Posted On: 2005-09-22
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Good Morning, it is September 22, 2205. It's Thursday and actually techiniquelly for me it's Friday because I'm going to be out of the office, I am going to be at a conference tomorrow. Welcome to the Financial Aid Podcast, I've got a great show for you today, got some listener feedback, some mail call, scholarship update and new; it's going to be a great show and of course tons and tons of Podsafe music. I've got some great music new tunes from the Podsafe music network and from some myspace users who posted on the Podsafe music network. If you are on myspace and you want more exposure, post your stuff on the Podsafe music network, it's a really great resource for musicians and it's free. Can't beat free. Hopefully today the podcast managed to, I hope I've managed to reduce some of the line noise. One of the reasons I originally bought the Samson microphone is because there were a lot of headset noise from using the headset. http://www.auctionads.com/blog/peek-at-auctionads-hardware/No matter what I did I couldn't make the Samson microphone, when it worked, sound as good as the headset. I couldn't figure out why; I talked to a few friends of mine who do audio engineering and one of them of course flippantly said, "that's because you have no idea what you're doing with a condenser microphone." I said, " you know that's very possible." I'm not an audio engineer and I don't pretend to be one. I'm a student loan technology person so, very different fields. My one friend said, "Well if the headset works for you then you probably don't need to change it." One thing that was causing me some issue was, which was one of the reason why I was looking at a condenser microphone was there was odd line noise from this headset, weird pops, and cracks. It turns out the junction where the USB cable goes into the actual headset on the Logitech, is to use separate pieces of rubber that when you move a certain way makes a really awful popping sound. So, I put some duct tape on it; as anyone who is in technology knows, the duct tape can cure just about anything. So hopefully -this was in fewer of those bizarre noises.
All right, let's get to the news. Topping the news today, In Kentucky, the Kentucky Community Colleges are considering a new project to outsource grading to a third party company. The program right now is in a pilot phase, only 48 students are going to be having their traditional freshmen essays graded in this manner. Basically, What the university is doing is outsourcing grading function to a third party company that will, hopefully that goal of program is to hopefully free up teachers and instructors to spend more time in actually helping their students and doing research rather than spending time grading. Some teachers complained that grading is a long and laborious slow process, and by outsourcing it to a third party company they can spend more time actually instructing than doing what is traditionally an administrative function. Opponents of this of course are saying, that if you outsource grading which is one the most important benchmarks when it comes to evaluate students' progress, there's really no point in having a teacher. You may as well have a distance learning course where someone can watch of course on DVD. So, very interesting from there Community Colleges in Kentucky. The Red and Black, the University of Georgia Community Independent Student Newspaper is questioning how much the financial aid to students who are displaced by the hurricane Katrina; how much it's costing the University system of Georgia and whether that financial aid should have also been devoted towards students in Georgia who have equal financial needs, but were not displaced by a hurricane. The Red and Black article Points out that the financial aid cost me overly burden the university from providing aid tune needy Georgia students as well. Which is a perfectly valid point, state university is funded by the state presumably for the state's residents. That's why state university's I have a varying market difference between in state and out of state tuition. At the same time, there's the humanitarian argument; the students that are displaced by the hurricane, certainly need more assistance than the students who have not been displaced by a hurricane. Simply because in many cases their families and their sort of social infrastructure has been wiped out with it. Speaking of hurricanes, hurricane Rita approaching the Texas gulf coast expected to make landfall Friday or Saturday, unfortunately it looks like it's going to be another really large storm. So if you are in the area for some reason you're listening to our Podcast, leave now. Before it gets there. You don't want to mess around with stuff like this-hopefully the lesson is learned by hurricane Katrina have taught us. Don't stay around at all. Pack up, leave quickly.
The Anchor which is a student newspaper in Rhode Island, points out the House Bill 609, the Higher Education Reauthorizatioin Act, is going to be cutting $11 billion or so from the Department of Educations Budget. Which of course is a bad thing. One fact finding thing that is important in the article is saying, the House Bill 609 reverses a bi-partisan decision in 2001 to lower interest rates to 6.8% to student borrowers, claiming that the cap of 8.25% represents a step backwards. There's a factual point in this, the 6.8% was set to be a fixed rate for Stafford Loans beginning in July 1, 2006 as opposed to the cap of 8.25% on a variable rate loan. When you look over the history of the Stafford Loan program over the last 10 years or so, the average interest rate of the Stafford Loans over that 10 year period, which is the repayment term of the Stafford Loan, is 5.57%. If you were to make the Stafford Loan Program a fixed rate of 6.8%, then on average over the last 10 years, you'll be paying about 1.3% more than if you would stayed with the variable rate. It's not necessarily true that the House Bill is going to cost students more. For those years that it's at 8.25%, the cap, yes it is going to cost more than the 6.8% but as you see in the last two years, the rates have been so low that students who have had the opportunity to consolidate and who have had the opportunity to make their payments on their loans, have saved quite a bit of money over what would have been a 6.8% interest rate. Just a little bit of a fact check. All right, let's move onto some Podsafe music. I've got some great music from the Podsafe Music Network. There's some tremendously good artist out there, so I'm very happy about that. We're going to start off today with Marlena Randall with "Just to See You There." I have got to say, I heard this tune yesterday when she posted it on the Podsafe Music Network and I said, "wow, this woman has some serious singing ability." I hope you agree. Here it is, "Just to See You There." From the Podsafe Music Network
There's nothing better than getting the day started off with some great Podsafe music, some great fresh music that you won't hear on any of the major record labels, you won't hear on commercial radio either, you will only hear it podcasts like this one. So I hope you certainly stayed tuned in. If you are in band, if you have band in college or whatever and you would liked to get your music played please feel submit it to the Podsafe Music Network and shoot me an e-mail at firstname.lastname@example.org let me know that it's out there. I'll take a look at it, give it a listen on the ride home one day and if you got the stuff, as obviously Ms. Randall does, then I'll be more than happy to play it and give you the exposure that you deserve. Like I said, it's just a great way to start the day. All right, let's move on to the scholarship update.
Today's scholarship update is the National Endowment for the Humanities. Have a number of grant programs and deadlines posted on their website for all sorts of things not just for students, but also for faculty, staff members anybody who is looking to expand their work in the humanities and liberal arts fields. I've not had enough coffee this morning yet, I'm working on my first cup. There's a whole bunch of grants and projects and things like that. Everything from civic stuff to helping kids learn how to read, to fellowship programs, Independent Research Institutions. That's one I think I want to start with right now is to talk briefly about it. The successful applicants for the fellowship programs in Independent Research Institutions will be awarded a grant in outright funds, matching funds or a combination of the two depending on the request of the applicant and the available of any EH Funds. Awards are generally made up to four years; recent grants have range from $64,560 to $378,000. These are for both institutions and for individuals. Definitely check out the website at www.neh.gov/grant and I will post a link to the show notes as well. It's very important, especially if you are looking for things that are project based scholarship, project based grants, where you could be doing a lot of work in something that interests you. Create something that is lasting and not just scholarship towards a general piece of education. Not to say that there's anything wrong with that but, if you have something that is very specifically project oriented, you could do a lot of good with this. You can create some pretty amazing works. There's one here that says we're covering Iraq's past, request for proposal to preserve and document Iraq's cultural heritage. Another one called Rediscovering Afghanistan. Tons of really great projects and grants, check out the website at www.neh.gov. All right let's do a little bit more of Podsafe music. I think I'm going to switch tracks here and do a piece from Granian who is a very popular artist on the Podsafe Music Network, you hear him a lot on shows like CC Chapman's. We're going to do Granian's "Uncovered." From the Podsafe Music Network.
As I've said in the past when playing Granian's music, they have that sound; if you remember the band "Live" from the mid '90s, they have that kind of sound, very honest acoustic and just raw rock sound. I really like it. It's just fun to listen to; it's very refreshing from sort of a manufactured pop.
All right, let's hit the mail bag. Have a great and long question from Kenny Stalts who asks, "I'm going to go study in England this year and I took out a Stafford Loan as well as a private loan to fund my courses, I remember on a previous podcast you mentioned the people who buy and sell Stafford Loans, I wonder if you could go over this again and he gave a list of his organizations, IEFC, Bank from America, MOHELA and ASA and he said somewhere in that tangled mess the fact that the loan was to be disbursed to me directly, did not get communicated so the check is in England. I'm not surprised at the number of parties involved. I'm curious why all these different organizations are involved and how they're all being compensated since I'm not paying them. They all seem to know my personal information and are happy to give me a different 1-800 number to call." All right Kenny, you have stumbled onto the wonderful world of FFEL Loans. Which stands for Family Federal Education Loan programs, it is the companion to the Direct Loan program. Both are administered by the Department of Education, both are federal student loan programs. Except for the private loan to which you applied for which is different. There are four big pieces to any of the FFEL loan programs, they may or may not exist in every situation but generally speaking there's four big pieces. The first piece is the marketing partner, the second is the lender, the third is servicer and the fourth is the guarantor. It's pretty much done in that order. What happens when you go to apply for a loan, chances are you applied with a marketing partner. This is the company that is responsible for effectively getting information, customers really for student loan programs and getting them to the right lender, to the lender they're working with. For example, the student loan network is a marketing partner organization. We are responsible basically for finding students who need student loans. Then when we find them we help them get connected with a lending organization. The second piece, is the lender. This is the company that actually puts up the money. They basically provide the funds to the marketing partner; really to the student and the school in this whole financial aid puzzle. They come with the money and they provide it. The third part is the servicer. This is an organization that is responsible effectively for managing the paperwork. When you get a bill for your student loan or you get a payment booklet when you do any of the deferment of forbearance, you're sending it to the servicer. This is the company that-they're just paperwork, that's all they do. Finally, there's the guarantor. This is sort of a lender to the lenders. This is the agency where, when you apply for a student loan, if for some reason you don't pay it the loan, you basically are defaulting on a loan. The guarantor pays the lender, pays off your loan so that the lender can continue to make student loans. Then the guarantor sends it out for collections of some kind. In some cases they'll work with your existing servicer and in some cases they'll give you a different servicer. So it's kind of a little bit tangled there. How all these companies make money? Because they're not asking you to pay them; although actually in some cases they are. With Federal Student Loans, especially the Stafford Loan, there's an origination fee. This is something that comes from the lender. It can be up to 3% of the total loan balance. That 3% is then split to all the different companies. The lender makes a lot of money on the interest that you pay. It forwards on the various fees, like the servicer basically charges a fee to the lender of some percentage per month. It's relatively small; I think it's considered like $25 a month or something like that in paperwork fees. The guarantor basically makes money by loaning money to the lenders if they need it and they get paid back on it when taking on the loans. The real money is made by the lending organization; the money is on the origination fee and the money is also on the interest that you pay. The Federal Guarantee program is effectively says, the lenders can charge only what the government says they can charge but if they're borrowing at a different rate that is above the student loan rate, then they reimbursed for it as part of four incomes.
We've talked about it in the past, that's kind of the puzzle. In your situation specifically, IEFC the company you mentioned is sort of the marketing part in the organization. They found you and you applied through them. Bank of America is almost certainly going to be the lender on this. MHELA, Missouri Higher Education Loan Association is going to be the servicer. They basically are going to be your paperwork company and then ASA is probably going to be the guarantor. ASA is actually also a pretty big servicer as well, you can have more than one servicer, you can have more than one lender depending on how your loans made up, how your loan portfolio is broken out. It can get very confusing. Here's the other thing on that you mentioned when it comes to companies selling loans. Lenders can and very often do sell loans. The reason for this is, it's pretty straight forward. Most lenders except for the super huge banks; do not have the cash reserves to basically hold onto a loan for the full 10 years. So what they'll do is securitize it. They'll package it up as a marketable security and sell it on the open market. This will usually go to Citigroup, or one of the mega banks that can afford to hold onto a loan for 10, 20, 30 years. Then the originating lender gets the money back and they can make new loans on it. When that happens, your servicer may or may not change, the guarantor may or may not change and the lender obviously does change when the loan is sold. You may or may not see changes based on how it all works. It's not the most transparent process, its certainly not the easiest process to understand; it does kind of make twisted sense. One of the reasons why Senator Kennedy made a proposal, the star proposal when it came to student loans about trying to focus more on the Direct Loan Servicing program is that the Direct Loan Servicing program-this is all kind of wrapped into one so that Department of Education is your lender, your servicer, your guarantor in some cases the marketing partner too because they don't have an affiliate program of any kind; and it's all done in a sort of "one stop shopping." Opponents of his proposal say that private organizations can be more efficient. Supporters of his proposals say that private organizations also have no idea as to what's going on, lose paperwork all the time, and charge all sorts of money. You would have to do the math to investigate which is the better program. It's generally the each individual educational institution or school decides whether it's going to work the FFEL program, the Direct Loan program or both. So, if you looking for the sort of "one stop shopping," inquire with your school's financial aid office. If you're going to apply for Stafford Loan for the U.S. school, please feel free to use our site, a little shameless blog here, www.staffordloan.com
All right let's finish off with one more piece of Podsafe music, I think we're going to do a new artist who just showed up, Rachel Rosas, we'll do her song "A Look." From the Podsafe Music Network.
New Podsafe music from Rachel Rosas by the Podsafe Music Network. As is the case for each show, I will have links to the various artists and now at the myspace pages as well in the show notes which you can find at www.financialaidpodcast.com just look around half way down the page and you will see the show notes. That is going to do it for today's show, actually ran a little longer than I expected too but that's because Kenny's question was an excellent one when it comes to decoding the mysteries of student loan industry. As I said earlier this week, Friday's show and Monday's show are both going to be all music shows, I will out of the office at a conference. Keep those questions coming into the mail bag at email@example.com , I would be more than happy to answer them on the air. Enjoy the music shows because I had a great time putting them together, they are going to be so much fun, they're so much good Podsafe music out there that you've - in a lot of ways you really don't need the main stream music industry anymore. It's still nice to hear what's popular and what's out there, I'm certainly not going to say that you shouldn't listen to them because you should there's good music, there's good music no matter what; the nice thing is there's a ton of other good music that you're not going to hear on commercial radio that you probably will only hear on podcast. Stay tuned in on tomorrow's show is going to have Kelly Goodland, Genocide, Whitney Steel, Aris, BJam, Icintilla and Desired Response Theories. Those are going to be great shows, so stay tuned, stay subscribed. If your not subscribed get subscribed, it's really easy directions on www.financialaidpodcast.com. If you are subscribed, get two of your friends subscribed if you like the show and directions are on there, very easy to get them subscribed as well. The next time I will be talking to you about Financial Aid, will be Tuesday so have great weekend everyone and we'll see you for the music show tomorrow, stay tuned, stay subscribed, see you soon and take care.