FAP658: Interest rate cuts, temporary loans, single lenders, Matthew Ebel

Student Financial Aid News
+ Federal reserve cuts funds rate by 0.25% to 4.25%
+ Prime rate change to 7.25%
+ Upside: interest rates based on prime decrease
+ Downside: it seems the Federal Reserve is trying to stave off economic damage from the housing bubble by making lending easier, thus creating another bubble
+ Kind of like an alcoholic trying to stave off the effects of going sober by drinking heavily
+ From the Chronicle: The U.S. Education Department has sent a second round of letters to colleges that have a high proportion of students borrowing from a single lender, as part of its investigation into possible illegal inducements.
+ The letters, dated October 24, were sent to 55 colleges, from among a group of 921 that initially received inquiries in June, said Sara Martinez Tucker, the under secretary of education. Similar letters were also sent to 23 lenders, Ms. Tucker said.
+ “We’re not accusing them of anything illegal at this point in time,” Ms. Tucker told reporters in a telephone news conference on Wednesday, “but we want to be sure, based on what we’ve learned.”
+ The letters in the first batch, sent on June 29, were based on the suspicion that a college’s having a large volume of student-loan business with a single lender could be a sign of violations, such as having financial-aid Web sites that automatically direct students to a particular lender, department officials said.
+ Such situations are among the problematic practices the department has seen at colleges that give their students a list of “preferred” lenders, Jeff Baker, a policy liaison in the Education Department’s Office of Federal Student Aid, said at a meeting of financial-aid administrators after the first round of letters.
+ The department plans to issue new regulations today to govern relations between colleges and lenders, including a requirement that any college providing its students with a list of preferred lenders include at least three choices, the education secretary, Margaret Spellings, during Wednesday’s telephone news conference.
+ If you’re a financial aid professional and would like to make the Student Loan Network your #3 choice, please let us know! (yes, I know, aim higher, etc. but honestly, #3 at a major school is plenty good to start)

Scholarship Update
+ The Hispanic Engineer National Achievement Awards Corporation (HENAAC) Scholars Program addresses the immense need that the United States has to produce more domestic engineers and scientists. The goal of the program is to ensure college retention with a 3.0 grade point average or higher; to guarantee college graduation with an undergraduate technical degree in four-five years; and, to contribute to Hispanic communities by producing role models for future generations and securing the country’s place as the finest technological leader in the world.
+ Deadline April 30
+ Awards up to $5,000
+ Details at our free college scholarship search service

Mail Bag
+ Nick writes in: So, here’s the deal…I start classes in January, and I was approved for a federal loan with my school for $3500, which will only pay for classes, so they gave me an ‘additional unsubsidized stafford loan‘ of $4000 for supplies which I won’t see until about 1-2 months after I start taking classes… so that means I have to somehow either pay for supplies myself (impossible), or try and get a private loan of some kind.
+ I only need $2500 for supplies, which will be payed back after I get my additional loan amount of $4000 in February or March, so I don’t need a long term loan to pay for supplies. The problem is that I don’t have a job right now and I cannot get a co-signer. My parents offered to co-sign for loans, but got denied for the last 3 loan applications, and they are the only co-signers that I would have. Since they don’t have the credit, and I don’t have any credit myself, getting a private loan has been impossible to do.
+ Is there any way at all to get a [temporary] loan of $2500, which I can and will pay back 1-2 months later. I have no credit right now and cannot get a co-signer. Am I totally screwed?
+ Private student loans do require cosigners if your credit isn’t good.
+ Options might be seeing if the school has any kind of payment plan
+ Also consider peer lending services like Prosper.com or Lending Club
+ Be aware you’ll pay interest rates equivalent to most credit cards, probably above 12%
+ Ricky Mondello asks whether test scores should be posted on blogs
+ Depends on whether they’re good or not
+ Definitely include them in your social media college application
+ What, you don’t have a social media college application? Fine, we’ll create one in an upcoming show.

Podsafe Music
+ Matthew Ebel, Goodbye Planet Earth
+ Buy Goodbye Planet Earth today!

Reminders
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+ Financial Aid Podcast Show Notes at FinancialAidPodcast.com.
+ Discuss this episode at the Financial Aid Forum!
+ Private student loans available at any time - visit AlternativeStudentLoan.com
+ Stafford federal student loans at StaffordLoan.com
+ Student loan consolidation at StudentLoanConsolidator.com
+ FAFSA form tutorials and free help at FAFSAonline.com
+ The Financial Aid Podcast is a publication of the Student Loan Network.

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