Student Loan Blog : PLUS Loans

NextStudent Unveils Website with New Look, Improved Features

Student Loan Girl — Sat, 07 Jun 2008 01:37:00 GMT

NextStudent has a sleek new website with upgraded features designed to offer you the most comprehensive and easy-to-use financial aid resource on the Web.

We’ve simplified our online application to make applying for student loans even easier, whether you’re a parent, undergraduate, or graduate.

Learn more about private student loans, Stafford loans, PLUS loans, Grad PLUS loans, and student loan consolidation.
Find free money for college with our award-winning NextStudent Scholarship Search Engine, which lists more than 5.9 million scholarships worth over $16 billion.
Sign up for our monthly NextPath newsletter for tips on everything from snagging a summer job to how to survive the economy with 10 easy ways to save money right now. Grads, get the scoop on the top 10 cities for jobs or how you can travel the world rent-free.
Check our education news bulletins to keep up to date on what’s happening in the world of financial aid, student loans, and higher education — all the changes and developments that affect you and how you’ll be able to pay for school.

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Banks Become More Selective, Leaving Some Colleges Without Student Loans

Student Loan Girl — Tue, 03 Jun 2008 00:49:00 GMT

Students at community colleges, for-profit universities, and other less competitive institutions may have trouble finding a lender willing to offer them federal student loans as some of the nation’s biggest banks pare down the list of schools they serve, according to an article that appeared today in The New York Times (“Student Loans Start to Bypass 2-Year Colleges,” June 2, 2008).

Citibank, JPMorgan Chase, PNC, and SunTrust are no longer offering student loans to certain colleges — schools that the banks have determined tend toward higher default rates, fewer borrowers, and small loan amounts that make business less profitable.

More than 6.2 million — over 40 percent — of the nation’s undergraduates attend community colleges. These students, according to the College Board, borrow an average of $3,200 a year.

In late May, Citibank, one of the nation’s largest providers of student loans, announced its student lending division, the Student Loan Corporation, would temporarily suspend lending to schools whose borrowers tend to have college loans with “lower balances and shorter periods over which we earn interest.” Citibank also announced it would cease lending to schools it anticipated to have minimal loan volume.

“The logic is so flawed, that for us to have volume with them in the future, we have to have had volume with them in the past,” said Korey Compaan, financial aid director at William Jessup University in Rocklin, Calif. To deny federal student loans to students based simply on the college they attend, he said, is “totally and completely unethical.”

Sallie Mae and Nelnet have recently reaffirmed their commitment to offering federal college loans regardless of the institution a student attends. And Wells Fargo has contacted financial aid administrators at schools dropped by Citibank to express a willingness to lend to their students.

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Sen. Hillary Clinton Unveils Plan to Tackle the Student Loan Crisis

Student Loan Girl — Tue, 29 Apr 2008 17:56:00 GMT

Sen. Hillary Rodham Clinton recently announced the details of a sweeping plan to help ensure students have continued access to federal student loans amid a flurry of private lenders leaving the federal student loan program.

“Hundreds of thousands of students who are actively considering how to finance their education could be left in the lurch, without the ability to pay for college,” Clinton wrote in a press release on April 25.

Clinton urged the Bush administration to act quickly to support her plan, which includes:

Creating a way for colleges to quickly make a switch from the Federal Family Education Loan Program to the Department of Education’s Direct Loan Program — a move that currently takes colleges about six weeks.

Allowing parents’ applications for credit-based federal PLUS loans to be reviewed on a case-by-case basis. Currently, parents will be denied outright for the low-cost federal loans if they have defaulted on a mortgage, or if they are 90 days late on a loan payment.

Authorizing the Education Department to advance money to state or private entities that issue student loans and to purchase federally guaranteed loans from private lenders that are no longer able to service the loans.

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Financial Aid Wars: Democrats and Republicans Try to Outdo Each Other

Student Loan Girl — Fri, 16 Feb 2007 16:20:00 GMT

It has been the hot topic in the news for the past couple months and on my blog, so we all should know by now that the 110th Congress is controlled by the Democrats. Why is that big news? Because 2007 is the first year the Democrats have controlled the Congress since 1995.

Surprisingly, the hot-button issue in this new Congress has been that of postsecondary education. In an attempt not to be outshone when it comes to middle-class issues, the Republicans also have rallied behind higher education initiatives. The end result has become something of a power struggle.

According to a Feb. 13, 2007 article written by Arthur M. Hauptman titled “Missed Opportunities on Financial Aid” that appeared in Inside Higher Ed:

“With support for postsecondary education now a hot political topic, federal politicians from both parties are engaged in a tug of war to see who can outbid the other in providing more financial aid to students and their families. House Democrats, as part of their ‘first 100 hours’ agenda, pushed through a bill to cut interest rates in half for some new borrowers. Democrats in both the House and Senate followed up by proposing the first increase in the Pell Grant maximum award in several years. The White House, not to be outdone, has now proposed more than a 10 percent increase in Pell Grants as part of its fiscal 2008 budget package and more increases down the line, all to be paid for by reduced lender profits and cuts in other federal student aid programs.”

Who Wins, Who Loses?

Hauptman, a public policy consultant who specializes in higher education finance issues, reported:

“More importantly, the Democrats’ plan helps the wrong borrowers. The interest rate cuts are limited to new borrowers in the subsidized student loan program, who, by definition, already qualify for federal interest payments while they are in school. As a result, they are precisely the students who least need the assistance in the near term, because the federal government is already paying the interest on their loans (which also means there is no net cost to the government while these borrowers remain in college, since it is already responsible during that time for making all interest payments to lenders). In this scenario, the students’ benefit from lower interest rates and the new cost to the government will occur only when repayment begins at least several years from now.

“By contrast, the House-passed legislation provides no help for the millions of borrowers who are currently having trouble repaying their loans because of high debt levels and/or low incomes. It would have been much better if the House had sought to help these borrowers, for example, by allowing them to consolidate all their federal student loans into a single loan repayment schedule when they leave school and begin repayment. This expansion of existing consolidation provisions would greatly simplify the student loan system by allowing borrowers to refinance their student loans once they leave school.

“Or the House could have sought to expand the largely underutilized income contingent provisions that give borrowers the option to repay their loans on the basis of their income once they complete their educational program. Rather than provide postponed help for new borrowers, these two changes would provide immediate relief for millions of borrowers who need the help now. And these two changes could actually save the government money rather than add to costs if they were financed directly by the federal government rather than having the loans continue to be held by the private sector which demands federal payments over the life of the loan.

“Senator Edward M. Kennedy of Massachusetts, the newly restored chairman of the Senate Health, Education, Labor and Pensions Committee, seems to understand this problem. He has emphasized the need to expand income contingency for borrowers who need help with their repayments and in moving toward greater reliance on direct loans as a way to cut government costs. Hopefully, he can persuade his colleagues in the Senate to provide some real repayment relief to borrowers rather than the cosmetics offered by the House. Otherwise borrowers with repayment problems will be out of luck for another several years until the politicians turn their attention back to this issue.”

Politics over Policy?

The bottom line is that there is a true gap in the funding of higher education in the United States, one that is making access to college difficult for low-income students and burdening many students with major financial debt. Hauptman hopes, “greater rationality will prevail as the House legislation and President Bush’s budget proposals wend their way through the legislative and appropriations process, with the end result being that assistance will be directed to the millions of current and future borrowers who really need repayment relief now from their student debt burdens, as well as the millions of students and families who continue to need help in paying for their education.”

There are financial strategies that students and their families can employ to help ease the burden of college debt. Parents should look into taking advantage of PLUS loans, which are federal loans that can be used to pay up to the full cost of college (including tuition and living expenses) at a low interest rate. Another option is federal student loan consolidation. By consolidating, students and/or their parents can lock in at a low fixed rate, take advantage of lender benefits, and extend the term of their loan WITHOUT prepayment penalties.

The student loan advisers at NextStudent are helpful and knowledgeable about student loans. They are a trusted source in getting you the appropriate information about your student loan consolidation, student loan options and helping students get the college financing they need. Go to www.nextstudent.com for more information.

Be sure to tune in next Thursday for my next blog on student loan advice.

Student Loan Girl

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