Friday, February 13, 2009

Missouri Suspends College Capital Projects

About Time.

This article at the St. Louis Business Journal explains that the Governor of Missouri has suspended building projects worth $107 million dollars.

He said that projects had to be suspended because the state student loan agency, the Missouri Higher Education Loan Authority, hasn’t been able to continue with payments to the state for college construction projects under a controversial plan created by his predecessor, Gov. Matt Blunt.

With the loans drying up to students, colleges will be forced to tighten their belts. If only colleges and universities would go all out and begin to compete on a low cost basis, and reverse the thirty years of 10%+ increases a year.

Thursday, February 12, 2009

Deducting Student Loan Interest

At Joe's Journal, he writes that the federal government should raise the amount of student loan interest that can be deducted from the current amount of $2500 to $5000 or more.

One way to mitigate this problem is allowing Borrowers to deduct the entire amount of their student loan interest.

We agree that students should be able to deduct the full amount of student loan interest paid, and we also realize that this should be a first step of many more.

If the relative repayments of a borrower are lowered through a higher tax deduction, lenders will simply make more money available, which will drive up college prices more, which will put the student ultimately in a worse position.

We think the full amount of student loan interest should be deducted, as Joe proposes. Furthermore, we think there should be a seven year cap on the repayment obligation of a student loan, whether federal or private.

Default Movie

Over at several young San Fransisco based filmmakers have released a trailer on their upcoming movie.

Good luck guys!

Wednesday, February 11, 2009

Consolidation of Student Loans

Many students have consolidated their student loans, both federal and private. The students can lock in a somewhat reasonable fixed federal rate (though it is higher than five years ago through congressional subsidy cuts).

Private loans are consolidated with variable interest rates. For now, the consolidated variable interest rates are low due to the weak economy and the Federal Reserve's attempt to "juice" the economy.

However, if investors in the US dollar ever take flight - if our dollar takes an inflationary path - these private loans will strangle the borrowers even more than now.

The macro economists are concerned with deflation right now, and this deflationary concern is keeping the variable interest rate low. Heaven help us if inflation returns.

Student Lender's Bailout was in May 2007

This is perhaps the most disturbing aspect of the student loan crisis. The government bailed out the banks that were participating in the student loan market in May 2007, yet the banks have shown no mercy to the students who have fallen in the economy.

“We have some tough times coming, we are so used to doing what we want when we want,” Moult said. “Everybody is going to have to be re-taught. The younger generation is not in a good position right now.”

That is an understatement. This quote is taken from The Volante Online which sees the coming shortage of private student loan money.

We think that the shortage of money may help keep college costs down, and will be better for everyone in the long run. There will be short term pain, however.

Time to Cancel Student Loans?

We agree with this Lansing State Journal article that wonders in written word whether it is a good idea to cancel federal student loans.

What a solution, I thought. Since many student loan borrowers have debt to government-funded programs, it would be easy for lawmakers to forgive the debts owed.

Indeed, it would be easy for the Federal Government to wipe the slate clean. If Bank of America gets $45 Billion at a time, why not students?

15,000 New Student Loan Defaulters a Month

We think it is going to be much worse than 15,000 defaulters per month in a year's time.

For the most part, companies stop hiring before undertaking massive layoffs. With the daily news of lost jobs, it is doubly bad for new college graduates - they have almost no chance of finding work that can pay the bills.

“I’ve done what I’m supposed to do, and they’re holding me hostage,” says Judy Ellis reports that the credit freeze is making it impossible for a student to come out of default status once he or she has entered that status.

And the economy has made it mighty easy to slip into the dreaded default status.

Tuesday, February 10, 2009

Suze Orman on the Student Loan Crisis

From the Suze Orman Show. Interesting.

Student Lenders Prey on African-Americans

The ten year default rate among African-Americans is close to 40% according to a study by the U.S. Department of Education.

Remember, it is in the bank's interest if a person defaults, because the loan quickly doubles, and then triples and quadruples or more within a few years.

The original debt and high fees can never be forgiven, and wages are forever garnished from the defaulter. Does not someone see the obvious problem with a system that targets a vulnerable ethnic group for, in fact, slavery?

Stimulus Bill Raises Loan Limit by $2000

According to Andrew Kreighbaum of the, the stimulus bill that recently passed the Senate (but still must go through the conference process), raises the federal Stafford student loan amounts.

Under the House bill, the amount a student could borrow from federal Stafford loans would increase by $2,000, allowing them to avoid taking out additional private loans with higher interest rates.

Additionally, poor students will be able to take advantage of the Hope Tax Credit and Lifetime Learning Credit according to the article.

We are completely for grants and credits - though we understand economics means that colleges will immediately raise prices by the same amount unless controlled.

Also, we have mixed feelings about the higher federal loan limits. It is good that students do not have to take a higher priced private loan, but again, if the colleges simply raise the tuition by a corresponding amount, the students suffer in the long run.

Auctioning Virginity to Pay Student Loans

We have heard stories of banks and debt collectors who asked student loan defaulters to go to the blood, sperm or egg donor facilities to get a little bit of money to pay some of the fees.

Hopefully, Salliemae does not get any ideas from this story, where a young woman is auctioning her virginity to be able to pay back her student loans.

We wonder if the student loan lenders will by able to hire lobbyists to change the law so that once a student has student loans, his virginity belongs to the bank.

Student Loan Financing Congress in DC

The 2009 Student Loan Financing Congress is scheduled to be held at the Ronald Reagan Federal Building in Washington DC over April 23-24, 2009.

Markwire reports that more than 40 leaders of the student loan industry will be featured in various venues.

Attendees will hear valuable insights and predictions for the student loans market in 2009 and beyond; pricing anomalies offering investment opportunities;

We are not sure how to interpret this partial quote. How do pricing anomalies offer investment opportunities?

Does this mean to buy defaulted loans, knowing that the government will pay and the bank can collect a second time with the student?