Student Loan Blog : student loan

Sen. Schumer Calls for Government to Protect Student Loans Amid Passage of $700 Billion Bailout Bill

Student Loan Girl — Tue, 14 Oct 2008 20:17:00 GMT

Concerned that students who are eligible to go to college won’t be able to pay for their education costs in light of the current credit crisis and a steadily worsening economy, Sen. Charles Schumer is urging the federal government to make sure student loans are still available, according to an Associated Press article (“Schumer Wants Student Loan market to Be Protected” Oct. 6, 2008).

Schumer recently wrote Secretary of Treasury Hank Paulson and Federal Reserve Chairman Ben Bernanke, advising them to keep tabs on the student loan market as the government implements a $700 billion bailout plan for the financial sector. The senator fears that the deteriorating credit market might burden college students with higher interest rates on loans or may prohibit borrowers from qualifying for student loans all together.

“The price we’ll pay will be that of a generation,” Schumer said.

Over 100 third-party lenders in the Federal Family Education Loan Program have suspended their participation in the federal student loan program, which is responsible for nearly half of all public and private student loan money, or about $60 billion. Students can access these federal student loan funds either through private lenders in the FFEL program, or through the government itself using the Direct Loan Program.

Schumer recommends that all colleges allow students to get loans through the government’s Direct Loan Program, instead of through a middleman, FFELP lender. The senator says he will be drafting letters to encourage New York college presidents and the American Council on Education to pursue a similar course of action.

Just last month, Congress passed legislation that will enable students who rely on loans to continue their education, regardless of the difficulties in the private credit market. The legislation is effective through the 2010 academic year.

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Community Banks May Be an Option for Families Looking to Weather Student Loan Crunch

Student Loan Girl — Thu, 07 Aug 2008 01:17:00 GMT

Although the turmoil in the nation’s credit markets has forced student loan providers, including some big banks, to stop offering federal and private student loans, these lenders’ financial troubles may provide the opening community banks need to get back into the student loan business, according to a guest editorial in The Boston Globe by Douglas Stebbins, managing director of a Boston-based investment banking firm (“A Role for Community Banks in Student Loan Crunch,” Aug. 2, 2008).

Credit unions may be better able to serve families who need student loans, Stebbins says, since community banks generally hold the loans until they’re paid in full, unlike other private lenders who bundle their student loans and sell them to investors in order to get the money they need to make new loans.

Lenders who rely on these sales have seen their traditional sources of revenue dry up, despite recent federal legislation that allows the Department of Education to purchase student loans from cash- strapped lenders in an effort to give them the liquidity they need to continue making new loans.

Community banks, on the other hand, “can provide a financing solution to an underserved population of parents and students,” Stebbins says, “and since these banks know their customers, their loans can be based upon the credit risk of the borrower, not the risk of the securitization marketplace.”

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Despite Greater Benefits Under New GI Bill, Vets May Still Opt for Trade Schools, Community Colleges

Student Loan Girl — Fri, 25 Jul 2008 22:38:00 GMT

Recently published research from the U.S. Department of Veterans Affairs indicates that approximately 57 percent of those veterans who used their GI Bill benefits in fiscal year 2007 attended either community colleges or for-profit institutions.

Veterans tend to enroll at these types of schools because they often cater to veterans’ needs, are more convenient, and in the case of community colleges, are cheaper than their four-year counterparts, according to an article in The Chronicle of Higher Education (“Cost,Convenience Drive Veterans’ College Choices,” July 25, 2008).

Even with the new GI Bill giving veterans sufficient benefits to cover the more expensive four-year colleges in their state, many educators, legislators, and other experts are skeptical about whether veterans will actually choose to attend these schools.

Convenience May Win Out Over Added Benefits of New Bill

The current GI Bill only covers 73 percent of a veteran’s tuition, fees, and room and board at a four-year public college, and only 31 percent of the costs at a private four-year school. Veterans often choose to attend community colleges, since their GI Bill benefits cover the costs of these schools in full.

But veterans may choose to attend a particular type of school for its low costs as well as for its services, according to Keith Wilson, director of the education service at the Department of Veterans Affairs.

Most veterans go back to school to build on a particular skill set gained in the military and are looking for programs that enable them to balance their studies, with work and family life, Wilson said.

Community colleges near military bases and schools, such as American InterContinental University, University of Maryland, and Tidewater Community College, do just that. They are set up to more specifically to address veterans’ needs by extending more academic credit for military experience, helping veterans access their federal benefits, and accommodating vets with physical and emotional disabilities.

Anthony Mabutol, a Navy veteran, told the Chronicle that he began his education at Tidewater for “practical” and “financial” reasons. He said he probably would still select Tidewater, even if he had more generous GI Bill benefits. The only difference, he said, is that the added benefits would allow him to eliminate his part-time job while attending school.

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For-Profit Colleges Face Expulsion from Federal Student Aid Program for Awarding Too Much Aid

Student Loan Girl — Fri, 25 Jul 2008 18:50:00 GMT

Under new federal legislation, many students at for-profit institutions have seen the amount of their Pell and federal student loan awards increase and a larger number these students have been able to cover all their college costs with just these two types of federal financial aid, according to an article in The Chronicle of Higher Education (“For-Profit Colleges Seek Fix for Student-Loan Problem,” July 25, 2008).

However, school administrators fear that with the growing number of students able to take out larger amounts of federal student aid, these for-profit institutions may run afoul of the federal requirement that at least 10 percent of a school’s revenue come from non-federal sources.

If more than 90 percent of a for-profit institution’s revenue comes from federal sources, these colleges may become ineligible to participate in federal student-aid programs, and students may be required to pay for college with more costly funding sources like private student loans or credit cards.

Lobbyists for these for-profit institutions are working with Congressional leaders to alter and renew the Higher Education Act to resolve this issue so that students may still be able to receive greater amounts of federal aid without jeopardizing the federal student-aid programs in place at for-profit schools.

Though Congress is preparing to break before the 2008 elections, lobbyists are hopeful that their addendum will be added to the final version of the bill, which may be voted on before the end of the current legislative session.

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New York May Soon Have Its Own Low-Interest Student Loan Program

Student Loan Girl — Wed, 23 Jul 2008 19:33:00 GMT

New York is one of the few states in the country where college students do not have access to a low-interest, state-backed student loan program, according to a report by the New York State Commission on Higher Education (“Final Report of Findings and Recommendations,” June, 2008).

The report, the result of a year-long study conducted by a commission appointed by former governor Eliot Spitzer, addresses a number of concerns related to New York's higher education system, including the lack of a state-backed student loan program.

Students enrolled at more than 1,000 public and private postsecondary institutions in New York — including the State University of New York, the largest public university system in the country, and the City University of New York, the nation's largest urban college network — have fewer low-cost financing options than students in many other states across the country.

One commission member estimates that students attending schools in New York pay an average of 9 to 12 percent interest on their loans while those in Texas, for example, pay only 6 percent (“Paterson Set to Embrace Student Loan Plan,” The New York Times, July 21, 2008).

If New York governor David Paterson has his way, the state’s college students may soon be able to complete their degree without being burdened by excessive student-loan debt. Paterson intends to heed one of the report’s chief recommendations, the institution of a low-cost state student loan program, with a petition to state legislators to implement such a program.

Paterson will also consider several other recommendations from the report:

Hiring 2,000 new faculty members
Establishing a $3 billion research fund
Expanding articulation agreements for seamless transfers between colleges by 2011

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Controversial Admissions Policy Proposal Could Shake Up University of California System

Student Loan Girl — Mon, 21 Jul 2008 22:53:00 GMT

The biggest change in how the University of California system evaluates prospective applicants in 10 years could come from a major administrator-proposed revision to the system’s admissions policy, allowing schools to depend less on test scores and more on individual student evaluations when making admissions offers, according to an article in The Chronicle of Higher Education (“U. of California Proposes Sweeping and Controversial Admissions Changes”).

The new policy would give more discretion to admissions officials at each school, David Longanecker, president of the Western Interstate Commission for Higher Education, told the Chronicle. Longanecker also said that the move would bring the state’s college admissions policies more in line with those of private and public research universities.

Advocates say that the system’s current strict eligibility formula doesn’t adequately consider deserving students from minority or low -income backgrounds who have high GPAs, but who didn’t take the correct college-prep classes or the SAT II.

Under the newly proposed rules, students would no longer have to take this additional test or as many required college-prep courses. Administrators would be allowed to evaluate applicants on an individual basis and would be able to forego the system’s current formulaic admissions methods that depend solely on test scores or other pre-set criteria.

Those administrators who are in favor of the change say that while the new policy would only marginally affect the largest campuses, such as U.C. Berkeley and UCLA, those like the U.C. Riverside and U.C. Merced campuses, which are less selective, may see a significant shift in the composition of their freshmen class.

Critics contend that fewer students with the highest grades and test scores would be guaranteed a spot at a California state school; a factor that may violate the state’s constitution which requires that the UC system admit the top 12.5 percent of California’s high school students.

“It's a change in substance as well as in symbol,” said William Drummond, a Berkeley journalism professor. “Ever since the 1960s and the master plan, we’ve been telling kids from primary school on up that if you work hard, we will guarantee you a place. Now we’ll just guarantee that you’ll be reviewed.”

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All Veterans Qualify for In-State Tuition at Ohio Colleges With New GI Promise Legislation

Student Loan Girl — Wed, 16 Jul 2008 22:19:00 GMT

Ohio governor, Ted Strickland, recently announced the implementation of The Ohio G.I. Promise, the first plan of its kind in the nation to extend in-state tuition rates to all veterans who attend an Ohio state public college or university on the GI Bill, according to an article in The New York Times (“Ohio Gives Veterans In-State Rates at Public Colleges,” July 9, 2008).

Just last month, President Bush signed the new national GI Bill which will double veterans’ benefits and allow soldiers to receive the equivalent of full scholarships at any public university or college in the state they reside.

Under The Ohio G.I. Promise, veterans, their spouses, and their dependents who are residents of any state may attend one of the Ohio’s 36 colleges and universities at the same in-state tuition rate enjoyed by legal Ohio state residents.

The move to implement the G.I. Promise bill is to attract more veterans to Ohio’s public colleges, which have experienced declining enrollments over the last several years, and to add some 230,000 students to the state’s school system over the next decade.

“If we are able to attract veterans to Ohio, we can link them and their families to internships, co-op and other opportunities, and if they get good jobs here, we’ll have Ohioans,” said Eric Fingerhut, chancellor of the Ohio Board of Regents. “We want veterans to know Ohio wants them to come here, and that we think they’re incredibly valuable high potential students.”

To meet the needs of the much-anticipated growth in veteran enrollments at Ohio colleges, Fingerhut told the Times that the state school system will significantly enhance the infrastructure that caters to military veteran students.

“We already have a number of very good programs, which we’ll be expanding, to provide the type of counselors, advisers, and mentors who can work one on one with veterans to help them make the transition to civilian life and navigate the academic environment,” he said.

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Colleges Experiencing Surge in On-Campus Housing as Economy Sags

Student Loan Girl — Fri, 11 Jul 2008 22:37:00 GMT

At colleges across the country, it won’t be long before students will start flocking back to campus, and with on-campus housing demand far exceeding supply, many school housing officials aren’t sure where all those students are going to live, according to an article in Inside Higher Education (“Look Who’s Living on Campus,” June 27, 2008).

John Carroll University in Ohio has residence halls that are over capacity for the first time in 10 years, according to Tonya Strong-Charles, director of the school’s media relations. Bryant University in Rhode Island reached capacity for the first time three years ago, says J. Thomas Eakin, vice president for student affairs.

The Massachusetts State College Building Authority is experiencing 105 percent occupancy at the nine on-campus housing facilities it manages, according to its executive director, Ed Adelman. The extra 5 percent represents spaces like study lounges that have been converted into large sleeping rooms.

Adelman says that the on-campus housing shortage is national in scope, and may be related to an increase in students, particularly upperclassmen, who tend to live off campus, needing to save money by moving back on campus.

“Reasons we’ve heard from upperclassmen are cost and budgeting,” said Doreen Riley, vice president for university advancement at John Carroll University. She notes that the rising costs of off-campus living may be responsible for bringing some students back to campus. “With utilities, gas prices and rising food costs, by the time you pay rent, that’s a lot of money,” Riley said.

Vickie Hawkins, director of university housing at Georgia Southern University, believes that rising utility costs have greatly contributed to the influx of students back to campus. “Students have said that with gas prices at $4-a-gallon, [they] are going to rethink how they’re using their vehicle,” she said.

To address this increase in demand, some colleges have offered financial incentives to freshmen to add a third roommate to double- occupancy rooms. Others, like Georgia Southern, have gotten more creative: they purchased and renovated an off-campus building for upperclassmen that was filled even before construction finished.

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GMAT Cheating Scandal Causes Students to Sweat Their Future

Student Loan Girl — Wed, 02 Jul 2008 23:37:00 GMT

Over 6,000 MBA students have been implicated in a huge cheating scandal involving the website Scoretop which illegally provided “live” prep questions to students taking their Graduate Management Admission Test, or GMAT — the test that many MBA programs require for admission to graduate school, according to an article in Business Week (“GMAT Cheating Controversy Grows,” June 27, 2008).

Contrary to authorized test preparation companies like Kaplan or Manhattan GMAT which legally purchase retired test questions from GMAT to help prepare their member students, Scoretop extended 30-day VIP service to students who paid the $30-fee to access questions that were actively being used on GMAT exams.

On June 23, the Graduate Management Admission Council, the owner of the GMAT, won a lawsuit against Scoretop for copyright infringement, since Scoretop published the “live” GMAT questions online without permission. The judgment allowed the court to seize Scoretop’s hard drive, which contained payment and other data, and to identify more than 6,000 individuals who had paid for the website’s service.

GMAC originally said it would cancel the scores of all students who cheated on the exam, make sure they could never take the GMAT again, and notify the respective business schools of students who had cheated on the exam.

Robert Burgoyne, GMAC’s legal counsel recently said, however, that GMAC probably wouldn’t cancel the scores of all 6,000 Scoretop VIP members who took the test, just those who knew using the questions was illegal. “We'll look for something that actually links people to conduct they should have known was improper,” Burgoyne said.

MBA students across the country are justifiably nervous. Those who have applied to business schools and used the Scoretop website may have their scores cancelled and may not be able to apply to an MBA program in the future. And currently enrolled students may be thrown out of their MBA program.

“I am extremely stressed out,” one GMAT test-taker who used Scoretop questions commented in response to BusinessWeek.com's original story about the cheating scandal. “I am so upset and worried right now."

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Colleges May Be Required to Refund Student Loans for Military Members Called Into Service

Student Loan Girl — Wed, 02 Jul 2008 00:20:00 GMT

At the same time the recently passed GI Bill was being pushed through Congress, legislators have been considering a veterans education “bill of rights” that would protect service members who are called to duty in the middle of their higher education studies, according to an article in The Chronicle of Higher Education (“Congress May Require Colleges to Repay Loans for Students Called to Military Service,” June 27, 2008).

Both the House and Senate are looking at legislation, which has become unpopular among colleges, that would require institutions to refund student loans and other out-of-pocket expenses to students who are called to active military duty mid-semester.

Under the proposed legislation, students would be able to sue colleges that fail to make the refunds and would require colleges to re-enroll veterans at the same academic status they held when they departed for military service.

Opponents say the requirements would be difficult to implement and that the potential changes would conflict with existing rules. They counter that Congress should require the loans to be discharged instead of having colleges repay them.

David Baime, vice president of the American Association of Community Colleges, claims that students should be responsible for the loans they take out, not the institutions they attend.

“It’s kind of outrageous to expect institutions to repay loans” that students take out, he said.

Supporter of the bill Patrick Campbell, legislative director for the Iraq and Afghanistan Veterans of America, says that the new requirements are only fair, pointing to the many horror stories of vets who have attempted to get refunds or re-enroll at their schools after returning from active duty.

Campbell said, “When veterans come home and their schools make them jump through hoops, some students will not go back.”

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Pending 21st Century GI Bill: New Benefits for a New Era

Student Loan Girl — Thu, 26 Jun 2008 22:39:00 GMT

Many educators are excited about the potential impact of the proposed GI Bill, legislation that has gotten the nod by President Bush in its current form, according to an article in Inside Higher Ed (“Gauging the New GI Bill,” June 20, 2008).

“I think that expanding the GI bill, making it more generous, can be one component of really expanding access to higher education for people who come from disadvantaged backgrounds,” said Suzanne Mettler, Cornell University professor.

Current GI Bill benefits, worth only $1,101 monthly, have not kept pace with the escalating cost of a college education. Many experts believe that the current level of veterans’ benefits — used primarily by those from low socioeconomic backgrounds — are not enough to help veterans attain a decent college education.

But in the next couple of weeks, the Senate will vote on a revised version of the GI Bill that would:

Increase education benefits to cover up to the cost of in- state tuition at the most expensive public college in a veteran’s state
Offer a monthly housing allowance
Provide $1,000 a year for books
Open up the option of allowing transferable educational benefits for a veteran’s spouse and/or children

Benefits Unlikely to Affect Vets’ Choice of School

Educators at some two-year schools, where about 40 percent of GI Bill recipients pursue their degrees — are concerned that their enrollment numbers will dwindle significantly once these soldier- students are able to attend more expensive institutions.

However Keith Wilson, director of the Department of Veterans Affairs, says that may not necessarily be the case. He says the new bill isn’t expected to radically alter how and where veterans will attend college.

“In my experience, I’m not sure that’s necessarily true. I think convenience is still going to be paramount,” Wilson concluded.

Regardless of how the results of the bill shakes out, James Wright, president of Dartmouth College, says veterans should be able to choose the college that is the best fit for them and believes the new Bill will allow them to do so.

“Those who are coming out of the military should be able to think about going to the best schools in the country,” Wright said. “They should be thinking about going to the colleges that most meet their needs.”

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