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.

08.23.13 | 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.
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08.07.13 | Student Loan Servicer Transfer

Posted in Financial Aid, News, Repayment, Student Loans by Student Loan Network Staff

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…)

08.05.13 | Measure Twice: The Impact on Graduation Rates of Serving Pell Grant Recipients

Posted in Financial Aid, News by David Levy

The Advisory Committee on Student Financial Assistance, an independent committee providing expertise on student aid to Congress and the Secretary of Education, has recently released a policy bulletin, “Measure Twice: The Impact on Graduation Rates of Serving Pell Grant Recipients.”

The analysis raises concerns about tying federal student aid to measures of college performance such as 6-year graduation rates and academic progress. By examining correlations between a college’s six-year graduation rate and three other factors—the percentage of first-time students who are Pell Grant recipients, average student test scores, and the amount of endowment per student, the committee found that colleges with more Federal Pell recipients and fewer financial resources tend to have lower graduation rates. “The [ACSFA] analysis finds that these three inputs are powerful determinants of 6-year graduation rates at nonprofit 4-year public and private colleges.”

As Mark Kantrowitz, Publisher of Edvisors, has noted, “College graduation rates correlate with academic performance and other risk factors, so refocusing the Pell Grant program on completion will shift eligibility from financial need to academic merit. High-risk students – such as first-generation college students, low-income students, students who are single parents, students who lack a high school diploma, students who work full-time while enrolled and students who enroll part-time – are less likely to graduate. This represents an abandonment of the basic principle of college access that every student should have an equal opportunity to pursue a college education without regard to ability to pay. Refocusing the Pell Grant program on completion will introduce a bias in favor of Bachelor’s degree programs at more selective colleges.”
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08.02.13 | The Usual Mistrust or a Preview of More Bipartisanship?

Posted in Financial Aid, News, Stafford Loan, Student Loans by David Levy

Federal Student Loan Compromise

This content was updated on 7/9 to reflect the passage of the Smarter Solutions for Students Act

With bipartisan support, on July 31, 2013, the House of Representatives passed H.R. 1911, the Smarter Solutions for Students Act (also known as the Bipartisan Student Loan Certainty Act, as amended by the Senate), by a vote of 392 to 31.

President Obama  signed the legislation into law on August 9, 2013.

Under the new law, interest rates on new loans each July 1 will be based on the last 10-year Treasury auction in the previous May. The specific interest rates will be as follows:

  • Undergraduate Students (Subsidized and Unsubsidized Federal Stafford Loans): 10-year Treasury + 2.05% with an 8.25% cap
  • Graduate and Professional School Students ( Federal Stafford Loans): 10-year Treasury + 3.6% with a 9.5% cap
  • Parents and Graduate/Professional School Students (Federal Parent and Federal Grad PLUS Loans): 10-year Treasury + 4.6% with a 10.5% cap

Based on the current 10-year Treasury rate, this will yield interest rates of 3.86%, 5.41% and 6.41%, respectively, for new loans this year, made after July 1, 2013. (more…)

07.01.13 | 3 Things You Should Know About the Stafford Loan Interest Rate Increase

Posted in News, Stafford Loan, Student Loans by Student Loan Network Staff

As you may have heard, the interest rate on subsidized Stafford loans just increased from 3.4% to 6.8%, effective July 1, 2013. Congress wanted to keep rates down, but the deadline hit before all parties could agree on a course of action. Here’s what you need to know about these changes.

1. It only affects new loans

I’ve received a lot of questions lately about the impact of this rate increase. It seems like graduates everywhere are concerned that their student loan payments will soon be skyrocketing. The good news is, it’s not retroactive — meaning it won’t affect any subsidized loans originated before July 1, 2013. So for borrowers who are currently repaying older loans, don’t worry, you’re in the clear.

However, the new rate will impact loans originated after July 1, 2013. This means any new subsidized loans will have the 6.8% rate. Despite this rate hike, subsidized loans are still a better deal for borrowers because the interest subsidy remains intact.
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06.26.13 | Will Student Loan Interest Rates Double on July 1?

Posted in Financial Aid, News, Stafford Loan by Mark Kantrowitz

If Congress does not act, interest rates on new subsidized Stafford loans will double from 3.4% to 6.8% on July 1, 2013. Previously originated subsidized Stafford loans and all other education loans will not be affected.

Doubling of the interest rates certainly sounds dramatic, but the actual impact on students will be more muted.

Each year, less than a third of undergraduate students receive federal subsidized Stafford loans. The average subsidized Stafford loan is $3,357, based on data from the 2007-08 National Postsecondary Student Aid Study (NPSAS), with average subsidized Stafford loan debt at graduation of $9,008 ($11,329 for Bachelor’s degree recipients). Only 3% of subsidized Stafford loan borrowers graduate with debt equal to the aggregate limit of $23,000.

Assuming a 10-year repayment term, doubling of the interest rate on $3,357 in debt increases the monthly loan payment by less than $7. On $9,008 in debt, the increase is less than $18; on $11,329 the increase is less than $24; and on $23,000 the increase is less than $48.

Doubling the interest rate does not double the monthly payment. Most of the monthly payment goes to principal, not interest. For example, on a 10-year term, increasing the interest rate from 3.4% to 6.8% increases the monthly payment by about one sixth (16.9%).

So while the interest rate increase will increase borrowing costs, it is not a major disaster.

Focusing on the interest rates, on the other hand, is a distraction from the real problem (more…)

06.14.13 | 5 Solutions to the Subsidized Student Loan Debate

Posted in Financial Aid, News, Stafford Loan, Student Loans by Student Loan Network Staff

Over the past month, you may have heard about the impending subsidized student loan interest rate increase, as politicians frantically work to come to a consensus before July 1. Right now, subsidized student loans interest rates currently stand at 3.4%, but will increase to 6.8% unless a new bill is passed by July 1.

With this decision having a major impact on your future, it is important to stay up to date with the issue and the suggested solutions.

1. Default Solution: Increase to 6.8%

As stated above, if politicians fail to come to an agreement, the interest rate for subsidized loans will increase to 6.8%.

2. Democratic Solution: Student Loan Affordability Act

Most Democrats in the House of Representatives argued for a two-year extension on the 3.4% interest rate, which would maintain the current interest rate and bring the question to Congress again in two years. However, this bill was rejected in the Senate on earlier this month.

3. Senator Elizabeth Warren’s Solution: Student Loan Fairness Act

Senator Warren proposed a bill which would dramatically cut the interest rate on subsidized loans. Citing the fact that the student loan debt now exceeds $1 trillion, Warren proposed cutting the interest rate to 0.75%, which is the same rate that banks are able to get from the government. For more information, please see our recent article on the details of Warren’s bill.
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06.11.13 | Impacts of the Potential Stafford Loan Rate Increase

Posted in Financial Aid, News, Stafford Loan, Student Loans by Student Loan Network Staff

Student Loans in the MediaWith the recent legislation involving the subsidized student loan interest rate, many have begun to express concern towards the fact that if Congress is not able to reach an agreement by July 1, subsidized Stafford loan interest rates will automatically increase from 3.4% to 6.8%.  In the process, many news sources have erroneously been reporting that this increased interest rate would yield an additional $1,000 in annual debt for the average borrower. However, this figure is much lower in reality.

Using the loan repayment calculator from Finaid.org, we can begin to calculate more-accurate rates (though still estimates). Assuming a student borrows $23,000 over the course of four years—the maximum amount that can be taken out for undergraduate studies—the annual increase will be less than half of what has been reported.
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