School Loans Consolidation

When taxpayers assume the risk of student loans – Washington Post

medsites — Mon, 21 May 2012 01:28:38 +0000

In his May 17 op-ed column, “Student loan boondoggle,” George F. Will proclaimed that President Obama has “socialized the student loan business.” This presumably refers to the elimination of the Federal Family Education Loan Program, which used taxpayer money to guarantee student loans made by private lenders such as Sallie Mae. Essentially, the program allowed private lenders to distribute student loans without assuming the risk associated with the loan. If a student were to default on his or her loan, taxpayers would foot the bill. When conservatives continuously repeat that they believe government should stay out of the free market, do they mean only that the government should stay out when it doesn’t provide a way for corporations to profit from taxpayers’ money?

Patrick Kenney, Amherst. Mass.

Go here to see the original: When taxpayers assume the risk of student loans – Washington Post

Money Matters: Repaying your student loans – WMUR Manchester

medsites — Sun, 20 May 2012 23:40:41 +0000

Tropical Storm Alberto, meandering off the coast of South Carolina, was expected to stay offshore, and forecasters Sunday canceled a tropical storm watch for coastal areas.As of Sunday afternoon, the center of Alberto was about 105 miles southeast of…
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Excerpt from: Money Matters: Repaying your student loans – WMUR Manchester

Student loan myths and facts – Pocono Record

medsites — Sun, 20 May 2012 21:14:44 +0000

This is an exciting time of year in the life of a high school senior. Prom, graduation, finally settling on a college, and, of course, deciding how to pay for it.Many will need to depend on student loans. There are several important changes coming soon that new borrowers, returning student borrowers and those who are no longer in school should be aware of.

Some of these changes have been blown out of proportion so I hope to dispel some of the myths and provide solid information about the changes.Changes to new undergraduate Stafford LoansFederal Stafford loans are available to all students regardless of credit worthiness, and come in two varieties, subsidized and unsubsidized. With a subsidized Stafford loan, the government pays the interest on the loan while the student is in school, while with an unsubsidized Stafford, interest accrues during that time period. You may choose to pay the interest as you go, or let it roll over into the loan balance.Your Expected Family Contribution from the FAFSA you filed earlier determines your eligibility for subsidized loans. Both Stafford loans have a grace period, meaning that repayment is not required until six months after graduation, dropping below half-time status, or leaving school. In prior years, the government continued to pay the interest on subsidized student loans during the grace period. However, for subsidized loans disbursed on or after July 1, 2012 and before July 1, 2014 only, that will change: The government will suspend the payment of that grace period interest, and the borrower will be responsible for the interest that accrues. Payment is still not required during the grace period, but the loan interest will add to the loan if it isn’t paid. This does not affect existing loans.You may have heard the uproar about student loan interest rates doubling. But here’s the scoop on that: The only loans affected by the interest rate change are new subsidized Stafford loans originated on or after July 1, 2012. The interest rate for those loans will go back to 6.8 percent as planned, as the rate was reduced in steps between July 2008 to a low of 3.4 percent for loans originated between July 2011 and June 2012 only. Again, no existing loans are affected, and unsubsidized Stafford loans will remain at 6.8 percent, where they were. Despite what you might hear on the news, this was not a new increase, rather the result of a temporary reduction expiring.Although federal student loans are generally more attractive than private student loans due to the flexible repayment terms and wide availability, Stafford loans do have borrowing limits that may not cover your entire need. Limits remain unchanged for 2012: for freshmen, the limit is $5,500 per year (of which only $3,500 may be subsidized if eligible), sophomores $6,500 per year ($4,500 max subsidized), and juniors and seniors $7,500 per year ($5,500 max subsidized). The limits are higher for those considered independent students. The total maximum that a dependent undergraduate student may borrow is $31,000, of which $23,000 may be subsidized. Independent undergraduate students may borrow up to $57,500 total.There are no changes at this time to the other federal student loan program, the Perkins loan. The Perkins loan program offers additional loans with a 5 percent interest rate to students with exceptional need. Like the subsidized Stafford, the government pays the interest while the student is in school and during the nine-month grace period. Note that this is three months longer than the Stafford grace period, and there are no fees with Perkins loans. The change in subsidized interest payments during the grace period does not affect Perkins loans. While the program loan limit is $5,500 per year, an individual school may have lower limits on loans they administer.Graduate Stafford Loan changesStafford loans are also available for graduate students, and in the past both subsidized and unsubsidized Staffords were offered. Beginning July 1, 2012 however, subsidized Stafford loans will no longer be available to graduate students. Those with existing subsidized Staffords will not see any changes to their loan terms, but no new subsidized loans will be originated. Borrowing limits for graduate students remain at $20,500 per year, but going forward that entire amount will consist of unsubsidized loans, continuing with a 6.8 percent fixed interest rate. Over the course of a lifetime, graduate or professional students may borrow up to $138,500 of Stafford loans. Students in the medical field may borrow even more.Origination fee rebates eliminatedStafford loans and Parent PLUS loans both assess an origination fee, which can be between 1 percent and 4 percent. In the past, students and parents have not been charged the full amount due to a fee rebate. That rebate has been eliminated, so borrowers will be responsible for the full origination fee.For those in repaymentThere are options for borrowers struggling to pay back loans after graduation, one of which is the Income Based Repayment program. Under the current rules of this program, borrowers’ payments are limited to 15 percent of discretionary income, which is defined as the part of your income that is above 150 percent of the current poverty level for your family size and state. If income is less than that, there is no payment required (interest still accrues however). Any balance that remains after 25 years is forgiven (or 10 years of qualified public service work). The program is designed to change in 2014, limiting payments for new loans to 10 percent of discretionary income and reducing the number of years to 20 for forgiveness. There is a proposal under consideration to move that effective date from 2014 to 2012.Special limited time offerThe Department of Education rolled out a new consolidation offer for a limited time. Called Special Direct Consolidation Loans, eligible borrowers may receive an interest rate reduction for consolidating loans between January 2012 and June 30, 2012 only. In order to qualify you must have at least one loan owned by the Department of Education and one commercially owned Federal Family Education loan and be current or less than 270 days delinquent. If you are eligible, you should have been contacted, but you may also check your eligibility at www.studentloans.gov.This consolidation is not the same as traditional consolidation; the terms of your original loans remain the same, with the exception of an interest rate reduction on the commercially held loan. You simply have one servicer and one payment under this plan. You must apply under the special consolidation plan, and not under the traditional consolidation application. For information visit: http://studentaid.ed.gov/PORTALSWebApp/students/english/specialconsolidation.jspErin Baehr is a Certified Financial Planner, the owner of Baehr Family Financial, a fee-only financial planning firm in Stroudsburg (www.baehrfinancial.com). She can be reached at 223-1550.

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See more here: Student loan myths and facts – Pocono Record

Will: Less bipartisanship needed on student loans – The Columbian

medsites — Sun, 20 May 2012 17:09:48 +0000

By
George Will
Columbian

Syndicated Columnist

Sunday, May 20, 2012

Bipartisanship, the supposed scarcity of which so distresses the high-minded, actually is disastrously prevalent. Since 2001, it has produced No Child Left Behind, a counterproductive federal intrusion in primary and secondary education; the McCain-Feingold speech rationing law (the Bipartisan Campaign Reform Act); an unfunded prescription drug entitlement; troublemaking by Fannie Mae and Freddie Mac; government-directed capitalism from the Export-Import Bank; crony capitalism from energy subsidies; unseemly agriculture and transportation bills; continuous bailouts of an unreformed Postal Service; housing subsidies; subsidies for state and local governments; and many other bipartisan deeds, including most appropriations bills.

Now, with Europe’s turmoil dramatizing the decadence of entitlement cultures, and with American governments — federal, state and local — buckling beneath unsustainable entitlements, Congress is absent-mindedly creating a new entitlement for the already privileged. Concerning the “problem” of certain federal student loans, the two parties pretend to be at daggers drawn, skirmishing about how to “pay for” the “solution.” But a bipartisan consensus is congealing: Certain student borrowers — and eventually all student borrowers, because, well, why not? — should be entitled to loans at a subsidized 3.4 percent interest rate forever.

In 2006, Democrats proposed cutting in half the statutory 6.8 percent rate on some federal student loans. Holding Congress in 2007, and with no discernible resistance from the compassionately conservative Bush administration, Democrats disguised the full-decade cost of this — $60 billion — by pretending the subsidy, which now costs $6 billion a year, would expire in five years.

The five years are up July 1 and of course the 3.4 percent rate will be extended. Barack Obama supports this. So does Mitt Romney, while campaigning against a “government-centered society.”

The low 6.8 percent rate — private loans for students cost about 12 percent — was itself the result of a federal subsidy. And students have no collateral that can be repossessed in case they default, which 23 percent of those receiving the loans in question do. The maximum loan for third- and fourth-year students is $5,500 a year. The payment difference between 3.4 percent and 6.8 percent is less than $10 a month, so the “problem” involves less than 30 cents a day.

The 3.4 percent rate applies only to one category of federal loans, but because the Obama administration has essentially socialized the student loan business, federal loans are 90 percent of student borrowing and this “temporary” rate probably will eventually be made permanent for all federal student loans.

The Atlantic’s Conor Friedersdorf notes that if Washington is feeling flush enough to spend another $60 billion on education in a decade, it could find more deserving people to subsidize than a privileged minority of college students who are acquiring credentials strongly correlated with higher-than-average future earnings.

The average annual income of high school graduates with no college is $41,288; for college graduates with just a bachelor’s degree it is $71,552. So the one-year difference ($30,264) is more than the average total indebtedness of the two-thirds of students who borrow ($25,250). Taxpayers, most of whom are not college graduates (the unemployment rate for persons with no college: 7.9 percent), will pay $6 billion a year to make it slightly easier for some fortunate students to acquire college degrees (the unemployment rate for college graduates: 4 percent).

Between now and July, the two parties will pretend that it is a matter of high principle how the government should pretend to “pay for” the $6 billion while borrowing $1 trillion this year. But bipartisanship will have been served by putting another entitlement on a path to immortality.

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See the rest here: Will: Less bipartisanship needed on student loans – The Columbian

Staten Island college students crushed by a lesson in debt – SILive.com

medsites — Sun, 20 May 2012 15:11:04 +0000

STATEN ISLAND, N.Y. — Robert Applebaum graduated from law school in 1998 — and thanks to all the interest on his loans, the Richmond attorney still hasn’t managed to put a dent in the $65,000 principal he borrowed to afford law school at Fordham University.
He’s not alone. More than a decade later, more and more college students are feeling the sense of pride and achievement they have when accepting their diploma quickly give way to something else: A sense of dread knowing that, in six months, a bill will come in the mail.
“They feel that they’ve been sold a bill of goods — they’ve been told since birth that they had to get a college education to succeed, and now they’re in a worse financial situation than they would have been if they had never gone to college at all,” Applebaum said.
He borrowed $65,000 to fund his law degree from 1995 to 1998. When he graduated, he took a job in public service — as an assistant district attorney in Brooklyn, a job he held until 2004.
Applebaum didn’t earn enough money to make loan payments, so he put them in forbearance. He didn’t have to make payments, but interest kept accruing — until the total owed ballooned to $88,000.
“After eight full years of repayment, I haven’t made a dent in the principal, thanks to capitalized interest,” he said.
With tuition having risen rapidly in the last decade, matters are even worse for many of those graduating now.
“I don’t think there’s a very good grasp of the fact that they paid such high inflated prices for the same education that people 30 or 40 year ago got — that they could pay for with a summer job or a small student loan,” Applebaum said.DEBT TOPS A TRILLION While the diplomas may be in their hands, most students leave college without having fully paid up – nationwide, people hold a total of $1 trillion in student loan debt, more than the amount the country has put on credit cards. Applebaum didn’t go into debt to fund his undergraduate education at SUNY Oneonta — a rarity now. Roughly two-thirds of students attending any four-year school, including public schools like SUNY, now leave with debt. On average, they owe $25,000. By comparison, in 1993, fewer than half of those students owed money, and the average debt was less than $10,000. “College costs have outpaced both family incomes and available grant aide for quite a while, and we see that reflected in rising student debt,” said Lauren Asher, president of the Project on Student Debt. If a high school senior thinks she can work a summer job to pay her way through a public college, she might want to think again. In the early 1980s, working a full-time, minimum-wage summer job earned two years’ worth of tuition and fees at a public, four-year college. In the early 90s, the same minimum wage job covered just a little more than one year of tuition and fees. “Now it covers just about half,” Ms. Asher said. More than 60 percent of those attending public colleges like SUNY have loans upon graduation, Asher said. “Their average debt isn’t as high as some of the other types of schools, but it isn’t as low as you think,” Ms. Asher said.A FAMILY’S STRUGGLE One Island father, Bob, who did not want to use his last name, said for most of his peers, sending their children to college is a struggle — and doing it debt-free is nearly impossible. His oldest son graduated several years ago with about $25,000 in debt – the average. Another son graduates this year, on track to owe about the same, and he has a daughter still in school. They all attended private colleges. “Once my second child hit school, I had to take a Parent Plus Loan out, because there was no way I could afford for both kids,” he said. He also took out a home equity loan, and tried to invest wisely to make more money. He knew college would be expensive for his children, he said, but he wanted them to be able to attend good schools and have the whole college experience. Asked if his children realized how much they would owe at graduation, he said, “Not at all.” His oldest son, who has graduated, is doing OK with his payments – but he’s also stretched the pay-back term from 10 years to 20 years. While Congress is squabbling about letting the unsubsidized Stafford loan interest rate go from 3.4 percent to 6.8 percent, Bob pointed out his children paid the 6.8 percent rate on their Stafford loans, and the rate reduction about to expire was relatively new and only available to some students. He said the rates need to be even lower than 3.4 percent. The interest rate on his home equity loan he took was lower than that on his Parent Plus loan, he said. “Student loans should be cheaper than any other debt, which it’s not,” he said. To help deal with what could become a student loan bubble, he also proposed a refinancing program that would allow students to get lower interest rates, pegged to the rate for the 10-year treasury bill or other measures.A STIMULUS IDEA Applebaum, the attorney, eventually took a job in the private sector. He began making $500 a month payments on his loans. One afternoon, he was watching cable news coverage of the stimulus debate that raged in the first month of President Barack Obama’s term. He thought about that $500 a month he was spending on his debt. “If you would just rid me of that obligation, I would have $500 a month to spend on other sectors of the economy,” Applebaum said. Forgiving student debt, it seemed, could be a bottom-up approach to stimulating the economy. “I know if that $500 was in my pocket, it wouldn’t be in my pocket for long,” he said. “I will spend that money, and most middle-class people will.” And without the heavy weight of student loans overhead, young people would be more willing to make big purchases — like homes. “How do we expect the housing market to improve when the very people we rely upon to buy homes are graduating with mortgage-sized debts and they can’t get jobs?” Applebaum asked. Applebaum posted an essay with his idea on Facebook and, as he puts it, it “exploded.” Soon he was giving interviews to national media outlets about his idea for forgiving student debt. Today, he runs forgivestudentloandebt.com, and his petition in favor of the Student Loan Forgiveness Act of 2012 has nearly a million signatures. Applebaum emphasizes he’s not in this to avoid paying back his loans. His proposal was largely intended to get people talking about the issue — and to offer a better idea of how to stimulate the economy than the ones he had been hearing. “This problem isn’t going away — it’s getting worse by the minute,” he said. There’s no reason for lenders — especially private ones — to stop giving the loans, since they cannot be discharged in bankruptcy. Students have to pay whether they finish school or not, and regardless of whether they a find. “Lenders don’t have to engage in any kind of risk-analysis,” he said. “Anyone with a pulse can get them.” In turn, colleges can raise tuition, knowing students can take out hundreds of thousands of dollars of loans. “Top colleges and universities have no incentive to keep costs down, and they haven’t — because they know they’re getting paid up front,” he said. Applebaum said the problem is that in American, higher education is treated as a commodity — but it isn’t like other things you can buy and sell. “I can’t sell you my law degree. It’s inherently different than any other type of good,” he said. Deciding to fund public education through grade 12 is arbitrary, he said, when a college degree is necessary to be competitive. He thinks education should be free. “We stopped looking at college as a public good and a wise investment in our future, and we started treating it as if it was a sole individual commodity, as if it only benefited the student and not the society at large,” he said.

Read the original post: Staten Island college students crushed by a lesson in debt – SILive.com

Clock ticking on student loan payments – Seacoastonline.com

medsites — Sun, 20 May 2012 12:43:40 +0000

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Catherine Gilmore, 24, of Dover, graduated from the University of New Hampshire on Saturday with excitement but also anxiety over the prospects of finding a job to pay off her student loan debt.Joey Cresta photo

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DURHAM — Commencement is an exciting time for graduates who, for the first time in their lives, will no longer be identified as “student.”But those final steps as they march through graduation and into adulthood may be full of anxiety as they enter a world short on job opportunities and tall on demands for money to pay off the astronomical debt they have accrued over their college years.

Debt and circumstance
$31,048: Average debt of graduates of four-year institutions in N.H., highest in the nation74 percent: of N.H. graduates have some debt, second-highest in the nation.Source: The Project on Student Debt

New Hampshire students in particular face daunting prospects as they enter the work force. According to the Project on Student Debt, an Institute for College Access and Success initiative to increase public understanding of the implications of borrowing as a means to pay for higher education, graduates of four-year institutions in New Hampshire are burdened with an average debt of $31,048, the highest in the nation. Seventy-four percent of New Hampshire graduates have some debt, second-highest in the nation.Meanwhile, Republicans and Democrats in Congress, not to mention the White House, have politicized the issue of student loan rates. President Barack Obama has pushed to prevent interest rates on student loans from doubling on July 1, but the parties disagree on the mechanism by which the nation will pay to hold rates steady. The White House has said doubling the 3.4 percent rate would result in an average of $1,000 of extra debt for students.That could be cruel punishment for students at the University of New Hampshire, where in-state tuition is among the highest for public schools in the country. According to UNH, tuition and fees for in-state students next year will be $16,422, compared to $28,882 for non-residents. Including room and board, the cost of attending UNH is $26,186 for residents and $38,646 for out-of-staters.The amount of debt leaves students like 24-year-old Catherine Gilmore of Dover feeling “awful.” She received her bachelor’s degree in environmental conservation on Saturday and leaves the university some $38,000 in debt.”It’s kind of surreal to be done. I have a little bit of anxiety because I’m afraid about finding a job,” Gilmore said.She has worked as a sales associate at a jewelry store in Dover since 2006. Unless she can find a higher-paying job after graduation, she said she will have to take on a second job to pay her bills.”You’ve got to get a pretty good job, or work a couple jobs, right out of college,” she said. “So it makes me nervous, definitely.”Gilmore said she thought her degree was in a field general enough that work opportunities would be plentiful. But she has been watching employment listings for a year and has not seen many promising options. She said she has applied to at least a dozen listings but the response has been underwhelming.Her path through UNH was a circuitous one. She took a year off after graduating from high school in North Conway before taking some classes at the New Hampshire Community Technical College, known today as Great Bay Community College. She then transferred to the Thompson School of Applied Science at UNH, where she earned an associate’s degree in landscape operations in two years. She then spent a year earning an associate’s degree in business management before beginning her bachelor’s program at UNH.Her work at Thompson School reduced a four-year bachelor’s program to a two-year program; however, she said some credits did not transfer and in some cases two or three Thompson School classes counted for only one class at UNH, forcing her to re-take classes and spend more money.”I felt like (the transition) could have been smoother,” she said.It was in her associate’s programs that Gilmore felt she learned the information and skills most useful to her. She said the Thompson School programs got her out in the field more than courses for her bachelor’s degree that focused on classroom lectures.”You’re not looking at slides of plants. You’re outside, you’re identifying plants, you’re learning how to prune them, you’re doing the landscaping techniques that you’re supposed to be practicing,” she said.Gilmore said her business management classes were also useful and noticeably improved her job performance right away.”I noticed immediately at work that my communication with my co-workers improved,” she said. “Before I (got) that degree I had a lot of difficulty at work because I’m a perfectionist and I have a dominant personality. Taking that class helped me learn how to work with (people) and manage myself.”The clock is ticking for all students who, upon graduating, enter a six-month grace period before they have to start making student loan payments. However, the three-month summer break between her final semester at the Thompson School and her first at UNH proper counted toward that grace period, she said.Despite the looming monthly payment on her student loans and a belief that a college education is “too expensive,” Gilmore said it was a sacrifice she would make again.”The year off was like a rude awakening. I realized that if I didn’t get a college degree I’d be working crummy jobs (and) making $8 an hour,” she said. “I’m bummed that my loans are going to kick in (and) I’ve got three months to find a real or a second job… I’m nervous about setting myself apart. I’m hoping that all this money that I’ve spent on three degrees will set me apart.”Debt and circumstance$31,048: Average debt of graduates of four-year institutions in N.H., highest in the nation74 percent: of N.H. graduates have some debt, second-highest in the nation.Source: The Project on Student Debt

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Excerpt from: Clock ticking on student loan payments – Seacoastonline.com

MBA students can pile up debt – STLtoday.com

medsites — Sun, 20 May 2012 08:06:51 +0000

Joe Mihalic wasn’t thinking at all about how he was going to pay off student loans — which would end up totaling $101,000 — when he was accepted to Harvard Business School.

“I assumed all would take care of itself; that I would go to Harvard, get a high-paying job, and everything would be OK. I was completely naive.”

Then, when he graduated from Harvard with an MBA in 2009, got the six-figure job he wanted, bought a home and started paying $1,057 a month on his student loans, the naivete started to dissipate. Two years after graduating, he had paid $22,000 toward his loans and saw he still had $91,000 more to go due to accumulation of interest.

It was a shocking revelation, a signal that he was trapped with overwhelming debts that would control how he could live his life. Not only had he barely made a dent in the principal after two years of payments, but he had $42,000 in interest to pay over the next 10 to 15 years.

He never questioned the value of getting his Harvard MBA, and he liked his job managing a business development division for Dell in Austin, Texas. But with debt payments arriving every month, he realized he had lost flexibility in his life. He knew that if he lost his job, it could be a disaster. He would have to think twice about rocking the boat at work, balking if he was overlooked for a promotion or taking a job that paid less even if it would allow him “to make a valuable contribution to the world.”

“I didn’t want a gun to my head every time I thought about this,” he said. “I felt trapped.”

It’s a revelation that few students contemplate as they apply for programs, said Sandy Kreisberg, an MBA admissions consultant. “All they want is to get into a top program.”

After acceptance, they might ask about financing, but most, like Mihalic, think an MBA will deliver wealth, and they need not fret about money, Kreisberg said. That tends to be true of top MBA programs, although jobs have been more difficult to get since the 2008 financial crisis.

More top MBA programs are trying to help students with scholarships, and some compete for students with top GMAT scores by offering aid, said John Byrne, editor of Poets & Quants. For example, Mihalic received $54,000 from Harvard.

But with costs of some top MBA programs about $300,000, based on a Poets & Quants analysis that includes living expenses and lost income from quitting a job, debt can be oppressive. And when considering MBA programs, pay attention to the effect of scholarships on cost, plus the job placement rates at each school, when applying, said Byrne.

Levels of debt vary substantially between schools, even those in the top 10 or 20. At Harvard, Byrne said, the average MBA student in 2011 had $77,880 in debt, similar to Stanford at $77,599. The University of Pennsylvania’s Wharton School was highest with $114,339. Sometimes top private colleges can help students more than public ones.

Despite high costs, Byrne said MBA students have the lowest default rates on student loans, about 20 percent. MBA graduates have the advantage of relatively high pay, with base salaries averaging $91,400 in 2011, said Byrne. PayScale Inc. put the median salary in 2012 for MBA graduates at $83,500, but $136,000 for MBA graduates of the country’s top 30 business schools as ranked by Bloomberg Businessweek.

A higher salary allows students to take on substantial debt and live within a rule of thumb in education finance. That is: Borrow no more than what your first year of annual pay is likely to be.

In addition, it’s wise to stick with federal Perkins and Federal Grad PLUS Loans because they include forgiveness programs, such as limiting debt payments to 10 percent of a person’s income and forgiving debt that’s left after 20 years.

While those rules can take some pressure off students, Mihalic didn’t want to pay loans for 10 years. He put himself on an austere lifestyle. He sold a car, took in two roommates, stopped going to movies, didn’t take dates to dinner, skipped trips and friends’ weddings and even carried his own flask of liquor when he went to bars with friends.

He blogged about it, and in seven months he was debt-free except for his home. Now, he said, he’s so used to an austere lifestyle, it’s difficult for him to spend money.

Read the original here: MBA students can pile up debt – STLtoday.com

Whistleblower: Loan consolidation — for a fee – Minneapolis Star Tribune

medsites — Sat, 19 May 2012 23:21:14 +0000

Instead of leaving you to track down student scholarships or fill out FAFSA forms yourself, companies will eagerly do it for you for a fee. Now, thousands of Minnesotans saddled with student debt are companies’ latest targets: For a cost, they’ll consolidate your federal loans for you.

As college graduates’ average debt rises and U.S. legislators gridlock over a contentious debate on increasing loan rates this summer, companies are emerging that promise to save borrowers money by consolidating federal loans.

In northern Minnesota, one 80-year-old New York Mills woman was among the first clients of a new California company doing just that. National Student Loan Solutions in Tustin, Calif., called her last month with an offer to consolidate $7,000 in federal loans she’s helping her grandson pay off from St. John’s University. She didn’t waste any time, sending the $395 upfront fee that day.

“When somebody says they’re going to reduce your payments, gee, why wouldn’t you think that would be good?” said the woman, who declined to be named.

It would be illegal for National Student Loan Solutions to charge upfront fees as a debt settlement company, but experts say that it’s allowed for a debt consulting company. However, financial aid experts caution against paying for something borrowers can do for free online themselves.

“This is the first I’ve heard of it,” said Lauren Asher, president of the Institute for College Access & Success, which runs the Project on Student Debt. “It’s quite disturbing that someone is trying to create a market for paying substantial amounts for something that’s for free.”

The Federal Trade Commission, which has long warned consumers about companies that charge upfront fees, advises that borrowers carefully consider whether it’s worth the benefit of paying for an educational service, adding the advice to new, not-yet-released FTC educational material.

With more people leaving college in debt, experts say the industry could be ripe for an influx in these companies. In Minnesota, 70 percent of state college students were in debt in 2010, the fifth-highest percentage in the United States, according to the Project on Student Debt.

In New York Mills, the woman contacted by National Student Loan Solutions had second thoughts about whether it was worth the fee and $39 monthly cost, declining to submit a contract.

“I’m an 80-year-old woman, and it’s hard for me to comprehend all this stuff,” she said.

That’s exactly why owner Hugh Adams said he created the company four months ago, helping borrowers fill out lengthy paperwork to consolidate federal loans — not lending or modifying loans. He said the upfront fee is needed to maintain the Orange County business.

“What I’ve done is created nothing different than H&R Block,” Adams said. “We’re simply a consulting firm. The general public doesn’t know what’s available to them. We just push the paperwork process through the bureaucracy of the Department of Education.”

This month, the California BBB opened a file on National Student Loan Solutions, also known as Nationwide Processing Center, after an inquiry about it, rating the company an “F,” despite having received zero complaints, because it charges advance fees and hasn’t provided background information. But the California attorney general’s office said that its upfront fees are legal, because it’s not a debt settlement company.

When Whistleblower told him about the New York Mills woman’s story, Adams refunded her money.

“I don’t have anything to hide from anyone … I’m not trying to get rich,” he said, adding that he, too, worries about other companies ruining their reputation. “I’ve most definitely found a niche. My biggest fear is having crooks in the business.”

So far, he said he has about 120 clients nationwide and has consolidated 20 loans. Adams, 53, said that, as the father of three children in their 20s with student loans, he started the company after spending three months researching loan consolidation and having previous experience in auto and mortgage finance. He now advertises on TV and radio stations or contacts people directly.

He admits people can go online to do the work for free themselves, but he said it can be confusing and, for a fee, his company will complete it sooner.

At both the Minnesota Office of Higher Education and the University of Minnesota, experts advise against paying fees for educational services like scholarship searches or filling out FAFSA forms. In Boston, National Consumer Law Center lawyer Deanne Loonin runs a student loan advice site and has started to hear from borrowers about similar federal student loan consolidation businesses.

“What I’m telling everyone now is be very wary,” Loonin said. “I’m worried that we’re going to see similar things as with foreclosures and credit cards. We’re already starting to see it.”

Kelly Smith 612-673-4141; Twitter: @kellystrib

Original post: Whistleblower: Loan consolidation — for a fee – Minneapolis Star Tribune

Harkin Talks About Student Loans – WOI

medsites — Sat, 19 May 2012 23:21:14 +0000

by Phil Prazan
pprazan@myabc5.com

College students around the country are bracing for a big cost increase.
Loan interest rates are set to double this July.
It’s putting students and lawmakers alike on edge.

If the increase isn’t stopped, college students will each pay about one thousand dollars more on their loans.
That makes for a six billion dollar increase around the country.
To keep the interests rates down, Congress has to come up with that 6 billion dollars.
The debate now is about where that money will come from.

Saturday morning, Senator Harkin (D-Iowa) came to the DMACC Campus to try and urge students to voice support for his plan.
The current Democratic plan is to get the money from what they see as a tax loophole.
The Republican plan is get take certain funds away from the new Health Care Bill.
Currently the minority Republican Senators are filibustering.
That’s why Harkin had time to hold a roundtable meeting with students currently enrolled at DMACC.
“Meetings like this, again brings home to me how, how a lot of students really struggle. Some of them have really tough lives and they’re borrowing the money and then they’re trying to better their lives. Some of whom have worked before, coming back for returning and yet they’re going to have this huge debt load hanging over their head,” says Senator Tom Harkin (D-IA)

Three in four Iowa college graduates have student loan debt.
So now all eyes are on Washington to see if a compromise will appear.
If nothing is done by July 1st, those interests rate will double.

See the original post here: Harkin Talks About Student Loans – WOI

Graduating collegians cope with student debt in a weak economy – Los Angeles Times

medsites — Sat, 19 May 2012 21:45:11 +0000

College graduation is typically a time to tally accomplishments and to look ahead. But for many graduates, it is also a time to tally student loans and figure out how to repay them.About two-thirds of college graduates have some student loans to pay off, and their average debt is about $25,000 to $28,700, according to estimates by education experts and organizations. (About 10% of those with loans owe more than $50,000 or so.)Many college seniors say they had not thought much about their debt until they received summaries just before graduation. Their reactions ranged from complete panic to a calm sense that their degree will help them get well-paying jobs to cover the loans.”While you are in college, it doesn’t seem real,” said Ben Herrington-Gilmore, who will graduate Sunday from Occidental College.The weak economy compounds graduates’ worries about payments on many federally backed student loans that come due six months after graduation.”It’s clearly another stress in a tough job market,” said Lauren Asher, president of the Institute for College Access & Success, an Oakland-based group that works on issues related to student loans. “These are challenging times, and the one thing worse than graduating with a lot of debt is not graduating and still having a lot of debt.”She and other experts urge graduates to explore their options to consolidate loans and to apply for programs that could reduce and stretch out their payments, and possibly forgive portions in the long run if their incomes are low enough. Some public service and teaching jobs also help with reducing debt.The Times recently interviewed graduating seniors at several California campuses about their loans and how paying them off figures into their post-college plans. For some, the path ahead seems clear and secure; for many, uncertainty is the only certainty. But all said they valued their college experience and do not regret taking out loans even if they now pose serious challenges.–Ben Herrington-Gilmore, 22, feels “pretty up in the air at this point.” An Occidental international relations major from Minnesota, he has applied for about 20 jobs at law firms as a legal assistant or administrative aide. But so far, even though he had two unpaid legal internships during school, he has no solid prospects. Meanwhile, his almost $27,000 in education loans will start to come due in the winter.”Now that unemployment is more and more a realistic possibility, it makes me feel a little more on edge,” he said. “They are not incredibly monstrous and not predatory loans. But it is definitely looming over me.” His loans come from the federal Perkins and Stafford programs and include both subsidized ones that carry no interest during school and unsubsidized ones that build up interest debt before payments start.He had financial aid and merit scholarships at Occidental, where undiscounted tuition this year was $41,860, not including room and board. He was employed six hours a week in campus work study jobs, most recently in the admissions office. With the lease for his off-campus apartment ending in June, he is preparing to move in with his father, who is a Presbyterian minister in Connecticut, and apply for work in the New York City area.”It will be easier to be at home instead of staying on a friend’s couch,” said Herrington-Gilmore, who wants to apply to law school or graduate school in religious studies in a year or two.He is adjusting to the idea that he probably won’t land a job immediately. “The value of my education is much more than getting a job after graduation,” said Herrington-Gilmore, who spent a semester abroad in Brazil. “But it is frustrating that I will be paying back all this for at least 10 years.”–Beginning in her freshman year at Whittier College, Brianne O’Doherty worried that her student loans could turn into a big problem. She received substantial financial aid, got some help from her parents and often worked 20 hours a week at campus jobs, but she still managed to accrue about $35,000 in federally backed Stafford and Perkins loans.With the economy struggling, the prospect of that debt was “alarming” and she said she intensely felt the need to quickly get a job.A marketing and visual communications major who graduated recently, she began looking for a job in January, well before many of her classmates. She said she searched online, at job fairs and through alumni connections. “The loans were a big part of that and the need to be independent,” said O’Doherty, 21. Her fallback was to move in with her family in a Chicago suburb and search for work there.But she was recently offered a well-paying job in business development at a high-tech firm in Austin, Texas, and she is preparing to move. She said she intends to live frugally so she can pay off her loan in chunks larger than required; her goal is to repay them in five years, half the usual time.