Why the average student loan debt impoverishes and breaks you despite your ... You might think that you're safe so long as your average student loan debt ... But even if you had loaded yourself with just an average student loan debt, ... Even An Average Student Loan Debt.... http://www.averagestudentloandebt.com 2012-02-22T17:04:37+01:00 text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/helping-students-out-of-tight-spots.html This Penn State alum is starting a microloan program to lend students emergency cash at low interest rates. WHAT PROMPTED YOU TO START THIS PROGRAM? I've been giving to Penn State over the years, but I wanted to fill a gap that wasn't being addressed. I began reading about microfinance and I wondered whether such a program could be useful at the university. DON'T STUDENTS GET ENOUGH FINANCIAL AID? There's a misperception that plenty of money is out there and all you need to do is borrow it. The typical annual need for a student at Penn State is $27,000--and that's before books and transportation. Their aid packages typically top out around $15,000. HOW MUCH WILL THE LOANS BE FOR? They'll range from $1,500 to $2,500. WILL THEY HAVE AN IMPACT? The office of financial aid says that students routinely come in with emergencies, often in the middle of a semester. The stories are really heartbreaking, such as students whose parents have lost their homes or jobs. They often need extra money to cover the rent or maybe fix a car they use to commute to campus. Some have to drop out of school. WHERE'S THE MONEY COMING FROM? Our initial goal is $50,000 in donations, which my wife and I will match two-to-one. That $150,000 will be available at low interest rates starting in the fall semester through the office of financial aid. HOW CONFIDENT ARE YOU THAT THE LOANS WILL BE REPAID? We've learned from micro-finance in the developing world that repayment rates are high because people with a common bond are embarrassed to default. I think that there will be a similar experience with students. If a student defaults on his or her loan, it's not hurting some faceless organization. Because repaid money will go back into the fund, a default will... text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/hoping-to-make-student-loans-more-forgiving.html The Obama administration's proposal to provide relief to student loan borrowers could reduce payments for some college graduates, but the plan won't do anything for borrowers with the most expensive types of student loans, analysts say. The plan, which was unveiled Wednesday, contains two main elements: Expands a program that allows federal student loan borrowers to apply for a reduction in their loan payments based on their income. Currently, borrowers who qualify for the income-based repayment program can have loan payments capped at 15% of their discretionary income. After 25 years of qualifying payments, the balance of the loan will be forgiven. Under the administration's proposal, payments would be capped at 10% of discretionary income and forgiven after 20 years. However, this expanded relief would only apply to loans issued in 2012 or later, says Michael Ryan, vice president of American Student Assistance, a non-profit that helps borrowers manage their debt. Borrowers with loans issued before 2012 would be subject to the existing income-based repayment standards, he says. Advocates for student borrowers hope the administration's plan will raise awareness about the income-based repayment program, which they say has been underused. An estimated 450,000 borrowers have signed up since the program was launched in 2009, says Lauren Asher, president of the Institute for College Access and Success. Borrowers who have both Federal Family Education Loans, which are federally guaranteed loans issued by private lenders, and Direct Loans, which are issued directly by the federal government, can lower their interest rate by a half-percentage point by consolidating all of their loans into the Direct Loan program. This option is only available to borrowers who have both types of loans, Ryan says. Borrowers who have already consolidated their loans won't be eligible. The consolidation option would be available from January through June 2012. The Obama plan doesn't provide any relief for... text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/i-did-not-want-to-borrow-more-than-i-could-reasonably-pay-back.html Before 8 a.m. every weekday, Sara M. Harrington and her husband fit their 9-month-old daughter into her car seat and drive a mile to a babysitter's house before going on to the University of Iowa, where Sara's husband drops her at her office. He drives three more blocks to his own office, in the information-technology department of a local hospital. They do the whole thing in reverse at 4:30 p.m. Limiting themselves to just one car, a Ford Freestyle, is a sacrifice the couple have made so they can pay off their student loans. Each of them graduated with around $23,000 in education debt, and their monthly repayments total $500 - the third-highest item on their monthly budget, after the mortgage and the day-care bill. Because of their education loans, Ms. Harrington says, they were also frugal when they bought a 1,700 square-foot home, in 2006. "We didn't buy the most expensive house we could afford, knowing that we have these student-loan expenses for 10 years," she says. They also use cloth diapers and Ms. Harrington continues to breast-feed their baby, in part to save money. And instead of expensive nights out, most of their weekend entertainment is getting together over potluck dinners with other couples. But Ms. Harrington says borrowing for her education was worth it. She knew enough from her work-study job in the financial-aid office as an undergraduate not to overborrow. "My parents would have borrowed for me, but I felt because it was my education, it was my responsibility," she says. "I willingly took it on myself. But I didn't want to borrow more than I could reasonably pay back with a major in psychology." Ms. Harrington earns $36,000 a year working as a full-time counselor in the university's Office of Financial Aid. Her portion of the loan repayments amounts to... text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/low-interest-rates-prompt-proposals-to-change-student-loan-consolidation-limits.html RECORD-LOW interest rates have made borrowers who consolidated their student loans several years ago -- and locked in what are now considered high rates -- wish they could do it all over again. But under federal law they get only one chance, leaving many disgruntled borrowers to call their Congressional representatives in recent weeks to complain that they, too, want to take advantage of lower interest rates. Responding to that pressure, some Democratic members of Congress are leading a push for legislation that would allow borrowers to consolidate their loans multiple times. Reps. Rosa L. DeLauro, of Connecticut; Danny K. Davis, of Illinois; and David Wu, of Oregon, have each introduced bills. Loan consolidation lets borrowers combine several student loans into one and then lock in a single interest rate. This month, that interest rate fell to a record low of 3.4 percent. Consolidating loans for a second time could mean substantial savings for some borrowers, especially those who combined their loans three years ago when rates were around 8 percent. For example, a $25,000 loan repaid over 20 years at that rate would cost about $15,000 more than the same loan balance at 3.5 percent. "It would provide tremendous relief," said Lesley Sillaman, Representative DeLauro's press secretary. "The point here is to make student-loan debt more manageable and college education more affordable." ONE LONG-SOUGHT PROVISION The legislation introduced by Mr. Wu has 52 co-sponsors and several controversial provisions, including one change long sought by Republicans. Last year, lobbyists for Sallie Mae and some other lenders pressed the Bush administration and Republican Congressional leaders to change the interest rate on consolidated loans from a fixed to a variable rate, to make loan consolidation a less attractive option for borrowers. After coming under a firestorm of criticism from advocates for students, college lobbyists, and Democratic... text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/minneapolis-based-us-bank-offers-student-loan-breaks.html U.S. Bank recently rolled out cost reduction programs for student loan borrowers who graduate or maintain good grades. U.S. Bank’s Good Grades Perk rewards students with a 1 percent principal reduction from their original loan amount if they graduate with a cumulative GPA of at least 3.30. The bank’s Graduation Perk program lowers a student’s original loan principal by 2 percent when they show proof of graduation. Together the one-time reductions can lower loan principals by up to 3 percent and may reduce monthly payments. Both perks can be applied to the bank’s fixed rate and no fee (variable rate) student loans. U.S. Bank offers several benefits for customers in addition to the new perks, such as AutoPay discounts2, optional deferred payments3 and the option to add a cosigner which may help lower the loan’s annual percentage rate. Both programs are available to anyone who has applied for a U.S. Bank Fixed Rate and U.S. Bank No Fee student loan on or after Aug. 1 this year. Student loan customers who qualify for one or both of these perks will have 12 months to redeem their loan discount. For more information, visit the U.S. Bank Student Loan website at www.usbank.com/student-loans. U.S. Bank provides a comprehensive line of student banking products including student loans, campus ID card programs, Internet banking, U.S. Bank student checking and savings and Visa Buxx prepaid spending cards. text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/new-blow-to-private-student-loan-market.html Private lenders, never a big part of the student loan market, have fled in droves over the past few years. Now some analysts are warning that new legislation and an increasing wave of defaults could drive out the last few holdouts. Sen. Dick Durbin, D-Ill., and Rep. Steve Cohen, D-Tenn., introduced legislation in May that would allow private student loan debt to be discharged in bankruptcy, reversing a change made in 2005. Some analysts have said that if the proposal becomes a law, it would reduce what little demand remains for private student loan securitizations. But that market has a more immediate problem do deal with: more students are falling behind on their loan payments, according to Claire Mezzanotte, a managing director of structured finance at the Toronto credit rating agency DBRS. The share of student loans in repayment that are 60 days or more delinquent has doubled to 4.9% in the second quarter of 2011 from 2.5% in the second quarter of 2006, according to DBRS. Gross defaults of 1.3% on private loans "continue to remain relatively high, at approximately triple the levels seen pre-recession," Mezzanotte writes in a report published Wednesday. Students graduating with debt since the recession are facing an uncertain economy and high unemployment, which has made it more difficult for them to find jobs and start paying off their loans. Federal student loans generally offer repayment assistance, forgiveness and debt relief programs, but private lenders have been more reluctant to offer such forbearance programs, Mezzanotte writes. The number of private lenders offering student loans has dropped to "just a handful" from more than 80 in 2007, as players are "either exiting the business when liquidity and funding dried-up, or through industry consolidation," Mezzanotte writes. A recent law has also had an impact on the market. President Obama last year signed a... text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/options-for-financial-aid.html Families who are bracing for the expense of a college education often start thinking about how they will pay for their child's education even before getting accepted to a college or university. It's important to look at all options for financial aid in order to not have too much debt that could follow a student or parent for years come even after graduation. In-state tuition at public colleges can cost up to $30,000 or even more. Without knowing any of the options, it is important to first file a FAFSA form with a school's financial aid department. According to the organization Next Student, the FAFSA form allows students to give the federal government all of their financial information. Once the government has that in hand, they can determine what the best financial aid options are. One option often used by students entering college is a loan. Loans, like the federal PLUS loan, Perkins loan, Stafford loan and FFEL loan, can help you pay for college without putting a dime down to do so. Familes are required to pay back some or all of these loans (depending upon the student's financial status and the financial status of their parents), but loans can be an effective way to paying for college. Another option is grants, which can be obtained through the government (like the Federal Pell grant, for example) or through a particular school. Grants pay for college tuition and do not need to be repaid once you graduate. These grants are usually only "granted" to those who are in need of financial aid, but all students who think they might be eligible should be sure to apply for them. text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/student-first.html A return to the Education Department's loftiest echelons made James Kvaal appreciate some similarities there under the Obama and the Clinton administrations. "We've had great leaders in [Education Secretary] Arne Duncan and [Clinton appointee] Richard Riley, who share the same humility, encourage a collegial staff environment and focus on the impact of policies on individual students," Kvaal says. "I'm grateful to be here for a second time." As deputy undersecretary of Education, Kvaal inherited responsibility for the new direct federal role in student loans, a rare government assumption of what had been a lucrative private sector service. The transfer was mandated by a controversial amendment to the landmark 2010 health care reform law. Much credit for the program's "smooth transition," he is careful to say, goes to Education's former chief operating officer Bill Taggart, who led the effort. "Some were saying government wasn't capable of expanding the program so quickly. It is now one of the largest financial institutions in the country," Kvaal says. "Many of the best from the private companies are now our contractors." Kvaal, a youthful 37, boasts a resume ranging from politics to policy. After graduating from Harvard Law School, he went from the Clinton Education Department to working for Rep. George Miller, D-Calif., and then for Sen. John Edwards, D-N.C, on his 2008 presidential bid before moving to the Center for American Progress and on to the White House National Economic Council. Though he's conversant in health care and tax policy, Kvaal made his reputation with a paper that exposed exploitation in the student loan system. He co-authored the paper with former Education deputy undersecretary Robert Shireman, a longtime advocate of government lending. For Kvaal, steering policy and implementing it have been markedly different. "On a campaign the task is to help the boss articulate a vision, working off a... text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/student-loan-debt-surpasses-1-trillion.html Students and workers seeking retraining are borrowing extraordinary amounts of money through federal loan programs, potentially putting a huge burden on the backs of young people looking for jobs and trying to start careers. The amount of student loans taken out last year crossed the $100billion mark for the first time, and total loans outstanding will exceed $1trillion for the first time this year. Americans now owe more on student loans than on credit cards, reports the Federal Reserve Bank of New York. Students are borrowing twice what they did a decade ago after adjusting for inflation, the College Board reports. Total outstanding debt has doubled in the past five years -- a sharp contrast to consumers reducing what's owed on home loans and credit cards. Taxpayers and other lenders have little risk of losing money on the loans, unlike mortgages made during the real estate bubble. Congress has given the lenders, the government included, broad collection powers, far greater than those of mortgage or credit card lenders. The debt can't be shed in bankruptcy. The credit risk falls on young people who will start adult life deeper in debt, a burden that could place a drag on the economy in the future. "Students who borrow too much end up delaying life-cycle events such as buying a car, buying a home, getting married (and) having children," said Mark Kantrowitz, publisher of FinAid.org. "It's going to create a generation of wage slavery," said Nick Pardini, a Villanova University graduate student in finance who has warned on a blog for investors that student loans are the next credit bubble -- with borrowers, rather than lenders, as the losers. Full-time undergraduate students borrowed an average $4,963 in 2010, up 63% from a decade earlier after adjusting for inflation, the College Board reports. What's happening: Defaults. The portion of borrowers in default... text/html 2011-12-25T22:35:28+01:00 http://www.averagestudentloandebt.com http://www.averagestudentloandebt.com/general/student-loans-forgive-and-forget.html One of the great things about America, President Obama told students at the University of Colorado, is that no matter how humble your roots, you still have a shot at a great education. He also told students that his goal is to "make college more affordable." Alas, the president's prescription for making higher education affordable seems likely to yield the same results as his plan for curbing health care costs - that is, it is likely to drive prices higher than inflation. The nation's next fiscal nightmare may well be a higher-education bubble. Americans now owe more on student loans than on credit cards. As USA Today reported, America's student loan debt is expected to exceed $1 trillion this year. Rising costs have left many graduates in a deep hole. Many of last year's graduates walked away with a diploma and, on average, $24,000 in student loans. The default rate on student loans rose to 8.8 percent in 2009. Occupy Wall Street activists have been calling for forgiveness of student loans. Congress already passed legislation proposed by Obama to cap some student loan payments at 15 percent of a graduate's discretionary income and to forgive the balance after 25 years. Thursday, Obama pledged to lower the cap to 10 percent of discretionary income - with forgiveness after 20 years. What next, 5 percent and 15 years? "And we can do it at no cost to the taxpayer," U.S. Secretary of Education Arne Duncan cooed in a statement. "That is simply not true," responded Neal McCluskey of the libertarian-leaning Cato Institute. Taxpayers are on the hook for those loans. Last week McCluskey put out a paper that concluded that when government bestows more aid, institutions benefit far more than students. The phenomenon predates this administration. The College Board reports that for the last decade, college tuition and fees exceeded...