Student Finance

More money for college: Congress reaches deal

Steven — Mon, 17 Sep 2007 18:11:47 GMT

Congress reaches deal to boost college aid

House, Senate negotiators agree on bill that would boost Pell grant maximum, cut $20 billion in subsidies to banks that issue student loans.

September 7 2007: 3:18 PM EDT

House and Senate negotiators reached an agreement Wednesday to boost aid to college students, a deal that calls for slashing roughly $20 billion in government subsidies to banks that issue student loans.

Under an agreement reconciling differences between House and Senate bills, the maximum Pell grant, which goes to the poorest students, would increase from $4,310 to $5,400 by 2012.

The legislation also would cut interest rates on federally backed student loans to poor and middle-class students from 6.8 to 3.4 percent over the next four years.

House Democrats pushed for an interest-rate cut, following up on campaign promises. Such a provision had not been included in the Senate-passed version of the bill.

Democratic lawmakers said the $20 billion in cuts were aimed at excessive government subsidies to the industry. The subsidies were established to ensure banks enter the college loan business.

College savings: Minimizing risk

Joe Belew, president of the Consumer Bankers Association, issued a statement Wednesday criticizing the legislation. He said services to borrowers would be affected. "Inevitable cuts in critical customer support will mean less service, more confusion and more difficulty for students and parents when applying for financial aid," he said.

Nearly all of the cuts would go toward making college cheaper, but $750 million would be spent on federal budget deficit reduction. The legislation is attached to a must-pass bill needed to meet spending targets in the federal budget.

Under the House-Senate agreement, the government would provide loan forgiveness for college graduates who go into public service professions, such as teaching.

It also would cap annual payments for students at a percentage of their income, which is aimed at preventing people from having to pay back more than they can afford.

The full House and Senate are expected to vote on the legislation soon.

Student loan scandal: Effects on consolidation

Steven — Tue, 04 Sep 2007 17:10:17 GMT

Student loan scandal: Effects on consolidation

Deciding whether to consolidate federal student loans is never easy. Here's what you need to know.

By Jeanne Sahadi, CNNMoney.com senior writer

May 29 2007: 2:23 PM EDT

NEW YORK (CNNMoney.com) -- It's a good thing you got that college education. You can put it to good use navigating the complex maze that is the student loan industry as you consider whether to consolidate your federal student loans.

For those who have never done it, it's a question that comes up every year in anticipation of the rate change on July 1 of the variable federal student loans.

But this year, there's a twist. News of student lenders offering perks and kickbacks to colleges and alumni associations to include them on preferred lender lists have, understandably, made consumers wary.

But that actually may be one good thing to come out of the scandal. The advice about deciding whether and with whom to consolidate hasn't changed. It's just become even more relevant.

"The current scandal reinforces the need to be a savvy consumer and examine carefully any offer you receive no matter where it comes from," said Lauren Asher, associate director of Project Student Debt and the Institute for College Access and Success.

Indeed, said Mark Kantrowitz, publisher of FinAid.org, "even when a school's preferred lender list is unbiased, you still have to identify which loans are best for you."

The question of whether to consolidate your federal loans depends on the type of loans you have, their rate (variable or fixed) and your goal: Do you want to reduce the interest you pay long-term? Lower your monthly payment? Pay just one bill instead of several? Get better discounts?

It also depends on whether you've already consolidated the loans in question before. By law, you may not consolidate the same loans twice.

Here's what to consider if you have:

Stafford loans

If your Stafford loans were issued before July 1, 2006 they are variable-rate loans.

What determines the change in the variable rate every July is the yield on the 3-month Treasury bill during the last T-bill auction in May. This year that yield was only .076 percentage points above where it was during the same auction in 2006. So payments on your Stafford loans are not likely to go up much at all after July 1, and the rate for consolidation won't change at all.

So there's little reason to consolidate if your sole goal is to lock in a lower rate this year.

But there is one exception: if you're still in your so-called grace period, defined as up to six months after your graduation. That's because you still are enjoying the "in-school" rate, which is about 0.6 percentage points less than it will be when your grace period ends and you go into repayment. Consolidating before your grace period ends lets you to lock in that lower rate. Technically, you may lose out on some of your grace period because you will need to begin repayment within 60 days of consolidating. But if you apply for consolidation before July 1, a lot of lenders can set it up so that the clock on that 60 days doesn't start until close to the last two months of your grace period, Kantrowitz said.

There's also little reason to consolidate if you want to lock in a lower rate and you got your Stafford loan after July 1, 2006. That's because those loans are fixed rate loans at 6.8 percent and won't change.

Whether you have variable or fixed rate Staffords, however, you might consider consolidating if you want to reduce your monthly payments. You can do so by combining your loans into one loan and extending the repayment term. But by doing so you greatly increase the amount of interest you'll pay. By changing your repayment term from 10 years to 20, you'll cut your monthly payment by a third, but you'll double the amount of interest you pay long-term, Kantrowitz said.

A 30-year term is even more expensive. Say you have $20,000 in fixed-rate Stafford loans. Asher notes that you'll pay $7,619 in interest on them over 10 years. But if you consolidate and extend the repayment term to 30 years, you'll lower your monthly payment by $100 but you'll end up paying $26,935 in interest.

Besides rates and monthly payments, weigh discount incentives when considering consolidation. Many lenders offer breaks if, say, you direct debit your payments or pay on-time for 36 consecutive months. Compare not only consolidation discounts offered by different lenders, compare them to the discounts you're currently enjoying. Sometimes, Kantrowitz said, "discounts for consolidated loans are inferior to those on unconsolidated loans."

(Here's a good table for comparing specific discounts at FinAid.org. For a more general look at which discounts are more valuable than others, see this table from the Project on Student Debt.)

Once you have loan consolidation offers in hand, you can see which offers the better deal by using FinAid.org's loan consolidation calculator.

Perkins loans

These are fixed-rate federal loans at 5 percent. Student loan experts caution against consolidating them because doing so makes you ineligible for loan forgiveness programs. (Here's more information on the types of loan forgiveness programs available.)

Private loans

Private student loans are much costlier loans than those guaranteed by the federal government and borrowers don't enjoy the same protections as with federal student loans.

If you're among the minority of borrowers who have taken out private loans, and lenders send you offers to refinance your private loans, Asher's best advice: "Be even more careful (than you'd be with federal loan consolidation offers)." That's in part because the rates on these loans are based on your credit and can be as volatile as credit card rates.

Here are good questions to ask before taking out or refinancing private student loans.

And for both federal and private student-loan related questions, Kantrowitz's FinAid.org student loan page is an excellent resource.

Student loan company agrees to cut alumni ties

Steven — Tue, 04 Sep 2007 17:04:04 GMT

Nelnet one of the largest U.S. student loan companies will stop paying alumni associations for student referrals; will contribute $2M to educate students, parents about loans.

By Althea Chang

July 31 2007: 3:05 PM EDT

NEW YORK (CNNMoney.com) -- Student loan company Nelnet reached a $2 million settlement with New York Attorney General Andrew Cuomo stemming from investigations into the company's student loan practices.

Nelnet also agreed to stop paying alumni associations to refer students to their consolidated loans.

Under the settlement, Nelnet agreed to follow a code of conduct outlined by the Attorney General and will contribute $2 million to a fund to help educate college-bound students and parents about their loan options.

Student loan scandal: Effects on consolidation

In April, Nelnet agreed to contribute $1 million to a similar fund as part of a settlement with the Attorney General of Nebraska. Under that settlement, the company agreed to post a review of its business practices on its Web site but was not required to end its relationships with alumni groups.

Recently, Nelnet agreed to terminate relationships with all alumni groups, according to company spokesman Eric Solomon.

"The New York Attorney General's Code of Conduct effectively reiterates actions the company has already taken with respect to its student loan business," the company said in a prepared statement Tuesday.

"Although Nelnet strongly believes that the outsourcing and alumni consolidation services are valuable services for our customers, proposed federal regulations and legislation also call for the elimination of these programs," the company said.

In a number of agreements with college and university alumni associations, Nelnet paid for the use of school logos in their advertisements, and for placement of company materials on college web sites.

Columbia fires financial aid director

"Alumni associations recommended Nelnet loans because they were being paid to do so, not because the loans necessarily offered the best terms to students and alumni," according to a statement from the New York Attorney General's office.

Nelnet (down $2.24 to $17.48, Charts), one of the largest holders of federal loans, paid the organizations an annual fee or payments for every loan consolidation application an association directed to them.

The company, covered travel and hotel costs for school employees to participate in sponsored marketing events, paid for school financial aid personnel to attend luncheons, dinners, retreats, and gave school employees tickets to sporting events, shows and spa treatments, according to Cuomo's office

Student loan crackdown bill

Steven — Thu, 10 May 2007 02:40:20 GMT

House passes

student loan crackdown bill

The bill tackles conflicts of interest in the $85 billion student loan market amid widening scandals.

The U.S. House of Representatives overwhelmingly passed a bill Wednesday cracking down on conflicts of interest in the $85 billion student loan market amid a widening scandal.

Adopted by a 414-3 vote, the bill would require colleges and lenders to abide by new codes of conduct; ban gifts from lenders to college aid officers; require disclosure of college-lender relationships; and protect students from aggressive marketing practices.

Investigations by Congress and New York Attorney General Andrew Cuomo have accused lending institutions of providing pay and perks to college financial aid officers in return for being put on "preferred lender" lists shown to students looking to borrow money for their education.

Allegations have also emerged of questionable stock dealings involving lenders, financial aid officers and one employee of the U.S. Department of Education, which oversees the nation's complex student financial aid system.

"Corrupt practices among lenders, schools, and public officials have undermined our student loan programs," said House Speaker Nancy Pelosi in a statement, calling the bill a needed action to clean up the student loan industry.

Under the measure, "preferred lender" lists would not be banned but would be more tightly regulated, while ensuring students have access to lenders not on the lists, as well.

House Education Committee Chairman George Miller told reporters after the vote that the bill - known as the Student Loan Sunshine Act - will help restore student loan ethics.

Miller said he hoped the Senate will move swiftly to adopt a similar bill so a measure can be sent to the White House. If the Senate moves slowly, he said, "I would be concerned" because of continuing revelations of student loan misconduct.

California Rep. Buck McKeon, senior Republican on the House Education Committee, said, "We do need to reaffirm our trust in the system. I believe this bill does just that ... I'm hopeful the other body will pick up this legislation."

Edward Kennedy, chairman of the Senate Education Committee, said there is bipartisan agreement on a Senate package of student loan industry reforms that he expects to include in an upcoming Higher Education Act reauthorization bill.

"These reforms will include many of the measures included in the version of the Sunshine Act I introduced in February, including a ban on lender gifts, reform of 'preferred lender lists,' and disclosures to make ... education loans more transparent," said the Massachusetts Democrat in a statement.

In the House, Texas Democrat Ruben Hinojosa called the passage of the Sunshine Act "a very important first step."

Some congressional Democrats want further reforms, including a measure to channel more students into direct government loans and away from federally guaranteed loans.

Student loans: Don't get burned

Steven — Wed, 09 May 2007 04:16:41 GMT

Financial aid officers don't always act in the student's best interests. Here's how to protect yourself.

For students who plan to borrow for college, choosing a lender has become a lot more complicated.

In March a scandal erupted when New York State Attorney General Andrew Cuomo launched an investigation into allegations that student loan companies provided kickbacks to university financial aid officers and staffers in order to win more business.

One key goal was to gain a spot on so-called preferred lender lists - the companies specifically recommended by financial aid officers, which tend to be chosen by most students. Attorneys General in California, Connecticut and other states have launched similar investigations.

Cuomo has already won multi-million-dollar settlements from several loan companies, including Citi and Sallie Mae, the nation's largest student lender. (Sallie Mae (Charts), whose stock price has plunged, recently agreed to a $25 billion buyout by two private equity firms along with two banks.) Several colleges and universities, including the State University of New York, New York University and the University of Pennsylvania, have also agreed to settlements.

Do these disturbing headlines mean that students and parents should avoid borrowing from lenders on the colleges' preferred lists?

Not at all. Most colleges vet lenders closely to make sure that their terms are attractive and that they offer good service, said Kal Chany of Campus Consultants, an independent financial aid consultant in New York City. Still, Chany says, "You should consider the lending list only as a starting point."

Fact is, as the scandals have shown, it's important to shop around, since you may well find a better deal elsewhere. Remember, you are allowed to borrow from any loan company you choose - not just those recommended by the school.

Here are three key points to consider:

Understand why your college is recommending particular lenders. And if it's not clear, ask your financial aid office. "One benefit of the investigation is that college and universities are making an effort toward greater disclosure," says Mark Kantrowitz, publisher of finaid.com, a financial aid information Web site. (Citibank is an exclusive advertiser on the Web site.).

Some colleges may recommend a loan company because it offers great customer service, for example, and not because it offers lowest possible rates.

Look for up-front discounts. At many colleges, lenders have agreed to waive so-called origination fees on Stafford student loans, the main federal loan for students, which run 3 percent of the loan amount.

Scrutinize repayment rules. Many lenders will offer to reduce their rates by 1 percent to 3 percent - the current interest rate on Stafford loans is 6.8 percent. But check to see what strings may be attached.

For example, some lenders may simply guarantee a reduced rate once you start repaying, while many others require that you sign up for an automatic repayment plan and maintain an on-time payment record for anywhere from 12 to 36 months.

For parents taking out PLUS loans, lenders may also reduce rates for on-time payment. Many will also permit interest-only payments if you run into financial trouble.

"Be sure you understand the conditions of these repayment breaks," says Patrick McTee, financial aid director at the University of Denver. "If you have trouble keeping up with your bills, you are better off choosing a lender guarantees to reduce the rate by 1 percent, then one that will give you 2 percent off but only if you never miss a payment."

Bank rates may have peaked

Steven — Sun, 29 Apr 2007 00:01:56 GMT

Interest rates on bank deposits seem to have peaked for the time being. With Reserve Bank of India (RBI) deciding to maintain status quo on key interest rates and keeping the inflation target at 4-4.5% in the medium-term, there is apparently no pressure on the banking industry to raise deposit rates further from current levels.

According to a cross-section of bankers, chances of deposit rates rising any further is lot less than them actually dropping from current levels. Bankers, therefore, feel this is the best time for small depositors to lock in their monies at the current available rates. Fortunately, there is no dearth of innovative deposit schemes to suit individual depositors. Some offer 9-9.5% rates for a one-year period, while monies can also be locked in for longer terms at slightly lower rates.

Senior citizens get another 0.25-0.5 percentage point higher rates over the card rates, making these deposits more lucrative compared to several postal savings deposit schemes. “For quite sometime, deposit rates have been moving in just one direction: northward. At the current level, deposit rates are attractive by any standard.

Going forward, if we see inflation easing from the current level, one may come to a conclusion that chances of deposit rates going down from current levels are higher than going up,” ICICI Bank’s head for liability products Maninder Singh Juneja told ET. Although inflation moved up again to 6.09% in the first week of April after hovering below the 6% mark in the two consecutive weeks prior to April, RBI expects inflation to ease to below 5% level in the medium term.

Toeing the RBI line, Centurion Bank of Punjab managing director & chief executive officer Shailendra Bhandari said on Wednesday: “Both inflation and credit growth are likely to be within the target during April-June quarter. Therefore, no altercation in deposit rates is expected till June.

The scenario may change post-September when the busy credit season kicks in.” United Bank of India’s chairman and managing director PK Gupta agreed. “For the moment , there is no pressure for banks to increase deposit rates further. Inflation is likely to be under control. We also expect a moderate credit growth this year. Therefore, we don’t feel a further rise in deposit rates is necessary at this point in time. At least till June 2007, there may not be any change in interest rates,” Mr Gupta said.

Incidentally, days ahead of the RBI policy announcement, UBI has announced a new deposit scheme whereby depositor get 9.5% interest (0.5 percentage point more for senior) if they park their monies for 500 days. This scheme will be available for up to May 31, 2005.

Some Universities got kick on the ass for Student Loan Scandal

Thu, 26 Apr 2007 00:18:43 GMT

If you ever applied for student loan from your school, do you recall that your school financial office give you a list of lenders to choose from on those list they have the word "Preferred Lender", you might though those lenders are the best lenders which give students lower interest rate that the school recomend you. Now the fact is revealed and the justic is found for student by some attorneys. The fact is those lenders are not the best lenders that give students low interest rate, they pay the school to put their name in the preferred list or the school share the revenue with them. That is really unfaire to student, we are poor and our school is making money on our back. Finally, at the time of writing, three universities got kicked on the ass by some attorney and forced to give back the money they earned to students.

for full article click on this link to read cnn news.

New to Student Loan?

Sun, 22 Apr 2007 01:45:24 GMT

Student loans are loans offered to students to assist in payment of the costs of professional education. These loans usually carry a lower interest rate than other loans and are usually issued by the government. Often they are supplemented by student grants which do not have to be repaid.

Click here to learn more about student loan and resources here...