Early 2010 saw many changes in the area of student loans. President Obama signed into act legislation that would increase the access US citizens have to higher education and make repayment of any financing received easier. Perhaps one of the biggest changes is the removal of subsidies toward private lenders taking education loans. The federal government is, instead, looking to provide student loans directly.
FEDERAL STUDENT LOAN PROGRAM
The US Federal Student Loan Program is available to any US citizen, regardless of income. The program was enacted to help the millions of Americans that would otherwise be unable to attend college, university, or trade school. In addition to the Federal Loan Program overall, there are additional federal grants, loans, and awards for which you may be eligible. Talk to the financial aid department of your university for more information.
INCOME-BASED REPAYMENT
Anyone who has a federal student loan can apply for income-based repayment, commonly referred to as IBR or Income-Contingent Repayment (ICR). IBR has been available since July 2009, so it is still relatively new. It means that your loan payments will stay affordable relative to your income. IBR payments are less than ten percent of your income (or 15 percent of discretionary income) and can be as low as $0. You are eligible for IBR for any federal student loan, be it for graduate school or undergraduate studies, new or old, and from any lender.
STUDENT LOAN FORGIVENESS
Under IBR, if you make your payments on-time for 25 years, your federal student loan debt will be forgiven. Have a job in government or a non-profit? If so, your debt may be forgiven after 10 years. The program is called Public Service Loan Forgiveness (PSLF) and includes all jobs in all forms of government, including hospitals, schools, universities, etc., and includes non-profit organizations, requires that you participate in IBR, and have a Direct federal student loan. If you do not have a Direct federal loan, you can always consolidate or reconsolidate into a Direct loan.
WHAT HAS CHANGED
Under the new legislation, IBR will be even more generous for borrowers who take out their first federal loan on or after 1 July 2014. There will be a lower payment cap and student loan forgiveness after just 20 years. In addition, the maximum Pell Grant will also increase under the new legislation, although changes will not go into effect until 2013.
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Wednesday, July 28, 2010
Thursday, July 15, 2010
Student debt already a crisis
There is increasing evidence that Canada's student loan program is a train wreck waiting to happen. We noted last Sunday that post-secondary students across the country owe more than $13 billion in outstanding loans.
Many are in over their heads. One out of five students who attend a public university cannot repay what he has borrowed.
The situation is even worse at private career colleges. There, 40 per cent of students will default on their debts. At some vocational schools in B.C., loan delinquencies exceed 75 per cent.
These are well beyond the default rates for business loans and residential mortgages. Part of the problem is easy money. Students with limited resources can borrow huge sums, virtually no questions asked.
For example, kids whose family income is $25,000 can borrow $40,000 for a four-year degree program. Pretty much all they need is proof of enrolment and a clean credit history.
Yet what chance do they have of paying it back? The Canada Student Loan program charges interest at the prime lending rate plus five per cent. A loan that size adds up to monthly payments of $360 for 15 years.
Of course, if the education that students receive is worth what they paid, perhaps they can make good on their debts. Yet is it?
The staggering default rates at private vocational schools would certainly suggest otherwise. But even at public colleges, there is room for serious doubt.
Tuition rates at Canadian universities have grown at double the cost of living for at least 30 years. In just the past decade, fees for a four-year arts or science degree in B.C. have more than doubled, from $8,800 to $20,000.
Add in room and board, books and other charges, and an undergraduate degree costs about $60,000. Professional colleges like law and medicine charge $90,000 or more.
It's possible these increases have been used to improve the quality of instruction. Yet there's limited evidence for that. Between 1987 and 2006, the number of full-time students at Canadian universities grew 57 per cent while the number of full-time professors grew only 20 per cent.
That's why so many courses nowadays are taught by graduate students or teaching assistants, rather than faculty. It's why class sizes have ballooned and multiple-choice exams have replaced written essays. Students are paying more but getting less.
Universities are able to charge the limit because they know kids can borrow the money -- not necessarily that they can repay it. The huge run-up in tuition rates has been matched, step for step, by burgeoning student debt.
The situation resembles what happened with mortgages in the U.S. There, for a while, house prices soared because buyers got easy credit.
The bubble eventually burst when mortgage holders could no longer afford the huge monthly payments. The housing market collapsed, taking with it a large chunk of the banking sector.
The only reason Canada's student loan program hasn't gone the same route is that the amounts are not as large and the federal government quietly writes off the losses. But the personal damage inflicted is just as severe. Young people begin their lives hopelessly in debt, or worse, effectively bankrupt. And high tuition rates are being propped up by reckless lending policies.
We need a student financial assistance program, recognizing that even with part-time work and family support, post-secondary education is beyond the reach of too many young people.
No one should be denied an education because his or her parents lack money. But student loans in their present form have made education less affordable, not more.
With tuition rates now in the stratosphere, it's time to rethink post-secondary financing. And the place to start is on campus. By one means or another, we need to ensure that students get value for their money.
Source
Many are in over their heads. One out of five students who attend a public university cannot repay what he has borrowed.
The situation is even worse at private career colleges. There, 40 per cent of students will default on their debts. At some vocational schools in B.C., loan delinquencies exceed 75 per cent.
These are well beyond the default rates for business loans and residential mortgages. Part of the problem is easy money. Students with limited resources can borrow huge sums, virtually no questions asked.
For example, kids whose family income is $25,000 can borrow $40,000 for a four-year degree program. Pretty much all they need is proof of enrolment and a clean credit history.
Yet what chance do they have of paying it back? The Canada Student Loan program charges interest at the prime lending rate plus five per cent. A loan that size adds up to monthly payments of $360 for 15 years.
Of course, if the education that students receive is worth what they paid, perhaps they can make good on their debts. Yet is it?
The staggering default rates at private vocational schools would certainly suggest otherwise. But even at public colleges, there is room for serious doubt.
Tuition rates at Canadian universities have grown at double the cost of living for at least 30 years. In just the past decade, fees for a four-year arts or science degree in B.C. have more than doubled, from $8,800 to $20,000.
Add in room and board, books and other charges, and an undergraduate degree costs about $60,000. Professional colleges like law and medicine charge $90,000 or more.
It's possible these increases have been used to improve the quality of instruction. Yet there's limited evidence for that. Between 1987 and 2006, the number of full-time students at Canadian universities grew 57 per cent while the number of full-time professors grew only 20 per cent.
That's why so many courses nowadays are taught by graduate students or teaching assistants, rather than faculty. It's why class sizes have ballooned and multiple-choice exams have replaced written essays. Students are paying more but getting less.
Universities are able to charge the limit because they know kids can borrow the money -- not necessarily that they can repay it. The huge run-up in tuition rates has been matched, step for step, by burgeoning student debt.
The situation resembles what happened with mortgages in the U.S. There, for a while, house prices soared because buyers got easy credit.
The bubble eventually burst when mortgage holders could no longer afford the huge monthly payments. The housing market collapsed, taking with it a large chunk of the banking sector.
The only reason Canada's student loan program hasn't gone the same route is that the amounts are not as large and the federal government quietly writes off the losses. But the personal damage inflicted is just as severe. Young people begin their lives hopelessly in debt, or worse, effectively bankrupt. And high tuition rates are being propped up by reckless lending policies.
We need a student financial assistance program, recognizing that even with part-time work and family support, post-secondary education is beyond the reach of too many young people.
No one should be denied an education because his or her parents lack money. But student loans in their present form have made education less affordable, not more.
With tuition rates now in the stratosphere, it's time to rethink post-secondary financing. And the place to start is on campus. By one means or another, we need to ensure that students get value for their money.
Source
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