US student loan bill advances, Bush will sign

WASHINGTON (Reuters) – The U.S. Senate on Wednesday unanimously approved legislation aimed at stabilizing the student loan market and heading off what lenders warn could be a shortage of loans in coming months as millions of college students lock in their finances before heading to school.

The bill would temporarily allow the U.S. Education Department to inject liquidity into the secondary market for student loans, which seized up recently after investors were spooked by the subprime mortgage crisis.

The department would be empowered until mid-2009 to buy federally guaranteed loans that lenders are unable to sell as securitized debt. Many lenders depend on selling such debt to raise money for new loans.

The bill would also let the Education Department funnel capital for loans to state guaranty agencies under a “lender of last resort” program — not only for students, but for entire colleges, if they face loan shortages from other sources.

The House of Representatives was expected to vote in favor of the bill, possibly as soon as Thursday. The White House said on Wednesday that President George W. Bush supports the legislation and will sign it.

Loan providers such as Sallie Mae (SLM.N: Quote, Profile, Research), Bank of America Corp (BAC.N: Quote, Profile, Research), Citigroup (C.N: Quote, Profile, Research), JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) and many others in the $85-billion industry would be affected.

Sallie Mae said the bill would give the Education Department “at no cost to taxpayers, the flexibility to implement a comprehensive, equitable solution to the credit crunch in the student loan capital markets.”

The company urged the Education Department to move as quickly to write regulations to implement the bill as Congress had in adopting it. Sallie Mae, known formally as SLM Corp, is the nation’s largest student loans provider.

The industry has also been shaken by the recent exit of some lenders from the federally guaranteed student loan program after the government slashed subsidies paid to lenders. The cuts reduced the profitability of making such loans.

Most U.S. student lending goes through the guaranteed loan program. Dozens of lenders, accounting for about 14 percent of federally guaranteed student loans issued, have dropped out, but many more lenders are still active in the business.

UNCERTAINTY FOR STUDENTS

The situation is causing concern among lenders and lawmakers about whether enough loans will be available this summer, typically the peak season for student lending.

“The full scope of the problem isn’t clear yet, but we can’t afford to wait for a full-blown crisis before we act,” said Massachusetts Democrat Edward Kennedy, chairman of the Senate education committee and sponsor of the Senate bill.

Some critics of the student loan industry have expressed skepticism about the severity of any crisis for students, while acknowledging lenders face problems.

Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, said a “frenzy” had been created by lenders’ warnings about a potential loan shortage. “We have no evidence that anybody is being denied loans right now,” Nassirian said.

Stephen Burd, senior research fellow at think tank New America Foundation, said some lenders were having financing problems. “We just don’t think the government should let the loan industry define the terms of the intervention.”

In addition to pumping liquidity into the secondary market, the bill would let students borrow more money under the federal loan program; give parents of students more time to repay federal college loans; and ensure that parents hit by the mortgage crisis can still qualify for college loans.

The Senate added an amendment to the bill that would make more federal grant money available to about 100,000 students.

The student loan industry was embarrassed last year by revelations of kickback schemes and conflicts of interest among some lenders and colleges. The scandal threw the industry on the defensive just as Democrats determined to reform the loan system took over Congress after the November 2006 elections.

US student loan bill advances, Bush will sign
Thu May 1, 2008 6:03pm EDT
By Kevin Drawbaugh

 

Five Ideas for Saving Money on Student Loans

Student loans provide the springboard for bright careers and higher earnings. They can also drag a young professional deep into a financial hole if his repayment isn’t managed wisely.

Enthusiasm abounds for college graduates. Exciting career opportunities await-including potential for high earnings, interesting travel and, if you’re lucky, a really nice parking space. It sounds rosy, but there’s a thorny side to the story: Student loans, which graduates sometimes forget, need to be repaid.

Student loans can provide a financial education outside the classroom. Learn how to shrewdly manage your loans, and you’ll develop an understanding of debt management that will benefit you for the rest of your life. Here are five ideas to get you started on the road to repayment:

1. Consolidate

If your loans are at rates higher than what’s currently on the market, consolidation might be an option. Combining all your student debts into one loan can significantly reduce your monthly payment-but it may extend the term of the loan. Avoid consolidation unless you have in excess of $10,000 in student loans, and be careful not to mix private loans with government ones. If you combine the two, you lose federal benefits such as deferments and subsidized interest.

2. Automate payments

With your hectic everyday pace, it’s easy to miss a bill payment now and then. Late paying wreaks havoc on your credit score. Avoid this dilemma by setting up automatic bill payments. Your monthly bill will be deducted automatically from your savings or checking account. As an added bonus, many lenders offer a reduced interest rate for loans with automatic deduction.

3. Don’t be late

Arriving late to a party may be fashionable, but if your payment arrives late, your credit score suffers. If financial woes are causing you to fall behind on your bills, contact your lender immediately. Work with them to find a solution to get you over any short-term hurdles.

4. Look for cash incentives

Many lenders offer cash incentives for good repayment performance. Make 12 payments in a row, for example, and a lender may credit $1,000 to your account. Research various lenders to find the best cash-back program.

5. Choose the right repayment option

Many different types exist; be sure to pick one that fits your financial situation. Options include:

Standard repayment: Monthly payments are fixed up to 30 years. This option offers the lowest overall interest costs.

Income sensitive repayment: Monthly payments adjust annually based on your income. The more you make, the faster your loan gets paid off.

Graduated repayment: Initial repayment amounts start out low, and then steadily rise during the life of the loan.

Brighter grads will learn to view their loans as more of an opportunity than an albatross. Instead of focusing all your attention on investments and 401(k) programs, consider the above methods for repaying your student loans. A penny saved is a penny earned, a fact that holds true for anyone who understands the value of effective debt management.
By: Greg Mischio

 

Student Loans: Outlook 2008

Scandal rocked the student loan industry in 2007-what’s on tap for 2008?

When Jackie, the TV weather person, gives her prediction for the week, you don’t expect her to mention what’s happening in the student loan industry. That’s a good thing, because the outlook might involve lingering thunderstorms and high-pressure systems, as colleges and lenders try to rebound from some bad business that was uncovered last year.

Student loans and scandal

In 2007, the student loan industry was marred by scandal. Some colleges and universities were found to have revenue-sharing agreements with lenders who were receiving financial kickbacks for funneling their students to only one lender. As a result, nearly 1,000 colleges and universities received letters from the Federal Student Aid office (FSA) reminding them of their responsibility to provide students with several lender options. A few months after sending the initial batch of letters, the FSA followed up with 55 colleges and 23 lenders, asking for further documentation of their student loan activity.

Stricter standards

In the aftermath of last year’s scandal, colleges and student lenders can expect 2008 to be characterized by stricter interpretation of existing legislation, further scrutiny into college records and, possibly, enforcement actions to protect a student’s right to choose his own lender.

The Higher Education Act of 1965 (HEA) doesn’t permit colleges to receive payments from lenders in exchange for student loan applications. The exact definition of what constitutes an enforceable violation, however, is open to interpretation. Traditionally, the FSA has acted on the belief that a violation happens when the lender gives the incentive specifically in return for exclusive student referrals. But the lender has been allowed to provide schools with other types of incentives, such as those intended to further the lender’s advertising, branding, or goodwill objectives.

A lender’s burden

In the latter part of 2007, the FSA announced that a new interpretation of the HEA will take effect in July, 2008. Under the new interpretation, the FSA places the burden on the lender to prove that payments made to colleges were not for the purposes of obtaining student loan applications. This burden of proof may make it difficult for lenders to partner with colleges on any type of business development program.

The FSA might also start conducting more on-site reviews of a college’s financial aid records, as well as their business dealings with lenders. These examinations may go as far as reviewing relationships between lenders and affiliate groups, such as alumni organizations. While the existing federal legislation doesn’t prohibit arrangements made between lenders and affiliate groups, at least one lender in 2007 was forced to stop paying an alumni group for exclusive student loan referrals.

Where schools or lenders are found to be non-compliant, the FSA may initiate action to suspend or terminate that entity’s participation in the Federal Family Education Loan Program (FFEL). Hopefully, such measures can be avoided, because the students will be the ones to get stuck in the downpour.

 

Teenage Children – Balancing the Relationship

Teenagers! One minute as parents our relationship is great the next Whoosh! Up it goes in flames – again. Is that how seems in your family?

Bringing up teenagers is for sure a challenging prospect and one of seemingly precarious balance. It is so easy to drop the wrong side of the ridge and at times it seems that whatever you do it is ‘out of the chip pan and into the fire’ [an English saying].

It used to be that way in my family, all calm and comfortable with everyone getting on well with their own things, me with my hobbies and my teenage children doing well? whatever it is that teenagers do?.and that was part of the problem?. the gap of ages so to speak.

It used to really wind me up when following a perfectly innocent comment all hell would break lose and to the chain reaction would burst forth. One minute calm and tranquillity? the next into the heart of the furnace with each providing the fuel to the other.

The trigger that fired, created anger and anger spurned more anger, it was getting ridiculous and no one ‘won’ or gained anything from it other than a bad feeling followed by guilt.

But as parents we have the benefit of having been there, done that?. As is said so often and you would think that as mature adults we would see the situations for what they are.

Eventually the light came on as to how to break the cycle?..You know that other old saying? It takes two to have an argument? well I MUST be getting older as I hear myself using the very same phrases so often heard of my parents and grand parents, yes they have stood the test of time and more likely because of the truth that lies within them. So that was it really, I realised that the best way to solve this was to manage things that I had the ability to control. The thing that had been staring me in the face was really quite simple?It takes two to have an argument? so remove myself from the situation?. Result? – no argument and no I didn’t leave the family!

What I did though was research, study and then put into action a number of techniques that would help me to manage my own anger and thereby starve the furnace of it’s fuel? result?… no arguments, I felt much much better, the tension like atmosphere has pretty much gone and yes, when my children wind me up I can manage to discuss it with them without the original scenario returning to the discussion.

Life is good again, understanding has grown in leaps and bounds and I now know that ‘Garage’ isn’t only about automobiles!

Anger Management is for many rather difficult to explore. JJ Coopers program takes a comprehensive look at practical, proven methods gained by helping people deal with anger and anger issues. http://www.anger-management-ebook.com

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How You Can Get Affordable Supplemental Health Car

Our older years are supposed to be our golden years, yet many seniors are faced with financial burdens they shouldn’t have to deal with – especially after long lives of education, taking care of families, working, and paying taxes! Where’s the fun in the golden years if they’re spent worrying about how to pay for the left over health care costs that Medicare failed to pick up?

That’s where affordable supplemental health care insurance for seniors comes into the picture. By purchasing an affordable supplemental health care insurance policy, seniors can rest assured that all of their health care costs will be covered, and not just the health care Medicare covers.

When seniors purchase an affordable supplemental health care insurance policy, they can stop stressing about the next health care bill the mailman drops off. After all, if you already have health care insurance, you shouldn’t have to worry about health care coverage and costs, right? Wrong. Some health care insurance, such as Medicare for seniors, doesn’t cover all health care costs. Luckily, with an affordable supplemental health care insurance policy, seniors won’t have to stress anymore.

Many health insurance companies offer affordable supplemental health care insurance policies that are perfect for seniors; however, Medicare offers several affordable supplemental health care insurance policies for seniors as well. When choosing an affordable supplemental health care insurance plan for seniors, the goal is to choose a plan that isn’t going to cost anymore than paying for the additional health care costs out-of-pocket would cost. Many seniors are on limited incomes as it is, so considering one of the plans Medicare offers is a good start.

Medicare plans include the original Medicare with Medicare Supplement plan; the Medicare Part D plan which offers prescription drug coverage; the managed care plan, which includes HMOs, PPOs, POS, and cost plans; the Medical Savings Account Plan; the Religious Fraternal Society Benefit Plan; and the Private Fee-for-Service plan.

How to Get Affordable Supplemental Health Care Insurance for Seniors How to make self employed health insurance more affordable

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How You Can Get Affordable Supplemental Health Care Insurance For Seniors by Elizabeth Newberry

 

How Do Second Mortgages Work?

A second mortgage is a fixed rate, simple interest, installment loan, recorded as a lien on the property title deed behind the existing first mortgage. Equity in your home can be accessed without refinancing the current mortgage, which can save money on costs, and retain an existing low rate.

The guidelines can vary depending on the lender, some may have a limit of 80% loan to value, while others may offer loans up to 100% of value. Homeowners who have little, or no equity, may be able to qualify for cash out, but good credit is the key to a high loan to value second mortgage program. Also, see FHA loans as an alternative for a high loan to value, or lower credit scores.

The cash out from a second mortgage can be used for any purpose. Paying off high interest debt is a common use which can provide several benefits, such as: reducing monthly payments, changing compound interest into simple interest, and saving money from a possible tax deduction.

Second mortgage rates can be influenced by a number of factors such as: credit scores, the amount of the loan requested, debt to income ratio, your disposable income, and the value of your home.

Payment terms are usually offered in 5 year increments, which can range from 5 to 30 years. Fully amortized, fixed rate second mortgages are scheduled to be paid off at the end of the designated term as specified in the loan documents, with no balloon payment due.

Second mortgage interest payments may be tax deductible for a primary home, with a limitation for the deduction set at the a maximum of $100,000 or 100% of value. Check with an advisor.

The full second mortgage balance, minus any closing costs, is paid in one lump sum at the close of the loan process, unless there is an agreement to pay any third parties directly. For example, a lender may require some borrowers to pay off certain debts in order to meet the debt to income ratio. Also, if you have a line of credit or home equity loan, it must be paid off with the new loan.

 

Credit Crisis will Affect Student Loans

Many students enter school with the hopes of bettering themselves and earning more income. A recent announcement by Sallie Mae that they’ll no longer make loans to subprime borrowers may throw a wrench in the goals of many students, particularly those with bad credit.

Throw a pebble into a pond, and you’ll see gentle ripples expand in concentric circles. The subprime lending crisis has been the equivalent of throwing a cinder block into that pond. It’s sent out a tidal wave of trouble, and student loans are the latest financial product to get hit.

Sallie Mae, the nation’s number one lender for college students, recently announced it will no longer make private education loans to students who are subprime borrowers. “Subprime” is classified as a person who’s a high credit risk, and either made late payments on a credit card or loan, or carries too much debt.

Private loans to feel the most impact

For-profit education institutions, such as culinary schools, design academies, and trade schools, will feel the brunt of Sallie Mae’s announcement. These institutions rely heavily on subprime borrowers for their enrollment.

The impact will not be as profound at non-profit colleges and universities. These types of institutions benefit from a higher number of grants and government financial aid. Nevertheless, with private loans making up nearly a quarter of all education loans, the ripple effect will likely occur.

Adapting to a new financial order

Just like the real estate and mortgage lending industry has adapted to new market conditions, educational institutions are likely to do the same. Many have already begun exploring ways to self-fund their own private loans, a prospect that may even add revenue, provided that they don’t make the same mistakes as the home lending sector.

How can private educational institutions avoid the same problems that are currently plaguing lenders like Sallie Mae? First and foremost, they should be careful to follow solid lending fundamentals. The lending institutions that have suffered losses are the ones that have extended loans to people with horrendous credit. By tightening lending guidelines, lenders can steer clear of student loan defaults.

Student adaptation

How will subprime students fare in this new financial order? Undoubtedly, it will be a struggle. Students will have to do more research to find a lender that will work with them. But with private educational institutions beginning to provide their own loans, they actually stand a better chance of getting a loan at a reasonable rate, rather than being raked over the coals by unscrupulous lenders.

Ultimately, cleaning up the student loan pool is a task that must be shared by both lenders and students. Tighter guidelines will prevent future defaults. For students, sound money management will help them raise their credit scores. Hopefully, these changes will allow students not only to qualify for better loans, but also give them access to a better life.

 

Overview of Student Loans

When you’re trying to pay for college, it’s nice to turn to a wealthy uncle for a little financial assistance. No one is happier to help you pay for your higher education than Uncle Sam and the federal government.

You can tell a lot about a society by how much it values education. With its vast network of public and private universities, America is a world-leader in education.

Our emphasis on higher learning could be attributed to the correlation between education and economic growth. If the U.S. is going to keep its economy running at full speed, it needs an intelligent workforce. Higher education doesn’t come cheap, however, so the federal government has created a number of student loan programs.

Perkins loans

Available to undergraduate and graduate students alike, Perkins loans offer the lowest interest rate-currently fixed at 5 percent-and can take up to 10 years to repay. Your school acts as the lender, and the loans are given on a first-come, first-served basis.

It’s a particularly attractive loan for people in the military, law enforcement, certain teaching positions, and non-profit jobs. If you pursue a career in these public service fields, the government may discharge your loan.

Stafford loans

Stafford Loans are provided to undergraduates and graduate students who are enrolled in school at least half-time. Unlike Perkins loans, the government will partially subsidize the money based on a student’s level of financial need. Uncle Sam will pay the interest during school years, but the student must begin repaying the loan six months after graduation. In the unsubsidized loan, a student loses his six-month grace period.

Loans are made available directly from the government to colleges or financial institutions. Current rates for Stafford loans are capped at 6.8 percent. Terms of repayment range from 10 to 25 years on both the subsidized and unsubsidized loans.

PLUS loans

Like the Stafford Loans, PLUS loans are granted to undergraduates and graduates who are enrolled at least half-time. With PLUS Loans, the interest rates are variable, but they do have a cap. Loans distributed directly by the government are capped at 7.9 percent, and those distributed through a school or a lender are capped at 8.5 percent. There’s also a fee associated with the PLUS loans. Repayment terms are 10 years, and you must begin within 60 days after the final loan is disbursed.

To obtain any of these loans, a student first needs to apply for the Free Application for Federal Student Aid, or FAFSA.

Even though the government values education, it can’t give a free ride to everyone. The loan programs are based on a student’s financial need, which may be the cause for the wide number of programs. If you’re confused, consult with a financial aid counselor or a loan officer from a lending institution, and you’ll find out where you fall in the student loan spectrum.

 

When Not to Consolidate Student Loan Debt

To a college graduate, the call to “consolidate” is almost as familiar as her school fighting song. But consolidating student loans might not be as warranted as it was in years past-especially in light of recent rate changes.

Most college students spend a great deal of time with advisors. They receive guidance on class work and their various areas of study. The smart student should also seek out guidance on financial matters- especially if she has student loans.

For the last several years, students have been told to consolidate their loans before a July 2007 rate hike took place. Now that the deadline has passed, many factors need to be considered before initiating a loan consolidation.

Rate matters

The first thing that you want to do is compare the rates of your current loan with today’s market. When you consolidate your student loans, a weighted average of all the interest rates of the loans is taken and rounded up to the nearest 0.125 percent.

To find out what your new monthly payment would look like after consolidation, meet with a lending official and/or do it yourself with an online loan calculator. You may discover that the new rates don’t justify a refinance. You’ll also want to see if the rates on your current loans are fixed. If they are, it may not make sense to refinance everything just so that you have the convenience of one loan payment. If you’re uncertain about the terms on your loan, review your portfolio with a lender. Many will be happy to help you, free of charge.

Act quickly for student debt consolidation

Consolidation works most effectively if the transaction occurs within six months of graduation. That stretch of time is considered a grace period for students-they receive a price break if they start repaying their loans during that time. When the grace period ends, the interest rate on the loan increases by nearly 1 percent.

Unfortunately, if you choose the rate discount, you’ll have to start repaying the student loans almost immediately after graduation. However, there are lenders willing to hold the package until the end of the grace period. Check with your bank to see if they have the same policy.

Long-term costs vs. consolidation

Ultimately, you’ll need to determine your top priority. If you need low monthly payments on your loans, you may want to consider refinancing and stretching out your loan terms. However, if you’d like to be rid of a monumental debt as quickly as possible, you can opt to keep your loans at their current rate and pay down your principal.

As any academic advisor will tell a student, there are many variables to consider when making a decision. When it comes to student loans, take a good look at your current financial situation and consider your short-term job prospects. Don’t jump at the easy money that a consolidation can bring. The best advice dictates that you understand all the factors at play before you make your consolidation decision.

 

Four Ideas for Student Loan Consolidation

To consolidate or not to consolidate? Hamlet might have asked this question if he had graduated from college with student loans. If you’re considering a loan consolidation, you’d be wise to follow a few simple tips.

The great thing about graduating from college is that you don’t have to worry about homework hanging over your head. On the flip side of the coin, you may have something far worse to be concerned about-a student loan payment.

Many graduates consolidate their loans to lessen the pain of repayment. But no financial transaction should be taken lightly. Not only must you carefully analyze your current situation and goals, you need to consider what types of student loans are on the market. Here are some student loan consolidation tips to keep in mind.

1. Shop until your payment drops

You don’t have to stick with the same lender if you’re going to consolidate your loans. Shop around and look at different opportunities. Rates may not vary, but you could find that different lenders offer different discounts (see next tip). You may also find that the lender that you’re currently with has included extra charges that you don’t need to pay. It’s always wise to comparison shop, no matter what your purchase.

2. Go discount shopping

As you’re shopping for the best consolidation package, ask about discounts. Lenders today offer them for a variety of items, including everything from making a payment on time, to using automatic withdrawals from your checking account. Lenders highly value graduates who can make their student loan payments on time, primarily because so few of them do. Discounts for on-time bill paying might include reducing your payment by one full percentage point if you can rack up a 36-month consecutive payment streak.

3. Tame the terms

By extending the repayment term of your loan, you can lower your monthly payment. For most graduates struggling in an entry-level job, that’s a very enticing prospect. But don’t judge a payment book by its cover-an extended loan term can be as frightening as term papers. Those lower payments don’t come cheap-you’re going to get whacked long-term by higher interest costs. Ask your lender to tell you the difference in long-term interest costs for loans with different repayment terms. The results will startle you.

4. Do a reality check

Most importantly, don’t choose a lower loan payment just so that you can buy a really cool car. Unless you’ve landed an exceptionally high-paying job out of college, you’ll probably have to choose more of a utilitarian vehicle until you can afford a nicer ride.

As a graduate, it’s great to be free from the constraints of endless exams and required reading. Unfortunately, the financial equivalent to academic pain is waiting in the wings. Repaying a student loan will be a concern of yours for a long time to come. Make sure that the debt isn’t with you one day longer than necessary by carefully shopping for the right consolidation loan.