Student Loan Debt

No Reward for Prodigal Sons and Daughters

noreply@blogger.com (Steve Brown) — Fri, 13 Mar 2009 04:24:00 +0000

When I defaulted on my student loans back in the mid-90's, I was given the opportunity to make things right. William D. Ford agreed to purchase my student loan debt, and promised that if I didn't miss a payment for a year, they would remove all related derogatory items from my credit reports. I paid on time for a year, and they kept their promise. Having those negative items expunged from my reports was a huge deal for me, because my defaulted debt was holding me back financially.

Today, students who made similar mistakes with their student loan debt and who are now looking to rehabilitate their loans are hitting a brick wall. These students aren't able to get the negative marks on their credit reports removed because the current credit crisis has caused the market for student loan debt to dry up. Details of this issue can be found in this NextStudent.com press release. Here's a clip:

"...Before a defaulted borrower's student loan can be considered fully rehabilitated and the borrower's credit and loan status returned to good standing, the guarantor must resell the borrower's college loan to a new lender. But in the current credit freeze, no lenders are buying.

In November, the sole commercial bank still buying rehabilitated student loans announced it would no longer do so. Although a few non-bank entities may still purchase some of these college loans, 19 of the nation's 35 guarantors currently have no buyers for their student loans.

Each month, the Chronicle reports, $150 million in student loan debt is being added to the growing backlog of student loans awaiting rehabilitation.

Consumer advocates and guarantors are concerned that if something isn't done soon to help move these student loans out of default and restore borrower credit, borrowers may get tired of remaining in default and stop making payments on their student loans altogether -- which would lead to even more, snowballing defaults..."

But help is on the way. The Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF) program is now greasing the wheels of the credit markets by providing the funds necessary to revive the market for all kinds of debt, including student loan debt.

My prayer for the TALF: Godspeed.

Can You Get Student Loans Discharged When You File for Bankruptcy?

noreply@blogger.com (I.C. Jackson) — Wed, 28 Jan 2009 20:23:00 +0000

It makes sense that many individuals who find themselves filing for bankruptcy also have defaulted student loans. In our current economic climate, you may be hard pressed to find a college educated twenty or thirty-something who isn't experiencing woes with student loan debt. Government statistics released in September of 2008 report only to FY 2006, when default rates were low, at 5.2 percent. However, when recession hits, student loan default rates go up. Right before the U.S. recession of the early 1990s (which had been looming since Black Monday of 1987) student loan default rates reached a historic high of 22.4% in 1989.

I think it's safe to say that default rates are on the rise again.

So, many borrowers who are considering filing for bankruptcy have defaulted student loans as well. The problem, however, is that generally student loans aren't dischargeable via bankruptcy. In fact, there is very little consumer protection involved with student loan debt in any respect. Such borrower vulnerability is the inspiration for a gripping new film, Default: the Student Loan Documentary. The trailer for this documentary sheds a lot of light on how student loans are some of the most dangerous financial products of our time:

The current recession is sure to cause many other borrowers to default on their student loans, and this may come as they are already considering filing for bankruptcy. The lack of basic consumer protections like the right to refinance, Fair Debt and Collection practices, adherence to usury laws, Truth in Lending requirements, and statutes of limitations build a financial trap that many college graduates cannot escape in a poor job market. Because so many borrowers are uninformed about their financial rights and responsibilities when they acquire these loans, the lack of bankruptcy protection can come as a shocker when it comes time to file. Most people filing for bankruptcy cannot get their student loans discharged.

However, there is a small group who can...technically. If you find yourself experiencing such a great hardship, as in the case of a crippling disability, that you feel you cannot pay back your student loans you can indeed file a separate motion for the discharge of that debt.

But how often does that happen?

How Hard Is It To Get Your Student Loans
Discharged Because of a Disability?

Unfortunately, it is extremely difficult, even in an exceptional case, to get your student loans discharged.

The truth is that most borrowers will never actually be so financially burdened that they can prove that they would never be able to pay back their student loans. AllExperts.com adds,

"...Court decisions that find undue hardship for the debtor have been extremely rare in the reported case decisions. A review of the reported court decisions in this area will disclose that most undue hardship discharges that have been granted typically go to individuals that suffer from some type of very severe permanent and total disability or some sort of permanent disability that drastically restricts the ability of the debtor to more than a subsistence level of income. The courts require a finding that the debtor has proven each of the following three elements:

That the debtor cannot maintain, based upon current income and expenses, a “minimal” standard of living for himself and his dependents if compelled to repay the student loans; and

That additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

That the debtor has made good faith efforts to repay the student loans..."

Furthermore, if they indeed did meet such qualifications, retaining legal counsel would probably be just as burdensome, preventing them from taking legal action at all. Therefore, in all practicality, it is nearly impossible to get your student loans discharged when you file for bankruptcy. If you do file for bankruptcy, you will still have to find a way to pay your student loan debt. It will only continue to compound if you ignore it; you simply have to pay it back.

So, I guess that there are three guarantees in life - death, taxes, and student loan debt.

EDITORIAL: Just Because College Is Expensive, It Doesn’t Mean That You Shouldn’t Have To Pay For It.

noreply@blogger.com (I.C. Jackson) — Thu, 16 Oct 2008 05:33:00 +0000

As I was listening to The Rush Limbaugh Show yesterday, I heard a sound byte of Senator Obama and a young college student who was a little disgruntled about the cost of her education. Obama agreed that what she was experiencing wasn’t fair, and of course, went on to give his typical encouragement blurb about change, hope, or what have you. Limbaugh came back to rant about how Obama doesn’t think that people should have to pay for higher education because he is a socialist. Thoughts of my own mountain of student loan debt soon drowned out the radio, and I found myself sincerely contemplating the issue.

Was Obama right? How much should I have to pay for higher education?

Just to be sure Rush’s argument wasn’t unfairly slanted, I checked Obama’s position on his website, www.barackobama.com. His official stance on higher education costs read as follows:

...Obama and Biden will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students. Recipients of the credit will be required to conduct 100 hours of community service...

Low to middle income families would surely welcome such policies, and for good reason. According to the U.S. Census bureau, the cost of postsecondary education has more than doubled since 1990. Faced with today’s gloomy economic climate and grim future, parents and students are crying for relief. Obama promises to educate high school graduates for 1/3 of the cost of tuition.

But is that his job?

While the tax credit sounds great to those who qualify for it, it should worry Americans who do not, because they will be the ones paying the bill. With Obama appeasing the American middle class by promising to increase the tax burdens only on Americans making more than $250,000 a year, this wealth redistribution system essentially boils down to the “rich” and the government taking care of the “poor”.

Is that really fair?

Others argue that the cost of a student’s college education should only be negotiated by two parties - the college and the student. This could be viewed as a free-market approach to education. While some insist that private institutions not backed by the government only serve the rich, the opposite is true. Harvard University has plans to increase student aid this year in a grand effort to subsidize tuition so that more deserving students can afford to attend. This is a good example of a private institution compromising with students to accommodate the changing economic climate.

Whether you like Obama’s plan or not, the truth is that the U.S. government already offers generous student loan programs that empower millions of Americans to pursue higher education while contributing to the American economy. While we hate to pay back the student loans that seem to multiply exponentially as soon as you sign on the dotted line, we enjoy the professional positions that we are able to pursue as a result of our advanced education. Furthermore, the interest goes to help fund the government that provided the initial loan. This allows students to pay their own way through college without having to offer collateral or pay out-of-pocket. Is that not more than fair?

Just because college is expensive, it doesn’t mean that you shouldn’t have to pay for it.

My parents knew that they would not be able to afford to pay all of our college tuition, so they told us to study hard and apply for as many scholarships as we could. They took out loans to cover some of the difference, and so did we. That’s life. Otherwise, we would have either had to put off going to college until we could acquire the necessary savings and credit or pursue other options. This approach to funding higher education wasn’t pleasant, but it was most certainly fair. It’s fair because the return on the investment has the potential to be exponentially higher than the investment itself. If I owe $100,000 in student loans but I make $150,000 per year, the investment pays off substantially. Unfortunately, since great jobs are not guaranteed, college education is a risky investment. That doesn’t mean, however, that if you come up short that it wasn’t fair because the cost of the education was too high. You might then be able to requisition the government to bail you out because you lost money pursuing gain that did not pan out for you.

Wow; that sounds eerily familiar…

Losing Track Of Student Loans Can Wreak Havoc On Your Personal Finances

noreply@blogger.com (I.C. Jackson) — Sun, 28 Sep 2008 00:24:00 +0000

While having a big family is a wonderful blessing in and of itself, it’s especially rewarding during tax season. Don’t get me wrong; I value my family infinitely more than a tax refund, but it feels good to know that my commitment to my marriage and children is recognized by our government when tax time rolls around. We had twins last year, so when my husband and I realized that we would get a Child Tax Credit for both of them, we thought that was pretty nice. After deductions, we expected a return in the thousands, so we were happy campers.

During that same time, however, we were dealing with a frustrating issue that did not put smiles on our faces at all. Somehow, when I consolidated my federal student loans, one of them was not included. I didn’t understand how it could have happened, considering how informed the consolidation company was. Loan consolidators do all of the hard work for you - they call you out of the blue, offering to make your life easier by combining your student loans with a great interest rate and anything else you need, including forbearances. As they are explaining everything to you at the speed of light, they list all of your outstanding loans and help you to understand why making one easy monthly payment would ease your anxieties about student loan debt. They’re right; it does. So, I agreed with them and consolidated my loans. They reviewed the information with me again, reading back the information on each smaller loan that would be merged together into the big loan. So, I thought everything was taken care of.

And then we found the one that got away.

Actually, the one that got away found us; once the creditor discovered I had moved and gotten married, they politely called to let me know that I owed them money for a small student loan. It took a while to figure out what happened, but when we did, my heart sank. I was so young and I took out so many small loans while I was in school that I hadn’t been keeping track of them properly. So, when the consolidators did not have their facts and figures right, I should have been able to correct them, but I wasn‘t. I ended up with a defaulted loan because it went unpaid and unnoticed for quite some time. As many young Americans know, having a student loan in default is guaranteed to bring a lot of unwanted phone calls, anxiety, and grief that we did not want. One artist was so encumbered by Sallie Mae that he wrote a song about it:

So, we did everything we had to do to bring that loan back to current status, although it didn't happen until around the time we filed our taxes for the year. Thinking that everything was settled, we filed and waited, only to learn that the creditor had not reported the updated status of the loan, so our entire federal refund would be garnished to settle the debt.

Needless to say, that knocked the wind out of my sail.

Lots of people depend on their federal tax returns each year to cover large expenses or to revive their personal finances. However, outstanding student loans, if they are not current or at least in forbearance, can cause your federal income tax refund to be garnished. Although what we lost was actually enough to pay off the debt and would release us from it, we couldn‘t help but feel blindsided. Our tax preparer told us that we could have appealed the situation, considering that the return was garnished unnecessarily. We decided to just let it go. Although we mourned the loss of our beloved tax return, debt freedom, much like family, is simply too great a commitment to take lightly.

StudentLoanJustice.org

noreply@blogger.com (Steve Brown) — Thu, 28 Aug 2008 13:15:00 +0000

Was reading the New York Times on Sunday and came across an article about the StudentLoanJustice.org website. It's a web space you must visit at least once if you or a member of your family has student loans. Site is chock full of content that's both shocking and engaging. This site is not just a place to read up on the injustice that exists in the American student loan industry, it's also the official website of the StudentLoanJustice.org Political Action Committee (PAC).

Here's a clip from the site's "about" page:

"StudentLoanJustice.Org is a grassroots organization started in March, 2005. The purpose of StudentLoanJustice.Org is to give borrowers who's lives have been adversely affected by the predatory, uncompetitive laws that have been passed by Congress since the 1990's a place to tell their stories, to conduct research about higher education legislation, higher education lenders, the effect these have had on the lives of citizens, and to cause a solution to be legislated. Without advertising, revenue, or staff, StudentLoanJustice.Org has grown to thousands of members across the country comprising every state in the Union..."

When I defaulted on my student loans, it was because I didn't want to make the payments. I was trying to get ahead in life. I didn't think the government could or would take every penny I had in my bank account. But that's exactly what happened; I learned a hard lesson.

The U.S. economy is languishing right now, and I'm certain that a consequence of the economic downturn will be lots of Americans defaulting on their student loans in the months ahead. Many will have legitimate reasons for defaulting, like an unexpected illness or unemployment. And here is a very ugly truth I learn at the StudentLoanJustice.Org site: Sallie Mae CEO Albert Lord made more than $230 million in compensation since the late 90's, and a significant portion of that money came from the fees associated with borrowers defaulting on their student loans. Lord got so fat from student loans that he put in a bid to purchase the Washington Nationals baseball team.

Now, if a CEO grows a company's profits during his tenure at the top then, yes, he should get a generous bonus. If a company goes from grossing $3 billion per year to grossing $35 billion, then a bonus of $500 million is OK with me.

But banks that are in the business of making student loans are not like banks that make business loans, originate mortgages or issue credit cards.

If a borrower suddenly finds himself in financial dire straits and can't make payments on his/her student loans, that person can't get the debt discharged via bankruptcy, thanks to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 [1][2][3]. Default on your loans, and the fees will pile up (don't forget about the interest.) Those fees go to student loan specialists like Sallie Mae, and make CEO's like Mr. Lord very rich. To me, it's obscene that a CEO can get rich in this way.

There are some interesting articles and OpEd's here. There's a group in Facebook here. You can share your student loan horror story here.

Many Americans have shared their student loan horror story with StudentLoanJustice.org here. It's truly amazing how many defaulted due to hardship only to find that their student loan debt has doubled, tripled and even quadrupled due to interest and fees. No, it's not amazing, it's disgusting.

In a recent blog entry, I was second guessing my decision to use a significant chunk of my savings to payoff my student loans. After reading unnumbered horror stories at the StudentLoanJustice.org site, all my doubts have disappeared. Yep.

Is Leasing A City's Waste Treatment Plant A Good Way to Raise Cash for Students?

noreply@blogger.com (Steve Brown) — Wed, 27 Aug 2008 13:27:00 +0000

Mayor Don Plusquellic of Akron, Ohio has an ambitious plan to help graduates of Akron's public high schools pay for college and trade school. The plan: lease the city's waste treatment facility to a private contractor and generate as much as $200 million.

Yeah, I know. You're thinking that maybe this story is a hoax, that it belongs in the Onion. But it's not. Click here to read the AP story.

Was Paying Off My Student Loan Debt A Bad Idea?

noreply@blogger.com (Steve Brown) — Thu, 24 Jul 2008 07:46:00 +0000

Back in January 2008, I decided to payoff my student loan balance and be done with it. At the time, I wasn't too worried about draining my savings account, since business was good, and I felt that my business was more or less recession proof. I was paying 8% interest, and there was no way for me to consolidate to get a lower interest rate, because I had already consolidated with William D. Ford. (FYI: you can only consolidate student loan debt once, unless you go back to school and get more student loans.)

Here's what prompted me to payoff my student loan debt:

The above is a clip from the 2007 tax statement sent to me by the folks at William D. Ford. As you can see, since I consolidated, the amount I paid toward the principal was about the same as the amount I paid in interest. That just boiled my blood, and made me a little bit sick to my stomach. I'd been paying interest my whole life, and I was tired of it. This student loan debt was the only debt on which I was paying interest. I had an opportunity to rid my life of interest payments, so I took it.

Now, I'm beginning to wonder if paying off my student loan debt was a good idea. Yes, I know, you're asking yourself, "how the heck can paying off a huge debt be a bad idea?" It can be, if, like me, you are now working with a depleted savings account. I have learned -- the hard way -- that my business is not recession proof. In fact, I have learned that it is in fact very sensitive to economic conditions. This is the first time the economy has taken a hard spill since I began expanding my business back in 2003.

I had paid off my car note a few months previous to paying off William D. Ford, which did not help at all. At the time, I was very confident in my ability to maintain a steady and strong income. I got cocky, and now I'm paying the price.

Here's are the other directions I considered:

Keep paying ~$110 per month with 8% interest. Balance would be reduced to $0 in about 500 years.
Increase my monthly payment to reduce the time it will take to bring the balance to $0, and reduce the total amount I would have to repay. Of course, with this option, I still would have been burdened with an 8% interest rate.
Transfer the debt to a 0% credit card. A decent option, but with 2 significant negatives 1) Once the interest-free period ends, there is no way to guarantee that I'd be able to find another favorable 0% credit card deal to which I could transfer my balance. 2) Balance transfer fees. 18 months ago, finding a 0% credit card that doesn't charge a balance transfer fee was easy. With the onset of the economic slowdown and the global credit crunch, feeless deals have all but disappeared.

So, yeah, I'm hurtin' right now, but I'm still very glad that the debt is gone. I cannot put into words how satisfying it was to call William D. Ford to check my balance, and hear this.

So, how am I going to manage?

First, I'm going to petition the family court to have my child support payments reduced. My monthly payment is nearly $700 for one child, which is way too high considering my current income. The mother of my child and I recently canceled plans to send our daughter to an expensive, private school. The fees were just too high (~$8,500 per year.) That's too much for a child going into Kindergarten. Even if my current income was the same as it was one year ago, when I was making almost as much as a U.S. Senator, I'm 90% certain that I would have decided against sending her to that expensive school. Fact is, she's doing great in the subsidized private school she's attending now. She also goes to Kumon twice per week, which I can recommend to any parent who can afford the $200 per month (she is way ahead of her peers in math and reading, thanks in no small part to Kumon.)

Second, I'm going to cash out my whole life insurance policy and get a term life policy. Suze Orman has finally convinced me that whole life insurance is not the best way to go.

Third, I'm going to cutback on my food shopping. Thankfully, I stocked up on meat during the good times. I now have a deep freezer full of high quality meat that could last a year or so -- literally!

If you can payoff your student loans, I say do it. Just don't payoff your car note within the same time frame! Comments welcome.

Can You Save Money by Consolidating with Sallie Mae?

noreply@blogger.com (Steve Brown) — Tue, 31 Jul 2007 01:57:00 +0000

The folks at Sallie Mae have put together a handy and user-friendly tool whereby you can quickly and easily figure out if consolidating your student loans with Sallie Mae® can lower your monthly loan payments. After answering 5 questions, the animated tool will show you how much you can save each month, if at all, by consolidating with Sallie Mae.

Click here to jump to the new Sallie Mae tool.

Caveat: Consolidation can be advantageous if, for example, you have many loans from different agencies. However, it's important to remember that a lower monthly payment can also extend the life of your student loan indebtedness by a significant amount. A longer loan term invariably translates to paying more in interest charges in the long run. Keep that in mind when making your decision.

NB: Sallie Mae used to be a government-subsidized entity, but the company completed a conversion to being a 100% private organization back in 2004. Sallie Mae, therefore, no longer has an official relationship with the federal government.

Top 100 Student Loan Consolidators and Originators

noreply@blogger.com (Steve Brown) — Sat, 31 Mar 2007 18:13:00 +0000

If you're planning on applying for a new student loan, or planning on consolidating your existing loan(s), then you'll find the following news useful. The Department of Education recently released two top 100 lists: The Top 100 Student Loan Consolidation Lenders for 2006-2006, and the Top 100 Student Loan Originators for 2005-2006. These two lists are based on dollar amounts on new guarantees.

Nancy Pelosi Is A Friend of Federal Student Loan Aid: Let's Make Her Speaker of The House

noreply@blogger.com (Steve Brown) — Thu, 02 Nov 2006 15:09:00 +0000

Bill Moyers is an American hero.

Did you see the PBS show "Capitol Crimes?" If you haven't, you need to watch it before voting next week. To be perfectly frank, I can't see how anyone could vote Republican with the knowledge of what Tom Delay did as a Republican leader in The House of Representatives.

But, not all Republicans are bad, right? Well, maybe not all, but if you saw the standing ovation that Mr. Delay received just before he left Washington in disgrace, you can't help but wonder if most Republicans are in fact corrupt. Bottom line: I think most Republicans admire Mr. Delay, and I think that they would have him back as leader is given the choice.

Let's Get America Back on Track!

Do America a favor and vote for a Democrat on November 7th. The Republicans don't deserve to lead The House, and they should be relegated to minority status. Plain and simple.

So what does all this have to do with student loans? Glad you asked.

You see, if the Democrats take control of Congress, then Representative Nancy Pelosi will become Speaker of The House, and, unlike most Republicans, Nancy Pelosi is a friend of federal student loan aid programs. Over the past couple of years, the Republicans have cut funding to student loan programs, thus making it harder for smart and deserving kids who don't have parents with deep pockets to get ahead in the world.

Of all the programs the Republicans could have raided, why federal student loans? It's about priorities this time around, and the Republicans have demonstrated that their priorities are not the priorities of the American people.

Thanks for voting on November 7th.

The Student Loan Consolidation "Single-Lender Rule" Has Been Repealed by H.R. 4939

noreply@blogger.com (Steve Brown) — Fri, 23 Jun 2006 20:27:00 +0000

On June 15, 2006, President Bush signed The Emergency Supplemental Spending Bill--H.R. 4939-- into law. The passing of H.R. 4939 means that the student loan consolidation Single-Lender Rule has been repealed, so now student loan debtors can consolidate their student loans with any lender they choose (click here for some more background on the Single-Lender Rule.)

Now that student loan debtors have the freedom of choice, NextStudent.com--the company which offers no cost student loan consolidation--urges borrowers to consolidate before consolidation rates rise on July 1, 2006 (only 1 week left!)

For more, here's a clip from yesterday's press release:

"The single-lender rule that prohibited student borrowers from consolidating their student loans with the lender of their choice was repealed June 15, 2006 when President Bush signed into law the emergency supplemental spending package, H.R. 4939. This has paved the way for student borrowers to consolidate their federal student loans with the lender of their choice at low interest rates before the July 1, 2006 rate increase of 1.84 percentage points.

In order to take advantage of the low interest rates, student borrowers now are urged to consolidate before the July 1 deadline, according to NextStudent, the Phoenix-based premier education funding company. The well-established company offers low rates and unmatched benefits and incentives to all student borrowers.

By consolidating before the deadline, student borrowers will avoid an interest rate hike that is the second-largest rate increase in the history of the federal student loan program. Some of the expected new rates include: a 6.8 fixed rate for Stafford loans disbursed on or after July 1, 2006, and an 8.5 percent fixed rate for PLUS loans disbursed on or after July 1, 2006.

With consolidation, a borrower’s various loans are combined into one loan and one monthly payment at a low interest rate that is locked for the loan’s life. Repayment terms can be extended and thousands saved over the long term.

NextStudent’s offerings of low rates, aggressive benefits and discounts along with top-notch customer service are unrivaled in the student loan industry. The company offers a 2.5 percent interest rate for qualified borrowers, when benefits are applied: 0.60 percent reduction for students who consolidate after graduation; 0.25 percent reduction with use of Auto Debit; and an additional 1 percent for making 36 consecutive on-time payments.

Student borrowers now can consolidate their loans through the lender of their choice. With less than two weeks until the July 1 deadline, student borrowers are urged to consolidate their loans to get the best rate and incentives before the rate increase.

About NextStudent

NextStudent, federal lender code 834051, is dedicated to helping students and their families find affordable ways to pay for college. NextStudent offers one-on-one education finance counseling and has a portfolio of highly competitive education finance products and services including a free online scholarship search engine, federally guaranteed parent and student loans, private student loans, both federal and private student loan consolidation programs, and college savings plans.

The NextStudent Scholarship Search Engine, one of the nation’s oldest and largest scholarship search engines, is updated daily, available free of charge, completely private – and represents 2.4 million scholarships worth $3.4 billion."

The Dark Side of 529 College Savings Plans

noreply@blogger.com (Steve Brown) — Thu, 22 Jun 2006 17:31:00 +0000

Every responsible parent worries about it: how to save enough money so that the kids have enough to pay for college?

You've probably heard of 529 College Savings Plans; maybe your financial advisor, a friend or a family member has recommended 529 plans as a great way to save for university fees--fees that seem to rise at an unreasonable rate each and every year.

But what if someone told you that 529 plans are a bad idea? What if a financial aid expert told you that 529 plans are a hazard to the average family, and must be avoided at all costs? Would you believe it?

Well, that's how author and college financing expert Reecy Aresty feels about 529 plans. More from Reecy's side of the argument can be found below in the snippet from today's press release:

"'529 Savings Plans are a financial hazard to the average family, and must be avoided at all costs.' So says Reecy Aresty, the nation’s foremost authority on college admissions and financial aid. He’s a veteran radio and TV guest pioneering a subject of immense concern to millions of families, and author of the ground-breaking new book, 'Getting into College and Paying for It!,' the only book of its kind available in Spanish.

With over 25 years of playing the financial aid game, Aresty says, 'In the financial aid formulas, students have no asset protection allowance. Every dollar they have will be assessed at 25% or 35% per year, depending on the college. If a family will qualify for financial aid, and most do, then those with money in 529 Savings Plans face a far worse fate - all that money (often $100,000 or more) which could have been legally repositioned outside the financial aid formulas will all be spent, often before graduation.'

A number of states have made contributions tax deductible with North Carolina and Pennsylvania next in line. But here’s the rub. A 529 Savings Plan is considered a parent asset when calculating financial aid eligibility, and families will lose 5.6% of the value every year in financial aid. What’s worse is that colleges treat money in a 529 Plan as a resource, reducing financial aid dollar for dollar.

When confronted with the facts, financial aid officers nationwide have made comments such as: 'Depending upon the value, there will be annual distributions to pay for tuition and fees.' 'Our calculations may vary from year to year.' And this disturbing remark from a prestigious school in New England: 'Financial aid is not the issue here, paying for the student’s education is.'

The sad truth is that literally tens of millions of dollars a year are unnecessarily wasted because families are not made aware of the consequences when setting up these accounts. Additionally, numerous brokerage firms have been sued and suspended for misrepresenting 529 Plans in general.

Getting Into College And Paying For It! exposes the truth. Reecy’s book has numerous admissions strategies to guarantee the student that all-important edge to the college of their choice at application time, because, 'all the financial aid in the world is worthless without an admission ticket.'

The following financial aid strategies have resulted in millions more for those who became aware: how to legally avoid the 35% assessment on student assets, how divorced and separated parents can legally cut the cost of college by up to 90%, and how to appeal unappealing financial aid offers and negotiate for the best possible financial aid package. Here’s what some of the media have said about Reecy and his book:

'Reecy Aresty is an informed, interesting, and complete source on all matters relative to circumnavigating and understanding the quagmire that funding for higher education is in this day and age.' Brad Shepard, WHYN News Talk 560, Springfield, MA.

'A helpful family guide to college financing: Don't despair if you have an acceptance letter, but not enough financial aid. Aresty says if you plead your case properly, you could increase your financial aid by thousands of dollars. That's The Savage Truth!' Terry Savage, TV commentator on CNN, CNBC, PBS, NBC, and Chicago Sun-Times personal finance columnist.

'Filled with trade secrets and insider information, it is more than just a guide but a virtual manual on how to send America's students to the college of their choice without spending their family's life savings. It should be required reading for every parent of a college-bound student!' Florida’s Education Times, The Voice of Education, Palm Beach County Edition.

Reecy’s company, College Assistance, Inc., in conjunction with College Funding Prep of Norfolk, MA presents free monthly seminars that take families from the first day of 9th grade up to and including attending college. For additional information or to request a review copy, please call Reecy Aresty at 561-672-7374."

For tips on saving for college, click here.

It's Déjà Vu All Over Again: Student Loan Consolidation Rates Are Set To Increase On July 1, 2006

noreply@blogger.com (Steve Brown) — Sat, 13 May 2006 22:11:00 +0000

The good folks @ NextStudent.com (NextStudent.com offers no cost student loan consolidation) issued a press release yesterday to remind everyone that student loan consolidation rates are going to rise on July 1, 2006. July 1^ST is almost here, so if you plan on consolidating, now's a good time to do it!

Here's a snippet from yesterday's press release:

"It is a good idea for students and graduate students to consolidate their student loans before July 1, 2006, when interest rates are set to increase, according to NextStudent, the Phoenix-based premier education funding company. With little more than seven weeks remaining until the deadline, students are running out of time before the federal student loan program will be impacted by changes in rules and regulations.

The federal student loan program took some major hits with the passing Feb.8 of the Deficit Reduction Act of 2005, S. 1932. Although programs including Medicare and Medicaid were reduced, the federal student loan program was hit hardest with approximately $12.7 billion in cuts.

If students do not consolidate they likely will end up spending thousands more in total repayment on their student loans. That coupled with the higher cost of college and the decrease in federal student loan programs, students are finding it is more difficult to receive a college education.

Federal student loan consolidation can help. Consolidation collects all of a student’s loans, such as Stafford and PLUS loans, and packages them into one, allowing for one easy monthly payment. In addition, through consolidation the interest rate is locked in for the loan’s lifetime. For the long term, students can save upwards of 60 percent, which adds up to thousands.

NextStudent offers in-school borrowers a 4.75 percent interest rate. Eligible borrowers can receive an interest rate of 2.75 with applied benefits. This rate’s incentives include the .60 percent savings for those students who consolidate after graduation, an Auto Debit incentive equal to a .25 percent reduction, and a 1 percent additional decrease after the first 36 consecutive on-time payments.

Students can help themselves and save money that can be used for other daily expenses when they consolidate before the expected July 1 deadline. With student loan consolidation poised for major changes and interest rate hikes, it is important to consolidate while there still is time.

About NextStudent

NextStudent, student loan consolidation programs, and college savings plans.

The NextStudent Scholarship Search Engine, one of the nation’s oldest and largest scholarship search engines, is updated daily, available free of charge, completely private – and represents 2.4 million scholarships worth $3.4 billion.

For more information about NextStudent and its student loan programs, please visit the company’s Web site at http://www.nextstudent.com/."

Is H.R. 609 A Good Idea?

noreply@blogger.com (Steve Brown) — Wed, 10 May 2006 22:50:00 +0000

On March 30, 2006, the U.S. House of Representatives passed The College Access & Opportunity Act (H.R. 609): H.R. 609 would repeal the so called "Single Lender Rule" which denies student loan debtors the freedom to shop around for the best possible student loan consolidation deal. Is H.R. 609 good for student loan borrowers? Maybe. But H.R. 609 contains language that has many students, citizens and Members of Congress up in arms against it; check out these links:

http://www.aacrao.org/federal_relations/Vote_No_HR609.pdf

http://as.sdsu.edu/govt/council/pub_notice/notices/Archive/05-06/CB_F05-02.html

http://www.civilrights.org/issues/affirmative/details.cfm?id=41784

H.R. 609 is now being considered by the U.S. Senate. If you think the bill is no good, use the following link to contact your Senator and tell him/her how you feel about it:

http://www.yourcongress.com/MemberSearch.asp

And, because it's only right to present both sides of the story, here's a snippet from a press release that was issued today:

"For online student loan expert Mike O'Brien, CEO of national student loan marketer EDLoan.com, the drawn-out struggle on Capitol Hill over the repeal of the Single Lender Rule has proceeded at an excruciatingly slow pace. But he's primed and ready to lead the charge for student loan borrowers if the repeal passes, now considered a distinct possibility in 2006.

'The outcry against the Single Lender Rule has been going on since I first entered the industry in 2000,' says O'Brien, who launched financialaid.com that year, a student loan marketing organization that became one of the nation's most successful online loan marketers. 'I've had to tell literally thousands of borrowers that I can't help them get lower interest rates or better terms for their student loan--or we've had to personally work with borrowers to consolidate their loans through long, drawn-out processes--all because of this rule. Now that it finally looks like Congress is hearing the call to action, and we're ready to spread the word to borrowers everywhere.'

The hopes of student loan borrowers and entrepreneurial loan organizations like Edloan.com rest on The College Access & Opportunity Act (H.R. 609), passed March 30 by the House of Representatives and currently under consideration by the Senate. As part of its terms, the Act will allow student loan borrowers to 'shop for the best deals' on consolidation loans by eliminating the Single Lender Rule. This rule limits consumers' ability to consolidate with the lender of their choice by requiring consumers who have all of their loans held by a single lender to consolidate with that lender, even if they could obtain better terms and service elsewhere. Borrowers would now have the ability to consider other lenders for the best terms and services, while ensuring the original holder of their loans can and must compete to retain the loan.

If the Single Lender Rule is repealed, EdLoan.com plans an aggressive online promotional and educational campaign to notify borrowers of their new options."

Missouri Hopes to Keep Science, Math and Special Education Teachers In Missouri by Lessening Their Student Loan Debt Burden

noreply@blogger.com (Steve Brown) — Fri, 05 May 2006 03:17:00 +0000

Premise: How can a state government keep math, science and special education teachers from leaving the state? Payoff some of their student loan debt, of course!

Further details can found below in the snippet from today's press release:

"The Missouri Higher Education Loan Authority (MOHELA) has announced a grant of loan forgiveness to a group of teachers in Missouri to support the retention of math and science teachers in Missouri schools, and to reverse a shortage of special education teachers in the state. MOHELA identified 339 eligible math and science teachers and 222 special education teachers from 200 school districts in Missouri who hold MOHELA loans, and who have not yet reached five full years of experience. Each has received up to $2500 in loan forgiveness from MOHELA.

Missouri Governor Matt Blunt emphasized at his 2006 Math and Science Summit, held earlier this week, the importance of improving the knowledge and expertise of Missouri's students at all levels specifically in the areas of math, engineering, technology and science if we want to be global leaders in today's economy. During the summit, participants highlighted the importance of expanding the number of teachers with expertise in the areas of math, engineering, technology and science and finding ways to retain teachers in these fields. MOHELA believes its loan forgiveness program can play an important role in assisting Missouri to meet this challenge. This is another good example of how public-private partnerships can work together to focus resources to address a state initiative.

'MOHELA's Spring 2006 loan forgiveness program will help shore up Missouri's efforts to expand and retain teachers in these key fields,' explained Raymond H. Bayer Jr., Interim CEO and Executive Director. 'Eliminating up to $2500 in student loan debt reinforces the valuable role these teachers play in shaping Missouri's future, and acknowledges the personal and financial sacrifice teachers make to do this important work. We especially appreciate the encouragement and support of the Missouri state Departments of Elementary and Secondary Education (DESE), Economic Development (DED) and Higher Education (MDHE) in developing this initiative.'

MOHELA believes that experienced and qualified teachers are vital to improving student performance in math, science and special education. However, many teachers leave the profession before they have completed five years of teaching. This new plan strives to keep them in the classroom longer. MOHELA believes experienced teachers can yield positive improvements on college attendance and graduation rates.

'MOHELA remains committed to its core mission in the face of important and changing issues at the federal and state government level,' added Bayer.

Loan forgiveness is one of many MOHELA borrower benefit programs and is made possible by MOHELA's access to tax-exempt bonding authority granted by the Missouri Department of Economic Development. For more information on this, or other MOHELA services, log on to http://MOHELA.com.

MOHELA is one of the largest nonprofit student loan secondary markets in America, and is a leading holder and servicer of student loans with more than $5.2 billion in assets, and loan purchase activity in excess of $1.2 billion per year. MOHELA advances its benevolent mission of eliminating barriers for students so they can access higher education through local, regional and national partnerships with a variety of educational and financial institutions."

Where The Heck Are My Student Loans?

noreply@blogger.com (Steve Brown) — Thu, 06 Apr 2006 18:33:00 +0000

When I decided to consolidate my student loans, I had to spend an inordinate amount of time trying to figure out who exactly was holding my student loans (I wasn't very good at keeping records back then.)

So I am happy to report about a nifty utility I recently discovered at the National Student Clearinghouse website called the "LoanLocator"; simply enter your Social Security number and your date of birth on the secure page and the system may be able to retrieve your student loan information for you (participation in the LoanLocator service by your lender is necessary for a successful retrieval.) To give the LoanLocator system a try, point your web browser to:

https://www.studentclearinghouse.org/secure_area/loan_locator.asp

And feel free to post a comment here to let us know if the LoanLocator it worked for you. Thanks!

Student Loan Consolidation News: The Government-Run William D. Ford Program Will Implement New Restrictions on March 31, 2006

noreply@blogger.com (Steve Brown) — Fri, 24 Mar 2006 03:55:00 +0000

If you have a Direct Student Loan under the government-run William D. Ford consolidation program, or if you plan on consolidating with William D. Ford, then you should know that new restrictions will take effect on March 31, 2006. Further details can be found below in the clip from today's press release:

"The Department of Education has announced that, beginning March 31, 2006, they will restrict the right's of students to consolidate their William D. Ford loans. Currently, any borrower [who] has a William D. Ford student loan (also known as a Direct Student Loan) and one other Federal student loan, can consolidate their student loans with any eligible lender. After March 31st, the Department of Education will restrict which lender that each borrower can consolidate their loans with.

'The Federal Government has announced that, after March 31st, all Two-Step Student Loan Consolidations that are not complete will be invalid,' said Michael Babb. 'We believe that this change in regulations severely restricts the consolidation options available to federal student loan holders because the borrowers will not be allowed to pick who they want to consolidate their loans with.'

The pending Department of Education restrictions will severely limit the choices borrowers have when it comes to consolidating their student loans. This limited choice means borrowers may not get all the benefits available to them through the free Federal Student Loan Consolidation program.

'Even though it is a Federal program, not all consolidation packages offer the same interest rate reduction,' added Babb. 'To ensure that eligible borrowers receive the best interest rate for their consolidation loan, we are encouraging borrowers to do their research and work with a consolidation company that offers the best benefit package. We are also encouraging all borrowers to find a company that offers a secure, e-signature application. Following these two simple rules will ensure borrowers that they are getting the best interest rate available and that they will meet the upcoming March 31st deadline.'

Based in Tampa, Florida, Academic Financial Solutions has saved Federal Student Loan holders millions of dollars by reducing their payments through consolidation. For more information on how to consolidate Student Loan debt, call Toll Free 1-866-416-6333 or visit their Website at http://www.AcademicFinancial.com."

Update: March 24, 2006 - The folks @ StudentLoanConsolidator.com issued a press release on this topic today; snippet below:

"In less than one week, up to 40% of students and college graduates with federal student loans may find themselves unable to consolidate their student loans with the lender of their choice. New regulations from the US Department of Education will restrict the availability of consolidation options for thousands of students around the country, robbing them of their right to choose which companies may help them manage ever-growing student loan debt. If students fail to file a consolidation application before March 30, 2006, they may possibly lose the right to choose their consolidation lender forever.

When the new regulations take effect, students will only be able to consolidate their loans with their current lender, effectively forbidding them from 'shopping around' for lenders offering the most money-saving options. Students who hold loans with the Department of Education plus a private lender, or who wish to reconsolidate previously consolidated college loans will be affected most.

Jonathan Rudy, director of loan consolidation at StudentLoanConsolidator.com, remarked, 'These new regulations, in concert with the Deficit Reduction Act legislation passed earlier in the year, do a great disservice to students and college graduates who want to find a lender that offers them the most money-saving benefits available. Once the deadline passes, affected students will be stuck with whoever currently holds their loans, and it would not surprise me to see borrower benefits suddenly disappear or be drastically cut back as lenders realize these students have no other choices.'

'I cannot emphasize enough that students and graduates need to act immediately to file consolidation applications. Once the clock strikes 11:59 PM on March 30, the window of opportunity closes, and no one knows how long it will remain closed - if it ever reopens,' continued Mr. Rudy.

Student loan consolidation offers the ability to lock in fixed rates, make one payment a month, and cut monthly payments by as much as 60%. Parents with federal PLUS loans are also generally eligible for student loan consolidation as well.

For more information or to consolidate federal student loans, visit http://www.StudentLoanConsolidator.com or call toll-free (877) 328-1565.

Email Customer Service at StudentLoanConsolidator.com for more information; to apply for a student loan consolidation, graduates should visit http://www.StudentLoanConsolidator.com as soon as possible or call toll-free (877) 328-1565.

StudentLoanConsolidator.com is a service of the Student Loan Network (http://www.StudentLoanNetwork.com), an education services company offering students options for managing the entire education life cycle, from getting into their college of choice to financing their education and beyond. The Student Loan Network is based in Quincy, Massachusetts."

Consolidation Rates Go Up in July; Consolidate Now @ The Best Possible Rate, If You Haven't Already...

noreply@blogger.com (Steve Brown) — Tue, 21 Mar 2006 08:21:00 +0000

Thanks to The Deficit Reduction Act of 2005, student loan consolidation rates will be going up on July 1 of this year. But according to a press release issued by the folks at NextStudent.com, you can consolidate your student loans, as low as 2.75% right now.

Here's a snippet from today's press release:

"NextStudent, one of the nation’s premier federal student loan consolidation and education funding companies, is pleased to now offer to qualified borrowers a 2.75 percent fixed student loan consolidation rate, with benefits applied.

The Deficit Reduction Act of 2005 recently passed and brought with it major cuts to the federal student loan program along with changes that will negatively impact federal student loan consolidation rates and regulations. Changes are set to take effect July 1, so eligible borrowers now can lock in low rates and reduce payments as much as 70 percent.

According to NextStudent, in-school borrowers can receive a student loan consolidation rate of 4.75 percent, allowing them to avoid the July 1 increase on their federal student loan rates. The company’s borrower incentives include: one easy payment, no prepayment penalties and a longer payment term.

The student loan consolidation program has no fees or costs and is beneficial for borrowers who want to reduce or postpone monthly payments before the July 1 rate increase when it will become more difficult to consolidate. NextStudent offers eligibility determination in one minute to borrowers who want to prevent interest rate hikes on their student loans.

About NextStudent
NextStudent, listed at No. 15 on the Top 100 Consolidating Lenders for fiscal year 2004, is dedicated to helping students and their families find affordable ways to pay for college. NextStudent offers one-on-one education finance counseling and has a portfolio of highly competitive education lending products and services including an online scholarship search engine, low and no-cost federal student loans , parent loans, private loans, student loan consolidation programs and college savings plans.

The NextStudent Scholarship Search Engine , one of the nation’s oldest and largest scholarship search engines, is updated daily, available free of charge, completely private – and represents more than 800,000 scholarships worth $2.8 billion.

For more information about NextStudent and its new 2.75 percent fixed student loan consolidation rate, please visit the company’s Web site at www.nextstudent.com."

Tips on How To Save for College

noreply@blogger.com (Steve Brown) — Thu, 23 Feb 2006 20:10:00 +0000

I came across a press release today that contained some great tips on how to save money for a college education (thanks to Andrew D. Schwartz and the good folks @ www.MDTaxes.com). Here's a snippet from today's release:

"...One positive outcome of the Deficit Reduction Act of 2005 is that the maximum Stafford Loan increases from $2,625 to $3,500 for first-year students and from $3,500 to $4,500 for second-year students, effective July 1, 2007.

Saving For A Child's Education
Do you have a child who will attend college in the future? Rising student loan interest rates provide an extra incentive for you to save more money towards your child's education.

What is the best way to save for a child's education these days? With all the options available to you today, it's important to understand the basics:

529 Plans. With these state sponsored education savings plan, you purchase into a managed investment portfolio based on when your child will attend college. Amounts contributed grow tax-deferred, but since the post-2010 rules have not yet been determined, withdrawals from a 529 Plan to pay for college tuition and fees might end up being taxed at your child’s rate starting in 2011. For 2006, you can contribute up to $12,000 per child into a 529 plan. Or, you can make five years worth of contributions, up to $60,000, all in one year. Just make sure to file a Gift Tax return (Form 709) electing to spread your 529 contributions over five years.

Pre-paid Tuition Programs. If you’re concerned that the cost of college will rise quicker than your investment portfolio, take a look at pre-paid tuition programs. Many states offer these college savings programs on behalf of colleges and universities within their state. Or you can check out the Independent 529 Plan (www.independent529plan.com), which is a national pre-paid tuition program representing approximately 250 schools throughout the country.

Coverdell Education Savings Accounts. Formerly known as Education IRAs, you can contribute up to $2,000 per beneficiary per year into an ESA. You’re not allowed to contribute to an ESA if your adjusted gross income exceeds $220,000 ($110,000 if single). Amounts contributed grow tax-free, as long as the money is used for your child's K-12 or college tuition or other allowable education expenses. Unlike 529 Plans, the tax rules for ESAs won’t change in 2010 when the 2001 Tax Act sunsets.

Two Tax Credits. If you're paying for a child's tuition out of your current earnings, don't overlook the Hope Scholarship Credit, which saves you up to $1,500 per year in taxes each of the first two years of college. Another option is the Lifetime Learning Credit, which saves you up to $2,000 in taxes per year. Both of these credits phase out this year once your income exceeds $107,000 if married or $53,000 if single.

U.S. Government Bonds. Another way to save for a child's education is with EE Bonds or I Bonds. Both of these bonds can be purchased at a bank or from TreasuryDirect.gov. I-Bonds are currently yielding 6.73%. As long as your child's name isn't on the bond, the interest isn't taxable to you as long as the total bond proceeds don't exceed the amount spent for tuition and fees. This tax break has a pretty low phase out - $121,850 for married couples and $76,200 for single individuals in 2005.

Employ Your Child. If you have an unincorporated business, you can pay your child up to $5,150 (in 2006), deduct his or her wages, and your child won't pay any income taxes (provided the wages are the only income earned during the year) or social security taxes. You can also contribute up to $4,000 from those wages into a Roth IRA each year, which would be available to pay for your child's college expenses, fund first time homebuyer costs, or grow tax-free over the next fifty years or more.

Higher Rates Are Here To Stay
'It looks like the days of low interest rates on your student loans end on July 1st,' says Schwartz. 'Consolidating your loans by June 30th, and taking advantage of the strategies described above to save for your child's education can help cushion the blow...'"

Bush Signs $12 Billion Worth of Cuts to Federal Student Loan Aid Programs Into Law

noreply@blogger.com (Steve Brown) — Thu, 09 Feb 2006 09:00:00 +0000

On February 1, 2006, The U.S. House of Representatives passed S.1932--The Deficit Reduction Act of 2005--by a very tight vote of 216-214; basically, a Republican bill passed by a Republican majority in Congress (S.1932 only made it through The U.S. Senate by a deciding vote that was cast by Senate President Dick Cheney.) S.1932 includes $12 billion of cuts to federal student loan aid programs. Yesterday--February 8, 2006--Bush signed S.1932 into law.

What are the real world implications of S.1932? On July 1, 2006, the interest rate on Federal Stafford Loans will go from 4.7% to 6.8%. The interest on Parent PLUS loans will go from 7.9% to 8.5%.

OK, now let's get as real as we possibly can here: if, for example, you are a parent, and you borrowed $30,000 via a Parent PLUS federal student loan to pay for your child's education, then, after July 1, 2006, you will pay over $10,000 more in interest payments by the time you pay the balance down to zero (you can avoid the interest rate increases by taking advantage of no cost student loan consolidation before July 1, 2006.)

Here's what Mr. Bush had to say about the changes to federal student loan programs when he signed the bill into law:

"The Deficit Reduction Act makes important improvements to federal student loan programs. The bill cuts excess government subsidies to lenders and makes other reforms that will help us reduce overall student loan costs by about $22 billion. With that money, we will save taxpayers $12 billion -- because we intend to increase student aid by 10 additional billion dollars. What I'm telling you is, the students are getting the money, and we're making the program a lot more efficient for the taxpayers."

For a different point of view, I've posted below a snippet from a recent NextStudent.com press release:

"Congress voted on and passed Feb. 1 the Deficit Reduction Act of 2005 that included massive cuts to federal student loan programs. The $12.7 billion in student loan cuts and changes in laws regarding student loan consolidation will negatively impact those students seeking a college education and others seeking to consolidate their higher interest loans. The industry expects a rush of students seeking to consolidate at the current low rates before the imminent July 1 increase.

Prior to the bill’s passing students and concerned citizens throughout the country made last-minute phone calls and sent e-mails urging their representatives to vote no on budget reconciliation, but to no avail. Previously the bill passed the House by a narrow margin of 212-206.

Students and graduates now are in jeopardy. With college costs increasing every year and the forthcoming higher interest rates on student loans and student loan consolidation, the dream of a college education for many could become just that: an unattainable dream for students and families who fear they cannot afford college let alone the cost of student loans.

Student Loans Take the Hardest Hit

Throughout this past fall and early winter students, parents and other concerned citizens had been gearing up for the vote. While the government looked to cut major spending in the wake of disasters such as Hurricane Katrina, students spoke up through the Stop the Raid on Student Aid Campaign. Unfortunately, the campaign in the end did not stop the passing of the five-year $39.7 billion legislative package that includes the $12.7 billion in cuts to student loans, by far the worst of the cuts to federal programs that also include Medicaid and food stamps.

The final vote came on the heels of President Bush’s Jan. 31 State of the Union address, which was expected to garner support for budget reconciliation. The House reconvened on the same day for the Second Session of the 109th Congress.

A majority of the legislation’s provisions to student loans will take effect on July 1 and others will be implemented over time. Some provisions include an increase to 6.8 percent for federal Stafford Loans, from rates as low as 4.7 percent. PLUS fixed interest rates will jump to 8.5 percent, from 7.9 percent.

Consolidate Student Loans Before July 1 Rate Increase

With student loan consolidation rates set to skyrocket on July 1, now is the time for students and graduates to consolidate, according to NextStudent, the Phoenix-based education funding company. Students and graduates now are urged to consolidate as current consolidation rates can be as low as 2.75 percent with benefits applied. Other incentives to consolidate include a longer payment term, one monthly payment and no prepayment penalties.

The following are other provisions affecting student loan consolidation that take effect July 1, 2006. Students and graduates should be aware of the new regulations so that they now can take action:

Consolidation Loans

Retains the single holder rule

Eliminates spousal consolidation

Eliminates in-school consolidation

Eliminates reconsolidation in both FFELP and DL, except that a FFELP borrower whose delinquent loan has been submitted to a guaranty agency for default aversion is eligible for a DL Consolidation loan for the purpose of obtaining an income contingent repayment plan

Provides that a FFELP borrower may consolidate in the Direct Loan Program only if a FFELP lender denies the borrower’s application for a consolidation loan or denies the borrower’s application for a consolidation loan with income sensitive repayment terms. Additionally, directs the Secretary to consolidate loans of defaulted borrowers

Provides that, unless otherwise specifically provided, the terms of DL consolidation loans must be the same as FFELP consolidation loans..."

My personal take on this? During the recent State of The Union speech, Mr. Bush said that we, as a nation, should boost investment in math, science, research and education, yet with S.1932--the bill that Mr. Bush just signed into law--the average, young, middle class American, with the will and the brains to make it through 4 years of college, will have a tougher time finding the money it takes to make it.

What are your feeling about the changes to federal student loan programs? Your comments are welcome and appreciated.

Supreme Court Decision: Social Security Benefits Are Fair Game

noreply@blogger.com (Steve Brown) — Wed, 07 Dec 2005 23:08:00 +0000

Years ago, when the government emptied my bank account in order to satisfy a portion of the student loan debt that I wasn’t repaying, I was floored. I could not believe that the government had the power to take away all my money in such a manner. It was a wakeup call that I won’t ever forget, and it was, quite frankly, one that I really needed.

From this day forward, many retired and disabled folks who receive Social Security (SS) benefits, and who’ve made the mistake of disregarding their student loan debts, may experience the same shock and horror that I went through when they get their next SS check.

Today, the Supreme Court ruled against Mr. James Lockhart, the 67-year-old retired postal worker who’s SS check had been cut by 15% in order to make payments towards his 20-year-old student loan debt.

Lockhart’s case was controversial in 3 dimensions:

Lockhart defaulted on his student loan debt 20 years ago, which means that his SS benefits should have been protected by the Debt Collection Act of 1982.
The Social Security Act stipulates that SS benefits should not be "subject to execution, levy, attachment, garnishment, or other legal process."
Lockhart claimed that he needed every penny of his monthly social security check ($874) to pay for food and the medicines he needs to treat his diabetes and heart disease. James Lockhart lives in public housing.

Today’s Supreme Court ruling sorts out 2 conflicting rulings made by 2 lower courts regarding Lockhart’s case and another similar case.

The 9^th US Circuit Court of Appeals had ruled against Mr. Lockhart because The Court felt that the Higher Education Act gives the government every right to take a cut of Lockhart's SS benefits.

However, the 8^th Circuit Court made a contradictory ruling in a case that was separate from, yet very similar to, the Lockhart case. The case involved Ms. Dee Ella, a Kansas City, Missouri woman who defaulted on her student loan debt 20 years ago; the 8^th Circuit Court decided that the Social Security Act and the Debt Collection Act should protect Ms. Ella from having her SS benefits offset by the government.

So, basically, the job of the Supreme Court was to decide which Act of Congress should trump the other: The Higher Education Act (or, to be more precise, the Higher Education Technical Amendments) won out.

So now it doesn’t matter how poor or disabled your are, it doesn’t matter if you need every penny of your SS check to pay for life-preserving medicines and food, and it doesn’t matter if you defaulted on your student loan debt 30 or even 50 years ago: the government can--and most likely will--offset your SS benefits if you default on your federally subsidized student loans.

Your comments are welcome and appreciated.

The James Lockhart "Social Security Offset" Case Goes To The Supreme Court

noreply@blogger.com (Steve Brown) — Tue, 01 Nov 2005 09:50:00 +0000

Remember the story about James Lockhart, the 67-year-old guy who's having his meager Social Security (SS) benefits garnished because he defaulted on his student loan debts 20 years ago? Well, Mr. Lockhart sought a legal remedy for his predicament, and now his case has made it all the way to the Supreme Court!

The case is now being decided by the nation's highest court because 2 lower courts have made conflicting rulings regarding Lockhart's case and another similar case.

Let's first consider Mr. Lockhart's case, in which The 9^th US Circuit Court of Appeals ruled against Mr. Lockhart. This particular panel of jurists ruled against Mr. Lockhart because, according to their decision, the Higher Education Act gives the government every right to take a cut of Lockhart's SS benefits (also known as an "offset") in order to satisfy his student loan debts, even though these debts are over 10 years old. The age of Lockhart's debt is very significant here, because according to the Social Security Act and the Debt Collection Act, Mr. Lockhart's SS benefits should be shielded from government collection because his student loan debts are over 10 years old.

In other words, there's some serious conflict between these laws: on the one hand, you have the Higher Education Act which should permit the government to take a portion of Lockhart's SS benefits despite the fact that his student loan debts are very old, while on the other hand, Lockhart's SS benefits should be protected by the Social Security Act and the Debt Collection Act.

So with this critical conflict between the above mentioned laws, it was probably inevitable that another court would rule contrary to the decision handed down by the 9^th US Circuit Court of Appeals. And that's exactly what happened.

Dee Ella of Kansas City, Missouri, had borrowed over $4,000 via government student loans in order to pay for college. Back in 1984, Ella defaulted on her student loans. In 2001, her SS benefits were cut from $814 to $750 as a result of a government offset. Sounds familiar? Indeed. Ella's case is very similar to Lockhart's: student loans debts that are over ten years old; the government offsetting SS benefits despite conflicting laws.

Well, in Ella's case, the 8^th Circuit Court ruled in favor of Ella; the Court decided that the ten-year limit on SS offsets should be applied in her case, and that her SS benefits should be left alone.

So now it's up to the Supreme Court to sort out this mess. The Court's ruling should be interesting, especially because the Court has a new boss. Stay tuned.

How do you feel about the government offsetting SS benefits in order to satisfy old student loan debts? Should the ten-year rule stick, or should student loan defaulters be responsible for their education loans regardless of how much time has passed? Your comments are welcome and appreciated.

National Institutes of Health Starts Taking Applications For Its Loan Repayment Program

noreply@blogger.com (Steve Brown) — Tue, 01 Nov 2005 08:59:00 +0000

The National Institutes of Health (NIH) has started a Loan Repayment program that repays up to $35,000 of student loan debt per year. Sounds super-generous, right? Well, as you might have guessed, it's a program reserved for highly qualified individuals, i.e. you've got to have a PhD, and you have to satisfy other very specific prerequisites to boot.

Details from a press release issued today are below:

"On Thursday, September 1, 2005, the National Institutes of Health (NIH) began accepting applications to its five Loan Repayment Programs (LRPs). Deadline for applications is December 1, 2005.

The five LRPs offered by the NIH include the Clinical Research LRP, Clinical Research LRP for Individuals from Disadvantaged Backgrounds, Contraception and Infertility Research LRP, Health Disparities LRP, and Pediatric Research LRP.

Through these programs, the NIH offers to repay up to $35,000 annually of the qualified educational debt of health professionals pursuing careers in biomedical and behavioral research. The programs also provide coverage for federal and state tax liabilities.

To qualify, applicants must possess a doctoral-level degree, devote 50 percent or more of their time (20 hours per week based upon a 40-hour work week) to research funded by a domestic non-profit organization or government entity (federal, state, or local), and have educational loan debt equal to or exceeding 20 percent of their institutional base salary. Applicants must also be U.S. citizens, permanent residents, or U.S. nationals to be eligible.

'The NIH Loan Repayment Programs offer an easy and effective way for research scientists to focus more on medical research and less on repaying student loans,' says Dr. Norka Ruiz Bravo, Deputy Director for Extramural Research. 'Since 2002, nearly 4,000 qualified health professionals have benefited from more than $225 million disbursed in loan repayment support. Through these programs, the NIH has opened doors for many young scientists to launch careers in research without the burden of student loan debt.'

All applications must be completed by 8 p.m. eastern time, December 1, 2005. Visit www.lrp.nih.gov to apply.

The Office of the Director, the central office at NIH, is responsible for setting policy for NIH, which includes 27 Institutes and Centers. This involves planning, managing, and coordinating the programs and activities of all NIH components. The Office of the Director also includes program offices which are responsible for stimulating specific areas of research throughout NIH. Additional information is available at http://www.nih.gov/icd/od/.

The National Institutes of Health (NIH) — The Nation’s Medical Research Agency — is a component of the U. S. Department of Health and Human Services. It is the primary Federal agency for conducting and supporting basic, clinical, and translational medical research, and it investigates the causes, treatments, and cures for both common and rare diseases. For more information about NIH and its programs, visit http://www.nih.gov."

New Website Offers Tips for College Students and Grads with Student Loan and Credit Card Debts

noreply@blogger.com (Steve Brown) — Tue, 01 Nov 2005 01:54:00 +0000

YouCanDealWithIt.com offers free advice, tools and tips for college students and college graduates with student loan and credit card debts.

Here a clip from a press release issued today:

"YouCanDealWithIt.com, a comprehensive money management website, offers invaluable advice on budgeting, credit cards and student loans for college students and recent graduates, an increasingly indebted segment of American consumers.

Today, more than 83 percent of college students have at least one credit card and the average balance is $2,347, according to HSH Associates, an organization that tracks the country's consumer loan information. The typical college graduate owes $3,262 on their credit cards and almost $20,000 in student loan debt upon graduation.

As students and grads struggle to take control of their debt and manage their finances, YouCanDealWithIt.com can help with information on establishing good credit and handling existing debt—both important issues for future success.

The website offers easy-to-follow tips on how to save money every day with tools such as an online budget calculator. Users can create a monthly budget, learn how to prioritize spending based on needs vs. wants, and track and make adjustments as their finances change.

'The YCDWI budget calculator is really a great resource for planning my monthly expenses,' says Kimberly Rothwell, a spring '05 Georgetown University graduate. 'I really want to move out of my parents` house, and now I know how much rent I can afford.'

The website is a public service initiative of American Education Services (AES). Deena Engle, Assistant Vice President of AES’ Default Prevention Services, suggests students use YouCandDealWithIt.com to become smart money managers while still in school. 'After graduation, financial responsibilities grow substantially. Grads are faced with the challenges of managing student loan payments and other debt with brand new expenses such as rent, car loans and other costs.'"

Starting Tomorrow, Discharging Student Loan Debt By Declaring Bankruptcy Will Be Much Harder To Do, But Not Impossible

noreply@blogger.com (Steve Brown) — Sun, 16 Oct 2005 18:15:00 +0000

If you've been thinking about using bankruptcy to get rid your student loan debt(s), you better be prepared to prove that your financial situation is extremely dire. That's because changes to the nation's bankruptcy laws that will take effect tomorrow will make it far more difficult to discharge student loan debt using either Chapter 7 or Chapter 13 bankruptcy protection.

Some folks in the forums I frequent think that discharging student loan debt will be impossible once the changes take effect tomorrow, but this is not the case. In fact, you will still be able to discharge student loan debts with either Chapter 7 or 13, but you must be really suffering financially, or, as the lawyers like to put it,

"...paying the debt would cause the debtor 'undue hardship.'"

And the burden of proof will be on you. To secure a "hardship discharge", you'll need to prove that you are, e.g. unemployable for some reason, or suitably underprivileged, or that there are really no jobs available for someone with your skills. Certain physical or mental disabilities may also be enough to convince a bankruptcy judge that you are worthy of a discharge.

Of course, as with any legal battle, having a lawyer to represent you in bankruptcy court will drastically increase your chances of success if you decide to opt for bankruptcy protection.

It's really no wonder that these changes have been put into place. Back in the 1970's and 80's, certain unscrupulous college students would take out student loans in order to finance their college educations. They would then declare bankruptcy right after graduating from college and get their student loan debts erased. End result: a free education! So, as is usually the case, we all have to pay for the misdeeds perpetrated by a handful of scammers.