Video Scholarship Contest

Forget about student loans, check out the Scholarship Contests at www.ScholarshipPoints.com.  Specifically, they are running a new Scholarship Video Contest at:

http://www.scholarshippoints.com/scholarship-contests/scholarship-idol/

Student Loans - Apply Today

If you have not already applied for your student loans, get started today.  You may have used a lender last year that is no longer offering loans - so don’t assume they will be there this year.  Many student loan providers have dropped out of the program in the last year due to changes in federal regulations surrounding the program, reduced subsidies and the credit crisis.

Lenders still in business:

www.StudentLoanNetwork.com
www.GradLoans.com

If you know of others, please comment below…

Scholarship Idol Video Contest on YouTube

Win a $1,000 Scholarship or one of 9 hand held (”flip”) Video Cameras plus get 125 Scholarship Points!

We’re looking for the Scholarship Points Idol YouTube Video Contest, the member with the most talent and the most votes. Submit your original video entry between 7/4/2008 and 9/5/2008 to earn points and win great prizes! Get details below.

Learn more at:

http://www.scholarshippoints.com/scholarshipidol

Preferred Lenders and Colleges

A lot of attention in the press has been paid over the last two weeks on colleges and their relationships with preferred lenders. Below is an article from the Baltimore Sun that does a nice job of summarizing some of the issues and viewpoints:

N.Y. Probe Casts Doubt on “Preferred” College Lenders
by Eileen Ambrose — Personal Finance

Colleges soon will send out financial aid packages that will include billions of dollars in loans. Before borrowing, many parents and students will check the school’s “preferred lender” list.

But the office of New York Attorney General Andrew M. Cuomo is investigating how these lists are compiled and whether undisclosed financial arrangements are undermining what’s best for families.

Cuomo earlier this month released preliminary findings of an investigation into the $85 billion college-loan industry. And late last week, he announced his intention to sue a California loan provider over accusations of making illegal kickbacks to schools. The company says it plans to defend its business practices.

According to Cuomo, schools don’t disclose how they come up with the preferred lender list, so families are not aware of potential conflicts of interest. Some lenders, for instance, pay kickbacks based on how much business the schools steer to the lender, Cuomo said.

Lenders also have picked up the tab to send college aid officers to ritzy resorts or provided other freebies, he said. And families, he added, are sometimes misled to believe that they must choose a lender from the college’s preferred list.

Financial aid administrators agree that any abuse must be stopped, but they add such problems are rare. Schools develop “preferred lender” lists to help parents and students through the maze of borrowing, they say.

“The marketplace is saturated with options. … It’s hard to sort them all out,” said Ellen Frishberg, director of student financial services at the Johns Hopkins University. “We’ve done a scanning of the marketplace, who’s good at service and who gives good benefits. And now we’re getting in trouble for this.”

Hopkins is in the direct lending program, so students borrow directly from the federal government. The Baltimore university, though, compiled a list of lenders that offer the best rates and service for families seeking parent PLUS loans and private loans, Frishberg said. She said she hasn’t heard from Cuomo’s office.

Hopkins students borrow $50 million from the government each year, and lenders have noticed. Frishberg said lenders have dangled incentives for the school to drop out of direct lending or to put a lender on the preferred list. The university ignores the enticements, she said.

“We have ethics here,” Frishberg said.

Cuomo said he released the early findings so that schools can correct any problems before aid packages go out this spring. His office also published a brochure to help families understand the loan process. It’s available at www.oag.state.ny.us.

Apart from a house, a college education is the biggest purchase that most students and parents will make. Families owe it to themselves to know their rights and make sure they get the best deal.

“Remember not to forget your consumerism. Higher education is a business,” said Kalman A. Chany, author of Paying for College Without Going Broke. Listen to what the colleges say, but do your homework, too, he said.

If the school is in the government’s direct lending program, there’s no choice. Uncle Sam is your lender.

But if you’re attending a school outside the program, your options are numerous.

First, understand that a preferred lender list is only a guide.

“You are not obligated to borrow from a lender that’s on the preferred lender list,” said Mark Kantrowitz, publisher of FinAid, an online provider of student aid information.

Still, a college’s preferred list can be a good place to start your research. Look at all the lenders on the list because discounts and benefits can differ widely among them, Kantrowitz said.

Ask the school how it came up with its preferred list, advised Sarah J. Bauder, director of financial aid at the University of Maryland, College Park.

Selection criteria

The university chose its lenders for their technology, pricing and customer service, Bauder said. For example, lenders waive upfront origination and guarantor fees that can cost a student 2.5 percent of the amount borrowed, she said. The school also selected lenders that have been in the industry for at least 10 years and that keep their loans rather than selling them to another lender. That eliminates confusion and protects loan discounts from being lost, which can happen when loans are sold, she said. (The university adheres to state ethics rules that prohibit the kind of activities noted by Cuomo and hasn’t heard from the attorney general, Bauder said.)

Next, look at what lenders not on the school list offer.

Kantrowitz recommends creating a spreadsheet with the names of the lenders, the discounts and what it takes to earn those benefits. “Focus on the [benefits] you can’t lose and don’t require you to jump through hoops,” he said.

Upfront benefits are more valuable than those on the back end that borrowers might never see, experts agree.

Lenders, for instance, often promise a reduction in the loan’s interest rate after the borrower makes three or four years of on-time payments. Few borrowers can go that long without a tardy payment so most never get the discount.

Upfront discounts vary. Many lenders will lop a quarter-point or half-point off the interest rate upfront if borrowers repay with automatic withdrawals from a bank account.

The Missouri Higher Education Loan Authority, a loan servicer, reduces the rate by 2 percentage points for borrowers making automatic payments on PLUS and Stafford loans. You don’t have to be from Missouri or go to school there to qualify. For a list of lenders the nonprofit works with, go to www.mohela.com.

To check record

To check a lender’s service record, ask your college if it has heard of any complaints. Or, see how lenders treat you when you call. “Are they responsive? Do they answer the phone? How long are you on hold? Ask how many people actually achieve benefits,” Frishberg said.

Your first choice should be federal loans, which are always cheaper than private loans, Kantrowitz said. But if you are going to take out a private loan, check with your school first, he said. “Some schools negotiate with lenders to get a better rate for students,” he said.

And never borrow more than you really need, he said.

More activity in Congress

Out today is news that Representative George Miller (D-CA), Chairman of the House Education and Labor Committee, has teamed with Rep. Rahm Emmanuel (D-Ill.) to submit The College Aid Made EZ Act. This bill would simplify the process for college students applying for federal financial aid by reducing the standard application from five pages to two. Much of the process would also be moved online to allow integration with the IRS (which could then supply information on some of the more challenging questions).

Things Are Starting to Get Interesting

As those of you who have been reading our blogs know, there is currently a lot of legislative activity taking place in the student loan industry. The President wants to increase Pell Grants are reduce guaranteed payments to lenders. Congress wants to reduce interest rates on subsidized Stafford loans by 50%. Senator Kennedy has proposed allowing students in-school to consolidate their current loan balances.

Yesterday, New York Attorney General Andrew Cuomo joined the national discussion by stating that colleges and universities across the country are accepting “kickbacks and other benefits” from student loan companies. He alleges that such practices - including preferred lender lists - favor schools and lenders to the detriment of the student.

“There is an unholy alliance between banks and institutions of higher education that may often not be in the students’ best interest,” Cuomo said. “The financial arrangements between lenders and these schools are filled with the potential for conflicts of interest. In some cases they may break the law.”

We believe that anything that increases student choice and promotes shopping around - including listening to your Financial Aid Officer - for the best product terms, rates, service, etc is the right thing to do for the student and/or parent. (We also believe that www.StudentLoanNetwork.com) is one of the places you should shop…!).

Stayed tuned to see how this latest blow to the Student Loan industry will impact on-going legislative discussions.

GradPLUS Loan vs. Private Loan

Last semester the Department of Education created a new loan program exclusively for Graduate students called the GradPLUS loan. Now students have options when it comes to bridging the gap between their financial aid package and the cost of attendance. Before students could only turn to Private loans to finance their graduate studies but finally the Department of Ed recognized the need for different sources of financing.

This raises many questions for grad students because they are not certain what loan is the best loan for them. Basically, if you are looking for a fixed interest rate loan, that has opportunities to defer or forbear your loan payments and your credit is good, fair or poor then you should apply for the GradPLUS loan. However the catch with the GradPLUS is that you MUST fill out a FAFSA! There is no escaping this lengthy paperwork if you want to receive the GradPlus loan.

Now, if you do not want to file the FAFSA then Private loan is the loan for you. To recieve a Private loan all you need to worry about is filing a short application and submitting proof of enrollment with the application. Proof can be a class schedule or a tuition bill. Also what is really nice about the Private loan is that the money is sent directly to the borrower. Unlike that GradPLUS loan this loan does not need to get certified by the school’s financial aid office. The application is quick, simple and the borrower is in complete control on how they receive the money.

After reading this if you happen to think of any other differences between GradPLUS and Private loans feel free to comment!

The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans, Education Loans/College Loans

Private Student Loan Consolidation - did you know?

Last week I was approached by an ex-colleague who is a recent graduate from Harvard Business School. He expressed dismay that he could not consolidate his 5 student loans. “As an international student, I took out private student loans. My friends are all consolidating their Stafford loans, but I can’t do that. Why not?” You can, I replied. He didn’t know that it was possible to consolidate private student loans. This isn’t uncommon. There is a tremendous amount of press and advertisements focused on federal loan consolidation, which groups one’s multiple Stafford, Plus and/or GradPlus loans into a single payment. The significant benefits are simplicity (one loan payment instead of many), a lower monthly loan payment, and often interest rate discounts for on-time and automatic payment.

The same benefits are available through private student loan consolidation. The market for private loans has grown incredible quickly and now accounts for approximately 20% of all funds borrowed for college. The market for private loan consolidation will undoubtably grow as more and more students - like my ex-colleague - realize the hassle of managing multiple payments each month…and the benefits of private student loan consolidation.

To learn more, visit www.studentloanconsolidator.com/private

Student Loan Interest Rate Reduction

A favorite pastime of mine is playing trivial pursuit with my closest group of friends. I play only with my good friends because I’m a sore loser and hate having people watch me struggle the sciences and sports questions. Regardless of these difficult pie pieces it’s truly one of my favorite board games . Today, for my post I will ask a quick student loan trivia question.

Good luck!

What year did Congress pass legislation that would allow students to claim a student loan interest paid deduction on their federal income tax returns?

The year Congress passed legislation was 1997 however student loan interest became deductible beginning with tax year 1998.

*To retrieve a copy of your tax documents to deduct this educational expense please contact your educational banking institution. Currently, a lender does not have to send out the tax document if you paid less than $600 a year in interest. If you are unsure of who your lender is please give us a call at the Student Loan Network at 877-328-1565. If you have any questions about if or how much interest you can deduct, you should consult with a qualified tax professional or contact the IRS Taxpayer Assistance line at 1-800-829-1040.

Take advantage of this deduction! If you qualify, the student loan adjustment can result in considerable tax savings.

The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans, Education Loans/College Loans

Consolidation and how it relates to new Education Bill

On January 17, 2006 the US House of Represenatives passed a bill to cut interest rates on all new subsidized Stafford loans. If this bill gets passed by the President it would mean that every year for five years your interest rate would gradually decrease. Starting at 6.8 and ending at 3.4%. The catch to this bill is that after that five year period it levels off to 6.8% again. Although this bill has not yet been signed by the President, they are anticipating it going through and taking effect this July,1.

You may be asking yourself what this has to do with consolidation. Well, I have received many calls from people who wanted to wait to consolidate because they thought the new bill would affect all their loans. The truth is that this new bill only affects your most recent student loans and has no affect on past loans. Another reason is because of the above statement. Since you are not eligible to consolidate while you are in school the dropping rate really has no affect on consolidation. Therefore, if you are in the buiseness of saving money then you really want to consider consolidating your loans. Not only will it lower your monthly payment but you will be locked into a fixed rate with only one bill to pay each montn. If you have any questions on the new bill check out the following link http://www.cbo.gov/showdoc.cfm?index=7729&sequence=. Questions about consolidation check out Student Loan Network

OTHER INFORMATIVE SITES
Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans