In a major “oops” moment, Sallie Mae accidentally mis-labeled some accounts delinquent causing these customer’s credit ratings to suffer as a consequence of the lender’s screw-up.

Read the full article from the Pittsburgh Post Gazette or read the excerpt below.

As many as 1 million student loan borrowers from Sallie Mae may have found that their credit scores plunged after the loan company erroneously reported they were delinquent in their payments.

Tom Joyce, senior vice president of corporate communications for Sallie Mae, said yesterday that the lender discovered Friday that a recent download of account information to one of the credit bureaus, Equifax, included a computer code that caused some accounts to be considered delinquent when they were not.

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some reported sudden drops of more than 100 points in their credit score.

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No one should be suprised by this latest development, as highlighted by a recent Washington Post article. You can read an excerpt of the article below, or read the whole article by clicking here.

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One of the first things that pops up if you check YouTube to find out about a public school in Western Maryland is a video that starts: FROSTBURG STATE UNIVERSITY. ITS GREAT!!! An edgy new-wavy punkish Electric Six song cranks in, and the camera lurches as people down shots, chug beer and do keg stands. One guy climbs unsteadily out a window, grins at the camera, then drops through the dark to the ground far below.

Not exactly the image the school wants to broadcast. And that’s nothing compared with some of the videos at other universities, which show fights, racist costumes, weird hazing rituals and everything else that’s ugly about college life. All playing out on a site that gets hundreds of millions of viewers a day, many of them smack dab in the school’s target market.

Now Frostburg, like a growing number of schools, is trying to elbow its own messages onto such sites as YouTube to promote themselves, create a virtual community and drown out embarrassing clips.

“Marketing in higher education is really at a crossroads,” said Nora Ganim Barnes, director of the Center for Marketing Research at the University of Massachusetts Dartmouth. “Those that don’t engage and manage social media are going to be left behind.”

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But like a parent trying to seem cool, sometimes the efforts are painful to watch. “The last thing someone on YouTube wants to see is a provost explaining the academic offerings at an institution,” Hawkins said.

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Read the whole article at the Washington Post website.

The President signed the bill this afternoon. Here are some aspects that might affect you:

Stafford Loans:

• Changes apply to loans disbursed on or after July 1, 2008
• It raises annual borrowing limit for unsubsidized Stafford loans for dependent undergraduate students (or students whose parents can’t obtain federal parent loans because of poor credit) by $2,000 to $6,000 for 1st year& 2nd year, and to $7,000 for 3rd, 4th and beyond.
• It increases the aggregate amount an undergraduate dependent student may borrow under the unsubsidized Stafford loan program to $31,000.
• It increases the annual borrowing limit for unsubsidized Stafford loans for independent undergraduate first and second year students (or students whose parents can’t obtain federal parent loans because of poor credit) by $2,000 to $6,000
• It increases the maximum annual amount for undergraduate independent students who have completed two years of study also by $2000 to $7000.
• It increases the aggregate amount of unsubsidized Stafford loans for an undergraduate independent student to $57,500.
• It provides for a period of deferment until 6 months after the child on a PLUS loan drops below half time or graduates.

There are several other provisions I won’t get into here, such as Lender-of-Last-Resort and creating an artificial secondary market for student loans at the taxpayers’ expense.

I don’t have exact details in front of me, but if Pres. Bush signs the new education bill, Stafford Loan annual limits and aggregate limits will go up.

Rumor has it that Stafford loans will go up by about $2000, meaning you’ll be able to borrow over $5000 as a freshman undergraduate - I do not have the exact figure yet, though, so stay tuned.

The interest rates will NOT change.

Last week, botht eh Senate and the House passed teh “Ensuring Continued Access to Student Loans Act of 2008” and it’s heading to President Bush’s desk next.  Bush has already indicated he will sign it.

I need to tell you that I have problems with this legislation.  Like most knee-jerk legislation, it’s a band-aid.

In simple terms, this bill will permit the federal government to purchase loans from lenders, essentially creating what’s called a “secondary market” - a market where lenders can bundle and sell loans to other companies , a common practice.

BUT - in this case it’s a false secondary market as it’s the taxpayers who will be fitting the bill.

My message to Congress - your legislation last year helped create this situation.  While the federal government seems to think it’s OK to operated at a net loss, private industry MUST make a profit in order to function.  It’s just basic economics.

So this post is completely off-topic, but I had to share.  I’ve been posting a lot bad news recently, so I decided I needed to post something warm and fuzzy.

This is really funny if you’re a fan of the Discovery Channel and know who these people are.  It’s cute even if you don’t.

I absolutely LOVE this commercial, and you all should take a minute and watch it.  It will make you smile.

I’ve been asked a LOT of questions about this since the new legislation was passed in October, and I finally have some concrete details to share with you.

You can view a PDF from the Department of Education that explains the changes.  Access the PDF here.  These are  guidelines.  Final regulations will be issued in November 2008.

Here are the highlights:

• You MUST make 10 years of payments (120 payments ) after October 2007 before your loans are forgiven - that means loan forgiveness won’t even start until October 2017.
• You MUST be employed in the public sector for all of those 120 payments.
• You MUST be employed in the public sector at the time the loans are forgiven.
• In the case of Parent PLUS loans, it is the parent who must mee the above 2 requirements, not the student.
• Your loans MUST be Direct Loans.  Now those of you in the FFELP program, don’t panic - you can consolidate (or re-consolidate) your loans into the Direct Loan program to qualify.

IMPORTANT: As many of you know, the standard repayment period for student loans is 10 years.  Essentially, those of you with high balances that you consolidate (ans thus extend the repayment period), or those of you on a reduced-income repayment plan will be eligible.

Here is a list of public-service full-time positions that are eligible:

• Emergency management
• Government
• Military service
• Public safety
• Law enforcement
• Public health
• Public education (including early childhood education)
• Social work in a public child or family service agency
• Public child care
• Public service for individuals with disabilities
• Public interest law services (including prosecution or public defense or legal advocacy in low income communities at a nonprofit organization)
• Public service for the elderly
• Public library sciences
• School-based library sciences and other school-based services
• Certain tax-exempt organizations
• Faculty teaching in high-needs areas, as determined by the Secretary
• Full-time faculty member at a Tribal College or University

In an unsual admission for this administration (just talking factual here, nothing else implied), the Bush administration admitted it doesn’t have the authority to fix the student loan crisis, and that Congress must fix it.

Here is an excerpt from the Chronicle of Higher Education. You may need a paid subscription to view the entire artcile.

The Bush administration called off internal deliberations over a bailout plan for student-loan companies
after concluding it did not have the authority to act on its own, instead endorsing a Congressional
proposal that would allow the education secretary to purchase loans from private lenders.

Education Secretary Margaret Spellings, after weeks of discussions within the administration, joined her
colleagues at the White House and Treasury Department in telling Congress that they see no legal option
for putting in place an industry-backed proposal to use the Federal Financing Bank to supply funds to
cash-strapped student-loan companies.

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The decision leaves Congress facing a ticking clock for solving a student-loan “crisis” that some
legislators aren’t sure yet exists. The members are also caught between industry lobbyists who feel the
authority proposed for the education secretary may offer them little real help and student-aid advocates
worried about setting a framework that might enable abuses.

The proposed authority for the education secretary appears to offer lenders nothing more than funds to
cover the cost of writing their loans, said Sameer Gokhale, an industry analyst with Keefe, Bruyette &
Woods. “That’s not really a viable option for many lenders,” meaning they might not continue to
participate in the government-subsidized system, Mr. Gokhale said.

At the same time, some student-aid lobbyists have expressed concern that the plans under consideration
in Congress, especially the version pending in the Senate (S 2815), contains enough loopholes and uncertainties that loan companies could profit by dumping only their lowest-value loans on the federal
government and keeping the more-profitable loans for themselves.

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Congress faces a difficult challenge writing a plan that will be fair to all sides and doing it quickly
enough - within a few weeks - to make a meaningful difference for college students who might
encounter problems finding a willing lender for this coming academic year, said Terry W. Hartle, senior
vice president for government and public affairs at the American Council on Education.

Senator Christopher Dodd (CT) recently introduced a bill to ensure all families have access to college funding.  One provision appears to reduce or eliminate the need for credit checks.

Now - wait a sec.  Eliminate credit checks???

Perhaps I’m a little slow, but isn’t that what got us into trouble in the first place with mortgages???  People borrowed more than they can afford to repay, right???  And now we’re in a recession because of it.

I admire the sentiment of Senator Dodd, but you can’t honestly tell me that someone with a 450 credit rating can afford to pay back a $20,000 student loan.

Does this seem nuts to anyone else?

If these people default on the loans, then the federal government will have to repay loan companies approximately 95% of the loan.  That means we, as taxpayers will be footing the bill, ultimately.

Bank of America last week announced that it would stop making private loans for the next school year. If they were your lender, it’s time to look elsewhere for next year.

Don’t forget - private loans should be your LAST option. Look into Scholarships and Grants first - you don’t pay them back!

Next, look for Federal student loans which have better interest rates and more favorable repayment options including hardship deferment and forbearance for those in qualifying fields.