Obama’s College Proposal Long on Hiloan agreementnts, Short on Specifics

President Barack Obama talks about his vision for rebuilding the U.S. economy while at Knox College Wednesday, July 24, 2013 in Galesburg, Ill.  (AP Photo/Seth Perlman)
Seth Perlman/AP

The student debt crisis is still looming, and President Obama has drawn a line in the sand. Sort of.For years, the president has drawn attention to student debt, often referencing his own student debt problems (as he’s often pointed out, he didn’t finish paying off his college loans until just before becoming a U.S. senator. This week, he announced the unveiling of a new student loan proposal. Unfortunately, neither he nor his staff mentioned any specifics: an email sent out by his office on Tuesday promised that his plan “includes real reforms that would bring lasting change,” but cautions that “They won’t all be popular with everyone — including some who’ve made higher education their business.”While frustratingly vague, Obama’s announcement hints at a definite policy direction. The president has often criticized out-of-control tuition increases; by warning “some who’ve made higher education their business,” he may be indicating a plan to go after price-gouging colleges and universities.On one level, the college funding problem is fairly easy to understand: at the same time that college degrees are increasingly necessary for a good job, their cost has skyrocketed, far out of pace with the average middle class income. To pay for these college degrees, students take out massive loans — more than $26,500 on average — gambling on the possibility that their post-graduation jobs will pay enough money for them to cover their loan. Since the Great Recession, that gamble has, increasingly, failed to pay off, as millions of college students have graduated into a sluggish job market, further dragged down by low-paying internships.For individual students hoping to pay off their debt and get on a firm financial footing, this is a personal problem; on a larger scale, though, it’s a national crisis. After all, students who are scrambling to make ends meet are less likely to buy homes and cars, start businesses, build families, and otherwise contribute to the economy. Add in the huge scope of the problem — there’s over $1 trillion in student loan debt hanging over our collective economic heads — and you end up with an economic hot potato that has the potential to massively slow down economic growth.With that in mind, it’s easy to see why Obama is trying to make higher education into a top political issue. And, to his credit, he has already put his money where his mouth is: his “Pay As You Earn” plan, enacted last year, limits student repayment on Federal loans to 10 percent of their income, and retires the loans after 20 years. For students who don’t take out private loans, this translates into a humane, reasonable repayment schedule.Not all of the president’s plans have been as effective, however. His compromise on student loan interest rates is great in the short term, but promises to leave rates rising sharply when the economy improves.The really bold student loan solutions are coming out of state governments, most notably Oregon, which recently approved “Pay It Forward,” a plan that would enable students to defer payment until after graduation. While in college, they wouldn’t pay tuition; afterwards, they would have to send their colleges 3 percent of their salaries for 20 years. This proposal follows in the footsteps of FixUC, a University of California proposal that is currently under consideration.President Obama’s vague promises aside, chances are that his proposals won’t be nearly as bold or revolutionary as the ones currently being passed around at the state level. The trouble is, if we really hope to forestall a major student debt crisis, they’ll need to be.Bruce Watson is DailyFinance’s Savings Editor. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.


Posted in Student Loan | Leave a comment

What Happened When Alex Kenjeev Paid Hunemployed loansis Student Loan in Cash

What happened when Alex Kenjeev paid his student loan in cashBy Mandi WoodruffLast week, a Reddit user posted a photo of a $114,000 student loan bill-paid in cash-that elicited thousands of comments and dozens more when it was posted by Business Insider.Since then, the anonymous alum has stepped forward as Alex Kenjeev, a 2009 law school graduate of the University of Toronto.Kenjeev, who works for venture capitalist firm O’Leary Ventures, told Business Insider the $114,000 payment was the last chunk left of $190,000 in loans he took out during school. He’d spent years dragging out his payments while pouring most of his income into a start-up. As for why he paid in cash, Kenjeev said he wasn’t proving some point about the dangers of credit cards or trying to show off. He just thought it’d be really funny. http://imgur.com/UZ19O?tags“It was stressful enough to carry such a big debt load. I thought it would be worth getting a few laughs out of it,” he said. “Neither bank thought it was as funny as I thought it was.” In fact, when Kenjeev showed up at the Royal Bank of Canada to withdraw the cash, the management initially refused him. Then they told him he’d have to pay a transport fee to have it delivered by armored truck.We reached out to an RBC spokesperson, who said that while the bank does take precautions for large cash withdrawals, it wouldn’t order an armored courier unless a customer asked for specific denominations or had a strict timeline for receiving the funds.In the end, Kenjeev dodged the fee but had to wait three days before he could pick up the cash. “After so many years of carrying student debt, a few extra days didn’t bother me,” he said.With the money stuffed into a canvas bag, he walked the two blocks over to Scotiabank, where his student loan was held. “I just plopped the bag down (on the counter),” he said. “They also didn’t know how to handle it. At first the manager didn’t want to accept the money.” While Kenjeev waited, calls to higher-ups were made, his RBC withdrawal slip was reviewed, and tellers went to work counting the bills by hand. “I was pretty naive,” Kenjeev admitted. “I didn’t really realize how much of a hassle I’d cause for everybody. You just look at things and you figure cash is simpler than anything else.”When all was said and done, he shook hands with the bank manager and walked out two-and-a-half hours later-completely debt-free. The idea to post a photo on Facebook came spontaneously, but he still doesn’t know who posted it on Reddit. “I was feeling very good about finally being debt-free,” Kenjeev said. “Some people have taken it pretty offensively. I actually think they have a point. It hadn’t really occurred to me.”More from Business InsiderThe Lifetime Cost of 13 Bad HabitsThese Tiny Homes Cost Less Than $60K and Could Help You Save Just as MuchBrace Yourself: This Is What It Really Costs to Get Married Today

Posted in Student Loan | Leave a comment

Teaching scholarships help brauto refinance loansight students become excellent teachers

teaching scholarships help new teachers excelEver since she watched an inner-city teacher change the lives of his calculus students in the movie “Stand and Deliver”, Rita Soledad Fernandez knew she wanted to be a math teacher. “I see education as a way of social change,” Fernandez said in an interview with WalletPop. “I wanted to teach low-income students and provide them with the same high-quality education that the students that come from money usually receive.” Deciding to become a teacher was a no-brainer. Paying for the education she needed to teach her students? Well, that was a tougher problem to solve, until Fernandez found Math For America, a nonprofit that recruits and trains excellent math students to be teachers in the New York City public schools and offers teaching scholarships.Many students want to be teachers but are drawn to other professions by high salaries and bonuses. Fernandez, who just completed her master’s degree as a Math for America fellow, says teaching scholarships like Math for America’s can help retain excellent teachers. “I had options because I did well in school, I had work experience and good test results,” she says. “It was hard, but I was really committed to the idea that if I’m really this good, then I really needed to help the students who need it the most. Math for America helped me do that.” Math For America is one of the many teaching scholarship programs for students who are interested in becoming teachers. National, state and local teaching scholarships can help education students pay for their undergraduate or graduate degrees.Some teaching scholarships are small, like Straightforward Media’s $500 teaching scholarships. They have an easy online application and are given out four times a year. Others, like Braintrack and the Applegate/Jackson/Parks Future Teacher Award, base teaching scholarships on written essays. Other foundations, like the James Madison Fellowship Foundation or the American Association of Physics Teachers offer teaching scholarships based on the subject taught. Organizations that support teachers, such as the nonprofit Teachers Count, often provide lists of nationwide education scholarships as well as resources for current teachers. In addition to traditional teaching scholarships, many programs also offer debt forgiveness for students who commit to teaching in a certain school district or a particular student demographic. The American Federation of Teachers offers a loan forgiveness database for students seeking help with their education loans. Fernandez suggests students think about pursuing the major they want to teach in, rather than an education program, and then seek out a loan forgiveness and teacher training program after they finished their degree. Other teaching scholarship programs, like the Stafford Loan Forgiveness Program for Teachers, may defer a student’s college loans for several years. Fernandez will start teaching 7th grade math at a city charter school in the fall. She can’t wait to be in a classroom, encouraging her students and seeing their potential. “Every day, you see development. Every day, you see growth. You see the students change, learn and transform. You see that change is possible,” she says.

Posted in Student Loan | Leave a comment

Studentmilitary auto loans Loans: How Income-Based Repayment Will Make You Poorer

Income-Based Repayment, or IBR, is intended to help struggling federal student loan borrowers The federal government introduced Income-Based Repayment, or IBR, last year to provide relief to federal student loan borrowers who are struggling to manage their loan payments.IBR provides a formula that caps monthly payments at 15% of discretionary income. Borrowers who make all their income-based payments for 25 years have the balance of their federal student loan debt forgiven at the end of that period. To find out how that would work for you, use this calculator.Education lender Sallie Mae recently noted in a press release that “Since IBR was introduced last July, approximately 23,000 Sallie Mae customers have enrolled in the plan. Under IBR, in addition to paying a lower amount each month, eligible customers can extend their payment term from the standard 10-year term up to 25 years.” How to Dramatically Increase the Cost of Student LoansThe problem for borrowers is that extending your repayment term will dramatically increase the amount of interest you’ll pay over the life of the loan — and, if you take the full 25 years to repay your debt, you’ll be around 46 by the time you’re debt-free. That’s a very, very hard way to establish a solid financial life. Let’s look at how this works with real numbers using this handy calculator from FinAid.org:Student A borrows $30,000 with a Federal Stafford Loan at 6.8% and opts for the standard 10-year repayment plan. He’ll make 120 payments of $345.24 before he is debt-free, having paid back a total of $41,428.97; $11,428.97 of that amount will consist of interest.Student B borrows $30,000 with a Federal Stafford Loan at 6.8% and stretches his repayment out over 25 years. His monthly payment will be $208.22 and he’ll make that payment for 301 months. He’ll pay back a total of $62,467.29, of which $32,467.29 will be interest.(I’m assuming, for simplicity, that after 25 years, you will have paid off your loan in full, which will likely be the result for most borrowers; I’m also making the payments the same each year because there’s no way to actually incorporate changing payments from changing incomes into this equation.) Now That’s Just DumbHere’s the problem with this scenario: In order to reduce your monthly payments by 40%, you’ll have to increase the number of payments you make by 150%. That’s dumb!The single most powerful thing you can do to improve your financial life is to get out of debt. The sooner you do that, the better — and healthier! — you’ll be.IBR is a valuable tool if you literally can’t afford to make your payments and put food on the table. But if there’s any way that you can possibly scrimp together the cash to make your loan payments, it’ll be a lot better for your total cost and financial health. My concern is that too many borrowers are opting for IBR as a way to lower the monthly student loan expenses even when they could find a way to make the full payments. If you can afford to eat out or go see movies, you should skip IBR and opt for a standard repayment plan.

Posted in Student Loan | Leave a comment

Grad School Math: Which Degrees quick personal loansAre Worth the Debt

Math degrees are worth the timeWith unemployment high and wages stagnant, now’s a rough time to be entering the job market.Historically, when an unwelcoming economy awaits, graduating college students tend to run for grad school. But the monetary value of an advanced degree varies greatly depending on major, school, and how much debt you take on to get it.

A forthcoming article in the American Economic Journal: Applied Economics outlines the dangers of starting a career during an economic downturn. According to the study’s authors, it can take up to 10 years for high-level workers entering the job market in a recession to narrow the wage gap between themselves and their peers who entered in better times. As for less-skilled workers, their earnings “can be permanently affected by cyclical downgrading” — in other words, a weak start on wages can lead to a lifelong disadvantage.For most people, the best move is to delay entry into the job market until the economy is stronger and workers are in higher demand. And when it comes to orchestrating that delay, few methods are better than graduate school: Not only does an advanced degree improve employability, but it can also have a huge effect on earnings. In fact, the median salary for someone with an advanced degree is $73,738 — over $13,000 more than the average salary for someone with only a bachelor’s degree. But not all degrees are created equal. Based on an analysis of Census data, Georgetown University’s Center on Education and the Workforce determined that the payoff from a graduate degree can vary wildly, from a 1% salary bump to a 190% wage explosion. And the degrees that deliver most bang for the education buck may surprise you. On the low end of the scale, the worst graduate major for salary improvement is meteorology, which only improved wage prospects by 1%. Only marginally better were studio arts (3%), petroleum engineering (7%), oceanography (11%), mass media (11%), advertising/public relations (12%), pharmaceutical sciences (13%), forestry (15%), computer engineering (16%), and miscellaneous education (16%). The reasons for the low salary bumps varied: In some majors, such as petroleum engineering and computer engineering, workers with bachelor’s degrees already earn high salaries, which aren’t much improved with higher degrees. In others, such as studio arts and mass media, the job market is weak regardless of how much education one has. Degrees That Are Worth the Money (and How to Tell)On the happier end of the spectrum, some graduate degrees can vastly improve your earnings. The big winners are health and medical preparatory programs, from which graduate or professional degrees can increase salary by 190%. Similarly, social sciences (134%), zoology (123%), molecular biology (115%), public policy (107%), biology (106%), biochemical sciences (101%), chemistry (93%), pre-law (81%) and physiology (78%) majors can all expect to get a major dividend from pursuing graduate or professional degrees.The differences are hardly academic: The average undergrad leaves school with more than $25,000 in student loan debt, and graduate students routinely finish with $30,000 or more added on to that tab. Degrees that increase salary by 10% or less can take a long time to start paying off.When it comes to determining how much a degree is worth, the “starting-year salary” guideline is a good rule of thumb. Basically, prospective grad students should calculate what their expected salary at graduation, then borrow no more than that amount. According to the Student Loan Network, most federal student loans follow a 10-year repayment schedule, which means that students who limit borrowing to a year of salary can expect to dedicate about 10% of their paychecks to paying off their educational debts — a manageable percentage. By contrast, they note, students who borrow 15% or more stand a much greater likelihood of defaulting.For some students, such as those in MBA programs, this isn’t much of a problem: Average income for MBAs after graduation hovers around $91,000, while the average cost of a two-year program is about $80,000. By comparison, law students face a tougher road: According to one survey, almost 90% graduate with $80,000 in loans, only to land in a glutted job market that pays an average starting salary of $62,000. For many people, graduate school is a chance to follow their passions and study what they love. But when the biggest dream is finding a job, it pays to choose a degree that the market will reward.Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

Posted in Student Loan | Leave a comment

How one man recfha loan calculatorovered from student loan disaster — and you can, too

It’s the bitter little pill stewing in the subconscious of every brilliant writer here at Money College: No matter how many fascinating pieces we write about how to save money and soft-shoe smart with fall’s best buys for dance clogs, or how to catapult yourself through a master’s program in a year with zero debt by working nights and weekends as a breath odor evaluator (nope, didn’t make that one up), a huge number of students will completely screw up their finances anyway.Take my debt. (And, in the spirit of the great Henny Youngman: No, really. Take my debt — please!) A few months ago, I wrote a piece about the wake-up call — and subsequent scores of collection calls — I received after graduating from a private university last May. Statistics show that I’m not alone, either: according to recent data obtained by the Chronicle of Higher Education, one in five federal student loans that entered repayment in 1995 have gone into default by now, a much higher number than anyone thought.So what’s a student to do when — like me — they’ve already borrowed too much, and their post-graduation income doesn’t begin to cover the bills coming in from all sides?As I learned over the past few months, one of the best things a beleaguered student can do is to simply pick up the phone and talk to their creditors. Sounds pretty basic, right? Certainly it sounds like a trite piece of fiscal wisdom, and it didn’t do me much good when my student lenders and credit card issuers started calling last June, either.Along the way, though, I realized that when it comes to debt, it takes two to tango. Both student lenders and credit card companies won’t hesitate to lend you large sums on some pretty speculative terms: the promise of future success and a rosy tomorrow. When that rosy tomorrow doesn’t greet you at the auditorium doors after your graduation walk, things might seem like they’re getting pretty desperate for you, but they’re also getting pretty desperate for your creditors, too. Creditors, debtors, collectors, representatives — it turns out we’re all whirling on this broken-down merry-go-round of excessive debt.Case in point: When my student loan bills came due to the tune of about $800 per month in November, I didn’t stand a chance of paying them each month on my wages from the local coffee shop. All of my student lenders (Citibank, Great Lakes Student Loans and Federal Direct Loans) rejected my forbearance requests, and even scoffed at my deferment papers; apparently, I hit that sweet spot where I made too much (in the ideal realm of figures set out by wealthy Washingtonians) to get some relief, but not enough (in real life) to actually pay my bills and have anything left over at all to make student loan payments.With less than 30 days left before the black hole of default hit on most of my student loans, I decided to pick up the phone one more time in June. I sat down with a list of phone numbers and started calling all of my student lenders. All of them, without exception, granted me a no-questions asked, over-the-phone forbearance, and even agreed to figure my income in such a way that I could claim an economic hardship deferment until I raised my income substantially. There’s an excellent chance this will buy me enough time to find a better-paying job and get my repayment plan on track, not to mention the option of loan consolidation to reduce my monthly payments.What gave me the power to get my lenders to grant me a stay after so many weeks of threats and demands? In part, poverty. State laws set limits over how much creditors can dig into your income and assets, and if you don’t reach that threshold, your creditors have almost no recourse against you. Even student lenders, who play by slightly different rules, will bend over backwards to avoid garnishment in a financial hardship situation because that route might take them decades to make up the loan balance. Once I got threatened with court orders and wage garnishments, I decided to research my own situation, and found that the State of Illinois protected almost everything I had. There was practically nothing my creditors could take from me. Not wages, not cash, not my computer or cameras — nothing. Power through poverty — it’s limiting and a bit ironic, I suppose, but it helps to know, because your creditors sure aren’t going to spell it out for you.Meanwhile, as I worked my student loans out of the whirlpool, I had another storm brewing on a different front. One bleary-eyed morning last month, I woke up to an insistent ring from my alleyway buzzer and trundled down the stairs in my boxers to stare at a big black-and-silver badge slung around a stranger’s neck: “You’ve been served.” My credit card company, which I wrote off while dealing with my student lenders, actually decided to sue me over the delinquent debt. While no one enjoys seeing “Chase Bank U.S.A. v. You” on a piece of notarized paper, I knew from my earlier research that credit card companies often occupy the lowest rung on the debt ladder; if your student lenders can’t get a slice of you, your card company really doesn’t have much hope. Rather than panic, I bought a manila envelope at Kinko’s and stuffed it with evidence — pay stubs, bank account statements, tax returns — and mailed it out with a cover letter formatted from a pro bono legal aid website in order to show the credit card company I was, as the industry term goes, “collection proof.” If they could beat me in court, fine, but I made sure they knew that they’d get a judgment that wasn’t the worth the printing paper as a result.Thus far, I haven’t heard another word about the lawsuit; this past week, I called the bank one last time, and they offered me a face-to-face meeting to discuss a debt settlement program (not through a debt settlement company!) that would forgive my credit card balance by more than half over a series of long-term payments. So, consider this an epilogue of sorts to my tragic tale from the “Tuition Ignition” series Money College ran in May. As endings to journeys go, it’s a bit more “The Road” than “Homeward Bound,” but I at least learned that, no matter the magnitude of your fiscal screw-ups, no one can render you completely powerless to stand up and deal with debt on your own terms.

Posted in Student Loan | Leave a comment

3 Smart Alternatives to 529 Plansloans for cars to Help Pay for College

College student class
Alamy

College costs continue to soar, making it more important than ever to help save for your kids’ college education. But what’s the best way to save?Advocates of college savings plans have dubbed May 29 “529 Day,” referring to the section of the Internal Revenue Code that authorizes the tax-favored accounts known as 529 plans.But many parents don’t realize that there are alternatives to 529 plans that can often produce even better results for those looking to make the most of their college savings. Looking at alternatives allows you to take a more holistic approach to your overall college-savings strategy.Why 529s Aren’t Your Only ChoiceThere’s no dispute that 529 college savings plans are extremely useful as part of a successful strategy for building an investment portfolio to use toward paying your children’s college costs. With key tax benefits like tax-free treatment for investment income that you use toward permitted college expenses and very high contribution limits, 529 plans offer advantages you won’t find in other savings options.But 529 plans aren’t always the best move for every investor. With some 529 plans, limited investment options and high cost levels for mutual funds and other underlying investments make them less attractive as long-term savings vehicles, despite their tax advantages.Consider the AlternativesParents have three reasonable choices beyond 529 plans to save for college:1. Coverdell Education Savings AccountsCoverdell Education Savings Accounts or ESAs give you a lot more flexibility to make exactly the investments you want toward your children’s college education. Unlike 529 plans, Coverdell ESAs have almost no restrictions on what investments you can make, with brokerage accounts giving you access to a full selection of stocks, bonds, ETFs, mutual funds, and other types of investments. Yet ESAs share the favorable benefit with 529 plans that the income they produce is tax-free when you use it for educational expenses.The challenge with Coverdell ESAs, though, is the low limit on contributions. Currently, the limit is just $2,000 annually, meaning that even if you’re diligent about setting aside the maximum each year, it will only make a small dent in your child’s financial needs for college.2. Custodial AccountsWith a custodial account, you hold money as custodian for your child. Different states have different laws covering custodial accounts, but generally, you can open an account in a child’s name and manage that money in whatever investments you want. The account gets treated as a regular taxable account for tax purposes, but the benefit is that income is attributed to your child’s tax return rather than your own, often qualifying for advantageous tax rates at least for some of the income from the account.Custodial accounts do come with two big challenges. The one that makes most parents uncomfortable is that you’re legally obligated to give control of the account to your child at the age of majority, which is typically 21. In addition, financial aid treats custodial accounts as available for the child’s contribution to educational expenses, which can lower the amount of outside support your child receives.3. Keeping College Savings In Your Own AccountFinally, one simple thing many parents do is just to keep an investment account in their own names that they know is earmarked for their children’s education. By doing so, they can keep managing their own investments the way they always have, sometimes taking advantage of cost savings from aggregating their assets in a single account.The downside to this strategy is that income is fully taxable at your own usually higher tax rate. But because financial aid calculations treat parental savings more favorably than the child’s own savings, holding onto your own money might actually be advantageous compared to a custodial account even with potentially higher tax liability.The Right Mix for Your KidsThe best answer for most families involves a combination of these strategies.Finding low-cost 529 plans with index funds as a core portfolio can get you most of the way to your savings goals.Then, you can use the limited funds you’re able to invest in a Coverdell ESA to make targeted investments in stocks that you’re most confident about.Investing just enough in a custodial account to take advantage of your child’s favorable low tax rates can limit any concerns about financial irresponsibility down the road.Finally, keeping some funds on hand in a regular brokerage account hedges against the possibility that you might need money for needs other than those that qualify for college-savings tax breaks.529 plans are a great way to save for college, but they aren’t the only answer. By using these alternatives instead of or as supplements to a 529 plan, you can get the best of all worlds in your college savings strategy.

Posted in Student Loan | Leave a comment

How muchbill consolidation loans student loan debt is too much?

The New York Times reported on the double whammy many recent college graduates are facing: Difficulty in finding a job and tens of thousands of dollars in student loan obligations just waiting — or demanding — to be paid back. Here’s a quick clip from it:Mark Kantrowitz, publisher of FastWeb.com and FinAid.org, recommends that students follow a simple rule of thumb. “Do not borrow more than your expected starting salary for your entire undergraduate education,” he said. “If your starting salary is going to be $40,000, then you should borrow no more than $10,000 a year for a four-year degree.”What exactly is the significance of that 1:1 ratio?Has Mr. Kantrowtiz analyzed student loan default rates and studies/surveys on how students cope with student debt loads of various levels? I don’t know. But there is no particular wisdom behind that $1 in debt for every $1 in earnings, and parents and students would do well to discard it. In my opinion, $40,000 in debt is way, way too much for students to leave college with. Then there’s another problem: “If your starting salary is going be $40,000. . .” How could you possibly know what your starting salary is going to be? Many students enrolled in college planning on careers as high-powered bankers but many of those jobs have evaporated — and so have their hopes of high starting salaries.When looking at college financing options, do yourself a favor: Reject cute-sounding formulas for how much student loan debt is too much, and do some actual research: Look at student loan default rates (Sallie Mae makes that information available on its website: It’ll take some digging but it’s good practice for your college-bound student), economic data, and surveys on the quality of life of students who leave school with large debt loads.Another tip: Don’t take advice on student loan debt from the publisher of a website that funds its operations through ads from financial services institutions offering student loans. Also: Never ask a barber if you need a haircut.

Posted in Student Loan | Leave a comment

How Much Would Obama’s Student Loan Proposal Save Youaussie home loan?

Student loans
Getty Images

For the last few months, media outlets — including this one — have been warning about that if Congress didn’t act by July 1, student loan interest rates were set to double. Well, now that the deadline has passed, interest rates have gone up, and the continued deadlock between Republicans in Congress and President Obama suggest that, at least for the time being, they aren’t coming back down.There’s an old saying that people vote with their wallets — and, as 2013′s fall semester gets closer, voters who are in college or have children going to college may well begin to wonder whose student loan proposals will lighten their wallets the most, and which options will make them heavier.At the moment, there are four proposals floating around Washington: Keeping the current situation, under which rates are doubling; extending the recently lapsed 50 percent rate cut; a bipartisan Senate proposal tying rates to the treasury rate; and an Obama-backed proposal tying rates to the 10-year Treasury rate. Depending on which proposal gets adopted, the interest tab on a $5,000 subsidized student loan could range from $721 to $1,904.If you’re wondering how these loan proposals would affect you, Slate has a fantastic loan calculator. Give it a peek — and figure out which politician’s plan is going to save you the most money!Bruce Watson is DailyFinance’s Savings editor. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

Posted in Student Loan | Leave a comment

Consumer Credit Rises as Credit Card Use Falls Agaimanufactured home loansn

Consumer Confidence
Matt Rourke/AP

By MARTIN CRUTSINGERWASHINGTON — Americans cut back on using their credit cards in September for the fourth straight month but boosted borrowing in the category that covers auto loans and student debt.Consumers increased their borrowing by $13.7 billion in September to a seasonally adjusted $3.05 trillion, the Federal Reserve said Thursday. That is a record and follows a gain of $14.2 billion in August.The increase was driven entirely by higher borrowing for auto and student loans, which rose $15.8 billion. Credit card debt fell $2.1 billion following a decline of $885 million in August.The string of declines in credit card debt will likely hold back consumer spending, which accounts for 70 percent of economic growth.The measure of auto loans and student loans has risen 8.5 percent from a year ago and has increased in every month but one since May 2010. But credit card debt is essentially where it was a year ago. And it is 17.2 percent below its peak hit in July 2008 — seven months after the Great Recession began.Slow job growth and small wage gains have made many Americans more reluctant to charge goods and services.But at the same time, the weak economy is persuading more people to go back to school to learn new skills. The Federal Reserve Bank of New York quarterly report on consumer credit shows student loan debt has been the biggest driver of borrowing since the Great Recession officially ended in June 2009.Analysts had hoped that consumers would step up spending and help drive faster economic growth in the final three months of the year.But a partial government shutdown in October lasted 16 days and left thousands of government workers temporarily without paychecks.That disruption is expected to hold back growth in the fourth quarter. Many economists believe the overall economy is growing at a rate just below 2 percent in this quarter, down from growth of 2.8 percent in the July-September quarter.The Fed’s borrowing report tracks credit card debt, auto loans and student loans but not mortgages, home equity loans and other loans secured by real estate.

Posted in Student Loan | Leave a comment