FAP622: Consequences of student loan legislation, mail bag, Brian Setzer Orchestra

Student Financial Aid News
+ Chronicle: With the threat of a presidential veto no longer looming, members of Congress gave final approval on Friday to legislation that would provide the largest increase in federal student aid since the GI Bill.
+ The compromise bill, which would slash government subsidies to student-loan companies and use the savings to reduce the federal deficit, raise the maximum Pell Grant, and halve the interest rate on subsidized student loans, cleared both chambers easily, 79 to 12 in the Senate and 292 to 97 in the House of Representatives.
+ In an effort to appease the president, lawmakers scaled back the number of new programs, from 10 to four, and raised the maximum Pell Grant to $5,400, the level contained in his budget request. But they did nothing to control the bill’s price tag, which ballooned from $18-billion to nearly $21-billion in the compromise version.
+ That cost would be borne entirely by lenders, which would see their federal subsidies shrink for the second time in two years. Under the bill, the subsidy rate for for-profit lenders would be cut by 0.55 percent, while the subsidy rate for nonprofit lenders would be trimmed by 0.35 percent.
+ At the same time, the bill would double the origination fees that lenders pay the government on loans they make, to 1 percent, and reduce the amount of money that the government reimburses most lenders for loans that go into default, from 97 cents to 95 cents of every dollar that is unpaid. It would also end a practice of rewarding lenders designated as “exceptional performers” with a default-reimbursement rate that is two percentage points higher.
+ NASFAA: “Student loan company Nelnet Inc. (ticker: NNI) said Thursday will have to eliminate 400 jobs because of new lending rules before Congress that would cut back on federal subsidies for student aid,” the Associated Press reports. “Nelnet plans to cut expenses by at least $25 million annually and the cuts announced Thursday represent more than 12 percent of the company’s 3,300 employees. Nelnet Chairman and CEO Mike Dunlap said the company is changing its approach to the student loan business because of the changes Congress is expected to approve.”
+ Some early signs of things to come – two prominent lenders, Sallie Mae (ticker: SLM) and NextStudent, have shifted the vast majority of their marketing to higher profit private student loans, in one case not even offering federal student loans as an option
+ Aggressive advertisements for student loan consolidation – and yes, we’re telling you too, borrower benefits are likely to no longer be available after October 1.
+ On an upbeat note, PodCamp Philly this weekend was a fantastic event!

Scholarship Update
+ The A. Patrick Charnon Memorial Scholarship helps students afford high quality undergraduate education in their chosen fields of study. Recipients must be admitted or enrolled in a full-time undergraduate program of study in an accredited four-year college or university in the United States. They must maintain good academic standing and make progress toward a degree. The Charnon Scholarship Review Committee will decide whether applicants fulfill the requirements of the award. The selection committee looks for candidates who value tolerance, compassion and respect for all people in their communities, and who have demonstrated their commitments to these values by their actions.
+ $1,500 scholarship
+ Details at our free college scholarship search site

Mail Bag
+ AJ writes in: I have a big fav to ask, my sister is going back to school after years of being out, she is 46 and is looking for aid to help her get threw collage, she has separated from her husband and is raising a child on her own in Dubuque Iowa.
+ File the FAFSA first and see what eligibility she has
+ Check out the listings for women and non-traditional student scholarships
+ Borrow Stafford federal student loans from StaffordLoan.com
+ Borrow private student loans from ActEducationLoans.com
+ Julie writes in: I’m hoping you can help me find a resource. I have over $4000 to use on an educational experience as a result of a year with AmeriCorps. I’d like to go to Italy for 2-3 months and study Italian. I’m not currently a student anywhere, and I’d take my 11 year old son with me. I need to find a college or universitsy either in the US or Italy that would accept Title IV monies in payment for tuition, without me being enrolled in a degree program. I also don’t need college credit, and that isn’t a requirement for the scholarship from AmeriCorps (though I don’t care if they want to give me credit.) I’m having trouble finding schools to accomodate my needs. Can you help?
+ Title IV funding requires you to be enrolled in a degree granting program at least half time or more
+ Fernando writes in: + At the university I’m attending, you get back whatever was left over after paying the semester’s costs. Some of the money I got back was a federal loan, and I wanted to know which would be smarter:
+ 1. Return all or part of the loan to the govt.
+ 2. Or put that money into a high interest saving account (e.g., savings account, Certificate of Deposit)
+ You’ve got to beat the loan’s interest rate plus inflation. Using core inflation of 3% as a benchmark, plus the 6.8% fixed rate, you’ve got to beat 9.8% annual returns to make it worth keeping the money and investing it – tough to do since most savings accounts return about 4.5% and CDs around the same

Podsafe Music
+ Brian Setzer Orchestra, One More Night

Reminders

+ Private student loans
+ Stafford loans | Other federal student loans
+ Student loan consolidation at StudentLoanConsolidator.com
+ FAFSA tutorials and free help
+ Financial Aid Podcast Show Notes at FinancialAidNews.com.
+ The Financial Aid Podcast is a publication of the Student Loan Network.

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