The New Zealand Government has proposed changes to the Student Loan Scheme in order to increase repayment rates and bring the overall loan balance to a more manageable figure.

“This in turn will make the scheme fairer for the vast majority of borrowers who do honour their loan obligations and for taxpayers more generally,” says Revenue Minister Peter Dunne.

However student advocate groups are opposing the move saying they will make it even harder for new graduates to find their feet as the repayments start too low and demand too much.

“New Zealand graduates already make payments from a level of income below any other income-contingent loans scheme in the world; the rate of payment proposed will now also be higher than is demanded anywhere else,” said Pete Hodkinson, President of the New Zealand Union of Students’ Associations (NZUSA).

Currently those with student loans who earn over $19,084 per year pay 10% of their income over the threshold. This will rise to 12%, an increase that the Massey University Extramural Students Society and NZUSA estimate will cost students and graduates between $15 and $30 per week.

The Green Party is also opposing the Government’s proposal, stating that a graduated rate would be fairer and more effective.

“A better alternative would be a progressive repayment rate that kicks in when graduates are actually earn[ing] higher incomes so that those who can afford to repay their loans do so, while those on lower incomes have a chance to find their feet first,” suggests Green Party student spokesperson Holly Walker.

The Government has also indicated it plans to make changes around student allowance eligibility and is considering a student allowance cap of four years.

The student allowance scheme allows students from low income families access to funding for living costs which is not added to their loan.

Student groups, including the New Zealand Medical Students Association, are also angered by these plans saying that it is unfair to those completing longer degrees and may discourage students from entering those degrees including medicine which is a minimum of eight years.

“We have grave concerns that the seven-year cap on student loans and now this four-year cap on access to student allowances may force students to take out high-interest bank loans to live, which will reduce access to tertiary education for many students and is unreasonable,” says NZMSA President Michael Chen-Xu.

The article NZ Government Plans Changes to Student Loan Scheme appeared first on The Toonari Post - News, Powered by the People!.

The Department of Education has been transferring large batches of federal student loans to new loan-servicing companies — leaving in the lurch some borrowers who are suddenly encountering problems with their loans, such as payments that are mysteriously adjusted up or down.

The switch, which has been going on for months and will ultimately include millions of loans, is mandated by a little-known provision tucked into the 2010 healthcare overhaul. Pushed by a consortium of nonprofit student loan companies, the provision forces the DOE to use nonprofit loan servicers. But at least in the short run, the switch has caused problems.

Borrower Isabelle Baeck said that after a new servicer, Mohela, took over her loans in December, she received a letter saying that her monthly payments had been reduced to $50 — roughly a quarter of what they had been. The change meant Baeck would ultimately pay more in interest over a longer period of time. Concerned, she said she has made repeated calls to get the problem fixed, only to have the payments repeatedly readjusted.

A Mohela representative declined to comment on specific borrower situations but said that the company is working hard to minimize disruption and to resolve issues as they arise.

Baeck is not alone. Since last fall, one million borrowers have had their federal student loans randomly assigned to one of the new companies, all nonprofits or subsidiaries of nonprofit organizations. It is not known what proportion of borrowers has had problems during the switch.

Like their for-profit counterparts, many of these nonprofit student loan companies traditionally originated, bought and insured student loans, with the day-to-day servicing making up only a portion of their business. Several — including at least six that the department has transferred or is planning to transfer loans to — have been touched by scandal in those other capacities, with accusations ranging from bad lending practices to violating state law to overbilling the Education Department.

In all, the Department of Education expects to add more than a dozen new servicers to the mix, roughly tripling the total number of companies that were handling direct federal loans this time last year. The move would also mean that borrowers with such loans would eventually be using about a dozen separate servicer websites, whereas before there was a single website for all direct loans.

Some worry the addition of so many new servicers could make standardization and oversight more challenging.

“It’s hard to know if having more servicers will help or hurt because it’s so bad with just a few right now,” said Deanne Loonin, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “Our fear is that the more you have, the less ability you have to oversee them.”

Ultimately, borrowers having their loans moved over to these new servicers have Congress to thank for it. Coupled with the passage of the health care reconciliation bill was an overhaul of federal student lending, which shifted the government away from backing loans by private lenders — what were known as federally guaranteed student loans — and toward loaning directly to students.

For-profit and nonprofit student loan companies alike lobbied over the change and shifted their business models accordingly. In particular, the nonprofit student loan companies won a carve-out to ensure they’d get in on the business of servicing the direct federal loans. The carve-out was crafted and lobbied for by the Education Finance Council, a trade group representing nonprofit student loan companies that spent more than $200,000 on lobbying that year. (The Education Finance Council did not respond to a request for comment.)

Now, two years later, borrowers are experiencing the effect of the law.

Borrower Karen Mahnk said she logged into the Department of Education’s student loan website in October and saw that her loan balance — which typically hovered around $100,000 — was suddenly zero. When she called around, her servicer told her that she had been put in an administrative forbearance.

That didn’t sit well with Mahnk, who said she didn’t want to put off her payments and certainly didn’t want to rack up additional interest. She said she called again and talked to someone else, who assured her the opposite — there was no record of forbearance.

While still confused about many details, Mahnk said she learned that her loan is being handled by a new servicer, a company called EdFinancial, which shows she’s not due for a payment until June. Taking no chances, Mahnk said she has been forcing through monthly payments.

“I wanted to continue making payments regardless of what their problem was,” Mahnk explained. But she’s still concerned about how things will shake out. “I’m only taking their word on it that my payment is fine, and that EdFinancial is going to do everything they’re supposed to do.”

EdFinancial did not respond to a request for comment.

Some borrowers were notified of the switch only after the fact. “There was really no prior warning,” said Scott Trudeau, a borrower whose loans were transferred to Mohela in late January. Trudeau, who said he’s never fallen behind on his loans, has had recurring problems since the switchover trying to correct his bank account information with Mohela.

“I get delinquency notices regularly, I get letters in the mail, but every time I try to give them money, the system breaks down,” he said. “I’ve had no trouble with the Department of Education all these years, but it’s been nothing but confusion with Mohela.”

“Anytime you change a servicing relationship, it can cause concern,” said Will Shaffner, Mohela’s director of business development and government relations. “They need to pick up the phone and call us. If they’re not satisfied with our service or aren’t getting answers, they should ask to speak with a supervisor. They can even get in touch with our CEO if they need to.”

The Department of Education’s own implementation schedule shows that the transition is still a work in progress and the phasing in of new servicers is being pushed back.

“FSA has been working aggressively to implement the new not-for-profit servicers,” the document reads. “Our original schedule did not fully accommodate the level of effort required to bring up servicers in a way that minimizes risks for borrowers, FSA, and the not-for-profits themselves.”

by Marian Wang, ProPublica, April 23, 2012, 2 p.m.

The article Student Loan Borrowers Dazed and Confused by Servicer Shuffle appeared first on The Toonari Post - News, Powered by the People!.

It was with some fanfare that the Obama administration announced last fall that it was ramping up a program to help students with federal loans reduce their monthly payments. Under the program, payments are adjusted based on how much students earn 2014 what’s known as income-based repayment.

Yet, even while the administration has emphasized easing the burden for student borrowers, some contractors with the Department of Education appear to be exacerbating it.

Bloomberg reported this week that some federally contracted debt collection agencies have been playing hardball with borrowers who are behind, insisting on payments the borrowers can’t afford 2014 even when federal student-loan rules allow more leniency.

The debt collectors have an incentive to be tough. As Bloomberg explains:

Under Education Department contracts, collection companies “rehabilitate” a defaulted loan by getting a borrower to make nine payments in 10 months. If they succeed, they reap a jackpot: a commission equal to as much as 16 percent of the entire loan amount, or $3,200 on a $20,000 loan.

These companies receive that fee only if borrowers make a minimum payment of 0.75 percent to 1.25 percent of the loan each month, depending on its size. For example, a $20,000 loan would require payments of about $200 a month. If the payment falls below that figure, the collector receives an administrative fee of $150.

The Department of Education is trying to balance its interest in helping struggling borrowers and stewarding taxpayer dollars, department spokesman Justin Hamilton told Bloomberg.

Striking that balance, it seems, hasn’t been easy. Consumer advocates chafed when President Obama, as part of a deficit-reduction plan promoted last fall, recommended allowing debt collectors to robo-call the cell phones of borrowers who fell behind on federal student loans and other debts to the government.

That plan didn’t get far. But the measure resurfaced as a line item [PDF] in Obama’s proposed 2013 budget last month.

As Bloomberg noted, federal student-loan rules require that collectors work out “reasonable and affordable” payments with borrowers to get them back on track, but the rules don’t spell out how such a calculation should be made. The Department of Education is meeting with key student-loan stakeholders this week to discuss, among other things , whether to use the income-based repayment formula to help set that standard. (As it stands, only borrowers who are current on their federal loans are eligible for help via income-based repayment.)

One thing that isn’t on the table at these rule-making meetings? A measure hailed by some advocates as potentially the single most important rule change for student borrowers who’ve become severely disabled and are seeking a discharge of their federal student loans. As we reported last year, the department initially pledged to overhaul the program and consider whether to simply accept Social Security determinations of disability instead of its current complex and opaque process. The department subsequently backed off that fix. Now it isn’t even on the agenda [PDF].

by Marian Wang ProPublica, March 29, 2012, 12:24 p.m.

The article While White House Emphasizes Easing Student Debt Burden, Fed Contractors Play Hardball appeared first on The Toonari Post - News, Powered by the People!.

A new study shows that students are struggling more and more with student loan debt. Currently, 27 percent of student loan borrowers have past due balances by at least one month, according to new Federal Reserve data of delinquent student loan debt.

This statistic is not in the least bit surprising. Students who currently struggle with student loan debt do so because they follow a pattern: they go to college to get better jobs, then find they may need to further their education at an institution of higher learning in order to get a job that will pay well enough to eliminate their student loan debt in a reasonable amount of time. As a result, they have to take out more loans, which leads to more debt.

The study also took information from Equifax credit reports and found that 15 percent of the United States population has student loan debt and that 40 percent of those under the age of 30 with student loan debt have outstanding student loans of over $20,000 on average.

Furthermore, students need to take out more and more money in loans as tuition prices increase. According to websites like finaid.org and a CBS News report, in the 2011-2012 academic year, college tuition increased at an of average of 4.6 percent at private colleges and universities, while the tuition at public colleges and universities increased on average 8.3 percent. Not only are students required to increase their student loan debt in order to further their education, but they are also required to pay more for increases in the tuition from year to year.

To put it in perspective, the tuition at Connecticut College–a private college in New London, Connecticut–for the 2011-2012 academic year was $54,970. If that increased by 4.6 percent, the cost to attend Connecticut College in the 2012-2013 academic year would be $57,499.

Meanwhile, the tuition at the University of Vermont–a public university in Burlington, Vermont–was $23,418 for a Vermont resident and $41,982 for a student coming from outside of Vermont. If these figures increased by 8.3 percent, it would cost Vermont residents $25,362 for the 2012-2013 academic year, and out-of-state students would pay $45,467 for the 2012-2013 academic year.

Considering all of this, it is not at all shocking that students are taking out more and more loans and are currently struggling with the enormous debts they have amassed. With rising tuition prices and an increasing need for a better degree, Americans are taking out far more loans than they can literally afford.

The article Students Struggle with Rising Tuition appeared first on The Toonari Post - News, Powered by the People!.

For students throughout the entire world, the student loan holds short term joy alongside long term anxiety. The loans themselves are the main form of direct government support for students in higher education in the UK. Money is loaned to students at a subsidized rate that helps contribute towards maintenance costs as well as tuition fees.

The whole notion is seen to financially support as much as possible, trying not to deter potential students who may be put off by the economic restraints associated with university.

The current system in place however does have its critics, with the maintenance loan often becoming an issue with a large number of students whose parents earn more than the average amount.

Many view university, or higher education as the perfect platform to mature, both academically and personally. This learning curve includes financial dependency for the majority of students, who are encouraged to use their loans wisely in what is fast becoming an economically strained society.

The value of the maintenance loan has severely increased over the last twenty years, with the average annual sum standing at £390 per student in 1990/91, when only 28% of eligible students accepted their loans. 1995/96 saw an increase to £1,250, whilst the turn of the millennium saw an even larger increase, with the annual average reaching £2,900. This academic year has seen the highest average at £3,700 per year, or just over £1,200 per term.

The whole idea behind a maintenance loan is to cover accommodation fees and imperative living essentials. However following on from last weeks article which focused on the party culture in the UK, this modern society we live in is failing to grasp what is viewed by many as one of universities, if not life’s fundamental learning stations.

More and more parents are naively agreeing to pay their children’s accommodation fees, which in turn leaves the said student in possession of the entire maintenance loan to spend how they wish. With a figure of over £3,000 million a year spent on student loans throughout the United Kingdom, it is obvious that in many cases this can amount to a lot of money.

Even though many parents feel they are providing beneficial financial support to their children, in many cases, individuals are left with over £1,000 a term, to spend how they wish. With a term being no more than a few months long, students who have this luxury are able to live fairly comfortably, a standard or living not associated with student life.

The excessive amounts of money available to students despite the stereotypical beliefs surrounding modern students is astonishing, which leads onto last week’s article that highlighted the party culture, excessive drinking and illegal drug taking that has become accustomed at many universities throughout the United Kingdom.

The stereotypical views associated with students, in these particular cases, are down to their own doing, and lack of financial responsibility. To be presented with such a large sum of money at the start of term and then to reach the final week’s and be well into your overdraft is an unnecessary deterrent that is easily avoidable.

Although it’s often said that years spent at University are the best of your life, this current party culture seems to take this term too literally which in turn is seen to jeopardize their academic studies and financial stability.

Although this financial ‘blessing’ doesn’t lend itself to every student in the UK, those who may be considered unfortunate in the short term will definitely benefit from their style of living, as they work hard to make the money they need to survive, developing good values and even better morals.

The article Student Loans Finance Excessive Lifestyle in UK appeared first on The Toonari Post - News, Powered by the People!.

The foreclosure crisis and the staggering unemployment rate have been the looming economic stories of the past two years.  However, student loan debt should not be ignored.  Universities, colleges, banks, and other student loan finance services have all taken advantage of our nation’s youth in order to pad their bottom line.  With foreclosures and other credit problems, there is a way out.  The student loan problem is one that a person can never be freed from.

Lenders have nothing to fear when giving out money for school.  The loans are guaranteed by the government.  If a person defaults on the loan, the lenders are not forced to go through collection agencies where they will likely never see their money.  Oh no.  They have the government in their back pocket.  The government will punish defaulters by garnishing wages, withholding tax refunds, or even docking social security checks.  For-profit colleges are often the worse culprits of the scam.  They don’t work for students.  They work for CEO’s and shareholders, and they have rewarded top executives very handsomely.

Senator Tom Harkin (D-Iowa) and his committee investigated the for-profit college crisis last year.  Harkin stated that for-profit schools often use deceptive recruiting techniques, have overpriced programs, and end up with huge profits while the most vulnerable students are left with staggering debt.  Very similar to the subprime mortgage collapse, for-profit colleges are using the lure of higher education to entice prospective students to take out huge student loan debts that they cannot afford.  Schools used misleading recruiting tactics to convince would be students that they will be able to afford the loan payments after graduation.  A recent General Accountability Office investigation revealed that all 15 schools that the office visited this past spring were using deceptive recruiting practices to convince students to enroll.

For-profit schools also have very poor success rate.  A recent investigation looked at 16 large for-profits schools and found that 57 percent of students who enrolled in 2008-2009 had dropped out, most within four and half months.  Even at the largest for-profit college, more than 64 percent of those seeking an associate’s degree dropped out within the first year.  But these for-profit schools are still raking in record high profits despite their lack of success.

“CEOs at for-profit education companies are rewarded with mega-million-dollar, taxpayer-funded salaries, even as the low-income students targeted by these schools struggle with staggering debts,” Senator Harkin wrote in a blog for The Hill.  He goes on to mention that the college Strayer, a chain of for-profit schools, receives three-quarters of its revenue from U.S. taxpayers.  The chairman and CEO of Strayer received $41.9 million last year, nearly 60 times the compensation of Harvard’s president.

It is clear that there has been no federal oversight and the student loan industry is as corrupt as the mortgage industry.  Other than Sen. Harkin though, most lawmakers are silent on the issue.  I have written to many members of Congress about the issue and have never received a personal response. Just the same old canned crap.  How long will America’s young adults be forced to suffer before the government steps in and cleans up the mess that greedy colleges and student loan companies have left behind?

The article Student Loan Debt and For-Profit Schools appeared first on The Toonari Post - News, Powered by the People!.