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Entries in Student Loans (4)

Thursday
Jun072012

Small Signs of Progress Show in Student Loan Impasse

Alex Wong/Getty Images(WASHINGTON) -- Is progress being made in the student loan impasse? Perhaps a little.
 
Late Thursday Senate Majority Leader Harry Reid, D-Nev., counter-offered two proposals of his own to pay for the one-year extension of student loans rates to prevent them from doubling on July 1.
 
And in a sign of tiny steps of progress, the letter was initially well-received by Republican leadership.

Reid proposes a combination of two ideas to pay for the extension, changing and allowing more flexibility to employers pension insurance premiums, which would garner about $9.5 billion, and changing contributions to Pension Benefit Guarantee Corporation premiums, which would raise about $8 billion.
 
“The combination of these two proposals will provide sufficient resources to fund both a one-year extension of the current student loan interest rate and reauthorization of the nation’s surface transportation programs,” Reid writes in a letter sent to House Republican leaders Thursday. “My preference would be to use the funds raised by these two proposals to pay for both measures, and pass them immediately -- since, as you know, both are critical to the economic security of middle class families, and both must be addressed before the end of June.”
 
Republican aides say they are still waiting for a response from the White House on their own proposals, sent last week, but received Reid’s proposals Thursday positively, indicating that they believe they “may be making progress.”
 
“We are encouraged to see the majority leader drop his insistence on taxing job creators,” Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, said Thursday. “We will review these new proposals and hope that they will finally review the bipartisan proposals we sent a week ago. But bottom line, now that Democrats are willing to take this issue seriously, and not just use students as props, we may be making progress.”
 
Both Republicans and Democrats believe the subsidized Stafford loan rates should not be doubled this July from the current 3.4 percent to 6.8 percent and agree the current rates should be extended for at least another year. But both sides thus far have not agreed on how to pay for the $6 billion bill.

Copyright 2012 ABC News Radio

Thursday
Nov032011

For-Profit Colleges Target Military Personnel, Market High-Interest Private Loans

Mark Wilson/Getty Images(WASHINGTON) -- America’s students are in debt, $1 trillion in debt in fact. But while most college graduates struggle to repay loans with less than 10 percent interest, some military personnel are drowning under significantly more expensive loans.

Holly Petraeus, CIA Director David Petraeus’s wife and an advocate for military families, told a Senate panel Thursday that for-profit colleges are actively targeting military personnel and their families, marketing private loans with inflated interest rates.

“There are some real concerns, there is real aggressive marketing right now to the military and not just to military members, but to their spouses and to their children as well,” Petraeus said.

To pay for the pricey private schools, these colleges often market “expensive private student loans” to service members, said Petraeus, who as the assistant director of the Office of Service-Member Affairs at the newly-formed Consumer Financial Protection Bureau is working to protect military families from such predatory loans.

Petraeus said she spoke with an Army wife at Ft. Campbell in Kentucky who had enrolled in an online course through a college she thought was officially associated with the military. She said representatives from the school, which actually had no military affiliation, called her a dozen times per day until she agreed to register.

But help was nowhere to be found once the school received her tuition payment. The woman ended up failing her course because she had trouble logging on, Petraeus said.

While meeting with service members around the country, Petraeus said she also heard horror stories of loan companies charging crippling interest rates. One internet lender, she said, tells service members who visit their site: “We  believe that your membership in the armed forces entitles you to special treatment. We speak your language!”  That language includes a steep interest rate on their loans that far out-paces rates on government-offered loans. And when military personel fall behind in their payments, harassing debt collectors take over.

“They may call a service member’s home and unit 20 or 30 times a day, threaten them with the uniform code of military justice, and tell them they’ll get them busted in rank or have their security clearance revoked if they don’t pay up,” Petraeus said. “We’ve even heard of a debt collector harassing a surviving spouse of a service member killed in action, insisting that she had to use the money from his death gratuity to pay off a debt immediately.”

College costs aside, many military members are in debt before they even enlist. Petraeus said that on a recent trip to Texas, “We were told that the average Air Force recruit arrives at Lackland Air Force Base for basic training over $10,000 in debt.”

“A continuing issue for the military is the general issue of indebtedness,” Petraeus said. "Unfortunately there are still too many young troops learning about wise spending through hard experience and years of paying off expensive debt.”

Copyright 2011 ABC News Radio

Tuesday
Jun072011

Senate Dems Say Regulations on For-Profit Colleges Don't Go Far Enough

Jupiterimages/Thinkstock(WASHINGTON) -- In a hearing on Tuesday, Senate Democrats criticized new proposed regulations on for-profit colleges for not going far enough to protect college students from taking on crippling debt.

“The answer is that for-profit colleges have distinguished themselves by asking a higher percentage of their students to borrow, more than any other sector of higher education,” Sen. Tom Harkin, chairman of the Senate Committee on Health, Education, Labor and Pensions, said.  “The difference between the subprime and the mortgage interest and this is if you got a bad house, you got a bad deal, you could walk away from it.  You can't walk away from these loans.”

At the age of 27, Eric Schmitt, a father of two from Hampton, Iowa, enrolled in Kaplan University, a for-profit college owned by the Washington Post Co., and drew thousands of dollars in loans to obtain an associate’s and bachelor’s degree.  Kaplan University told Schmitt he would be able to find a job paying $30,000 upon completion of his degree, but Schmitt never found work in his chosen field as a paralegal.

Since his graduation, Schmitt has only found temporary work, such as a janitor job which pays $10.50 an hour.  He now owes $45,000 from his education at Kaplan University.

“I feel that returning to school to get my degree has put me further away from my goals than before I started my education,” Schmitt said.  “The lifetime promise of a college degree has become a lifetime burden that I only can hope I bear alone.  The debt and the magnitude of my mistake is with me like a constant weight.  I have lied awake at night dreading what I might to do to save my family from this burden.”

Martha Kanter, undersecretary of the Department of Education, defended the proposed regulations, saying it protects students by establishing criteria for for-profit colleges to meet in order to receive federal aid. These conditions include ensuring loan payments do not exceed 12 percent of a former student’s earnings, and 35 percent of their former students are repaying their loans.

For-profit schools account for 10 percent of all higher-education students but account for 47 percent of loan defaults.  Compared to community colleges and four-year private and public institutions, a much higher proportion of students at for-profit colleges borrow money to pay for their tuition.  Ninety-six percent of students at for-profit colleges obtain loans to pay for their education compared to 13 percent at community colleges, 48 percent at four-year public and 57 percent at four year-private institutions.

No Republican senator attended the hearing, and there was not a representative for the for-profit schools on the panel, a problem lamented by Sen. Al Franken.

Copyright 2011 ABC News Radio

Tuesday
Jan182011

Ohio Supreme Court Denies Law License for Grad with Student Debt

Photo Courtesy - Getty Images(COLUMBUS, Ohio) -- While many law school graduates are all too aware of their accumulating pile of debt, few may realize it can prevent them from practicing law and kill any hopes of paying down their loans.

Just ask recent law grad Hassan Jonathan Griffin. The highest court in Ohio denied his bar application because he didn't have a plan to pay back $170,000 in school debt.

The Ohio Supreme Court on Jan. 11 said Griffin lacked a "feasible plan to satisfy his financial obligations." Griffin's debts include $150,000 from law school, $20,000 from his undergraduate studies and $16,500 in credit card debt.

The state's Supreme Court, which regulates admission to the practice of law in Ohio, requires that an applicant be at least 21 years old, have a bachelor's degree and law degree, and pass the Ohio bar examination.

But the state's rules specify that prior to taking the bar exam, applicants must demonstrate they possess "the requisite character, fitness, and moral qualifications for admission to the practice of law."

Griffin, 40, applied in November 2009 for the February 2010 bar exam, but his mounting financial obligations led to an investigation by the state's Board of Commissioners on Character and Fitness.

According to the board's report, Griffin graduated from Arizona State University in 2004 when he was 34 and worked full-time as a stockbroker for over five years before attending The Ohio State University Mortiz College of Law.

Since completing his first year of law school, Griffin has worked 24 to 32 hours a week at the Franklin County Public Defender's Office. Though he graduated from law school in 2008, he has been unable to obtain a full-time job and still earns $12 per hour at the public defender's office.

The board recommended that the court reject Griffin but permit him to reapply for the Feb. 2011 bar exam. Griffin confirmed he is re-applying for the February exam and his attorney said his financial matters are now in better order.

Griffin and the others are apparently in good company and if high loan debt were to be a major factor for admission to state bars, few would be admitted.

The American Bar Association (ABA) reported that the average amount borrowed for law school was $91,506 for private schools and $59,324 for public schools in 2008. A committee from the ABA wrote in a report that these figures do not include debt from students' undergraduate years and an average law school student will graduate with debt "well in excess of $100,000."

The November 2009 report, "The Value Proposition of Attending Law School," stated that prior to the recession, starting salaries for associates at large firms were around $160,000 a year.

But among law graduates from the class of 2008, only 23 percent of students started with that salary level. About 42 percent of graduates had an annual salary of less than $65,000. And the ABA report said prospects are even bleaker now, with students competing for half as many jobs at top law firms.

"Far too many law students expect that earning a law degree will solve their financial problems for life," the ABA committee wrote. "In reality, however, attending law school can become a financial burden for law students who fail to consider carefully the financial implications of their decision."

Copyright 2011 ABC News Radio







ABC News Radio