Student Loan Blog : student loan debt, paying for college

Aid Administrators to Lawmakers: “Don’t Kill Guaranteed Student Loans”

Student Loan Girl — Wed, 25 Mar 2009 00:02:00 GMT

Just as Congress is about to vote on President Obama’s plan to end the government’s Federal Family Education Loan Program, through which families get their student loans from private third-party lenders, a lender advocacy group is urging lawmakers to consider an alternative to the president’s proposal, reports The Chronicle of Higher Education (“Student-Aid Administrators Urge Lawmakers to Reconsider Killing Guaranteed Loans,” March 19, 2009).

Currently, college students can take out student loans through private lenders using the FFEL program, or directly from the Department of Education through the government’s Direct Loan Program, which Obama hopes to establish as the sole provider of federal student loans.

Instead of doing away with FFELP lenders altogether, the National Association of Student Financial Aid Administrators proposes creating a new federal student loan model that would allow FFELP lenders to continue their participation in the federal student loan program, but under different roles.

FFEL Program Participants Would Serve New Roles

In a memo sent to Congress, NASFAA president Philip R. Day Jr. proposes that student loans be financed through the sale of government subsidized bonds to investors and that the proceeds be used to disburse student loans to colleges, who will in turn apply the funds directly to students’ accounts, similar to how direct lending functions today.

Under the NASFAA’s proposal, private lenders would no longer market college loans to students but could bid on Education Department contracts that would allow them to originate, disburse, and service the loans. Nonprofit agencies and former guarantors would no longer guarantee student loans, but would instead provide default- management services to students, including entrance and exit counseling on their repayment options.

A unique feature of NASFAA’s proposal would allow family members, friends, and private companies to receive a tax credit in exchange for paying off a portion or all of a borrower’s debt. State-based nonprofit lenders would still be allowed to offer loan-forgiveness programs for students entering in-demand professions.

Congress Urged to Consider Alternatives

Earlier last week, the NASFAA asked lawmakers to go slow when considering Obama’s plan. Lawmakers were also urged to engage in “deliberative” discussions regarding the future of student lending, The Chronicle reported, instead of just “ramming through” the government’s proposal to end the guaranteed lending program.

Obama’s plan aims to eliminate guaranteed lending for students through a budget resolution outlining the government’s spending plan.

If that resolution includes instructions to Congress’ education committees to consider Obama’s proposal by way of the budget reconciliation process, Day says it would be the death knell of the FFEL program and “prevent a full vetting of alternative proposals.”

The NASFAA has asked legislators to convene a stakeholder’s meeting to consider other viable options to reform the federal student loan program.

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Senate Bill to Pay Off Student Loans for Montana Graduates

Student Loan Girl — Tue, 17 Feb 2009 20:21:00 GMT

A new bill facing the Montana Senate would give college graduates an incentive to seek employment in the state by creating a tax credit program for employers who help pay off a portion of graduates’ student loans, reports the Montana Kaimin (“Senate Bill Would Help Graduates Pay Back Their Loans,” Feb. 13, 2009).

Currently about 70 percent of students who attend the Montana University System graduate with student loan debt, according to Montana Guaranteed Student Loan Program, the state’s federal student loan guarantor. Many of those graduates are forced to leave the state to find jobs that pay well enough for them to be able to afford their student loan payments, as Montana’s wages are amongst the lowest in the nation.

“So many of these kids leave college with high student loan debt, and they just don’t have many choices because they have to go somewhere where they can make enough money to repay their loan debt,” says bill sponsor Roy Brown.

Tax Credit Program Includes Significant Incentives

Known as the “Keep Our Kids Here Tax Credit,” Senate bill 304 would offer employers a tax cut that would be equal to the amount employers contribute to a qualified employee’s student loan debt. Montana state graduates could see up to $5,000 of their loans paid off by their employer each year for up to three years.

To qualify, graduates must have completed a degree from a two- or four-year Montana college by 2009 or later and must be employed in the state at least 32 hours per week for nine months or more during the tax year.

“What we hope to do with this bill is to provide an incentive to businesses to hire graduates from Montana’s four-year and two-year institutions to start using resources the state has invested in,” said lobbyist Lucas Hamilton.

Although the bill, which is estimated to cost the state between $4 million and $38 million in tax revenue over a three-year period, faces an uphill battle at a time when the state is poised to make significant budget cuts, Brown says that Montana can afford to support the new program because the state will soon receive federal stimulus money and because his new bill will directly benefit the state’s economy.

He says, “When you put more money in pockets of small businesses, more money in the pockets of employees, and more money into the state of Montana, it’s a good situation for everybody.”

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College Student Finance Guru Blogs His Way to Book Deal

Student Loan Girl — Tue, 06 Jan 2009 21:04:00 GMT

Zac Bissonnette is living the blogger’s dream, getting paid to write for TheDailyBeast.com and AOL’s WalletPop.com, and now landing a book deal that may be just the ticket for helping him weather a dismal job market in one of the worst recessions in history (“Student Morphs Blog Into Book Deal,” Amherst Bulletin, Jan. 2, 2009).

Publishers Weekly recently announced that Bissonnette, a sophomore majoring in legal studies at the University of Massachusetts, is busy drafting a book for Portfolio, a publishing subsidiary of the Penguin Group, that will chronicle how parents and their children pay for college.

Scheduled for publication in 2010, the same year Bissonnette will graduate, the book will compare the value of a public versus a private college education, and, as Bissonnette explains, will critically examine what happens when students take on too much debt from student loans.

Bissonnette, who is paying his own way through college, says he began blogging in high school from a library computer.

Since then, his personal interest in finances has spiraled into a successful side business; after his blogs were picked up by WalletPop, for which he is now an editor, and The Daily Beast, he was featured on CNN’s “American Morning” for an editorial he wrote concerning President-elect Barack Obama’s economic policy and its effect on student loans.

He got his book deal shortly after his November CNN appearance. Bissonnette said, “I came up with this idea, got an agent, and he put this together.”

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