Student loans were a fact of life for Marjorie Dillon and she was OK with that — even though she didn't keep close track of how much she borrowed or completely understand the agreements. She and many of her former classmates at Robert Morris University in Moon relied on loans to pay tuition and expenses.
Ms. Dillon, 26, of Coraopolis, was the first in her family to attend a four-year university and loans were the only way to finance the business administration degree that would be her passport to a better life.
But six months after graduating with her bachelor's degree, Ms. Dillon is making $7.25 an hour plus tips serving beer at a bowling alley, working 25 to 30 hours a week. She's nearly $120,000 in debt, behind on her bills and, despite her best efforts, cannot find a better job. Her 80-year-old grandmother co-signed for the loans and could lose her house in North Fayette if the debts are not repaid.
"Honestly, I wouldn't have gone to school if I knew I would be in debt the rest of my life," Ms. Dillon said. "I won't be able to ever own anything. If you look at my credit report, it's (loaded) with Sallie Mae loans."
The financial crisis she is facing provides a snapshot of the worrisome outlook confronting many college graduates who find themselves juggling a mountain of student loans and other forms of debt in the early stages of their working lives.
Her case might be considered a worst-case scenario. The average cumulative debt for four-year college graduates has reached $22,656, according to Finaid.org, a leading Web site for financial aid information.
Some relief is on the way thanks to a new federal student loan repayment plan that will set monthly payments based on how much borrowers make and the size of their families instead of how much they owe. In some cases, graduates will make no monthly payments if their income falls below a certain level. And after 25 years of payments, any remaining balance is cancelled.
But the reduced income repayment program is only available for federal student loans under Stafford, Grad Plus and federal consolidated loan programs.
Ten of Ms. Dillon's loans totalling $108,639 were private signature student loans through the SLM Corporation — commonly known as Sallie Mae — which cannot be consolidated, forgiven, deferred or erased in bankruptcy. Two of her loans, totalling $9,000, are federal government loans.
Even if the variable interest rates stay frozen or never go up during the 25-year life of the loans — which is unlikely — her monthly payments on the $117,600 borrowed will climb to more than $1,100 and she will end up repaying at least $270,000.
Source
Wednesday, October 28, 2009
Thursday, October 15, 2009
Help for Forms and Repaying Loans
Applying for financial aid is about to get a little less annoying, and loan repayment will get more affordable for some students, thanks to recent initiatives from the U.S. Department of Education.
In June, the department announced that it would streamline the electronic version of the 109-question, six-page Free Application for Federal Student Aid. For many years, the FAFSA has been the subject of insults and curses from parents and politicians of all types. But government officials kept making it longer and more complicated to qualify students for specific scholarships and prevent parents from hiding income.
Research shows that the form has become so complex and frustrating that as many as 1 million students are giving up in disgust, thus possibly missing out on financial aid that would help them pay for college. In fact, many of the questions seem silly: After requiring students to enter their date of birth, for example, the 2009 paper form also asks students whether or not they were born before Jan. 1, 1986. Students also have to answer several repetitive questions about their marital status and the amount of school they've completed.
Repetitive questions will be eliminated from the online version of the form, says Secretary of Education Arne Duncan. Starting in January, the Education Department will also make it easy for students and parents who use the online version of the financial aid form to simply have their IRS tax forms automatically fill in many of the FAFSA questions about adjusted gross income, earnings, and the like, he promises.
Eventually, Duncan hopes to make the form even shorter. He plans to ask Congress for approval to cut out an additional 26 questions about savings, investments, and assets.
The simplification announcement was greeted with cheers by college financial aid officers, politicians, researchers, and others. "This is a great first step," says Marcia Weston, director of the YMCA's College Goal Sunday program, which drafts volunteers across the country to help families fill out their FAFSAs on a few Sundays each winter.
But she noted that many disadvantaged students do not have computer access and thus fill out the paper FAFSA, which will not be simplified. Those who need aid the most might still have to suffer through the most annoying form.
Source
In June, the department announced that it would streamline the electronic version of the 109-question, six-page Free Application for Federal Student Aid. For many years, the FAFSA has been the subject of insults and curses from parents and politicians of all types. But government officials kept making it longer and more complicated to qualify students for specific scholarships and prevent parents from hiding income.
Research shows that the form has become so complex and frustrating that as many as 1 million students are giving up in disgust, thus possibly missing out on financial aid that would help them pay for college. In fact, many of the questions seem silly: After requiring students to enter their date of birth, for example, the 2009 paper form also asks students whether or not they were born before Jan. 1, 1986. Students also have to answer several repetitive questions about their marital status and the amount of school they've completed.
Repetitive questions will be eliminated from the online version of the form, says Secretary of Education Arne Duncan. Starting in January, the Education Department will also make it easy for students and parents who use the online version of the financial aid form to simply have their IRS tax forms automatically fill in many of the FAFSA questions about adjusted gross income, earnings, and the like, he promises.
Eventually, Duncan hopes to make the form even shorter. He plans to ask Congress for approval to cut out an additional 26 questions about savings, investments, and assets.
The simplification announcement was greeted with cheers by college financial aid officers, politicians, researchers, and others. "This is a great first step," says Marcia Weston, director of the YMCA's College Goal Sunday program, which drafts volunteers across the country to help families fill out their FAFSAs on a few Sundays each winter.
But she noted that many disadvantaged students do not have computer access and thus fill out the paper FAFSA, which will not be simplified. Those who need aid the most might still have to suffer through the most annoying form.
Source
Monday, September 28, 2009
Corinthian Colleges Reports Fourth Quarter & Fiscal Year 2009 Results
SANTA ANA, Calif., Aug. 25 /PRNewswire-FirstCall/ -- Corinthian Colleges, Inc. (NASDAQ: COCO) reported financial results today for the fourth quarter and fiscal year ended June 30, 2009. The fourth quarter and fiscal year results exceeded our previous guidance range for start growth, revenue and earnings per share.
"Our strong fourth quarter and fiscal year results reflect the continued progress of our initiatives to improve the student experience and increase top and bottom line growth," said Peter Waller, Corinthian's chief executive officer. "We have successfully increased our student population for three consecutive years, and during fiscal 2009, the recession helped increase our growth momentum. The higher student population has resulted in improved leverage of facility and other fixed costs. Increased advertising effectiveness and lower media costs have improved efficiencies in marketing and admissions. Given all of these factors, our operating margin and cash flow increased substantially in fiscal 2009, and we expect continued improvement in the current fiscal year."
"We believe our business strategy positions us for consistent, sustainable earnings growth," Waller said. "In fiscal 2010 we expect our student population growth to be derived from several sources, including continued implementation of new programs, online enrollment, facility expansions, new branch campuses, and high school enrollment. In addition, we expect continued high unemployment to contribute to overall growth."
"While the recession helps drive enrollment growth, it also creates challenges in terms of career placement and student loan repayment," Waller added. "In fiscal 2010 we will continue to make substantial investments in both of these areas, to help graduates achieve their career goals and meet their financial obligations in a difficult economy."
Source
"Our strong fourth quarter and fiscal year results reflect the continued progress of our initiatives to improve the student experience and increase top and bottom line growth," said Peter Waller, Corinthian's chief executive officer. "We have successfully increased our student population for three consecutive years, and during fiscal 2009, the recession helped increase our growth momentum. The higher student population has resulted in improved leverage of facility and other fixed costs. Increased advertising effectiveness and lower media costs have improved efficiencies in marketing and admissions. Given all of these factors, our operating margin and cash flow increased substantially in fiscal 2009, and we expect continued improvement in the current fiscal year."
"We believe our business strategy positions us for consistent, sustainable earnings growth," Waller said. "In fiscal 2010 we expect our student population growth to be derived from several sources, including continued implementation of new programs, online enrollment, facility expansions, new branch campuses, and high school enrollment. In addition, we expect continued high unemployment to contribute to overall growth."
"While the recession helps drive enrollment growth, it also creates challenges in terms of career placement and student loan repayment," Waller added. "In fiscal 2010 we will continue to make substantial investments in both of these areas, to help graduates achieve their career goals and meet their financial obligations in a difficult economy."
Source
Tuesday, September 15, 2009
Student Loans: How Much Do I Really Owe Each Month?
That Sallie Mae/Gallup poll about student loans is still stirring up dust, with people arguing about whether it accurately reflects how much debt people are taking on for school. The survey found that fewer families borrowed money to send someone to college in 2008-2009 than the year before. I'm still thinking about it too and one section that particularly stands out to me is where they asked students to estimate their monthly loan payment once they graduate. The students were off -- by a lot.
Twenty-three percent of students wouldn't venture a guess at all, which I personally chalk up to fear. Can you blame them for not wanting to put a number to their future debt-filled lives?
The more debt you're staring at, the less likely you are to have a handle on the monthly load. Look at the chart above. Estimates from students who expected to borrow $10,000 or less were pretty close, but as their loans grew, the estimates all over the map. Sallie Mae says the range of estimates was $2 to $80,000 per month (those are the optimists who think they're going to pay it all back at once).
When I graduated, I remember being hounded to consolidate my loans. It was a smart move in the sense that it locked in a good interest rate. On the down side, it sent me straight into repayment with no grace period. I chose a graduated payment option, meaning I agreed to pay more as I made more. For the first three years, I paid a very minimal amount that barely covered interest. Last year, when I was making more but still feeling broke, my payment doubled. I really noticed the increase. Now, after nearly year of paying the new amount, it's starting to seem normal -- that is, until I look at my Sallie Mae statement and realize that at this rate it'll take me until 2020 to pay off my loans!
Source
Twenty-three percent of students wouldn't venture a guess at all, which I personally chalk up to fear. Can you blame them for not wanting to put a number to their future debt-filled lives?
The more debt you're staring at, the less likely you are to have a handle on the monthly load. Look at the chart above. Estimates from students who expected to borrow $10,000 or less were pretty close, but as their loans grew, the estimates all over the map. Sallie Mae says the range of estimates was $2 to $80,000 per month (those are the optimists who think they're going to pay it all back at once).
When I graduated, I remember being hounded to consolidate my loans. It was a smart move in the sense that it locked in a good interest rate. On the down side, it sent me straight into repayment with no grace period. I chose a graduated payment option, meaning I agreed to pay more as I made more. For the first three years, I paid a very minimal amount that barely covered interest. Last year, when I was making more but still feeling broke, my payment doubled. I really noticed the increase. Now, after nearly year of paying the new amount, it's starting to seem normal -- that is, until I look at my Sallie Mae statement and realize that at this rate it'll take me until 2020 to pay off my loans!
Source
Monday, July 20, 2009
Consolidating Student Loans Not Always Best Option
WHEN IT WAS first introduced in the mid-1980s, student loan consolidation was touted as a much-needed solution for those struggling to pay their debts from college. Borrowers could combine their Stafford and Plus loans into one payment and lock in the prevailing interest rate — typically, one lower than the average rates that they were previously paying on their other loans.
Times have changed, however, and consolidation is no longer the cheap and attractive option that it used to be. Thanks to the declining federal funds rate and the phasing out of variable-rate loans, consolidating your student loans now will actually cost you more over the lifetime of the loan. Eventually, consolidation will come back into fashion for variable-rate loans (rates should be much more attractive when they reset in July). But it will probably never again be the least-expensive solution for those with fixed-rate loans.
Source
Times have changed, however, and consolidation is no longer the cheap and attractive option that it used to be. Thanks to the declining federal funds rate and the phasing out of variable-rate loans, consolidating your student loans now will actually cost you more over the lifetime of the loan. Eventually, consolidation will come back into fashion for variable-rate loans (rates should be much more attractive when they reset in July). But it will probably never again be the least-expensive solution for those with fixed-rate loans.
Source
Monday, July 13, 2009
Tips On Consolidating Student Loans
It seemed like Monopoly money to her. Emily, a New York University senior who prefers not to use her last name, took on thousands of dollars of student-loan debt without giving it much thought--until now. Just weeks from graduation, she is applying for paralegal jobs in a tough market and suddenly coming face-to-face with the fact that in six months, she'll have to start making monthly payments of around $250 on her $20,000 debt.
"All I had to do was sign on to the Sallie Mae Web site, check off a few boxes and wait for the money to be disbursed," she says. "The thought of repaying it never really hits you until graduation is near."
If only the task of repaying student loans was as easy as taking them out. Instead, it's a complex process with which millions of college grads must grapple. Two out of every three undergraduates walk off the graduation stage with some form of student debt, according to a 2008 College Board study. The average: $22,700 per graduate--and that doesn't count the student-loan debt incurred by the half of entering college students who never earn a degree.
With three federal loans and seven private ones, Emily is in a situation familiar to college seniors and recent graduates across the nation. Like her, many consider consolidating their loans as a way to lower their monthly payments and simplify their finances. The theory is that, either by stretching out repayment of the loans or refinancing them at lower interest rates, the borrower can reduce monthly payments. Unfortunately, it's not a strategy that works for everyone.
One problem for people like Emily is that federal loans cannot be consolidated with private ones. Another is that beginning in July 2006, all federal student loans began carrying fixed interest rates. Before then, federal loans were issued with variable rates; by consolidating them, borrowers could often lock in a rate that was lower than what they were paying on each loan separately.
Now, "there is no financial benefit to consolidating federal loans, other than having a single monthly payment and access to alternative repayment plans," says Mark Kantrowitz, publisher of FinAid, a Web site that tracks the college financial aid industry.
If you can afford to make the payments on your loans, Kantrowitz says, consolidation isn't going to help you. If, on the other hand, you are having trouble making your monthly payments or think that you will in the future, consolidation can present several alternatives.
Remember, though, that while practically all repayment plans lower the monthly payments, they also add on several thousand dollars in interest costs by stretching out the life of the loan. If, for example, you stretch out a standard 10-year student loan to 20 years, you can cut monthly payments by 34%, but you will end up paying double the amount of interest over that time, Kantrowitz says.
If some or all of your loans were written before July 2006--say, in your freshman year of college if you are graduating this year--wait until after July 1, 2009 to consolidate, Kantrowitz suggests. He predicts the interest rate will tumble to a historic low of 2.6% from its current 4.2%. The problem with acting too quickly? Borrowers who have already consolidated won't be permitted to do so again at the new rate.
Starting this July, borrowers who have federal student loans can opt for a new income-based repayment plan. This may be a smart option for those entering fields with relatively low salaries, like public service. Under the plan, which is open to anyone with federal loans, the monthly payments are capped at a certain percentage of the borrower's income.
The rate is defined as the difference between the person's adjusted gross income (the amount on which you are subject to pay federal taxes) and 150% of the federal poverty level (which comes out to $16,245 for an unmarried person with no children, based on current rates.)
For an unmarried individual with no children and an adjusted gross income of $40,000, monthly payments would be capped at $365. An increase in salary would mean an increase in the monthly payment. If the full amount borrowed is still not paid off after 25 years of these payments, the remaining balance is forgiven.
Students who have already started repaying loans can opt for the income-based repayment plan, but there is an important caveat: Doing so will restart the clock and give your loan a new term of 25 additional years.
Emily, the NYU senior, like many students, had to turn to private loans to cover what federal programs would not. Private loans, unlike federal ones, carry variable interest rates. Consolidating them may save students money.
If, when the borrower took out the loan, he had a limited credit history, as most students do, three or four years of making regular payments on a credit card or an impressive employment history can improve a credit score by 100 points or more. That, in turn, can persuade a lender to reduce the interested charged as a result of a loan consolidation.
"Borrowers can get a lower rate now, and their rate may not jump as high in the future," Kantrowitz says.
Another potential benefit of consolidating your private loan is the removal of a co-signer, which can save a parent or relative from a potential liability. This is possible after 24 to 48 months of making regular payments.
Source
"All I had to do was sign on to the Sallie Mae Web site, check off a few boxes and wait for the money to be disbursed," she says. "The thought of repaying it never really hits you until graduation is near."
If only the task of repaying student loans was as easy as taking them out. Instead, it's a complex process with which millions of college grads must grapple. Two out of every three undergraduates walk off the graduation stage with some form of student debt, according to a 2008 College Board study. The average: $22,700 per graduate--and that doesn't count the student-loan debt incurred by the half of entering college students who never earn a degree.
With three federal loans and seven private ones, Emily is in a situation familiar to college seniors and recent graduates across the nation. Like her, many consider consolidating their loans as a way to lower their monthly payments and simplify their finances. The theory is that, either by stretching out repayment of the loans or refinancing them at lower interest rates, the borrower can reduce monthly payments. Unfortunately, it's not a strategy that works for everyone.
One problem for people like Emily is that federal loans cannot be consolidated with private ones. Another is that beginning in July 2006, all federal student loans began carrying fixed interest rates. Before then, federal loans were issued with variable rates; by consolidating them, borrowers could often lock in a rate that was lower than what they were paying on each loan separately.
Now, "there is no financial benefit to consolidating federal loans, other than having a single monthly payment and access to alternative repayment plans," says Mark Kantrowitz, publisher of FinAid, a Web site that tracks the college financial aid industry.
If you can afford to make the payments on your loans, Kantrowitz says, consolidation isn't going to help you. If, on the other hand, you are having trouble making your monthly payments or think that you will in the future, consolidation can present several alternatives.
Remember, though, that while practically all repayment plans lower the monthly payments, they also add on several thousand dollars in interest costs by stretching out the life of the loan. If, for example, you stretch out a standard 10-year student loan to 20 years, you can cut monthly payments by 34%, but you will end up paying double the amount of interest over that time, Kantrowitz says.
If some or all of your loans were written before July 2006--say, in your freshman year of college if you are graduating this year--wait until after July 1, 2009 to consolidate, Kantrowitz suggests. He predicts the interest rate will tumble to a historic low of 2.6% from its current 4.2%. The problem with acting too quickly? Borrowers who have already consolidated won't be permitted to do so again at the new rate.
Starting this July, borrowers who have federal student loans can opt for a new income-based repayment plan. This may be a smart option for those entering fields with relatively low salaries, like public service. Under the plan, which is open to anyone with federal loans, the monthly payments are capped at a certain percentage of the borrower's income.
The rate is defined as the difference between the person's adjusted gross income (the amount on which you are subject to pay federal taxes) and 150% of the federal poverty level (which comes out to $16,245 for an unmarried person with no children, based on current rates.)
For an unmarried individual with no children and an adjusted gross income of $40,000, monthly payments would be capped at $365. An increase in salary would mean an increase in the monthly payment. If the full amount borrowed is still not paid off after 25 years of these payments, the remaining balance is forgiven.
Students who have already started repaying loans can opt for the income-based repayment plan, but there is an important caveat: Doing so will restart the clock and give your loan a new term of 25 additional years.
Emily, the NYU senior, like many students, had to turn to private loans to cover what federal programs would not. Private loans, unlike federal ones, carry variable interest rates. Consolidating them may save students money.
If, when the borrower took out the loan, he had a limited credit history, as most students do, three or four years of making regular payments on a credit card or an impressive employment history can improve a credit score by 100 points or more. That, in turn, can persuade a lender to reduce the interested charged as a result of a loan consolidation.
"Borrowers can get a lower rate now, and their rate may not jump as high in the future," Kantrowitz says.
Another potential benefit of consolidating your private loan is the removal of a co-signer, which can save a parent or relative from a potential liability. This is possible after 24 to 48 months of making regular payments.
Source
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