Student Loan

Recently, lawmakers and the media have focused on potentially improper relationships between student financial aid administrators and certain lenders, even going so far as to propose eliminating the position in college student aid offices. These proposed measures could have harmful, unintended consequences for students and parents attempting to finance higher learning. Without an objective third party, consumers would be more prone to manipulation by direct-to-consumer marketing by unscrupulous lenders.

The idea of politicians tinkering with billions of dollars in the student loan program can make anyone a bit wary. But this time they got it right, with students coming out the winner in legislation passed recently by Congress and to be signed by the president. The law will cut nearly $21 billion in government subsidies to lenders over the next five years. Almost all the money will be plowed back into grants for the poorest students, lower interest rates and loan forgiveness for those in careers that society values but nevertheless underpays.

Student-loan borrowers cheered last month when the House voted to halve interest rates on federal loans. But don't start celebrating just yet. The bill, called the College Student Relief Act of 2007, would reduce the current rate on subsidized Stafford loans from a fixed 6.8 percent to a fixed 3.4 percent over five years. Subsidized Stafford loans are awarded based on financial need, and the federal government covers the interest while you're in school. The loan's counterpart, the unsubsidized Stafford, is available to any student, and interest accrues while you study.

WASHINGTON -- The Senate Labor and Human Resources Committee approved yesterday a modified version of President Clinton's proposal to put the federal government in the business of lending money directly to college students.The plan, which is now almost certain to be enacted in some form, is intended to cut costs both to students and to the government, which now acts as a guarantor of student loans made by private financial institutions.The most immediate saving would be to students, who now pay fees of as much as $80 for every $1,000 borrowed.

Americans love to shop. After all, we made The Price is Right the longest running TV game show. But when it comes to shopping for student loans - a complex product with hundreds of lenders to choose from - we'd rather have someone else do the legwork. Now, we've learned, that can be a problem. Colleges for years have compiled lists of recommended lenders to help families navigate through a maze of options. An investigation by the New York attorney general's office, though, uncovered chummy financial relationships between some financial aid officers and lenders promoted on the school's list.

COULD YOUR outstanding debt to Sallie Mae - the largest provider of student loans in the country - cause you to pay more on your home mortgage? Could that be the case even if your payment history with Sallie Mae has been perfect for years? The answer to both questions is a surprising yes. Though the company has not informed its 7 million-plus customers, Sallie Mae confirms that it has stopped reporting borrower loan repayments to two of the three giant national credit repositories. Nonreporting of on-time payment histories, in turn, can lower Sallie Mae borrowers' credit scores - sometimes by enough to render them ineligible for the best-available home loan rate quotes.

The Supreme Court today rejected an appeal from education agencies in Maryland and other states, which had argued that they should not be required to return to the federal government millions of dollars of their college loan programs' reserve funds.In Maryland, the ruling applies to $10.8 million in reserves from the Maryland Higher Education Loan Corporation.The court, without comment, left intact a ruling that a federal law requiring return of the reserve funds to the federal government did not violate property or contractual rights of state agencies that help run the program in Maryland, North Carolina and South Carolina.

If your federal student loan doesn't cover all your expenses and banks are making it harder to get private loans, who can you turn to? How about strangers? That's what some students are doing at peer-to-peer lending Web sites. These sites typically connect people needing money with dozens of regular folks willing to lend $50 or so at an agreed-upon interest rate. Usually borrowers at these sites seek several thousand dollars to pay off high-rate credit cards or for a business venture.

A year ago, borrowers consolidated education loans in droves to lock in the lowest interest rates in the federal loan program's 40-year history. Now, students and parents are once again advised that if they have any Stafford or PLUS loans left to be consolidated, do it before July 1. This may be the last time to use consolidation to lock-in exceptionally low rates before they go up and changes in the program kick in. "Anything after July 1, game's over,"...

Let's say somebody owed you a thousand bucks and would not pay it back.The deadbeat wasn't poor -- he had a job and enough money to buy compact discs and go to movies -- he just didn't feel like paying.You had tried appealing to his better nature. You had threatened him. You had tried legal means. But nothing worked.So you got an idea."What if I give you $1,000," you tell the deadbeat. "Will you pay me back $1,000 then?"The deadbeat thinks about it for a moment. "Yeah, OK," he says.This is the essence of Bill Clinton's new student loan/national service plan.