From the College Board: "In 2007-08, the $4,310 maximum Pell Grant equals 32 percent of the average published price at four-year public institutions and 13 percent at the average four-year private college or university."
The student aid reform bill that President Obama signed today, while spelling the end of new originations of federal student loans by private student lenders, may also give providers of non-federal (or private loans) a sense that they have dodged a bullet (for now at least).
Why? The earlier SAFRA bill called for a significant $5 billion expansion of the Perkins loan program, which is a 5% loan provided to lower income students. While there were still some significant unanswered questions about the program including the degree to which schools might participate, an expansion of this low-interest loan program would have had a significant impact on reducing demand for private student loans.
"Mr. Obama portrayed the overhaul of the student loan program as a
triumph over an "army of lobbyists," singling out Sallie Mae, the
nation’s largest student lender, which he said spent $3 million on
lobbying to stop the changes. "For almost two decades, we’ve been
trying to fix a sweetheart deal in federal law that essentially gave
billions of dollars to banks,"he said. The money, he said, “was spent
padding student lenders’ pockets."
Should financial literacy efforts focus more on a "train the trainer" model? Mint.com survey finds parents have strongest influence on teen's financial behaviors (of course, most probably are not being taught this in school which may explain the low count for teachers):
"The poll asked some 1,500 teenagers nationwide about their financial
role models, which included friends, family, celebrities and teachers.
Sixty-eight percent of respondents said their parents had the most
influence over their spending or saving habits. Sixteen percent were
inspired by friends, while 14 percent turned to TV, magazines, books,
radio or celebrities. Only 24 individuals said their teachers
influenced their spending habits."
As I was perusing the playbook for student loan collection agencies a few weeks back, I came across these five school-based criteria for which a student loan can be discharged. This got me wondering about how frequently these discharges might occur. Just to set the context, the total federal student loans outstanding today are north of $620 billion.
Here are descriptions of each of the five criteria:
Just a reminder to join me on Thursday for this timely webinar on "Using Third-Party Websites As Resources For Private Student Loans" on Thursday, April 1, 2010 at 1:30 p.m. Eastern Time. Click here to sign up for this free event.
The webinar will provide answers to such questions as:
How are financial aid offices responding to the new preferred lender regulations?
What is the Department of Education's stance on third-party websites and preferred lender arrangements?
What are the criteria parents and students use in selecting a private student loan?
What are the features and benefits of the current private student loan websites hosted by SLA?
If you waited until the last minute...this isn't good news (from the Spartanburg Herald Journal): "With about five federal
agencies expected to handle the flood of communication that will come
with the "mass exodus" of schools leaving their private lenders,
Sullivan [Allison Sullivan, director of financial aid at the University of South Carolina Upstate] said she was told by the Department of Education that
financial aid offices like hers will be provided a list of 800 numbers,
and that "it could be 10 days before anyone gets back to us." But by starting the process early, Sullivan said "we'll be prepared for it."
Someone likes the increase in Pell Grants (from Newark Star-Ledger): "I’m very much in favor of the bill," said Jean McDonald-Rash,
financial aid director at Rutgers University in New Brunswick. "Moving
money into grant aid, which doesn’t have to be paid back, is a positive
Question: How are borrowers who are split between multiple servicers in the FFEL purchased loan process being handled?
Answer: "Due to the nature of the FFEL Purchased Loan process, the assignment of a borrower’s federally-owned loans to the same servicer has not automatically occurred for all borrowers. In time, assignment of borrower’s federally-owned loans to the same servicer will become standard operating procedure. When this does not occur automatically, we will work to resolve situations in which a borrower’s federally-owned loans are assigned to two or more federal loan servicers. Resolution will involve transferring the borrower’s loans from one servicer to another."