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President Obama declares war on college costs

20.05.12

(MoneyWatch) 

COMMENTARY President Barack Obama is turning up the fervidness on colleges and universities.

The president wants these institutions to get serious about making college affordable . Of positively, politicians and presidents have been lamenting for years that college tuition continues to worst the rate of inflation rate and nothing has happened.

Here, however, is what's heartening this time around: Mr. Obama appears to have the guts to do something besides grumble about escaped college costs . The president, after all, has a track record. His administration has already gone after the covertly student loan industry and for-profit universities and achieved meaningful changes. The administration has also been pushing aggressively for much-needed recovery in the nation's K-12 systems through its Race for the Top competition among states.

Getting the reactionary higher-ed industry to change will take more than just a pretty please . It will require money. Or rather the warning of withholding money. And, in that regard, the federal government is in a position of power. The feds galvanize billions of dollars into private and public colleges and universities through grants, loans and tax credits. Last year, the guidance's tab was $167 billion.

Carrot and stick

The administration is proposing that some federal aid would be contingent on schools keeping their prices proper and providing good value. Schools that enrolled more low-income students, generated higher graduation rates and documented upright job placement rates would be rewarded with more federal aid for student loans and other programs. The slackers would turn up up short.

What's impressive about Mr. Obama's effort is that he is not just interested in lowering costs. He is clamorous more affordable prices and better outcomes .

"We should push colleges to do better," Obama said in a address at the University of Michigan. "We hold them accountable if they don't."

College naysayers

Predictably, college administrators and their perseverance groups are doing their "sky is falling" routine. These are the same characters, who congratulate themselves if they limit once-a-year tuition increases to only 4% or 5%.

If Obama thought the student loan and for-profit university industries were troublesome adversaries, he hasn't seen anything yet.

All I can say is, good luck.

Source: CBS News

What To Do If You Can't Pay Your Student Loans

20.05.12

The first, and perhaps most effective thing to know is, yes, you have to pay. This might seem like an obvious point, but according to FinAid.org  as many as one-fourth to one-third of borrowers are up to the minute or delinquent on their very first payment. And further, the current estimated number of borrowers in default—those who haven’t paid on their loans for nine months—is about 4 million out of 36 million borrowers in repayment. Don’t be one of them. As Make the grade spot Kantrowitz, publisher of FinAid.org and Fastweb.com says, “The government has very heavy-duty powers to compel repayment.”

The federal muscle includes garnishing wages (up to 15%), intercepting your tax refunds and, if it gets that far, siphoning off some of your venereal security once you’ve retired. Additionally, student loan debt is almost never forgiven in bankruptcy proceedings. In the end, on usual, people who default on their federal student loans end up paying 122% of the original loan because of interest and collection charges. “People often try ignoring their indebted hoping it will go away, but things will always get worse,” Kantrowitz said.

2. Arm Yourself (And Your Lender) With Word Next, figure out the best method for repayment. Your loan most likely comes with a standard 10-year-dub repayment plan. If you’re in an ideal situation and the amount you owe is less than your starting salary, you should be adept to afford to make the standard monthly payments. If you fall into the other category, don’t panic: You have options. Make understandable with your lender—this point cannot be overemphasized. They might seem like these big monsters that want to take your money, but they are very consenting to work with borrowers who communicate with them.

The best, and often least known option, is income-based repayment. This selection, instituted by the federal government in 2009, can provide meaningful relief for those whose revenues is insufficient to pay the debt. The way it’s calculated is complicated, but basically, lenders will look at how much you earn, note how far above the poverty line it is, and adjust your payment accordingly. If the calculation is below the yardstick repayment, then you are given the option to pay less. If you stick with the plan for 25 years, any residual debt (both the principal and interest) is automatically forgiven. For those who work full-time at a non-profit or collective service job, remaining debt is forgiven after only 10 years. “This is the best chance for those who are going to be struggling to pay their loans long-term,” Kantrowitz says.

Here’s how it would line in practice: A recent graduate starts their first job, making $50,000 a year. Under a sample 10-year-term plan, their payment on $50,000 in student loans would be somewhere around $575 a month. Using the paradigm calculation for the income-based repayment, the monthly payment is lowered to about $422.

The other selection is to extend the period of repayment from 10 years to 20. But while this will lower the monthly payment, it more than doubles the amount of interest paid over space since the borrower will have to pay on the loan for twice as long.

( MORE: Unable to Work, Retirees Move in With Kids and Find It’s Not So Bad )

Of sure, all of this changes if you have private loans in addition to federal student loans. Basically, the only way out with private loans is to repay them—and to repay them on the lender’s timetable. They do not allocate deferment or income-based repayment. Extensions often don’t lower the monthly payments by much and, while they do agree to forbearance, they often offer much shorter terms and sometimes charge fees. “You’re basically at the beneficence of the lender,” Asher says. But, thankfully, 85% to 90% of student loans are federal, not retired, so hopefully that doesn’t apply to most of you.

4. Even If You Can’t Pay, You Still Have Options

Source: TIME