Online college loan applications add to widespread student confusion

Half of students said they didn't believe they could ever pay down their student loans.

Most college students take out school loans without understanding the differences between federal and private loans or the risks of variable interest rates, and the ease of online loan application forms has exacerbated misunderstandings that tack on years of repayments.

About two-thirds of college students don’t understand the basic differences between  federally-backed student loans – which usually have lower and more stable interest rates – and private school loans that often have wildly fluctuating interest rates once students begin repayment, according to findings in a survey conducted by NERA Economic Consulting and Young Invincibles, a student advocacy group based in Washington, D.C.

Common misconceptions about student loan options aren’t a result of lazy Google searches, wayward clicks, and deceptive sales pitches from banks and companies hawking private loans.…Read More

Students seek to stop loan interest rate hike

President Obama said keeping the rate low would help 7.4 million borrowers save on average $1,000 over the life of the loan.

Millions of college students could be in for a shock this summer when the interest rate on a popular federally subsidized student loan doubles unless Congress acts.

College students on March 13 delivered more than 130,000 letters to congressional leaders asking them to stop rates from increasing from 3.4 to 6.8 percent.

The rate hike affects new subsidized Stafford loans, which are issued to low and middle income undergraduates. They hope to raise enough awareness to get Congress to stop it.…Read More

Wells Fargo rolls out fixed-rate student loans

Wells Fargo is hoping to make its student loans more attractive to families, the Associated Press reports. The San Francisco-based bank says it is now offering fixed-rate student loans, which is a departure from the industry practice. Unlike federal student loans, the private student loans issued by banks typically come with variable interest rates that are tied to a benchmark rate…

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House boosts college aid for students in need

Obama pushed for legislation that would fill a $19 billion Pell Grant shortfall.
Obama pushed for legislation that would fill a $19 billion Pell Grant shortfall.

Riding the coattails of a historic health care vote, the House on March 21 also passed a broad reorganization of college aid that affects millions of students and moves President Barack Obama closer to winning yet another of his top domestic policies.

The bill rewrites a four-decades-old student loan program, eliminating its reliance on private lenders and using the savings to direct $36 billion in new spending to Pell Grants for students in financial need.

In the biggest piece of education legislation since No Child Left Behind nine years ago, the bill also would provide more than $4 billion to historically black colleges and community colleges.…Read More

Student aid, linked to health care, gets a trim

An increase in Pell Grants was cut back in the revised student aid reform legislation.
An increase in Pell Grants was cut back in the revised student aid reform legislation.

Congressional Democrats on March 18 trimmed their original student loan plans, reduced spending for community colleges, and eliminated early childhood money from a broad rewrite of a college aid bill piggybacked on to fast-track health care legislation.

The student loan measure would be the biggest change in college assistance programs since Congress created them in the 1960s, ending a private-lender program by having the government originate all loans to needy students.

But facing savings smaller than anticipated from the switch and a shortfall in Pell Grant money for low-income students, Democrats are proposing no increases in Pell Grants over the next two years and a modest increase over the five years that follow.…Read More

Connecticut might waive student loans for ‘green’ job workers

Paul Goulet hopes Connecticut will help him get from under nearly $8,000 he’s borrowed for college after losing his job in a paper manufacturing plant. Goulet, 55, is a student in environmental studies at Goodwin College, aiming to find work in wastewater treatment. State legislation that would waive thousands of dollars in loans would benefit him and other students who earn degrees or certificates in green technology and other jobs, reports the Associated Press. Loan forgiveness programs aren’t new—states use them to entice medical professionals to rural areas, steer teachers to certain subject areas, and attract farmers to local agriculture. But Connecticut’s proposal could break new ground. Trying to boost its work force in high-growth green technology, the state would annually forgive as much as $2,500 of federal and state education loans for up to four years, or 5 percent of loans, whichever is less. The legislation comes as the White House is emphasizing the importance of green works and job creation. President Barack Obama announced in January $2.3 billion in tax credits, to be paid for from last year’s $787 billion stimulus package, that he said would create 17,000 green jobs…

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Technology makes student aid more accessible

Students have increasingly looked to the web for financial aid.
Students have increasingly looked to the web for financial aid.

Over the past decade and a half, the internet has made it easier for families to learn about, find, and apply for college scholarships, government grants, and other types of student financial aid. This transformation of the financial aid industry continues even today with a simplified federal aid form and a new XML data standard that will make applying for scholarships easier than ever.

I have acted as a catalyst for some of these major developments and have a unique perspective on the role of the internet in paying for college.

I founded the FinAid web site in the early 1990s to help people plan for and pay for college by making the process easier to understand and more efficient. FinAid was one of the internet’s first web sites, not just one of the first web sites about student financial aid. It is also one of the oldest web sites still in existence.…Read More

Education secretary pushes to revise student loan practices

Education Secretary Arne Duncan on Tuesday urged the Senate to overhaul student lending, asserting that the banking industry has had “a free ride from taxpayers for too long” and that executives with lending giant Sallie Mae have enriched themselves as borrowers rack up college debt, reports the Washington Post.

“Working Americans pay while bankers get rich,” Duncan said in a prepared statement. “Sallie Mae executives have paid themselves hundreds of millions of dollars in the last decade while teachers, nurses, and scientists — the backbone of the new economy — face crushing debt because of runaway college tuition costs.”

Duncan’s unusually pointed critique marked an escalation in the student loan debate as the Obama administration seeks to end a program that uses private lenders as middlemen for federally backed loans. The tone of the comments echoed President Obama’s recent populist rhetoric about the need to expand regulation of Wall Street……Read More

Industry lobbying imperils overhaul of student loans

Four months ago, it appeared all but certain that the White House and Democrats in Congress would succeed in overhauling the student loan business and ending government subsidies to private lenders. But an aggressive lobbying campaign by the nation’s biggest lenders has now put one of President Obama’s signature plans in peril, reports the New York Times, with lenders using sit-downs with lawmakers, town-hall-style meetings, and petition drives to plead their case and stay in business. Obama called the idea a “no-brainer” last fall, predicting it would take billions of dollars from the profits of private lenders and give it directly to students, and many colleges already have moved to get loans directly from the federal government in anticipation of the next move by Congress. But House and Senate aides say that the administration’s plan faces a far tougher fight than it did last fall, when the House passed its version of the bill. The fierce attacks from the lending industry, the Massachusetts election that cost the Democrats their filibuster-proof majority in the Senate, and the fight over a health-care bill have all damaged the chances for the student loan measure, said the aides, who spoke on the condition of anonymity. But they said the administration had recognized the threat and was beginning to push back in an effort to get the plan approved…

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