Showing posts with label schools in america. Show all posts
Showing posts with label schools in america. Show all posts

Tuesday, September 1, 2009

Student Loans: How Much Do I Really Owe Each Month?


The more you borrowed, the less able you are to guess what your payments will be. Click to enlarge.(Sallie Mae/Gallup)

By Caitlin Kenney

That Sallie Mae/Gallup poll about student loans is still stirring up dust, with people arguing about whether it accurately reflects how much debt people are taking on for school. The survey found that fewer families borrowed money to send someone to college in 2008-2009 than the year before. I'm still thinking about it too and one section that particularly stands out to me is where they asked students to estimate their monthly loan payment once they graduate. The students were off -- by a lot.

Twenty-three percent of students wouldn't venture a guess at all, which I personally chalk up to fear. Can you blame them for not wanting to put a number to their future debt-filled lives?

The more debt you're staring at, the less likely you are to have a handle on the monthly load. Look at the chart above. Estimates from students who expected to borrow $10,000 or less were pretty close, but as their loans grew, the estimates all over the map. Sallie Mae says the range of estimates was $2 to $80,000 per month (those are the optimists who think they're going to pay it all back at once).

When I graduated, I remember being hounded to consolidate my loans. It was a smart move in the sense that it locked in a good interest rate. On the down side, it sent me straight into repayment with no grace period. I chose a graduated payment option, meaning I agreed to pay more as I made more. For the first three years, I paid a very minimal amount that barely covered interest. Last year, when I was making more but still feeling broke, my payment doubled. I really noticed the increase. Now, after nearly year of paying the new amount, it's starting to seem normal -- that is, until I look at my Sallie Mae statement and realize that at this rate it'll take me until 2020 to pay off my loans!

Source.

Articles is highly informative for best student loan consolidation searches, student loan consolidation interest rates, student loans, consolidating private student loans, student loan consolidation comparisons and even student loan debt consolidation.

Wednesday, August 26, 2009

New Rules For Ditching Student Loans

Some states cut back, but feds expand benefits for those in public service.

Hoping some of your student loan debt will be wiped away because you've chosen a selfless career? That may depend on what state you're from, what type of loan you have, and, of course, what profession you're in.

Most states have quasi-governmental agencies that monitor the status of federally subsidized student loans and administer loan forgiveness programs for those who follow certain career paths. Many of these agencies temporarily foot the bill for loan forgiveness before being reimbursed by the federal government. But some have been using excess revenues and state government funds to create their own loan forgiveness benefits.

Now, with loan markets in turmoil and states facing record deficits, some state loan forgiveness initiatives are on shaky ground or have been cast aside altogether.

The Pennsylvania Higher Education Assistance Agency, for example, recently cut its forgiveness programs for nurses and members of the military. PHEAA had been using money it made from activities like buying and selling student loans on the secondary market to help students wipe away loan debt. With that line of business (among others) no longer profitable, something had to give. "We've had to modify the programs we offer simply because we don't have the funds coming in that we did in the past," says Keith New, the agency's spokesman.

Others states that have cut loan forgiveness programs include Kentucky and New Hampshire.

So what's a current college student to do? First off, check what type of federal loan you've received. The most common type of loan comes from the Federal Family Education Loan Program (FFELP), followed by loans from the William D. Ford Federal Direct Loan Program.

While the loan limits are similar, FFELP loans go through a second party like a bank, while Direct Loans are taken directly from the government. If you have a FFELP loan, you'll want to consider consolidating it into the Direct Loan program, which could allow you to qualify for a wider variety of federal loan forgiveness programs. That option has been available for more than a decade. (New since August 2008 is the ability to transfer a previously consolidated group of FFELP loans into a single Direct Loan.)

You won't incur any fees for consolidating into a Direct Loan, says Sam Wilson, vice president for customer assistance at Texas Guaranteed Student Loan Corp., the state agency that oversees student loans in Texas. That's true regardless of whether you qualify for a particular forgiveness program or not. But in general, you shouldn't be shifting your loans around unless you have a good reason. "If you are seeking a benefit that is only available in the Direct Loan program and not available in the FFELP program, then you have the option to consolidate your loans in Direct in order to obtain that benefit," Wilson says.

Here's a run-down of the major types of loan forgiveness available:

The Military
The big news for members of the armed forces is that they can qualify for a freeze on interest accrual on loans made on or after Oct. 1, 2008. The benefit is available for up to five years of service, and is only for active-duty military serving "during war, mobilization or national emergency." The catch with this one is that you have to have a Direct Loan in order to qualify.

Also passed into law this past autumn was a cap on the interest rate charged to student loan-holders who become active-duty members of the military after they've taken out a loan.

For years the feds have capped interest rates for new service personnel who owed money on loans for purchases like automobiles. Now the rate cap of 6% (including fees) also applies to FFELP or Federal Direct loans current members of the military took before Aug. 18, 2008.

Another new loan forgiveness perk for members of the military only covers those who have taken out Federal Perkins loans--need-based loans funded by the U.S. Department of Education and disbursed by individual colleges and universities. Historically, military personnel with Perkins loans could get 50% of their student debt forgiven after five years of service. For those who have completed a year of service by this August, they can now qualify for 100% forgiveness of their Perkins loans after five years in uniform.

Teachers
New for those going into teaching is that the loan forgiveness provisions for both FFELP and Federal Direct loans now extend to teachers who work part-time at more than one school district or work for educational service agencies. This change should be welcomed by educators in rural areas, as they are more likely to be employed by multi-district or state-run school facilities.

The important thing to know about the government's loan forgiveness for teachers is that it only covers those working in public school systems that have been officially recognized as serving economically depressed areas (which means they're classified as "Title I" districts under the federal No Child Left Behind Act).
The subject you teach may also affect how much loan forgiveness you receive. Most eligible teachers see $5,000 chopped off their student debt after five years in the classroom. But for special-education teachers, or teachers instructing math or science at the high-school level, the forgiveness amount is much higher--$17,500 after five years. Also, teachers with Perkins loans are eligible for 100% forgiveness after five years.

Public Service
Since 2007, the government has encouraged grads to go into certain professions by offering to cancel the debt owed by workers in fields like emergency health, law enforcement, library administration, public day care and many more.

The rub? You need to be employed in public service and make all your monthly payments for 10 years before your remaining debt is forgiven. And, like other forgiveness options we've highlighted, this one is only for holders of Federal Direct loans.

The good news for FFELP borrowers is that they too qualify for a new forgiveness program for grads who go into professions for which there is a "national need." As far as the list of applicable careers goes, there's a lot of overlap between this initiative and the 2007 one, but there are some unlikely inclusions, like dentistry.

Here's the bad news about the new program, slated to start running from Aug. 14: Congress created it but hasn't appropriated any funding for it. So all you aspiring dentists out there shouldn't assume you'll be able to rely on this one, which reduces debt by $2,000 a year up to $10,000.

Source.

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Tuesday, August 25, 2009

Student Loans: A College Student's Key to Financial Success

Student Debt
Financial success may come in different forms. Financial success does not only mean that you are financially independent, or you have been able to make thousands of dollars off the stock market. To be financially successful, may mean making sure by the time you graduate from college, you are not in debt or worse off than you started.

As essential as it is to secure a part-time job to support your personal wants, you must be aware of the “hidden regressors” that come uninvited. Your first check in the mail, brings you to some degree, some feeling of accomplishment. Your adult life is just beginning, where you see the value of getting paid for work done. It goes without say that it’s at that time where you start to take on additional responsibilities. The importance of communication and being able to be reached wherever and whenever, prompts you to procure a wireless. The apparent need of getting to and from your job incurs the cost of driving insurance, gas and all other related transportation expenses. Indubitably, acquiring a job doesn’t always mean money inflow; it creates a path for money outflow. One needs to be prepared for the unexpected and the ability to be financially successful.

Credit cards: a friend or a foe? When the due date for bills draw nigh, and the checks are not coming in as often as you would have expected, many students feel pressured to use credit cards as a means of a short-term loan. This method where you plan on immediate repayment is not harmful; however, many students misconstrue that credit cards are an invention to make college life luxurious and comfortable. Wrong!

Saving is sometimes barely doable for some students, since they end up owing money to all these credit card companies. Our system is designed so that without good credit, one is limited from doing a lot of things. It is thus sagacious if we use our credit cards wisely. Use credit cards for things you know will definitely bring you a return. For example, use your credit cards to buy gas to take you to work. When you decide to use your credit cards to buy all the possible clothes on sale; and the purchase is backed by the conviction of repayment after you graduate, put the credit card back in your book bag.

Credit cards can either make you or unmake you; this is because if you use them wisely, once you graduate, it will be easier to get a loan for a new car or a lower security deposit on that new apartment. For the college students that work, there is always a possibility of saving your money, even if you can’t save a lot; you can still save a little. Try to research online, for banks that offer high interest rates on their savings account. The proliferation of online savings accounts has undeniably increased the interest rates, and thus the potential to earn more on your savings.

To be financially successful means to be free from debt, in the college perspective it is to try to avoid a post-graduation debt. The “broke college student” has the ability to be financially successful, if means are taking to save more and use credit wisely.

However, you would be forgiven for wondering why there has been no mention of the enormous impact that college loans have on a post graduate's ability to live in this 'debt free utopia'. Student loans are the biggest reason for post graduate debt. Sure you can take steps to stem the use of credit cards but the fact is that you will have had to borrow to finance your education.

Source:

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Debt Consolidation: The Pros and Cons of Debt Consolidation Mortgage Loans

Debt Consolidation
Debt consolidation mortgage loans can help you lower your interest rates and monthly payments. With reduced rates, you can also pay off your debt sooner. However, reducing your equity could subject you to private mortgage rates. You may also end up spending more on interest payments by delaying payments.

Saving With Mortgage Interest Rates

Mortgage interest rates are much lower than credit card or unsecured loan rates. Consolidating your debt with a refinanced mortgage or home equity will reduce your payments simply by having a lower rate. By paying the same monthly payments, you can pay off your debt rapidly.

Your interest is also tax deductible with a mortgage or home equity loan, where your credit card interest isn’t. Student loan interest is also tax deductible and shouldn’t be consolidated for a higher rate.

Reducing Your Payments

Consolidating with a loan also allows you to reduce your payments by picking longer terms. So if your income is reduced or you have other financial obligations, lengthening your payments can give you some breathing room in your budget.

Paying More In Fees And Interest

The cost of a mortgage can be more than what you are paying in interest charges if you have a small amount of debt. To refinance a mortgage, origination fees can add up to thousands. Other types of home equity loans can cost hundreds or nothing to open. You may also have to pay private mortgage insurance premiums if don’t leave 20% of your equity in tack.

Delaying payments can also add up interest payments, even with a lower rate. For example, a loan amount of $10,000 will cost $11,587.10 in interest for a 30 year loan at 6%. That same amount will cost $5,896.71 for a 5 year loan at 20%, which is what most credit card payment plans are like.

Deciding To Pay Down Debt

Consolidating your high interest credit can help pay off your debt by providing structured payments. You can also lower your interest rates, making repayment easier. However, be aware of the costs and shop around for low rates and fees. To get the most out of a consolidated loan, choose short terms to avoid making large interest payments.

Source:

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Saturday, July 11, 2009

Paying for college: Stimulus funds allocated to help students

Many college students on Guam will have an easier time paying for college this coming school year, thanks to stimulus funds from the American Recovery and Reinvestment Act of 2009.
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An additional $4 million has been allocated to Guam for the Pell Grant program, which provides direct aid for undergraduate students who demonstrate financial need.

The funds will be used for a $500 increase in Pell Grant funding -- for students who qualify for the full amount -- during the 2009-2010 academic school year. Students who receive the full Pell grant will have $5,350 to pay for college next school year.

This covers the total cost of tuition at UOG for a full-time, undergraduate resident for the year, even with the recent tuition increase, said Christina Manglona, program coordinator at the University of Guam financial aid office. And money will be left over for books and supplies.

President Obama has further proposed to increase Pell Grant funds for students by another $200 in his fiscal 2010 budget, by recommending a maximum Pell Grant award of $5,550 for the 2010-2011 academic year.

"I think that's really great. Students don't have to rely on pulling out another loan," said UOG senior and Financial Aid Office work-study student Doris Techaira about the $500 increase.

"I'm glad of the increase," said Diana Elayda, 20, who transferred recently to UOG from Saipan. "It will help. I'm trying to avoid loans, I don't want to have a bunch of loans coming at me when I graduate."

Elayda, who is a double major in criminal justice and public administration, found funds for college through federal grants, work-study, the university's Trio program and the G.I. Bill stipend she receives as a reservist for the U.S. Army.
Tax credit

Students and their families on Guam also can benefit from the $2,500 American Opportunity Tax Credit, as Guam's tax code mirrors the federal tax code, said Department of Revenue and Taxation Director Art Ilagan.

The credit is partially refundable and can be used for college tuition funds paid for the 2009 and 2010 tax years.


The credit was created by the ARRA stimulus act, and Obama has proposed in his 2010 budget to make the tax credit permanent.

Manglona said that 75 percent of all undergraduates at the University of Guam receive either partial or full Pell Grants to attend school, and 90 percent of all students at UOG receive some form of financial aid, in the form of scholarships, loans and aid programs from the local and federal governments.
Making it easier

Obama also has recently announced that a simpler and more user-friendly Free Application for Federal Student Aid, or FAFSA, is now in place, with changes that already have been made and further changes that will be phased in over the next few months, according to a news release from the U.S. Department of Education.

The FAFSA Web site now provides instant Pell Grant estimates and student loan eligibility, so students no longer have to wait for weeks to find out about funds for college. During the summer, questions will be consolidated on the online application to make the process easier.

The President also will be introducing legislation to Congress to eliminate 26 financial questions on the FAFSA, which have little impact on the aid award and are difficult for students to complete.

The aim of streamlining the FAFSA is to boost college enrollment throughout the country.

"There are few things as fundamental to the American dream or as essential for America's success as a good education," said Obama in remarks made in April. "America cannot lead in the 21st century unless we have the best educated, most competitive workforce in the world. And that's the kind of workforce -- and the kind of citizenry -- to which we should be committed."


Source:

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Friday, July 10, 2009

What Colleges Can Cut


Colleges are cutting costs, in big ways (layoffs, hiring freezes) and small (window-washing and free HBO for students).

We asked experts in higher-education finance, college students and recent graduates to suggest ways for colleges to economize.

* Jane Wellman, Delta Project on Postsecondary Costs
* Cindy Hong, recent Princeton graduate
* Hannah Howard, recent Columbia graduate
* Ronald G. Ehrenberg, economist
* Molly Corbett Broad, American Council on Education
* Victoria Boggiano, Dartmouth College senior
* Robert Zemsky, The Learning Alliance
* Edward Mitchell, recent Morehouse College graduate
* Justin Guiffré, George Washington University student


Cut Bureaucratic Bloat and Duplication
Jane Wellman

Jane Wellman is the executive director of the Delta Project on Postsecondary Costs, a nonprofit research organization.

Can colleges cut their costs, without harming quality or reducing access to students?

Some can, absolutely. Particularly among the national elite institutions, the last decade has seen increases in spending from an arms race for prestige, not for advancing student success. While these institutions are not characteristic of most colleges and universities, they set the bar for spending elsewhere in higher education and contribute to a growing public belief that colleges have misplaced priorities for spending.

The majority of public institutions have not been increasing spending in the last decade. For them, tuition has gone up in large part because of eroding public funding. That doesn’t mean they are off the hook from having to cut costs and improve efficiency and effectiveness.


We Can Pay for Our Own Laundry
Cindy Hong

Cindy Hong is a 2009 graduate of Princeton University, where she majored in public and international affairs. She was a columnist for The Daily Princetonian.

In the midst of the recession, universities need to cut down on superfluous student services while maintaining academic needs. During the “bubble” years, super-wealthy universities lured students in with their large endowments. The idea was that these schools offered the best financial aid, the best academic resources and the best campus life. In addition to fantastic libraries, no-loan grants and summer funding for unpaid internships, we also enjoy small perks like free laundry, free food at college sponsored “study breaks” and free concerts.

But in recent months, even universities with endowments the size of small countries are tightening their budgets. Unsurprisingly, the first things to go are often big ticket items: new academic buildings, labs and courses. Princeton, my alma mater, has pleaded poverty as a reason to not extend library hours and to cut the number of courses offered next semester.


I Didn’t See a Lot of Excess
Hannah Howard

Hannah Howard is a 2009 graduate of Columbia College and writes a column, “Served,” for Serious Eats.

I graduated from Columbia College in May. Now, I have an Ivy League degree in creative writing and anthropology, and my parents are about $200,000 poorer.

I loved attending Columbia for the same reasons that made the school my first choice four years ago. New York City is the love of my life. I met smart, remarkable people, a few of whom became great friends. I spent a lot of time in tiny classes arguing about Foucault with freakishly brilliant professors and classmates until my brain hurt.

From my perspective, students are the last spending priority at Columbia. In student housing, where I lived for four years, the water in the showers was either scorching or glacial but rarely tolerable. Infestations might be part of New York’s charm, but our cockroach and mice roommates were amazingly abundant. I sometimes awoke at 4 a.m. to find my roommate chasing mice. He was more successful than our traps at catching the little guys.


Private Schools Have to Set an Example
Ronald G. Ehrenberg

Ronald G. Ehrenberg is the Irving M. Ives Professor of Industrial and Labor Relations and Economics at Cornell University and the director of the Cornell Higher Education Research Institute. He is the author of “Tuition Rising: Why College Costs So Much” and the editor of “What’s Happening to Public Higher Education.”

The last three decades have seen an increase in the dispersion of spending across academic institutions. Spending per student has grown at private institutions relative to public ones and, within the private sector, at well-endowed institutions relative to less well-endowed ones. Thus, the ability of colleges and universities to cut their expenditures without doing serious damage to their educational missions will vary widely across institutions.

Most public higher education institutions have been cutting costs for years. Their tuition increases have been largely because of efforts to at least partially make up for the failure of their state support per student to keep up with inflation.

Personnel costs make up the lion’s share of their budgets and they most surely need to look closely at their administrative and other non-instructional staffing levels. Forcing them to make substantial cuts on the academic side will invariably mean a substitution of cheaper part-time and full-time non-tenure-track faculty for full-time tenured and tenure-track faculty. Research suggests that institutions that make such substitutions see a decline in the graduation rates of their students.


Colleges Can’t Do It Alone
Molly Corbett Broad

Molly Corbett Broad is the president of the American Council on Education, the major coordinating body for higher education in the United States. She is former president of the University of North Carolina.

While it is difficult to make broad recommendations about how a college or university should weather this recession, one thing remains clear: bold leadership is required. Each president is guided by the unique mission of their institution, its financial resources and long-term strategic plan.

But while their goals are the same — protecting the academic core and helping students and families weather tough times — colleges are taking different tacks. Arizona State University has fundamentally streamlined its administrative structure. Hundreds of other institutions — as varied as Washington State University, Beloit College, Harvard University, and the University of California at Berkeley — have implemented layoffs, furloughs, wage reductions, program eliminations, and the delay of major construction projects.


Deans and the Dining Hall Can Go
Victoria Boggiano

Victoria Boggiano is a senior at Dartmouth College. She is the day managing editor at the school’s student newspaper, The Dartmouth.

Colleges and universities should not sacrifice the quality of academics when trying to cut costs, nor should money-saving tactics have a negative impact on students’ day-to-day ability to perform well.

Administrators everywhere are in a bind: revenue coming in is decreasing, while costs are staying the same. They tend to look at the situation a certain way — areas that are the first to get minimized frequently include searches for new faculty and maintenance of 24-hour cafeterias. This is a short-sighted tactic. To save money, schools must instead focus their efforts on cutting extraneous measures that have little impact on the learning process or quality of life.

First, schools often spend thousands of dollars on musical performers or artists. Why? Student bodies are replete with talented young adults who would probably jump at the chance to showcase their abilities on stage or in the student union. There is no need to pay hundreds of thousands of dollars when that money could go toward hiring two new paleontology professors or buying more computers for the math department.


We Need a Three-Year Degree
Robert Zemsky

Robert Zemsky is the chairman of The Learning Alliance at the University of Pennsylvania.

For 30 years American colleges and universities have pursued the chimera of lower costs through increased efficiencies — pursuing a destination that is ever promised but never reached.

It is not that colleges and universities do not know how to cut costs — they do. As every president and chief financial officer knows, one reduces expenditures by first cutting current expense — events, travel, books, journals, even a sport or two — and then by reducing payroll through delayed hires, postponed salary increases, furloughs, layoffs, even salary roll-backs.


Go Green
Edward Mitchell

Edward Mitchell graduated from Morehouse College in 2009 with a B.A. in political science and will attend Georgetown University Law Center in the fall. He was editor in chief of The Maroon Tiger, the student news organization.

Although schools should not hesitate to do what is needed, they must avoid any budget cuts that will make bad situations worse. Avoid cuts that will negatively affect quality of education or scare off prospective students. Cutting full-time faculty must be a last resort, as should any reduction in scholarship funding.

Short of that, though, our tough times call for tough decisions. Smart budget cuts can reduce costs of attendance and compensate for revenue lost in the recent worldwide economic downturn. Start with simple things — reduce campus energy consumption, limit travel, and lower student organizational expenditures.


Forget the Light Show
Justin Guiffré

Justin Guiffré is the opinions editor of The GW Hatchet at The George Washington University.

A college degree is an unusual purchase. Our perceptions are tied to the current quality of the institution. A 1968 Corvette will gain or lose value regardless of how Chevrolet is performing. The same is not true with colleges. In 2006, the University of Chicago jumped from No. 15 to No. 9 in the U.S. News & World Report rankings. The value of an old Corvette isn’t tied to the value of a new Corvette, while the value of a 2005 University of Chicago degree has grown in only one year to that of a top ten school.

There’s a growing consensus that these rankings are not perfect. When you purchase a college degree there is an expectation that the institution will strive to at least maintain, if not increase, the value of that degree. This means that a college should avoid cost cutting that affects its reputation, like its research staff, and academic performance, such as class size.


Source:

Articles may highly informative for best student loan consolidation searches, student loan consolidation interest rates, student loans, consolidating private student loans, student loan consolidation comparisons and even student loan debt consolidation.

Thursday, July 9, 2009

What to Do You Do When Debt Consolidation Goes Wrong

Debt consolidation loans are available for almost anyone wanting to roll all their debts together into one loan. The benefits include paying off other outstanding debts, reducing your interest rate charges, and wiping clean any overdue accounts you might have had.

It’s relatively easy for almost anyone to apply for a debt consolidation loan and in recent times, the benefits have been advertised widely by many lending companies and brokers.

Lending money is a lucrative business for banks, lenders, and brokers alike. When any business advertises products available, they focus on the benefits and the features. They want the products to sound good and they want your business.

But what about the potential for negative side effects?

Debt consolidation loans aren’t always the quick-fix solution that people might believe.

The biggest problem consumers find after they’ve consolidated their debts and begun payments on their new consolidation loan is that they haven’t considered the reasons they got into such a financial mess in the first place.

Bad spending habits are the main cause of high consumer debt levels in America today. Many people live beyond their means and spend much more money than they earn each week.

This shortfall between income and expenses is usually covered by the availability of quick, easy credit. Advertising sales pitches are so slick and so convincing that it’s easy to fall into the debt cycle without knowing you’ve done it.

Before you know it, you could have several credit cards, personal loans, car loans, or student loans. Easy credit is so tempting and so readily available, the only time many people realize they’re in over their heads is when payments are due and they can’t access any more credit.

Debt consolidation loans then become a major focus for people in this situation because of the promise of being able to get rid of all those outstanding debts and the relief of dealing with just one easy repayment each month.

Unfortunately, without first fixing the bad spending habits that got you into trouble in the first place means it won’t be long before another surprise bill or repair expense crops up.

People are creatures of habit. Faced with the prospect of being unable to pay the new bill and completely forgetting about the new debt consolidation loan that was once their financial savior, many people will simply apply for a new credit card and begin the vicious credit cycle all over again.

If you plan to apply for a debt consolidation loan to fix all your credit problems, be very aware that you’ll also need to fix your own bad spending habits in order to benefit from it.

Before leaping into a debt consolidation loan, take some time to work through a realistic budget and be sure you’ll be able to afford your new payments as well as put a little aside to help with unexpected bills. This way, you’ll avoid falling into the same credit trap again in the future!


Source:

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Wednesday, July 8, 2009

New Plan Ties Reduced College Loan Payments to Income

For the first time in years, there is good news for college students who borrow to pay for their education.

Starting Wednesday, the federal Education Department will begin offering a repayment plan that lets graduates reduce their loan payments, based on their income.

“We know today’s borrowers are concerned about their ability to repay student loans in the current economic environment,” Arne Duncan, the education secretary, said in a statement. “This new plan addresses the issue head-on by giving them the option of a reduced monthly payment tied to their annual income.”

Also on Wednesday, the interest rate on new federal Stafford loans, the most widely used federally guaranteed student loan, will drop to 5.6 percent, from 6 percent. By 2012, the rate will fall to 3.4 percent, under a schedule mandated by Congress.

The changes come as student borrowers face a difficult job environment and after many families have found it harder or impossible to use home equity loans to pay for college. Since the credit crisis, it has also become more difficult and more costly to obtain private student loans, which are not guaranteed by the government and which typically carry variable interest rates determined by borrowers’ credit histories.

“These benefits are guaranteed, no matter what happens in our economy, and are kicking in at exactly the right time for millions of Americans,” said Representative George Miller, Democrat of California and chairman of the House education committee.

While the interest rate cut applies to new loans, the new repayment option is available to borrowers who took out federal loans or who used a federal consolidation loan to combine their higher-education debts.

The extended payment program, called “income-based repayment,” limits what borrowers have to pay to 15 percent of the difference between their gross income and 150 percent of federal poverty guidelines. After borrowers make payments on loans for 25 years, the balance is forgiven. (The Education Department already offered an “income-contingent” repayment plan, which was similar, but less generous.)

“These programs are such an enormous victory,” said Christine Lindstrom, director of the higher-education access program at U.S. PIRG, the consumer advocacy group. “It enables all borrowers to be able to face their life circumstances and know there is some flexibility and responsiveness based on what life throws their way.”

To help borrowers understand the program, the Education Department has set up a Web site with a calculator to determine monthly payments based on income and family size.

The extended payment plan is intended to work with another program that forgives federal loans taken out by people working in public interest jobs. If borrowers make payments under the income-based plan, the balance on their loans is forgiven after 10 years.

There is a catch, though. To participate in the program, borrowers must shift their loans into the federal Direct Loan program, in which the government extends credit directly. The forgiveness is not available for loans made by banks or other loan companies, like Citigroup or Sallie Mae.

The definition of public service under the forgiveness program is broad. Jobs in government, public schools or colleges, nonprofit organizations, public interest law, early childhood education, public health or public libraries all could qualify, according to the Education Department.

The forgiveness benefit could lead to even greater interest in public service jobs, which are already drawing more applicants. For example, in the 2008-9 academic year, more people than ever applied to Teach for America — 40 percent more than the year before, said Kerci Marcello Stroud, a spokeswoman.

The earliest anyone working in public service could see any benefit from the forgiveness program is 2017, because the program began in 2007. So someone who started teaching in 2005, for example, would not get credit toward the 10-year period for working in 2005 and 2006.

Due to the length of the program, people interested in participating will have to be careful to document their public interest employment and to make sure they have the right kind of loans. Neither of the new programs help with repayment of private loans made by banks or other lenders.


Source:

Articles may highly informative for best student loan consolidation searches, student loan consolidation interest rates, student loans, consolidating private student loans, student loan consolidation comparisons and even student loan debt consolidation.

Tuesday, July 7, 2009

Government Buys Student Loan: What to Do?


In addition to receiving housing information and their class schedules, students heading back to campus this fall should look out for one more crucial piece of mail this summer.

Beginning July 1, the majority of families who hold federal Stafford, Grad PLUS or Parent PLUS loans will receive notices that their loans have been bought by the Department of Education, says Sam Nelson, director of client relations for the Illinois Student Assistance Commission.

"To help lenders stay in the student loan market, the federal government is buying on the secondary market and servicing the loans themselves," says Nelson. "Six out of every 10 student loan dollars are now made with federal money instead of with private capital."

Although the change is no cause for alarm, students should be aware that the switch in loan servicers could affect certain borrower incentives and will affect where payments should be sent. Here's what to do if the federal government scoops up your student loan.

Consider your incentives
"Having your student loan purchased by the Department of Education doesn't really change much for the student borrower," says Jason Delisle, director of the federal education budget project at the New America Foundation, a think tank in Washington, D.C. "The terms and conditions of the loan are already spelled out by the federal government. They won't change at all. The only thing that changes is who's servicing the loan."

Delisle adds that while interest rates, loan limits, fees, repayment conditions and default options will stay the same for new loans and old ones currently in repayment, borrowers who took out student loans before the Department of Education started purchasing them in 2007 could lose certain borrower incentives.

"Before 2007, when the Department of Education started buying loans under ECASLA (Ensuring Continued Access to Student Loans Act), lenders offered certain discounts. For example, you might get a fee waiver before you start payments, or you might get 2 percent off of your remaining principal after making two years of consecutive payments," says Mark Kantrowitz, publisher of the financial aid Web site Finaid.org. "When ECASLA took effect, lenders who wanted their loans to be purchased by the Department of Education had to stop offering almost all of those incentives."

Most large student lenders -- including Wachovia, JPMorgan Chase, KeyBank, Edamerica and the National Education Loan Network, or Nelnet -- switched to the ECASLA program and dropped all borrower incentives except one: ECASLA gives borrowers who set up automatic payments on their accounts a 0.25 percent interest rate reduction.

A few lenders, such as Wells Fargo, service loans outside the ECASLA program and still offer a broad range of incentives. Although students who took out loans before 2007 with lenders who switched to ECASLA have already lost their incentives, those who have stuck with non-ECASLA lenders could lose their current incentives if they consolidate non-ECASLA loans with those sold to the Department of Education.

"That means that if you received any front-end discounts, like a cash principal reduction after you graduated, you could get a letter saying, 'Please pay that back,'" says Kantrowitz. "It may be worthwhile to keep a loan out of consolidation just to keep the discounts."

To figure out if consolidation will mean losing lucrative benefits, Kantrowitz recommends that students considering consolidation ask their lenders about benefit loss before combining loans.

Stay in contact
On top of consolidation woes, a change in loan servicers could also affect where and when students should send in payments.

"The biggest thing borrowers need to know if their loan is sold is that they may need to send payments to a different address and to notify the new servicer if they move," says Nelson. "One of the easiest ways that students end up in default is that the mail never gets to them because the student never tells them where they're moving. If a borrower wants to be proactive, stay on top of that issue."

Sending payments to a different address is no big deal for borrowers whose loans were all bought by the Department of Education. However, borrowers who hold multiple loans, some dating prior to 2007, may find that some of their loans have been bought under ECASLA and others haven't. In that case, students may need to send payments to two different loan-servicing agencies.

To ensure that they're on top of payments, students should contact their lenders as soon as possible to verify where to send payments and to which servicers, especially if multiple lenders are involved, says Frank Gittens, CEO and co-founder of Advance Your Institution, a Goodyear, Ariz., company that provides liquidity for school-sponsored student loans.

"If I have a Bank of America loan from last year and a Citibank from this year and both entities are selling to the Department (of Education), I would call and ask, 'How is that going to get reconciled when it comes to paying back my loans?'" says Gittens. "Are they going to combine payments? If not, I'd think about consolidating those loans. When you graduate, you're not going to want several different bills to pay."

Students can bypass the change-of-address problem and save a little on interest by enrolling in an automatic payment system that directly withdraws from a bank account each month. Students and parents can also pay loans online at www.dl.ed.gov.


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Really can't pay? Pick up the phone.

They're the punishing conditions that come with a credit card: interest rates, late fees, monthly minimums. As much as you grumble, there's little you can do.

Enter the recession, and a shift in the rules.

With delinquencies and charge-offs on the rise, credit card companies are quietly negotiating terms with people in need of relief. The hope is to recover what money they can, rather than letting the debt go entirely uncollected.

“The thinking used to be that you needed to be late with a few payments for a modification,” said Bill Hardekopf, CEO of LowCards.com. “But the mentality of issuers has changed dramatically. They want to do everything they can to collect this money.”

This year, Bank of America expects to issue 1.2 million credit card modifications, up 20 percent from 2008. Chase says it recently expanded eligibility for its repayment program to those in earlier stages of delinquency.

That's not to say just anyone can rewrite the terms of a card agreement; adjustments are still reserved for those in true financial distress. And in general, card companies are more likely raising rates and fees, and lowering limits.

But if you're having trouble paying the bills, it could be worth calling your credit card company to request more manageable terms.

The candidates

Credit card companies are tight-lipped about who qualifies for adjustments, but experts say lenders are easing up on eligibility these days.

“If you demonstrate that you only have so much left over after covering your expenses, that gives you some ammunition to present a case,” said Ben Woolsey, director of consumer research at CreditCards.com.

Generally, you want to show you can't keep up with payments for much longer under your current circumstances.

Among the factors a lender will consider are your income, your payment history, the size of your balance and any other debts and assets. A recent job loss or other financial emergency could be another reason for requesting leniency.

You don't necessarily have to be behind on your bills.

The options

Among the most common ways a credit card company could ease your debt are forbearance, lower interest rates and debt management plans.

Forbearance is when a lender gives a temporary reprieve on payments. Late fees are generally waived for the period, meaning you won't get a delinquency mark on your credit report. Interest charges typically continue racking up.

The time out could help you get back on your feet, but don't expect it to last more than a couple of months, said John Ulzheimer, the president of consumer education for Credit.com.

Forbearance on credit cards typically isn't reported to credit bureaus, although forbearance on student loans usually is, Ulzheimer said.

Another pain-free way to get some relief is negotiating a lower interest rate. Or you might simply ask that a recent hike not be enacted.

A more serious option your credit card company could offer is entering into a debt management plan, which entails working with a credit counseling service to repay your debt. This might be proposed if other adjustments won't remedy the problem.

As part of the plan, late fees are usually waived and interest rates lowered. You'll still pay the entirety of your debt, although likely in smaller amounts over a longer time.

The nonprofit credit counseling agency that administers the plan will charge a fee of around $20 to $50 a month. It may be waived if you can't afford it.

One of the drawbacks of entering a debt management plan is the likely closure of your credit card account.

Depending on the size of your debt, the repayment plan could also span several years. And it will show up on your credit report for the duration of the plan. It disappears from your credit report once you're done paying.

The risks

There are potential repercussions that come with asking for a modification, so think it through. The strategy could boomerang.

“Anytime you pick up the phone and call your issuer right now, you run the risk of them doing something adverse to your situation,” Ulzheimer said.

Flagging that you're a risky customer might result in a lower credit limit, or even the closure of your account, Ulzheimer said.

Card companies are going to hold you to the terms of your agreement if they think you can pay. This is especially true because new laws will require them to follow stricter rules on raising rates come February.

That doesn't mean you should be afraid to pick up the phone if you really do need an adjustment. After all, a clampdown on your credit card terms isn't as bad as a delinquency or bankruptcy.

The alternatives

A more serious course of action is pursuing a debt settlement, which is when you agree to pay a portion of your balance and have the remainder written off. Unlike a modification to your terms, however, a settlement has a big impact on your credit profile.

You should consider a settlement only if you truly don't think you'll be able to keep up with payments, or if you think continuing to make payments will put you in danger of bankruptcy.



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