Saturday, 28 September 2013
Student Loan Changes Squeeze Historically Black Colleges
Friday, 27 September 2013
The Unspoken Cause of the Student Loan Crisis
WASHINGTON, DC - JUNE 21: U.S. President Barack Obama shakes hands with university and college students after urging Congress to pass legislation that would keep federal student loan rates from doubling during an event in the East Room of the White House June 21, 2012 in Washington, DC. Obama said that if Congress doesn't act, subsidized student loan debt would double to 6.8 percent on July 1, affecting nearly 7.4 million people who currently hold loans like Pell Grants and Stafford loans. (Image credit: Getty Images via @daylife)As student loans have soared to $1 trillion in the U.S. and created a crisis, people miss a key point about the cause and, thus, the solution: Much of the reason that half those loans aren't currently being repaid is because student loans are made without regard to the creditworthiness of the borrower.
If a student intends to be an engineer and has the grades in math and science to suggest she can do so, she is an excellent credit risk. Engineers are very likely to be hired right out of college, to command premium salaries and to see their incomes increase steadily through their careers. Someone majoring in fine arts is not nearly as good a credit risk. Jobs are simply harder to come by and don't pay as well.
Yet students majoring in highly coveted STEM disciplines (science, technology, engineering and mathematics) are evaluated in the same way as those focusing on fine arts, history, English, social work, etc. when loans are awarded.
When a couple applies for a mortgage, they face considerable scrutiny about their ability to repay the loan, and rightly so. In the early to mid-2000s, lenders got so caught up in the housing bubble that they basically assumed that everyone would be able to repay, and look what happened when they relaxed their underwriting standards: Millions defaulted on mortgages, and the country is still digging its way out from under the mess.
The discipline that has returned to mortgages needs to be brought to student loans. Those applying must be evaluated partly based on their majors.
That statement surely sounds harsh to some. College is seen as a good thing for all, a time for young people to mature and a means for getting a leg up in an economy that increasingly values education. So, the goal of national policies, including those related to student loans, has been to help as many people as possible earn college degrees.
But facts are stubborn things, and the fact is that students in certain majors will have a hard time paying off their loans. Some majors lead to jobs with starting salaries of $98,000 a year. Some lead to starting salaries of $20,000. The loans needed to earn a degree at a private institution costing more than $50,000 a year don't fit a social worker's salary.
Obviously, if people don't need loans, then they can major in whatever they want-and the likely salary upon graduation shouldn't be the only criterion for picking a major. The world needs people with the kinds of skills that humanities majors develop. The world needs social workers, too. In fact, government might decide that some of those going into social work should have their educations subsidized so that they can start their careers with little or no debt-but any subsidies should be explicit, not mixed in with policies in lending.
As a society, we actually aren't doing students a favor if we grant them loans they can't repay. A typical student amasses $27,000 in debt in college, and it isn't possible to walk away from a student loan even in dire circumstances, as it is with other consumer debt. With student loans, the government can garnishee wages to force repayment, so students may be saddled with debts that last a lifetime. Meanwhile, the lack of discrimination in handing out loans has created an enormous risk for the federal government, which either grants the loans or guarantees them.
President Obama recently announced policies on college education that, among other things, try to help students make better choices by rating the colleges that they might attend, but we also need to change the process of granting loans to help ensure that students can afford them.
Thursday, 26 September 2013
The Fiscal Times
Top Dollar Degrees: Parents On Hook For Child's Student Loans
Updated: 09/25/2013 7:39 AM Created: 09/24/2013 8:58 PM KSTP.com |
American student loan debt now tops $1 trillion, according to the Consumer Financial Protection Bureau. But what happens when students can't pay it off?
If a parent co-signed the loan, the burden shifts to them.
5 EYEWITNESS NEWS is highlighting the dangers in part three of our series, "Top Dollar Degrees: How To Pay For College Without Breaking the Bank."
We spent months researching and spoke with several bankruptcy attorneys along the way. Each one told us they get calls from parents all the time who are simply stuck paying off their kids' student loans. Nothing -- not even bankruptcy -- can wipe that slate clean.
So parents need to know when they sign on the dotted line for their child, that signature could lead to long-term financial problems.
Rasheedah El-Amin dreamed of a better life.
"It's still hard. It's very hard for me because I had such dreams -- dreams that were coming true after fulfilling that promise to myself. I felt it. It was this close," Rasheedah said.
Rasheedah graduated from St. Catherine University, set to become a radiology technologist. At the height of the recession, she had trouble finding a job.
Then the health problems started.
She had seizures and issues with her spine. That led to spinal surgery that left Rasheedah unable to work.
"My body just couldn't do labor anymore. As a matter of fact, my body says, 'I'm through. I'm through. You're going to have to figure out how to use your brain because the body's not functioning for me,'" Rasheedah said.
Disabled or not though, Rasheedah had bills to pay. She paid for college with federal and private student loans. The federal loans were erased because of her health issues. The private ones were not.
To date -- including interest -- Rasheedah owes nearly $80,000.
"The private loan people didn't give a rat's a**. Just did not care," Rasheedah said.
That's because even though Rasheedah couldn't pay back the loans, maybe someone else could.
Rasheedah's mom, Arlene El-Amin, 67, co-signed the loan.
"Her future looked very well. I mean, she would start off as a new employee at $25 an hour, which made it seem -- it was quite promising," Arlene said.
Unable to pay the $80,000, and with other debts mounting, Arlene now plans to file for bankruptcy.
Here's the catch though -- student loan debts are rarely, if ever, wiped out in bankruptcy.
"It's unimaginable that I can file bankruptcy against my home, against my mortgage, against my car, against all my debtors, but I can't file against a student loan? Something is not right about that," Arlene said.
Sen. Al Franken, D-Minnesota, is on the Senate Education Committee, and he's backed several pieces of legislation he thinks could help. One example is the Fairness For Struggling Students Act, which, if passed, would make it possible to eliminate private student loan debt in bankruptcy.
Franken has also backed legislation that aims to help students receive better counseling when taking out a loan.
"Unfortunately, there's no perfect solution. But it's important that we continue taking steps toward making college more affordable for Minnesotans," Franken said.
Of course, even the best laid plans still come with a certain degree of risk. That's why parents like Arlene hope student loan laws are rewritten.
"What makes a student loan so much more important than a home to live in or other necessities in life? I don't see that," Arlene said.
As for Rasheedah, becoming a radiology technologist may no longer be the dream -- but she is still dreaming.
"Even with all this, I know there's something -- there has to be something else that my Lord has in store for me, and I just got to figure out what it is," Rasheedah said.
For Arlene, or any other parent, bankruptcy often means losing everything else -- right down to their retirement plan being wiped out.
Experts say parents can and should co-sign their kids' loans, but that they need to more closely scrutinize the terms.
Many banks are getting out of the student loan market altogether, largely because of increased scrutiny from lawmakers. JPMorgan Chase announced it's getting out of the market just a couple of weeks ago. Bank of America, Citigroup, and U.S. Bank have already done the same. So for future borrowers, it means more student loans will come from the federal government.
Wednesday, 25 September 2013
Top Dollar Degrees: Parents on Hook for Child's Student Loans
Updated: 09/25/2013 7:39 AM Created: 09/24/2013 8:58 PM KSTP.com |
American student loan debt now tops $1 trillion, according to the Consumer Financial Protection Bureau. But what happens when students can't pay it off?
If a parent co-signed the loan, the burden shifts to them.
5 EYEWITNESS NEWS is highlighting the dangers in part three of our series, "Top Dollar Degrees: How To Pay For College Without Breaking the Bank."
We spent months researching and spoke with several bankruptcy attorneys along the way. Each one told us they get calls from parents all the time who are simply stuck paying off their kids' student loans. Nothing -- not even bankruptcy -- can wipe that slate clean.
So parents need to know when they sign on the dotted line for their child, that signature could lead to long-term financial problems.
Rasheedah El-Amin dreamed of a better life.
"It's still hard. It's very hard for me because I had such dreams -- dreams that were coming true after fulfilling that promise to myself. I felt it. It was this close," Rasheedah said.
Rasheedah graduated from St. Catherine University, set to become a radiology technologist. At the height of the recession, she had trouble finding a job.
Then the health problems started.
She had seizures and issues with her spine. That led to spinal surgery that left Rasheedah unable to work.
"My body just couldn't do labor anymore. As a matter of fact, my body says, 'I'm through. I'm through. You're going to have to figure out how to use your brain because the body's not functioning for me,'" Rasheedah said.
Disabled or not though, Rasheedah had bills to pay. She paid for college with federal and private student loans. The federal loans were erased because of her health issues. The private ones were not.
To date -- including interest -- Rasheedah owes nearly $80,000.
"The private loan people didn't give a rat's a**. Just did not care," Rasheedah said.
That's because even though Rasheedah couldn't pay back the loans, maybe someone else could.
Rasheedah's mom, Arlene El-Amin, 67, co-signed the loan.
"Her future looked very well. I mean, she would start off as a new employee at $25 an hour, which made it seem -- it was quite promising," Arlene said.
Unable to pay the $80,000, and with other debts mounting, Arlene now plans to file for bankruptcy.
Here's the catch though -- student loan debts are rarely, if ever, wiped out in bankruptcy.
"It's unimaginable that I can file bankruptcy against my home, against my mortgage, against my car, against all my debtors, but I can't file against a student loan? Something is not right about that," Arlene said.
Sen. Al Franken, D-Minnesota, is on the Senate Education Committee, and he's backed several pieces of legislation he thinks could help. One example is the Fairness For Struggling Students Act, which, if passed, would make it possible to eliminate private student loan debt in bankruptcy.
Franken has also backed legislation that aims to help students receive better counseling when taking out a loan.
"Unfortunately, there's no perfect solution. But it's important that we continue taking steps toward making college more affordable for Minnesotans," Franken said.
Of course, even the best laid plans still come with a certain degree of risk. That's why parents like Arlene hope student loan laws are rewritten.
"What makes a student loan so much more important than a home to live in or other necessities in life? I don't see that," Arlene said.
As for Rasheedah, becoming a radiology technologist may no longer be the dream -- but she is still dreaming.
"Even with all this, I know there's something -- there has to be something else that my Lord has in store for me, and I just got to figure out what it is," Rasheedah said.
For Arlene, or any other parent, bankruptcy often means losing everything else -- right down to their retirement plan being wiped out.
Experts say parents can and should co-sign their kids' loans, but that they need to more closely scrutinize the terms.
Many banks are getting out of the student loan market altogether, largely because of increased scrutiny from lawmakers. JPMorgan Chase announced it's getting out of the market just a couple of weeks ago. Bank of America, Citigroup, and U.S. Bank have already done the same. So for future borrowers, it means more student loans will come from the federal government.
Educational loan waiver; last date on September 30, 2013
Report Suggests Reforms to Help Private Student Loan Borrowers
There has been some churn recently in the private student loan market. With JPMorgan Chase exiting the business - following Bank of America, Citigroup Inc. and U.S. Bank - Sallie Mae, Wells Fargo & Co. and Discover are left as the big three dominating the market.
But that's not the most important news for borrowers. Instead, the federal Consumer Financial Protection Bureau's efforts to provide new financing options for existing private loan borrowers, as described in its report " Student Loan Affordability," should take center stage.
All current students should strive to borrow only federal loans with their far superior protections. Graduate students can rely on PLUS Loans to ensure they only rely on federal loans to finance a graduate or professional education.
[Learn how the new student loan deal will affect borrowers.]
Unfortunately, federal loan limits sometimes force undergraduates whose parents cannot take out PLUS Loans onto the private market. Even more unfortunately -perhaps, as the bureau says, misled by the fact that private loans mimic federal loans - not all students take full advantage of the federal loan limits before turning to private loans.
From the Student Loan Ranger's point of view, the continuing decline in private lenders' share of the market that has been going on since the rise in stricter underwriting standards after the 2009 financial crisis is a good thing, even if it means some decline in competition that could lead to better terms for borrowers.
However, that decline is of little benefit to current holders of private student loans. There was about $150 billion in outstanding private student loan debt as of last year, according to a 2012 report by the bureau, and the cumulative defaults on these loans exceeded $8 billion on more than 850,000 distinct loans. That represents far too many struggling borrowers.
[Check out ways to graduate without student debt.]
Even worse, these borrowers have few good options: Despite a few helpful court decisions, most are unable to discharge their student loans in bankruptcy and, as a consequence, have little leverage when it comes to negotiating new repayment terms with private lenders.
As the bureau describes in its report from earlier this year, the potential impact of student debt burdens is huge. It may explain the increasing reluctance of young people to form new households, discourage the formation of new businesses by young entrepreneurs, decrease the retirement security of older Americans and result in fewer much-needed primary care physicians and teachers.
Of course, not all of these can be blamed on private student loans, which are, as already noted, a relatively small percentage of total outstanding student loan debt. But private student loans do have a disproportionate impact because of their aforementioned lack of borrower protections. This particularly includes the lack of income-driven repayment options, such as the new Pay As You Earn plan for federal loans, which reduce borrowers' payments to an affordable percentage of their income.
The bureau's report outlines a number of options to make private student loans more affordable that should be considered by lawmakers. The bureau first looks at options to allow borrowers to restructure private student loans, which could include requiring private lenders to offer repayment options similar to those offered for federal loans, amending repayment terms to make them affordable to borrowers based on a temporary or permanent debt-to-income ratio, or allowing borrowers to convert their private student loans to federal loans.
[Find out when to borrow through private student loans.]
The Student Loan Ranger supports the latter option, while recognizing that it could result in a windfall for some private lenders who originated very risky loans - and some of whom, such as for-profit colleges, anticipated high levels of default.
The second broad category of reform examined by the bureau is jumpstarting a refinance market. Student borrowers do not have a long credit history and so lending to them entails a large degree of uncertainty that is reflected in the generally high interest rates on private student loans.
Because of the lack of a refinance market, even borrowers who repay their loans on time while seeing their salary and equity increase, making them far less risky borrowers, cannot refinance their student loans at lower rates. This is in marked contrast to the housing market, for example, which has a robust refinancing industry.
While all of these reforms entail complications and trade-offs, they are eminently doable. The Student Loan Ranger feels the bureau's efforts to alleviate the unnecessary stress and suffering of far too many private student loan borrowers may also help improve the economic prospects of all of us.
Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works's educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.
Is the student loan bubble about to burst?
Tuesday, 24 September 2013
Americans Look Abroad to Avoid Student Loan Blues
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Monday, 23 September 2013
RI senator works to manage interest rates on student loans
RI senator works to manage interest rates on student loans
Saturday, 21 September 2013
Which Student Loan Repayment Plan Should You Choose?
Whether you're just beginning to pay back your federal student loans or you've been making payments for years, you likely have a plethora of repayment options. And each repayment option has its pros and cons.
If you're thinking about switching from a standard repayment option, here are some different ways you can opt to repay your student loans and choose the repayment option that works best for your needs.
Repayment Plans: An Overview
The following repayment plans can be used for Federal Direct Loans and Federal Family Education Loans, including the Parent PLUS Loan and Stafford Loans. (Perkins Loans and private loans operate under different rules, so you'll have to contact your school or lender to determine your repayment options for those.)
Standard Repayment:This plan is what you'll start with, unless you switch to another repayment option right off the bat. Standard repayment plan payments are at least $50 per month and will have your loan paid off within 10 years.Graduated Repayment Plan:Based on the assumption that you start with a lower-paying career but gradually increase your income, this plan begins with lower student loan payments, which increase about every two years. You'll have your loans paid off within 10 years.Extended Repayment Plan: If you can't manage standard or graduated payments, the extended plan allows smaller fixed or graduated payments that let you pay off your loan in up to 25 years.Income-Based, Pay As You Earn, Income-Contingent and Income-Sensitive Plans: Although each of these plans differs slightly and applies to different loans, they're all meant to make student loan payments more affordable based on your income. You can find out more about the specifics of these programs from the Federal Student Aid website.Deferment and Forbearance: If you're really struggling to make student loan payments, especially due to a short-term financial crisis, a deferment or forbearance allows you to put off your loan payments entirely for a short period of time.Which Plan is Right for You?
The first step in choosing the right student loan repayment option for your situation is to see which options you qualify for. Most options are available only for certain types of loans or only if you have a very high loan balance or very low income. You can talk with your lender (or check its website) to see which plans you might qualify for.
While you're at it, take time to consider how a different repayment plan might affect you financially in the long term. It's all too easy to fall into the trap of opting for a smaller student loan payment simply because you'll qualify for one. But remember, the longer you take to pay off your loan, the more interest you'll pay over time.
The Federal Student Aid repayment estimator is a helpful tool, since it can show you how much you'd expect to pay under different repayment plans.However, you may qualify for several repayment options.
Let's say you have about $25,400 in student loans and are paying 6.1 percent interest. If you're married with one child and making $50,000 of joint adjusted gross income each year, you'll have a few options.
Under the standard plan, you'd pay about $283 a month, pay off your loans in 10 years and pay $8,500 in interest.
Move to the graduated plan, and your payments will start around $162 and end around $486. You'll still pay your loans within 10 years, but you'll pay about $10,800 in interest.
If you switched to the income-based repayment plan, you'd pay your loans off in just over 10 years, with a monthly payment between $259 and $283. Your total interest would be around $8,700. With the income-contingent plan, it would take you 11.5 years to pay off your loans, making payments of $245 to $282 per month. You'd pay a total interest of $10,300.
In this situation, the best option for repaying your student loans is the standard repayment plan. Yes, it comes with higher monthly payments, but it also has you paying between $200 and $4,000 less in total interest.
If you're really struggling to make those minimum payments, it's better to switch to a lower-payment plan than it is to make late payments or miss payments altogether.
is freelance blogger and journalist who writes about personal finance for the Dough Roller.
Friday, 20 September 2013
Student loans filling coffers of retailers, property developers
A pedestrian passes in front of an American Apparel Inc. store in New York, U.S., on Wednesday, April 6, 2011.Ramin Talaie/Bloomber/Getty Images
EAST LANSING, Mich. -- Josh Tolbert graduated from Michigan State University three years ago with an engineering degree, memories of spring-break trips to Panama, Hawaii and Cancun, a souped-up Dodge Cummins truck -- and $110,000 in debt.
Tolbert, now 25, had hardly lived student life on the cheap. For one year of college, he even lived in an off-campus housing development with sprawling, neatly tended grounds that featured free tanning, three swimming pools, Jacuzzis and a hockey rink.
While he worked summers to help support his lifestyle, there was another key factor at play: taking out loans from banks and credit card companies eager to shower him with easy cash.
"I knew that I could borrow the money I needed to live," said Tolbert, who kept a credit card nearly maxed at $3,500 during his senior year.
"I planned it this way," Tolbert said. He now has a solid job as a project manager at an engineering firm outside Lansing, making $50,000 a year. His loan payments total $1,200 a month.
Few would deny that student-loan debt in America is a huge and growing problem. The cost of education has jumped 585 percent since 1985, while enrollment in degree-granting schools increased 37 percent between 2000 and 2010. A report released last month by the Consumer Financial Protection Bureau showed that federal-backed student-loan debt is now over $1 trillion.
But while much of the money borrowed by students goes directly to universities and colleges to cover tuition, the cash is also feeding some other coffers. In a rarely reported development, the vast student-loan sector is helping to prop up retail stores and travel companies in a bubble of spending around college towns across the country.
Even housing developers have gotten in on the deal, as some free-spending students are eager to splash out borrowed funds on expensive housing -- fueling a property boom as new construction goes up near college campuses. Some multilevel luxury spaces aimed at students can rent for more than $1,000 a bed. At the University of Texas at Austin, student properties near campus go for an average of $907 a month this year, according to apartment market researcher Axiometrics.
"We never had companies that only do off-campus housing until the mid-'90s," said Jay Denton, head of research at Axiometrics. "Off-campus housing didn't cater to the students. But as on-campus housing began to fill up, there was this pent-up need for off-campus apartments, and the developers began to try and one-up each other to get that market."
The money to pay for this increased push for luxury came "either from getting that loan or from parents with money," Denton said.
Business strategy
Yamila Gottig, a 21-year-old senior at the University of Florida, uses her student-loan money to live with a roommate in a two-bedroom place in Gainesville that features granite countertops, upscale appliances, private parking and a short walk to campus.
"Yes, it is luxe," said Gottig, who pays $525 in rent to live in Lion's Gate, a condo development where most two-bedroom rentals go for $1,300 to $1,400 a month. She gets a deal on a two-bedroom at $1,100. "I'm giving my parents a break on paying my expenses by taking out loans to live."
The image of the starving college student is being challenged by that of the well-heeled or loan-dependent student who subsidizes the college experience via borrowed money that goes into the hands of developers, brands and travel providers. Some brands, such as American Apparel and Urban Outfitters, often play for students by renting costly storefronts on student drags rather than malls in outlying suburbs.
"There's been a big trend in growing relevant retail into college towns, in the vicinity of the campus," said Antony Karabus, founder of Karabus Management, a retail advisory firm. "The kids aren't starving anymore. Kids are taking out large student loans, and they have fun money for clothes, electronics, whatever they want."
It's part of a strategy for American Apparel, where spokesman Ryan Holiday acknowledged in an email that "at least 90 of our 250-plus stores are nearby college campus or schools of some kind."
But marketing aggressively to students -- especially those who might be spending borrowed resources -- is fraught with controversy. In the 2009 Credit CARD Act (CARD stands for Card Accountability Responsibility and Disclosure), banks' actions earned them a provision in the legislation prohibiting them from issuing a credit card to any person under the age of 21, unless the person has proof of a way to pay a debt.
That, however, does not stop some determined students who are keen to tap into the easy money supply being offered them -- there are many tricks they can use to dodge the regulations.
"The intriguing part of that is that student loans allowed access to a kid's financial situation, so they can cross-market the credit cards," said Robert Manning, president of the Responsible Debt Relief Research Institute. "Once they get a loan, the credit card companies know that they could afford to make the minimum payments."
Added Mark Kantrowitz, founder of FinAid.org, a website about college finances: "Students have told me they didn't need a co-signer for credit cards because their student aid counts as income."
Hoping for a bailout
Robert Borosage -- president of the Institute for America's Future and a vocal backer of a crusade by Sen. Elizabeth Warren, D-Mass., to lower college-loan interest rates -- said the finance industry had put some students' financial future at risk.
"There is no doubt there has been exploitation by banks who didn't tell kids how onerous a debt can be," Borosage said. "A lot of kids got into a hole they didn't know they were getting into, and a lot of people were glad to get them into the hole. But I think this has sobered the next generation, who will be more aware of debt."
There are signs the trend might be peaking. Last week, JPMorgan Chase announced it was dropping out of the private student-loan market, leaving a smaller number of banks -- Wells Fargo, Discover Financial Services and SLM Corp. among them -- still providing loans to students beyond the four-year limit of $31,000 for federal loans.
That should at least slow the freewheeling student borrowing the nation has seen in the past two decades and, in the process, perhaps put a dent in the finances of companies and developers that have enjoyed the benefits of big spending by some students.
"The student-loan market will be less effervescent than it was," Borosage said.
Still, there is plenty of debt to be settled, as the average student-loan balance across all age groups has gone up 58.5 percent since 2005, according to the Federal Reserve Board of New York. Some holders of this debt have one big hope: a bailout.
Joe Borri, a 51-year-old art representative from Farmington Hills, Mich., has heard it from the friends of his two college-student kids -- a daughter at Michigan State and a son at Western Michigan University.
"A lot of these kids think the government is going to let them go on these loans," Borri said.
But is a bailout coming?
"Some politicians seem to imply that, and it's a seductive solution," said Richard Vedder, director of the Center for College Affordability and Productivity at Ohio University. "But if the government doesn't do it, no one knows who pays in the end, other than the kids borrowing the money."
And these kids won't be kids forever. The Federal Reserve Board of New York reported in March that, as of the end of 2012, borrowers ages 30 and under carry $322 billion of the nation's student-loan debt; those 30 to 39 carry $321 billion, and those 40 and older carry $323 billion -- with 12.5 to 16.4 percent of the older group 90-plus days delinquent on payments.
Only 37 percent of federal student-loan borrowers between 2004 and 2009 were able to pay off their loans without postponing payments or becoming delinquent, according to a March 2011 report from the Institute for Higher Education Policy (PDF).
Borrowers who default on federal loans face the possibility of garnished wages, collection fees, and seizure of state and federal tax refunds, Social Security and disability income, as well as other consequences. Such concerns, however, seem far from the minds of active borrowers.
Borri's son, a senior, recently took out a student loan in order to live in a place Borri said is nicer than his own home, complete with an indoor basketball court. That is a far cry from his own memories of college.
"Yeah, we had carpeting at my place in college," he said. "It was pizza boxes and newspapers."
Student Loan Repayment Troubles? Don't Delay
Dear To Her Credit, I lost my job three years ago. I lost everything as a result. I took a $12,000 pay cut and got another job, but I have been trying to catch up ever since. I owe a federal student loan of $9,800. I was trying to establish a payment plan, but instead of agreeing to a plan, they garnished my pay by nearly $300 without any prior notice. Now I can't even afford to pay my rent. They will not negotiate. Would filing for bankruptcy stop the garnishment? - Denise Dear Denise,
I hate to see you file for bankruptcy over a $9,800 student loan. I generally recommend it only when a person's consumer debt is more than their annual income and they don't see any way to pay the debt in the foreseeable future. Bankruptcy costs too much in time, money and future consequences to be used as anything other than a last resort.
Another problem with bankruptcy is that it probably won't get rid of your student loan debt. Long ago, students could finish their education, have student loans discharged in bankruptcy while they were still young and broke, and then start their careers unencumbered by debts for the education that made those careers possible.
Now, unfortunately for you, the rules have changed. Student loans are generally not discharged in bankruptcy.
The Federal Student Aid Ombudsman states that for you to have your loans discharged in bankruptcy, a bankruptcy court must answer "yes" to three questions:
Will repaying your student loans prevent you from maintaining a minimal standard of living? Will your hardship continue for much of the loan repayment period? Did you make an effort to repay the loan before filing for bankruptcy? (In practice, this means repaying your loan for at least five years.)
There are other ways besides filing for bankruptcy to stop collectors from garnishing your wages. Have you tried to get a deferment or forbearance on your student loan?
You may be able to defer repayment of a student loan if you meet the criteria and conditions for your type of loan, and you are not more than 270 days behind in your loan payments (or six months behind for an unemployment deferment on a Federal Family Education Loan).
Some common reasons for a deferment are being enrolled in school half-time, being unemployed, suffering economic hardship or serving in the military.
Forbearance of a student loan is a little different. You may qualify for forbearance even if you have defaulted on the loan. Forbearance means you can make reduced payments for a time; for example, while you are ill or if your monthly payments total more than 20% of your monthly income. In some cases, forbearance means you can stop making payments for a time. Interest continues to accrue during this time.
Another place you can seek relief is from the court that approved the garnishment. Rules vary by state, but your creditor should have given you advance notice before garnishment. Now that they are garnishing your pay, your options are more limited. Look up the rules for garnishment in your state and make sure they are not taking more than the limit allowed by state law. You can ask the court to adjust the amount if it is causing you financial hardship. If that won't work, I suggest you find a way to increase your income, either by taking on a second job or reducing your living expenses, perhaps by moving in with a friend or relative until the loan is paid off.
Good luck!
See related: Steps to contest, end wage garnishment, Why not leave country and bail on student loans?
Thursday, 19 September 2013
Student loan debt: 'It's terrifying'
September 18, 2013, 7:56 pm
(NECN: Peter Howe, Boston) - This autumn, some 21.8 million students are expecting to be enrolling in college across the country - up 42 percent from 2000, according to the U.S. education department - and they are also piling up colossal debt."It's terrifying. It's absolutely terrifying, especially with the prospect of going to graduate school," said Grant Ryan, a Hingham, Mass.-native now living in Dorchester who's a senior at the University of Massachusetts at Boston -- and is already $30,000 in debt pursuing his degree in psychology and communications studies. "Those aren't fields that have jobs right out of undergrad," said Ryan, who is looking at becoming a college student-relations official someday. "So going to graduate school and thinking about accumulating even more debt is a scary thing."Wednesday found Ryan at the UMass-Boston edition of Project Credit Smarts, a Massachusetts program that moves around the state trying to help students get smarter about managing student loans and more. "I have a student debt looming, so I just wanted to learn how to manage everything now and offset the debt that's going to occur later on" Ryan said. What experts like state Consumer Affairs undersecretary Barbara Anthony tell students: Don't make your student loans worse by getting too many credit cards -- or loading them up with debt and late fees. "The debt you incur while you're in college can stay with you for the rest of your life," Anthony told attendees at Wednesday's session.Today students graduating from college in Massachusetts have piled up -- on average -- $27,000 in debt, although it's becoming more and more common to hear about students who are carrying over $100,000 in debt by the time they get a diploma. And while Americans generally have succeeded in working down their debt levels since the financial meltdown of 2008, on student loans the picture has gone exactly the opposite direction, passing the symbolically freighted $1 trillion level last year.State Division of Banks commissioner David Cotney said: "It is now more than the combined debt of all credit cards in this country. It's more than the combined debt of all auto loans in this country.""I don't think that the level of financial literacy education among students," Anthony said, "has matched the growth in student loan debt."Agreed Cotney: "Using that debt responsibly -- and all debt responsibly -- can help ensure your financial future."A sign that maybe students have really been getting that message: As of last year, according to student loan giant Sallie Mae, 35 percent of college students had a credit card, down from 42 percent in 2010, an indication of possibly tightened credit standards by banks and card issuers but also an indication more students are waiting to get trapped with plastic. Those included 21 percent of freshmen, 28 percent of sophomores, 38 percent of juniors and 60 percent of seniors.With videographer David Jacobs
Tags: Boston, massachusetts, Peter Howe, college students, student loan debt, MA Project Creidt Smarts, college students loan debt
Student Loans: Choosing The Best Lender
This article is provided and sponsored by:ClearPoint Credit Counseling Solutions__________________________________
Many student loan borrowers consider refinancing through a consolidation, but most don't know the true costs of this decision. While new terms may look better on paper, they could potentially cost you more in the long-term due to interest. Refinancing also isn't a good idea for everyone, and its effectiveness can vary based upon your past and present credit scores.
The most common form of refinancing student loans for private loans happens in the form of consolidation.
The idea is this: replace a student loan, or multiple student loans, with a new loan at a lower interest rate.
This can be done by reaching out to your lender and requesting this option or by reaching out to another lender who offers student loan refinancing.
The Benefits
Refinancing student loans typically has one of these benefits:
Reduced interest rates Reduced monthly payments The convenience of one monthly payment
It's important to identify what your needs are before moving forward with refinancing student loans. The best benefit is to receive lower interest rates, which can save you thousands, but this option won't be available to everyone.
This is where the credit score comes into play. If you have improved your credit score since you first applied for the loan, chances are you can negotiate a lower interest rate, either with your lender or a new lender. The change in interest rate will likely be determined by how much your credit score has improved.
On the other hand, if your credit score hasn't really improved much, you will just be getting the benefits of reduced monthly payments and the convenience of making just one payment each month. These can be useful perks in the short-term but will cost you more over the course of the loan.
Federal vs. Private Refinancing
When it comes to refinancing, there are many differences between private and federal loans. Consolidation is just one of many options available to consumers who want to refinance federal student loans. And, it's important to understand that consolidation isn't always the best option.
Income-based repayment options and other plans could be much more beneficial to the consumer. If you rush into federal loan consolidation, you may lose the eligibility for some of these potentially better programs.
Also, federal borrowers should always keep one rule in mind: never consolidate federal loans with private loans. Very few lenders even offer this option, but it is possible. Doing this will strip away some of the benefits available for your federal loans, as they will basically become private loans in this process.
In some cases refinancing student loans is a great idea. As we have shown, the savings can be significant. But before moving forward, it may be a good idea to get some professional advice.
To sort all of this out and make the best decision for refinancing student loans (especially federal loans), sign up for free student loan counseling. A nonprofit counselor can help determine the best way to manage your student loans.
The White House Wants to Help You Make Smaller Student
Woman in a Bookshop/Aubrey Beardsley
The latest summer policy push from the White House is an ambitious effort to shift the college financing system to provide more support to students at schools that do right by them, while making life harder for institutions that live off federal loans but don't provide much value for students.
Most of what the president proposed during a speech today in Buffalo consisted of longer-term reforms or was directed at institutions themselves, but the White House push also came with a big helping of news you can use.
There are, according to the White House, 37 million people with outstanding federal student loans. A little more than 2.5 million of them are using one of the three income-dependent payment plans the federal government makes available to borrowers: the Pay As You Earn Repayment Plan, the Income Based Repayment Plan (IBR), and the Income-Contingent Repayment Plan.
Given the size of the average new college graduate's debt burden ($26,000 in 2012) and the fact that median household income in the United States was, in 2011, $50,054, that means there is some universe of borrowers, of unknown but likely significant size, suffering unnecessary hardship or risking default on their federal loans because they don't know that there are government programs that could help them reduce their monthly educational-debt payments to a more manageable level. This goes for whatever salary they are making, so long as they are shelling out more than 10 to 15 percent of their income on payments on federal student loans. Nearly two-thirds of the people in IBR and Pay As You Go make less than $60,000 a year.
The key take-homes from the White House's fact sheet on the proposed changes:
* the President has proposed allowing all student borrowers to cap their federal student loan payments at 10 percent of their monthly income. Currently, students who first borrowed before 2008 or have not borrowed since 2011 are not eligible for the President's Pay As You Earn plan.
* Beginning this fall, the Department of Education will contact borrowers who have fallen behind on their student loan payments, undergraduate borrowers with higher-than-average debts, and borrowers in deferment or forbearance because of financial hardship or unemployment to ensure they have the information they need to choose the right repayment option for them.
Because it is so hard for the White House to get funding for new programs through Congress, most of what Obama's talking about doing involves changes that can be enacted administratively, or helping college graduates take better advantage of existing programs. Here are the big three existing programs the Department of Education wants to get the word out about:
* Pay As You Earn, as described by IBRInfo:
Pay As You Earn (PAYE) is a is a modified version of the Income-Based Repayment plan for some current students and recent graduates. The plan lowers the payment cap from 15% to 10% of a borrowers' discretionary income, and forgives any remaining debt after 20 rather than 25 years of payments. ... Borrowers must have taken out their first federal student loan after September 30, 2007 and at least one after September 30, 2011. Only Direct Loans qualify. ... Pay As You Earn went into effect December 21, 2012.
* Income Based Repayment, as described by IBRInfo:
IBR is available to all student loan borrowers with federal loans who have high debt relative to their income. IBR is available for most types of federal loans made to students, but not those made to parents. ... Income-Based Repayment is available for any federal loans in the Direct Loan or Federal Family Education Loans (FFEL) programs, regardless of when the loan was taken out. ... If your reduced payment under IBR does not cover the interest on your loans, the government will pay that interest on your Subsidized Stafford Loans during your first three years in IBR. ... A partial financial hardship is when the 10-year standard monthly payment on what you owed when you first entered repayment is more than 15% of discretionary income. You must have a partial financial hardship to be eligible for IBR. ... IBR started in 2009.
* Income Contingent Repayment, as described by the Department of Education:
This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of: the amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or 20% of your monthly discretionary income.... The maximum repayment period is 25 years. If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged.
The ICR program launched in 1994.
Update: This isn't the president's first push to enroll more people in IBR; he started urging the Department of Education to do so in summer 2012. As of February 2012, Time magazine reported, only 630,000 people were enrolled in IBR.
Refinancing Student Loans
This article is provided and sponsored by:ClearPoint Credit Counseling Solutions__________________________________
Many student loan borrowers consider refinancing through a consolidation, but most don't know the true costs of this decision. While new terms may look better on paper, they could potentially cost you more in the long-term due to interest. Refinancing also isn't a good idea for everyone, and its effectiveness can vary based upon your past and present credit scores.
The most common form of refinancing student loans for private loans happens in the form of consolidation.
The idea is this: replace a student loan, or multiple student loans, with a new loan at a lower interest rate.
This can be done by reaching out to your lender and requesting this option or by reaching out to another lender who offers student loan refinancing.
The Benefits
Refinancing student loans typically has one of these benefits:
Reduced interest rates Reduced monthly payments The convenience of one monthly payment
It's important to identify what your needs are before moving forward with refinancing student loans. The best benefit is to receive lower interest rates, which can save you thousands, but this option won't be available to everyone.
This is where the credit score comes into play. If you have improved your credit score since you first applied for the loan, chances are you can negotiate a lower interest rate, either with your lender or a new lender. The change in interest rate will likely be determined by how much your credit score has improved.
On the other hand, if your credit score hasn't really improved much, you will just be getting the benefits of reduced monthly payments and the convenience of making just one payment each month. These can be useful perks in the short-term but will cost you more over the course of the loan.
Federal vs. Private Refinancing
When it comes to refinancing, there are many differences between private and federal loans. Consolidation is just one of many options available to consumers who want to refinance federal student loans. And, it's important to understand that consolidation isn't always the best option.
Income-based repayment options and other plans could be much more beneficial to the consumer. If you rush into federal loan consolidation, you may lose the eligibility for some of these potentially better programs.
Also, federal borrowers should always keep one rule in mind: never consolidate federal loans with private loans. Very few lenders even offer this option, but it is possible. Doing this will strip away some of the benefits available for your federal loans, as they will basically become private loans in this process.
In some cases refinancing student loans is a great idea. As we have shown, the savings can be significant. But before moving forward, it may be a good idea to get some professional advice.
To sort all of this out and make the best decision for refinancing student loans (especially federal loans), sign up for free student loan counseling. A nonprofit counselor can help determine the best way to manage your student loans.
Proposal to provide education loans to minority students
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