Daily Aid 7: The Implications of Merrill and Lehman on College Financial Aid
Daily Aid 7: The Implications of Merrill and Lehman on College Financial Aid
Student Financial Aid News
Over the weekend, Bank of America (ticker: BAC) agreed to acquire investment powerhouse Merrill Lynch (ticker: ML), while Lehman Brothers (ticker: LEH) prepared to file for bankruptcy. This marks yet another huge development in the world of financial services after the failure and government takeover of Fannie Mae and Freddie Mac last weekend.
Analysis
Bank of America may have been coerced into buying Merrill Lynch by the Treasury and the Federal Reserve Bank. Had Lehman declared bankruptcy, Merrill might well have collapsed in the same day, and the market wouldn’t be able to tolerate two major brokerages going bust in the same day.
Commentary
The impact of the past 10 days will last for a very long time. Directly, the bankruptcy of Lehman Brothers will mean the permanent closure of its private student loan arm, Campus Door. The students and families who took out private student loans from Campus Door will be getting notices from whoever buys those assets that their payments are due to someone else now.
Indirectly, the impact will be far, far greater. Over the past year, industry business and financial professionals have been stunned at how long the credit markets have been in trouble, and this week’s announcements are shocking even to veterans. Borrowing for banks and other financial institutions isn’t getting any easier, and market conditions are deteriorating rather than improving.
So what does this mean for you? The problems we all encountered over the past few months with regard to student loan companies not being able to get money to lend are likely to repeat themselves this winter and spring. Capital - cash - simply is being poured into massive debt sinks that banks are developing.
Some suggestions:
1. Be insured. If you have any deposits at banks that are over the FDIC limit, fix that immediately. Get your cash under the insurance limits. If you work at a company, ask your payroll officer or CFO if the company’s payroll is protected. For very large payrolls, some folks have mentioned using CDARS to maintain insurance limits.
2. Consult professional help. If you’re trying to save for college, now is a good time to consult a financial planner. Try not to make too many impulsive moves without consulting a professional, but realize also that a more conservative approach might do you well over the next 2-3 years. Disclosure: I have absolutely no training or expertise in investing. If I was an expert, I’d be rich, and I’m not. Taking advice about your money from a blog post you read is both dangerous and silly.
3. Find scholarships now. No matter what your economic situation, you need to be hunting for scholarships. Period. Grab our free scholarship search eBook, sign up for our $10,000 scholarship drawing, and hit the pavement ASAP. In school? Doesn’t matter. Get moving.
4. Student loan troubles may loom. Anticipate difficulties with obtaining private student loans this winter. Anticipate some more student loan companies going out of business and closing up shop. Don’t wait to take care of stuff like your taxes or the FAFSA.
5. Above all else, be flexible and adaptable to changing situations. If your family has been directly impacted by the financial services breakdown, you may need to lower your costs, including switching to a less costly college. You may even need to take some time off. There’s no shame in that. There’s so much economic chaos right now that your personal situation is more likely a reflection of the broader market and its conditions, and not an indicator of personal failure, and lots of people understand that. Do what you have to do to remain economically as strong as possible, prioritizing costs and needs. The college education isn’t going anywhere.
5 most recent Financial Aid Podcast posts
Did you enjoy this? If so, please consider subscribing for free to get it delivered to you. Subscribing for free means you don’t have to remember to download it every day.
+
+
+
Reminders
+ 
+ Financial Aid Podcast Show Notes at FinancialAidPodcast.com.
+ Free scholarship search secrets eBook at StudentScholarshipSearch.com/ebook
+ Free college scholarships contests!
+ Open an FDIC-insured savings account today!
+ Stafford federal student loans at StaffordLoan.com
+ Parent PLUS loans at ParentPLUSLoan.com
+ Graduate student loans at GradLoans.com
+ Private student loans available at any time - visit AlternativeStudentLoan.com
+ Private 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.
I want to hear from you! Send me your comments, questions, and feedback using this handy contact form!
