Tag: student loans (Page 3 of 4)

      Both parties shill for the for-profit college industry

      February 17, 2011 /

      Some Democrats and Republicans are trying to scuttle attempts by the Obama administration to impose new rules on for-profit colleges to prevent abuses against students to rack up huge debt for dubious degrees.

      The Department of Education is tired of federally subsidized student loans going to shady for-profit colleges that have poor track records of getting the students who do graduates good work — often leaving them stuck with mountains of debt. To curb this phenomenon, the agency has been moving along with a new regulation they call the “Gainful Employment” rule.

      Under “Gainful Employment” rules, for profit schools would have to show that their students can find work without getting stuck with unreasonable debt in order to qualify for federal loans.

      But behind the scenes, a bipartisan bloc of House members see things differently. They say the rule would reach too far and clamp down on institutions that do a decent job of educating and preparing students. But they want to tie the Department of Education’s hands completely, and block the funds they’d need to implement the rules at all.

      Fortunately, many members of Congress are with the administration on this, and Obama could veto any bill with this language.

      Your Career, Your Education

      Understanding Financial Aid for College

      February 3, 2011 /

      Graduate_Financial Aid

      Colleges and universities are frequently faced with the daunting task of assessing and implementing tuition increases based on the skyrocketing costs associated with operating an institution of higher education. Each year, most colleges and universities have no choice but to increase tuition from several hundred dollars up to $1,000 or more. For students, the difficult, and in some cases, nearly impossible task of paying for tuition, books, fees, and living expenses, cannot be tackled without help.

      Fortunately, the federal government has a number of programs in place to help students finance some or all of their education. These programs, typically a combination of grants, which do not have to be repaid, and loans, which do have to be repaid, have been successful at helping more than 55 percent of all students meet their tuition costs. One such program is the Federal Pell Program.

      Federal Pell Program

      The Federal Pell Grant Program is the largest grant program offered by the federal government. In 1973, the program had 176,000 recipients. Today, more than 5.3 million students receive Pell Grants.

      The Pell Grant Program is administered by the U.S. Department of Education and the U.S. Congress sets the maximum award amount. Over the past 15 years or so, the amount of Pell Grant award funds utilized has nearly tripled. In 1995, the amount of funds utilized totaled $5.5 billion and in 2008, this number reached $14.2 billion.

      In the earlier years of the program, the Pell Grant award was a maximum of $1,515 per student per academic year. For the 2009-2010 award year, the maximum award amount was $5,350 and for the 2010-2011 award year, the maximum award amount is $5,550 per student. 

      The award amount is based on a student’s need analysis and status (full or part-time). This means that awards are dependent upon:

      -The Student’s expected family contribution or EFC
      -The cost of tuition
      -Whether the student will be attending school for an entire academic year or less
      -Whether the student will be attending school full-time or part-time

      Each year, this need-based award helps millions of low-income individuals pay tuition costs. It is important to keep in mind that “low-income” means an individual whose family’s taxable income for the preceding year did not exceed 150 percent of the poverty level amount. Poverty level amounts effective through 2010 are as follows:

      Size of Family Unit

      48 Contiguous States,
      D.C., and Outlying Jurisdictions

      Alaska

      Hawaii

      1

      $16,245

      $20,295

      $18,690

      2

      $21,855

      $27,315

      $25,140

      3

      $27,465

      $34,335

      $31,590

      4

      $33,075

      $41,355

      $38,040

      5

      $38,685

      $48,375

      $44,490

      6

      $44,295

      $55,395

      $50,940

      7

      $49,905

      $62,415

      $57,390

      8

      $55,515

      $69,435

      $63,840

      If your income meets the requirements, Federal Pell money is guaranteed.

      Merit Scholarships

      A large number of states and schools offer merit scholarships. State and school-sponsored merit scholarships are programs that require students to maintain at least a B average. There are also a number of merit scholarship opportunities offered through community groups, corporations, and foundations. Fastweb.com to search through a wide variety of scholarship opportunities.

      Financial Aid Options

      Federal Student Loans

      Federal loans are available through the Federal Direct Loan Program and the Federal Family Education Loan Program (FFELP). Under the Federal Direct Loan Program, the institution acts as the lender and the federal government supplies the funds. The types of loans available through the Federal Direct Loan Program and the FFELP include:

      -Low-interest Subsidized Stafford Loans
      -Low-interest Unsubsidized Stafford Loans
      -Parent Loans for Undergraduate Students (PLUS)

      Subsidized Stafford Loans are based on financial and Unsubsidized Stafford Loans are not based on financial need. The government pays the interest on subsidized loans until the student graduates and the student pays the interest on unsubsidized Loans from the date of origination. Amounts may vary for both types of loans. For dependent students, the amount that can be borrowed during each school year ranges from $2,625-$5,500. For independent students, the amount ranges from $6,625-$10,500. Repayment begins after the student graduates, however, if the student is unable to begin repaying the loan, deferment and forbearance options are readily available. A number of cancellation and deferment options exist for teachers and other eligible positions as well.

      Under the Parent Loans for Undergraduate Students (PLUS) program, parents will have to complete a loan application. In general, parents must pass a credit check in order to be approved for a PLUS Loan. If the parents credit is not acceptable, a co-signer may be required. The co-signer must have excellent credit. If parents cannot produce a co-signer with pristine credit, some lenders may waive the credit check.

      Parent Loans

      Parents must prove that extenuating circumstances exist in order to waive the credit check. Parents can borrow up to the total amount of the student’s education costs, minus any financial aid that the student has received. PLUS loans have annually adjusted variable interest rates and interest begins to accrue on the day the loan is disbursed. Loan repayment begins within 60 days after the loan has been fully disbursed.

      The Federal Perkins Loan program is available to students with great financial need as determined by the U.S. Department of Education. Under the Federal Perkins Loan program, the school acts as the lender but it also uses partial funds from the federal government. Federal Perkins Loans are available to graduate and undergraduate students. Students can borrow up to $4,000 annually towards undergraduate tuition costs and up to $6,000 annually for graduate tuition costs.

      For more information about federal student loan programs visit the U.S. Department of Education Federal Student Aid website at www.fafsa.ed.gov.

      Private Loans

      In some cases, students may not qualify for enough federal financial aid to cover all tuition costs. In these cases, the only other option may be to apply for alternative funding such as a private loan. Private loans are offered by private lenders and there are no federal forms to fill out. However, the requirements for obtaining a federal loan are strict.

      The parent’s employment, credit history, assets, etc., will be considered when evaluating the loan application. Depending on the parent’s financial information and history, the interest rates may be low or high. Two major benefits of private loans include: no annual limit and parents may defer payment of the loan until the student graduates.

      Private loans may be obtained from just about any major financial institution. The best private student loans will have interest rates of London Interbank Offered Rate (LIBOR) + 2.0% or PRIME – 0.50% with no fees. It is important to keep in mind that these rates are available to borrowers with great credit or borrowers with good credit plus a creditworthy cosigner.

      How to Apply for Financial Aid

      No matter what your income level, all students should apply for financial aid. To apply for financial aid, you must submit a Free Application for Financial Aid (FAFSA), either electronically online or by mail. Applying online is fast and easy. Just visit the official FAFSA website to get started.

      application

      Once you have submitted your application, the federal government will determine your Expected Family Contribution (EFC). In simple terms, the EFC is the out-of-pocket money the family (parents and children) must pay for school. If the EFC cannot cover the costs of attending school, financial aid will help bridge the gap.

      How the Federal Government Determines Need

      The federal government computes the EFC through a formula that takes the students and parent’s available income and assets into consideration. The available income is the total income minus several different allowances. The federal government’s formula for calculating financial aid stipulates that the following percentages of income and assets be used for college expenses in any single year:

      -35 percent of a student’s assets
      -50 percent of a student’s income
      -2.6 to 5.6 percent of a parent’s assets
      -22 to 47 percent of a parent’s income

      It is important to note that the percentage contributions for parents vary depending on their economic status and age. Lower-income families and older parents are expected to contribute less and higher-income families with younger parents are expected to contribute more. Once the EFC has been determined, your information will be forwarded to the school or schools you have applied to in order to compute the amount of money you will need to cover tuition and other costs. You will receive an award amount that may include a combination of monies from grants and loans. You have the option to accept or reject the loans.

      Your Education

      Yes, Colleges Still Have Money to Loan

      January 25, 2011 /

      Financial Aid_College

      Even during tough economic times, colleges and universities have the means to tap into funds that have been reserved for a “rainy day.” Take Ohio State University, for example. Faced with the possibility of decreased enrollment due to lack of financial aid to many students, Ohio State University tapped into the school’s emergency fund back in 2008 to move roughly $1 million into a program that provides students with emergency short-term loans. The loan amounts ranged from $100 up to $1,000. OSU took it’s mission to help young people pursue their dreams and earn a degree a step further by guaranteeing that tuition would not be raised midway through the 2008-2009 school year. The university went on to promise that if tuition rose for the 2009-2010 school year, financial aid would increase in lockstep.

      Ohio State University is not alone in its quest to provide financially strapped students with emergency University backed loans. Universities currently loan more than $1.5 billion out of the $66 billion in new federal student loans, to students. As of 2006, more than 157 participated in School as Lender (SAL) programs. Among the more than 157 participating SAL schools are:

      • Akron University
      • Bowling Green State University
      • Chicago School of Professional Psychology
      • Des Moines University
      • DeVry University
      • Emory University
      • Loyola University of Chicago
      • New York Institute of Technology
      • Nova Southeastern University
      • Palmer College of Chiropractic
      • Parker College of Chiropractic
      • Southern Methodist University
      • St. Louis University
      • Touro College
      • Tufts University
      • University of Arizona
      • University of Illinois
      • University of Nebraska
      • University of Phoenix
      • Walden University
      • Widener University in Pennsylvania

      Wellesley_College_campus

      While roughly a third of schools use institutional funds to finance student loans, other schools partner with a commercial or nonprofit lending institution to establish a line of credit. Once the line of credit is established, the schools offer loans directly to graduate, law, and medical students, often placing themselves on the list of lenders the school recommends. The schools hold the loans for a certain period of time, typically two to three months after the money has been fully disbursed to the students/borrowers. During that time, the school collects interest, plus the government subsidies provided to lenders in the federally guaranteed student-loan program. The schools then sell the portfolio back to the banks for the agreed-upon premium.

       Status of the School as Lender Program

      While many universities have money for loans from funds taken directly from their own savings, universities that have partnered with a commercial or nonprofit lending institution to establish a line of credit might be in trouble. For starters, schools acting as lenders are constantly being scrutinized in order to help protect students and borrowers against unscrupulous practices. And although $1.5 billion is a small slice of the more than $66 billion in new federal student loans, the federal government doesn’t want the SAL program to undercut federal student loan programs. Schools operating as lenders in the Federal Family Education Loan Program (FFELP) should keep in mind that current federal regulations require guarantors to conduct reviews of certain schools that act as lenders. According to federal regulations 34CFR 682.401(c), guarantors must conduct program reviews of lenders that meet at least one of the following criteria:

      • The volume of FFELP loans made or held by the lender and guaranteed by the guarantor equaled at least 2 percent of the total loans guaranteed by that guarantor in the preceding year.
      • The lender is one of the 10-largest lenders of loans guaranteed by that guarantor in that year.
      • The lender’s FFELP volume was at least $10 million in the most-recent fiscal year.

      Currently, SAL programs are still in place, but according to Part B, Section 436 of the Federal Family Education Loan Program (FFELP), the Senate amendment terminates authority for the school as lender program, effective June 30, 2012.

      Your Education

      Only 22 percent of students at for-profit colleges graduate

      November 24, 2010 /

      We’ve done a number of posts about for-profit college scams, so we aren’t too surprised by the terrible graduation rates reported in a new study.

      For-profit colleges graduated an average of 22 percent of their students in 2008, according to a new report from Education Trust.

      That average palls in comparison to bachelor’s-seeking graduation rates at public and private non-profit colleges and universities for the same year, which averaged 55 percent and 65 percent, respectively.

      The report, titled “Supbrime Opportunity” (PDF) also reveals that for-profit colleges increased their enrollment by 236 percent from 1998 to 2009.

      The median debt of for-profit college graduates — $31,190 — far outpaces that of private non-profit college graduates, which stands at $17,040, and is more than triple the median debt for those from public colleges, which is $7,960.

      The government has helped to create this monster with easy access to student loans for these institutions, who now have the incentive to accept as many students as possible. Then they make money regardless of whether they provide value to their students.

      Fortunately, the Obama administration has proposed new rules to make it more difficult for many of these for-profit colleges to waste taxpayer dollars.

      Your Career, Your Education

      A look at for-profit college EDMC

      August 21, 2010 /

      BusinessWeek has a recent profile on for-profit college EDMC and the involvement of Goldman Sachs. The article is balanced, as they gave EDMC the opportunity to present success stories, but many of the stories are unfortunately similar to others we’ve heard regarding for-profit colleges – too many students paying huge tuition costs, racking up huge student loans, and then not being able to get high-paying jobs they expected (or were sold on by recruiters). One student profiled in the article got a bachelor’s degree in game art and design at EDMC for a cost $70,000 in tuition and fees. After she graduating she got a job that paid $12 an hour recruiting employees for video game companies. She eventually lost that job and now she’s stripping.

      We’re seeing more and more lawsuits in this area, and the article points out some lawsuits against EDMC. Changes are also coming from the Obama administration.

      On July 23, the Obama Administration proposed restricting—and in extreme cases, cutting off entirely—programs whose graduates end up with the highest debts relative to their salaries and have the most trouble repaying their student loans. EDMC will be affected more than most other for-profit companies because of its focus on “passion” fields, such as art and cooking, rather than more practical accounting or business degrees, says Jeffrey M. Silber, an analyst with BMO Capital Markets in New York. Cooking, fashion, and arts jobs tend to have low starting salaries: A beginning cook, for example, earns an average of $18,000 a year, according to U.S. Bureau of Labor Statistics data, while a two-year culinary degree can cost $40,000 to $50,000. EDMC spokeswoman Jacquelyn P. Muller says Art Institute students tend to earn more, with those holding culinary degrees starting at $28,000.

      You have to do your research if you’re thinking of attending one of these schools, and don’t fall for high-pressure sales tactics!

      Your Education

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