creating another mandatory spending program during a recession, with a record-high federal deficit, leaves many lawmakers uneasy.

Rep. Paul Ryan, R-Wis., the senior Republican on the House Budget Committee, decried Obama's Pell Grant proposal as "an autopilot entitlement immune from congressional oversight at precisely the time when we should be reforming existing entitlements."
Lending industry resists

Obama also is seeking to overhaul federal Perkins loans, administered by schools to bridge gaps between other loans, grants and scholarships. The revamped Perkins program would provide $6 billion in loans a year, compared with the current level of $1 billion, and participation would be expanded beyond the current 1,800 institutions to all 4,400 colleges and universities. An additional 2.7 million students could receive the loans.

The administration has suggested that it wants to change the distribution formula for Perkins loans, to give priority to needier students and to reward schools that control costs.

The private lending industry is fighting to preserve its role.

"In the end, this is not about growing the size of government or relying on the free market — because it's not a free market when we have a student loan system that's rigged to reward private lenders without any risk," Obama said.

Industry officials contend that private loans provide stronger default protections and better serve smaller schools, and some institutions have suggested that they may be content to play a more limited role. Industry officials are urging lawmakers to convene a summit of industry leaders to search for middle ground. But they also acknowledge that the prospect of capturing $94 billion and directing it to Pell Grant assistance could prove hard for Congress to resist.

"The only reason they're doing this is the government can make a lot of money," said Kevin Bruns, executive director of the trade group America's Student Loan Providers. "Private-sector lending built this entire industry, and now the federal government has piggybacked off of it."

Source

Goodbye to FFELP: NextStudent and Other Lenders Eyeing Possible End of Largest Federal Student Loan Program

2009-05-22T22:58:00.000+08:00

Lenders of federal student loans are becoming increasingly concerned for their future as President Barack Obama continues to promote his plan to make the federal government the sole provider of federally sponsored parent and student loans, doing away with the third-party Federal Family Education Loan Program and essentially wiping out over half of private lenders' student loan business.

Under the current federal student loan system, colleges and universities can choose to participate in either the FFEL program or the Federal Direct Loan Program, with a few schools opting to be set up for both. Students who attend a FFELP school must obtain their federal graduate and college loans from private banks or state agencies, which in turn receive subsidies from the federal government. At schools that participate in the Direct Loan Program, on the other hand, students are issued their federal student loans directly by the government.

The $85 billion FFEL program has dominated the federal student loan arena for more than 40 years, with loans issued by FFELP lenders having come to represent nearly three-quarters of the total federal student loan market, far outstripping the volume of federal student loans made directly to borrowers by the U.S. Department of Education through the Direct Loan Program.

FFELP's detractors point to the program's cost to taxpayers -- money, the critics say, that goes to line the pockets of private lenders instead of to students -- as well as its too-close-for-comfort dependence on the health of the credit markets, which last year led to a virtual freeze on FFELP lending, as student loan lenders reeled from the credit crunch brought on by the subprime mortgage crisis.

Faced with a $1.75 trillion budget deficit, President Obama is hoping to make good on his campaign promise to dissolve the FFEL program and turn over all origination of federal parent and student loans, as well as all federal student loan consolidations, to the Education Department, a move the administration contends will save taxpayers $4 billion a year.

This changeover, however, would mean that the 83 percent of colleges and universities that currently participate exclusively in the FFEL program would be required to make significant changes in the systems they now use for administering their federal parent and student loans in order to transition into the Direct Loan Program.

FFELP lenders are attempting to push back against the president's student loan initiative and have proposed various alternatives. But the momentum on Capitol Hill may be against them, says Charles Gabriel, a managing director at Washington-based Capital Alpha Partners.

"Even though the budget plan does not necessarily spell (the) beginning of the end for the federal student loan programs," says Gabriel, "it does portend a tough, potentially uphill struggle for the industry and FFELP community."

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Credit Loan Unveils Online Financial Videos and Infographics to Help Explain Current Economic Crisis

2009-05-21T19:34:00.001+08:00

Through visually appealing, witty infographics and interactive financial videos, creditloan.com seeks to make personal finance topics, current economic problems, and economic principles guiding these issues understandable to the general public.
During this entire economic situation, the general public has had one crisis after another thrown at them.

There is little discussion of the principles involved, yet all of these crises, from the fall of Freddie Mac and AIG, to the Dot Com failures and housing crisis, affect everyone directly. By providing these interactive financial videos and infographics, we think we've solved the complexity issue by simplifying these concepts, so that everyone can understand what is really going on.

Tampa, FL (PRWEB) May 15, 2009 -- Credit Loan, Inc., provider of online personal loans through its service-based and educational website, has added a variety of financial videos and infographics to its site to help people understand complex economic issues that directly affect them. Using simple graphics, plain language, and witty storylines, these interactive web applications simplify the complicated concepts that drive the economy.

In the animated video, CEO & Banking Executive Riches, the financial crisis is stripped down to a plot illustrating top executives from companies such as Freddie Mac, "walking the plank." Lost money is represented by treasure and gold floating in the water. Another video visually illustrates the situation that led to the AIG crisis, with television headlines guiding a timeline, with a thermometer demonstrating the rising anger and frustration caused by the situation.

"During this entire economic situation, the general public has had one crisis after another thrown at them," says Daniel Wesley, CEO of Credit Loan, Inc. "There is little discussion of the principles involved, yet all of these crises, from the fall of Freddie Mac and AIG, to the Dot Com failures and housing crisis, affect everyone directly. By providing these interactive financial videos and infographics, we think we've solved the complexity issue by simplifying these concepts, so that everyone can understand what is really going on."

In the Game of Economy, the visitor is prompted to click on a start button to spin the 'Wheel of Chaos', each time which they are presented with a personal situation and its cause/effect relationship on the economy. This board game style application serves to illustrate the steps leading to the overall financial and housing crisis.

Other videos include an overview of how the U.S. originally came into the use of credit and its relationship with creditors, while another presents a synopsis of Barack Obama's stimulus plan. Additional infographics detail Obama's first 100 days in office as well as the 14 largest dot com companies that went under and the money that went down with them.

"The concepts that are laid out in the videos and financial infographics are serious. With the average person struggling to pay their bills and keep a job, we are doing our part to help them understand what has happened and what is being done to rectify the situation. Access to these resources is provided by a centralized graphic on the creditloan.com homepage. This centralized access exemplifies our vision that all of our visitors deserve a firm understanding of the economic crisis," added Wesley.

About Credit Loan, Inc.

Credit Loan, Inc. is an organization specializing in personal loans, credit cards, and debt consolidation. In 1998, it founded Creditloan.com to help educate consumers about a variety of personal finance issues. Bad credit loans, mortgage/refinancing loans, student loan information, and credit reports are among the many topics that are discussed. The company's site offers a repository of information, including videos and infographics, and provides access to professional help, with email questions typically answered within 24 hours.

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The Student Loan Scam

2009-05-16T22:05:00.000+08:00

Not everyone would willingly choose to become the public face of the debt-ridden. Alan Collinge didn't exactly choose to do so, defaulting on $38,000 in student loans only after a series of missteps and strokes of misfortune, but he has embraced his situation with gusto, founding StudentLoanJustice.org to advocate for distressed borrowers and now writing a book, The Student Loan Scam (Beacon Press).

Collinge's tactics have at times been controversial -- he has been criticized for personally attacking student loan lobbyists, for instance -- but with the Obama administration putting the student loan programs front and center in its higher education agenda, the industry he writes about and his views are likely to remain relevant. In an e-mail interview, Collinge discussed his personal experiences and his assertion that none of the policy changes currently being debated will make a difference for borrowers without reform of federal bankruptcy laws.

Q. Can you give our readers the 1-minute version of how you ended up getting into such a jam with student loans? How much of your situation evolved because of your own (potentially flawed) decisions, and how much because of the unfair practices or policies or rules by other parties?

A. I originally borrowed $38,000 in FFEL loans for college, and graduated from the University of Southern California in 1999 with undergrad and graduate degrees in aerospace engineering. I took a job (with takehome pay of about $2,000 a month) as a researcher at Caltech out of school, consolidated my loans with Sallie Mae, and began making regular payments of almost $400 a month. I took a night job as a waiter, but keeping to a budget proved difficult, exacerbated by expenses related to a minor car accident and money I had spent trying to develop an invention since graduate school. I left Caltech in the summer of 2001 hoping to secure a higher paying position in the defense industry. Unfortunately, the economy after September 11th left me unemployed/underemployed for more than a year.

In December 2001, I requested a hardship forbearance, but Sallie Mae turned me down and put my loans into default. I tried repeatedly to negotiate a reasonable payment solution with Edfund, the guarantor, but they offered me no solution but to begin repaying on what had exploded to $80,000 by spring of 2003. I spent the next two years dealing with all manner of collection companies to negotiate a solution I could realistically afford, but by 2005, what had started as a $38,000 headache had become a $100,000 nightmare.

There is no doubt that my decisions after graduation contributed to my financial distress. I could have made wiser decisions about where to work out of college, and placed more emphasis on pay rather than other factors. I should have never left my job at Caltech without a solid position to go to. The fact that by 2002, I was working in a kitchen 90 hours per week for less than minimum wage was on account of my actions, and mine alone.

However, the explosion of my debt from headache to insurmountable proportions had much more to do with the predatory environment that gives the industry a perverse incentive to default student loans. Like most borrowers, I didn’t realize until well after graduation that federal student loans were the only loans in the nation that are largely non-dischargeable in bankruptcy, have no statutes of limitations, and can't be refinanced after consolidation. Nor do they realize that borrowers can have their wages, Social Security, and disability income taken without a court order, for example. Lenders are largely unwilling to negotiate with distressed borrowers, and act in a predatory fashion.

Had there been standard consumer protections in place to motivate the lending system (Department of Education included) to avoid default, I am certain that my forbearance would have been granted, and today I would likely be nearing payoff of my loans.

The systematic removal of standard consumer protections from student loans gave rise to a predatory guaranty and collection industry that, armed with the strongest and most ruthless collection powers ever allowed, proceeded to extract massive revenue from misfortunate borrowers. Many would consider this a success in government-business partnerships, given the profits for the lenders and the protection of the U.S. taxpayer. But the resulting system gave all parties involved an interest in a high default rate (there is some debate about the federal government’s fiscal incentive, but for all other parties, there is no debate), rewarding the system for providing horrible loan administration, confusing the borrowers, providing them with ridiculously bad, incomplete, misleading, and even dishonest information. Some lenders were even caught falsifying documents, and defaulting loans without ever attempting to collect on the debt.

The human cost of this system has been shameful. Millions of citizens have been strong-armed into either repaying several times more than they originally borrowed or being effectively relegated to second class citizens. Many have literally fled the country as a result, or even worse. Finally and importantly, the system has caused an inflationary spiral in tuition and other costs charged by our nation's colleges and universities. This affects everyone who attends college and their families -- borrowers and non borrowers alike.

Q. There are a lot of people who tend to think that the troubled borrowers whom your group represents have brought their problems on themselves. To what extent is that fair, and to the extent it's not, why not?

A. Personal responsibility in assuming and repaying debt is always important, as with any other type of lending system. However, this principle of personal responsibility has been used as a cover for corporate and governmental irresponsibility and predation for far too long. The disastrous effect this has had on millions of individual citizens, and for the public interest generally, is now becoming evident, and no amount of spin, personal attacks against borrowers, etc., can change the incontrovertible facts, and the logical conclusions that must be drawn from them.

One example: in the 1970's, the industry used anecdotal stories of students graduating college and then promptly filing for bankruptcy to convince Congress to restrict, and then ultimately remove, bankruptcy protections. This was a successful trick (for lack of a better word) that appealed to emotion rather than reason. In hindsight, it turns out that in fact, far less than 1 percent of federally guaranteed student loans were discharged through bankruptcy when they were treated as all other loans in the country.

Q. What are the two or three biggest problems with our current system of financing college enrollment for students and families, in your view?

A. There is only one core problem: The removal of standard consumer protections (such as bankruptcy rights, statutes of limitations, refinancing rights, and other free market protections) from the student loan system. This has caused other problems:

1. This removal had caused predatory behavior by the lending and collection industry.

2. The system has also demotivated the Department of Education. Because it has no financial interest in whether or not students default (arguably, it may be actually making, not losing, money from defaulted loans), it doesn't act in a way to ensure that students don't default. So, the Department no longer has an incentive to pressure universities to keep their costs low, their quality high, and the time in attendance low, and we all know the results. ED/lenders/universities can feebly point to penalties against lenders and schools for high default rates as sufficent incentive for them to want to avoid defaults, but it is well-known that this "cohort" default metric is very easily manipulated -- even under the new definition -- and is really a paper tiger. They would really would do better to be honest and admit it. The American public will greatly appreciate -- and is capable of handling -- candor, forthrightness, and complete/accurate information from the department, as opposed to the misinformation, disinformation, and lack of information that has come to be a hallmark of the Federal Student Aid office.

3. The system has also enabled the colleges to raise their tuition and other fees at double the rate of inflation for over 30 years now, which only exacerbates the problem for the borrowers, and extends it to affecting everyone who attends college -- non-borrowers and borrowers alike.

Q. The student loan industry has been very much on the defensive in the last couple of years, first from New York's attorney general and now from the Obama administration. I had more or less assumed that you'd be a cheerleader for the White House plan to end the lender-based guaranteed student loan program, given your experiences, but I've seen comments from you suggesting otherwise. What don't you like about the move to 100 percent direct lending?

A. I take no strong position on this debate. Any systems architect would be compelled to admit that it is more efficient, structurally. But whether it is a direct- or private-lender based system, the lack of consumer protections only ensures that the future system will be wrongly motivated, and the problems that arise from that will be perpetuated and enlarged. Private companies will likely be both servicing and collecting on student loans under the proposed system. This could -- and likely will -- sustain the same perverse incentives to default loans. In the absence of other revenue that they formerly had under the FFEL system (origination fees, interest, and subsidies), this incentive could even be increased, without strong and clear instruments in the contract language that guard against it.

Q. What should be done to improve the student loan system?

A. It’s simple. In the public interest, Congress should act decisively to return standard consumer protections to student loans, and also to terminate some of the more debilitating collection powers, such as state license suspension and seizing the Social Security income of senior citizens (for example).

Source

Debt consolidation loans- Rapid help to improve your credit ratings

2009-05-15T22:03:00.000+08:00

Multiple debts in your financial status can be the cause of rejection from many lenders in availing loan. However, debt consolidation loans have been specially introduced for those borrowers who are falling in varied number of debts and have difficulty in getting instant cash help from the financial market. These schemes will helps consolidating and managing your debts without any restrictions and financial obligates at all.

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Bloody' student loan battle removes private lenders

2009-05-14T22:01:00.000+08:00

Cal State Long Beach President F. King Alexander's struggle with private lenders and a reluctant Congress over student loans has come to an end in what he described as a 15-year fight on a “bloody battlefield.”

Beginning in fall 2009, all student loans offered by the financial aid office will be exclusively funded through the U.S. Department of Education as part of the Federal Direct Loan Program, effectively cutting private lenders out of the student-loan equation.

CSULB has traditionally participated in the Federal Family Education Loan Program (FFELP)—a program created in 1965 by Congress—where funds for loans are provided by private lenders and guaranteed by the federal government.

Interest rates for direct-subsidized and unsubsidized loans will remain unchanged, according to Enrollment Services. Processing and origination fees will be fixed at 0.5 percent after a 1 percent Direct Loan Fee Rebate.

During the first year of repayment, however, if a student is late on a payment the rebate is revoked.

Fees imposed by private lenders and banks varied from 0.5 percent up to 2.5 percent, according to Nicolas Valdivia, director of financial aid.

Under FFELP, banks and other lenders had little to no risk while taking on student loans since the federal government purchased defaulted loans.

Banks “have been playing far too big of a role in policy development,” Alexander said. “They've just been making free money forever—billions and billions of free dollars.”

Michael Solt, dean of the CSULB College of Business Administration, said direct lending “cuts out the middle party that's extracting some profits” and increases the “efficiency of the whole economic system.”

“Banks deserve profits for what they do,” Solt said. “But whether this is the right place for them to profit at the expense of students and parents, I'm not so sure.”

Continuing students with loans will have to pay back at least two loans after a 6-month grace period following graduation or dropping below half-time enrollment.

Students can also choose to consolidate their loans into one monthly payment upon repayment through the Federal Direct Consolidation Loan program or through a private lender.

“I think consolidating can reduce the monthly expenses,” Solt said. “But again, going through the banks versus going through the government, my guess would be the government would be a lower-cost way to go because they're charging a lower interest rate.”

President Barack Obama said during an April 24 news conference that banks and lenders are mobilizing “an army of lobbyists to try to keep things the way they are.”

Alexander agrees.

“This is a big battle,” he said. “It may be the last time that their lobbyists are going to be all over [Capitol] Hill trying to stop us from getting something done.”

The battle may have already been decided, as CSULB is just one of many universities opting to remove private lenders from its student loan process.

“I know that of the CSU institutions, about 11 have gone" to direct lending, Alexander said. “The rest of us are going right now.”

The switch is an issue Alexander has been working toward for nearly two decades. But recent delays from lenders have sparked more immediate action.

Valdivia said at least two lenders were unable to send funds to CSULB on time. As a result students experienced delays in receiving their money.

Valdivia would not comment on which lenders the affected students used.

The Obama administration estimates that eliminating the FFELP program will save $48 billion over the next decade. In total, implementing Obama's proposal could save approximately $94 billion over the same amount of time, according to the Congressional Budget Office.

Part of Obama's proposal would use the billions in savings to increase Pell Grants, as well as place the grants at a fixed rate above inflation for low-income students.

In 1995, banks successfully lobbied to limit the amount of schools that could switch to Federal Direct Loans.

“Now there's no indication that that's going to happen [again],” Alexander said. “Because you have the president in favor of it, secretary of education in favor of it and Congress majority in favor of it. The only people that are not in favor of it are the banks.”

A Republican-run Congress blocked President Bill Clinton's Direct Loan initiative by only allowing about 25 percent of all higher education institutions to participate in the program, Alexander said.

“The Republicans have been very interested in protecting the banks and the private lenders,” Alexander said. “The difference is now they don't have Congress to put limits on how many schools can go” to Federal Direct Loans.

Alexander estimates that currently 35 percent of institutions have gone to direct lending.

“It's better for our students to go in this direction,” Alexander said. “There is no chance the rug is going to be yanked out from under us.”

Source

Program offers potential forgiveness for student loans

2009-05-13T21:54:00.000+08:00

any students, graduation is right around the corner, and for those taking advantage of federal loans, graduation also means having to start paying off their loans in six months.

This July, students will be able to take advantage of a new federal loan forgiveness program called Income-Based Repayment - part of the College Cost Reduction and Access Act of 2007.

The program is designed to make monthly payments more manageable based on a borrower's income and family size.

If borrowers owe more than they make, chances are they'll be eligible for the program.

Edie Irons, communication director for The Project on Student Debt, said the program is the culmination of a long process that first started in 2005 through the Department of Education, and was eventually passed by Congress in 2007.

"It is pretty exciting," Irons said. "It's really gratifying mostly to hear from borrowers who are going to get relief because of (Income-Based Repayment). There are thousands of people out there who can't wait to get into IBR and see their loan payments reduced to more manageable amounts."

Loans covered by the program include those made by the Department of Education, Stafford, plus and consolidation loans.

Eligible applicants will have their monthly payments capped at 15 percent of their discretionary income, which is determined by the difference between adjusted gross income and 150 percent of the federal poverty line.

After 25 years of repayment, the balance of the loan is forgiven.

Raychel VonBargen, a junior interior design major, said if her career as a designer doesn't pan out, the Income-Based Repayment program is something she might look into, but she also said the length of time for the loans to be forgiven is daunting.

"Twenty-five years just seems so long," she said. "I don't want to have debt looming over me for 25 years. I would do whatever I could to pay it off."

Income-Based Repayment isn't the only option for graduates who have low paying jobs after accumulating a significant amount of debt from student loans.

Last July, the Public Service Loan Forgiveness program took effect as part of The College Cost Reduction and Access Act of 2007.

Those enrolled will have their loans forgiven after 10 years of full-time employment as a public servant.

To qualify, borrowers must be employed by the federal, state, or local government, a 501(c)(3) nonprofit organization, or work full-time for AmeriCorps or the Peace Corps.

Mia Staten, a sophomore child development major and AmeriCorps employee, said she hopes the programs will encourage more people to attend college, but also said she is worried that people might work at a nonprofit organization for the wrong reasons.

"You want people that work in nonprofit organizations to be caring people, and not just doing it to get their loans paid off," she said. " I'm glad that it's a bonus for the people who want to be there, but at the same time it might attract people who aren't really there because they want to help others."

Despite the fact that The Project on Student Debt was not involved in the Public Service Loan Forgiveness program, Irons said she is still excited about it.

"I've talked to people who have realized on the phone with me that they can afford to go into public service now," Irons said. "I am looking forward to seeing just how many people sign up."

Graduates who want to apply for Income Based Repayment or Public Service Loan Forgiveness can call the U.S. Department of Education at 1-800-557-7392

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Obama fighting for affordable higher ed, President correct to reform student loan process

2009-05-12T19:04:00.000+08:00

Today, a college education is more important than ever before.

Half of the fastest-growing jobs in America require a bachelor's degree or an advanced degree. And if you do not have a college degree, you're twice as likely to be unemployed in the current economic crisis.

Yet, at the same time, students and families across America are struggling to cope with the skyrocketing cost of higher education. The cost of tuition and public universities grows each year. On average, the cost of tuition has grown 10 times faster than a typical family's income.

That's why President Barack Obama has made college affordability and accessibility a priority for his administration. The president already has made college more affordable for 7 million students by increasing the availability and generosity of Pell grants and making working families eligible for a $2,500 tax credit to help offset the cost of tuition, a move that is expected to save 4.9 million families a total of $9 billion.

In his address to a joint session of Congress earlier this year, the president set a goal of the United States having the highest college graduation rate in the world by 2020. The president's plan, which he introduced in more detail last week, is very simple: It will create savings by changing the way loans are given to students.

Right now, some loans, called Federal Family Education Loans, are made by banks and lenders who get a big subsidy from the government for offering loans to students. Obama's plan will change the lending process so that loans are given directly to students.

This will end the subsidies given to private lenders, saving money and making the lending process more efficient.

By eliminating the Federal Family Education Loans program and cutting out the banks as middlemen, the government will save tens of billions over the next decade -- money that will be used to expand Pell grants, offer tuition tax credits and launch college completion programs for students who need it.

Make no mistake, lenders will fight to keep the current wasteful program -- they are making good money from the system as it is now. The banks and lenders who've made billions off this program are hiring an army of lobbyists.

And they are gearing up for a fight -- but so are we.

Obama also will reform the Pell grant system. Right now, the value of a Pell grant is set by Congress and is vulnerable to Washington politics and the whims of the market -- putting working class families and college students in the middle of the political game.

Today's Pell grants cover less than half as much tuition at a four-year public institution as they did a few decades ago. To fix this problem, the president's proposal pegs Pell grants to a fixed rate, ensuring that it's a grant that students can count on each and every year.

As unemployment rises, a college degree is more important than ever. We must do everything we can to make sure all eligible students can get the education they need to get ahead and compete in the global economy.

College Democrats are thankful that with President Obama at the helm, we are much closer to making the dream of an affordable college education a reality.

Source

Service organizations help students pay for school, serve community

2009-05-09T19:16:00.000+08:00

As the ability to pay off college loans and pay for graduate school gets harder, a college senior may look into another option for payment, one that fulfills the financial requirements and also allows them to give back to others.

Volunteer service organizations, including AmeriCorps, Teach for America, the Peace Corps and the National Guard, all help to pay for college tuition, loan re-payment or graduate school.
In AmeriCorps, a student can receive the Segal AmeriCorps Education Award after completing a term of service, which lasts 10 to 12 months. Currently, this award is $4,725, which can go toward costs at higher learning institutions, educational training or repayment for qualified student loans.

AmeriCorps is divided into three programs: AmeriCorps State and National, AmeriCorp Volunteers in Service to America (VISTA) and AmeriCorps National Civilian Community Corps.
Service in AmeriCorps can include activities such as tutoring or mentoring children, working for Habitat for Humanity, the Red Cross and many others.

Siobhan Dugan, AmeriCorps public affairs specialist in Washington D.C., described the service as "any social service or duty you can do full time."

"It has provided people with the ability to continue their education," she said.

AmeriCorps VISTA volunteer Katharine Baas works in the Center for Service Learning. Through the North Carolina Campus Compact, she is just one VISTA member representing AmeriCorps at institutions throughout the United States.

According to Baas, more people have been applying to work with AmeriCorps.

"It's professional growth you can get through these positions," she said.

Teach for America also allows students to earn the AmeriCorps education award.

In addition, Teach for America students receive a full salary with benefits. They will also be teacher certified at the end of two years.

Depending on the region in which they are placed, teachers can be paid $27,000-$47,000, according to Jennifer Peddycord, North Carolina Teach for America recruitment director.
Partnering graduate schools such as Yale Law School offer two Teach for America grants worth $30,000 each and most partnering universities waive the application fee.

"Logically, it really makes a lot of sense," Peddycord said. "I was making $40,000 and reaping all these benefits (at the same time). For a job right out of school, that is pretty good."

The Peace Corps is another service organization that allows students to give back while gaining financial benefits.

Today, the Peace Corps works in emerging areas including education, youth outreach, community development, business development, environment, agriculture, health, HIV/AIDS, food security and information technology in regions all over the world.

Under Stafford Loans, the Federal Perkins Loan and direct consolidation loans, students can defer payment through the Peace Corps.

Under the Perkins Loan, students can receive 15 percent forgiveness per year they serve.
Normally, students serve for 27 months, according to Laura Lartigue, acting press director for Peace Corps headquarters in Washington D.C.

"It's a great deal," she said. "It is a definite financial benefit for people who are strapped with the student loans."

The National Guard also helps recent college grads with financial assistance.

First, the Montgomery GI Bill SR (Chapter 1606) gives students a monthly stipend of $329, which they can use for school or living expenses as long as they are enrolled in school. Students get this automatically if they join the National Guard for six years.

If deployed, students are given a larger amount ($528-$1,056, depending on how long they are deployed) through the Reserve Education Assistance Program Chapter 1607 GI Bill.

In the National Guard tuition program, students can get $4,500 a year that goes directly to any accredited school.

In the North Carolina state tuition assistance program, the maximum amount of money received is based on the highest state tuition rate, which is currently $5,396 from the University of North Carolina at Chapel Hill.

As far as loans themselves go, "if they are qualified to enlist in the National Guard, they are eligible for student loan repayment," said Devin L. West, sgt. assistant incentive manager for North Carolina.

For a six-year enlistment, there is a $20,000 payoff, a 15 percent payoff per year. To earn this loan payoff, students must score at least a 50 on the Armed Forces Vocational Aptitude Test military test, commit to a six-year obligation and be part of a deployable unit.
"I've seen a lot of soldiers who enlist use it," West said. "I think it's a great benefit."

Federal loan program overhaul

2009-05-08T19:14:00.000+08:00

Students will now obtain their federal loans through William D. Ford Federal Direct Loan Program.

Changes are being made to the federal loan program at SCSU starting in fall 2009.

Last Wednesday, students received an e-mail from the financial aid office regarding these changes.

Students will now obtain their federal loans from the U.S. Department of Education through the William D. Ford Federal Direct Loan Program instead of through Stafford and Parent (PLUS) loans.

The switch to this program affects anyone who receives funding through federal loans.

According to Michael Uran, the director of Financial Aid at SCSU, about 8,000 students participate in federal student loan programs.

"Students and parents have experienced a great deal of uncertainty in the past two years as lenders and guarantee agencies have left the program, borrower benefits have for the most part been eliminated, and loans have been moved from one servicer to another," Uran said.

SCSU is switching to this program for loans to have a more dependable source of funding for students.

The funds are provided through the U.S. Treasury which provides students and parents security with a stable source of funding.

"We believe that the Direct Loan program will ensure that SCSU students and parents have access to a secure, dependable and cost-effective source of funding while providing a more streamlined and predictable borrowing experience," Uran said.

Students who have previously taken out SELF loans will not have to worry about this new program affecting past loans. The Stafford Loans will still be deferred until graduation.

"Parent borrowers in the PLUS loan program will need to make the transition to the Federal Direct Parent Loan program where the federal government serves as the lender," Uran said.

The process to obtain a Direct Loan for the fall is very easy, especially if you have taken out federal loans before.

After completing the FAFSA, students need to fill out the SCSU application for financial aid for the 2009-2010 school year. Students then request/accept their Direct Loan through the financial aid award found on eServices. After that, students simply need to complete the Direct Loan Master Promissory Note and the loan application is complete.

If students have not previously taken out a federal loan, they will also have to complete the Online Entrance Counseling for Direct Loan Borrowers in addition to the steps above.

After graduation, borrowers who have taken out Direct Loans in addition to previous Stafford loans will have the choice to make payments to the previous lenders for the Stafford loans and the Department of Education for the Direct Loans or to consolidate loans into one payment.

Borrowers can choose to consolidate loans with the previous lender or with the Department of Education, although many private lenders have discontinued their consolidation services because of the economy.

Source

Savvy Consumer: Graduates have options on repaying student loans

2009-05-07T19:13:00.000+08:00

As thousands of Texas college students graduate this month, many will ponder the gloomy job market with one thought: How am I going to repay all those student loans?

In the past decade, sizable student loan debt has become a fact of life for a majority of graduates. In 2007, almost 6 of 10 college students graduated with debt, according to the Project on Student Debt.

Those without a job, or with one that doesn’t pay much, should know they likely have some time. Payments on federal Stafford loans have a grace period of six months. Perkins loans have a nine-month grace period.

Unfortunately for most graduates this year, consolidating loans won’t be the money-saver it has been in the past.

Federal student loans made after July 1, 2006, are at a fixed rate that cannot be changed in consolidation, said Mark Kantrowitz, author of FastWeb College Gold and founder of the Web site finaid.org. The fixed rate for 2008-09 federal student loans is 6 percent.

And in any event, few lenders are offering the service, experts say, despite historically low interest rates.

"I’m predicting interest rates for consolidation will be dropping significantly, to around 1.88 percent in July," Kantrowitz said. "But that will only be an option for variable-rate loans made before July 1, 2006."

Still, all is not lost. There’s a new repayment plan option, and an existing loan forgiveness program has been expanded, said Lauren Asher, acting president of the Institute for College Access & Success, which runs the Project on Student Debt.

Starting July 1, students with federal loans can use a new program called Income-Based Repayment.

"If you just got a degree in finance and you’re competing for shifts at Starbucks with a laid-off software engineer, this could really help," Asher said.

The repayment program is limited to students who have high debt relative to income. The formula is complicated, but Asher’s group offers a calculator at www.ibrinfo.org.

Basically, if you earn under 150 percent of the poverty level, you would pay nothing. Most who qualify will pay less than 10 percent of their total income for their loans. After 25 years of payments, any remaining debt is forgiven.

The expanded program, Public Service Loan Forgiveness, now includes nearly any job related to government service or a nonprofit organization, including teaching.

Graduates who work in such a job and pay on their loans for 10 years will have any remaining debt canceled, Asher said.

Students in the public service program should also be enrolled in Income-Based Repayment or a similar plan, Asher said.

While the public service program expansion went into effect Oct. 1, 2007, there is still no place to register, Asher said. She recommends keeping track of all employment records while waiting to sign up.

The program could be a boost for such organizations as AmeriCorps, said Rosa Moreno-Mahoney, associate director of services and volunteerism with OneStar Foundation, which runs Texas’ AmeriCorps program.

"If you have high student debt, this may be a good option for new graduates," she said.

The Texas AmeriCorps program offers around 2,500 positions each year, both part-time and full-time, with local organizations. Jobs can include a modest living allowance and healthcare.

AmeriCorps also provides an education award of up to $4,725 that can apply to past or future higher-education expenses, including student loans. That applies after the completion of a position, usually around 12 months, Moreno-Mahoney said. The organization will also pay interest on student loans that are in an interest-only deferral status while the student is working for AmeriCorp.

For a listing of AmeriCorps jobs in the state, go to www. AmeriCorps.gov.

Dealing with student loan debt Recent graduates with student loans should:

Find out your lender, loan balance and repayment status for each loan. Federal loan information is available at www.nslds.ed.gov. (You’ll need the PIN you created when you completed the FAFSA form. If you don’t remember it, get a duplicate at www.pin.ed.gov.) For private loans, look for paperwork or contact your school.

The grace period for payments to begin on Stafford loans is six months after graduation. For Perkins loans, it is nine months.

The standard loan repayment period is 10 years. If the payment is too much, consider graduated payments, which increase every two years, or extended payments, which stretch out the term.

Consider the Income Contingent Repayment plan and the new, more-generous Income-Based Repayment plan, which starts in July. Visit www.IBRinfo.org, or www.finaid.org and look under student loans.

Source

Student debt consolidation - Private student loans in Ontario, Vancouver Canada

2009-05-06T19:10:00.000+08:00

In general, available to students in Canada, various loans to run their higher education courses with ease.But they encounter many more problems when the loan repayment is approaching. When you are faced with such a critical situation, you must have a private school loan debt consolidation because it can solve all your problems with ease. With the support of private school loan debt consolidation, you can repay the loan and can easily continue your studies to pay for your future. Students in Canada are eligible for loans debt consolidation in two ways federal student loan and private student loans.

As these student loans are at a higher interest rate, it is relatively difficult to turn to loans to consolidate student debt to these types of loans in the event fall in debt. When you qualify for student loans, you need to pay your monthly payments on time and beyond that you also to answer any more monthly expenses, it becomes difficult to manage. You can get rid of this condition by using a vibrant private school loan debt consolidation in Canada who would be able to do your best for your study.You can easily meet with many more loans through costs of private student loan debt consolidation.

The private student loans with no credit check options are god get money after the federal student loans. In fact, private student loans are provided at higher interest rate, they are good for disposal because of their flexible repayment terms and conditions. These loans can be used by students and their parents. With the help of your student loans, you can pay your college fees, hostel expenses, purchase of books and also do much more to suit your educational needs. In fact, it offers the possibility to withdraw money to meet their expenses with ease.

Source

Obama plans to boost higher education grants

2009-05-05T19:08:00.000+08:00

President Barack Obama's health-care goals may be garnering attention, but his higher education proposals are no less ambitious.

If adopted, they could transform the financial aid landscape for millions of students while expanding federal authority to a degree that even Democrats call controversial.

At stake is a plan to expand the Pell Grant program, making it an entitlement akin to Medicare and Social Security. Key to the effort is a consolidation of student lending that would give the U.S. Department of Education a near monopoly over the practice -- a proposal that has mobilized the private loan industry, which lent $55.3 billion to 6.4 million students in the 2007-08 school year.

Obama outlined his initiatives, which also include incentives for colleges to cut costs and to raise graduation rates, in the fiscal 2010 budget that Congress approved Wednesday, and Democratic leaders said they hope to make them law by October.

The aim is to improve access to post-secondary school for those who need it most: lower-income students for whom college or vocational training can be the decisive factor in their economic future. The president has said he wants the United States to lead the world by 2010 in the proportion of college graduates, a position the country had long held; it now ranks seventh for the 25-34 age group.

The administration's plans are "the most fundamental rewriting of federal student aid policy in 35 years,"

said Terry Hartle, senior vice president of the American Council on Education. "These are big changes. They are painted with a broad brush. ... It's easy for this to be overshadowed by health-care proposals, but for many families, these discussions will be equally important."

Even critics of the plan say the status quo is unsustainable.

Students are amassing debt on a scale that approximates a home mortgage. The economic downturn has meant rising rates for defaults on loans, as well as for students dropping out. Private schools face shrinking endowments, and public universities face state budget cuts.

The tuition crisis has built over many years, however, and until recently Congress did little to address it. The maximum Pell Grant award was frozen at $4,050 from 2003 through 2007. When Democrats came to power that year, they laid the groundwork for many of the changes on the table, including raising Pell Grants to the current amount of $4,731. They also began to curb federally subsidized private loans.

But Obama would go further. He wants to terminate the private Federal Family Education Loan program, the primary source of student loans. Advocates say the move is a formality: The government already effectively controls the program by guaranteeing loans and in recent months, buying back loans by the billions from struggling firms.

Shifting all lending authority to the government through its Direct Loan program would save $94 billion over 10 years, according to the Congressional Budget Office. Obama would use that windfall to expand the Pell Grant program, created in 1965 to cover most tuition costs for low-income students.

Creating another mandatory spending program during a recession, with a record high federal deficit, leaves many lawmakers uneasy.

Rep. Paul Ryan, R-Wis., the senior Republican on the House Budget Committee, decried Obama's Pell Grant proposal as "an autopilot entitlement immune from congressional oversight at precisely the time when we should be reforming existing entitlements."

White House officials, along with veterans of financial aid debates, have been surprised by the lack of strong resistance to the Obama plan so far, even among Republicans.

Rep. George Miller, D-Calif., the education committee chairman, said recent credit market turmoil "pretty much makes the case" that private lending is an unstable source of aid. But he said lawmakers from both parties are bombarded with complaints about college costs, and they know something must change.

The most vocal naysayer is Sen. Ben Nelson, D-Neb., who voted against the budget in part because of the student loan proposal. Nelson's state is home to Nelnet, a loan provider that employs 1,000 people and has contributed generously to his political campaigns.

"It's not just thinking about your state," he said. "I have a fundamental difference in opinion thinking that all student aid ought to come from the government."

But other Democrats with large private lending operations in their states, including Rep. Allen Boyd, D-Fla., and Sen. Robert Casey, D-Pa., supported the 2010 budget, with the student loan reforms intact. As the legislation advances, Democratic lawmakers are anticipating a far more forceful opposition.

College-loan arithmetic

2009-04-30T22:21:00.000+08:00

President Obama is engineering a federal takeover of the college-loan industry. This new entitlement will cost taxpayers billions and never go away.

Mr. Obama's plan to fully nationalize an already government-dependent sector adds another expensive burden to the already overwhelmed federal budget. It is also likely to result in a loss of tens of thousands of jobs, limit loan options for students and substantially increase the deficit. It's up to Congress to resist this public-sector capture of private-sector profit and instead embrace less costly reforms.

Lawmakers vote in the coming days on the 2010 budget proposal, which eliminates the federally guaranteed student-loan program, known as the Federal Family Education Loan program (FFEL).

Those loans are replaced with direct government loans from another existing Department of Education loan program, the lesser-used Federal Direct Loan Program (DLP). The supposed savings are used to expand the availability and size of Pell Grants for poor students, making them a mandatory part of the annual budget.

The Office of Management and Budget has promoted the changes by arguing that a consolidated student loan program will be "more efficient and less expensive" while "helping to finance substantially larger Pell Grant scholarships for low-income students." But claims of efficiency and cost savings ignore the real cost to taxpayers and how public- and private-sector loan competition ensures better performance for consumers.

While Mr. Obama talks about the need to address the ever-burgeoning cost of entitlements, he is really seeking to add another never-ending mandate. Like Social Security and Medicare, the Pell grant proposal requires a minimal level of mandatory spending that increases each year.

The Congressional Budget Office (CBO) estimated in March that consolidating the loan programs will save $94 billion over 10 years. But CBO also found that a Pell entitlement program will boost yearly spending by $293 billion over the same period, wiping out those savings. The administration's budget also omits the considerable cost of servicing the loans, expected to total hundreds of millions of dollars per year.

Mr. Obama characteristically doesn't take into account the long-term deficit cost. CBO estimates that the deficit will hit almost $1.7 trillion this year, or 11.9 percent of gross domestic product, and $1.1 trillion in 2010, or 7.9 percent of GDP. This will be the largest deficit as a share of GDP since 1945.

Peter Warren, president of the Education Finance Council, told us the real fiscal impact is simply ignored. "The proposal itself adds to public debt outstanding. That is not a factor that anybody ties to assess the impact. It is just not considered," said Mr. Warren. His group, which represents nonprofit and state-based student-loan providers opposed to the changes, also estimates 35,000 jobs could be on the chopping block with an additional 50,000 workers adversely affected.

Larger lenders will compete for contracts to service the government loans, but the industry is full of smaller players unable to compete. In an effort to buy off these largely state-level and quasi-government agencies that currently make loans under FFEL, the administration is providing $500 million a year in subsidies to fund financial-literacy programs and other services.

For too long, the government's aged private student-loan program has socialized losses while companies garnered immense gains. But establishing another bloated entitlement program with taxpayer debt is not the solution. Like much of the spending seen in the $730 billion stimulus package, the loan-program consolidation is another Obama administration policy that America cannot afford.

Source

Student Loan Consolidation Service: How To Know The Best

2009-04-29T22:04:00.000+08:00

Each Year, a large number of students graduate from college with great burdens. They are burdened with paying off their student loans while searching for a well-paying job. Using a student loan consolidation service can help in finding a feasible solution.

Although there is no shortfall of student loan consolidation service, be careful when choosing a company that offer this service to prevent getting into problems with them. If you make a mistake in choosing a consolidation company, be sure that your general financial crisis will significantly increase, thus making an already bad situation much worse. This is why it is important to search carefully for a good consolidation company for your student loan. Among other things, the right student loan consolidation service will combine all your loans into one easy loan with reduced rate of interest. This means that instead of making various payments a month, you will only have to make just one payment.

In order to be able to make up your mind which student loan consolidation company is a good match for you, do a search online for companies that are offering this service. With your search, you should be able to build a list of companies. After making this list, see what individuals have to say about them. Be sure to stride carefully; don’t listen to testimonials. Some of them are paid for. See forums and other open discussion sites where you will find honest reviews, testimonials and criticism by real people. Use judgment and find out independent remarks from people. This is by far, the best way to decide if a specific student loan consolidation service is the right match for you.

Read all contract papers slowly and cautiously. If any contract document is not completely understood, you should not sign it since this could mean trouble. If legal mumbo jumbos make you go mad, it is important that you search for help from someone who understands them. If not, the student loan consolidation service may just take you for a ride around town.

Source

A Better Approach to Student Loans

2009-04-28T21:44:00.000+08:00

Private student loan companies are forcing Congress and America to choose between providing a new direction to help all of us achieve the American dream and subsidizing those companies that have taken advantage of college students for years ["The Student Loan Industry Pushes Back," Economy & Business," April 14].

Sallie Mae has hired powerful lobbyists in an attempt to block President Obama's plan to make Pell grants dependable for students and working families.

In the past year, while students have been drowning in debt, Sallie Mae awarded its chief executive $4.6 million in cash and stock and its vice chairman more than $13.2 million in cash and stock, including the use of a company plane.

We cannot continue to allow students and their families to take out loans from private companies that push students further into debt with few options for making affordable payments. We support the president in making a commitment to passing a federal budget that bolsters Pell grants, not private loan companies.

Source

Obama plan to slow private loans

2009-04-27T19:45:00.001+08:00

In an effort to help save money and increase college attendance and graduation rates, President Barack Obama is proposing to change the way student loans are distributed nationwide.

Obama’s plan, included in his budget proposal, would end the Federal Family Education Loan Program in exchange for more direct lending to students by the federal government.

Under the current FFEL program, private lenders receive a government subsidiary for every student loan they make, though the loans are still guaranteed by the government. Therefore, even if a student defaults, the bank will still receive a return on their investment.

According to Obama, the banks, serving as the “middleman” are wasting billions of taxpayer dollars each year.

“According to the Congressional Budget Office, the money we could save by cutting out the middleman would pay for 95 percent of our plan to guarantee growing Pell Grants,” Obama said in a speech at the White House Friday, according to The Associated Press. “This would help ensure that every American, everywhere in this country, can out-compete any worker, anywhere in the world.”

Secretary of Education Arne Duncan said the president’s plan will increase funding for loans and other incentives by $2.5 billion over the next five years, while indexing each loan to a rate slightly above inflation.

At the University of Wisconsin, students who receive financial aid do not get it directly from the government, but rather from banks backed by the government, according to Susan Fisher, director of student financial services.

If the president’s proposal passes and all federal loans are made direct loans, Fisher said she is confident students at UW won’t suffer as a result of the change.

In addition to changing the way student loans are administered, Obama’s budget proposal would also change the way federal Pell Grants and Perkins loans are distributed.

The president plans to increase Pell Grant funding by $500 next year, raising the maximum award amount to $5,500. Obama also hopes to change the way the value of a Pell Grant is determined.

Currently, the grants are determined each year by Congress. Obama’s proposal would index the grants at a rate slightly above inflation each year to alleviate Congress from its annual duty.

Fisher said she anticipates an increase in requests for student loans next year due to the large number of students’ families that are struggling financially.

Overall, however, Fischer said she is pleased with the president’s proposal to change the way financial aid is distributed to students.

“I love what he’s doing with Pell Grants … trying to get more,” Fischer said.

But Fischer said she does not agree with the president’s plan to change the way the Perkins Loans Programs are distributed.

Under the current Perkins programs, students who have previously received a Perkins Loan repay their loans into a fund that provides the money for those students currently receiving a Perkins Loan.

Source

Eric Hardmeyer, president, Bank of North Dakota, column: Leave Bank of N.D.'s loans alone

2009-04-25T21:46:00.000+08:00

Bank of North Dakota’s Student Loan Services has provided meaningful programs and student loans on behalf of the state’s residents for 42 of the bank’s 90-year history. In the past year, we have seen unprecedented volatility in student loans, many lenders leaving the marketplace, and the federal government slashing subsidies and increasing participation fees.

Most recently, President Barack Obama’s budget proposes an end to the Bank of North Dakota-administered Federal Family Education Loan Program in favor of the federal government becoming the sole lender through the Federal Direct Loan Program.

The federal government then would use a national vendor, selected by a bid process to service student loans.

I urge Herald readers to contact their congressional delegation in Washington in support of the bank’s continuance in the Federal Family Education Loan Program.

The Federal Direct Loan Program eliminates the power of choice among students attending school. Money comes directly from the federal government as opposed to a financial institution. Students’ power to choose from a list of lenders would be taken away.

Instead, a small number of service providers (or big corporations such as Sallie Mae) would be designated by the federal government to help people fill out forms as well as to disburse loans and provide customer service from afar.

Currently, BND oversees an $890 million student loan portfolio and funds 68 percent of the annual student loan volume in the state. We continue to improve borrower benefits by paying federal origination and default fees on Stafford Loans in the Federal Family Education Loan Program for all students attending school in North Dakota.

In 2008, Bank of North Dakota saved student loan borrowers $3.3 million by paying these fees. In addition, BND paid $4.4 million in fees to the U.S. Department of Education.

The president’s budget proposes that the Direct Loan Program will take advantage of low-cost and stable sources of capital so students are ensured access to loans, while providing high-quality services for students using big corporations to service loans. But BND already provides that ideal and has done so consistently, at the local level, for 42 years.

Again, we ask Herald readers to contact their Congressional delegation in support of BND’s Student Loan Services and its participation in Federal Family Education Loan Program — which 100 percent of the state’s public and private colleges and universities have selected as their student loan program.

Source

Obama to address rising college tuition on Friday

2009-04-24T21:40:00.000+08:00

President Barack Obama will be underscoring his concern for middle-class families strained by rising tuition costs.

The White House says the president will meet Friday with a family struggling to afford the cost of college. Obama is proposing to cut wasteful spending from the federal student loan program by ending taxpayer subsidies to banks.

The president also faces a dilemma as he's expected to issue a proclamation on the 94th anniversary of the start of what most scholars regard as the genocide of Armenians by Ottoman Turks.

Referring to the estimated 1.5 million killings as genocide could offend vital ally Turkey. Steering around the word would break Obama's campaign pledge to recognize the killings as genocide.

Private lender options shrink

2009-04-23T21:42:00.000+08:00

Stephanie Hoelker had "a big scare" when her loan provider, Key Bank, stopped offering private loans. The senior biology major said she looked for other loan providers, but wasn't sure she would be approved for loans.

"I don't feel secure," she said. She pays for college on her own without any help from her parents. She had a little luck with financial aid from the government; but she only received it her first two years of college. The senior, who is going to Kent State for one more semester, relies mostly on private loans to finance her education.

She did find another lender with Citi Bank, but pays two or three percent more interest on her loan than she did previously.
WHAT THIS MEANS TO YOU Many private lenders have stopped offering loans, forcing some students to begin looking around for other options for the 2009-2010 school year.

Lenders exit the community

Around 111 lenders in the Federal Family Education Loan Program have suspended loans, and about 34 private lenders have suspended practices as well, according to the National Association of Student Financial Aid Administrators. Kent does not use FFELP loans because it is operated under the Direct Loan program.

Director of financial aid Mark Evans said there were once about 250 private loan programs.

Lenders are closing because "the federal government significantly reduced subsidy," he said, adding that some lenders are eliminating loan consolidation.

Student Loan Xpress, a FFELP and private loan lender, is among those no longer offering loans. David Harmon, the president of Student Loan Xpress, said the company had to exit for two reasons. First, Congress lowered the interest rates on loans, making the rate too low for Student Loan Xpress to offer loans. Secondly, "the market for purchasing was dried up."

Two of the nine FFELP lenders the University of Akron works with dropped out.

"Student loans are trying to avoid the home loan mess by not giving loans to people who can't pay them off," said Doug McNutt, the director of financial aid and student enrollment services at Akron.

He said the lenders really hurting are the ones whose primary business is student loan lending.

Tighter credit checks for private loans

Credit checks for loans are getting tighter, McNutt said. For example, if a student had a credit score of 600, they could qualify for a certain loan in the past; now the loan may require borrowers to have a credit score of 650. It was estimated that about 5 percent of people who got private loans won't qualify this year due to lines of credit.

Graduate student Nick White, who is going for a masters in economics, said this affects the lower middle class.

"At our age, (there is) not time to build up credit score," he said. "We will all have a lower credit score. (It can) kill your rates if you can even get a loan."

Junior psychology major Jessica Krieger is "really concerned about next year," she said. She spoke with people at the office for a private grant she receives and they told her they are facing reductions they have never seen before. She is considering getting a job next semester to make up for her loss of financial aid.

"I'm concerned grades will drop if I have to work more if I don't get tuition covered," Krieger said.

President Barack Obama plans to eliminate the FFELP loan program because it is funded privately by banks and lenders who receive subsidies and guarantees from the government. The program provides no greater benefits than the Direct Loan Program and costs more. The Direct Loan program is publicly funded. Obama aims to make the Direct Loan program the primary federal loan program.

"I think next year will be the hardest year," she said. "I think Obama will take care of us."

Loans still available

Lenders who suspended loans have honored their commitments for loans already disbursed for the 2008-2009 cycle, Evans said. If a student, like Hoelker, who borrowed from a suspended lender is borrowing for the 2009-2010 cycle, the student will have to select another lender.

Hoelker found the process of switching lenders to be a learning experience. She said it's not a convenience, but it teaches her responsibility.

Evans said options still exist for student aid and there are other lenders available. About 11 lenders plan to increase lending, according to the National Association of Student Financial Aid Administrators.

"Kent State is in a good position to make loans available because they are in a Direct Loan program," he said. "Despite merges and banks terminating, (there is) still a number of lenders (that) plan to expand market in the private loan industry."

Source

How Does The Student Loan Repayment Bonus Scheme Work?

2009-04-22T21:39:00.000+08:00

Question:

Could you please explain the new student loan repayment bonus scheme?

As I understand it, if you can pay $500 extra towards your student loan per year, the government will cancel a further 10 per cent ($50) of your loan. I assume that, since student loans are interest-free, it would be best to do this at the end of the financial year.

Answer:

Mary Holm: You're right on all scores - except that the scheme isn't limited to $500 repayments.

To catch everyone else up with the play, the Government has announced a scheme to encourage people to repay their student loans faster.

Presumably this is because - given that the loans are interest-free for those living in New Zealand - some people have been repaying them as slowly as possible.

Student loan borrowers do have to make some repayments if they live in New Zealand and earn more than a threshold amount, which has just risen to $19,084 a year. Compulsory repayments are 10 per cent of every dollar earned above the threshold. (There's a different formula for those who live overseas.)

Beyond that, though, some borrowers have figured that if they have any spare money, they will end up better off by putting it in a savings account, where it earns interest, rather than paying extra off their student loan.

The Government has now said that if you make voluntary repayments - above the compulsory amount - of $500 or more in an April 1 to March 31 year, they will reduce your loan balance by 10 per cent of the voluntary repayment. If you repay an extra $700, your loan will be reduced by a total of $770. If you repay an extra $20,000, your loan will be reduced by $22,000.

The bonus scheme - which is expected to be passed into law later this year - will apply to payments from April 1, 2009, made by anyone living in New Zealand or overseas. After April 1 each year from 2010 on, the Government will check if you have made voluntary payments of more than $500 during the previous year - in a lump sum or many payments - and will credit your account for the extra 10 per cent.

To be eligible, you have to be up to date with your repayment obligations. Also, your loan has to have been transferred from StudyLink, which manages student loans while you are studying, to Inland Revenue. So anyone planning to make repayments should wait until that transfer has taken place.

You're correct in saying that - as long as you live in New Zealand - it's a good idea to make the voluntary repayments in March, so you can earn interest on the money in the meantime.

There's also another reason to wait until March. If there's a chance that your total voluntary repayments over the year might not reach $500, you might want to wait until you have $500 or more so you can get the 10 per cent bonus.

So far we've assumed it's worthwhile to take part in the scheme - if you have the money. After all, a 10 per cent top-up is like a 10 per cent return, after tax and risk-free. You can't beat that - or can you?

Number crunching shows that in many circumstances you would still be better off saving spare money in a bank account and continuing just the compulsory repayments on your student loan. While your bank account after-tax return will be less than 10 per cent, if the money sits in the account for years, compounding can make this the better option.

Consulting actuary Michael Chamberlain of MCA has come up with a formula to help student loan borrowers living in New Zealand work out where they stand. Subtract $20,000 - the approximate student loan repayment threshold over the next few years - from your salary. Take 30 per cent of the remaining amount.

If the answer is more than your student loan, pay the loan off as quickly as you can, making use of the 10 per cent bonus. If the answer is less than your loan, keep making just the compulsory loan repayments. Recalculate each year. Your time will come!

For example: You earn $50,000. Subtract $20,000 to get $30,000. Thirty per cent of that is $9000. If that is more than your loan, pay it off using the bonus.

Another way to look at it: If you figure that your compulsory payments will repay the loan in full within the next three years, make use of the bonus. If not, don't.

These calculations assume a before-tax bank account interest rate of 5.5 per cent over the remaining period of your loan. That's higher than current rates, but lower than a few years ago. If rates rise above 5.5 per cent, paying the loan off fast will be less attractive. If they stay lower, it will be more attractive. But the rule of thumb is a good guide.

There are, of course, other issues at stake too:

If you are living overseas, you pay interest on your student loan, currently 6.8 per cent. You should definitely use the bonus scheme, paying off as much as possible as fast as possible.

You might simply dislike being in debt. Fair enough. Make use of the bonus.

You might want to repay the loan fast to make it easier to apply for a mortgage or other loan - although the fact that you also have money in a savings account should at least in theory cancel that out.

Nobody knows if a future government could remove the scheme. If you are a "bird in the hand" person, grab the chance while it's going.

Source

Transforming student loans

2009-04-21T21:28:00.002+08:00

When President Barack Obama made his first prime-time address before Congress, he asked every American to commit to at least one year of higher education or career training. And he set an ambitious goal: "By 2020, America will once again have the highest proportion of college graduates in the world."

This is doable if Congress follows through on Obama's proposal to get it done - by transforming the nation's financial aid system of loans and grants.

You might recall that the guaranteed loan program has been plagued by scandal: State and federal investigations in 2007 found that lenders were providing special favors, perks and kickbacks to get colleges to steer students to the guaranteed loan program.

The guaranteed loan program also costs taxpayers a lot more than the direct loan program. For example, a 2005 U.S. Government Accountability Office study found that the federal government's cost in the guaranteed loan program is $9.20 per $100 in loans, compared with $1.70 per $100 in the direct loan program.

The Congressional Budget Office estimates ending subsidies to private lenders through the guaranteed loan program could save taxpayers $94 billion over the 2010-19 period. This reform is a no-brainer.

Obama has proposed eliminating subsidies for private-sector lenders through the guaranteed loan program - and redirecting the subsidies from lenders to students. Any student eligible for a federal direct student loan would

Under Obama's proposal, the average Pell Grant award nationally would increase by $121, from $3,236 to $3,357 - allowing an estimated 130,000 more students to attend college. In California, the average Pell Grant for 2010-11 would rise $127, from $3,404 to $3,531 - allowing an estimated 27,547 more students to attend college.

Not surprisingly, banks and other private lenders with enormous political clout are squawking. Under Obama's proposal, they'd no longer receive any subsidies but would not be hampered from lending.

The House passed the Obama proposal, which is now in the Senate.

The president understands the dynamic. "I know that banks and big student lenders won't like the idea that we're ending their huge taxpayer subsidies," he has said. "I know they're gearing up for a fight as we speak. My message to them is this: So am I."

This is a change worth fighting for.

Just who is supposed to be the beneficiary of federal financial aid for college, anyway? By ending unnecessary subsidies to private lenders, Americans get reduced costs and students get more direct aid - a win-win.

Source

Credit cards harder to come by for college students

2009-04-18T20:48:00.000+08:00

Banks long have been happy to hand out credit card applications to college students. But the financial crisis has slowed lending to all but the most creditworthy borrowers.

College students, often with little income or credit history to speak of, are not exempt.

Consider American Express: The company no longer lists its Blue for Students card on its Web site, as it does with the other credit cards it offers. You have to type "student" in the search bar to find it.

Does that spell the end to charging pizza and textbooks on a credit card? Not necessarily, but you may have to work harder to obtain the plastic.

Here's what to do:

•Search online

Issuers have competed to be a student's first card, hoping to build a relationship that extends beyond graduation.But today, more consumers are finding it difficult to pay their bills.

In 2008, issuers wrote off $55.9 billion in losses, up from $41 billion the year before, said Robert Hammer, chairman and chief executive of R.K. Hammer, a bank-card advisory firm.

In addition, the Federal Reserve has introduced regulations that prohibit certain credit card practices, including raising interest rates on pre-existing balances.

As a result, "banks are closing accounts, lowering credit limits and raising fees," Hammer said. They're also aiming their marketing firepower at borrowers with strong credit histories and the income to repay their bills.

But student cards have not disappeared. But on CardRatings.com, which tracks credit card offers, only five are promoted in the "student" category. "We typically have triple that amount," said site founder Curtis Arnold.

As a result, you'll likely have to do a little more digging to find the right card for you.

Look for offers online at www.cardratings.com, along with other sites such as www.indexcreditcards.com and www.cardtrak.com.

•Contact your bank

In addition to your online search, contact the bank at which you have a checking or savings account. Given your existing relationship, the bank may be more willing to approve a card, Arnold said. If you can't get a traditional credit card, you may qualify for a secured card, a type of credit card that is backed by a cash deposit.

•Become an authorized user

If you cannot open a credit card in your own name, consider becoming an authorized user on a parent or guardian's card.

The account history also appears on your credit report. That can be good and bad: On one hand, you establish credit history almost immediately, which may help you qualify for your own credit card or other loans. On the other, if your parent pays late or carries a high balance, that can hurt your credit.

In the end, establishing credit in your own name is important. More than ever, you need a strong credit record to qualify for a mortgage or auto loan or to rent an apartment. And it may be harder to open a credit card if you wait until after graduation.

But you don't want to get stuck with just any old credit card, either.

Read carefully the terms and conditions, paying close attention to the interest rate, fees and the number of days you have to pay your bill.

Options available for borrowers behind on student loans.

2009-04-17T20:47:00.000+08:00

Several options are available for borrowers who can't keep up with student loans.

Deferment: Payments stop and interest does not accrue for a set period of time. Common reasons for deferment include unemployment, economic hardship, military service or returning to school more than half-time.

Forbearance: Payments are stopped as in deferment, but interest continues to accrue.

Income Based Repayment: Starting in July, borrowers earning less than 150 percent of the poverty level can have monthly payments set to zero. Payments are set on a sliding scale for those earning more. Payments reset each year based on income, but after 25 years, any remaining debt is forgiven.

Cancellation: Activities such as teaching in a low-income area, volunteering for the Peace Corps or Head Start or serving with the military in a war zone can result in the forgiveness of a portion or all of a student loan.

Source

Student-loan debtors get breaks

2009-04-16T20:46:00.000+08:00

Tough economic times are causing more borrowers to fall behind on their student loan payments.

But lenders, loan servicing firms and the federal government are getting more aggressive in their efforts to assist struggling borrowers.

"When it comes down to making your student loan payment or buying gas to get to work, it isn't a difficult decision to make sometimes," said David Clark, manager of default aversion with College Assist, an Aurora firm charged with keeping the student loans it guarantees in Colorado current.

Compared with other types of credit, the consequences of defaulting on a federally guaranteed student loan can be more severe, while getting a break on payments can be much easier.

Many borrowers, however, aren't aware of the options available for deferring payment. And starting this July, a new income-based repayment program is coming online that will defer payments for households earning less than 150 percent of the poverty level.

"We are wanting to hear from our customers and work with them to find a way for them to be successful," said Patricia Nash Christel, spokeswoman with Sallie Mae, the nation's leading provider of student loans.

"Nobody wins — not the customer, not the federal loan program, not the school and not the lender — if someone defaults," she said.

Once a borrower gets two months behind, he can expect calls and e-mails from the original lender, the company that services the loan and guarantors such as College Assist, responsible for $15 billion in student loans tied to Colorado.

Unlike other types of unsecured loans, student loans don't go away in a bankruptcy filing. And once student loans go unpaid for more than 270 days, they are considered in default.

More severe consequences follow, such as garnishment of 15 percent of wages, seizure of state and federal tax rebates, and the loss of federal benefits and professional licenses.

Charity Hoover, a Colorado Springs hairstylist, finally decided she'd better talk to College Assist after three weeks of constant phone calls.

"I didn't want to admit that I was behind," Hoover said. "I don't know why I let it get to that point."

After her husband lost his job in November, she stopped making payments on $31,500 in student loans. College Assist provided her a break on one loan through Colorado Mountain College until June.

About 5.2 percent of student loans nationally and 2.5 percent in Colorado were in default in the fall of 2007, according to the most recent federal counts available.

College Assist, which guarantees about half of the federally backed student loans made through private sources in the state, attributes that lower rate to its efforts to reach out to borrowers.

"Once we can get someone on the phone, we have a 90 percent rate of curing an account and keeping it out of default," Clark said.

Often, it can involve offering basic financial advice, such why staying current on a student loan is more important than keeping cable or why a borrower may be paying too much in rent given their income, he said.

About half of delinquent borrowers, however, have moved so many times they can't be tracked down or they don't respond.

Historically, college dropouts and recent graduates who are underemployed or unhappy with the education they received were the most likely groups to skip out.

More recently, economic hardships are boosting delinquencies among borrowers like Hoover, who have paid in the past.

"We are seeing borrowers under more stress," Christel said.

Source

Credit Crisis Spreads to School Loans

2009-04-15T20:42:00.000+08:00

THE METEOR THAT HIT CREDIT MARKETS last fall damaged student lending as much as any sector. that other bright light in the sky? A revamping of the guaranteed student-loan program that would eliminate private lenders and bring all federally backed lending inside the U.S. Department of Education (www.ed.gov).

Since last year's credit disruptions in private capital, concerned lenders, parents and school-aid administrators have been lighting up education blogs and news sites looking for school-funding alternatives and information. More recently, the Obama administration proposed eliminating private-lender guarantees under the umbrella Federal Family Education Loan Program (www.ed.gov/programs/ffel/index.html) in favor of direct disbursements from the competing Federal Direct Loan Program (www.ed.gov/offices/OSFAP/DirectLoan/index.html). Since the government pays less for its funds than private lenders, the administration believes there will be savings that can be used to expand student scholarship programs.

Collectively, FFELP's several subprograms account for about three quarters of all federally guaranteed student lending nationwide, says Mark Kantrowitz, publisher of the encyclopedic student-aid site FinAid (www.finaid.org). As of July 2010, all of those loans would be diverted to Direct Loan, quadrupling its current loan volume.

In order to avoid additional job losses among lenders in their districts, there is a 50-50 chance Congress will block the Obama proposal, says Kantrowitz, who also publishes the student-aid sourcebook "FastWeb College Gold" and its accompanying scholarship-matching service (www.collegegold.com). "But parents are still worried that there could be disruptions in the lending process or problems consolidating loans."

A researcher and commentator on student lending for more than two decades, Kantrowitz has posted two white papers on the scope and complexity of the twin student-finance challenges at www.finaid.org/lenderlayoffs and www.finaid.org/creditcrisis, respectively.

When private-capital markets began tightening, Congress responded by pushing through two pieces of emergency legislation that kept federal monies flowing for the current school year and 2009-2010. But changes to the mechanisms by which federal loans are doled out need to be completed before the 2010-2011 school year's application season -- less than a year off. Large lenders such as Sallie Mae (www.salliemae.com/resources) and school administrators alike have been trying to forestall that change by lobbying Congress.

"Part of what simplifies direct loans for the government," explains Kantro-witz, "makes things more complicated for aid officers on campus."

Established in 1994, FinAid is one of the longest-running and most comprehensive educational Websites, offering free access to all its calculators and planning tools. It has since been joined by other sites also replete with tools, aid updates and links to a bevy of other resources that can help parents and college-bound kids navigate the changing lending landscape.

THE BLOGS AT Inside Higher Ed (www.insidehighered.com) and NextStudent (www.nextstudent.com), for example, closely follow the twists and turns of new loan proposals. Founded in 2004, Inside Higher Ed is tracked by more than a half million students and school officials. It not only provides online news and commentary, but also scholarship and loan-matching services and job listings for education professionals -- all for free. In addition to being a lender and loan intermediary, NextStudent operates a free scholarship search engine that, it claims, contains more than 42,000 awards worth more than $3.4 billion -- and it is updated daily.

Although not an education site per se, the current edition of Kiplinger Magazine offers college-bound students and parents a useful road map to financing college (www.kiplinger.com/magazine/archives/2009/04/desperately-seeking-tuition.html). The online home of Kiplinger's magazine and newsletters, Kiplinger.com is, predictably, one of the most useful resources in this area -- as it is for so many personal-finance topics.

The hunt for education funding has also made up a large part of person-to-person lending on the Web since that sector got rolling a couple of years ago. Instead of putting students through the kind of formalized process that banks and the Education Department do, GreenNote (www.greennote.com) helps students obtain loans from friends, family and community members. It charges students a one-time documentation fee and lenders a small management fee. GreenNote was recently acquired by TuitionU.com as a complement to its own loan portfolio, which includes more traditional funding sources.

STATE AND FEDERAL LOAN agencies themselves have created an extensive array of free search and planning tools targeted toward their offerings. The Education Department's FAFSA4caster (www.fafsa4caster.ed.gov) and the (now private) Sallie Mae's planning site (http://go.salliemae.com/plan), both help high-school seniors figure out whether they qualify for aid under their programs, and how much.

Like most things government, though, federal and state sites and their Web addresses can be confusing -- the Education Department's (apparently) main student portal (www.ed.gov/offices/OSFAP/DirectLoan/calc.html) is one example. Since federal guarantees for student aid began in the 1960s, the programs and controlling agencies have blossomed, spawning a tangle of funny names, acronyms and protocols for students and parents to learn -- Pell, Stafford, Data Release Number. Each has generated its own set of sometimes-overlapping forms that need to be responded to carefully and filed with a given state or federal agency or, sometimes, both.

A 1992 attempt to make the paper pile less intimidating only engendered the most important form and acronym of all: FAFSA, or Free Application for Federal Student Aid (www.fafsa.ed.gov). A FAFSA is needed anytime federal aid is involved; and, having grown past 100 questions today, is paperwork simplification bureaucracy-style.

FAFSA does, however, provide a useful test of endurance for matriculating seniors. If little Suzie or Johnny can complete this form, she or he clearly deserves to be in college.

Source

Student loan Debt Consolidation..and some tips to get out of student loan debt.

2009-04-14T21:01:00.001+08:00

In US average student completes their graduation with about $21.000 in debt,it is really becoming worse day by day for the students to get them out of debt.The proportion of the student loan debt is overwhelming day by day and it has really become a matter of concern in the upcoming days for the students.If you are in a situation like that then there are some program which will help you to pay off your loan.

1.If your income is not allowing to pay off your federal loan then you can go for an economic hardship deferment or forbearance.it will help you to reduce your monthly payment yes but keep in mind that your interest rate will grow on.

2.If you have a long term financial problem,there are also some extended repayment plan that can reduce your payment plan stretching life of your loan for 30 years but it will definitely increase your total repay amount.

3.Do you have any federal student loan through the US Department of Education's Federal Student Aid Programs then you have an income contingent repayment plan by which you can pay off your loan.

There are also news that another Debt relief program is to come in July 2009 which will be an income based repayment program.In this plan if your income is higher still you have to pay less.So with proper guidance and student Debt relief program get out from the burden of debt while pursuing your studies and move towards the bright future ahead.

Loan Modification to keep away from mortgage foreclosure

2009-04-13T20:57:00.004+08:00

If you're unable to manage your mortgage or you're already behind on payments, try negotiating a workout plan with the lender so that you can avoid foreclosure. There are workout plans such as forbearance, deed in lieu, short sale, loan modification and others. You need to choose the one that best fits your mortgage situation.

What is a loan modification program?
Mortgage loan modification (home loan modification) is where the lender may lower your mortgage rate, or add any dues to the mortgage balance and extend your loan period. This is to ensure that your monthly payments are reduced.

There can also be a reduction in the principal balance you owe. The purpose is to make your payments affordable so that you can save your credit and keep your home.
When is loan modification suitable for you?
Loan modifications (mortgage modifications) are suitable for you when:

* You have experienced a long-term reduction in income.
* Your monthly expenses have increased.
* You don't have enough income to pay off mortgage dues.

Are you eligible for mortgage modifications?
You may be eligible if:

* The lender hasn't declared a foreclosure yet and even if he has done so, he should have removed the loan from the foreclosure status.
* You're delinquent on the loan for 3 months or more.
* The loan has been originated for more than 12 months.
* You have stable surplus income to help you pay at the modified rate/terms.
* The property is in good physical condition.

How does a loan modification work?
If you're concerned about how to do a loan modification, here are 7 things you should be aware of.

1. Review your financial situation: Prepare a Financial statement including a detailed list of your expenses (food, gas, credit cards and other financial obligations) in a spreadsheet and calculate the average costs on each item for the past 3 months or so. This is important because most lenders would ask you questions on your financial situation and require you to submit a Financial Statement.

2. Hardship letter: Prepare a Hardship letter of not more than 2 pages wherein you'll put down why you aren't able to carry on with the usual payments and why need a loan modification. Know how to write hardship letter.

3. Collect documents: You need to gather certain documents which the lender may review when you request for mortgage loan modification. The documents are:
* Paystubs and bank statements for past 2 months
* W-2 Form for last 2 years for the employed
* Form 1040 for last 2 years if you're self employed
* Rental Agreement if the loan is not on your primary home
* Most recent mortgage statement
* Property tax statements

4. Contact your lender: Call up the lender and make him aware of your situation. An even better way to communicate is by sending a hardship letter. It is easier to get a home loan modification if you're behind on payments. However, you may get approved even though you're not yet late but are not sure whether you can keep up the payments.

5. Fill out paperwork: Once you qualify for mortgage modification, the lender will send an information packet and a financial worksheet for you to calculate your expenses. You need to attach documents you've collected along with the worksheet. This is for your lender to assess your financial situation and interpret whether you can pay your mortgage after home loan modification.

What you need to prove by filing out the paperwork is that the loan modifications will help improve your situation and make your payments manageable.

6. Written Agreement: Once the lender reviews your paperwork, he may verbally agree to modify your loan. He'll also send you a document explaining the loan modification offer for your approval.

7. Stop gap repayment plan: Once you accept the offer, the lender will need you to start off a stop gap repayment plan till the mortgage modification goes through. This will go on for maximum 60 days during which the lender reviews your loan status, financial statement and documents in order to assess the risks in modifying your loan.

During the stop gap period, you need to prove that you can afford monthly payments along with other expenses after loan modifications. Only then you have a fair chance to get your loan modified.

Home loan modification may be offered alone or as a part of forbearance. However, not all loans are appropriate for mortgage modification. Loans being modified are mostly those which are above the market rates or have lower loan-to-value ratios and mature terms.

Do you need professional help?
If you cannot negotiate mortgage loan modification on your own, an attorney or a loss mitigation specialist can communicate on your behalf. Your attorney should be one who has good service background and can ensure that you get a fast response from the lender. Any foreclosure action is stopped while the attorney negotiates with your lender.
What happens when you're in mortgage modification?

* You'll be able to get current on the loan.
* If you have an ARM, modification may help you convert it into a fixed rate fully amortized loan.
* The lender may reduce the interest rate below the market rates.
* The entire PITI (principal, interest, escrow items such as tax and insurance payments etc) may or may not be added to the current loan balance.
* Any administrative fees resulting from cancellation of foreclosure may be added to the loan balance.
* The modified principal balance can exceed 100% loan-to-value or the original principal balance if any dues are added. In such a case, your monthly payments are likely to go up.

The purpose of loan modification is to ensure that you can better afford the mortgage payments. But make sure you don't miss payments as the lender will consider it a new default and initiate a foreclosure on your home.

source

New Student Loan Program NYHELP

2009-04-10T19:59:00.000+08:00

GOVERNOR PATERSON ANNOUNCES ENACTMENT OF NYHELPs STUDENT LOAN PROGRAM

Unique Loan Model Fills a College Financing Gap During Challenging Times

Governor David A. Paterson today announced that the New York Higher Education Loan Program (NYHELPs) has been enacted as part of the 2009-10 New York State budget. NYHELPs will help fill the gap between college costs and financial aid by giving New York students and families access to low-cost education loans not currently available in the private loan market. A minimum of $350 million in loans will be provided annually to approximately 45,000 resident students enrolled in degree-granting programs at a college or university in New York State.

“New York remains the national leader in helping students pay for college. NYHELPs complements our State’s generous array of scholarships, grants and loan forgiveness programs – all of which help students achieve their dream of attending college,” said Governor Paterson. “Families who are struggling to find affordable ways to pay for college and need alternative loans to fill the gap between aid and cost of attendance now have one more resource available to them. NYHELPs will keep the doors to college open for many New Yorkers.”

“NYHELPs will promote the State’s future economic vitality by helping to develop a skilled workforce,” Governor Paterson continued. “Through NYHELPs, New York State’s diverse public and independent higher education institutions remain accessible to our students and a strong foundation is built for establishing their careers here after college.”

Proposed by Governor Paterson in his Executive Budget and supported by the State Senate and Assembly, this unique student loan program creates a new paradigm with a public/private partnership in which the State, the banking community and colleges work together to ease the financial burden on students and families.

The New York Higher Education Services Corporation (HESC), the State’s student financial aid agency that administers the Tuition Assistance Program (TAP), and over 25 other grant, scholarship, and federal student loan programs, will administer NYHELPs. Lenders will make fixed rate student loans supported with up to $350 million in private activity bonds issued by the State of New York Mortgage Authority (SONYMA). The program allows for unlimited participation by lenders making low-cost variable rate loans. The State is providing $50 million in General Fund support in the initial year and $10 million a year thereafter toward default reserve funds which will have the effect of lowering the overall cost to the students through reduced fees. Colleges participate by contributing a nominal fee to the reserve funds based on one percent of their loan volume in the program.

HESC President James C. Ross said: “I commend Governor Paterson for advancing and securing this vital program that reinforces his commitment to higher education. Thanks to Governor Paterson’s leadership, this first new student aid initiative in New York State in 35 years eases the financial burden and makes for a brighter future for students and families in New York State.”

Students could receive an estimated interest rate between 7.5 and 8.5 percent, subject to market conditions, as compared to rates of 12 to 17 percent that students have faced in recent months. In addition to this significant saving on interest, NYHELPs safeguards students from borrowing more than they need by requiring that they first apply for and receive State and federal student aid they are entitled to in order to qualify for a loan. Further borrower protections include preference for students demonstrating financial need and a school certification requirement which ensures that the student has been informed about the best options among all financial aid programs available.

SONYMA President and CEO Priscilla Almodovar said: “SONYMA welcomes the opportunity to use our debt issuance and finance expertise to structure a student loan program that works for the State of New York and its college students. We look forward to our partnership with HESC.”

A key component of NYHELPs is the requirement that borrowers complete a comprehensive Web-based financial literacy education program before borrowing. This program will help students make smart borrowing decisions, provide guidance on the pitfalls of credit card debt, and emphasize the student’s responsibility for paying back their student loans. The program will encourage students to establish a budget and savings plan, apply for free aid, and borrow only what they need.

NYHELPs borrowers will apply online through a dynamic interactive Web site, HESC Student Loan Marketplace. Students are informed of the true cost of all loans, ensuring that they apply first for grants and lowest-cost loans and borrow only what they need. Students receive trustworthy information and, with only one credit check, preserve their credit scores. HESC Marketplace is designed as an open network to ensure transparency of lender information.

NYHELPs loans will be available for students in the spring term of the 2009-10 academic year.

Loan program changes coming

2009-04-09T19:54:00.002+08:00

Due to recent shortcomings with the current Federal Family Education Loan (FFEL) program, Cal Poly will institute the Direct Lending program in order to distribute financial aid more efficiently and effectively.

Come fall 2009, the William D. Ford Federal Direct Student Loan (DL) program will allow students and parents to directly borrow loans through the U.S. Department of Education, which provides a stable source of funds and one entity (the Direct Lending Servicing Center) for everything related to the repayment of loans, according to Cal Poly's Financial Aid Web site.

There will be one site for the master promissory note (MPN), entrance counseling and exit counseling, making the process quicker and easier. Students can always access account information online and multiple payment plans are offered to accommodate students.

"You are borrowing through the federal government, the loan is being serviced by the federal government and you are repaying the federal government," said director of Financial Aid Lois Kelly. "We've cut out a bunch of people in that whole process."

The FFEL program's "whole process" involves a partnership between the school that certifies the student's eligibility for the loan, the student who chooses a particular lender to borrow from, such as a bank who puts up the capital of the funding, and a servicing agency who processes the loans, Kelly explained. Also, a guarantee agency acts on behalf of the federal government to assure all the correct processes are followed and the lender's investment is returned.

Cal Poly saw this as an opportunity to economically improve the financial aid process through the DL program, Kelly said.

"I think it will make the process a lot more seamless," said industrial technology junior Jeff Bruchez, who has depended on financial aid throughout college. "Because right now if you go through a third-party lender, you have to send the paperwork through them and it might take two or three weeks before you hear back."

The DL application process closely mirrors its predecessors because the electronic submission process is the same as three other current grant programs, Kelly said. Families will still complete the Free Application for Federal Student Aid (FASFA) and the Cal Poly Financial Aid Office will determine the student's eligibility for loans. A new electronic promissory must be signed and a 1.5 percent loan fee will be added to the amount of each Stafford loan. But before the money is disbursed, there is a 1 percent rebate automatically deducted, unless a student fails to repay the loan. This fee helps reduce the cost of making these low-interest loans.

Some of the difficulties Cal Poly has encountered with the FFEL program include inefficient means of processing loans, lenders pulling out of the program due to the poor economy, not providing the last disbursement of loans and decline in customer service, Kelly said.

Cal Poly currently has 79 different lenders to accommodate and by law they cannot "stop students from borrowing from a lender back East that might have a different process (to evaluate the loan), such as a different guarantee agency," she said. "That means we have to accommodate every process that every lender across the country uses."

Accommodating these processes is a time-consuming endeavor that the depleted Financial Aid office has less staff to commit to. There is a common electronic submission process that some lenders prefer not to use, causing Cal Poly to do applications by hand, fax lenders information and receive more individual disbursements that must be processed manually, Kelly said.

"All of that means th e electronic system we had in place is now stumbling because there are more exception processing," she added. "This increases cost and decreases service to our students because students have to wait longer. If there was a problem with the processing we would call the lender (and have to communicate) through voice mail" because lenders are forced to decrease staffing to accommodate budget cutbacks.

About 17 percent of the lenders have left the FFEL program over the last few years, Kelly said. Thus, students were forced to accumulate loans with different lenders, and to the "few hundred students that impacted, it was a real pain. One of the reasons we chose the DL program is because they are the largest single consolidator in the country, so if you have loans with several different lenders, then they can purchase all of those loans so you can pay one entity back," which would give students longer to repay the loan.

Source

private student loans no credit check for bad credit

2009-04-08T19:50:00.000+08:00

Private Loans with No Credit Check is the expectation of the gloss for the private students who have no source of cash generation to pay for the education as tuition payments, school and examination fees, hostel fees, books, laboratory expenses and travel expenses, etc.. Now the students completed their studies without any obstruction. Most loans are provided to students for the systematic review of their credit standing. Credit history includes credit rating, the exhibits of the creditworthiness of potential borrowers. And so, bad credit holders of its credit, is the result. Private School Loans with No Credit Check is potential for them.

While trying to get the best private student loan programs, we recommend a quality look. In general, a good research can be done with the help of the Internet. As you go online, it patronizes the discovery of the best private student loan program for you. How? By comparing with another program and each watchful review the advantages and disadvantages.

It is encouraging that despite the bad credit history, for example, defaults, arrears, CCJs, IVA, bankruptcy, etc. can be the amount of private student loans with No Credit Check. There are a multitude of lenders and loan companies, the equipment with Private Student Loans no credit check, to the students with a poor credit history, they can still be a source of joy for this loan to study in graduate under graduate and University.

Even as it is likely for students to scrounge money regardless of their bad credit, they have limited Resorts, at what time to take over the loan of their preference. They are easy to accept whatever offer that their lenders lend them. This is one of the most negative things have a bad credit. In fact, with the private student loan with No Credit Check, some places are loans to the borrower. The facts of this loan is that individual students can also use the refund within 6 months to 3 years or upon completion of their training. Thus private students need not to lose their hearts to the issue of earning capacity cash.For more information visit http://www.studentloansdebtconsolidation.net

Source

Equal Justice Works: Student Debt Relief on the Way; Historic Legislation Takes Full Effect July 1

2009-04-07T19:44:00.001+08:00

The College Cost Reduction and Access Act -- legislation that forgives student debt and limits monthly loan payments -- becomes fully effective on July 1, 2009. Signed into law nearly two years ago, the College Cost Reduction and Access Act (CCRAA) will now help thousands of recent graduates cope with student debt and enter public service.

Many experts believe that the new law, combined with other legislation to increase support for national and community service, will sweep in a new era of public service for the country.

To help college graduates and their advisors understand, qualify and take advantage of benefits under the College Cost Reduction and Access Act, Equal Justice Works has developed a free online resource (http://www.equaljusticeworks.org/resources/student-debt-relief/default) center that provides a comprehensive overview of its provisions as well as many practical tools including checklists, calculators, lists of loan repayment assistance programs, FAQs and podcasts.

The College Cost Reduction and Access Act includes two key provisions -- Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF):

-- Income-Based Repayment lowers monthly student loan payments on
federally guaranteed student loans; and

-- Public Service Loan Forgiveness cancels remaining debt for public
servants after 10 years of public service employment.

Among the many considerations for those looking to take advantage of one or both of these provisions are learning what counts as public service employment; how much will be paid under IBR; and tax implications for these programs. In addition to the comprehensive online resources, Equal Justice Works also maintains a forum to answer common questions about the benefits.

Heather Jarvis (http://www.equaljusticeworks.org/about/staff#jarvis), senior program manager for Equal Justice Works and Vice Chair of the ABA Section of Legal Education's Committee on Government Relations and Student Financial Aid, has spent much of the last year touring campuses around the country explaining the College Cost Reduction and Access Act to students, financial advisors, and career counselors.

"We think that the College Cost Reduction and Access Act is probably the most significant breakthrough in public interest law in a generation," says Ms. Jarvis, "so I'm continually surprised at how little is known about the benefits of the new law."

The benefits are "huge, potentially life-changing" says Ms. Jarvis, but they are not automatic or guaranteed, and students need to be sure that their loans qualify under the new law. That, she says, was the motivation for compiling the best resources for students on the Equal Justice Works website.

"There's a lot to know -- it can be hard to wrap your head around," says Jarvis, "But we have made it as easy as it can be through outreach to schools and the new site."

Equal Justice Works "Student Debt Relief" is at http://www.equaljusticeworks.org/resources/student-debt-relief/default. Partial funding for the development of the online resource center on equaljusticeworks.org and other outreach efforts to increase awareness of the College Cost Reduction and Access Act was provided by a generous grant from the Ford Foundation.

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Don't use 401(k) money to pay off debt

2009-04-06T20:58:00.001+08:00

Dear Liz: The 401(k) plan at work has been terminated. We have $51,000 in credit card debt and $45,000 in the 401(k) account. Should we pay the 20% withholding tax and early penalty to get out of debt?

Answer: Of course not. Using retirement money to pay off debt is stupid on a number of levels.

The 20% that's withheld when you prematurely withdraw money from a 401(k) often isn't enough to cover the actual tax bill. You'll pay taxes at your regular federal and state income tax rates on the money, plus penalties. (The federal penalty is 10%, plus whatever penalty your state adds.) Even if you're in the 15% tax bracket, you'll have to pay taxes equal to more than a third of the money you withdraw. At higher tax brackets, you could lose half or more of the money you take out.

Once the money is withdrawn, you can't put it back. That means you lose all the future tax-deferred gains the money could have earned. Assuming an average 8% annual return over 30 years -- and the stock market has achieved that, even counting in the years of the Great Depression -- you'll wind up losing $10,000 or more in retirement money for every $1,000 you withdraw now.

Furthermore, money in a retirement account is protected from creditors should you wind up in bankruptcy. Before you use protected money to pay off a debt that could be erased in a bankruptcy filing, you should talk to an experienced bankruptcy attorney.

Old bankruptcy may not be issue

Dear Liz: On a recent flight, an attendant came through the cabin asking whether anyone who had the airline's branded credit card wanted to be upgraded to a better card. I filled out the application and a short time later received a letter stating that not only was my upgrade denied, but my credit limit on the existing card was lowered immediately from $15,000 to $2,300. I called the issuer and after some conversation was able to determine that the action was the result of a credit bureau reporting a 15-year-old bankruptcy. My credit scores over the last several years have been in the mid-700s or higher. Can you tell me whether the bureau was correct in reporting a 15-year-old bankruptcy?

Answer: First, you need to find out whether the bureau is actually reporting the bankruptcy. Often when credit card customers call about an adverse action -- a credit limit being lowered or a rate increased -- they are given only vague reasons why an action might have been taken, not why it actually was. You might have filled in the gaps of one of these deliberately nonspecific conversations and jumped to the wrong conclusion.

You can discover the truth by getting a copy of your credit reports, which you can obtain at www.annualcreditreport.com free once a year.

If the bureau is in fact reporting the bankruptcy, you should dispute the information immediately as being too old to report. Credit bureaus are supposed to drop mention of a bankruptcy 10 years after the case is filed.

You also should consider getting a credit card from a different issuer. Your credit scores are strong enough that other companies would be delighted to have you as a customer.

Should I pay off my student loan?

Dear Liz: My student loan balance is just $7,000 and costs me $80 a month with nine years left to repay. I'd like to pay it off, but the problem is that I have no other debt, since I pay off my credit cards monthly. I'm afraid to pay off the loan for fear that doing so might hurt my FICO score.

Answer: A better reason not to pay off the debt is that it's pretty cheap money. If you invest that cash instead, you may get a better long-term return. If you really want to pay the loan off, however, you shouldn't let worries about your scores stop you.

Student loans typically do help your credit scores, and they'll continue to so long as the lender reports them to the credit bureaus, which is typically for 10 years after you pay them off.

Having and using credit cards also helps your scores. There's no need to carry a balance.

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Bill gives Ky. teachers help with college loans

2009-04-05T20:57:00.000+08:00

Kentucky teachers who were hurt when the state essentially had to halt its loan-forgiveness program for public school educators will receive some additional state money to help defray their debts under a bill signed by Gov. Steve Beshear last week.

The bill, House Bill 480, calls for the Kentucky Higher Education Assistance Authority to use about $1.3 million from the state's $2 million Teacher Scholarship Program to provide additional money to affected teachers in the Best in Class Program.

The money will not pay off the affected teachers' loans, but it is a step in the right direction, said Justin Matson, a math teacher at Jefferson County Virtual Middle School who helped organize a campaign supporting the bill. About 1,000 teachers across the state lobbied for its passage.

"We're happy, but we're still lobbying the federal and state government for additional funding wherever they can find it," Matson said Friday. "We're hoping to chip away at this little by little."

An estimated 5,000 teachers were affected by the change in the program, which was aimed at filling high-need areas such as science, math and special education.

Citing federal cutbacks, officials at the authority announced in January 2008 that it would phase out three college loan forgiveness programs it has been using to attract and keep teachers, nurses and public-service attorneys in Kentucky.

Authority officials said they had to scale back the programs because the federal government isn't providing as large a subsidy to student-loan lenders. Also, fees for guarantors like the authority were increased under the federal College Cost Reduction Act, which then-President George W. Bush signed in September 2007.

The state agency acts as the guarantor for student loans provided by the Kentucky Higher Education Student Loan Corp., also known as The Student Loan People.

Under the changes, students who took out loans after June 30, 2008, are no longer eligible for the forgiveness benefits. Students who took out loans before that deadline are eligible to receive what money is available, which for most amounted to about $900 this past year, according to authority officials.

The bill, which was sponsored by state Rep. Brent Yonts, D-Greenville, does not provide any additional state money for nurses or public service attorneys affected by the changes. It does, however, direct The Student Loan People to work with borrowers to maximize repayment schedules for their loans within the federal limits.

The bill also urges Beshear to encourage the state's congressional delegation to provide federal stimulus money and other federal funds to assist in paying off the loans of eligible participants.

"Education is always one of the governor's highest priorities," Beshear spokesman Jay Blanton said in a statement regarding the bill. "It is very unfortunate that the federal government has changed the law, which funded these benefits. … This pressing need will be considered along with all others as we face the uncertainty of next year's budget in these worsening economic times."

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MONEY: People should file FAFSA as soon as possible.

2009-04-04T20:54:00.000+08:00

There is a way for everyone to afford going to college, says Andy Leardini of the College Financing Group.

As spring approaches and acceptance letters are opened, college bound students and their families may be concerned about how to pay for a college education. But, as Leardini said Friday, everyone can afford college, no matter the income level. But people should file the Free Application for Federal Student Aid as soon as possible, he advised.

With more than 10 years of educational lending experience, Leardini and partners Rick Ross and Nancy VanZetta started the College Financing Group back in November. The firm specializes in helping parents and students with the college financial aid process, determining options and providing advice to families. Visit the group’s Web site at www.collegefinancinggroup.com.

•••

QUESTION: What is the best way to start looking for ways to pay for college?

ANSWER: It all starts with contacting the school of your choice, their financial aid office. Begin the process of the Free Application for Federal Student Aid that will make you eligible for the federal loans that are available along with any federal grants.

•••

Q: Have you noticed any change in the difficulty of getting a student loan?

A: There were initially some reports that access to student loans would be an issue. But through the federal Stafford, or direct, loan program? As long as you complete the up front paper work, the FAFSA, incoming freshmen will be eligible for up to $5,500 in Stafford loans.

•••

Q: For those who filed the FAFSA earlier in the year, can they make changes now?

A: Yes. It’s called special circumstances. A lot of the information that they supplied is from prior years, 2008 tax information is what they would be supplying. So if something were to change in terms of special circumstance, such as divorce, loss of job or income, or the death of a parent, it is in their best interest to make the financial aid office of their school of choice aware of that information. That’s so they can make changes to the financial aid package. A lot of that is just documenting information. A FAFSA can be filed anytime after Jan. 1, but check with schools for their deadlines. The earlier, the better.

•••

Q: Do you see a lot of families wondering how they’re going to pay college?

A: The majority of families are in that boat and have to take on additional debt to finance their child’s education. There is a lot of stress, but there are affordable, cost-effective options for families to finance their child’s education.

•••

Q: What kind of help does a group like College Financing offer?

A: A group like ours, we help families through the process. More than ever in this economy, people are losing their jobs or taking a pay cut, which affects the financial aid formula. We do everything from start to finish. We’ll help them with the preparation of the forms, we then sort of educate them. We go through financial options and help them go through the package. No matter what their income level is, the most important thing is to complete the FAFSA.

•••

Q: Any advice for families?

A: It’s not to late to apply. No. 2, if they’re struggling, and they don’t have the time, energy or they’re stressed out with the process, that they would contact someone like us. It’s an objective resource to help them understand how to afford the college of their son or daughter’s choice. We’ve helped a lot of families who thought they might not be eligible for financial aid but ended up getting some aid.

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Obama Seeks To Change Federal Student Loans

2009-04-03T20:49:00.001+08:00

President Obama's higher education agenda includes major changes to the federal student loan program and a push to make Pell grants for lower income students an entitlement. Similar proposals were pushed by Presidents Bush and Clinton. But they went nowhere on Capitol Hill. So is this the year they will finally pass?

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Student loans: Procure your education needs

2009-03-29T20:54:00.000+08:00

In the Canada, great percentage of students while pursuing higher studies feel the definite urge to take-up a loan to meet their education needs. For the education requirement of the students, financial experts have come up the student loans. These loans overcome the financial problems of education. The repayment period is to be paid after acquiring a job, after studies.

With the help of Student Loans, the borrowers can pursue graduate, post graduate, professional, medical or other courses as per their preference. Not only this, the loan entails others expenses such as meeting of education cost, paying of accommodation charges, buying books, stationery, computers, food expenses etc.

The borrowers can procure student loans in two categories namely secured and unsecured. In the secured option of student loans, the amount is obtained by pledging valuable assets such as property, car and valuable documents as security. This helps the borrowers to avail substantial amount for a longer time period. On other hand, students who do not possess or do not want to place their collateral against the loan amount can avail unsecured option. The unsecured student loans are an ideal funding option but under this option, the students can raise a small loan amount for a short period.

The loan amount is generally depended upon the student? course fee, repaying strength and credit scores. The repayment of the student loan amount is feasible as you can start the repayment after completion of your education. The interest rates charged on these loans are kept low so that it can be repaid easily.

To avail the student loans, the borrowers can either browse the internet or search for the traditional lender. Internet is considered as the best mode for searching and searching the loan quote as it takes just few click to select a suitable deal.

So, waiting for what? Just take a step today towards achieving your dream as student loan is there to consider your financial needs.

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Student worries: loan repayments, fake job offers

2009-03-28T20:58:00.000+08:00

The majority of business school students graduating this year are checkmated by the economic downturn.

No jobs and low salaries are obviously the main student concerns. There are other concerns, too, such as repayment of loans and fake placements. The government should be proactive in mitigating the suffering of students. The immediate step that should be taken is to prolong the moratorium and repayment period of student loans; the interest rates should also be lowered. Students also need to be vigilant against fraudulent companies that take a training fee or surety money while giving offer letters. Such companies are more likely to disappear with the money.

Most B-school students now finance their studies. Following the unjustified steep fee hike in the Indian Institutes of Management (IIMs) in the last two years, many other B-schools have also increased their fees to at least Rs6 lakh. For a loan of Rs6 lakh, the monthly repayment instalment is about Rs18,000, which the students have to start paying six months after getting a job.

The academic year 2008-09 is coming to an end and in many B-schools at least half the graduating batch is without jobs.

Even in some top-ranked B-schools, the median salary is about Rs4.5 lakh per annum, which translates to about Rs20,000 per month after deducting taxes and house rent allowance, etc. In lower-rung B-schools, many students have settled for jobs of about Rs10,000 per month. With such low salaries, paying loan instalments after six months will be tough.
There have been media reports that some nationalized banks are ready to reschedule loans on a case-by-case basis. This is a welcome move, but more needs to be done. The government should, through the Reserve Bank of India, direct all banks to increase the moratorium period by at least another six months.

Need for vigil: Students at IIM Calcutta. Exploiting the insecurity among students, racketeers masquerading as consultants and company executives are now promising jobs—they take a training fee or security ranging from Rs35,000 to Rs2 lakh, and then disappear. Indranil Bhoumik / Mint

Need for vigil: Students at IIM Calcutta. Exploiting the insecurity among students, racketeers masquerading as consultants and company executives are now promising jobs—they take a training fee or security ranging from Rs35,000 to Rs2 lakh, and then disappear. Indranil Bhoumik / Mint

For those students who don’t get a job, the repayment period starts after one year. This period, too, should be prolonged by another six months. The repayment duration should also be extended and the interest rate decreased so that the monthly instalment to be paid is below Rs10,000 for a loan of Rs6 lakh.

B-schools, on their part, should consider decreasing the fees they charge. At the same time, those institutes that have doctoral programmes should increase the stipend offered to research scholars to at least Rs30,000 a month. This will encourage competent students to take the profession of teaching since the chips are down in the corporate sector.

Students also need to be careful about fake placements. Exploiting the insecurity among students, there are now racketeers masquerading as consultants and company executives. They promise jobs, in fact give the offer letter, take a training fee or security that ranges from Rs35,000 to Rs2 lakh, and then suddenly disappear. Such cases have been reported in Uttar Pradesh, Orissa and Andhra Pradesh.

Recently, in Padmanava College of Engineering in Rourkela, 31 students were cheated of Rs50,000 each by a dud information technology firm. The money had been deposited as surety a few months back by students who were given offer letters. “Executives” of the fake firm also made pre-placement presentations to the students.

In another case, a firm took Rs60,000 per student as training fee and got the trainees to sign a two-year bond. It paid each student Rs7,000 per month for three months and then conducted a “test” in which all the students were failed and asked to go without any refund. The victims are students of Institute of Technology and Management, Gorakhpur, Azad Institute of Technology Lucknow, Sagar Institute of Technology and Moradabad Institute of Technology.

Besides taking steps against fraud companies, the government should also be proactive in generating jobs. The present government has not done enough to counter the economic downturn. It has to drastically increase public spending in areas that generate more jobs.

For example, if work on the national highways project had not been delayed, it would have had a great spin-off effect on jobs. Since political leaders are engaged with elections, nothing much can be expected from them in the near future—unless the plight of students is made into a political issue.

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