04.30.08
Sudent Loan Forgiveness for people working in the public sector
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
04.29.08
Bush administration realizes it doesn’t have authority to fix student loans
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.
…
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.
…
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.
04.23.08
Latest PLUS loans proposal seems illogical!
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.
04.21.08
Bank of America announced it will not lend provate loans
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.
04.17.08
Financial Aid Roundtable available for free online
Following on a comment I got yesterday, here is the link to the Financial Aid Roundtable that my coworker hosted last week with industry experts and Financial Aid Officers.
http://www.studentloannetwork.com/student-resources/
Take a listen – the questions answered may be more helpful than you realize!
04.15.08
Washington Post Editorial cartoon parodies student loan “crisis”
You want to see this, trust me. This will make you laugh, even if it is ruefully:
http://www.washingtonpost.com/wp-srv/opinions/cartoonsandvideos/toles_main.html?name=Toles&date=04142008
You may need to register for a free account to access this cartoon.
04.14.08
3 Years at the Student Loan Network
Well, I don’t normally talk about myself much, but I thought I might bring this up today, what with all that’s going on in this industry at the moment. I’ve reached my third anniversary here at the Student Loan Network.
My, how time flies.
Lots of crazy memories. Our old offices with the leaky roof… Sharing an office with 2 other tech guys and an intern… Lots of Star Wars related moments – yes we are geeks here… Crawling under desks for what seemed like hours to set up the new office (and my mother wonders why I never wear skirts to work!)… Awarding our first scholarship through ScholarshipPoints…
Thanks to my co-workers past and present for 3 years of growth, silliness and laughter. You guys are the best.
04.11.08
Why is there a student loan “crisis” brewing?
I’ve had to answer this question a lot recently, as people are confused as to why this suddenly becamse a big deal.
Thankfully, the Washington Post recently ran a great article that explains what happened in layman’s terms. Really, it’s just a perfect storm of bad timing, leading to companies backing out of the market, closing completely and laying off thousands of employees right as we hit a recession.
Here’s an excerpt from the Washignton Post. You may need to set up a free registration to view the article.
Most lenders rely on the securitization of debt to generate enough cash to issue student loans. This process turns ordinary loans into securities, just like stocks, so they can be bought and traded on the debt markets. But lenders have been unable to securitize any loan made after Oct. 1, when a cut in federal subsidies to lenders went into effect. A few weeks later, the credit crunch that began among troubled mortgage securities started to ripple across the student loan industry. Both developments dried up investor appetite for student loans.
Then a second critical source of funds collapsed. Many student lenders receive funding through auctionrate securities — variable-rate bonds that are put up for bid as often as once a week to determine their interest rate. Normally, the bidding process produces a lower rate than that of traditional bonds. But over the past few months, as the credit crisis spread across the financial system, bidders have been unwilling to buy these bonds except at high rates.
Now, only student lenders with large cash reserves, such as banks, may be able to survive.
04.10.08
Did you miss the Financial Aid Roundtable? Download it for free.
If you missed yesterday’s free Financial Aid Roundtable, you can download it for free and listen to all the great tips and advice that were covered. Visit the site http://www.financialaidpodcast.com/2008/04/09/financial-aid-podcast-live-today-12-pm-eastern/ and subscribe via the links on the left. The episode will be available on the podcast next Wednesday. If you’ve never listened to a podcast, I would recommend using the iTunes link – iTunes is very easy to use.
04.08.08
TERI – largest non-profit student lender – files for bankruptcy.
In what came as a bit of a surprise, TERI filed for bankruptcy yesterday. TERI supplies a lot of lending money to other companies.
Here’s an excerpt from TERI’s press release:
The Education Resources Institute (TERI) Files for Chapter 11 Bankruptcy Protection Volatility in student loan market adversely impacts non-profit guarantor of private loans; organization is working to minimize disruption to student loan borrowers
BOSTON, MA (April 7, 2008) – The Education Resources Institute (“TERI”), the oldest and largest non-profit guarantor of private education loans in the country, announced today that it filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Massachusetts.
This action became necessary as the nation’s ongoing credit woes continue to cause unprecedented volatility in the student loan market and immense hardships on loan-related companies. Mounting difficulties in financing the securitization of private education loans, along with a rise in borrower defaults and delinquencies brought on by a slow economy, have adversely impacted TERI’s liquidity. Under the protection of Chapter 11, TERI, while it restructures, expects to continue its operations and initiatives that promote college access and success. The portions of TERI’s activities that are grant and foundation-funded will not be affected by the filing.
“TERI made this difficult decision to allow us to refine our loan guarantee business while ensuring that we continue to provide high quality college access and assistance programs to underserved individuals seeking guidance,” said Willis J. Hulings III, TERI President and CEO. “Chapter 11 will provide us with the time and opportunity to determine how best to provide our programs and services for the long term in this challenging economy. We will be working with our partners and lenders to minimize disruptions to student loan borrowers.”
