NEW YORK (Dow Jones)--Shares of student lenders jumped Wednesday after an analyst suggested that the industry may not immediately be pushed out of the federal loan origination business, a prospect many had feared for months.
"Although still an uphill battle, the survival of the FFELP program, we believe, is a real possibility," FBR Capital Markets analyst Matt Snowling wrote in a note to investors, referring to the Federal Family Education Loan Program, which allows private lenders to originate government-backed loans for college students. The Obama administration had proposed a plan to ...
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Monday, December 28, 2009
Tuesday, December 15, 2009
Student loan consolidation makes sense, but federal, private debt has different rules
Q I recently graduated from college with private student loans. Is there any institution consolidating private student loans, and does it make sense to do so? D.F.
A Yes, there are banks that offer private consolidation loans, but to benefit from this repayment option, you'll have to meet select criteria.
When you consolidate your student loans, you wrap all the money you've borrowed throughout college into one, bigger loan. So you won't have to keep track of multiple loans.
In addition, you can repay a consolidation loan over a longer period (as much as 30 years compared with 10 or 15 for standard repayment), which lowers the monthly payment.
Now the fine print: While you can consolidate federal and private student loans, you can't bundle them together. Like matters of church and state, you have to address federal and private loans separately.
Consolidating federal education loans is relatively easy. You qualify regardless of the size of your loans, and there are no credit checks and fees. Also, the interest rate you pay -- a weighted average of the rates on your federal loans with a cap of 8.25 percent --is fixed.
To apply, go to the U.S. Department of Education's Federal Direct Loan Consolidation program at loanconsolidation.ed.gov.
Private student loan consolidation is trickier. For one, only a handful of lenders, including Chase and Wells Fargo, still do it.
"Lenders that relied on the capital markets are unable to get the funding for these loans," said Mark Kantrowitz, publisher of www.finaid.org.
To qualify, your balance generally needs to add up to at least $7,500.
Also, the interest rate you pay is variable and based on your FICO credit score. The higher your credit rating, the lower your rate. At Wells Fargo, for example, rates range from about 4.25 to 9 percent. But there is no cap, as with federal consolidation loans.
Here are three scenarios in which consolidation makes sense, if you qualify:
Your credit score has improved since you first borrowed.
"Students who are most likely to benefit are those who got their loans when they had a very thin or nonexistent credit history," Kantrowitz said. "And since then their credit score has increased by at least 50 and preferably 100 points."
With that kind of jump, your interest rate could drop by roughly 1 point, Kantrowitz estimated.
You need to release a co-signer.
To qualify for a private student loan, you may have needed a co-signer, such as a parent, spouse or other relative. Like you, the co-signer is responsible for the loan's repayment. Many lenders will "release" the co-signer after you make a series of on-time payments.
But if your lender doesn't have that option, a consolidation loan is a good way to orchestrate the "release."
You need to simplify your repayment.
You need to minimize the number of bills that you have to keep track of each month.
But comparison shop before you consolidate. Though you have few lenders to choose from, loans will vary: Some lenders, for example, may charge fees to consolidate.
There's also no "upfront pricing:" You have to apply to see what interest rate you will be charged.
"You may not qualify for the lowest advertised rate," Kantrowitz said. "You still have to shop around."
Source
A Yes, there are banks that offer private consolidation loans, but to benefit from this repayment option, you'll have to meet select criteria.
When you consolidate your student loans, you wrap all the money you've borrowed throughout college into one, bigger loan. So you won't have to keep track of multiple loans.
In addition, you can repay a consolidation loan over a longer period (as much as 30 years compared with 10 or 15 for standard repayment), which lowers the monthly payment.
Now the fine print: While you can consolidate federal and private student loans, you can't bundle them together. Like matters of church and state, you have to address federal and private loans separately.
Consolidating federal education loans is relatively easy. You qualify regardless of the size of your loans, and there are no credit checks and fees. Also, the interest rate you pay -- a weighted average of the rates on your federal loans with a cap of 8.25 percent --is fixed.
To apply, go to the U.S. Department of Education's Federal Direct Loan Consolidation program at loanconsolidation.ed.gov.
Private student loan consolidation is trickier. For one, only a handful of lenders, including Chase and Wells Fargo, still do it.
"Lenders that relied on the capital markets are unable to get the funding for these loans," said Mark Kantrowitz, publisher of www.finaid.org.
To qualify, your balance generally needs to add up to at least $7,500.
Also, the interest rate you pay is variable and based on your FICO credit score. The higher your credit rating, the lower your rate. At Wells Fargo, for example, rates range from about 4.25 to 9 percent. But there is no cap, as with federal consolidation loans.
Here are three scenarios in which consolidation makes sense, if you qualify:
Your credit score has improved since you first borrowed.
"Students who are most likely to benefit are those who got their loans when they had a very thin or nonexistent credit history," Kantrowitz said. "And since then their credit score has increased by at least 50 and preferably 100 points."
With that kind of jump, your interest rate could drop by roughly 1 point, Kantrowitz estimated.
You need to release a co-signer.
To qualify for a private student loan, you may have needed a co-signer, such as a parent, spouse or other relative. Like you, the co-signer is responsible for the loan's repayment. Many lenders will "release" the co-signer after you make a series of on-time payments.
But if your lender doesn't have that option, a consolidation loan is a good way to orchestrate the "release."
You need to simplify your repayment.
You need to minimize the number of bills that you have to keep track of each month.
But comparison shop before you consolidate. Though you have few lenders to choose from, loans will vary: Some lenders, for example, may charge fees to consolidate.
There's also no "upfront pricing:" You have to apply to see what interest rate you will be charged.
"You may not qualify for the lowest advertised rate," Kantrowitz said. "You still have to shop around."
Source
Saturday, November 28, 2009
The Loan Arrangers: Consolidating Student Loans Can Be Tricky
If you’re stuck paying down student loans, and need to catch your breath, a loan consolidation may be in the cards. But before you sign on the dotted line, you’ll have to weight the pros and cons first.
No doubt, plenty of student loan borrowers can make a case for consolidating their loans. According to The College Board, between 2000–2001 and 2006–07, an estimated 60% of bachelor’s degree recipients borrowed to fund their education. The College Board also reports that the average debt per student loan borrower average increased 18%, to $22,700 in 2007 from $19,300 in 2001.
Source
No doubt, plenty of student loan borrowers can make a case for consolidating their loans. According to The College Board, between 2000–2001 and 2006–07, an estimated 60% of bachelor’s degree recipients borrowed to fund their education. The College Board also reports that the average debt per student loan borrower average increased 18%, to $22,700 in 2007 from $19,300 in 2001.
Source
Sunday, November 15, 2009
How college students can build credit
For "money" Monday, let’s talk about how college students can build their credit. Their options are changing along with credit card rules.
The new credit card law that goes into effect next year bans credit card companies from giving students gifts to sign up or from signing them up at all if they're under 21 and can't prove they can make payments on the card. But until then, you can bet credit card companies will be aggressively targeting college students-- maybe like never before.
USA Today says if college students want to resist the temptation of their own card and the potential trouble it can lead to, they can build their credit by becoming an authorized user on their parent's card. When they use their parent’s card, the student's use is reported to the credit bureaus in their name.
Source
The new credit card law that goes into effect next year bans credit card companies from giving students gifts to sign up or from signing them up at all if they're under 21 and can't prove they can make payments on the card. But until then, you can bet credit card companies will be aggressively targeting college students-- maybe like never before.
USA Today says if college students want to resist the temptation of their own card and the potential trouble it can lead to, they can build their credit by becoming an authorized user on their parent's card. When they use their parent’s card, the student's use is reported to the credit bureaus in their name.
Source
Wednesday, October 28, 2009
Loans, grants and scholarships are options for students
In the current economic climate, students and their parents might feel the pinch more than ever when it comes to funding tuition.
Brenda Noblitt, assistant director of financial aid at MU, said circumstances often change for students during college.
The Financial Aid Office in Jesse Hall can provide students with information and assistance in obtaining grants, scholarships and student loans. Advisers are available to discuss money matters with students and refer them when necessary.
The process of obtaining aid is based primarily on a student’s financial situation, determined by the income of their parents or guardian.
The first important step to securing aid is completing the FAFSA or Free Application for Federal Student Aid form. It can be accessed online. Students may be eligible for grants, loans and work study.
“Students should complete the FAFSA each year before our March 1 priority filing date," Noblitt said. “They can also complete the general scholarship application before MU’s priority filing date."
Here's an overview of the process of securing financial aid through loans, grants and scholarships.
Source
Brenda Noblitt, assistant director of financial aid at MU, said circumstances often change for students during college.
The Financial Aid Office in Jesse Hall can provide students with information and assistance in obtaining grants, scholarships and student loans. Advisers are available to discuss money matters with students and refer them when necessary.
The process of obtaining aid is based primarily on a student’s financial situation, determined by the income of their parents or guardian.
The first important step to securing aid is completing the FAFSA or Free Application for Federal Student Aid form. It can be accessed online. Students may be eligible for grants, loans and work study.
“Students should complete the FAFSA each year before our March 1 priority filing date," Noblitt said. “They can also complete the general scholarship application before MU’s priority filing date."
Here's an overview of the process of securing financial aid through loans, grants and scholarships.
Source
Thursday, October 15, 2009
Best Tips for Better Debt Management and Debt Consolidation
3 Tips for Better Debt Management and Financial Success
If you're having trouble managing your debt you're not alone. More and more people are sinking into debt and wondering what the heck happened and how they can fix it. If you want to get out of debt and stay that way, there are some fundamental debt and money management skills you're going to need to learn.
Learn to Manage Your Money
Just like mutual funds have money managers making the decisions on what stocks to buy, hold and sell and when to perform these actions, you need to become your own professional money manager. Not only will this help you get out of debt, it will help keep you out of debt, as well as reach other financial goals you may have, such as buying a new home, sending a child to college, or retiring.
Some important money management tips include:
1 - Pay cash for things whenever possible. Try not to use credit cards at all. Consider keeping only one credit card debt management , that is for emergency use only. Don't buy things you want but don't need until you have the cash to do so.
2 - Budget, budget, budget
I'm not saying you have to start recording every penny you spend. Not many people can do that for very long. However, you should know what your monthly bills are, when they need to be paid, and how much income you take home each month. Make sure all your monthly bills get paid before you spend any money on items that you don't need. This is especially true when you are trying to get out of debt. Once you are out of debt (not including longer term debt like your car or mortgage), you'll have more disposable income to spend on other things, as well as save for other financial goals. But if you are in debt, getting out should be your number one financial priority.
Use Professional Advice
Understand that at time you'll need to seek the advice of a professional such as a CPA or financial planner. I'm not saying you need to hand everything over regarding your finances for someone else to manage (and pay them huge commissions at the same time) but putting a financial plan in place, and having a CPA do your taxes, may be a very good idea that will save you money in the long run.
Keep Learning
Constantly learning about debt management program and how to manager your personal finances and investments will help keep you out of debt once you are debt free and keep you on track for your financial goals. By always learning about the topic, it will be in your mind and you'll be less likely to slip back into bad habits and find yourself in debt again.
Source
If you're having trouble managing your debt you're not alone. More and more people are sinking into debt and wondering what the heck happened and how they can fix it. If you want to get out of debt and stay that way, there are some fundamental debt and money management skills you're going to need to learn.
Learn to Manage Your Money
Just like mutual funds have money managers making the decisions on what stocks to buy, hold and sell and when to perform these actions, you need to become your own professional money manager. Not only will this help you get out of debt, it will help keep you out of debt, as well as reach other financial goals you may have, such as buying a new home, sending a child to college, or retiring.
Some important money management tips include:
1 - Pay cash for things whenever possible. Try not to use credit cards at all. Consider keeping only one credit card debt management , that is for emergency use only. Don't buy things you want but don't need until you have the cash to do so.
2 - Budget, budget, budget
I'm not saying you have to start recording every penny you spend. Not many people can do that for very long. However, you should know what your monthly bills are, when they need to be paid, and how much income you take home each month. Make sure all your monthly bills get paid before you spend any money on items that you don't need. This is especially true when you are trying to get out of debt. Once you are out of debt (not including longer term debt like your car or mortgage), you'll have more disposable income to spend on other things, as well as save for other financial goals. But if you are in debt, getting out should be your number one financial priority.
Use Professional Advice
Understand that at time you'll need to seek the advice of a professional such as a CPA or financial planner. I'm not saying you need to hand everything over regarding your finances for someone else to manage (and pay them huge commissions at the same time) but putting a financial plan in place, and having a CPA do your taxes, may be a very good idea that will save you money in the long run.
Keep Learning
Constantly learning about debt management program and how to manager your personal finances and investments will help keep you out of debt once you are debt free and keep you on track for your financial goals. By always learning about the topic, it will be in your mind and you'll be less likely to slip back into bad habits and find yourself in debt again.
Source
Monday, September 28, 2009
Same day loans for unemployed: Patronizes the jobless people
Keeping urgencies faced by the people who do not have any permanent source of earning in mind, same day loans for unemployed are designed by the financial experts. In this vast market, this category of loan patronizes the jobless people at anytime and anywhere.
With the help of these loans, the unemployed people feel free from formality of faxing documents, pledging assets or credit check.
The needy applicant can make use of loan amount for meeting various causes. The best part of this loan is that the applicant does not need to explain the usage of amount to the lender. The terms and conditions offered to same day loans for unemployed are similar to payday loans. With the difference that these loans don't require job and income details in order to avail the amount.
Source
With the help of these loans, the unemployed people feel free from formality of faxing documents, pledging assets or credit check.
The needy applicant can make use of loan amount for meeting various causes. The best part of this loan is that the applicant does not need to explain the usage of amount to the lender. The terms and conditions offered to same day loans for unemployed are similar to payday loans. With the difference that these loans don't require job and income details in order to avail the amount.
Source
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