College Student Funding in the News
There’s been a lot in the news recently about college student funding.
At the start of the financial aid cycle…
We sent Congress all our money and all we got was this job as a loan servicer. New information is emerging about the millions of dollars that private lenders have spent on fighting the elimination of the bank-based Federal Family Education Loan Program (FFELP). Kelly Field, writing for the Chronicle of Higher Education, reported today that between January 1, 2008, and the end of June 2009, the top FFELP 20 participants spent nearly $14 million lobbying federal legislators against the Obama administration’s plan shut down the program. Just by itself, Sallie Mae, the student-loan industry’s biggest player, spent almost $6 million over the last 18 months to charm Congressional representatives — both Republican and Democrat.
That sounds like a lot of money to you and me, but it’s a small investment when you realize that until recently, private lenders got very rich in the multibillion-dollar federal student loan industry.
It’s the thought that counts. The new Post-9/11 GI Bill that went into effect on August 1st had an ambitious deadline to meet: providing all the veterans who applied with the money they needed for tuition, books, and housing by the time the school year began. The new benefits, which are well-intentioned and well-deserved, provide veterans with generous financial aid for college. Unfortunately, the timeframe may have been a little too ambitious. More than 270,000 veterans applied for college student funding and the GI Bill computer system was not able to keep pace. It’s far behind in processing requests, causing last-minute financial hardships for many veterans.
Fortunately, many schools are allowing veterans to begin classes anyway, and the Washington Post reports that the VA has scrambled to come up with emergency money. Starting October 2nd, veterans who need college funding right away can get an immediate $3,000 advance.
At the end of the financial aid cycle…
Who knew bankruptcy wouldn’t end student loan debt? At the other end of the financial aid lifespan, the U.S. House Judiciary Committee began looking into revising 2005 bankruptcy laws so that personal bankruptcy would include private student loans. Under current law, even if you file for bankruptcy, you would still be on the hook for any private student loan debt you have. (Your federal student loans may be discharged if you file for bankruptcy, if a bankruptcy court rules that repayment would cause you undue hardship.)
If you’re forced to file for bankruptcy (a difficult and embarrassing experience for anyone), your credit card, mortgage, and other consumer debt all gets written off. So why not your private student loan debt, too? Several student finance experts and advocates talked to the Judiciary Committee about the unfairness of the existing bankruptcy law, which has become more glaring under the crushing impact of the recession and unemployment. Stay tuned.
Die, student loan… maybe? On the other hand, if you’ve got money to burn and have been wondering whether you ought to use it to pay off your student loan early, the Motley Fool offers some excellent advice under a typically witty title, “Die, Student Loan, Die!” The decision comes down to comparing interest rates (what you’re paying on your student loan vs. what you might get from saving or wisely investing the money) and the other debt you may be carrying.
And in between….
No, I don’t want the free T-shirt. Starting next February, new rules take effect regarding the marketing of credit cards to young college students. Like other industries that have developed a reputation for preying on college student funding, the credit card industry is getting some clean-up. A new credit card law prevents banking and finance companies from offering college students free gifts for signing up for a credit card. This is an old stand-by that’s been used on college campuses for years, especially in September when the 18-year-old freshmen arrive and the first week of school is one long festival.
But in a digital age, credit card companies can send appealing offers of high credit lines (with astronomical interest rates and fees) right to the phone of those very young college students. (An annual Sallie Mae report on student credit card debt showed a 74% increase in 2008 — and an average 4.6 credit cards per undergraduate!) The new law will also prohibit under-21 students from getting a credit card at all if they’re not able to prove an independent means of income or provide the (legitimate) signature of a 21-or-older co-signer — a protection long overdue.