My Student Loans

End student-loan profiteering

AS TUITIONS skyrocket, more students are being priced out of a college education. Today, Pell Grants, which help finance the education of students from low-income families, can cover only 30 percent of tuition costs, down from 50 percent a generation ago. The federal government already provides some direct loans to students, granting $20.1 billion to students in 2008-2009. Yet, far more student loans - $56.7 billion in the most recent academic year - came from private banks that make government-guaranteed loans to students. This arrangement offers little benefit to the public; banks are paid by taxpayers for making no-risk loans that are insured by the government.

On Wednesday, though, House Education Committee Chairman George Miller introduced legislation, with President Obama’s support, that will eventually remove private banks as intermediaries in the federal student loan system. Miller noted that the credit crisis has pushed up interest rates on federally subsidized student loans from 3.4 percent to 6.8 percent by 2012. Direct federal lending better shelters student loans from the market, and also saves the public money. The Congressional Budget Office estimates that relying on the federal government for loans will save taxpayers $87 billion over 10 years.

This taxpayer money is urgently needed to provide aid to students for whom a four-year college is out of reach. Earlier this week, Obama proposed to infuse $12 billion into community colleges. Another block of savings will give extra funding for Pell Grants and link them with cost-of-living increases.

In this economic climate, Congress must fix the broken system that unnecessarily takes money from taxpayers and students. Educational investments should go straight to students.

-Boston.com

If I ever pay off my student loans, I’m going to take a 2 week vacation.

barelysarcasm:

Never had one of those. They sound neat.

Same here, same here….

Student Loans May Bite Early

University students working in their summer holidays could be forced to make student loan repayments under a proposed change to the scheme.

The change would hurt those already scrimping to get through university, student representatives warn.

The move is one of a raft of Inland Revenue Department initiatives designed to simplify the management of loan repayments and expected to cost $30 million over the next three years.

The proposal would see the threshold at which people must begin loan repayments changed from an annual figure to one based on a weekly, fortnightly or monthly pay-cycle, depending on when a person is paid.

Currently, those with a student loan who earn over $19,084 a year must make repayments.

Under the proposed changes and based on the current annual threshold, borrowers paid weekly and earning over $367 a week would have to make repayments.

Victoria University student president Jasmine Freemantle said students should not be expected to repay their loans when they were still studying.

“It’s going to have a negative impact on students who may work longer hours over summer and during other non-teaching periods in order to generate enough money to survive.”

Students adjusted their working hours to suit their workloads. Many worked 50-hour weeks when they were less busy, such as in study-breaks, and during these times would likely be earning more than $367 a week, she said.

“This change is going to penalise students for undertaking additional employment.”

New Zealand Union of Students’ Associations co-president Jordan King said: “There are thousands and thousands of students who use the summer months to get money they need for term time. If they’re forced to make repayments in that time that would be problematic.”

Labour’s tertiary education spokeswoman Maryan Street said Labour welcomed the move to streamline the repayment process but the threshold change was “harsh and punitive”.

“It’s going to be a real headache. The way students are able to keep their student loans down is by amassing savings in their holidays.”

Revenue Minister Peter Dunne acknowledged the change would be unpopular with students.

“It’s one of the issues we want to look at during consultation. What we’re trying to do is simplify the system.”

Changing the threshold so it was based on the amount received in a regular pay cycle rather than a projected annual income meant over- and underpayments would be identified and corrected earlier, rather than at the end of the financial year.

Other proposed changes included scrapping the late-payment penalty charged to overseas borrowers in favour of a higher interest rate on their loan, and enabling borrowers to access their loan information, change their account details and make payments online.

The IRD plans to develop policy proposals over the next few months and introduce legislation this year. The changes would apply from 2011.

CRUNCHING THE NUMBERS

The student loan repayment threshold is currently set at $19,084.

Those earning more than $19,084 a year must pay 10 cents for every dollar they earn over the threshold.

There are more than 535,000 student loan borrowers and more than 40,000 are overseas.

Total student loan debt is currently $9.5 billion.

This is expected to rise to $14-15b by 2015.

Source: Inland Revenue Department

New law to help in paying back college loans

WASHINGTON (CNN) — As a graduate from Syracuse University with a master’s degree in international relations, Jana Morgan was hoping to help victims of human rights violations caused by resource wars.

The tight job market, though, has made her put those dreams aside for now while she pays her bills — by waiting tables at The Barrack’s Inn in Sackets Harbor, New York.

Morgan is realistic about her future income options. “If you are going into public service, you aren’t going there to make money, you are going there to help people,” she said in a recent interview.

Her less-than-anticipated income means that it is difficult for her to make her student loan payments for the nearly $80,000 in debt she accumulated getting through college. Morgan is looking at a new law that goes into effect July 1 that would help her cap her student loans at 15 percent of her adjusted gross income.

Then, if she completes 10 years of public service, her loans would be dropped completely. Based on her current income, her $800 payments would go away for the time being, according to calculations she did on the Department of Education’s Web site.

The College Cost Reduction and Access Act that created the new Income-Based Repayment program was signed into law in 2007 to help make student loan payments more manageable.

However, the Department of Education warns that making smaller loan payments may actually increase the amount that borrowers will need to pay back in the long run because interest will accrue for a longer period of time. On the other hand, if the borrowers meet certain criteria, their remaining student loan debt can be dropped after 25 years.

Morgan is not the only one struggling in the weak economy. According to Rep. George Miller, the Democratic chairman of the House committee that worked on the bill, “The U.S. college affordability crisis is only worsening and to top it off, this year’s graduating class is about to enter the toughest job market for college graduates in 25 years.”

Unemployment numbers for May indicate that 15.5 percent of people age 20 to 24 are unemployed in the U.S. compared to the overall unemployment rate of 9.4 percent.

The Income-Based Repayment program is designed specifically for those students who have high loan amounts and low income. To continue to qualify for the repayment plan, every year borrowers will have to provide information on their income and family size. When income increases, the payments will revert back to the standard amounts.

As for Morgan, if she had know what kind of debt she would be carrying after she earned her degrees, she might have done some things differently.

“As an 18-year-old, I might have applied to more schools that would consider funding me fully, and I probably should have been considering my economic situation at that time,” she said.

However, Morgan said she would not have changed her mind about going to college.

[From CNN]

Recession Imperils Loan Forgiveness Programs

When a Kentucky agency cut back its program to forgive student loans for schoolteachers, Travis B. Gay knew he and his wife, Stephanie — both special-education teachers — were in trouble.

“We’d gotten married in June and bought a house, pretty much planned our whole life,” said Mr. Gay, 26. Together, they had about $100,000 in student loans that they expected the program to help them repay over five years.

Read Entire Story at NY Times