March 15, 2007

Student Loan lenders paid kickbacks to colleges

Posted in Student Loan News at 1:09 PM by Joe From Boston

Here’s a bit more on the growing scandal about student loan companies that paid kickbacks and gave special benefits to colleges in return for sending students their way.  Visit CNN to read the original article.

Student loan kickbacks eyed in probe
Lenders allegedly paid kickbacks to universities and employees to lure students their way, the attorney general says.

NEW YORK (Reuters) — New York Attorney General Andrew Cuomo said Thursday that companies specializing in student loans paid kickbacks to universities and their employees for steering business to them.

Lenders paid for trips for university officials, provided computer systems, and put school representatives on their boards to curry favor, Cuomo said at a press conference.

Investigations are continuing and lawsuits against lenders and schools remain an option, he said. His office has not yet announced any legal action.

Last month Cuomo, who succeeded Eliot Spitzer as attorney general Jan. 1, said his office had expanded a probe of whether lenders use payments and perks to encourage colleges to steer student borrowers their way.

Back to school

Spitzer began a preliminary inquiry in November, requesting information from student lenders Nelnet Inc. (up $0.14 to $24.45, Charts) , Education Finance Partners, Educap and Sallie Mae, the nation’s largest provider of student loans.

Cuomo expanded the probe by sending letters to more than 60 U.S. educational institutions, requesting records that detail how they develop their lists of preferred lenders. The attorney general also sent requests to two more lenders: The College Board and CIT Group.

Concerned that the guidance offered to students is tainted by conflicts of interests, Cuomo asked schools to disclose if there are financial relationships with lenders and if any favors were offered to individual financial aid officers.

The probes are the latest in a series of regulatory and legislative difficulties for student lenders. The House of Representatives in January voted to halve interest rates on many student loans to 3.4 percent over five years.

Sen. Edward Kennedy (D-Mass.) meanwhile has pursued support for a bill that would reward colleges for steering students to direct government loans instead of government-guaranteed loans provided by private sector companies like Sallie Mae.

The New York probe wants to determine whether lenders are making payments and doing favors, such as funding all-expense-paid trips for college officials, to be included on preferred lists schools give students shopping for loans.

Why You Should Not Consolidate Private Loans with Federal Loans

Posted in Consolidation at 9:32 AM by kpops

I often hear from borrowers that want to include a private loan with their Federal Loan Consolidations. This is something that simply cant be done at all because you can not turn Private Loans into Federal Loans. You can however consolidate Federal Loans into a Private Loan Consolidation although this is HIGHLY Discouraged. Why? When you consolidate these loans together all of the loans then become one and your Federal Loans are no longer backed by the Government. Federal Loan Consolidation carries benefits such as Loan Forgiveness, Discharge, Fixed Interest Rates, and Deferments or Forbearances. Private Loan Consolidations on the other hand are entirely Credit Based, stay a a Variable Interest Rate and are rarely ever Fixed, do not necessarily have Deferments or Forbearances, and can most often not be discharged. Do the benefits that Federal Loans have sound like something you want to give up? I would say most often not! What you can do though is consolidate both with the same company. Contact The Student Loan Network to find out how to apply for Federal and Private Loan Consolidation.

The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans

More political wrangling over college funding

Posted in Student Loan News at 7:37 AM by Joe From Boston

They’re at it again. President Bush wants to cut $760 million from government programs that help fund colleges and universities, in order to pay for closing and refurbishing military bases – something the president did not do during the Republican-led Congress of the past 6 years. To me, this just smacks of political infighting and a complete disregard for our students. Read the article in the Chronicle of Higher Education – a paid subscription may be necessary.

Bush Plan to Cut College Programs Is Considered a Dead Letter in Congress

President Bush has proposed slashing $760-million from programs that benefit colleges this year and using the savings to help cover a $3.1-billion shortfall in a program for closing and renovating military bases. But the proposal is considered dead on arrival in Congress.

Lawmakers, who would have to consent to the plan, have a long history of ignoring such requests, viewing them as interference with their power of the purse. The cuts would reduce appropriations that Congress approved only last month, to finance federal programs for the remainder of the 2007 fiscal year, which ends on September 30.

Congress’s Democratic leaders have already said that they plan to provide money for the military bases in a supplementary appropriations bill for 2007. Before the Democrats won control of Congress, in November, Mr. Bush never proposed such cuts to any appropriations bills approved by the Republican-run Congress.

The higher-education programs singled out by Mr. Bush, in a memorandum released on Friday, include several that he has proposed reducing in his budgets for 2008 and past years, but that Congress has chosen to finance anyway.

He wants to cut $381.0-million from Career and Technical Education State Grants and eliminate $104.8-million for Tech-Prep State Grants; both programs support vocational and technical education offered by community colleges. He would eliminate the entire $65.0-million budget for the Leveraging Educational Assistance Program, which encourages states to match federal dollars for need-based student aid. In addition, he would eliminate the Commerce Department’s Advanced Technology Program, which provides grants for teams of businesses and universities to develop new technologies for commercial use. And he would cut almost in half spending for the Agriculture Department’s Hatch Act grant program, which supports research by land-grant universities.