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House to Take Up Student Loan Fix 2013

Posted by Michael M.K. Thursday, May 16, 2013 0 comments

House to Take Up Student Loan Fix 2013 - It's a better deal at first, but student loan rates could steadily
climb and cost students more over the long haul under the plan House Republicans are considering.

Members of the Republican-led House Education and Workforce Committee planned on Thursday to finish up a bill that would keep interest rates from doubling on new subsidized Stafford loans on July 1. The GOP measure provides lower rates immediately and for the next few years, but the plan also comes with potentially higher costs for some students in coming years.

Democrats planned unified opposition.

"It's clear that the Republican student loan proposal will increase the cost of education for students and families," said Rep. George Miller of California, the senior Democrat on the committee. "Instead of adding billions in new debt onto borrowers, Congress should keep student loan interest rates affordable in the short term to ensure that a college degree remains within reach for students and families."

Without Congress' action, interest rates for new subsidized Stafford student loans would double from 3.4 percent to 6.8 percent on July 1. Neither party wants to see that happen, although there are strong differences in the methods to dodge that.

Under the proposal by the committee's chairman, Rep. John Kline, R-Minn., student loans would be reset every year and based on 10-year Treasury notes, plus an added percentage. For instance, students who receive subsidized or unsubsidized Stafford student loans would pay the Treasury rate, plus 2.5 percentage points.

Using Congressional Budget Office projections, that would translate to a 5 percent interest rate on Stafford loans in 2014 but climb to 7.7 percent for loans in 2023. Stafford loan rates would be capped at 8.5 percent, while loans for parents and graduate students would have a 10.5 percent ceiling under the GOP proposal.

In real dollars, the GOP plan would cost students and families heavily, according to the nonpartisan Congressional Research Service. The office used the CBO projections for Treasury notes' interest rates each year.

Students who max out their subsidized Stafford loans over four years would pay $8,331 in interest payments under the Republican bill, and $3,450 if rates were kept at 3.4 percent. If rates were allowed to double in July, that amount would be $7,284 over the typical 10-year window to repay the maximum $19,000.

For students who borrow the maximum subsidized and unsubsidized Stafford loans, they would pay $12,374 in interest under the Republican bill. The interest charges would be $10,867 if subsidized loans were allowed to double in July, or $7,033 if rates stay the same. The maximum available in subsidized and unsubsidized amounts is $27,000.

Graduate students and parents, meanwhile, would see interest payments reach $27,680 for four years of college under the GOP plan. If Congress keeps the rates the same, their interest payments would be $21,654 on the original maxed-out $40,000 loan, according to the Congressional Research Service report.

Democrats ahead of the hearing pledged to oppose Kline's plan and said they would offer amendments to the bill. They declined to provide further details before Kline gaveled the committee into its morning session. One idea that is popular among Democrats is to extend the 3.4 percent rate for subsidized Stafford loans for two years while leaders work on a long-term fix.

The White House, meanwhile, remained skeptical of the House measure.

"While we welcome action by the House on student loans, we have concerns about an approach that both fails to guarantee low rates for students on July 1 and asks too many of them to bear the burden of deficit reduction through unaffordable rates," White House spokesman Matt Lehrich said in a statement.

Obama's budget outline included flexible rates for student loans, pegging the interest to markets, but did not have a cap. Republicans had long pushed for the flexible rates and Kline said he would go along with Obama on that principle while adding a cap that Democrats sought.

During the 2010-11 academic year, about 7.5 million undergraduates borrowed from the subsidized Stafford loan program. In all, there were 36 million students loan borrowers through federal programs, according to the Education Department.

Source : http://abclocal.go.com

Student Loan As a Family Affair

Posted by Michael M.K. Saturday, March 16, 2013 1 comment

Student Loan As a Family Affair - If the mere mention of FAFSA (Free Application for Federal Student Aid), which most colleges and universities use as the universal form for determining financial aid eligibility for grants and loans -- doesn’t strike fear in your heart, then you probably aren’t staring down the possibility of not being able to afford to send your son or daughter to college this fall.

Even worse off than those who are already struggling to gather all the financial documents necessary to complete the lengthy application are the parents who are nursing the hope of landing scholarships, grants and student loans but have yet to hear about the FAFSA process.

Sorry, Illinoisans, the “priority deadline” -- the cutoff to qualify for state-based college aid -- was March 1. And funds were so limited that the state asked families to file “as soon as possible after Jan. 1, 2013” -- a hefty request when tax forms didn’t even arrive until the end of that month.

Take heart, Texans, your budding scholars have until March 15 to meet their priority deadline and Mississippians until March 31.

As for everyone else whose students are deep into considering prospective campuses and majors (see here), it’s time to have some serious heart-to-heart conversations about how to pay for college.

And the No. 1 thing families need to know about applying for college financial aid (see here) is that it involves a ton of hard work.

First, the only way to triumph over the nightmare stories of students who graduate with tens of thousands of dollars in debt -- or worse, drop out before earning a credential but still owing on loans -- is to step out of your comfort zone and talk frankly about your child’s hopeful expectations and the real-world limitations of parental help.

Probably the most shocking statistic I’ve heard about our country’s trillion-dollar student-loan debt crisis is that Americans 60 and older are among the hardest hit.

Last spring, the Federal Reserve Bank of New York reported that this demographic owes about $36 billion in student loans with about 10 percent of those loans delinquent.

Every parent wants to help their child through college but, as much smarter financial minds than mine have noted, it isn’t wise to sign or co-sign your life away on someone else’s education loan, even if that someone else is your baby. Plus, it might not be the best choice.

Research by Laura Hamilton, a sociology professor at University of California (see here), found that while the common perception is that the more a family contributes to college costs, the more time students have to focus on studies, this may not be true. She reported that though students whose parents picked up most of the tab were likelier to graduate, their grade-point averages were lower than those of their peers, possibly because they had such a small stake in the financial aspects of their educations.

And then we have the question about whether a student should work while attending college. Over the past few years, there has been tension between those who are proud to have worked their way through and others who fear it puts students -- especially minority and first-time college students -- at risk of not performing well in school.

It’s definitely a legitimate concern, especially if you’re talking about students who haven’t proved themselves to be high academic achievers. Yet, the American Psychological Association recently reported that African-American and Hispanic high school students who work long hours while attending school have more stable grades compared to whites and Asian-Americans working the same hours.

These studies shouldn’t absolve parents from fretting about how college and its costs could make or break their child’s future. But the tidbits could fuel the much-needed preparation and soul-searching required to confront some of the very real consequences of how to finance a family’s college dreams.

Navigating these emotionally thorny issues is terribly hard work, but also the perfect precursor to the sometimes mind-boggling labor of applying for student aid (more here). My husband and I already have our own student loans to pay off, and now we’re planning on how to pay for college for our two sons. Believe me, it’s a nightmare.

Source : Washington Post Writers Group

Student Loan Defermest

Posted by Michael M.K. Sunday, February 24, 2013 0 comments

Student Loan Defermest - Deferring payment on student loans is necessary when circumstances prevent a borrower from staying current on payments. There are many types of deferments available depending on the kind of student loan and the situation. For instance, deferments on private loans are completely discretionary to the lender. If a private lender wants to grant or deny a deferment they can, without consequences. Ironically, they may also charge a borrower requesting a deferment because they're unable to pay. Sallie Mae often charges $150 for a three month deferment.

For deferments of federal loans there are rules to be followed and made available to borrowers. The most common deferment on a federal student loan is the "in school" deferment. In other words, if a borrower is

in school for at least half-time, payments on the federal loans will be deferred. For Stafford loans there are also deferments available when a borrower is unemployed, in a rehabilitation training program, in a graduate fellowship, in the military service or following active duty, temporarily totally disabled or caring for a disabled spouse or dependent. Deferments are also available for economic hardship.

Economic hardship deferment applications must be in writing and can be issued in one year increments for a maximum of three years. To qualify for an economic hardship deferment a borrower must show that they are receiving federal or state public assistance, are a Peace Corps volunteer, have an economic hardship deferment on another loan or is working full time but still at 150% of poverty. An unemployed borrower seeking a deferment must be registered with an employment agency and must show proof of eligibility for unemployment benefits. To obtain an economic hardship deferment on a Parent PLUS loan, all cosigners to the loan have to be unemployed.

In addition to deferments, borrowers can verbally request a discretionary forbearance for causes such as poor health or other personal problems. While a forbearance may be needed for a short term crisis it's important to remember that when a forbearance ends, all interest is capitalized, creating a long term significant increase in the amount of the student loan debt.

Report Details Woes of Student Loan Debt

Posted by Michael M.K. Saturday, February 16, 2013 0 comments

Report Details Woes of Student Loan Debt - As in the housing market, securitization of student loans led to more aggressive underwriting for borrowers who could not possibly afford the debt they took on, according to a government report.

The 131-page report was formally released by the Education Department and the Consumer Financial Protection Bureau on Friday. It provides new estimates for total outstanding student loan debt: more than $1 trillion in 2012, composed of $864 billion in federal government loans and $150 billion in private student loan debt.

Cumulative defaults on private student loans exceeded $8 billion, a sum from over 850,000 distinct loans.
That total has risen in the last decade as lenders bypassed college financial aid offices and marketed loans directly to students. Students often signed on without realizing the difference between private and government loans or that government loans usually offered better terms, the report says.
Private student loans, for example, usually charge higher interest rates and are harder to discharge in bankruptcy.

Student Loan Debt Crisis: How’d We Get Here and What Happens Next? (US Education)

Posted by Michael M.K. Monday, February 11, 2013 0 comments

Student Loan Debt Crisis: How’d We Get Here and What Happens Next? (US Education) - The amount of student loan debt and the rate of delinquency have been climbing for years now. If it seems like every new statistic is worse than the last, that’s because it is. Two studies released this week are no exception.

Credit bureau TransUnion says that in the past five years, the average student loan debt each borrower carries has risen 30% to $23,829. More than half of student loan accounts, which add up to more than 40% of the total dollars owed, are in deferral status. This is just a temporary reprieve; students can defer for only a few years before they have to repay.

The trouble is, many of them aren’t doing so. FICO Labs found that delinquencies rose by 22% in five years. For the newest group of loans it studied, delinquency rates are 15.1% — higher than the 11% cited by the Federal Reserve in a November report. Like the Fed’s study, the FICO analysis doesn’t include loans that are in a deferred status — which means the number of people who can’t afford to pay back that money may be almost twice as high as what the official delinquency rates reflect.

This situation obviously can’t be sustained over the long term. “I think a few more years and it’s going to be a general crisis,” says Barry Bosworth, an economist at the Brookings Institution. Interest rates are unusually low right now; when they rise, more borrowers who were just keeping their heads above water are liable to become delinquent.

Note EU-Digest: some European Governments like that of the Netherlands have also started to move away from Government subsidized student support and opted for a privatized student loan system. Given the results obtained in the US with this privatized loan system it does not seem to be the proper way to proceed.

Student Loan Debt Could Cripple Economy For Decades

Posted by Michael M.K. Friday, February 8, 2013 0 comments

Student Loan Debt Could Cripple Economy For Decades - The price of a college education has been climbing at a substantially higher rate than inflation for years; meanwhile, the value of a college degree has been falling. That’s why thousands of debt-laden college graduates are facing the worst economic bust to plague the United States since the housing bubble burst.

A recent report from the Center for College Affordability and Productivity, entitled “Why Are Recent College Graduates Underemployed?”, refutes the oft-repeated theory that college educated Americans have the potential to earn substantially higher lifetime incomes than their uneducated peers. In fact, the report indicates that many college-educated Americans are woefully underemployed because “the growth of supply of college-educated labor is
exceeding the growth in the demand for such labor in the labor market.”

From the report:

About 48 percent of employed U.S. college graduates are in jobs that the Bureau of Labor Statistics (BLS) suggests requires less than a four-year college education. Eleven percent of employed college graduates are in occupations requiring more than a high-school diploma but less than a bachelor’s, and 37 percent are in occupations requiring no more than a high-school diploma;
The proportion of overeducated workers in occupations appears to have grown substantially; in 1970, fewer than one percent of taxi drivers and two percent of firefighters had college degrees, while now more than 15 percent do in both jobs;
About five million college graduates are in jobs the BLS says require less than a high-school education;
Comparing average college and high-school earnings is highly misleading as a guide for vocational success, given high college-dropout rates and the fact that overproduction of college graduates lowers recent graduate earnings relative to those graduating earlier;
Not all colleges are equal: Typical graduates of elite private schools make more than graduates of flagship state universities, but those graduates do much better than those attending relatively non-selective institutions;
Not all majors are equal: Engineering and economics graduates, for example, typically earn almost double what social work and education graduates receive by mid-career;
Past and projected future growth in college enrollments and the number of graduates exceeds the actual or projected growth in high-skilled jobs, explaining the development of the underemployment problem and its probable worsening in future years;
Rising college costs and perceived declines in economic benefits may well lead to declining enrollments and market share for traditional schools and the development of new methods of certifying occupation competence.

Meanwhile, over the past five years the average amount of student loan debt accrued by college students has risen by 30 percent to $23,829. More than half of student loan holders have currently deferred student loan payments, which is only a temporary solution for struggling degree holders.

Some economists expect the American economy to struggle for decades under massive student loan debts because student loans are almost impossible to discharge in bankruptcy and the government will collect by garnishing the paychecks and tax refunds of those who fail to pay. Furthermore, being underwater on student loans can harm a person’s credit score, making it more expensive for them to get loans for homes or vehicles.

As more and more Americans struggle to pay back student loans while underemployed, the economy as a whole will suffer, since the purchases of first homes and other durable goods are put off indefinitely.

Source : personalliberty.com

Money Doesn't Grow on Trees

Posted by Michael M.K. Thursday, February 7, 2013 0 comments

Money Does Not Grow on Trees - It has now been over one month since my student loans entered repayment. One month of numerous letters, emails, and telephone calls. The letters arrived first to remind me of my upcoming payments. Then the emails began and finally telephone calls.

In reply, I have sent mail to all of my lenders and I have called them. As I have stated in earlier posts, my lenders are unwilling to make different repayment schedules based on my financial situation. That is, with the exception of my federal loans.
My federal loans account for approximately $33,000 of my student loan debt. Therefore, they represent about 25 percent of my total debt. $33,000 is by no means a small amount and so I applied for Income-based Repayment. I applied about a month ago through the Department of Education’s website and Nelnet. It was a simple process that took approximately 15

minutes to complete. Income-based repayment, or IBR, uses tax information from the IRS to determine how much money is owed per month. Since I had current IRS information, a lot of work was streamlined.

The decision has now been made regarding my application. I found out this past week that I qualify for the IBR plan. Five loans are under the plan, which amounts to $26,800. Since I qualify, my monthly payments have been reduced from $304.55 to $0. Yes, zero dollars. The reason for that is because of my total debt to income ratio. Although I wanted to qualify, I was unsure if I would. Now that I have, it’s a good start to my student loan debt.

By saving the $304.55 per month, my income almost covers my private loan debt. However, I am still in the red by about $100 per month.

Now that I know I qualify for the Federal guidelines of the IBR plan, it reaffirms my commitment in seeing new repayment plans for private loans. If private lenders adopted a similar plan to IBR, student loan debt would be manageable.

I am thankful for the Federal repayment plans and am hopeful that they will one day extend to all student loans. After all, Money Doesn't Grow on Trees.

How To Applying Online For Apprentice Loans

Posted by Michael M.K. 0 comments

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