Student Loan News, Updates and Blog Posts

It doesn’t, at least not in 2009. But President Obama has proposed a couple of key changes that are turning a few heads for the 2010 academic year.

Pell Grants: The key is to get more funds into the hands of those students with the greatest financial need. No one wants to see a student deprived of going to school based on limited funds.

The blueprint proposes making the Pell Grant program a mandatory spending program that automatically increases with the Consumer Price Index plus 1 percent, opposed to the current system, which is a standard fixed amount.

Eliminating the Federal Family Education Loan Program (FFELP): This is the ire of great debate. Obama wants to eliminate the FFELP program in favor of the Direct Loan program.

The FFELP program extends into the private sector affording many lenders the ability to lend funds to students, while the Direct Loan program is run through the government.

Phillip Day, President and CEO of NASFAA, expressed concerns about the dissolution of the FFELP Program. “Recently, the freezing credit market has created instability in the FFELP causing great anxiety for students, parents and colleges about the continued availability of student loans.” The key is to ensure multiple funding options are available.

Students and parents should not be negatively impacted by losing FFELP participant-provided services like college access programs, financial literacy education and loan delinquency and default prevention.”

It’s important to note that the changes recommended by the Obama administration are not certain. The president’s budget provides a blueprint for Congress. Congress will ultimately decide what is included in the final FY 2010 budget.

Five most recent student loan help blog posts:

Teens are feeling the economic pinch just like the rest of us, which makes scholarships a necessity and not just a luxury for many looking to go to school. Summer jobs, seasonal retail help, after school employment, and temp work are near impossible to find these days. No one seems to be hiring.

Since June alone the unemployment rate has jumped from 5.6% to 7.6% leaving millions of Americans out of work. You need to go back nearly seventeen years to September of 1992 before you can find comparable unemployment numbers.

One of the main problems facing teens in getting a job is the competition. They are no longer going head to head with their peers. Teens are competing for the same jobs as workers in their late 20’s, which generally have more work experience and offer more value to an organization. It is tough times for all, and no age group is exempt from the impact. A rising tide may raise all ships, but a tidal wave can leave you shipwrecked.

Until that tide rises again I suggest entering every free scholarship drawing you can find. Divide and conquer. Two big giveaways are on the horizon. Freecollegescholarships.net is offering a 10K giveaway on 3/25 and scholarshippoints.com is holding their first big 10K drawing of 2009 on 3/31.

For those of you who are already scholarshippoints.com members here is a special 10-point code for you, ILOVE10K.

What do you guys think? Do you agree about the job market? Have you been let go from a job, or know the seasonal employment you are accustomed to will not be available this year?

Education has long been considered one of the recession proof industries, but the tide of change has washed in a new reality. Endowment dollars are down, which puts more pressure on universities to use their funds more prudently.

Harvard University president, Drew Gilpin Faust, announced last week that it will slow or halt the construction of a new $1 billion science complex in Allston. That one eighty is major news when you consider Harvard has the largest total endowment in the United States.

Northeastern is offering a 25% tuition break for recent graduates looking to pursue a Masters degree, Boston College announced a 2% budget cut across the board to increase the school’s financial aid budget by 2.5 million, hundreds of schools have issued a hiring freeze, and some are reallocating funds from renovation projects to financial aid.

With more money being allocated to financial aid efforts, students are the real benefactors. So if you had scratched off a pricey school from your college “wish list” it may be worth putting it back on. It’s a whole new ballgame now.

Five most recent student loan help blog posts:

I find the older I get the more cynical I become. Perhaps that’s because I’ve been burned so many times before. I now tend to look at opportunities with a skeptical eye. When someone tells me something is FREE I immediately think they are full of crap. I guess I’ve been conditioned to believe if you pay nothing in life that’s exactly what you get in return. Well, it takes a big man to admit when he’s wrong, but….I was wrong, at least about one opportunity.

Scholarshippoints.com is giving away $10,000 at the end of March, NO STRINGS ATTACHED; unless you consider signing up so they know who you are and where to send the money a string.

Laura Mack and Victoria Fiorentino were the big 2008 10K winners. They were not jaded by the world like me, and that literally paid off for them.

Are you more a Laura & Victoria optimist or David pessimist? The fact is someone will be walking away with 10K next month whether you choose to sign up or not. But if you don’t sign up your chances of winning are exactly 0.00%. Really, what do you have to lose? Sign up today.

Whether you’re gambling, running a business, trading on Wall Street, or going to school to receive a master’s degree the goal remains the same; gain profitable returns. Of course when you attend school you don’t get that instant gratification, like at a casino, but your relatively short-term commitment could pay long term dividends.

Hiring for those with an M.B.A. remains nearly unchanged, despite the latest Bureau of Labor Statistics report placing the national unemployment rate at 7.6%. Hiring managers, which hired M.B.A.’s last year say they expect to hire the same many this year or even more, according to Graduate Management Admission Council. Some corporate recruiters even think they’ll have to fight harder to land top candidates.

Many view hiring those with an M.B.A. as a long-term investment in human capital. It is always good to have the next manager in the pipeline should another manager retire or be lured away by a competitor, and companies are willing to pay for that insurance.

According to the U.S. Census Bureau those who hold a master’s degree make on average 21% more per year than those with only a bachelor’s, which is befitting when you consider the average M.B.A. recipient shells out about $100,000 in tuition, and is better equipped to handle the ever changing global market. An M.B.A. graduate will likely experience a return of investment on tuition in three-to-five years, but that’s assuming a student can even get into a graduate program.

Many students are having difficulty finding a seat for graduate school. New York University’s Stern School of Business reported a 30% increase in attendance in off-site informational sessions last fall. Northwestern University’s Kellogg School of Management had a 22% increase in applications in ’08, according to the Personal Journal. And since last June the amount of registered applicants taking the Graduate Management Admission Test (GMAT) has gone up by nearly 50%.

Basic supply and demand tells us if more students are seeking their M.B.A., and schools are not increasing the amount of students they are accepting into their graduate programs, you could be left without a chair when the music stops. That means you quite literally need to come with your “A-game” to get into most of these graduate programs; although it’s not strictly based on GPA. Recommendation letters from professors, job experience, and extracurricular activities all factor in as well. The best thing you can do is hedge your bet.

Strength in numbers is the way to go. Apply to as many graduate schools as possible. That includes out of state and online degree programs, which are believed to be just as good, if not better, than a classroom degree. You may need to relocate or recalibrate your game plan, but it is well worth it in the long run.

It’s been said we’re all drowning in information but are starved for knowledge. Will you quell those hunger pains? An M.B.A. could prove to be the best investment of your life.

If you are in school at a College or University, and you are not independently wealthy, then chances are you are familiar with the FAFSA, the Pell Grant and the Stafford loan. If your parents handle all your tuition bills, forward this blog to them, because in these tough times it is increasingly more difficult to get those bills paid.

Ok so here is the scenario:

• You fill out the FAFSA every year, and you are getting the maximum amount possible in the Stafford loan. If you aren’t sure what the max amounts are you can click here (and scroll down).
• You are not eligible for the Pell Grant because your parents make too much money, OR you do get the Pell Grant, which can range anywhere from a few hundred dollars a school year to $5350 a year (amount increased from last year because of the new Stimulus Bill).
• The school gives you institutional aid.

Now you add up all this aid, and what do you have left? A balance most likely, that is due to the school before you can register for classes. The reason for this is even with all this aid, the cost of attendance is so high now, that financial aid (in the forms of Federal loans and grants) is not usually enough to cover the tuition costs. So what are your options?

4 solutions/options for getting that bill paid:

1. Check with someone IN PERSON at the financial aid office and make sure there is no other federal loan or grant you could potentially be eligible for (Perkins, federal supplemental loan, more Stafford). Also check to see if there is any more institutional aid available. It does not hurt to ask. Seeing someone in person can make a difference as well.
2. Search for scholarships. There are scholarships out there for everyone, and most of them are not merit based (meaning you don’t need to have accomplishments under your belt, etc..)…Here is a good place to start: http://www.studentscholarshipsearch.com/ (If you want more information about winning scholarships, post a comment and I can point you in the right direction).
3. If your parent is willing to borrow a loan in their name to help with your tuition costs then the Parent Plus loan should be their first choice. It is a Federal loan in the Parent’s name used to cover tuition costs. Payments CAN BE deferred until the student is out of school. This loan can never be transferred to the students name, at any point in time.
4. If your parent is not willing to have a loan in their name, then look into a Private Student loan. Keep in mind that in order to get a Private student loan, you usually need a cosigner…especially with the tightened credit standards we are all experiencing.
5. If #3 and #4 are not an option for you, then I would suggest looking at state and community colleges around your home. I can’t stress enough how little it matters where your degree comes from. As long as you have one, it won’t matter what school you got it from (excluding the IVY League schools, and certain other elite schools). Check out the programs your community college has, you might be surprised. You have to ask yourself if it’s the degree you want, or the experience you have while you are getting that degree that is more important. Try and get a grasp on what a huge amount of student loans can do to your financial future.

Special Points Code: IAMTAPPED

For more information and more financial aid help from people who are experiencing the same issues you are, visit this Financial Aid Forum.

By Deanne Loonin

For years, lenders fought and clawed to get into the largely unregulated world of predatory private student lending. During this time, a particularly unholy alliance developed between unlicensed and unaccredited schools, like Silver State Helicopters, and mainstream banks and lenders. The creditors didn’t just provide high-interest private loans to students to attend unscrupulous schools; they actually sought out the schools and partnered with them, helping to lure students into scam operations. They then turned around, and like subprime mortgage providers, made big money on these loans by securitizing them and shifting the risky debt onto unsuspecting investors.

Lenders got away with this because no one was paying attention. Regulatory agencies simply ignored their responsibility to stop unfair lending practices.

As Higher Ed Watch revealed in December, these schemes have been carried out in violation of federal (and in some cases state) laws. This is a national disgrace that requires quick federal action to prevent future abuses and to provide redress for those who have seen their dreams of bettering themselves shattered by greed.

At issue is the FTC Holder Rule (more accurately referred to as the Federal Trade Commission Preservation of Claims Rule), which puts lenders on the hook when they have "referring relationships" with trade schools that defraud students or shut down unexpectedly. Under the provision, students are entitled to recover any payments they have made and to have their remaining indebtedness canceled.

The rationales for the FTC rule include:

• The deterrent effect on creditors. The rule is intended to deter lenders from developing business arrangements with bad merchants and help force the market to police itself. As summarized by the West Virginia Supreme Court in 1995, without the rule, a financial institution could "run in effect a ‘laundry’ for ‘fly-by-night’ retailers."

• A possible "deep pocket" for victims of consumer fraud. A victimized student cannot recover from a school that is collection proof, insolvent, or in bankruptcy, but this individual can often collect from a related creditor.

• A means of leveling the playing field for consumers. Even if the school is solvent, it is very difficult for a student who has been ripped off to simultaneously fight a collection action by the lender and bring a lawsuit against the school. By far the most practical and efficient action for the student is to fight the collection activity by holding the lender responsible for the school’s actions.

At the National Consumer Law Center’s Student Loan Borrower Assistance Project, we have found that most private student loan providers flaunt the rule. In a March 2008 report surveying 28 private loan agreements, we found that 40 percent didn’t include the holder notice in them at all. Nearly all the rest contained the notice but undermined it by including contradictory clauses – saying, for example, that students would be responsible for repaying the loans in full no matter how dissatisfied they were with the schools.

A favorite tactic of national banks is to simply ignore the holder rule, saying that it doesn’t apply to them. Among other arguments, they claim that they are outside the reach of FTC enforcement. They also argue that state versions of the rule don’t apply to them because such laws are preempted. The banks make these dubious arguments, knowing full well that their direct federal regulators, like the Office of Comptroller of the Currency, have neither the desire nor the incentive to hold them accountable. [The OCC, for example, is financed primarily by the fees it collects from the banks it regulates.]

The creditors have also exploited a technicality in the FTC rule. The main problem is that the FTC rule obligates only the schools, not the lenders, to include the notice. In other words, the FTC can enforce the law only against schools that fail to include the notice, not the lenders.

This is a problem that must be fixed, but in the meantime it should not be used as an excuse for doing nothing. Regardless of who is required to insert the notice, the lenders are still engaged in unfair and deceptive business practices when they partner with schools that fail to include it .  If banks are routinely being referred loans by schools and the schools are not arranging for the banks to put the notice in the notes as they are required to do, then the banks are using notes that violate federal law and should be liable for unfair practices. 

Banking regulators must act to fill in the jurisdictional and legal gaps. They can do this by enforcing the FTC holder rule. The trade commission, state attorney generals, state licensing and accreditation agencies must review loan documents provided to students by schools and sue schools that violate federal law by not including the holder notice. Meanwhile, government agencies supervising lenders must monitor school notes and sue lenders that violate federal law by contradicting or otherwise trying to evade the holder requirement.

Accomplishing all of that would be a tremendous first step, but it would not be enough. The FTC rule must also be amended so that lenders in addition to schools are obligated to include the notice. Other federal agencies must also adopt the FTC rule so that there is absolutely no doubt that loan providers outside of the FTC’s jurisdiction, including all national banks, can be held liable. There are various ways to make this happen. The Federal Reserve Board could adopt the rule by issuing regulations. Congress could also act by requiring these rules be put in place.    

These unscrupulous arrangements between schools and lenders may have slowed down for now, but not because the creditors did the right thing and started vetting their business partners and not because the government finally said enough is enough.  Instead, any current slowdown is simply because the money has stopped flowing, at least for now.

This is hardly a cause for celebration.  Bailouts could potentially give these same creditors the funds to start ripping off students again. In the meantime, thousands of students have been harmed and left in the cold trying to figure out how to get out from under incapacitating debt for worthless educations. 

Lenders that poured resources into ripping off students have spared no expense in trying to silence students who fight back.  In the current environment where creditors are rewarded with bailouts for prior bad acts and where no one wants to take responsibility for the meltdown, taking action in this area is one small way to hold creditors liable for the damage they have done.

Deanne Loonin is a staff attorney with the National Consumer Law Center and the director of the center’s Student Loan Borrower Assistance Project. She focuses on consumer credit issues generally and more specifically on student loans, credit counseling, and credit discrimination. She is the principal author of numerous publications, including "Paying the Price: the High Cost of Private Student Loans and the Dangers for Student Borrowers." Her views are her own and do not necessarily reflect those of the New America Foundation.

Most Americans are convinced that higher education is essential for economic success but not accessible, according to a survey conducted by Public Agenda and the National Center for Public and Higher Education.

Sixty-seven percent believe admission to higher education for qualified students is a problem, while eighty-six percent believe students have to borrow too much money to pay for college. With applications for financial aid up 25% and schools offering 20% less aid those numbers are justified, and students are feeling the crunch. But as challenging as the education sector has been the workforce has been far worse.

According to the Bureau of Labor Statistics the unemployment rate has now climbed to 7.6%, up from 4.9% last January. And if you look beside you in the burgeoning unemployment line you will find all members of our racially and ethnically diverse workforce accounted for. We stand as equals, but on unstable ground.

So what is the American dream today during these taxing economic times? If you polled Americans you’d probably find procuring a job was near the top of that list, a far cry from where we were forty-five years ago when equality was the order of the day. It was August of 1963 when Martin Luther King Jr delivered his impassioned I have a dream speech, which spoke of equality for all men. Earlier this year Barrack Obama helped make that dream a reality when he was sworn in as our 44^th president. Now he is at the center of the economic storm and trying to figure out a way to stop the bleeding and create jobs for all Americans.

However, one benefit of being out of work is the amount of aid you may qualify to receive from your FAFSA. The FAFSA of course is the form used to determine the amount of money a family is expected to contribute to the price of attending a postsecondary institution. The less money you have the more aid you get, and that figure may increase later this year.

The latest economic stimulus bill calls for 14 billion dollars to be injected into the Pell Grant program, raising the maximum yearly allotment from $4,850 to $5,350 for the 2009-2010 academic year. The proposal also aims to increase the Unsubsidized Stafford loan allotment by $2,000 and provide 490 million dollars for undergrad work study.

We are all in deep water these days, but the FAFSA may serve as your rising tide. So catch that wave and hang 10.

At Higher Ed Watch, we have long opposed the idea of the government bailing out private lenders who have engaged in predatory private student loan practices. Our view, as we have said before, is that student loan companies should have to bear responsibility for the consequences of pushing high cost private loan debt on high-risk borrowers. After all, for years, they gladly raked in profits from these loans.

Over the past six months, we have heard from scores of financially distressed borrowers who are outraged that the government would rush to the aid of private student loan providers without offering any relief to them. With U.S. Treasury Department officials preparing to start carrying out this month their plans for reviving the credit markets to help provide capital and liquidity to lenders so they can continue making high-cost private loans, we feel that it is our duty to make sure these voices are heard.

Typically in our mailbags, we provide a sample of comments that have been submitted on a given subject. But as we sifted through the dozens of comments we have received in recent months, one particularly caught our eye because it perfectly illustrates the human costs of a system that has left so many students vulnerable to abuse from predatory lenders and unscrupulous trade schools.

Like many of the distressed borrowers we hear from, this commenter says that he was duped into taking out high-interest private loans by aggressive trade school recruiters who misled him about the terms and conditions on these loans, as well as the quality of the academic programs their schools were offering:

I have attended two schools — ITT and Westwood. When signing up they told me that I would need a Sallie Mae loan to cover what my grants didn’t and that once I completed school that I would be making payments of around $50 a month for each loan.

After attending I didn’t feel like I was receiving the education that I was paying for in these loans. The reason why I say this is because my 4th grade son was bringing home assignments that mirrored the ones I was receiving from ITT and Westwood. I was getting A’s on all my assignments without any studying because it was so easy my son could do it. If you are going to pay over $75,000+ in loans when you complete a school shouldn’t it actually teach you something??

After withdrawing from these schools, he says that these loans have become an inescapable burden for him and his family. The loan giant Sallie Mae, he says, has been inflexible and unwilling to help him find ways to make repayment easier.

Ultimately, this commenter has paid a heavy price for his decision to go back to school to try and better his life. His situation, he says, has become increasingly desperate:

Until we started going to receive food from the church last winter, my family had to all live in one room in the back of our trailer with no water, gas, or phone (can only pay electric on $120 a month). For heat we had a space heater that could only heat one room. My wife was late term high risk pregnancy at the time. We lived on ramen noodles and what the local church was able to help supply with their food assistance.

 It’s bad when a government-protected institution puts money ahead of the welfare of its citizens. After the winter was over Sallie Mae collected around $3000+ of family assistance and it sure hasn’t shown up as credit on my loans.

As policymakers move forward with their plans to help private loan providers, we believe that it is absolutely essential that they look for ways to help private loan borrowers who find themselves in dire straits. Borrowers with unmanageable debt loads may not be able to hire high-priced lobbyists or lavish lawmakers with generous PAC contributions, but that doesn’t mean that they should be left out of the discussions.

As always, we appreciate the comments we have received on this topic and others. Please keep them coming.

Deion Sanders was known as “prime time” back in the day; a name the self-absorbed NFL star actually gave himself. But when people speak of prime time these days they are usually referring to the widely used benchmark which determines the interest rate on a number of loans. Strike now while the kettle is hot is my advice.

I’ve been beating the private student loan drum for the past few weeks, and with good reason. It is a great time to take out a private student loan for school. With the prime rate at 3.25% and Stafford loan rates ranging between 6% and 6.8% it’s just good business acumen.

Whether you are looking to cover a portion of your student loans or fund your entire education with private loans one thing is certain, the rates have never been better. Apply today.