FAP881: Credit crisis, Sallie Mae, FAFSA updates
FAP881: Credit crisis, Sallie Mae, FAFSA updates
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Weekly Financial Aid News Roundup
From the Chronicle:
Moody’s Investors Service has placed two colleges that invested in Commonfund’s short-term fund on a watch list for credit-rating downgrades and has issued a negative ratings outlook for a third. The colleges — Franklin Pierce University, Simmons College, and Suffolk University — are among 1,000 institutions that had their short-term accounts frozen by Wachovia Bank, the account manager, in late September. As of October 21, such colleges were able to get access to 48 percent of their original balances.
Moody’s, which is analyzing the effect of the freeze on colleges’ ability to operate and make debt payments, stressed in a report issued today that the ratings revisions were not based solely on the colleges’ exposure to Commonfund. Other factors taken into account were an inability or unwillingness to secure capital elsewhere, a history of weak operating performance, and high levels of variable-rate debt.
Commentary
Unsurprising. Colleges, like individuals, need to readjust to the mindset that cash is king in the current economy, and that any kind of investment that ties up your money is going to hurt.
Cash is king for you, too. If you have money in the markets (529 plan, 401K, etc.) that you will need in the next year or two, consult your financial advisor about getting it out of the market or moving it to something that carries insurance of some kind.
From the Chronicle:
A former Sallie Mae employee, in a False Claims Act lawsuit against the loan company that was recently unsealed in federal court in Indiana, alleges that Sallie Mae had been using the practice of granting forbearances to systematically balloon student-loan debts. In the system of government-guaranteed student loans, the tactic was part of a strategy to grow student debts as large as possible, increasing Sallie Mae’s profits, before taxpayers and debtors were stuck with the final bill, said the former Sallie Mae employee, Michael Zahara.
Commentary
I applaud Michael Zahara’s bravery for coming forward and bringing to light this tactic. This practice may be illegal and is also just reprehensible. Just to be clear, the Student Loan Network does not and has never engaged in any kind of practice like this.
If you’ve been a victim of this kind of practice, you’ll want to consult a lawyer. Any debt that you’ve incurred that is the result of fraudulent or illegal practices is invalid and a court can order the debt dismissed, so if you’ve been a victim of this, call a lawyer to see if the practice is illegal. Depending on how strong your case is, they’ll probably do it on a percentage basis of money won in a lawsuit, rather than have you pay legal fees out of pocket.
In other news, check out our FAFSA update news.
Scholarship Updates
We had the Micron scholarship earlier in the week.
In just 7 days, we give away $10,000. Are you registered?
Eye on the Economy
The credit crisis hits home for colleges.
Free Stuff Friday
Bacardi’s hooking you up with Halloween music.
Taco Bell is giving away a free taco for every base stolen during the World Series.
Bargainist has TONS of coupons you can print out.
Gmail for Mobile hits 2.0 with offline access for any J2ME phone. Sorry iPhone users.
Gmail regular gets templates for fast replies to common questions.
We’re just 10 days away from the general election.
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