Student Loan Help

Financial independence, regardless of your definition, is something we all strive for. But think about those two words for a moment. What does financial independence truly mean to you? Perhaps financial independence to you means moving out of Mom and Dad’s house and getting your own place. Maybe it means procuring your first checking account and paying for that designer sweater with your after school job. For me I thought I was King the day I signed up for a Visa card outside Gillette Stadium at a New England Patriots game. Amazingly I was approved (I’ll tell you how later). Truthfully, I only signed up to get the free t-shirt. Those marketing wizards know our weaknesses, free stuff! Regardless of your definition of financial independence, we all aspire to have it. And good credit can certainly go a long way in getting you the funds you need for school.

I can’t tell you how many students I have spoke to over the past year who have said to me, “Dave, my parents won’t help me with school. I’m on my own. What can I do?” They feel overwhelmed and lost, and with good reason. They have gained all this momentum and are energized about going to school only to discover they can’t due to lack of funds. It’s deflating. It’s like when Charlie Brown went to kick the football and Lucy pulled it away at the last possible minute, just cruel! Well, I want to make sure Lucy and her mischievous ways are tamed. I want to ensure your kick is as true as an Adam Vinatieri last-second Super Bowl winning FG. What I want is for you to get a loan you don’t need right now!

Ok, you’re probably confused and wondering what on earth I am talking about. Get a loan I don’t need? This guy is crazy you are thinking! Well, remember I told you I got approved for that Visa card? What I didn’t tell you was that five of my friends also applied and walked away with a free t-shirt only. I was the only one who got approved with a $500 credit line extended. What was my secret? I got a loan I didn’t need when I was 17 years old.

When I was 17 my father took me to the bank and co-signed for a $1,000 loan for me. We walked out of the bank together that day with $1,000 in cash and a payment book. My father then handed me the payment book and the $1,000 and told me to pay the loan off. I was scratching my head, why I asked? I want you to establish credit history. You have 12 payments to make, make all 12 of them. I will pay the extra $90 in accrued interest he said. But I don’t want you to rush back here tomorrow and pay the whole thing off. Pay it each month so they can see you are responsible, and make sure you pay on time. I didn’t appreciate what he was doing for me back then; I was young and naïve. So in between my basketball games and trips to the mall I would stop off at the bank and pay them back with the money they had given me. It just became part of my routine. I never gave it much thought – that is - until I was the envy of my friends at the Patriots game.

My holiday wish is for everyone to have a person in their life like my Dad.  Someone who will take the time to lead by example and outline a winning formula.

Hey Dad, in case I haven’t told you lately, I appreciate all you’ve done for me.

Shelley Rep from NCHELP (NCHELP.org) posted the following:

The Congressional Budget Office has issued its estimate of the cost to the federal government of H.R. 4137, the College Opportunity and Affordability Act of 2007, as approved by the House Education and Labor Committee on November 15. This bill represents the House version of Higher Education Act reauthorization. In contrast to the budget reconciliation legislation enacted in September (which was a cost cutting and spending bill), the HEA reauthorization is referred to as a policy bill.

According to the CBO, the bill (if enacted) would increase direct spending by $75 million in 2008 and decrease direct spending by $27 million over the 2008 to 2017 period. One of the “savers” in the bill is the change in the definition of “cohort default rate”. The bill includes an amendment offered by Congressmen Grijalva (D-AR) and Bishop (D-NY) that would revise the definition of cohort default rate by adding to the period of time in which a default is counted as part of a school’s cohort default rate. Right now, a borrower default is included in the rate only if it occurs during the fiscal year when the loan enters repayment or the following year. The amendment would add one year to this period. Schools are subject to losing eligibility to participate in Pell and the student loan programs if their default rate exceeds 25% for three years. While no schools have been subject to this sanction in recent years, that could change if the amendment were included in final legislation.

CBO projects that this change would reduce the number of schools eligible to participate in the student loan programs, thereby reducing direct spending by $27 million over the 2008 to 2017 period. Accordingly, all the net savings in the bill are attributable to the change in the cohort default rate definition.

The CBO cost estimate also points out that the bill reauthorizes and amends many of the discretionary programs, and creates new discretionary programs. Discretionary programs require annual appropriations. CBO estimates that implementing these programs would cost $97.4 billion over the 2008 to 2012 period.
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An interesting way to balance the budget? Submit your comments and/or thoughts.