I’ll start off the new year the right way by saying thank you to everyone who is a member of the Financial Aid Podcast family. Thank you for your continued support and interest, for your love of the show and for the desire for more affordable higher education for everyone. I wish you prosperity, good health, and much love in the new year, and please continue to let me and my colleagues here at the Student Loan Network know how we can continue to serve your needs.
All the best,
Chris
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Daily Aid 54: Save money by paying less for the same stuff
Student Financial Aid News
I’m anticipating this being a very slow news week as most places have closed up shop until January. That said, the Student Loan Network is very much open for business, especially if you have questions about the upcoming 2009-2010 FAFSA.
The Recording Industry Association of America is abandoning its practice of suing students and others who download and share music in violation of copyright, The Wall Street Journal reported. The shift could alter a legal dynamic in which colleges have many times felt caught between the music industry and students.
Commentary
Good news for students who have been wrongly accused, and as always, the Student Loan Network always recommends buying your music and video legally, or enjoying legal free music and video from independent artists and even signed artists who want to give some promotional stuff away, like Trent Reznor.
Also from Inside Higher Ed:
Tufts University announced Friday that it lost about $20 million — about 2 percent of its endowment — through investments controlled by Bernard Madoff, who is accused of running a worldwide Ponzi scheme. “It is personally painful for me to communicate this information to you,” wrote Lawrence S. Bacow, president of Tufts, in a message announcing the loss.
Commentary
Expect more news like this in the next few months as more house cleaning and due diligence is performed throughout financial markets. In the short term, this will hinder efforts at college affordability, but will be good for everyone in the long term as more garbage is cleared off the books.
Disclosure: some links above are sponsored links and the Financial Aid Podcast earns a nominal amount of money for them. Thanks for supporting the show.
News You Can Use
Over the weekend in the great snowstorm of 2008, I saw a lot of ice melter for sale at incredible prices. A small 10 pound jar of ice melter at the grocery store was $10. Knowing that most ice melter is simply salt, I went to the hardware store and bought an 80 pound bag of rock salt (intended for use in a water softener) for the same $10.
A dollar per pound is what the average consumer probably paid. I paid roughly thirteen cents per pound, or got eight times the raw materials for the same dollar spent.
Why would you pay 8 times more for the same goods? Convenience, perhaps, or a lack of awareness about other options.
Here’s another example. You can buy a track off of iTunes for 99 cents, which seems like a great deal. However, a secondhand thrift shop in your area may have the entire album for $1 or less. If you’ve got the time, it pays to research options other than the most convenient option, because convenience comes at a price. If your time is more valuable than your money, then by all means pay for convenience, but if your money is more valuable than your time, take a few moments to do some research before you buy even common everyday items. You’d be amazed at additional areas where you can find savings.
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Rice University is expanding its “no loans” policy so that financial aid packages for undergraduates will not contain any student loans for those with family income of up to $80,000 — up from $60,000. In addition, for undergraduates for whom loans are part of the package, the university is reducing its four-year loan cap to $10,000, down from $14,500.
Commentary
It’s great to see universities, even in tough times, still able to make college a little more affordable. Tip of the hat to Rice for stepping up.
A major interest rate changed yesterday. The Federal Funds Rate, set by the Federal Reserve Bank’s Federal Open Market Committee, for the first time ever set a variable rate as their target rate, from 0 - 0.25%. Their aim, in other words, is to get the interbank lending rates close to zero. What does this mean for you? If you have any kind of loan based on the Prime Rate, which has historically been the Federal Funds Rate + 3%, you got an interest rate cut of anywhere between 0.75% and 1.0% yesterday. This means that your mortgage, your credit card, your private student loan, whatever - if it’s indexed to the Prime Rate, you’re getting an interest rate cut.
If you’re a student who has a vintage pre-2006 Stafford loan, and you haven’t already consolidated it, you’re potentially looking at the lowest interest rates in history on federal student loans if they stay like this through the end of May. Federal student loans issued after July 1, 2006, of course, have different rates. If you have any kind of debt which is subject to these abnormally low rates - home equity loans, car loans, etc. - talk to a financial advisor very soon about refinancing into a fixed rate in the near future. Rates are not only at historic lows, but at abnormal, highly unusual lows that are guaranteed not to last.
If you have a fixed rate mortgage, keep a very close eye on mortgage rates; it may well be worth your time and money to refinance if 30 year fixed rate mortgages start to drop precipitously. Check with local banks and credit unions for mortgage options as well - there’s money to be saved if you’re able to refinance at least 1% below your current rate.
The Bill & Melinda Gates Foundation today announced its first round of grants to improve U.S. college enrollment and completion rates, directing $69 million largely to support research and the development of policy recommendations, and building in many cases on work also funded by other foundations, largely to try to ramp up practices and programs that have already been proven effective.
The Gates Foundation publicly rolled out its plans to focus on access and completion, with the stated intent of doubling the number of low-income students who earn a college credential, in November, following months of rumor and speculation.
In framing the grant awards in a news release, the foundation stipulated a “commitment to using data to shape its investments by building on the most promising programs and policies already under way, catalyzing innovation in areas where there has been limited success, and, over the longer term, bringing the most promising practices to scale.”
Commentary
Bill Gates is right on target with his funding, making the objective for his grants not necessarily college access, but college completion. There are a LOT of kids who get in but never get out, and if they’ve taken on student loans and other debts while in school without earning the accompanying credential, they’re just getting into financial trouble.
Significant numbers of for-profit colleges say their students have had trouble paying for college because they lack sufficient financial support, and 70 percent of the institutions say they have seen increases in students registering for classes but not showing up, according a survey released Monday by the Career College Association. More than half of institutions responding to the survey say they are providing their own loans to students to try to close the gap between their federal aid and the students’ cost of attendance.
“The nation’s student-loan companies remain deeply worried about their financial health,” The Chronicle of Higher Education reports. “They may now be worrying just as much, however, about the willingness of colleges to recognize their own financial peril. A series of student-loan providers, gathered here last week for an annual conference sponsored by the Consumer Bankers Association, recited their now-familiar tales of economic and political woe. Some described their worries as being compounded, however, by growing doubts about whether colleges understood the urgent need to make fundamental fixes.”
Commentary
Colleges and universities absolutely need to recognize that in this particular economic situation, nothing is off the table. There is every possibility that the downturn will markedly improve in 2009; there is every possibility that the downturn will get sharply worse. Those colleges that can cut expenses fastest and reduce tuition the most will be the ones who get the students. Those who are unwilling or unable to make deep cuts as the rest of the economy is doing may not make it.
Believe me, I wholeheartedly sympathize with any employee who wants to see a return to good economic times. We all do. However, the uncomfortable reality is that times are quite the opposite now and higher education is not immune to this economy. In the end, if tuition is higher than what customers can pay, customers will not pay. No amount of institutional appeal or marketing can put more money in customers’ pockets to pay for college.
Scholarship Update
The Gordon A. Rich Memorial Foundation is now accepting applications for grants for the 2009-2010 academic year. The need-based scholarship supports the higher education goals of five students each year who are awarded $12,500/year for four years. In light of the magnitude of lost jobs in the financial services industry, the Foundation has recently expanded its criteria to encompass students whose parents either work, or have worked, in the financial services industry.
Scholars must demonstrate high academic achievement, integrity of character, potential leadership and financial need. The students’ parents or guardians must work or have worked in the financial services industry. Application Deadline is Saturday, February 28, 2009.
I’m 28 and am trying to go back to college to finish my bachelor’s degree. I’m in the process of applying to universities in the northern Va/DC area, and I’m wondering if I can apply for scholarships and financial aid prior to actually being accepted somewhere. For instance, I see the Student Loan Network’s $10K scholarship asks for school information. I would love to do as much as I can now and work on these things concurrently if possible.
I’m trying to do what I can to line everything up, but being completely independent, it would be incredibly beneficial to know how much money I can rely on/expect before I start school. Perhaps even a show or segment on returning students would be useful for others.
Also, from your recent interviews with the folks from CSU, I remember something being said about not having to list parental information on the FAFSA but that it still may be useful. Is it still beneficial to list my parents’ tax/income information even though I am definitely an independent?
Thank you very much for any help you can give.
You can, but many scholarships do require proof of enrollment so that they’re not just handing cash to someone. What I’d suggest is doing lots of groundwork in advance - identifying scholarships you’ll be eligible for, and then after acceptance, launching a huge batch of scholarship applications. Remember that you can always withdraw if the finances don’t work out.
Regarding the FAFSA and independent student status, having your parents financial information will only hurt you if you’re an independent.
Best of luck to you as you return to college!
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Daily Aid 47: Financial aid crunch, photo scholarship, DIY Holiday Cards
Student Financial Aid News
Last night’s Sunday Night Financial Aid went very well. Lots of great questions from the audience, lots of great feedback. As soon as I can, I’ll convert the video and have it posted. My thanks to everyone who participated - we’ll definitely do it again!
There’s been a LOT of stories like this one from the LA Times about students and families having to rethink how to pay for college. Absolutely, many will have to consider what the value of an education is, and whether the price tag of the more expensive schools justifies the investment.
A big piece of the financial aid puzzle is making sure you apply for as much aid as you’re eligible for, and in the right order. The short version?
6. Keep hunting for scholarships! Every dollar you find in scholarships is a dollar you can either pay back for what you’ve borrowed or can be applied to tuition.
In times of economic instability, enrollments at community colleges typically balloon. Those left without jobs, however, often cannot afford to further their education even at relatively low-cost institutions. Now, amid rising unemployment nationwide, some community colleges are waiving tuition for their local jobless.
Northampton Community College in Bethlehem, Pa., announced Monday that, as of next semester, it would begin waiving tuition for those recently laid off because of local business or industrial plant closings. These individuals will be able to take a maximum of 12 tuition-free credits or the financial equivalent in non-credit courses.
Commentary
I applaud NCC for helping out in its local area. They’re putting the community in community college.
Scholarship Update
A photography scholarship today. youngARTS is NFAA’s core program. It provides recognition and awards to young artists across the country. We are the only organization that encourages and recognizes artistic excellence in nine art forms: dance, cinematic arts, jazz, music, photography, theater, visual arts, voice, and writing. Each year, approximately 6,000-8,000 students register for the youngARTS program and approximately 10 percent receive cash awards. youngARTS Winners share over $500,000 in cash awards. $10,000 Gold Awards $5,000 Silver Awards $3,000 Level I $1,500 Level II $1,000 Level III $250 Honorable Mention Awards* $100 Merit Awards* Hundreds of youngARTS participants share over $500,000 in cash awards. youngARTS Finalists share a total benefit package valued at $1 million including an all-expense-paid trip to Miami, Florida, in January for youngARTS Week and individual cash awards ranging from $250 to $10,000. Our panelists select up to 150 students each year as youngARTS Finalists and bring them to Miami for youngARTS Week for master classes, showcase performances, exhibitions, enrichment programs, and final adjudications.
Here’s an idea for those still sending paper holiday cards. I was at the store yesterday and was shocked at the price of even generic, bland greeting cards. Why would you pay $4.99 for five holiday cards when you can take photos and have them printed? There are places online - tons - where prints are 8 cents per print for 4×6 prints. I don’t mean the gimmicky holiday cards, just straight photo prints that you can write on the back of.
If you take the photos yourself, you’re making a custom gift with personal involvement AND saving a ton of money over regular holiday cards. Use free photo editing software like Photoshop Express (understanding that there are intellectual property issues with it, like giving up some rights, but for holiday cards, who cares?) and make some cheap yet thoughtful holiday greetings.
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Florida’s state universities, squeezed early by the slumping economy’s effect on tax revenues, instituted a three-year cap on freshman enrollment last year. The mammoth California State University system — with 450,000 students — has announced plans to reduce its head count by up to 10,000 students for the next school year. Absent a boost in state funding, the smaller, more-selective University of California system has warned of a similar reduction. Enrollment limits are also under consideration in Tennessee and Washington.
“As public colleges grapple with reductions in state funding, the prospect of reduced access to higher education is looking more likely,” The Wall Street Journal reports. “[T]he pressures are threatening to restrict access to higher education at a time when the economic crisis is driving more Americans to seek new degrees or additional training, a common reaction in a downturn. College enrollment typically increases during a recession, but some observers wonder whether a continuing slump will actually keep enrollment numbers down next fall.”
Commentary
This will be an interesting challenge - will the largest incoming class in history face fewer seats than ever? If so, combined with already slated tuition increases will make competition and therefore pricing for college higher than ever. This is yet another wrinkle in the coming financial aid crisis, and an unwelcome one.
The rising cost of college — even before the recession — threatens to put higher education out of reach for most Americans, according to the annual report from the National Center for Public Policy and Higher Education.
Over all, the report found, published college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent. Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families.
“If we go on this way for another 25 years, we won’t have an affordable system of higher education,” said Patrick M. Callan, president of the center, a nonpartisan organization that promotes access to higher education.
Commentary
We don’t have an affordable system of higher education now, compared to other first world countries. A look across the ocean at Europe shows that while some nations are moving towards a for-profit model, many nations still subsidize the higher education of their citizens, understanding full well that a dollar (or euro or krona) invested today in a citizen is likely to yield many more in both GDP and tax revenue down the road.
Scholarship Update
MPI Scholarship Program. College Education Funding is money designated for college work towards undergraduate or graduate degrees and requires acceptance in a program of study. The application deadline for the next major funding for the academic year is March 31, 2009. However, additional money could be available in the fund, so applications are accepted throughout the year. Application for these scholarships must be made a minimum of three (3) months early so as to meet your needed deadline. For example: If you are attending a winter semester, you must submit your application three (3) months minimum before you need to know if you received an award. Please see the following for specific qualifications for our current Category I scholarship fund.
A bit of a rant as I hear more questions from families about 529 savings plans and other investment vehicles for putting money aside.
Investing is not saving. Investing is a form of gambling.
Saving is setting money aside with a goal - preservation of capital. Whatever you put into savings, you expect there to be that much when you go to find it later. Put $20 under a mattress, and when you come back, there should still be $20 there. Put $20 into a savings account (disclosure: paid link) and there should always be $20 available to you.
We’ve gotten confused. We’ve confused saving and investing, believing that saving should provide yield or pay interest. While savings accounts have paid interest in the past (and still do today), typically the interest paid doesn’t even keep up with inflation, so we’ve looked for more and more ways to improve the interest we’re paid on our savings.
Here’s where we get into trouble. There are investment vehicles masquerading as savings vehicles, and they’re not. A 401K is not a savings account. A 529 college investment plan is not a savings account. Why? The definition I use for an investment vs. savings is that in an investment, there is a non-trivial chance of you losing the principal. That is, put $100 into an investment and when you come back, you may have $96 or $125 or $0.
Saving: a very small chance of losing your principal, or original money.
Investing: a greater chance of losing your principal.
What a lot of families are realizing today, with the market and economy the way they are, is that 529 college plans and 401k retirement plans are very much investments, and they’re losing value rapidly.
If you’re in this situation, what should you be doing? Three things. First, talk to your financial planner about reallocating your investments or cashing them out if you need the money soon, within a year or two. If you don’t have a financial planner, get one. Many community banks and credit unions have one on staff that’s free or has a nominal fee for customers.
Second, looking towards the future, be very careful about what you do with your money. Saving money is important, absolutely. Consider how you want to save it, and whether preservation of capital is more important than growth of an investment. Know the difference between saving and gambling so that you can make smart financial decisions no matter where you are in life.
Third, start saving. Even if it’s just a dollar a week, start putting money aside as you can. The more you save, the more room you have in tough times. Just as the current recession can’t last forever, neither can the best of times. Save in tough times as you can, and save aggressively during good times.
Full disclosure: I am not a certified financial planner, CPA, or hold any form of certification or qualification for financial advising. As with all financial advice you find on the Internet, take it with a grain of salt and understand that you are solely responsible for the choices you make.
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One of the quieter discussion topics at the recent MASFAA conference was on the topic of preparedness for college. It was pointed out by many that if you’re academically unprepared for college, you’re better off doing some preparatory work in a community college or other transitional program rather than pay full tuition and expenses for an extra year of catching up to other peers. If you’re not sure you’re ready for college, take an online course or even a free course in iTunesU to judge for yourself. If you feel lost after even just a couple of sessions, it may be an indicator that you need to do some transition work - and you won’t have to pay full price.
From NASFAA:
“The national and regional recession is putting many college students in a stagnant position: They may not be able to afford college because their family households are losing income, but then they may struggle to find jobs once they do graduate,” The Citizen-Times reports. “According to Marjorie Ellis, director of career planning at Appalachian State University, the job market is down, and it’s showing on campus. The Career Development Center has had a couple of companies cancel interviews citing the current state of the economy and the effect it is having on their business.”
I am an US citizen but I would like to go to grad school abroad, can I still qualify for financial aid?
It depends on the graduate school. A select few schools are Title IV certified, which means they’re recognized by the US government and US financial aid can be applied there. Some other foreign schools also have tuition agreements with US universities, where you pay your bills at a US school but attend overseas. Check with the school you’re thinking about attending for more information.
What paper work is required to show to prove that I am supporting myself?
Typically, for a professional judgement override, a financial aid administrator will ask to see rent, utilities bills, and other forms of identification which establish you living on your own at a separate place from your parents.
I am a 22 year old student. I have been living on my own for 3 years and yes I have had the FAFSA problem. I say if I am old enough to gamble money in Vegas, I should be old enough to be considered an Independent person. Who made this law? Why 24? My parents don’t pay anything for me nor do they have the money to pay for school. I tried the override thing but schools are tougher than ever and I didn’t get any help. I have a friend who had parents pass away and I am helping her. She lives with me and I am supporting more than 50%. Will this be considered in my FAFSA? Have any advice?
The law was made by Congress in the Higher Education Act and regulatory interpretation set up by the US Department of Education. If your financial aid advisor was unable to help, you may want to approach your school’s director of financial aid with the appropriate documentation and make your case there. Be prepared with tons of paperwork!
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Everyoneistalkingabouthowthey’llsavemoney, about how they’ve committed to putting money aside. Except for a few folks doing the soda can recycling thing, no one is talking about how to bring more money in the door. Saving is easier when you have more money to work with - which seems like a blatantly obvious, trite thing to say, except that it’s not on anyone’s radar.
Don’t get me wrong. I encourage frugality. I encourage cutting back on discretionary expenses. However, at some point, you can’t cut any more. You can’t staunch expenses any further without a serious, really unpleasant reduction in your quality of life - which in turn makes you less likely to stick with a savings program.
So let’s talk in this blog post today about how to get more money coming in the door.
Obviously, as many have mentioned, working a job is a way to bring in some income, and the more you work, the more money you bring in. Downside - the more you work, the less time you have for academic study, which is the point of college.
Incremental income can indeed come from recycling, especially if you’re smart about it and gather recycling at the right times & places, like after frat parties when there’s literally cases of empties just sitting on the sidewalk. A guy in my town cruises up and down the streets on garbage day and simply loads boxes of recycling into his station wagon before the town claims them.
The recycling idea is a starter for a much bigger idea, the idea of arbitrage, unequal pricing for equal things. Take a look at the free section of your local Craigslist. How many of those items could you obtain? If you live in a major city, chances are there’s a ton of free stuff that someone is just too lazy to get rid of, so they list it for free, even if it’s still usable or an easy fix if you know the right people.
Then take the free stuff, assuming it’s in good condition, and resell it. List it on Craigslist in the appropriate for sale section at cut-rate prices, or on eBay if it’s sufficiently valuable enough. List it on your campus bulletin boards and other places buyers congregate. Got a TON of stuff? Find a local flea market and rent a table once you’ve gotten a resale business going - the local flea market here charges $60 per week for a large booth, so if you can swing that with previous sale profits, you can gain access to a lot of buyers and foot traffic.
Think that’s fast money? Try services like PhoneRaiser to recycle old phones and stuff.
Not up for the challenge of a physical goods auction house? Look online. See what affiliate programs like Shareasale (disclosure: paid link, hereafter [PL]) you can sign up for, and then see what merchants whose stuff you like you can resell. I’m serious when I say that the Financial Aid Podcast sold over $700 in random stuff like Halloween costumes and personalized checks. For a major corporation, that’s barely a soda budget, but for a college student, that’s rent in some parts of the country - not to mention an easy win for the $500 savings challenge. You can sign up for programs like Shock Coffee [PL], and resell on your personal web site highly caffeinated beverages [PL] as well as many, many other products.
Saving doesn’t just mean reducing what you spend - it also means earning more. Try some of these approaches and see if you can bring some more cash in the door to help you achieve your savings goals.
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The Coming Financial Aid Crisis, Part 2 in a Series
In the first part of this discussion on the coming financial aid crisis, we talked about Pell Grant shortfalls and increased demand due to enrollments. Let’s dig into some heavier economic data to see what may lie ahead.
Here’s a chart of underutilized labor from the Bureau of Labor Statistics. Underutilized labor includes the unemployed, discouraged workers (people who are jobless and have stopped looking/stopped filing for unemployment insurance), and underutilized workers (part time employees who want a full time job but can’t get one).
The reason I use labor underutilization rather than employment is because underutilized labor affects financial aid as well - if you’re working only part time, you have that much less income to work with.
What this shows is a sharp and increasing spike in underutilized labor, to 11.8% of the workforce.
Second item: this story in Yahoo Finance shows that day care centers are reporting record drops in enrollments.
What does that mean? The same economic pressures that are driving parents to find alternatives for day care are going to impact public and private university enrollments, as well as the ability for families to pay for higher education. As the labor markets get tougher for job seekers, the raw numbers of people applying for financial aid will jump, as will transfers from private colleges to public colleges, unless private colleges have the endowment and financial means to step up institutional aid.
Summary: not only will more people be applying for financial aid due to demographics, more people will be applying for more financial aid due to the economy.
Given this picture, what should you be doing right now to prepare?
Financial Aid Paperwork
First, be aware that there’s an entirely new section of the FAFSA, including questions about displaced workers, for 2009. The definition of displaced worker encompasses anyone who’s been laid off or let go, unless the termination was for cause or you just up and quit your job. When you go to file your FAFSA for 2009, it’ll be super important to make use of that section if your family has run into hard times.
For the immediate moment, if the wage earner(s) in your family have lost their job(s), you should talk to your financial aid officer right away. One of the things a financial aid officer can do is help adjust your financial aid package to account for significant financial changes at home; in this case, you’d be asking about a professional judgement override on future earnings, which could change how much you pay at least for the spring semester. You’ll need to provide a copy of the termination notice that your family’s wage earner(s) received as documentation of the financial status change.
Given the latest data on unemployment and the credit markets, it seems unlikely that private student loans will improve their availability before next summer at the earliest. If you need to pay for college above and beyond what you can get in scholarships, grants, and Stafford loans, your best bet is going to be the Parent PLUS loan for the time being.
General Education Finance
Be open to the possibility of changing schools and attending a less expensive institution. Be aware of the possibility that you may have to take some time off if necessary. As much as you can, find ways to reduce the cost of college through things like taking credits at community colleges, online degree programs, and testing for college credits using CLEP exams.
If you’re not aggressively pursuing every scholarship you’re eligible for, you need to get on the wagon as soon as possible. Grab a copy of our free scholarship search eBook and get moving. Once the huge wave of students with increased need comes into the market in early 2009, competition for scholarships will increase drastically. Get in the game now, get all of your groundwork done, and be ahead of the curve. Make sure you’re enrolled in our free scholarships program, Scholarship Points.
General Personal Finance
Despite urging from retailers, spending less, rather than more, is and should be your primary concern right now, whether or not your job is in danger, whether or not your family’s financial health is good. Frugality in uncertain times is one of the best defenses you can use to protect yourself. Cut out everything that can be cut, discretionary spending like dining out, coffee from coffee shops, etc. If you’re thinking about allocating dollars for the holiday season, go light on spending and heavy on face time with family.
Save money. Save, save, save. If you aren’t saving, start. Start an FDIC insured savings account like this one at ING Direct. We’re in a period of deflation, when the amount of money in circulation actually decreases, which means that the dollar you save today may be worth more tomorrow.
Hope Is Not Enough, But It’s a Start
Overall, I’m still optimistic about the longer term prospects of anyone in or entering college. A college education, for those who want it, is still a strong investment in yourself. That said, it’s not enough to hope that the economy will turn itself around or that things will get better all by themselves. Yes, absolutely, time will help fix a great many of the problems that the economy faces, but simply waiting for things to get better is a poor strategy. The uncomfortable reality is that things are going to get worse before they get better.
With everything else going on in the economy, there are no bailouts for college students. The most important person you need to talk to about your ability to pay for college is… you. Take up the scholarship hunting mantle and go find financing for your education. Work hard, innovate, find different ways to raise money that others aren’t doing. Look around for opportunities to bring in scarce dollars through things like affiliate programs and other online ventures.
I believe in your ability to beat the bad economy. You wouldn’t be reading this blog or listening to the Financial Aid Podcast if you weren’t motivated, energized, and determined to make college affordable for yourself. While the rest of the world sits around and blindly hopes for someone to come save them, I know you’ll be doing your damnedest to do whatever it takes to pay for college because you know you’re worth it.
I’ll leave you with this final request - tell me more ways that the Financial Aid Podcast can help you. What resources are you missing (besides money)? What things don’t you know about that you need to know about to make your education financing search better? How can I help you more?
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In addition to replicating the loan purchase and pool investment programs it put in place for 2008-9, which would cover loans made through September 30, 2010, the department plans to allow for the creation of “conduits” (likely to be banks or big student loan providers like Sallie Mae) that are designed to be a middleman between groups of lenders and outside investors. Under these arrangements, the conduits would (using funds from private sources, not federal money) purchase student loans that were fully disbursed between October 2003 and July 2009 (only non-consolidated loans would qualify), and the entities would then issue “asset-backed commercial paper” (a form of short-term investment vehicle) to private investors.
The Administration intends to provide liquidity support to one or more conforming Asset-Backed Commercial Paper (ABCP) conduits. These conduits will purchase FFELP loans, providing longer-term stability to the guaranteed student loan marketplace. The Department intends to make all fully disbursed, non-consolidation FFELP loans awarded between October 1, 2003 and July 1, 2009 eligible for this program. An eligible lender trustee creates a pool called a conduit, to which other lenders transfer ownership of their student loans. This conduit issues commercial paper to sell, backed by the loans in the pool (Asset-Backed Commercial Paper). After private investors purchase the commercial paper (CP), student lenders would be paid out of the amounts received from these investors. The Department of Education will provide liquidity to the facility by entering into forward purchase commitments with these eligible lender trustees, whereby the Department promises to purchase, at a date in the future, eligible student loans at a prearranged price if the commercial paper that has been issued by the conduit cannot be re-issued or “rolled” at maturity and the conduit does not have sufficient cash to repay commercial paper investors.
Commentary
Talk about a poorly written press release. Here’s the summary in terms that normal people can understand:
The Department of Education will buy up loans that student loan companies can’t sell on the market.
What does this mean for you? Almost nothing from a loan servicing perspective. If you take out federal student loans from any lender, your paperwork will not change - who you pay your bills to will not change (unless you consolidate your student loans). This is a user-friendly regulatory change.
What it does mean in the bigger picture is that student loan companies will have access to more capital - cash - to make loans with, because the federal student loans themselves can be sold back to the Department of Education. This in turn means that federal student loans such as the Stafford loan and PLUS loan will remain widely available - you as a student should have absolutely no trouble securing federal student loans at all for the coming year.
WHAT ARE THE OBJECTIVES?
+ To promote the beauty and versatility of wool
fabrics and yarns
+ To encourage personal creativity in sewing,
knitting, crocheting, spinning and weaving
wool fabrics and yarns
+ To recognize creative skills
+ To develop life skills, including:
–being responsible for one’s self
–being a good sport
–accepting judges’ decisions
–learning about and appreciating diversity
WHO CAN ENTER?
+ Pre-teens, age 12and under
+ Juniors, ages 13-16
+ Seniors, ages 17-24
+ Adults, age 25and older
(Ages as of December 31, 2008)
+ Made for Others (any age)
I just wanted to thank Christoper Penn for doing an outstanding job with his podcasts. I have been a avid ITunes listener of your broadcasts for the past several months. With twin daughters going to college next year, I need all the support I can get to provide them a quality and affordable education. Your detailed discussions and tips have been invaluable. Keep up the good work. I plan on making these podcasts available to my daughters guidance office so that others may share in the benefits of your site and podcast. Thanks again! As an aside, can you provide (I know they are your competition) some other podcast sites which you feel might also benefit TO-BE college students and their parents. I listen to a few other such as Countdown to College Radio and Applywise. Both also provide great tips; although yours has been the best so far!
Don, thank you so much for your kind words and also for sharing the Financial Aid Podcast with others! In terms of to-be college student podcasts, we actually have an eBook still in development (but almost done!) called Better Test Scores Through New Media. It contains all kind of educational resources for feeding your head, and is a great choice for college-bound kids. That should be finalized late this month or early next month.
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