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Student Loan Consolidation Program

Posted On: 2005-10-03
Length: 31:52

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Good morning. It is a beautiful, New England morning here in Quincy, Massachusetts, just south of Boston. This is the Financial Aid Podcast. Welcome if you are just joining us; well, just joining me really 'cause there's a lot of listeners, but there's just, there's only one person on the program. That's me. My name is Chris, by the way. I am the pod, the Financial Aid Podcast host, producer and well pretty much everything when it comes to the podcast. Hope you enjoy it. We have a great show for you today. Got a lot of very important news to discuss. Some stuff like federal budget cuts and stuff like that, which you know, doesn't sound like the most exciting thing and when I did the podCast 411 interview, a little ways back, I mentioned the original tag line on the show was, "Less boring than it sounds." And it's true. The topics themselves are not particularly, they don't sound particularly exciting, but they are relevant to you. If you're a student, of if you are a parent who is trying to get a student through school and finding the money to do so. And hopefully, also not, you know, not getting too much into the minutia but rather giving you the resources and links to find out the details on your own if you are so inclined. So, with that, let's get to the news right away.

(break music)

In the news today, us. Well, the Student Loan Network, specifically. Our press release on student loan consolidation came out this morning. We're talking a lot about in this press release, basically changes in, the legislative changes proposed for the Student Loan Consolidation Program as well as all federal financial aid and higher education programs has been delayed in Congress for at least sixty days so that gives people a chance to, you know really go ahead and get their paperwork in order so that you can consolidate your student loans and then, you know, once we figure out what the final form of the Higher Education Act Reauthorization is, we'll know, have a better idea of what changes are coming down the pike. But changes are going to be coming down the pike to the program and almost certainly do to the incredible amount of lobbying by a lot of the really big name lenders, like Sallie Mae and stuff like that. The changes to the program were not necessarily going to be beneficial to students. So, some of the proposed changes include: penalizing graduates with higher interest rates if graduated choose a fixed rate consolidation or a variable rate consolidation. Currently, everyone gets fixed rate federal student loan consolidation, which if you consolidated last year, or even if you consolidate now, it's still a very good deal. Right now if you are in school or you are in your grace period, you're paying 4.7% on your Stafford Loans. So, if you were to consolidate, round up to your next one-eighth of a point and I believe that should be 4.75%. That is far below the, the ten year average Stafford Loan repayment rate of 5.53%, and it's certainly below the 6.8% proposed, in, in the, in one of, I think the House proposal. The Stafford Loan interest rate increases would be from the 5.53% currently to 6.8%. That would be a fixed 6.8% rate. Which, you know, in the 80's, when you know, when mortgages were like 12 and 18%, 6.8% sounded really good. But, when you look back to last year, and Stafford rates were at an all-time low of 2.77%, if you were in your grace period or in school, 6.8% doesn't sound so much like a good deal; sounds like almost three times the cost. So, that's not necessarily beneficial. The proposals, regardless of whether in the House or the Senate, are looking to cut anywhere from five to twelve billion dollars from the higher education funding, to be put towards other priorities. What those priorities are, it's kind of hard to say 'cause the government hasn't really allocated it. The elimination of spousal consolidation. So, if you are married, currently, if you are married, you can consolidate your loans with your spouse and then for your household, you can just make one payment. The downside of spousal consolidation, of course is that if you get divorced, somebody ends up holding the bag on that loan package; the loans cannot get split up again, so it, you know the divorce rate unfortunately in this country is very, very high. So, if you're not 100% confident in your marriage, the maybe a spousal consolidation is not the best idea. But, at least the option is there for you. The option is there for you to consolidate your loans together. The new proposals reduce that, remove that, just say "Goodbye"; you know, no spousal consolidation anymore. Which is unfortunate because it really doesn't cost the government all that much money. Finally, of course, preventing graduates who opt for income contingent repayment plans from consolidating their loans. This is probably the dumbest part of the proposal. And the reason it's dumb is, income contingent repayment plans are very, very often, these are the people who are in life public service, who like to do pro-bono law work or school teachers, these are the people who need income contingent repayment, which is basically to say, if you're not making a lot of money, but you're doing a lot of good, you can qualify for income contingent repayment and yet, you know, reduced payments on your student loans; trading it out, of course with stretching out your term and stuff like that. Consolidating your, you know, with your income contingent repayment really does save a lot of money. It's a great thing for people to do, especially if you're in that public service field. I guess the government kind of realizes it's not really making a whole lot of money, so no more consolidations. So, you're, you're at, will be at the mercy of variable interest rates. So, this is kind of what's in proposals now and it has to go to the full House and the full Senate for voting and ratification and then eventually on to the President for signature, so there is still time if you are interested in the, in getting the legislation changed. You can certainly position your representatives to not vote for this or vote "no" on the Higher Education Act Reauthorization and get it sent back for revision. On the other hand, if you aren't particularly interested in getting involved in the political process, you just want to get, you know, your loan taken care of, that's OK too. You can certainly do so at our websites: Student Loan Consolidator Dot Com or if you want, you know, you want a shorter URL to send to friends, Today I Saved Dot Com. Either one will get you there. Either one will get you into the consolidation process but you want to act sooner rather than later because no matter which of the two proposals, House or Senate, gets in acted, the results are going to be less favorable for students. So, that's the, our press release, which is of course, going to top our news for today. Second thing in the news today that I noticed is the Operation Offset. Now, this has been making some, quite a bit of rounds in the political blogs. Essentially, Operation Offset is a, a proposal by the Republican Study Committee, which is a hundred members of Congress, which is looking to trim 949 billion dollars, almost, almost a trillion dollars from the federal budget in ten years to offset the reconstruction of the Gulf Coast; hurricane funding, basically, the new to offset the additional spending for hurricane funding. There's a lot of interesting things in this proposal and I don't necessarily mean that in a good way. Some of the proposals, some of the things in this proposal, are removal of 25 billion dollars from the Center for Disease Control, which to me sounds like a really, really bad idea. Especially if you've been keeping up in the news with the whole Avian Bird Flu thing; probably wanna have to see it getting a little more funding than less. Medicare, Medicaid, of course getting a swift kick. See, 5.5 billion dollars to eliminate all funding for the Corporation for Public Broadcasting, so no more PBS. National for the Endowment of the Arts Humanities eliminated. Two and a half billion dollars cut from Amtrak, so we'll make sure that the trains run even worse than they do now, if you've ever taken Amtrak. The only time I've ever taken Amtrak that was, that was an even halfway decent experience was taking the Acela trains and that was just, other than that, taking the regular Metro liner from Boston to New York is just a hideous experience. I can't imagine how much, how, you know worse it will be with less funding. And the one that is relevant to almost all of us, all of the students who are listening to the podcast anyway, is the elimination of 8.5 billion dollars from higher education to cut all subsidized loans to graduate students and the commentary in the proposal I thought was very interesting. It, you know, you kinda got to wonder what these guys are smoking. I'll read you the exact text: "The federal government has extensive loan options for financing education. Student have likely had help, government help paying for college if there was financial need---which is not exactly true, but, there are a lot of people in financial need and they don't get help but---Graduate students make an informed decision to invest in their own futures and should bear the cost of schooling, especially since private interest rates are currently low---well, that's fine, I'll get to the commentary on them in a minute---This reform would allow higher education funding to be focused on college students while still allowing graduate students to benefit from unsubsidized federal student loans; savings of 8.6 billion dollars over ten years." Alright, a couple of talking points on this. The first: Government help paying for college and not, not so much if you're in the middle class. If you're poor, and you know you're below the poverty line, or just above the poverty line, yes, absolutely and you know in a way, as it should be because the part of our society that needs the most help should get the most help. But that's not to say that anyone above a certain line shouldn't get any help, which is kind of how it is structured now. Second thing: Graduate students, yes they do make an informed choice to invest in their own futures, but their also, their also a part of the society as a whole; you can't just say, "Oh well, you know, they'll figure it out." They, graduate students are basically people who are going for more advanced degrees. You know, master's degrees, MBAs, doctoral degrees for whatever. These are people who, especially when it comes to things like the medical profession, the legal profession, the technology profession; these are the people who are making the investments in themselves and in the society around them to be even better, to go to the next step beyond college and say, "I can achieve more", "More schooling will help me make better decisions, be a better professional." You know, you cannot be a physician with an MD or you cannot be an MD with a bachelor's degree; it just doesn't work. Nobody in their right mind would employ you. So, this whole proposal about the idea that, you know, they're investing in their futures, we don't need to take care of them, is, is patently ridiculous. Every student who wants to pursue education, whether it's college, graduate school, you know, doctoral degrees, whatever, should have access to financial aid of some kind and preferably financial aid that's advantageous to them. One point that this proposal says is that private interest rates are currently low. Well, yes they are currently low at the moment. You know, you can get alternative student loans like from private student, Alternative Student Loans Dot Com or act education student loans and the interest rates are low, but they're pegged to the LIBOR index, the BBA London Internet Banking Offered Rate. This means that's a fluctuating rate and there's no cap on it like there is on the federal student loans. So, if things turn around like they were in the 1980s, yeah, you could get a student loan for, you know 18-19%. This proposal seems to think that rates, yeah, they're currently low, but they're not going to stay low forever. And that, they go in cycles, just like everything else in the business world. They don't have caps like federal financial aid, so I think it's a very, very shortsighted proposal. Unfortunately, it's probably gonna, in some form, it's probably gonna make it to, the, into the federal budget. That will be unfortunate, so again, if you're interested in letting Congress know that yes, it's important to fund Gulf Coast reconstruction, yes, it's important to help hurricane victims, but it's also important to not mortgage the entire future of the country to finance the immediate need now. Especially since there are other things, you know, you could not fund say like the Big Dig, which being from Boston I can say. Those are the kinds of areas that you should be looking for savings. As opposed to things that are going to make our societies, as a whole, better in the future. Monday morning rant. Seems to happen a lot. Alright, let's do a quick promo and then some Podsafe Music. This is a promo from the Anti-Poverty Campaign of Sentor John Edwards. The speaker is actually Rob Walch of podCast 411 so here it goes:

(podcast promo)


Great new Podsafe from Alice Marie. "Could It Be?", by the Podsafe Music Network. Her stuff appeared over the weekend, it's got a really, really nice sound. I'm trying to figure out how to place it, but incidentally, I hope that you enjoyed both of the Podsafe music shows over the weekend. It was a lot of fun putting those together. And, if you have any feedback, let me know: financialaidpodcast@gmail.com. Alright, let's talk now a little bit about some scholarships. Let's do a scholarships update.

(break music)

Today's scholarship update is the Boston University Alexander Graham Bell Scholarship. This is a full tuition scholarship to Boston University and guaranteed admission to the Boston University Engineering Master's Degree Program, provided a 3.4 grade point average is earned during the Bachelor of Science program. It is a combination scholarship; full tuition in undergraduate plus guaranteed admission to the graduate program as long as the GPA is good enough. Some criteria for you: Only students who have applied and are accepted for admission to Boston University's College of, applied to the Boston University College of Engineering will be considered for this award. The application is available on B's website. Each candidate must also submit a 500-word essay responding to the following: Write an essay about an engineering advancement or innovation that you feel has had an important impact on society. Your essay should describe the advance, innovation and discuss its implications for society and the field of engineering. The essay must be submitted electronically, as a Microsoft Word document. They also request a whole bunch of other things. The deadline is December 1st, 2005. This will be for the 2006 school year. Applicant should indicate that they are applying for the Alexander Graham Bell Scholarship. Students must also have, let's see, a projected average high school GPA, 3.5; average SAT score, 1300 combined on the critical reading and math sections, 600 or higher on the writing section and be in the top 10% of your high school class. So, a link will be, of course, to the scholarship in the show notes, which you can find at www.financialaidnews.com/blog or at www.financialaidpodcast.com. The Alexander Graham Bell Scholarship is today's scholarship update.


New Podsafe Music from Amy Ayers. That was, check it out, "One More Day". Incidentally, over the weekend, I played an artist whose name I consistently mispronounced and she was nice enough to send me an email and let me know. Rebecca Lobe, not Lobe. Lobe was the artist that we played over the weekend. You can check out in the show notes, of course, and if you're using iTunes, you can get the back issues from the October 1st and 2nd podcasts; the all-music podcasts. Alright, let's talk a little bit now about some mail call.

(break music)

Betsy Calvin writes today wondering where the funding from the Parent-Plus Loan goes. As she was hoping to send some funds to her, her son to pay for some college expenses, with the Parent-Plus Loan. Well, here is generally how it works with federal student loans. It's a point of confusion. Federal student loans are dispersed to the school, to the school's financial aid office. And, minus any fees and stuff like that the school would deduct from it, and any allocations for things like tuition, and anything the school administers, anything that is left over after the school is done with the loan is then sent to the parent or the student as a check, essentially. So, what happens, a lot of the time is that the school also deducts stuff like activity fees, room and board fees, any of the additional fees that are above and beyond the straight tuition that a student would then be responsible for are out of those loan proceeds. And then given, you know, processed by the school. So, if you are looking for a student loan to go straight to you, as a parent or student and you do not want to have the school administer the loan, then you need to apply for what is called a Direct to Consumer Private Loan. A Direct to Consumer Private Loans go direct to the consumer. They do direct to the borrower as opposed to going through the school and requiring school certification. Currently the only student loans that are direct to the consumer loans are private student loans like the Act Certification Loans. So, if you're interested in getting a loan to manage school expenses and stuff like that, and you didn't want the school to manage it, you have to apply for a private, student loan and you can do so at Act Education Loans Dot Com. And that is the, probably the only significant piece of mail in the mailbag today regarding student loans and stuff. The rest was all spam and, 105 messages and only two of them were not spam. Disappointing. Alright, let's do one last piece of Podsafe Music and then I think we'll call it a show.


New Podsafe Music from Bree DeMoss song entitled, "Good Riddance". Alright, that is going to do it for today's show. As always, you can find more information about anything we discussed in today's show at our show notes: Financial Aid News Dot Com forward slash blog. Or on our website: www.FinancialAidPodcast.Com. I've added some new stuff out there. If you wanna be notified by email when a new podcast is released, just go to the website: Financial Aid Podcast Dot Com and sign up for the email notification for the podcast. If you are subscribed to our newsletter, you should have received the October 2005 issue. Let me know again what you think of it. If there's things you liked, you didn't like, we're confused about, financialaidpodcast@gmail.com. As always, stay tuned, stay subscribed and if you're not subscribed, get subscribed. It's really easy. The instructions are on the website, of course. If you really like the podcast, get, get two of your friends to subscribe to it. It's, you know, show them how to do it, show them how to get iTunes and show them how to subscribe to our podcast. That would be great. I really appreciate it. Otherwise, well, I guess we'll see ya next time. Take care.

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