FiLife

In between the recent Popemania and Pennsylvania primary blitzkrieg, you might have heard murmurs about the student loan industry being in a kerfuffle. It’s just one of the many residual effects of this recession business, which means it’s time to hit the books.

Here’s a quick roundup of what you need to know if you have a student loan, are looking to take one out, or are just really into reading about this kind of thing.

-The AP via HeraldNet has a quick-and-dirty FAQ about what the student loan news boils down to for parents and students.

- Here’s a big roundup from the WSJ about how and why private student loan lenders are dropping like flies. Friend of FiLife Mark Kantrowitz offers some nuggets of advice toward the bottom of the article. (more…)

We’ve mused about angry alumni who aren’t reaping the benefits of their alma maters’ new-found financial aid generosity, but what if you still don’t get any financial aid love as a fresh applicant?

That’s what happened to Erin O’Connor, Critical Mass blogger and admitted student to Harvard’s John F. Kennedy School of Government. In her open letter, O’Conner writes:

A few weeks ago, I received the wonderful news that I have been accepted to study at the Harvard Kennedy School of Government (KSG), but my initial euphoria was soon stamped out as a second KSG email arrived announcing that I would only be offered loans as financial “aid.” KSG suggests that I take out more than $130,000 in loans to pay for my two-year Master’s program. $130,000? I want to attend KSG to get the best possible preparation to enter the public sector. How am I supposed to work in the public sector strapped with $130,000+ of education debt? Being accepted to KSG has turned out to be a pyrrhic achievement indeed.

O’Conner was accepted as a graduate student, not an undergraduate, therefore is not eligible for all of the tuition cuts that have received so much attention lately. She points out that with interest rates, $130,000 would balloon to $350,000 over thirty years and says that up to three-fourths of admitted K-school students face a similar dilemma. And Harvard isn’t the only institution with eye-popping high tuition.

O’Conner’s letter puts out some harsh financial-aid fighting’ words. So we called up the folks at Harvard’s Kennedy School for comment.

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A number of Columbia Law School graduates, most of who work in the public sector, are pissed at their alma mater. The school recently announced that it’s sweetening its loan forgiveness program for current students, but it’s not extending all of the changes to recent graduates. The angry alumni are now pressuring the school to grandfather them into the new policy.

The school’s former loan assistance repayment program provided financial support for up to ten years to graduates engaged in human rights work, government service, and other non-profit legal work. The benefits phased out once a graduate made more than $25,000 a year. The new program doubles the salary threshold to $50,000 for students graduating in 2008 and later.

This seemingly insulated battle between an elite law school and a handful of its former students is a telling symptom of the student debt maelstrom underway. (more…)

We hate to say we told you so, but as we predicted, an increasing number of private colleges have continued to cut tuition deals for middle and lower-income families. Following the lead of big boys like Harvard and Yale, now Dartmouth, Stanford and Brown have introduced new financial-aid plans of their own.

Can this be guilt? A realization that most of its students are graduating with debt in the sextuple (it’s a word, we swear!) digits? Altruism in its truest form?

Unfortunately, it’s probably none of the above. Private colleges are ultimately businesses that a) adhere to the same formula of supply and demand as your local 7-Eleven and need to compete for your dollar and b) have gotten their arms twisted by the Senate to dip into their endowments.

Here’s a roundup of the latest selfless acts of kindness scheduled to kick in this fall:

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If you ask these people, today’s twentysomethings are swarming with financial scabies.

KeepItInYourPants.org is handing out a $5,000 scholarship for the student who can produce the best Debt Disease PSA and perpetuate its gimmick of likening credit-card debt to STDs. You can see the Pants People’s intro video (Barry White alert!) here, via US News and World Report.

I admire the general mission of the campaign, but I think most of us would rather take a missed credit-card bill payment over the clap any day. And unlike STDs, credit cards can actually be good for you. Last I checked, there weren’t any rewards program out there for herpes infections.

It’s no secret that banks and credit-card companies seek out college kids like underage frat boys looking for a kegger. And the average undergrad will have $2,327 in credit card debt by graduation.

But what about the irony of handing out a $5,000 scholarship to promote debt awareness and not even breathing a word about ballooning student loan debt? I looked all over the Debt Disease site with its nifty iPod icons and awkward pop-punk design (because kids today LOVE that stuff) and couldn’t find ANY information about how to use credit cards responsibly, establishing credit history or the fundamentals of student loans.

So who are the sexually-charged folks behind this campaign? (more…)

There’s a new motive for identity theives – getting into an elite university.

Whether it’s supporting a meth addiction, a shopping spree or just trying to pull a weekend at Bernie’s, identity theft is usually a tip of the criminal iceberg.

And thanks to 29-year-old Esther Elizabeth Reed, cops are unearthing an Ivy-League identity scandal. CBS reports that cops arrested Reed in suburban Chicago for committing ID theft to gain admission to Columbia, Harvard and California State at Fullerton to study – get this - criminology and psychology.

Reed racked up over $100,000 in loans using various sophisticated identity schemes, according to MSNBC. While studying as a graduate student at Columbia for two years, she masqueraded under the name Brooke Henson. But according to CBS, the real Brooke Henson is from South Carolina and has been missing since 1999 (cops don’t think that Reed had anything to do with Henson’s disappearance).

Officials aren’t sure yet how Reed got her hands on Hanson’s social-security number and other pertinent information. But Reed used Hanson’s identity to obtain an Ohio identification card, and then took a high school equivalency test and the SAT. Her score eventually landed her at Columbia University, reports MSNBC.

Another alias that Reed used was Jennifer Myers, primarily as an account name for instant messaging. A tipster who had IM’d with her eventually brought her down, according to MSNBC.

The moral of the story? Identity thieves are just becoming more and more clever. Protect yourself buy checking your credit report regularly and considering a credit freeze. And be especially suspect if you suddenly discover that you’ve received an Ivy League masters degree without ever having set foot on campus.

-Mary Pilon

Illustration credit

Albert Lord, the CEO of student-loan giant Sallie Mae has reason to be frustrated. A deal to buy the company fell apart. The stock is down by more than half from the price a group of buyers had originally agreed to pay for the company. He sold almost all of his own shares recently, which didn’t look like much of a vote of confidence at a time that he’s supposed to be rescuing the company. Investors are howling.

But then, at the end of a call with analysts yesterday, during which he noted that there will be metal detectors at the next investor meeting (presumably to keep people from shooting him and his executive team for screwing things up so badly), he signed off with the following:

“There are no more questions. Let’s get the fuck out of here.” (more…)

Starting next fall, Harvard announced on Monday, families earning between $120,000 and $180,000 won’t have to pay more than 10% of their annual income towards tuition. The school will also eliminate loans from its award packages and take the equity that a family has in its home out of the financial-aid equation.

Harvard isn’t the first school to eliminate loans from financial-aid packages. But none have reached out to the middle and upper-middle class the way Harvard did this week, let alone with a policy that’s so easy to understand.

Now that Harvard has taken the lead among other schools in terms of financial-aid offerings, we decided to call some Harvard competitors that have introduced improved aid programs themselves in recent years and see if they planned to match Harvard’s move.

Here’s what the spokespeople for the schools said: (more…)

Last week Ron mused about the kinds of things we’d all like to get from our credit-card companies. This week, it’s student-loan lenders’ turn.

Student-loan providers are notoriously evil unaccommodating, perhaps forgetting that most of their clients are at the stage in their lives where they’ve just been granted the right to vote and can’t yet enjoy a vodka tonic. Although federal loans (i.e. Stafford, Perkins, Parent/Grad Plus) generally have better terms than private loans (loans that function like personal loans), both industries are in dire need of a makeover.

Here’s some stuff we’d like from student lenders: (more…)

There goes another rate cut I won’t get for a few months.

Just recently, I learned that Wednesday’s one-quarter percentage point reduction in the Federal Funds Target Rate doesn’t affect the variable interest rate I pay on my private student loan until January. How can that be, given that online savings account rates are sure to fall within days?

It took a while to figure out the answer.

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