Student Loan Consolidation Lowdown

– Pushpa Sathish, Staff Writer

Students across America were given something to cheer about when a whopping majority in the House of Representatives voted to reduce interest rates on Stafford loans. The Bush administration had increased the interest rate to 6.8 percent, a figure that is higher than the market rate. The new bill, will decrease the amount to 3.4 percent over a five-year period. After six months, the rate will return to the original percentage. Pell Grants and student tax credits have not been increased. Around 5.5 million students with Stafford loans are expected to benefit through this move. Contra Costa Times reports:

However, Congress should not stop there. Rep. George Miller, D-Martinez, chairman of the House Education and Labor Committee, offered some promising words when he said of the bill, "This is a down payment." The next steps should be to make the lower interest rates permanent, increase Pell grants and establish tax credits or deductions for college expenses.

– By Pushpa Sathish, Staff Writer

It’s a well-known fact that college students have a far more significant burden to bear than that of books and lessons — the debt that they accumulate as they go through the years of academic life. If Congressman George Miller has his way, the debt load on students’ shoulders will be considerably lighter. The incoming chairman of the House Committee on Education and the Workforce is working on plans that will effectively decrease interest rates on the loans issued to college students, as part of the domestic agenda of the new Congress.

His press conference, centered around the theme, “Strengthening America’s Middle Class,” focused on how to increase Pell Grants for deserving students, besides offering a solution to help incoming House Speaker Nancy Pelosi deal with rising student debt. With the Department of Education estimating that more than 200,000 students either defer or forego a college education because of its high associated costs, Miller said his plan was to recommend a 50 percent cut in interest rates on need-based loans, from 6.8 to 3.4 percent. SF Gate reports:

Miller also plans to take up the reauthorization of President Bush’s "No Child Left Behind" education legislation, which expires next year. But of all the issues in public education, "the grandaddy of them all is funding," he said. "To improve teaching, to improve professional development, to make sure we are able to have talented teachers in all classrooms, in all schools … we are going to have to have that."

– By Pushpa Sathish, Staff Writer

If you’re a university student in Canada, you’d better wish on your brightest star that you live in the Quebec area and not in Atlantic Canada. Why? Because you don’t want to be saddled with the burden of a large student debt.

According to research by the Canada Millennium Scholarship Foundation, students from Atlantic Canada graduated with the maximum debt this year ($29,747), followed by those in British Columbia ($26,675), the Prairie provinces ($22,787), Ontario ($22, 589), and finally Quebec ($12,992). The national average debt is $24,047.

The varying levels of debt in different regions across the same country are attributed to the disparity in tuition fees and grants. Nearly 60 percent of those who graduated this year are deep in debt, a significant increase from the 45 percent in 1990. Of the 57 percent who borrowed for a college education, nearly 30 percent owe more than $15,000 while 44 percent are at least $10,000 in debt.
The very purpose of borrowing is defeated when students drop out without completing the course because of large debts. They are unable to pay back the money borrowed without the right education and a proper job. A study conducted in August this year warns that students with large debts are more prone to drop out.

Programs that have been set up to help graduates pay off their loans have not drawn the necessary response. Only around 33 percent of those who graduated in 2002 have enrolled in the scheme which allows those who earn a small income to temporarily stop loan repayments. The government helps by covering the interest on the loan.

According to the Foundation, the situation is expected to go from bad to worse because of the new changes to the federal and provincial student loans program. 

Imagine having a debt of nearly $30,000 at the age of 22! That’s the situation most young graduates especially young women, find themselves in. When they graduate from University, their entry into adult life begins with a slow crawl from student loans to solvency. Twincities.com reports:

Nationwide, 20- and 30-somethings such as Ingram are surprised to find that early debts can have a far-reaching impact on the quality of their lives. And while all young people are struggling, experts say, young women between the ages of 18 and 34 may be suffering the most.

Read more: Debt weighs heavily on women in their 20s and 30s

I knew our elected representatives would be working out some kind of formula, but the recent problems made one a bit let down. Interest rates rose and student loans got higher as fees and other charges rose burdening students. The costs had become so unbearable that I wondered how long it could go on like this. Seems our representatives had the same thought and decided to do something about it. A recent plan introduced by Rep. Tom Petri would allow students who took loans to repay them through a percentage of their incomes.

This plan aims to keep student loans affordable. Students who use the plan would know that if they had trouble finding work in any given year, or if they took a lower-income public service job, their repayments would automatically be stretched out. Any balance left after 25 years would be wiped clean. Americanchronicle.com reports:

Petri’s Income-Dependent Education Assistance (IDEA) Act of 2006 would create a new direct consolidation repayment option that all federal student loan borrowers would be eligible to participate in following graduation. Petri said that unlike current consolidation options, the IDEA Act would provide two key benefits for both borrowers and taxpayers.

Read more: Petri Introduces Student Loan Plan

Students in Michigan; some good news may come your way soon in the form of extra help paying for your college education. A plan recently introduced by house democrats would pay back interest on student loans, if those students work in certain high-tech fields. Wins.com reports:

Dianne Byrum, State Representative: "The growth sectors and the jobs, we need to be training the workforce for today and into the future, rely much more on math and science, we have to be encouraging our Michigan students to go into those fields." Students must also work in Michigan for five years after they graduate. Representative Diane Byrum says an educated workforce living in Michigan is vital to turning around Michigan’s economy.

Read more:More Details on Interest-Free Student Loan Proposal

Student loan indebtedness is climbing each year, and large education debt can change a student’s future. How much debt a student has at graduation can affect career choices, lifestyle and family plans. news-gazette.com reports:

Student loan indebtedness is climbing each year, and large education debt can change a student’s future, Durbin said. How much debt a student has at graduation can affect career choices, lifestyle and family plans.

Read more: Cut Student Loan Rates, Senator Says

The consolidation delay issue has snowballed into a major controversy now with the Education Department receiving nearly 80 inquiries about delays. Education Department officials have now stated that the department can impose money penalties on lenders and, in extreme cases, can bar them from participating in federal loan programs. Civilrights.org reports:

Banks and other lenders say that if there are lags in processing applications, they are the result of the sheer number of students who have applied to consolidate their loans; one consolidation company received 40,000 applications in June alone. There is no central database that tracks the pace of consolidation activity.

Read more: Dispute on Loan Consolidation

The din just wouldn’d die down as banks, loan consolidators, and experts urged students to consolidate before the July 1 deadline. Students rushed in their thousands to consolidate their loans and lock in lower interest payments before the higher rates took effect. You would think that by now, the process having been completed, students would no longer be worried about their financial situation. Well, the fact is something else altogether.

Frustrated students and executives at some of the companies that process the applications are now accusing big lenders like Wells Fargo, Wachovia and even Sallie Mae of violating federal regulations and slowing the process, charging the higher rates in the meantime. According to loan consolidators, the banks have too many incentives to delay of which the interest rate plays a very important role. Congress raised the maximum interest rates that lenders may charge on student loans. As of July 1 the rate for students paying off Stafford loans rose from 5.30 percent to 7.14 percent, and nearly every lender charges the maximum. Nytimes.com reports:

Banks and other lenders say that if there are lags in processing applications, they are the result of the sheer number of students who have applied to consolidate their loans; one consolidation company received 40,000 applications in June alone. There is no central database that tracks the pace of consolidation activity.

Read more: Dispute on Loan Consolidation

Now the Education Department is offering a sop after causing the harm. What am I talking about — The personal data of 21,000 student loan borrowers recently appeared on the Education Department Website. As solution, the department has offered to arrange for free credit monitoring for these students. Seattlepinwsource.com reports:

Terri Shaw, the department’s chief operating officer for federal student aid, said the people involved are holders of federal direct student loans who used the department’s loan Web site - http://www.dlssonline.com - between Sunday and Tuesday. It is the latest in a string of data thefts and security breaches affecting more than a half-dozen federal agencies in recent months.

Read more: Ed. Dept. offers free credit monitoring