Student Loan Blog : federal student loan

Students’ College Access to Improve, Vice President Pledges

Student Loan Girl — Thu, 23 Apr 2009 23:50:00 GMT

Vice President Joe Biden intends to make higher education a reality for more young people, the Associated Press reports, in part by closing the gap between families’ incomes and rising college costs (“Biden Wants to Make Higher Ed More Affordable,” USA Today, April 18, 2009).

At a town hall–style meeting he hosted in St. Louis Biden told about 300 people that he’ll be asking the Treasury Department to figure out how to make college savings plans more effective and more reliable.

“We’re going to make a series of investments, investments in our families and our students,” he said, highlighting the administration’s efforts to improve tax breaks for families and increase need-based grants for low-and middle-income families.

White House Taps Existing Programs to Increase College Affordability

Since so many families save for college using tax-deferred 529 savings plans, which allow families to set aside funds to cover future tuition expenses, fees, books, and supplies, the Obama administration is examining a program that would allow families to take out low-interest loans against their 529 plans to help them cover college costs.

Obama has already increased funding for the need-based federal Pell Grant program, which helps low-income students afford school, but Biden said the Obama administration also wants to ensure continued Pell Grant funding by setting up the program to be automatically subsidized each year.

The government is also considering extending The American Opportunity Tax Credit beyond 2010, which allows families to claim a $2,500 tax credit for college expenses for up to four years.

But by far the most sweeping proposal from the Obama administration, which has drawn fierce criticism from leaders in the student loan industry, is the suggested cancelation of the federally funded student loan program.

Lenders say that cancelling the program will eliminate families’ option to choose from a variety of private lenders and federal student loan incentives and, instead, require them to borrow federal student loans through government’s Direct Loan Program.

Biden alleges that the move to cancel the federal student loan program would result in up to $94 billion in savings to the federal government over the next 10 years, which he said, “We can take … and reinvest … in more loans, more grants and more access to college.”

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College Grads in New Hampshire Get $8,000 Incentive to Work in the State

Student Loan Girl — Fri, 06 Mar 2009 23:24:00 GMT

Hoping to entice more college students to work in the state after graduation, the University System of New Hampshire is partnering with the state’s employers to offer students an incentive to stay.

New Hampshire graduates who work for an employer participating in the school’s new Stay Work Play Incentive Program and agree to work in the state for at least four years could receive up to $8,000 from their employer to help pay down their student loans, the New Hampshire Union Leader reports (“Push On to Keep Grads in NH,” March 2, 2009).

On average, New Hampshire college graduates leave school with $25,000 in student loan debt — the second highest level of student loan debt in the nation, according to the Project on Student Debt, a California advocacy group.

The Stay Work Play Program, slated to begin this fall, is open to employers who hire entry-level workers in the state.

Participating employers — who will make payments directly to a graduate’s student loan provider — will contribute $8,000 toward the federal student loans of graduates who received a two-year or a four-year degree from a New Hampshire college or university within the last 36 months. Graduates will receive $1,600 a year during their first two years on the job, and $2,400 a year during their last two years.

The state is hopeful that the new initiative will entice more college graduates to begin careers in New Hampshire, reducing the “brain drain” typically seen when graduates seek out-of-state employment. And employers, looking to fill vacant engineer and technician positions left by retiring baby boomers say the new program could also prove to be cost-effective. By helping employers find local talent instead of recruiting qualified candidates outside of the state, employers could save on relocation and training expenses.

Tom Daly, chief technology officer at Dynamic Network Services, an Internet services provider, says that the new incentive program could give recent college graduates a good reason to stay in the state.

With less student loan debt, employees may be able to better afford to buy a home in New Hampshire, Daly says. “If we can get that level of commitment, we’re not going to have brain drain.”

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Number of Students With Unpaid Tuition Bills Growing

Student Loan Girl — Tue, 13 Jan 2009 23:24:00 GMT

Colleges and universities all across the country are seeing larger numbers of students who may soon be forced to drop out of college due to unpaid bills, according to a recent survey (“Unpaid College Tuition Bills Rise, Survey Finds,” U.S. News & World Report, Jan. 9, 2009).

The American Association of Collegiate Registrars and Admissions Officer s found that of the 43 college registrars it surveyed, more than 65 percent said that they’d experienced an increase in unpaid bills over the previous year. At Spelman College in Atlanta, for example, nearly 25 percent of the student body — a record-breaking 500 students — is behind on their bills by an average of $3,000; nearly double the number of students who fell behind last year.

5 Things Cash-Strapped Students Can Do to Stay in School

In order to avoid being kicked out of college, students may take the following five steps to resolve their unpaid tuition bills:

Contact the registrar.
Some schools are willing to work with students to bring their accounts up to date. Schools may offer students an “emergency” loan, or give them the option of using a payment plan that allows a student to pay off the total amount they owe in small payments over a period of time.

Stop by the financial aid office.
There may be several school-sponsored scholarships available to students that schools didn’t offer before. To help students affected by the recession, some schools have raised additional funds to expand or create new financial aid programs, although aid may be limited.

Complete last year’s FAFSA.
Students who fill out the Free Application for Federal Student Aid could still retroactively receive college grants and low-cost loans that they would’ve qualified for last year. If nothing else, by filling out the FAFSA now, students may qualify for a federal student loan that could get help them get through the next semester.

File a “PJR”
If a student’s or a family’s financial circumstances have changed, such as a job or income loss, a student may request a PJR, a “professional judgment review,” from their financial aid office. During a PJR, the financial aid office may determine that a student needs more funds for college and could award them emergency or other aid.

Try peer-to-peer lending.
Once all other options are exhausted, students may want to explore borrowing money from extended family members, friends, or even strangers through social lending sites like GreenNote or LendingClub. But students should read the fine print on any loan documents to ensure they understand their rates and terms before borrowing.

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Student Loan Providers Get More Help From the Government

Student Loan Girl — Thu, 13 Nov 2008 22:39:00 GMT

In a move intended to avoid a shortfall in student loans next year, Congress has expanded the government program to buy federally guaranteed student loans from private lenders.

Under the updated loan-purchase plan, the Education Department can now buy lenders’ student loans with origination dates between Oct. 1, 2003, and July 1, 2009, The New York Times reports (“U.S. Buying More Loans to Students,” Nov. 8, 2008). The original buyback parameters only allowed lenders to purchase loans made for the current academic year and for the 2009–10 academic year.

Federal officials say that as much as $60 billion in student loans may be eligible for purchase under the new expansion.

“We were able to provide stable, reliable funding for students this school year,” said Education Secretary Margaret Spellings. Now the government is taking action to avoid problems in student loans for next year, she said.

Expanded Program May Solve Liquidity Problem

Many lenders were initially unable to participate in the student loan buyback program because the original version of the program only allowed lenders to sell loans on the secondary market that were generated prior to 2008.

The economic conditions during the current academic year have made it difficult for lenders to secure the financing needed to make new student loans that would be eligible for sale through the buyback program. Unable to sell their loans, lenders were then forced to carry their loans on their books.

“They have these government-guaranteed loans and nobody wants to fund them,” said Sameer Gokhale, a financial analyst for Keefe, Bruyette & Woods in New York. “The government is agreeing to buy more of the loans to give more liquidity.”

The Education Department hopes that the new initiative will provide lenders with the required funds to generate new federal and private loans next year, as lenders may be more likely to participate in the program once they can free up billions of dollars in loans under the new requirements of the buyback program.

“We need to do everything we can to prevent students from becoming the next victims of the financial crisis,” said Sen. Edward Kennedy, chairman of the Senate Education Committee. “Next year, we need to take a closer look at these programs to insulate them from fluctuations in the market so students’ ability to access loans is not threatened.”

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