consolidation-loan-review

Home Buyer Tax Credit Extended and Expanded by The Senate

2009-11-05T10:47:00.000-08:00

Besides the current low mortgage rates you now have another incentive to buy a home. The Senate has voted to expand and extend the first time home-buyer tax credit that was due to expire at the end November 2009. The House is expected to vote and pass it later today.

For first time home-buyers which includes anyone who hasn’t owned a home in the past three years the $8,000 tax credit has been expanded to April 30, 2010. You have to sign a sales contract by April 30 and close on the home by June 30, 2010.

The credit has been expanded to include a $6,500 tax credit for home-buyers who have owned their home for at least five years. The tax credit is only for a home purchase that will be your primary home and costs $800,000 or less.

The credit is also phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000. If you’re in the military serving outside The United States for at least 90 days the tax credit is extended for another year.

From CNN:

The extension will cost $10.8 billion over 10 years, according to the Joint Committee on Taxation.

Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS. Some portion of those returns, which the IRS couldn’t specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time.

By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors.

Mortgage rates did not budge in Bankrate's weekly survey.

The bench

mark 30-year, fixed-rate mortgage remained unchanged at 5.35 percent, according to the Bankrate.com's national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.31 discount and origination points. One year ago, the mortgage index was 6.44 percent; four weeks ago, it was 5.22 percent.The benchmark 15-year, fixed-rate mortgage dippe

d 2 basis points, to 4.72 percent. The benchmark 5/1 adjustable-rate mortgage remained unchanged, at 4.64 percent.

Extra credit

It appears increasingly likely that homebuyers will receive an early holiday gift from Congress and the White House.

Wednesday night, the Senate passed an unemployment relief bill that also extends the federal homebuyer tax credit into 2010 and expands the pool of eligibility beyond first-time buyers.

"Any program expansion can be considered a good thing for those seeking a primary residence," says Cameron Findlay, chief economist at LendingTree in Charlotte, N.C.

Weekly national mortgage survey

Results of Bankrate.com's Nov. 4, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
	30-year fixed	15-year fixed	5-year ARM
This week's rate:	5.35%	4.72%	4.64%
Change from last week:	N/C	-0.02	N/C
Monthly payment:	$921.38	$1,280.87	$849.81
Change from last week:	N/C	-$1.70	N/C

The House of Representatives is expected to quickly take up the measure for final approval. Then it would be up to President Barack Obama to sign the measure into law. The White House has said it favors an extension. Extending and expanding the credit would likely shape the type of home purchases that occur over the next few months, according to Findlay.

"Sales activity itself may not see a large increase," he says. "But we expect the mix of the sales to shift toward (the) primary residence owner."

Bill details

The Senate legislation will extend the existing $8,000 first-time homebuyer credit beyond its scheduled Nov. 30 expiration date and into the spring. A $6,500 credit also will be offered to existing homeowners who sell their current property and purchase a primary residence that costs $800,000 or less. To be eligible for the credit, move-up buyers must have lived in their present house for at least five years.

Income limits for the credit will increase to $125,000 for individuals and $225,000 for couples. Homebuyers who qualify must stay in their new homes for at least three years, or they will have to repay the credit. To be eligible for the tax break, homebuyers will have to be under contract by April 30, 2010, with closings wrapped up no later than 60 days after that.

The bill excludes investor-owned properties from eligibility, a move that appears to keep the program focused on "promoting long-term community price stabilization," Findlay says.

Act soon

Buyers would be the most obvious beneficiaries of an expanded credit. But sellers also could get a boost, especially if they live in states stung by dramatic property value declines. David Kuiper, a mortgage planner at First Place Bank in Holland, Mich., says homeowners who fear selling at a loss might be persuaded to do so anyway if they know they'll get money back in the form of a tax credit after buying a new home.

"It would help with the equity loss in the home they sell," he says.

Jim Sahnger, mortgage consultant for Palm Beach Financial Network in Stuart, Fla., says the credit could help reimburse other costs associated with selling a property, including "updating, minor renovations (or) recapture of closing costs."

However, the credit's impact also could cut in negative ways. As the spring expiration date draws nearer, sellers might use the credit as leverage against buyers who are "under the gun to get a deal done," Sahnger says.

"The closer we are to the deadline, the more sellers may be apt to hold firm on pricing," Sahnger says, noting that such a pattern emerged in recent weeks as the original Nov. 30 deadline loomed.

Meanwhile, a seller who "waits until the last minute to accept an offer" might not have enough time to find a new home before the credit expires, he says.

"Waiting until the last minute here should not be to anyone's advantage," Sahnger says.

Instead, Sahnger urges buyers to promptly take advantage of the tax credit and today's low mortgage rates.

"I would encourage someone to act sooner rather than later," he says.If you're in the market for a mortgage or refinance, you can look for the best interest rate by searching Bankrate's rate tables.

Private Loans Deepen a Crisis in Student Debt

2007-09-20T07:29:00.000-07:00

WASHINGTON — As the first in her immigrant family to attend college, Lucia DiPoi said she had few clues about financing her college education. So when financial aid and low-interest government loans did not stretch far enough, Ms. DiPoi applied for $49,000 in private loans, too. “How bad could it be?” she recalls thinking.

When Ms. DiPoi graduated from Tufts University in Boston, she found out. With interest, her private loans had reached $65,000 and she owed an additional $19,000 in federal loans. Her monthly tab is $900, with interest rates topping 13 percent on the private loans.

Ms. DiPoi, now 24, quickly gave up her dream to work in an overseas refugee camp. The pay, she said, “would have been enough for me but not for Sallie Mae,” her lender.

The regulations that the federal Education Department proposed this month to crack down on payments by lenders to universities and their officials were designed to end conflicts of interest that could point students to particular lenders.

But they do nothing to address a problem that many education officials say may have greater consequences — more students relying on private loans, which are so unregulated that Attorney General Andrew M. Cuomo of New York recently called them the Wild West of lending.

As college tuition has soared past the stagnant limits on federal aid, private loans have become the fastest-growing sector of the student finance market, more than tripling over five years to $17.3 billion in the 2005-06 school year, according to the College Board.

Unlike federal loans, whose interest rates are capped by law — now at 6.8 percent — these loans carry variable rates that can reach 20 percent, like credit cards. Mr. Cuomo and Congress are now investigating how lenders set those rates.

And while federal loans come with safeguards against students’ overextending themselves, private loans have no such limits. Students are piling up debts as high as $100,000.

Banks and lenders face negligible risk from allowing students to take out large sums. In the federal overhaul of the bankruptcy law in 2005, lenders won a provision that makes it virtually impossible to discharge private student loans in bankruptcy. Previously such provisions had only applied to federal loans, as a way to protect the taxpayer against defaulting by students.

While federal loans also allow borrowers myriad chances to reduce or defer payments for hardship, private loans typically do not. And many private loan agreements make it impossible for students to reduce the principal by paying extra each month unless they are paying off the entire loan. Officials say they are troubled by the amount of debt that loan companies and colleges are encouraging students to take on.

“It’s a huge problem,” said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. “When a student signs the paper for these loans, they are basically signing an indenture,” Mr. Nassirian said. “We’re indebting these kids for life.”

Dozens of students interviewed said that when they signed for their loans they were unclear on what interest rate they were getting and that financial aid counselors discussing repayment failed to include interest that students were compounding while in college. The lenders say they are providing a valuable service, helping students who might otherwise not be able to afford college. Tom Joyce, a spokesman for Sallie Mae, the nation’s largest student lender, said the company’s average interest rate on private student loans was just over 10 percent and that the typical borrower was a young person with little or no credit history and no collateral.

“What would the credit card interest rate be for that borrower — 24, 25 percent?” Mr. Joyce asked. “Our goal is to make it possible for students to graduate.”

But various members of Congress are now looking at ways to tighten oversight of private student loans.

The large growth in private loans — once confined primarily to graduate students — largely comes from steep increases in tuition, which have outpaced inflation and federal aid, and an increasing reluctance among parents to take on more debt.

For the last 15 years, the limits on the most common federal loans have stagnated at $17,125 for four years. They will increase slightly starting next month. In addition, loan companies have also come to realize that such loans can be hugely profitable.

Although the federal Education Department has no jurisdiction over private student loans, Education Secretary Margaret Spellings recently pledged to convene the agencies that do, including the Securities and Exchange Commission, the Federal Trade Commission and the Federal Deposit Insurance Corporation.

Research by the U.S. Public Interest Research Group and others show that some students are taking private loans before exhausting their eligibility for low-interest, fixed-rate federal loans.

Janea Morgan, 25, a 2006 graduate of California College San Diego, said that college officials had her fill out the federal financial aid form but never tapped federal loans. Instead, she said, they steered her to a private loan with KeyBank, at an interest rate that could rise four times a year, with no cap.

Now, she is carrying $46,000 in private loans at 9.22 percent interest, which she fears may rise beyond her ability to pay. Ms. Morgan said that when she asked college officials why they bypassed federal loans, “They said it would take too long.”

Barbara Thomas, vice president and chief operating officer at California College San Diego, said that she could not discuss Ms. Morgan’s situation because of privacy laws, but that generally students sometimes took too long to fill out the federal financial aid application properly. “It’s a time thing that kids have to work with,” Ms. Thomas said.

Sometimes marketing is at work. Last September, the United States Student Association complained to the Federal Trade Commission that a major private lending program, Loan to Learn, made “false and deceptive claims” in a brochure called “Demystifying Financial Aid.”

According to the complaint, the brochure stated inaccurately that “most government loans are need-based,” suggested that federal loans could not be used for education-related costs like computers and books, and that there were “strict deadlines” on applying for federal loans. In fact, students can get federal loans to pay for educational expenses, even retroactively.

George C. Pappas, a spokesman for Loan to Learn, dismissed the complaint as “absolutely ridiculous.” Nevertheless, EduCap, the parent company, has removed the passages from the guide. The F.T.C. declined to comment on Loan to Learn.

Students with private loans can be caught by surprise at how adjustable interest rates allow debt to swell.

Sean Craig Hicks, 35, attended the Westwood College of Aviation Technology, now known as Redstone College, in Broomfield, Colo., from 1997-2000 in the hope of becoming an airplane mechanic. He said a financial aid officer gave him an application for a $6,000 private loan through Wells Fargo to help pay outstanding expenses just before graduation. On the school’s hall walls, he said, were fliers for Wells Fargo loans. “You trust those people when they tell you this is the one to go with,” Mr. Hicks said.

Mr. Hicks said his loan documents had promised that if he paid the minimum due each month, he would pay off the loan by 2010. Instead, after six years of payments, most of them on time, he owes $100 more than when he took out the loan.

A spokeswoman for Wells Fargo, Mary Berg, confirmed that Mr. Hicks held a student loan, but called the dealings with him a private matter. Officials at Redstone College did not respond to requests for comment.

Many students out of dozens interviewed said it was not particularly clear what interest rate they had signed up for.

Take Attila Valyi, a Motorola employee in Plantation, Fla. Eager to jump-start his education, he turned to American InterContinental University, a for-profit institution offering a bachelor’s degree in 13 months. But discovering how much the diploma would cost was an endeavor worthy of a dissertation.

While the $28,000 tuition was no secret, Mr. Valyi said that at the urging of university officials, he had signed an application for a loan that doubled as a pledge to pay the money back. It did not indicate an interest rate. He took out two more loans before getting his bachelor’s degree, realizing only when it was too late, he said, that he carried loans at three different interest rates that could rise from month to month, the largest for $10,745 at 18 percent.

When Mr. Valyi, 30, contacted the lender, Sallie Mae, to refinance, he said he was told he could not do so until he graduated. “You’re locked in at 18 percent,” he said he was told.

Martha Holler, a spokeswoman for Sallie Mae, said Mr. Valyi and other borrowers of those years would have been told, during the application process and in an approval letter, the interest rate as a percentage above the prime rate. And they were free to cancel, up to 30 days after the money went to the school.

Lynne Baker, a spokeswoman for the Career Education Corporation, which owns American InterContinental and scores of other for-profit colleges, said that the corporation did not track individual student interest rates and that whether to pay such rates was the students’ decision.

7 Deadly Mistakes That Will Kill Your Credit Score

2007-09-19T06:39:00.000-07:00

Top 7 Credit Score Secrets
As a former credit counselor, I know that most individuals have a misguided perception of credit and I am here to debunk some common credit myths and provide you with some free information about how to improve your score. Since it is an absolute fact that a higher credit score means better interest rates for car loans, mortgages, and other debts, these tips can translate into a few extra dollars in your wallet each month.

1) Approximately 35% of your credit score is based on past debts that are over 30 days late. This means if for some reason you are going to be late on a payment, do not let it slip past 30 days late.

2) Canceling credit cards can actually hurt your credit score, particularly if they are an old and established part of your credit history. Even if you no longer use a card that is ten or twenty years old, in most cases it is better to simply shred it since 15% of your score is based on the length of your history. In addition, keeping accounts open gives you a better debt to credit ratio, which makes up 30% of your credit score.

3) While not taking on any debt and paying for everything with cash seems like a logical choice for individuals who can afford this lifestyle, no credit means bad credit in the eyes of lenders. There is bound to be a time when you cannot buy something with cash, such as purchasing your first house, so make the effort to open at least one account and make purchases with the credit card occasionally.

4) Applying for too many credit cards at once is extremely detrimental to your credit score since every time someone checks your current credit status, it leaves a ding that lasts a year. When you suddenly start applying for a large amount of credit, it sends up a red flag that you are enduring some financial trouble you are prepared for or that you are accumulating too much debt.

5) Although teenagers are not always the most responsible with money, getting your child a credit card early in life can make a significant difference in the long run as it is paid off in time. There are a few excellent options for low-limit cards and prepaid cards, which will both help you child start building a positive foundation for their future credit.

6) And finally, avoid freecreditreport.com like the plague! It isn’t free and is a complete scam. If you want your credit report for free you can check all three major reporting companies every 12 months without any negative effects at the government sponsored site: annualcreditreport.com

7) Never lie or falsify information about your credit score! Your credit score is easily checked by anyone and you may even face legal action for lying about it on loan applications.

Student loans’ crushing effect

2007-09-10T06:40:00.000-07:00

Consumer culture is crippling the economy

Student loans are having an adverse effect on our economy by indebting society’s smartest individuals.

First, let me make it clear, I do understand that student loans are a necessary evil. Without them, some intelligent, college-bound students would not be able to afford the advantages of higher education. But, the burden that comes with paying off student loans is a problem that is diminishing the effectiveness and productivity of our society.

To illustrate my point, here is a hypothetical situation comparing a person who didn’t receive student loans versus someone who did.

Imagine both students worked light part-time work loads their first couple years of college, and maybe even worked full-time jobs their third and fourth years of school. As a rough approximation, both students earned $60,000 over those four years. The individual without the student loans is using that money for tuition, books, food and entertainment, while the person with student loans has only food and entertainment to worry about.

At this point, you may be wondering what the problem is.

Consumer spending habits are awful in this country. The person with student loans is probably spending a majority of their $60,000 to live a more extravagant life. They’re probably thinking that once they graduate college, they’ll get a nice job and be able to pay off the student loans easily.

Unfortunately, this is more a fairy tale than truth. Most students do not fall into the category of immediately landing a job when entering college. Many students are jobless for at least the first year of their college experience, if not longer.

Let’s fast forward to graduation day. After graduation, you may take a little deserved break, or you might try to enter directly into the job market. Because you’re an educated, intelligent person, you’re probably expecting a nice job out of college, but after a few months of looking, the opportunity doesn’t knock on your door.

However, the institutions demanding your student loans back don’t care. So you make the first few payments, but then you realize that you need a job. At this point, you find a job below the standards you originally wanted and that you’re probably overqualified for. After all, it beats competing with the masses of college graduates for the limited job opportunities.

This phenomenon is destroying our economy’s potential. If our smartest individuals cannot afford to hold out for a job they know they can do, how is this good for society? The trickle down effect can be just as devastating.

Another problem with student loans is that it creates atrocious credit habits. It is no secret, although experts would ponder that credit card companies love to prey on poor college students. Just like smoking, credit cards become addicting.

Now you have interest payments on credit cards. If you’re unfortunate, they’re subsidized loans (loans that acquire interest upon graduation), and if you’re extremely unfortunate, they’re unsubsidized loans (loans that acquire interest upon acceptance of loan).

It is an unenviable position to start off from. One reason most people go to college is to better their lives, namely financially. If you’re in debt from the very beginning, it is an uphill battle that is easily lost. This is depressing because students who graduate from the various institutions of higher education, I have faith, are some of the brightest, most intelligent people on the planet. It is imperative that we give these individuals the opportunity to succeed and we haven’t.

It is obvious the effects that bad credit habits (many of which start in college) have had on our economy.

With the housing market in a state of disaster, and people thinking that Adjustable Rate Mortgages are the way to go, we have sunk ourselves Or maybe it is a stronger statement to say that credit cards and student loans have trained us to sink ourselves.

Either way, improvement is necessary. Instead of all the fluff classes we take in college, why not have a financial education class? I was a business management major, and not once did we ever talk about personal finance. There was not even an investment banking class.

If we choose to ignore teaching our students about money management and then allow them to wallow in a state of student loan purgatory, we are missing vital opportunities for growth and prosperity.

Yet, the problem isn’t with student loans themselves. It lies in the fact that no one wants to educate you about student loans.

For students with jobs, allocating money to pay the loans off before you graduate college is a simple, yet excellent idea.

I recommend finding out what the monthly payments will be once you graduate and try to save that money from your paycheck if at all possible. If you can’t afford to save that much, save what you can and invest that money. Since you probably don’t want to put that money at any great risk, you could put your savings in a Certificate of Deposit. Although it is generally advisable for young investors to take more risk, money to pay off student loans should not be risked.

With a plan in mind as to how you are going to pay off your student loans, the task of doing so is no longer so daunting. Once you have the confidence and ability to pay off your loans, you can search for that dream job for a few months, maybe even years longer.

One of my favorite quotes is, “Time, it’s too expensive.” It doesn’t have to be, though.

The Student Loan Crush

2007-09-06T05:52:00.001-07:00

How it got so heavy, and how to lighten it.

This September, over a million Canadians will start or resume their post-secondary educations. We take this for granted now, but half a century ago it was rare for young people to seek education beyond grade 12 -- if that far.

The desire for more education was clearly there, however. Studies like the 1962 Macdonald Report motivated the B.C. government of Wacky Bennett to build a new university (Simon Fraser) and to found a community college system. Similar trends made post-secondary accessible -- and cheap -- across Canada.

To give you a sense of how costs have changed, when Capilano College opened in 1968, a year's tuition in academic courses cost $200 -- equivalent to $1,184 in today's dollars. In 1987, tuition was $1,048 in today's dollars. In 1995, it was $1,424. But fulltime enrolment at Cap College this year will cost you $3,120 -- double the cost just 10 years ago.

Even so, Cap College is a bargain. According to StatsCan, average tuition for B.C. undergraduate students in 2003-2004 was $4,519 (in 2007 dollars). It hasn't gone down since then.

Tuition fees this year make up 23.3 per cent of B.C. post-secondary revenues, up dramatically from 19 per cent in 2003. Another 15.7 per cent comes from "other sales of goods and services" like parking, food, and photocopying. Federal funding covers only about 8 per cent of those revenues, with about 48 per cent coming from Victoria.

In other words, students are paying close to a quarter of the costs of their post-secondary education. Some manage to work part-time, often hurting their grades in the process. Others try to make enough money during the summer to cover the next year's expenses.

Many just can't make ends meet.

A million students in debt

So they borrow. And borrow. At least 990,000 students and former students across Canada have had to borrow to finance their educations, according to Julian Benedict of the Coalition for Student Loan Fairness.

If you visit the website of the Canadian Federation of Students, you'll see a "Canada Student Loan Debt" clock that is now well over $12.5 billion.

Shamus Reid, the head of the CFS in B.C., says the clock covers only the indebtedness incurred through the federal Canada Student Loan program. To get a real sense of the debt, we should add 30 per cent for B.C. provincial loans, plus whatever students run up on their own credit cards.

Reid says that half of the B.C. class of 2007 graduated in debt -- an average of $27,000. That's a 28 per cent increase from 2001, when the average debt burden, in today's dollars, was $21,000.
How did students get into this mess? When rich kids and scholarship students were the only ones who went to post-secondary, the system was small. It focused on advancing the brightest and flunking the rest. Those who passed would run the country.

But Wacky Bennett's Socreds could see that the future depended on teaching the local kids instead of just importing experts educated somewhere else.

A cheap, small post-secondary

The parents of the baby boomers were demanding better opportunities for their kids. They were glad to pay higher taxes to help get their children into law or medicine or business management. And by today's standards, the new post-secondary system was really cheap.

But it was also inadequate. B.C. had almost no post-secondary infrastructure: few instructors and staff, tiny libraries, and no suitable buildings. Cap College spent its first six years at West Van Secondary and various church basements. VCC started at the old King Edward High School at 12th and Oak, in classrooms with desks on rails.

Under the Dave Barrett NDP government in the early 1970s, however, the college system expanded rapidly across the province. The universities grew as well. Thousands of teaching, administrative and staff jobs opened up. A whole generation of MA's and PhD's soon took those jobs. Another generation of students flooded in. Post-secondary now had a lot of stakeholders.

Employers could pick and choose their employees from a much more qualified pool. Those without post-secondary were up the creek, and knew it -- especially when the recession hit in 1980. Young people and adults alike came back to school to improve their qualifications for the few jobs remaining. Women began to enroll in increasing numbers to help support themselves and their families. They're now a majority of both students and graduates.

Putting warm bodies in seats

Post-secondaries, meanwhile, came to depend on more students to support more programs. The whole system needed not just rich kids and smart kids, but every possible warm body.

Those bodies have been available. Virtually all students now understand that without post-secondary education, their career opportunities are limited. So they have been willing to borrow the money it takes to get them a diploma, certificate, or degree that they can take into the job market.

Colleges and universities are eager to sell them whatever program they want because the alternative is staff and faculty layoffs.

Governments since the 1960s have changed, however. Rather than go to their taxpayers, they have increasingly passed the cost of post-secondary on to the students and their families. And they have charged what the market will bear.

By now, the market will bear almost anything. When the Liberals took power in 2001, they jacked up tuition fees. We faculty were astounded to see students enroll in ever greater numbers ... at least until the last few years.

The market isn't bearing it any more, even with six different federal and provincial loan programs. And that bodes ill for everyone.

A bid for loan reform

Julian Benedict, who runs the Coalition for Student Loan Fairness from a Vancouver office, is trying to improve the situation. He and another former student, Mark O'Meara, founded CSLF last April. Among other resources, the organization's website offers news, horror stories from borrowers, and copies of the CSLF's correspondence with the Canada Student Loans Program.

Benedict is especially unhappy with the fact that Canada Student Loans is essentially funded by borrowers themselves, thanks to the high interest rates charged. The program also spends millions trying to collect from borrowers who have defaulted on their loans -- and it's easy to default since payments now kick in as soon as the borrower leaves school.

CSLF offers an eight-point plan for reform, including lower interest rates and a single-loan system. Since a significant number of borrowers run into bureaucratic hassles, CSLF wants an ombudsperson who can help resolve those problems.

"Borrowers aren't asking for a free ride," Benedict says. "We are asking for a fair lending rate and responsive customer service."

Low-income students giving up

Everyone agrees that post-secondary education means higher lifetime earnings. But the up-front costs of loan repayment can be a burden to graduates and a deterrent to students who don't want to get into debt. That, in turn, threatens a system with thousands of employees and a major impact on local and provincial economies.

StatsCan reports that in programs with rapidly rising tuition fees, students from low-income families have simply stopped enrolling. Education, long seen as a means of social mobility, is instead becoming a means of maintaining social stratification.

Most European countries charge very little tuition, and Sweden charges nothing at all. Such countries see the value in a highly educated population and workforce, so everyone invests in educating the next generation.

Here in North America we still see education as a benefit to the student, not the society. So we expect the individual to pay a substantial portion of post-secondary costs.

Until we change our minds about that, college and university will go on being unequally accessible.

Protect student loans

2007-09-06T05:51:00.001-07:00

As college tuition and fees rise, students are relying more on loans to finance their education. Those students shouldn't have to worry about whether their school is setting them up for a bad deal in order to earn kickbacks.

Students should be able to trust that when their school's financial aid office refers them to a particular lender, it is sending them to a business that it believes will offer them the best benefits and lowest interest rate.

But some students have apparently been sent to lenders that have paid colleges commissions and bonuses in return for recruiting student borrowers. Investigations by authorities in some states and by news organizations have uncovered close financial ties between colleges and lenders that aren't aimed at obtaining the best deal for students. In some cases, lenders gave gifts and free trips to college officials so they would be placed on the college's preferred lender list.

A congressional report issued this week detailed the ways in which colleges use the business they send to financial institutions in the form of student borrowing as leverage to tap these lenders in their fundraising campaigns.

A report by the Government Accountability Office released last month criticized the U.S. Department of Education for not properly overseeing the student loan program. It concluded that these practices ''may have resulted in some students taking loans with higher interest rates or fewer borrower benefits.''

That's unacceptable. As college costs rise to the point where a year's tuition and fees can get as high at some institutions as a standard middle-class salary, students are forced to rely more on student loans. Those loans add up over four years in college so that a graduate enters the workforce already fairly deep in debt.

Graduates work years to repay these loans. They shouldn't be further in debt because their college or university steered them toward a bad deal simply because the lender participated in their capital campaign or wined and dined some officials.

Congress is working on some reforms including a bill that would ban gifts to colleges and school officials in order to increase loan business. Higher education institutions shouldn't be banned from raising money from banks. That would put a crimp in fundraising and likely cause further increases in tuition. But some sort of wall should be built that ensures that college financial aid offices guide students toward the most affordable loans regardless of any relationship between the college and the lender.

It may be difficult to draw the line between healthy fundraising and kickbacks, but that line must be drawn, and it should be drawn in federal law

Student Loans or Stocks?

2007-09-06T05:43:00.000-07:00

A few days ago, a friend of mine who recently graduated from college asked me an important question that most graduates have faced at one time or another:

Should I pay down my student loans or invest in stocks?

Before I mention the advice I gave him, let me preface it by noting how this decision is tougher than ever these days. For instance, according to the U.S. Department of Education, the average college student now owes $19,200 after he or she dons the cap and gown. For some, the figure is much higher, especially for those who needed to take out additional private loans, which also carry higher interest rates.

The end of the innocence
That first monthly student loan bill can be daunting. Just consider the amounts of these monthly payments:

Considering that most entry-level employees make less than $2,000 per month after taxes, you can begin to see how debilitating student loan payments can be. For some, those payments represent 30%-50% of monthly income. In essence, it's a mini-mortgage for many of these young adults.

After rent, food, student loan payments, and other miscellaneous expenses, today's 20-somethings have very little left over to save or invest. It's imperative, however, that they find a way to do just that.

Make a dollar out of 15 cents
The advice I gave my friend was to try to at least pay down some of the principal on his loans, but to also get into the habit of paying himself first. That could mean just $50 or $100 a month now, but that type of financial discipline today will benefit him down the road.

But what to do with that $50 or $100 per month can also be challenging.

Many financial pundits will advise socking away six months of expenses in a high-yield savings account, but that's virtually impossible for the struggling youngsters. Instead, begin by shooting for $1,000, which should help cover any unexpected expenses (i.e., car breaks down, an insurance deductible, etc.). This cash cushion will also steer you away from bad debt, like credit cards.

After you've built up a $1,000 cash cushion, start an IRA, specifically a Roth IRA. With a Roth, all contributions you make are in after-tax dollars, and being that most college grads start in lower tax brackets, now is the time to make the most of those contributions. What's more, you won't pay any taxes on the withdrawals from a Roth IRA during retirement.

Pay to play
Two of the biggest obstacles when starting an IRA are with whom and in what to invest.

Investment firms like Vanguard, Fidelity, and T. Rowe Price are battling for your retirement funds, but some are more cost-effective for young investors. Vanguard and T. Rowe Price require initial IRA investments of $3,000 and $1,000, respectively, for most of their funds, which may be too high of a price point for struggling grads.

But Fidelity's "Simple Start" IRA plan, which requires just $250 to start (and $200 automatic investments each month) may be a great place to start for those looking to build their first portfolio. One of the funds Fidelity offers under this plan is the Fidelity Freedom 2050 Fund (FFFHX), designed for those expecting to enter retirement age around 2050. As you reach retirement age, the fund will automatically invest in more conservative instruments like blue chips and bonds.

Freedom 2050 is a "fund of funds," meaning it is made up of other Fidelity funds, and gives you broad exposure to large domestic stocks like Johnson & Johnson (NYSE: JNJ), AIG (NYSE: AIG), and Procter & Gamble (NYSE: PG), while also diversifying your assets into international stocks such as GlaxoSmithKline (NYSE: GSK) and Toyota Motor (NYSE: TM).

Get in the game
No matter which investment firm or mutual fund you choose, it's important for young adults to get started investing right now. Put compounding interest to work for you as early as possible, and reap the rewards later in life. You'll be glad you did.

Want to learn more ways to improve your financial life? Consider a free 30-day trial to Motley Fool Green Light, the Fool's personal finance service. Each month, the service promises to help you find ways to save at least $450.

More interest relief on student loans urged

2007-09-06T05:33:00.000-07:00

A growing number of Canada's most desperate student loan recipients are being denied relief from sky-high interest rates while the federal government spends millions on collection agencies to chase down those who are forced to default, advocates for reform say.

Figures obtained by the Coalition for Student Loan Fairness through Access to Information legislation show more than 18,000 borrowers defaulted on their federal student loans in the last five years after they were denied interest relief.
And the figures suggest the problem is getting worse every year.
In 2001-02, 19 per cent of applicants defaulted on their loans after they were denied interest relief. Between 2004 and 2006, the percentage jumped to nearly one-quarter of applicants whose requests for relief were rejected.

Awarded to borrowers who are not yet earning enough cash to pay back their mounting post-secondary education debt, interest relief has been denied to nearly 85,000 students since 2001 because they failed to meet the income threshold.

"The more you owe, the more you have to pay and the harder it is to qualify," said coalition founder Julian Benedict.
Some people still didn't qualify for relief even though nearly half their income was going to pay student loans, for which the interest rate is pegged at 2.5 per cent above prime, for a current rate of 8.75 per cent.

Benedict said the threshold is too high, because the scheme is unfairly based on gross rather than net income.
"Essentially, even though you're paying the loan with after tax dollars, you're being assessed for interest relief on the basis of money before taxes," he said.
"A lot of people are declined just on the basis of the fact that they meet the threshold with their gross income but not with their net."

To make matters worse, the eligibility grid isn't adjusted annually for inflation, nor does it take into account geographical variations in cost of living, he said.
"It doesn't matter where you live in the county, the eligibility criteria are the same," Benedict said.
"So if you're living in downtown Toronto or Moose Jaw, you're going to be assessed under the same eligibility requirements."

A report released last year revealed Ottawa had signed 176 contracts worth more than $180 million with 12 collection agencies to recoup student loans, said Benedict, who has launched a petition to convince the government to use net income as the basis for interest relief.
He's also pushing Ottawa to switch to a web-based application process to prevent another problem: fax forms that are frequently being lost in transmission.
In fact, student loan horror stories abound right across the country.
For Maureen Doyle, a 50-year-old single mother who took out student loans so she could go back to school to become a social worker when her two sons were teenagers, the experience has been nothing short of a nightmare.

Seven years later, Doyle – from Sudbury, Ont. – has discovered she stands no chance against younger people when it comes to finding work in her field. She's $70,000 in debt, has suffered a nervous breakdown and fears she'll lose her interest relief when she applies again next month.
"I was working two jobs seven days a week and just making ends meet, and I wanted something better for myself – and, more importantly, for my sons, to be a good example to them going back to school," she said in a quavering voice.

"At the end of the day I'm not a very good example, because all they see is me stressed out over loans and not securing a half-decent job."
For newly wed 34-year-old Newfoundlander Brian Vincent, who holds a science degree and an IT diploma, yet still has a menial shipping job despite moving to booming Alberta to find work, the situation is no less grim.

After 54 months, he'd received the maximum allowable amount of interest relief and was cut off in 2004. Between his federal and provincial loans, he's had collection agencies hounding him since 2001. The government has resorted to taking his income tax refunds and the his once $65,000 loan now stands at about $80,000.
Vincent said it's getting to the point in which bankruptcy, once he's eligible even for that, may be the only option.

"It's either that or I get a job that pays me $100,000 a year or I win the lottery."
Gary Toft, a spokesman for Human Resources and Social Development Minister Monte Solberg, who oversees the federal student loan program, said default rates have actually dropped by more than 22 per cent because of increased efforts to educate students about debt management.
He said the government is currently reviewing all aspects of the loan program in order to modernize it and improve delivery. Changes are expected in the 2008 budget, Toft said.

Pitfalls Affect Your Credit and Your Life

2007-09-05T06:32:00.000-07:00

The pitfalls of bankruptcy affect your credit and your life - forever. It is more difficult than ever to have your debts eliminated with Chapter 7, and Chapter 13 requires total repayment of all of your debt. Filing bankruptcy will stay on your credit report for seven to 10 years, and you will have to acknowledge it on all loan applications for the rest of your life. Bankruptcy can be devastating, but our debt relief service provides you a more secure alternative.

Financial difficulties happen suddenly. Personal or family illness can strike at anytime causing large amounts of unexpected debt. Medical bills and prescriptions can combine to create additional hardships.

Losing a job can also put you in a vulnerable financial position. Families with two incomes are just as susceptible to possible bankruptcy since the loss of even one income can make monthly bills and credit card payments nearly impossible.

Some consumers may consider Chapter 13 bankruptcy, which requires a steady income to be eligible to file. If one spouse loses their job, the couple can file individually or jointly depending how their loans are structured. The benefit of filing Chapter 13 individually is that it may affect only one spouse’s credit history. Nonetheless, most couples have loans in both partners’ names to receive lower interest rates. After one files for Chapter 13 bankruptcy, either spouse may be rejected for loans or may pay much higher interest rates than they would before the bankruptcy.

Our debt relief service works with you to solve your debt problem. We provide a way to alleviate your debt no matter your current financial or occupational status. Our system establishes a savings account you will be able to use to pay down your debt. You keep control of your funds during the entire process. You can also use your account to pay for emergencies should they arise.

Additionally, we work with creditors to decrease your total debt amount up to 40 percent to 60 percent. Our debt relief experts resolve millions of dollars in debt every month. We even deal directly with your creditors to eliminate that stress.

Research our reputation as a debt relief service to see how effective we are at reducing your debt. Our testimonials page gives merely a sample of how we’ve helped thousands of people with their debt. We’ve also been featured on ABC and CBS news as a leader in consolidating and reducing debt.

Bankruptcy is a long process that will certainly destroy your credit, but debt relief is available today. The initial consultation is free and our certified call center for outstanding customer service can walk you through our debt relief service.

Author Bio: Allison Roberts is a graduate of the University of North Texas Department of Journalism. She has experience in agency and in freelance public relations. Allison currently writes for Credit Solutions and she is completing an unfinished work of her late grandfather.

Debt Consolidation Basics

2007-09-05T06:27:00.000-07:00

The basics of debt consolidation involve you borrowing a loan and directing the proceeds toward paying off all your creditors and current debts. This debt-relief process allows you to focus your budget on one debt payment – the consolidation loan – instead of dealing with numerous debt payments on credit cards, medical bills and other debts. The first thing you need to consider when pursuing debt consolidation is which type of loan you need to pay off debts. Here are the two basic types of consumer loans offer by lenders for debt consolidation:
-Secured Loan
-Unsecured Loan

Secured Debt Consolidation Loans

Secured debt consolidation loans require you to provide collateral to the lender as security against repayment. Home equity loans rank among the most common secured loans used to eliminate debt. However, you need to be aware of the risks associated with secured loans. If you fail to make proper payments, the lender will gain control of your collateral.

Unsecured Debt Consolidation Loans

If you prefer not using collateral to borrow a loan, you need to obtain an unsecured debt consolidation loan. While these loans don’t require you to provide any security against repayment, they carry a much higher interest rate than secured loans. Unsecured loans are common products consumers use for debt consolidation because the interest rate is still lower than the rates levied on credit cards. Author Bio: Settle your debts today! Read about debt relief from financial writer Brad McDonnell, who is an expert on personal finance topics involving debt consolidation, credit card debt, bankruptcy and bad credit help. Credit Solutions provides an affordable consolidation alternative.

Consolidate Debt With A Home Equity Loan

2007-09-04T07:47:00.000-07:00

If you are a home owner who is having to borrow from Peter to pay Paul every month due to a mounting debt load, a debt consolidation home equity loan may be the answer. A debt consolidation loan will allow you to consolidate your high interest credit card and consumer loan debt into one low rate, affordable monthly payment.

A debt consolidation home equity loan is a secured loan. It is important for you to know that your home will be used as collateral which means the lender will have a lien on your home until the loan is paid off in full. None the less, if you are drowning in a sea of debt, a debt consolidation loan can give you a new financial start. It can help you avoid bankruptcy as well as end harassing creditor phone calls. In addition, in most cases, your monthly payment will be significantly lower freeing up cash that can be used for a retirement savings plan, to fund a college education or to just save for a rainy day.

It is important that once you obtain your debt consolidation loan you refrain from running the tab on the recently paid off credit cards back up. If you do not think you will be able to resist the temptation then you may want to consider cutting up your credit cards and closing out the accounts. If not, you can quickly find yourself in a situation that is worse than before you consolidated your debt!

Another benefit of a home equity debt-consolidation loan is that the interest you pay on the loan may be tax deductible. You should consult your tax advisor regarding your particular situation but in most cases as long as the combined 1st mortgage and new debt consolidation loan do not exceed 100% of the value of your home the interest will be fully deductible.

Most lending institutions these days offer home equity loans that can be used to consolidate debt so you should not have a problem finding a lender to facilitate your loan needs. You will also find that there is an abundance of information on the internet about debt consolidation home equity loans.

Loans not Bothered With your Credit History

2007-09-04T07:45:00.000-07:00

Are you tired of paying the debt amounts to a few couple of lenders every month? Are you fed up with different interest rates? Are you in search of a supporting hand who could convert you into a debt free new man? Here comes your real buddy, who could transform all these dreams to a reality. Still don’t believe? Then Come along with me and meet your helping hand. How do a debt consolidation loan become Different? Debt consolidation loans provide financial assistance to the customers who are in attempts to become debt free. Usually these loans are targeting customers who are tired of making different payments.

Usually these customers will be in search of a solution that could combine all the loans into one single payment. These loans provide such a platform. It is also seen that for different debts, the customers will be paying different rates of interest. They will need to convert these into a single rate of interest easing their calculations. Also these loans will help them in cutting down the expenses thus reducing the monthly budget, making it a favourite in the financial market. Usually to avail debt consolidation loans, the borrower will have to present the credit history to the lender. Credit history may include the customer’s previous credit records, payments and existing credits.

Also there are chances of the lender charging high rates of interest as because the customer leaves behind a bad credit history. Proper repayments are always a must in debt consolidation loans. As the customer grabbing a loan will always have a bad credit history, the loan lender will never fail to keep his cards closed to heart. His precautions will later turn into a nightmare for the customer on the failure in payments. To avoid this payments are a must in right time. Debt consolidation loans are of course the right choice of the customer if have a bad credit history. If made the payments clearly, there is nothing to worry. So what for the waiting is for? Go, grab it as soon as possible.

Finding the Right Student Loan

2007-08-31T06:14:00.000-07:00

Need money for college? Who doesn't need a loan to go to school these days? Tuition is ridiculous! It is common for a student to accumulate a lot of student debt on his or her way to a diploma. Where do you start on your way to a student loan or grant? Start with the school you are enrolled in or intend to go to.

There are people working at colleges whose job it is to understand student loans and be up to date with the information on all the different types of student loans. Even if you have no money, they are there to help you get you your tuition.

Private Student Loans

Private student loan debt consolidation programs are one way to get money for your college. Some of these loans are made to parents of students. Other Student Loans are designed to be made to the student and give a deferment period that gives the student time to graduate and get a job before he/she has to make monthly payments.

There are many ins and outs to student loan debt consolidation programs. For these types of programs it is best to start by asking the bank you, or your family does business with for information.

Stafford Loans

One such student loan you should find out about is the Federal Stafford Loan. The Federal Stafford Loan is one of the loans made to the student. This loan is based on need and no credit check is necessary. The government guarantees the Stafford Loan to the actual lender.

The Stafford Loan has a deferment period. Its payments do not start on until the student graduates. To be eligible for a Stafford Student Loan, you must be attending school on at least, a half-time basis.

Get All the Info

The trick is to get as much information on as many Student Loan Programs as you can. There are a whole lot of lenders willing to give you free information, so take it. There are new programs coming out and current ones changing all the time, so don't be afraid to ask.

Some schools offer Stafford Loans directly through the federal government. These are commonly known as Direct Stafford Loans. The schools offering student loans this way are called Direct Stafford Schools.

Some schools offer Stafford Loans through banks or other lenders. These schools are known as FFEL schools (Federal Family Education Loan schools). With this type of student loan you find the lender yourself and then go to the school so they can complete the paperwork.

Use a Student Loan Calculator

To help give you an idea what your payments will be after graduation, make sure you're using a real student loan calculator. A student loan calculator is a special kind of calculator. It must be capable of factoring in a deferment period. This is because student loans are unique in the sense the payments don't start until after graduation.

So, a correctly functioning student loan calculator will be able to compound the interest, which accrues during the deferment period. Then it will calculate the payment due based on that new amount.

The point is, if you get a student loan for $25,000 which you are allowed 10 years to pay off after graduation, and graduation is 4 years away, the amount you owe will not be $25,000 come graduation. If your interest rate is 7%, the amount you will owe after graduation will be $33,051.35. By the way, your payment every month for 10 years, after graduation will be $383.75.

The Money is There

Your further education is available to you if you want it. Financial need cannot stop you, but you must plan ahead, be serious, and find out everything you can. When is a good time to start? About half way through sophomore year in high school, you should start your search for your college funding!

What To Consider Before Taking Out a College Loan

2007-08-28T07:17:00.000-07:00

Q: Given everything that's going on with student loans, what should I consider as I weigh my college financing options this year?

Part 1

A: Many would-be borrowers are understandably nervous, as investigations of the private student loan market by the New York Attorney General turn up allegations of everything from kickbacks to redlining, in which rates are set on loans based on the school a student attends.

After a decade in which the amount of private loans exploded, consumer advocates say families should first make sure they've exhausted federal loan options and financial aid and payment plans from their school before they take out private loans.

Families took out $17.3 billion in private loans in 2005, up from $4.5 billion in 2000, said Sandy Baum, a senior policy analyst at the College Board and a professor of economics at Skidmore Collage. While private loans were only 4 percent of student loan volume a decade ago, they are now 20 percent, she said.

Why the jump? The amount students can borrow from the federal government has been frozen since 1992, she said.

But many students still don't exhaust the federal loans available to them, advocates say.

Last school year, financial aid counselors at Barnard, a private women's college in New York with 2,350 students, called every student's family who said they were considering private loans. After the calls, the total of private loans taken out by the school's students shrunk from $1.5 million to $400,000, said Alison Rabil, Barnard College's director of financial aid.

As she called families, Rabil said she realized those with private loans, "didn't know what they'd borrowed, they didn't understand what their other options were, they didn't know the interest rates of the loans they were requesting, they didn't know you could put any amount on our payment plan."

Families who need financial aid should start by filling out the Free Application for Federal Student Assistance (FASTA) form and file it with the government as they begin thinking about paying for school, said Luke Swarthout, the higher education advocate at U.S. Public Interest Research Group, a public advocacy group based in Washington, D.C.

How To Repair A Bad Credit History

2007-08-27T05:26:00.000-07:00

We all get into financially tight situations from time to time. Short term financial demands can catch anyone by surprise. It could be around the birth of a new child, medical expenses or just Christmas or birthdays. Whatever the reason, without care, financially tight situations can result in a bad credit history.

It's possible to get a bad credit history very easily. The credit reference agencies, Experian, Equifax and Transunion, maintain details on almost every adult in the country and they have a level of detail that for many is frightening.

As a matter of course the credit reference agencies have your personal details, your name, address and previous addresses, as well as credit information. If you have a mortgage they know about it. If you have any loans, credit cards or store cards they know about them and they know what payments you make.

If you rent your home the odds are they know. In fact they usually know the details of virtually all financial arrangements where there is any risk of a debt arising.

If you've applied for loans, credit cards or many other purchases or financial arrangements they know you applied, even if the application was unsuccessful. They also know how much you borrow, your monthly repayments and if you are ever late with a payment - even if it's by one day and caused by things outside your control!

How do they know? All the banks and financial institutions routinely tell them. The reason they tell them is that it is in their interest to do so. They know that by telling the credit reference agencies all the details an accurate picture of your financial position is created. A picture they can use the next time you apply for credit.

If you do miss a payment it will be recorded and that information stays on their records for 12 months! If you default that stays on for at least 3 years! Just missing a couple of payments can very easily mess up your credit score.

Once you have a bad credit history it can be a real nightmare. With a really bad credit history you are pretty much financially disabled from everything except transactions that can be covered with cash.

Finding an apartment to rent, trying to buy car, putting a down payment on a house, or applying for a credit card or a loan from a bank are all activities you are barred from with a bad credit history.

Banks, businesses and decent landlords can see a bad credit history a mile away and will avoid you like the plague. As a result all the steps that are supposed to build a good credit rating are no longer available. How can you break out of this credit catch-22 once you get stuck in it?

A good place to start is to contact a credit counselling service. Depending upon where you live there may be a free service you can use otherwise you may be forced to use a paid service. Paid or unpaid all these services do the same thing. They will conduct a complete financial assessment of your situation. It is imperative that you tell them everything, so don't hold back any debts, they need to know.

If possible they will help you set a budget and find a way for you to repay the overdue payments, past debts or forgotten bills. This will involve you paying extra to cover the arrears. Even if this is possible it will not, on its own, immediately repair your credit rating as the details of the missed payments and bad debts will stay on the record for at least 12 months.

If you are unable to clear any overdue bills or payments the counselling service will then approach your creditors. They will seek to come to some arrangement which allows you to pay smaller amounts over a longer period. They will initially seek an informal arrangement with each creditor but they can also seek a formal arrangements where you pay an affordable amount, usually over 5 years.

So long as you keep up these reduced payments, and depending on type of arrangement and where you live, after 5 years the debt may be cleared and your credit score will improve. Any arrangements with creditors will be notified to the credit reference agencies and is normally help on file for 3 or 6 years.

A third option, and the quickest, is to take out a consolidation loan to pay off all your debts leaving just one lower payment to make each month. If you own your own home - either outright or on a mortgage - this loan can be secured on the property either as a mortgage/re-mortgage or a separate secured loan.

With property as collateral it is relatively easy to get additional funds as the lender will have the security of your home and if you fail to pay, sometimes only one or two missed monthly payments, they will go for repossession to get their money back.

Without collateral obtaining a debt consolidation loan is more difficult but not impossible. Without the security of a property however, you will normally pay a significantly higher interest rate.

If you clear all of your debts using a debt consolidation loan cut up any credit cards and close the accounts. Make sure you don't fall into the same trap again.

So long as you make all the due payments and you are in control of the situation, many of the pressures will ease and, with hard work and self control, your bad credit history will become a thing of the past.

Borrowers Who Apply to Consolidate With NextStudent by August 31, 2007 Could Lower Student Loan Payments by up to 60%

2007-08-27T05:19:00.000-07:00

Borrowers Who Apply to Consolidate With NextStudent by August 31, 2007 Could Lower Student Loan Payments by up to 60%

PHOENIX, AZ - NextStudent, a leading Phoenix-based education funding company, currently offers its borrowers substantial interest rate discounts on federal education loans, including Stafford, PLUS, Grad PLUS, and Federal Consolidation Loans. For borrowers who consolidate their federal student loans with NextStudent, the NextStudent rate reductions could lower their monthly payments by up to 60%.

But because of pending federal legislation, those discounts may no longer be available to borrowers who apply for a federal education loan from NextStudent after August 31, 2007.*

NextStudent currently rewards borrowers with up to a 2.25% interest rate discount on any Stafford, PLUS, Grad PLUS or Federal Consolidation Loan:
- An immediate 0.25% rate reduction just for signing up to have loan
payments automatically deducted from a savings or checking account
- A 1% rate reduction after 36 on-time payments -- and NextStudent locks
in this rate reduction for the life of the loan, even if a borrower misses
a payment later on
- OR a 2% rate reduction after 48 consecutive on-time payments
On a Federal Consolidation Loan, these rate reduction benefits could lower a borrower's monthly student loan payments by up to 60% - but NextStudent will not be able to afford to continue offering those benefits if this legislation passes.

The College Cost Reduction Act of 2007 that's currently before Congress would slash $19 billion in government support for education loans. If Congress passes this bill as expected, private lenders like NextStudent may be forced to eliminate the discounts and rate reduction benefits they currently offer on federal education loans. Some lenders may no longer offer federal student loans at all.

The pending legislation will not affect NextStudent's current borrowers. However, with the cuts contained in the College Cost Reduction Act, NextStudent may no longer be able to offer these interest rate reduction benefits on loans that are funded after a final bill is passed and takes effect. With the bill expected to take effect on October 1, it is highly unlikely that borrowers who apply for a federal education loan after August 31, 2007 will have their loans funded in time to take advantage of the current NextStudent discount benefits.

NextStudent urges students, graduates and parents to apply for their federal Stafford, PLUS, Grad PLUS, and Consolidation loans by August 31, 2007, to take advantage of lower monthly payments and lower interest rates, before the new legislation prevents NextStudent from continuing to offer the current discounts.

Borrowers concerned about losing the rate discounts and other benefits private lenders like NextStudent can offer them should contact their Senators and Representatives and urge them to oppose the student loan program cuts contained in the College Cost Reduction Act.

* NextStudent will discontinue the interest rate discount benefit plan described above if Congress enacts the College Cost Reduction Act of 2007 or similar legislation. Provisions within that legislation would change the fee structure and yields for lenders that make federal education loans. It is not known at the time of this printing on which date the new provisions will take effect, nor whether they would be applied to federal education loan applications that had been submitted prior to that date but not yet funded. NextStudent will not offer the interest rate discount benefits described above for those federal education loan applications that are subject to the new provisions. NextStudent will make its best efforts to expeditiously process all federal education loan applications it receives prior to August 31, 2007, but cannot guarantee that any particular application will be processed in time for the interest rate discount benefits to apply.

About NextStudent

NextStudent, Federal Lender Code 834051, is dedicated to helping students and their families find affordable ways to pay for college. NextStudent offers one-on-one education finance counseling and has a portfolio of highly competitive education finance products and services, including a free online scholarship search engine, federally guaranteed parent and student loans, private student loans, both federal and private student loan consolidation programs, and college savings plans.

Home Equity Debt Consolidation Loans - 3 Things To Know

2007-08-24T06:46:00.000-07:00

Decided to consolidate your debt with a Home Equity Loan? That may be a very smart idea! Consolidating your debt allows you to make just one monthly payment, and home equity loans tend to have low interest rates and tax perks too, which could save you money. But before you borrow from the equity in your home, remember these three things:

It's not available to everyone.

Just because you "own" your home doesn't mean you'll be able to get a Home Equity Loan. The equity you have equals the value of your home minus the amount you still owe on it. So if you only purchased your home recently--or home values have fallen in your neighborhood--you might not have any available equity. Moreover, a lender will also assess your credit and financial situation--such as your credit score, current employment and income--before approving your loan application. Although it's a lot easier to get approved for a home equity loan than other types of loans, some borrowers may not qualify.

Your home is at risk.

With a Home Equity Loan, your house is collateral for the loan. So if you have problems making payments, the bank or lender can actually repossess your house. In general, you should only borrow from a home equity loan for debt consolidation if you're absolutely certain that you'll be able to make the monthly payments.

You may not save as much as you think.

People assume the interest they pay on a Home Equity Loan is tax deductible, and in most cases they're right. However, there are some states in which Home Equity Loan interest is not tax deductible, so check out the rules and regulations in your area before you sign up for the loan. Also, watch out for fees, charges and other extra costs that may be attached to your loan. Paying lots of points and fees could mean that you're not saving as much as you think with your Home Equity Loan.

Although a Home Equity Loan can be a smart, low-cost way to consolidate debt, make sure you carefully research your decision--and weigh the pros and cons--before signing on the dotted line.

What to Look For When Choosing a Loan

2007-08-23T06:34:00.000-07:00

It may be easier to simply accept the first loan you see, but sticking with your current bank and failing to shop around could cost you – big time! Read on to find out how to get the best deal for you.

Whether you want to consolidate existing debt, splash out on a lavish holiday or wedding, buy an overseas property or even invest in the latest cosmetic surgery trend, taking out a loan is a huge decision you should never make without looking into all the options carefully. Yet it’s one that many people take lightly, which has led to massive and increasing debt problems in the UK. Find out which option, if any, is for you.

Look Before You Leap

Before you do anything, consider whether a loan is absolutely necessary. It may seem like the easy option to your money problems, but a loan can all too easily become a huge weight you just can’t get out of. “It is always a good idea to consider alternatives before taking out a loan. If you have some savings, then dipping into your nest egg is likely to cost far less than borrowing money, even if it is a low-cost loan,” says David Kuo, Head of Personal Finance at Fool.co.uk.

“Additionally, delaying your purchase and putting away some spare cash is bound to work out cheaper in the long-run.”

Plan a budget to make sure you borrow as much as you need, but not a penny more, even if it’s tempting to have more money now and worry later. The more you borrow, the more interest you’ll have to pay.

Work out how much you are able to pay monthly. Keep your payments affordable so you don’t fall behind, but at the same time don’t make them too small – keeping the loan as short term as possible minimises interest payments.

Fixed? Variable? Flexible?

The first thing you need to do is to decide which type of loan will best suit your circumstances. If you’re disciplined and you’d like the amount you pay off each month to be up to you depending on your circumstances, a flexible or offset loan is best. That way, if you have extra cash lying around, you can pay your loan off more quickly and reduce interest payments.

“Any unexpected changes to personal circumstances can quickly send us down a spiral of debt. Consequently, it is a good idea to get a flexible loan, and make extra payments when we can afford to do so,” says Kuo.
Alternatively, if you’d like to be sure that your payment rate each month will stay the same no matter what the economy is doing, choose a fixed rate loan. This means that you will not be hit by scary interest rate hikes.

But always check for early payment penalties. For the majority of personal loans, you need to be aware that if you wish to pay your loan off earlier than expected you could be slapped with a repayment penalty of two months interest or more – so check up on this beforehand and if possible, opt for a loan that is flexible in this regard.

On the other hand, if you’d like your loan payments to fluctuate in line with the economy, choose a variable rate loan – but for this option you need to be sure you have the budget for higher repayments if the interest rate increases.

Consolidation Loans

Looking for a consolidation loan? You’re not alone – rising debt has led to massive increase in consolidation loans in the last couple of years.

It makes sense to roll up all your debts into one manageable payment, but it may not be the best option for you – especially since you will usually end up paying more money in the long run. Plus, people who take out consolidation loans often feel more secure and run up further debts thanks to additional credit card spending limits, which can be very difficult to resist, especially if money worries have kept you from splashing out on treats for months.

Instead, you could choose to pay off your debts with the highest interest rates first, while you only make minimal payments into other loans that are on another rate.

If you choose a consolidation loan however, do so carefully. “Around half of all consolidation loans carry a penalty for early settlement,” continues Kuo.

“This is unreasonable, and is unlikely to encourage borrowers to pay off their loans sooner.” And whatever you do, don’t use your credit cards until you have fully paid off your consolidation loan!

22.08.07 Choices for student loan consolidation

2007-08-22T05:35:00.000-07:00

Student Financial Advisors announces four types of payment choices for student loan consolidation. "We now offer four payment plans to choose from at student financial Advisors when recent graduates are consolidating student loans" said Peter Charles director of marketing at student financial advisors.

The four payment plans constitute a variety of payment options that will meet the financial needs of every graduate with federal student loans. The four payment plans are as follows.

First of we have the standard payment plan. With this plan the borrower of the loans will pay regular monthly installments. A standard payment plan involves a set monthly payment that does not change over the life of the loan.

The next most popular payment option is the graduated payment plan. With the graduated payment plan the borrower of the student loan pays smaller installments earlier and then the payments increase later along with your stability. A graduated payment plan involves starting with low monthly payments and gradually increasing the payments until the loan is paid off. This gives time for borrowers to find a job and receive pay increases.

We then come to a much less used payment option the variable payment plan. With a variable payment plan the borrower pays according to their financial situation, more if the borrower has more income or less if they have less income. However, a variable payment plan will allow you to adjust the amount of your payments based on changes in your incomes and expenses. In some cases income may stay the same but expenses may go up, this will allow a lowering of the required payment.

Lastly, we have the extended payment plan. With the extended plan the borrower of the student loan pays over a longer duration in lower installments. An extended payment plan gives you a longer period of time to pay off your loan, thus reducing the monthly payment. However, the over all cost of the loan will go up since the term of the loan is longer.

Bucking the Tide on Private Loans

2007-08-22T03:51:00.000-07:00

As the scandals and debates over private lending have grown in recent months, conventional wisdom has held that private loans are a necessary evil. Sure, students and their families are taking on debt that is typically more expensive and more risky than federally backed loans. But as long as families feel that college costs are otherwise beyond their reach, private loans will continue to become more popular.

By most measures, they have become much more popular. College Board data released last year show that the volume of private loans taken by students has been increasing by 27 percent annually since 2000-1, to a total of $17.3 billion. A decade ago, private loans made up only about 4 percent of student loan volume; now that total is 20 percent.

But while even critics of private loans talk about their growth as inevitable, Barnard College tried to roll them back during the last academic year — with success that stunned even the college: a 73 percent reduction (more than $1 million) in private loan volume. That suggests many of those taking out the loans do not need to, and might not do so if only someone explained the issues.

And that’s what Barnard did this year. The only real change in policy the college made was to require a conversation. Before Barnard would certify to a lender that a student was enrolled, the college required students or their parents to talk to an aid counselor. If, after that conversation, the family wanted to proceed, Barnard did not stand in the way. But for many families, the talk revealed risks and options they didn’t know about.

Barnard’s policy shift took place a year ago, before the scandals of private lending captured headlines. The idea came from the financial aid office, which, it may be worth noting in light of those scandals, did not maintain a “preferred lender” lists or accept cash or gifts from lenders. Alison Rabil, director of financial aid at the private women’s college in New York, said she was looking at data on students and became worried when she saw Barnard students starting to follow the national trend of taking out more private loans.

“It’s not just debt, it’s your worst kind of debt,” said Rabil. “Once we started looking at the private borrowing, we realized we weren’t helping students to discriminate among borrowers or to really think about private borrowing. We weren’t discussing it with them.”

What Rabil describes is in fact the norm in higher education. For many institutions, the only help they have provided is a list of lenders.

Based on the view that providing a list of lenders isn’t enough, and may lead many families in the wrong direction, Rabil prepared her team to talk to students and parents. They discussed various scenarios, the kind of advice they would provide and what to do with irate parents (in the end, only one parent was angered by the required call).

When the policy started, Barnard just sent off e-mail messages whenever a request to certify a private loan came in, and the discussions were scheduled almost immediately. “Parents called in a panic and said ‘What do you mean you won’t process my loan?’, and we just say that we wanted to talk about other options and the consequences of taking out this particular loan,” Rabil said. “It was not confrontational at all. It was, ‘We’re calling because we are worried about the financial health of your family.’”

The discussions were mostly on the phone, mostly with parents, and most lasted 20 to 30 minutes, although there were also many follow-up calls. In those calls, Rabil and her staff found out what parents didn’t know about private loans and alternatives, which was a lot, even though the typical parent was college educated and a homeowner. Here’s what they found:

Ignorance of the risks to borrowers of private loans. “I would ask them if they knew the interest rate, and most of them didn’t know,” Rabil said. A lot of parents said that they planned to help their daughters repay the loans, or even to repay the entire loan. “We were horribly blunt,” Rabil said, about how students’ debts can outlive students’ parents. “We had to talk about death and disability. We had to say, ‘if you die, your daughter is going to have to pay this loan back, but if you borrow [meaning a parent], that loan goes with you.’” Many parents hadn’t given the issue of their mortality any thought. Rabil also said her staff showed parents the cumulative impact of debt on students, and talked with the parents about how the debt might affect their daughters 10 years down the road, when they might be trying to buy a house or contemplating graduate school. “Is this really what you want for your daughter?” was the key question.
Ignorance about PLUS loans. Private loans are theoretically used when parents and students don’t think they can make the “expected family contribution” of an aid package, but Rabil said that many families don’t understand the potential of PLUS loans, a federal program for parents to borrow, with capped interest rates unlike private loans. The main thing parents have heard about the program seems to be that repayment starts 60 days after the last disbursement of funds for a year. That discourages them, but they are unaware that it is possible in most cases to get renewable delays of up to a year on repayment, Rabil said. All of the sudden, a loan that seemed like it wasn’t an option can become an option, she said.
Ignorance of the college’s payment options. Like many colleges, Barnard allows parents to pay tuition charges on a monthly basis instead of all at once. Parents who wanted to pay in a lump sum and then have their daughters take out private loans didn’t seem to understand, Rabil said, that they could put part of their payments on the monthly plan and avoid the need for a private loan. “If we could show them that they could put even $2,000 on the payment plan, that might cut the private loan,” Rabil said. In still other cases, she said, the discussions led to the discovery that families hadn’t reported relevant information on aid applications and that they were eligible for more aid.
There were some topics that the Barnard officials avoided. They never recommended pulling dollars out of a retirement fund. And on home equity loans, while they encouraged people with home equity to consult with others about the viability of using that as a source of funds, Barnard aid officials felt that they weren’t in a position to be knowledgeable enough about housing markets or mortgage terms to make specific recommendations.

The results — in dollars and reactions — were impressive. In 2005-6, the last year before the policy, 98 Barnard students took out private loans, for a total of $1,559,385. At the beginning of the 2006-7 academic year, well over 100 students sought certification to take out private loans, but after the required discussions, only 39 students took them out, at a volume of $414,889. The results far exceeded Barnard’s goal of reducing loan volume by 20 percent. PLUS loan volume is up moderately, and students and families appear to be using a variety of ways to avoid private loans.

“I was afraid people were going to bite our heads off,” Rabil said. “But people really seemed to be appreciative of the attention we were paying to their daughters.”

Rabil stressed that the Barnard campaign is not based on the idea that all private loans are bad. There are students for whom other options don’t work. But the fact that the relatively brief counseling sessions led to such a large reduction in private loan volume suggests that they aren’t necessary for many students who have been taking them out.

The counseling sessions also helped those students who did take out private loans. In those cases, Rabil said that many students and families were on the verge of agreeing to higher interest rates than were available elsewhere, and Barnard tried to steer them to better deals. The experience raised questions, Rabil said, about the way preferred lender lists suggest that some banks are better than others. What Barnard found was that lenders were better or worse for students based on a range of individual factors. For example, in given categories of creditworthiness, the college found the best deals for students borrowing themselves at one lender, while those with co-signers were better off with another lender.

“Even for the families that need private loans, we found that they don’t understand what they are getting into, and how we can mitigate some of the consequences,” Rabil said. “It’s really important that families know what their options are.”

Barnard has not previously publicized its approach, so experts on private loans and student aid said that they hadn’t heard about it. But when it was described to them, several called the effort a significant one that other institutions should consider adopting.

“This is a very innovative idea, and I like it,” said Jamie Merisotis, president for the Institute for Higher Education Policy, which last year issued a report expressing concerns about the growth in private loans. What has happened is that “colleges and universities have been cut out of the conversation” about private loans, with students getting information, not necessarily complete, from lender marketing, he said.

Barnard is in effect forcing itself back into the conversation, Merisotis said. “Students need consultation with the people who can say whether something is a good deal,” he said.

The only concern Merisotis had about the Barnard effort was scale. Barnard had four loan counselors handle the calls, and Merisotis worried that institutions with many more students wouldn’t have the staff to take such an individual approach. He agreed, however, that larger institutions might apply the idea in group sessions.

Sandy Baum, a Skidmore College economist and senior policy analyst at the College Board, said she thought the effort pointed to questions about whether all private loans are really necessary. “We don’t know how much of the volume is discretionary,” she said. “Anything we can do to get people to cover their family contributions without more borrowing is important.”

Added Baum: “I hope other schools will try this.”

Sub-prime loan crisis impacts China

2007-08-21T05:01:00.000-07:00

The sub-prime loan crisis has in fact had a limited impact on the Chinese economy, Zheng Jingping, spokesman of the National Bureau of Statistics (NBS), said yesterday, the Securities Daily reported today.

This is the first time a governmental official has responded to the crisis' impact on the Chinese economy.
With a similar view, market insiders said the crisis will not significantly impact China's A-share market, despite worries after the Shanghai Composite Index ended 2.28 percent lower at 4,656 points on August 21.
Stock markets have plunged in the United States, Europe, Japan, South Korea, and China's Hong Kong Special Administrative Region.

Analysts also say investors fear the US sub-prime loan crisis could trigger a slowdown in the US economy.
Experts said the domestic financial system suffered less from the crisis due to its sound control and supervision system.
Some domestic banks, including the Industrial and Commercial Bank of China, Bank of China, China Construction Bank and China Merchants Bank, have defended their slight involvement or noninvolvement in the crisis.

Bad Credit Debt Consolidation Loan – An Effective Tool To Resurrect Your Credit

2007-08-20T06:39:00.000-07:00

Bad credit debt consolidation loan is an ingenious concept that can help revive / improve your credit score. Best debt consolidation program of a genuine debt consolidation company can significantly reduce your pecuniary burden as well.

Bad credit debt consolidation loan is a solution to a major problem of modern society that’s been spreading like an epidemic over the last few years. People have got used to virtually living their lives on credit. However, credit card companies do not offer money for free. The interest rates involved and charges for late payments can really push people toward a continuous slide. Once the monthly installments begin to appear overwhelming to you, you are sure to fail in making timely payments. Firstly, this sends your credit score crashing. Then, you find yourself crushed under huge debt - a big mound of liability that seems impossible to pay off. However, bad credit debt consolidation loan can surely help you improve your credit as well as payoff your debt. Read on to find out how.

Understanding Debt Consolidation Loan

What a debt consolidation company does to pull you out of your financial crunch is that, they offer you a consolidated loan to pay off your various loans. For example, Mr. X has got three credit cards – two issued by two different banks and the other a store. However, Mr. X has come to realize that he has been spending more than his actual income. Owing to this lapse of his, he has not been able to make his payments for say last 10 months.

Now, if Mr. X approaches a company for a bad credit debt consolidation loan, they will first provide him an expert counseling. After assessing his actual financial position, they will work out the best debt consolidation program for him. As per this package, they will give him a loan that will suffice for him to pay off the pending installments of the three different credit cards in one go. Thus, he gets rid of the burden of three different credit cards. Now he has to pay back the bad credit debt consolidation loan only to the concerned company. The company fixes an installment and rate of interest that is in consonance with the actual financial status of Mr. X. So having comfortably settled his other liabilities, Mr. X begins to pay off the loan of debt consolidation company in easy installments.

Summarizing The Advantages

Continuing with the above example, Mr. X benefits from bad credit debt consolidation loan in a number of ways. Firstly, he is relieved of the tremendous stress that three different credit card companies were putting on him to make the payments. Secondly, because of the viable interest rate and installment amount fixed by debt consolidation company he is able to make his payments timely. This helps him both to clear off his debt and to develop a good credit score. When his credit score improves, he becomes eligible for credit cards and loans with low interest rates. Thus, life slowly but steadily comes back on track for Mr. X.

However, it must be kept in mind that it’s prudent to do comparison-shopping before opting for any particular offer. It’s best to go online and obtain multiple quotes. If you exercise due caution, online debt consolidation is also an excellent option.

If you have bad credit and want to reduce your debt burden and at the same time improve your credit score, a good option is to take a bad credit debt consolidation loan. With many online debt consolidation options available to you, selecting a debt consolidation company or the best debt consolidation program requires a thorough research and evaluation of all possible debt relief alternatives. Visit best debt consolidation program to know more about debt consolidation options and tips.