02.14.14 | Do Colleges Provide Adequate Disclosures to Student Consumers?

Posted in College Life, News, Parent Advice, Student Credit by David Levy

Do Colleges Provide Adequate Disclosures to Student Consumers?The U.S. Government Accountability Office (GAO) has released a study that describes the growing number of colleges and universities who have entered into arrangements with financial institutions to market bank accounts, prepaid cards, debit cards and other financial services (including disbursing financial aid) to students. While the Consumer Financial Protection Bureau (CFPB) has encouraged financial institutions to voluntarily fully disclose these agreements on their websites, the CFPB found that nearly a third of public colleges and universities fail to do so.

Schools argue that these college-lender agreements offer convenience for students and, potentially, help lenders to establish long-term financial relationships with students. However, the GAO remains concerned about how some of the financial agreements impact students, their families and colleges.

For example, the GAO found that many schools encouraged students to choose the college-lender product rather than providing unbiased, neutral information to help student consumers select the financial product that best meets their needs. The GAO speculates that these endorsements on the part of colleges and lenders may be influenced by incentives the schools receive as part of the school-lender agreements. These incentives may not be adequately disclosed to students.

The GAO cites an instance in which a lender provided $25 million to a school for the use of the college’s logo on affinity credit cards. Such a practice is currently banned for student loans but not for credit cards. In another example, a college is paid an up-front fee for endorsing the lender’s financial services on campus. (Additionally, the college can receive a bonus payment for each new student who signs up for the services.) The GAO report also cited instances in which college card fees for purchases using a personal identification number were higher than for similar debit card products provided by banks.

The CFPB notes that while “many financial institutions offer good products at competitive prices,” colleges, universities and lenders who have financial arrangements should disclose these relationships and provide unbiased information to students. Without more transparency about these types of relationships, student consumers are prevented from making informed decisions about what is in their best financial interest.

The U.S. Public Interest Research Group (U.S. PIRG) published a report, The Campus Debt Card Trap, which identified high fees and inconvenient free ATMs as key issues.

Both the U.S. General Accountability Office and the Consumer Financial Protection Bureau have indicated that they will be addressing these issues as they develop new rules. The U.S. Department of Education will also be revising the regulations concerning disbursement of federal student aid funds through debit cards.

In the meantime, students and their families are encouraged to review the Consumer Financial Protection Bureau’s Managing Your College Money and consumer advisory for information on accessing student loans and scholarships. Students and parents who wish to complain about a student loan, checking account, or credit card, may submit a complaint online or call 1.855.411.2372.

01.21.14 | Setting the (Education Loan) Record Straight

Posted in Student Loans by David Levy

Student Loan Debt at GraduationWhile average education loan debt at graduation continues to increase every year, the percentage of students graduating with student loan debt is also growing. How many students and their families are borrowing to finance a college degree and how much are they borrowing?

Mark Kantrowitz, Senior Vice-President and Publisher of Edvisors.com, recently analyzed data from the 2011-2012 National Postsecondary Student Aid Study (NPSAS). Among the observations in his student aid policy analysis report, Debt at Graduation:

  • The burden of paying for college has shifted from federal and state governments to families.
  • As a result, students are shifting their enrollment to lower-cost colleges and/or graduating with more debt.
  • Education loan debt is common for most students. For example, more than two-thirds of Bachelor’s degree recipients graduated with federal and private student loan debt. Of those who applied for federal student aid, nearly ninety percent of Bachelor’s degree recipients graduated with student loan debt in 2011-12. An even greater percentage of graduate and professional school students graduate with student loan debt.
  • The average student loan debt at graduation among Bachelor’s degree recipients who graduated in 2011-2012 with student loan debt was $29,384. (The average student loan indebtedness is $20,265 if one calculates the average for all Bachelor’s degree recipients, including those who graduated with no debt.)
  • Oftentimes, the amount of debt parents borrow to help their children pay for school is excluded from cumulative undergraduate education loan debt statistics. Kantrowitz has calculated the total education debt at undergraduate graduation to include Federal Parent PLUS loans. The average total education loan debt at graduation (including parent borrowing) for Bachelor’s degree recipients who graduated with debt was $35,432. Considering all Bachelor’s degree recipients including those who graduated with no debt, the total education loan indebtedness was $24,510.
  • Debt at graduation for graduate and professional students has increased more dramatically than for undergraduate students. “For example, the average debt at graduation for law school graduates increased from $93,336 in 2007-08 to $135,527 in 2011-12 ($11,048 per year) and the debt at graduation for medical school graduates increased from $127,017 to $180,109 ($13,273 per year),” Kantrowitz wrote.
  • These increases in total graduate education loan indebtedness might be attributed to the introduction of the Federal Grad PLUS loan in 2006 and the limited availability of gift aid to graduate and professional school students.
  • Surprisingly, most undergraduates do not graduate with six-figure student loan debt. In fact, less than one percent of undergraduate students graduate with debt exceeding $100, 000. (Unless undergraduate students borrow from non-federal student loan programs, it is impossible for them to graduate with six-figure student loan debt).
  • Six-figure student loan debt is more common for graduate and professional students. Six-figure student loan debt is most common among law school and medical school graduates where nearly 60% and 70%, respectively, of these students graduate with six-figure student loan debt (including both undergraduate and graduate loans). These figures are up sharply from four years ago, when about a third and half of law school and medical school students graduated with six-figure student loan debt.

Kantrowitz suggests that undergraduate and graduate students should borrow no more for their entire education than their expected annual starting salary at graduation. If total student loan debt is less than annual income, the student will be able to repay his or her loans in 10 years or less.

Otherwise, students will find their major lifecycle decisions such as marriage, car and home purchases, raising children and saving for retirement may be adversely affected.

David-Levy-EdvisorsDavid Levy is Associate Editor of the Edvisors Network. David brings 30 years of experience as Director of Financial Aid at some of the nation’s leading colleges, including the Scripps College, California Institute of Technology and Occidental College. He is respected by students, parents and financial aid professionals nationwide because of his extensive outreach and volunteer activities, his extensive knowledge of financial aid and his leadership in helping to simplify the aid application process.

09.17.13 | Take a Deep Breath and Beware of the Annual U.S. News College Rankings

Posted in News by David Levy

Now that the college rankings season has resumed, it’s a good idea to take a deep breath and consider the timely advice offered by Dr. John Tierney in The Atlantic. Despite its title, “Your Annual Reminder to Ignore the U.S. News and World Report College Rankings,” the article provides both a summary of the criticism leveled each year at the U.S. News rankings as well as other resources students and families should consider when looking at prospective colleges or even one’s alma mater. Before experiencing increased anxiety about the college admission process and deciding to which colleges to apply, keep in mind Dr. Tierney’s assessment about college rankings: “(they are) about as good for you as eating potato chips and Gummy Bears for dinner. With maple syrup.”

David-Levy-EdvisorsDavid Levy is Associate Editor of the Edvisors Network. David brings 30 years of experience as Director of Financial Aid at some of the nation’s leading colleges, including the Scripps College, California Institute of Technology and Occidental College. He is respected by students, parents and financial aid professionals nationwide because of his extensive outreach and volunteer activities, his extensive knowledge of financial aid and his leadership in helping to simplify the aid application process.

09.11.13 | Converse College Slashes Tuition

Posted in News by David Levy
Converse College

Image source: Converse.edu

Converse College, a small independent women’s liberal arts college in Spartanburg, South Carolina, announced that it is cutting its tuition by 43% for the 2014–15 academic year. The one-time tuition reduction or “reset” from $29,124 in the 2013–14 academic to $16,500 in the coming academic year affects both continuing and incoming full-time undergraduate students.

While ten other colleges have made similar tuition reductions since 2012, most have done so to increase enrollments. Citing increased enrollments over the past three academic years (including a 30% increase from last year), Converse College President Elizabeth Fleming declared that the College was making this move from “a position of strength.”

The college reported hearing from families about the flattening of their incomes over the past decade, intensifying concerns about the issue of college affordability. By resetting tuition amounts to back to levels not seen in more than a decade, Converse says it is working to reassure students and their families of the value of a Converse education.

In its announcement, the college indicates that it hopes this new pricing strategy — which will not reduce existing student services or its commitment to need-based financial aid — will reduce the “sticker shock” many families encounter as they plan for the cost of a Converse education.

David-Levy-EdvisorsDavid Levy is Associate Editor of the Edvisors Network. David brings 30 years of experience as Director of Financial Aid at some of the nation’s leading colleges, including the Scripps College, California Institute of Technology and Occidental College. He is respected by students, parents and financial aid professionals nationwide because of his extensive outreach and volunteer activities, his extensive knowledge of financial aid and his leadership in helping to simplify the aid application process.

08.27.13 | Why More Parents Might be Planning to Pay for College: The Rest of the Story

Posted in News by David Levy

An annual survey commissioned by Discover Student Loans shows that the number of parents who plan to help their children pay for college is up from last year.

Parents increasingly feel that a college education is valuable and a worthwhile expense.

  • Eighty-seven percent of parents say college is “very important” to their children’s future, compared to 81 percent in 2012.
  • Eighty-one percent of parents plan to help pay for their children’s college education, an increase from 74 percent a year ago.

But, as many families are learning, there is a big difference between a parent’s willingness and their ability to pay for college expenses.

08.23.13 | Obama Proposes to Shake-up Higher Education

Posted in News by David Levy

Citing “higher education as the single most important investment students can make in their own futures,” the Obama administration offered a plan to make college more affordable for American families.

Among several proposals, the initiative would create a new ratings system for judging colleges based on the value they provide to students and taxpayers. The new ratings system would become available before the 2015 academic year and would use a combination of factors to determine value:

  • student outcomes (i.e., graduation rates and graduation earnings),
  • affordability (average tuition, scholarships, and manageable loan debt) and
  • access (the percentage of students receiving Federal Pell Grants).

Institutional eligibility for student aid funding would be linked to these ratings starting in 2018. Students who enroll at high-performing colleges would receive larger Federal Pell Grants and better interest rates on loans.

08.21.13 | Federal Government Reports More Students Receiving Financial Aid

Posted in Financial Aid, News by David Levy

The U.S. Department of Education’s National Center for Education Statistics (NCES) released new data showing that more than seventy percent of undergraduates received some type of student aid (including student loans) during the 2011-12 academic year. Overall, nearly 8 percent more students received grants and 3 percent more students received loans in 2011-12 than in 2007-08. The report, a preview of the 2011-12 National Postsecondary Student Aid Study (NPSAS) to be released later this fall, is the most comprehensive source of data about how students and their families pay for college. The survey is currently conducted every four years.

08.14.13 | On vs. Off-Campus Housing

Posted in College Life by samantha b

Girl Pondering College Housing Options

With the fall semester of college starting up in a few weeks, college students are working towards finalizing their housing situation for the upcoming year. Unfortunately, you’re running out of time to answer the looming question: “Do I want to live on campus or off campus?” To help you to answer this question, we’ve weighed some of the crucial factors to consider while making this decision.

RAs, Rules, and Security

One of the first things that comes to mind about off-campus housing is the absence of resident assistants (RAs) and other members of residential life, and thus, the absence of rules. However, there is more to the story. While RAs serve as a form of law enforcement, they can also be a friend, mentor, and organizer of community events. In addition, the absence of RAs and desk assistants can result in lower levels of security. While many colleges are located in safe areas, this could be a relevant factor if your school isn’t located in the best area. On the other hand, living in an off-campus apartment will give you your first full experience of freedom, and with that, a strong sense of responsibility. Also, the absence of RAs means that your apartment could easily become the choice hangout spot for you and your friends.

Cooking and Cleaning

Living in a college dorm is kind of like living with really bad maid service. The communal bathrooms and hallways will probably be cleaned a few times a week, and you can call a custodian if, let’s say, your toilet explodes – and yes, this did actually happen to a friend of mine, but that’s a story for another day. In addition, you will probably choose to sign up for a meal plan, thus choosing to avoid cooking at the expense of sub-par food. On the flipside, living off campus will mean doing most of your own cooking and cleaning, but chances are that your cooking will be much better than the food in your cafeteria. (more…)

08.12.13 | Top Twelve Tips for Repaying Student Loans

Posted in Repayment, Student Loans by Mark Kantrowitz
  1. Get organized. Make a list of all your federal and private student loans, the amount owed, and due dates. To find information about your federal student loans, log into the National Student Loan Data System at NSLDS.ed.gov. You can also request a free copy of your credit report by visiting annualcreditreport.com or calling 1-877-322-8228. (Read the FTC’s warning about copycat free credit report sites that aren’t really free.)
  2. Keep your student loan lender informed of any changes in your name, address, telephone number, email address or marital status.
  3. Sign up for auto-debit on your student loan. You’ll be less likely to miss a payment and, in many cases, you may get a slight interest rate reduction on your loan.
  4. (more…)

08.07.13 | Student Loan Servicer Transfer

Posted in Financial Aid, News, Repayment, Student Loans by samantha b

Federal Student Loan Servicer Transfer

Last week, the United States Department of Education released a newsletter informing students and their schools that federal student loans handled by four nonprofit servicers would soon be transferred to new servicers. Over the next two months, the majority of loans that are currently serviced by COSTEP, EDGEucation, and EdManage will be transferred to MOHELA, while those serviced by KSA Servicing will be transferred to Aspire Resources Inc.

What is a Loan Servicer?

To provide a little background, your loan servicer is assigned to you by the Department of Education after your loan has been fully disbursed. This company processes your payments and works as your customer service representative while you repay your student loans. For additional information on loan servicers, try visiting StudentAid.ed.gov.

Transfer Process

You will receive either an email or a letter in the mail prior to the transfer to inform you if your servicer will change, as well as an additional notification once the transfer is complete. These notifications will provide information on your new servicer, along with a statement that they will be servicing the loan on behalf of the the Department of Education.

You will need to contact the new servicer to activate features such as electronic billing and automatic loan payments. In addition, both MOHELA and Aspire Resources claim that students will not need to reapply for deferment or forbearance if their previous servicer already reviewed their application, but you should contact your new servicer just to make sure that this information carries over. (more…)