How To Choose a Federal Student Loan Consolidation Lender

In the past few years, many students and graduates took advantage of record-low interest rates and consolidated their federal student loans to lock in the historic low rates. If you missed out — don’t fret, here is a simple guide on how better narrow down your decision for a future consolidation.

Besides locking in lower rates, there are some other reasons why you may want to consolidate your loans. Check out FinAid’s list of pros & cons to consolidating student loans.

So when rate changes comes around and locking in lower interest rate becomes a no-brainer, who should you choose to consolidate your loans?

The easy answer: your current lender. You’ve chosen your current lender for a reason, there’s no reason to complicate things further by going with a different lender. However, the problem with the easy answer is, you may have chosen the wrong lender in the first place, or, get this—there may be better lenders out there.

FACT: The only differences between federal student loan consolidation lenders are: Lender Repayment Incentives and Lender Service. Don’t underestimate their importance!

If you currently have a federal student loan for yourself or your child, you’ve no doubt received many solicitation from different lenders to get you to consolidate your loans to them. Many of these will tout some type incentive programs. Common repayment incentives are along the lines of reduction off in interest rate, after a certain amount of timely repayment.

Example: After 36 months of consecutive [timely] payment on your 10 year loan, you receive a 1% discount from your loan.

This typical type of lender incentive sounds great enough, but the problem is, many borrowers fail to qualify for the incentive program. Many of these incentive offers require timely monthly payment, so if you miss a payment deadline before reaching the required payment term, you won’t receive the rate deduction bonus. The same applies if you miss a payment deadline after earning your bonus.

In comes a different type of incentive program: immediate interest rate deduction if you sign up for auto debit, with additional deduction after consecutive payment.

Example: You receive a 0.5% interest rate deduction if you sign up to have your monthly loan payments automatically withdrawn from your checking account. Plus, after 24 months of consecutive on-time payment, you receive an additional 1.25% deduction in your interest rate.

A much nicer incentive, right? The above example is from ELC, which unfortunately has a minimum of $20,000 for their 1.25% deduction. If you only have a $10,000 loan, you’re out of luck on the additional interest deduction. Thus, it’s important to compare the offers and figure out which programs you can actually qualify.

As mentioned above, the second difference amidst the sea of lenders are lender services. Even if the incentive program is the best in the world, if the lender has a spotty track record for customer service, you may be doing yourself a disservice by signing up. What happens if you wish to defer your payment? If you call to ask about that, or a general inquiry on your loan, will they respond in a timely matter? For those of us with a low loan amount, lender service may not be a big deal—but for those of us that are in it for the long haul, you’ll want approachable service.

Remember, you can only consolidate once. So if you choose the wrong lender to go with, you’ll be stuck with them until you pay off your student loan for that expensive private university.

Important questions to ask when you’re choosing your lender:

• What is the repayment incentive?
• Is there a waiting period for the incentive? Do I have to earn it?
• What happens if I miss a payment?
• What happens if I request a deferment?
• How many of the borrowers actually receive the incentive?
• Is the lender knowledgeable and experienced?
• What is the credibility? Does your school support or recommend the lender?
• How is the accessibility?
Are there online account access? A 24/7 customer service number? If you call them, will they give you information tailor to you, or will they give you some generic scripted response?
• How is their long-term commitment? Does the lender have a history of selling consolidated loan?
The worse part in owing money, is when your lender disappears and some other company buys out your loan; suddenly you owe money to someone else.

If you can’t figure out some of these answers with the information provided to you, ask the lenders. This is a great way to gauge their service. If a customer service rep is having a hard time, or trying very little to help you understand their program, it may be a good cue to stay away. If they’re being such a hassle when you’re trying to give them money, imagine when you already owe them the money!

More Resources to Check Out:

• Bank Sweeten Student-Loan Terms from the WSJ
• Student Loan Consolidation Info from FinAid.org
• Best Student Loan Consolidation Deals from Fatwallet Finance Forum. Great thread with a list of various different lenders, their incentive programs and some first-hand customer service experiences.

More re selling loans - losing borrower benefits inevitable?

If you consider student loan consolidation, you better be aware of these tricks.

I bet you've been getting tons of email junk about student loan consolidation.
Tell me, did they promise "reduced interest rates"? Yes? OK, but look for the fine print - I guess you’ll find terms that allow the lenders to change - or even take away! - these benefits.

I compiled a list of common tricks loan lenders use to make sure you don’t earn their benefits.

1) “On-time payments” - Many lenders offer discounts for making on-time payments. What they don’t tell you is that to keep the discount you have to continue making on-time payments until the loan is paid off – which could equal up to 30 years of on-time payments!

Most lenders give borrowers a “grace period” before they will consider a payment late (typically around 14 days). However, some lenders require payments to be made “by the due date as initially scheduled” in order to qualify for their benefits. This means if your payment is not received by them on your payment due date, you lose your benefits.

2) Managing Your Loans Online - Some lenders may require you to apply online in order to even be eligible to receive their benefits.

Some lenders also require you to receive all correspondence from them electronically to be eligible for their benefits. If they send you an application confirmation via email, and your email address is deemed undeliverable twice in 48 hours, then you may not get the loan benefits. Also, if you ever change you email address without notifying them and their correspondence bounces back to them you could lose your benefits.


3) Automatic Debit - Most lenders offer borrowers an additional interest rate reduction (typically 0.25%) for using auto-debit (ACH) to make their monthly payments. However, some lenders tie the ACH benefits and the other benefits together. You have to use ACH to get the benefits. If you lose ACH then you lose the benefits too.

Sometimes the opportunity to sign up for ACH is limited to 30 days from the signing of the application. If the borrower does not follow up with the lender to get ACH WHILE the application is processing, then they can be outside of the sign up window. ALL benefits lost before they get their first bill!

They are required to sign up to receive their bill via email. In addition every month they must reply to the email acknowledging receipt. If they don’t they lose ACH which causes them to lose their benefits.

Returned emails, NSF in their checking account and failure to notify of a change of address are additional ways to lose ACH, which causes loss of other benefits.

4) Repayment Plans - There are four “repayment plans” that lenders can offer: Standard, Graduated, Extended and Income-sensitive. With a Standard repayment plan borrowers will pay a fixed monthly amount (principal + interest) for the life of the loan. With the other three options, borrowers can start with lower monthly payments by paying interest only for the first two years (Graduated), three years (Extended) etc.

Some lenders require borrowers to be on a Standard repayment plan to qualify for their benefits.

5) Minimum Balances - Some lenders require minimum balances to qualify for benefits (usually $20,000 or more is required).

6) Forbearance/Deferment – These are ways for borrowers to stop making payments for periods of time, such as times of unemployment or if they go back to school.

With some lenders, borrowers can lose their benefits if the apply for deferment or forbearance.

7) Proof of Graduation - Some lenders require borrowers to provide proof of graduation in order to keep benefits.

8) Early Pay Off - Borrowers can sometimes lose their benefits if they pay their loans off early.

Selling loans = loosing borrower benefits?

Do you wonder if selling loans will lead to losing borrower benefits?
Choosing a lender can be one of the most important decisions you’ll make when borrowing money to pay for school. Be sure to take into account the savings offered by each lender such as origination fee discounts, interest rate reductions, or rebates. To help you make the best possible choice, consider the following information.

Under federal guidelines, lenders are allowed by law to charge an origination fee of up to 3% of your gross loan amount. Some lenders offer you discounts on this fee, while others may offer special discounts or rebates for making a number of consecutive on-time payments. For more information, see the Loan Cost Comparisons of KHEAA’s Major Lenders. Loan costs change periodically, so you should contact the lender for the most current information.

*

Loan Cost Comparisons of KHEAA’s Major Kentucky Lenders
o Federal Stafford Loans
o Parent PLUS Loans
o Graduate/Professional PLUS Loans

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Loan Cost Comparisons of KHEAA’s Major Alabama Lenders
o Federal Stafford Loans
o Parent PLUS Loans
o Graduate/Professional PLUS Loans

*

Loan Cost Comparison for Alternative Loans

The Kentucky loan cost comparison chart is provided in the popular Adobe Acrobat™ format. If you need the free Adobe Acrobat Reader™ software, you can download it by clicking on the Get Acrobat Reader™ button below.


Following are important questions to ask about lenders you are considering for your student loan.

Does the lender provide origination fee discounts, interest rate reductions, forgiveness of principal, or other incentives?

The bottom line is that discounts and other incentives can save you money! Lenders are not allowed to provide an origination fee discount prior to disbursement for PLUS loans.

Does the lender sell its student loans?

Many lenders sell their loans to other holders or secondary markets after the loans have been disbursed. When your loan changes ownership, the servicer may also change multiple times during the life of your loan. It is important that you stay in touch with your loan holder and/or servicer to ensure you fulfill your repayment obligations.

Does the lender use a servicer?

Many lenders use loan servicing agencies, or servicers, to handle the day-to-day work on their student loans. Servicers handle not only borrowers’ questions about their loans, but also repayment and deferment issues. Since the borrower/servicer relationship is often long-term, it is important for you, the borrower, to know who you are dealing with. Some lenders service their loans locally and some use out-of-state or national servicers.

Does the lender require a credit check?

Federal regulations require that credit checks be performed for all Federal PLUS Loan borrowers. However, some lenders may require credit checks for Stafford Loan borrowers as well.

Does the lender require a "customer relationship"?

Some lending institutions, such as credit unions, require that you are a member of their institution before they will accept your application.

Does the lender offer Federal Consolidation Loans?

You are required to make payments to each lender that makes a student loan for you. If, throughout the course of your education, you borrow from more than one lender, you may be eligible to consolidate those various loans into one loan. By doing so, you will only have one payment to make to one lender each month. You may also reduce the amount of your monthly payments once your Consolidation Loan is approved. However, you may lose certain other benefits, such as deferment options, so consider these carefully before consolidating your loans.

As an alternative to a Consolidation Loan, some lenders are willing to buy or sell your loans from/to other lenders. This allows you to retain the same benefits on your loans and make one monthly payment. You should contact your lenders to determine if this is an option for you.

What is a preferred lender list?

Many colleges provide student borrowers a list of lenders to consider. These lists are developed by the colleges under a wide variety of objectives which may include some of the following: (1) prior service provided to borrowers at that school, (2) discounts or other borrower savings provided at loan origination time, (3) savings provided to borrowers during repayment of the loan, (4) proximity of banks/lenders in the area where the college is located, (5) electronic processes offered to student borrowers and the college financial aid office necessary for efficient and timely delivery of funds, and (6) cancellation provisions for borrowers who enter certain professions after graduation. These lists are suggestions and are provided as a convenience to the borrower for consideration. As a borrower, the ultimate decision on which lender to use rests with you--compare the origination fees, discounts, and other savings each lender offers and choose the one that is best for you.

Once I’ve compared lenders and the benefits they offer, how can I make sure I get the benefits I’m looking for?

Different lenders may have several different Lender ID Codes, and each code may have different benefits associated with it. Be sure to use the correct Lender ID Code when you fill out your loan application.

Life After College

How many times have you said to your friends, “I can’t wait to be able to afford all those things we can’t afford now”? The prospect of earning a “real” salary, buying a new car, and getting a new wardrobe is really exciting, but don’t forget that this new lifestyle is also going to include having to pay bills at the end of each month.

Once again, having a plan in place will help you deal with the new financial challenges you’re about to face. This time the plan is called a budget. It’s not easy to anticipate all the expenses your salary will have to cover, so putting the data on paper will help you see where your money goes. Here are some things to consider.

Credit Card Debt
Banks make getting credit cards easy. Credit cards make spending easy. But sometimes easy is not so good. Credit card companies market extensively to recent graduates because there is a great deal of money to be made in that market: Interest rates vary from card to card and may range anywhere from 10 to 20 percent yearly. It’s very easy for a new graduate to get caught in the credit card trap.

Before you accept or use your new credit card, make sure you carefully read and understand the fine print and can pay at least the monthly minimum balance. If at all possible, pay off your credit card debt as soon as possible. If you have a savings account or have received money as a graduation gift, you should consider paying off your credit card bills before you take that expensive trip you’ve been dreaming about. “Pay now, buy later” is a good rule of thumb at a time when your income is limited.

Repaying Student Loans
Most students are troubled by the prospect of repaying their student loans. They’re not sure of the who, what, when, and where of the system. Here are a few things to remember:

* All students who took out loans and signed promissory notes during their undergraduate study now have a legal obligation to repay that amount and any interest associated with that loan.
* Know the addresses and phone numbers of all your lending agencies.
* Know all of the loan repayment options that are available to you, such as loan consolidation, standard repayment, and graduated repayment. Choose the option that will best fall within the limits of your budget.
* A deferment is postponing the repayment of a student loan. As a borrower, you have a legal right to exercise this option if circumstances merit.
* Forbearance options are also available, where the lender agrees to extend your payment schedule to avoid a default situation. Contact your lender immediately if you are having problems with your repayment schedule. On certain occasions, lenders may be willing to temporarily change your repayment schedule.

A word of caution is needed here about credit ratings. Anytime you are late with a payment, whether it be a credit card payment, car loan payment, telephone bill, or rent, it most likely will be reported to a credit bureau. This bureau will be contacted when you try to get a mortgage or want to borrow money to make any kind of sizeable purchase. It’s very important to remember that your buying and spending habits now may have major repercussions in the future.

Buying a Car
Making any major purchase requires lots of research before the transaction is completed. The process of buying a car is time consuming and takes lots of patience.

The first step is to decide whether you want a new or used car. More and more people are buying used cars, since the initial cost of buying a used car is usually a good deal lower than the purchase of a new car.

Then, you should spend time prioritizing the extras you want. Can you really afford a sunroof or that stereo system that has spectacular sound? It’s true that such items will increase the resale value of your car, but they will also increase the purchase price.

Know the cost of insurance for the car before you buy a new car. Investigate several insurance companies and learn what services they provide, how much deductible you will have to pay, etcetera.

When it’s time to pick up your car, you will have to sign all loan agreements, have a certified check for your down payment, and have a check to cover the costs for the registration of your car. You will need some sort of verification from your insurance company to indicate that the car is insured.

Ultimately, you should consider all options before committing to costly payments each month, and remember, if you’ve made the wrong choice, you can always go to Plan B or even Plan C if necessary.

Building a Professional Wardrobe
Now that you’ve got that job, what kind of clothes will you need and, just as important, what impact will buying these clothes have on your budget?

Dress codes vary greatly, depending on the industry and management team at the helm of a business. If you’re not sure you’re dressing right on the job, look around you and notice the attire of the managers and others who are the decision makers. Meanwhile, wear your more conservative clothes until you get a sense of what’s appropriate.

But how do you manage to buy a wardrobe for your new work situation, while you’re living on a very tight budget? Once again, you’ll need to devise a plan.

You really don’t need to buy a great many clothes. Start with the basics and add new components and accessories from there. The mix and match rule will help you recycle the same outfits until you can afford to augment your wardrobe.

Also, check out discount stores and resale shops for apparel, at a fraction of the retail price. Think of buying clothes that are “classic” and not in a style that will be out of fashion next year. An expensive suit that you can wear for five or six years is a better investment than a poorly made bargain that looks shabby after you’ve worn it for a year or two.

If you put some time and effort into planning your wardrobe, you can look like a successful, big-time career person, by only using a small-time budget.

From: Reality 101: The Ultimate Guide to Life After College, by Fran Katzanek

i really enjoyed this book. this is an excerpt from this great novel. i recommend anyone reading this who is stepping out of college and fresh into the working world. considering i am one of those people, i had to pick this up at Barnes & Noble. Glad I did! This book is great. Besides, its nice to have a "smart read" once and awhile.

Reconsolidation Loans

John Carlton writes today in his blog:

...Here’s what I’m talking about: The Web has “officially” become the Number One source for advertising for many of the culture’s biggest advertisers — a year earlier than predicted. Gazillions of bucks that used to be channeled through “traditional” media (newspapers, magazines, direct mail, television, radio, etc) have now been measurably diverted online.

For the people who keep track of this sort of info, this news is astonishing and troubling (if not unexpected).

The entire foundation of our capitalistic economy is shifting, and most of the former movers and shakers simply are not prepared for the change.

The obvious signs of upheaval are the disappearance of entire market segments. Like most of the music-selling stores (Tower, Wherehouse, your favorite former local hipster CD haunt)...

Read more at his blog.

Comprehensive Overview of Student Loan issues

These days, getting angry seems to be part and parcel of earning a degree. And I'm not talking about student protests. I'm talking about student loans.

Higher education has always been expensive and applying for financial aid was never easy. The difference now is that student loan debtors, like other consumers, are more vocal when they think they're being treated unfairly. And student loan companies don't like what they're hearing.

The latest controversy revolves around Loan to Learn, whose parent company EduCap Inc., based in Herndon, pioneered the private student loan business.

A quick and dirty primer: Students have several pools of money to tap into to pay for school: their family, grants and scholarships, federal loans and private loans.

Student borrowers are limited as to the amount of federal loans they can take out. And family and grant money are, for most people, a finite resource. That's where private loans come in.



Private loans have become lucrative as the cost of higher education has risen. Loan to Learn, in fact, has seen its share of the market grow to 18 percent of all student loans and to about 10 percent of all student aid awarded -- a total of $13.8 billion in 2004-2005. Alan Collinge of Student Loan Justice says business is likely to get even better for private lenders in the education industry because Congress took bankruptcy off the table for private loans in the most recent bankruptcy legislation.

Last month, the U.S. Student Association filed a complaint against EduCap with the Federal Trade Commission, saying it misleads students and families about their loan options.

The complaint focuses on "Demystifying Financial Aid", a pamphlet Loan to Learn offers on its Web site. The gist of the complaint is that Loan to Learn makes private loans seem like an appealing alternative to federal loans and misleads borrowers about benefits that only federal loans offer.

Contacted yesterday, Loan to Learn spokesman Tom Calcagni said he is working on a response. As soon as we hear from him, we will post his comments here. The company told the New York Times yesterday that the allegations are "false and contrary to EduCap's philosophy and business practices of 20 years."

Loan to Learn is also facing claims they use gifts and paid trips to conferences to get on the good side of financial aid administrators, who put together lists of "preferred lenders" for student borrowers.

Applying for financial aid is so complicated and independent information so hard to come by, that student borrowers and their families have come to rely on the preferred lender lists and lenders know this, said Luke Swarthout of Student Debt Alert and currently a guest blogger for Generation Debt.

The payola allegations resurfaced yesterday in the New York Times, which reported that EduCap is sponsoring a February 2007 "Education Summit" at a Four Seasons in the Caribbean and has offered all-expenses-paid "special invitations" to university officials and their spouses. School administrators at universities that have accepted money from lenders or who have taken home items such as iPods from lenders, said the money and items they received were of too small a value to influence them.

As a private education lender that does not offer federally-guaranteed loans, Loan to Learn is not subject to the illegal inducements rules, said Mark Kantrowitz of finaid.org.

Kantrowitz says, however, he doubts any school is going to choose to promote a particular lender just because they throw a nice party or give away free iPods. "Most of the financial aid administrators I know are very dedicated, focusing on providing their students with the selection of lenders that best fit their needs," he said.

I suspect many student borrowers might be a tad less angry with lenders if executives at the student loan companies weren't making so much money. Sallie Mae Chairman Al Lord, you might recall, was part of a group that was in the running to buy the Nationals. EduCap chairwoman and co-founder Catherine B. Reynolds tried to donate $38 million to the Smithsonian in 2001, then withdrew it after curators balked at some of the requirements. Her foundation ended up giving $100 million to the Kennedy Center.

If you're shopping for a student loan, you might want to go beyond the preferred lender list. Sites such as simpletuition.com, finaid.org and the federal student office are good places to start.

According to Kantrowitz, low cost is one factor, but there are also dozens of other criteria, such as customer service and problem resolution.

Are you better off for having taken on student loan debt? Or is the cost of higher ed and the terms and conditions of student loans creating a new type of indentured servitude?

By Annys Shin | October 25, 2006; 10:15 AM ET | Category: Consumer News
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I took out $55,000 in federal loans and $90,000 in private loans for law school. So. Not. Worth. It.

Consolidating my loans ended up being an enormous problem because my consolidation lender underpaid the original lender, and so I went into default as a result of this mistake. Even though the consolidation company admitted blame, the default goes on my record because I am the one responsible. It took about 5-6 months to clear up. I was also charged a $900 loan origination fee as a result of my debt to credit ratio based on the fact that capital one credit cards do not submit my credit limit so the lender put my limit at 0, thus seriously decreasing my available credit, and increasing my debt to credit ratio.

My private loans are so high compared to the modest income I make. I spend 42% of my net income paying off my private and federal loans each month.

And my law school held a seminar to allow a company to tout it's service of finding the appropriate consolidation lender for each student. Using this non-profit organization (which has since become for-profit), I consolidated with their recommended company. After all the problems I encountered with my conslidation lender, I came to find out that the company my law school had speak at it is based in the same PA town that my consolidation lender is from. Additionally, this company suggested the same consolidation lender to each student, rather than finding a specific consolidation lender for each student's specific needs.

Posted by: law school debtor | October 25, 2006 09:58 AM

I am in the same basic boat as "law school debtor." My husband and I have a combined debt of $140,000 in school loans. I have two masters degrees and he has a doctorate from a prestigious university...but the market collapsed when I was finishing my masters and now there are no jobs. Now we have "day jobs" in other fields.

We pay 1/3 of our income to taxes and 1/3 to student loans every month...leaving us 1/3 of our income to live on. Though we pay around $20,000 a year in student loan payments, the government says we can only claim $2,000 of it on our taxes each year. We will be paying our loans until we are 60 and then we can expect to be taxed on any amount left remaining. We cannot afford to have children because of our student loan debt. We also cannot live near our families because the cost of living in those areas is so high. We cannot get government help because we technically make too much (even if 2/3 of it never gets to our pockets).

We went into debt to get an education so that we could get good jobs and we find that we have mortgaged away the rest of our lives by taking out student loans.

Posted by: collegedebt4life | October 25, 2006 10:27 AM

More than a few university administrators need to re-read their ethics standards. The doctors who accept gifts, free samples, and catered lunches from pharmaceutical salespeople say the same thing, "Oh, those are too small in value to affect my professional judgement."

The lesson in all this: students and famillies need to do their own homework, research the lowest cost of funds, and not rely on the biased views of lenders or school personnel.

Posted by: Ken L | October 25, 2006 10:56 AM

Like the previous two posters above, my husband and I have incurred a susbtantial amount of student loan debt. His (about $15,000) has been consolidated and will be paid off in about 20 years. Mine (still accumulating) will total about $75,000 when I am done with my graduate degree, and I will strive to pay off in the original 10 year period -- because the state of Michigan offers a 0% interest rate after three years of consecutive payments. A huge incentive not to consolidate!

I figure our monthly payment (mine are currently deferred as I am still in school) will be approximately $1000 a month, or about a quarter of our income -- if we still have the decent jobs we have.

Hopefully my studies will allow me to get an even better job, though with Michigan's economy being the way it is - I've really gone back for my MBA simply to be able to continue at the level I am.

Like others, it is likely we will delay/not have children, due to the loan burden we carry.

Welcome to the future -- where those who are educated can't afford to reproduce and pass their knowledge on to the next generation!

Posted by: Michigan | October 25, 2006 10:58 AM

The 'San Francisco Chronicle' has an article on the same topic today called 'Staggered by Debt'.
It prompted me to write about the issue of cooks and culinary schools on my blog 'Serge the Concierge'.
In that field (culinary), I believe that what makes it hard for students to repay their loans is the relatively low pay a cook gets in comparison to the loans she/he incurred.

Have a good day

Serge
Blog:
http://www.sergetheconcierge.com
Biz:
http://www.njconcierges.com

Posted by: Serge Lescouarnec | October 25, 2006 10:58 AM

I worked two jobs (one full time M-F, one part-time weekends) to pay for night school 25 years ago. I only got a 2-year degree after 6 years of night school. I didn't have the energy to work another 6 years to finish a full degree. I attended a private college in DC, and tuition was astronomically high then. It turns my stomach to see what the tuition is now. Not only did I have to pay school expenses, I lived on my own and had to pay all living expenses as well -- rent, food, clothing, books, car expenses so I could get to class. Not a dime from mommy and daddy, and the little bit I borrowed in student loans has been paid back.

However, those of you with law school loans can look forward to a filthy rich future judging from lawyers' salaries. Some make nearly $1 million a year and those piddly student loans will be paid off quicker than you think. If you marry another lawyer your wealth will double. Wow! Just imagine the house in McLean, summers in Europe, vacation house on Marthas Vineyard, au pairs and private school for your kids, Beamers and a Mercedes in the garage, or maybe a Lexus or two.

When I retire in 2 years, I plan to go back to community college, where I can go for free after age 60. I'd like to go into the health-care field and have an entirely new career.

Posted by: Southern Maryland | October 25, 2006 11:07 AM

It's so expensive just to attend school now days. Unfortunately it's almost a necessity if you want to get a decent job. For me I didn't want to get a student loan or anything or the sort. I paid my own tuition and worked the night shift to pay for everything. I know that option isn't the best for everyone but if you want to remain debt free from school, you have very little choices.

Posted by: ironhyde | October 25, 2006 11:18 AM

Southern Maryland fails to realize that most lawyers absolutely do not make that kind of money. Many, especially those going into public service, or working for the district attorney or public defender, earn less than $35,000 per year. For those people their law school loans will in no way be paid off in a couple of years. If you have any other ill-conceived lawyer stereotypes to discuss, I'd be happy to respond.

Posted by: poorlawstudent | October 25, 2006 11:19 AM

I borrowed $50,000 to get my MBA. Was totally worth it - I got my current job based on my MBA experience. Consolidated the Federal loans at 2.5%, have a private loan for about $10k that around 6%. After 24 months it'll go down to 5.5%.

I didn't think figuring out financial aid was that hard - my school's financial aid office had great materials on which private lenders they used, then I went online and did some research to find out who had the best repayment terms.

Will I be paying this off for the next 20 years? Yes. (Unless I win the lottery...) But I knew that going in, and I waited to find a job that paid enough that I could afford to pay them back and still live on what was left over.

Posted by: Howard County | October 25, 2006 11:22 AM

My husband and his hometown friends who went to college all incurred large amounts of debt in order to do so. However, all of them are much better off now then the ones who are stuck in the small PA town working dead end blue collar jobs in factories that are closing.

Posted by: skm | October 25, 2006 11:25 AM

Thanks for the links and information. I went to college some 30+ years ago, and grad school 20+ years ago. My debts are long paid off, but I do have a 9th grader who is just starting to think about college. I truly appreciate the heads-up.

Posted by: cotopaxi | October 25, 2006 11:26 AM

As with credit card debt, the student loan situation argues for better education of consumers as to the effects of interest rates, compound interest, etc. on the borrowing that they do. I'm lucky in that I've educated myself and worked to consolidate my debts in ways that have minimized the interest now due on them, but what a difference it would have made if at some point there had been some practical education in the public schools I attended to teach us how debt and interest works before dumping us out into a marketplace that's fairly unforgiving of mistakes.

Posted by: Moose | October 25, 2006 11:29 AM

Uh...who said that you need to spend $150K for a degree? Just because lenders are willing to shell out that kind of money, maybe you should really consider whether you can repay this type of debt when you graduate. I especially amazed at the number of parents who see no problem taking on this this type of debt load for the undergraduate education of their precious children so that they can attend schools like Duke, NYU, Fordham, Johns Hopkins, Boston College and Miami. Sure, these are prestigious schools and my wife and I both graduated from one of them in the mid-80s. However, when do you say "honey, I love you, but we need to look at schools that are a bit more within our means." Does this mean that you trade NYU for NVCC? No, but Virginia offers awesome schools, public and private (e.g., Lynchburg) at a fraction of the cost. Read Jay Matthews' book Harvard Schmarvard for a list of 100 that are great schools and a good value. Our daughter got into Ithaca, UNH and several Virginia state schools and chose to go in state. Could we have afforded the others? Sure, but would her education have been 2-3 times better? Unlikely! With the amount of information available today it is hard to understand how people can mess this up so badly.

Posted by: Lester Burnham | October 25, 2006 11:36 AM

Uh, Southern Maryland - my dad is an estate attorney in a small town in Pennsylvania and while he's not living paycheck to paycheck I can assure you he does not live in a mansion, does not summer in Europe, has never had an au pair, and has one car, which is none of the brands you list. Poorlawstudent is absolutely right that the stereotype that all lawyers are rich is way off base. How much a lawyer can make often depends on the type of law they practice, and the economy of the area. A public defender in East Liverpool Ohio is probably not going to make as much as a public defender in Beverly Hills.

Posted by: Arlington | October 25, 2006 11:56 AM

What everyone is totally missing is that these easy to get loans are fueling the price inflation at universities. The price of education has gone up many times the rate of inflation since these loans were established. Yet the education bought with this price increase has remained the same. In fact, looking at my university. They have the exact same profesors they had ten years ago, but the price has almost doubled. The difference is that universities are all using this loan money to build golden student centers, ours was just completed at $140 million. Universities waste this money and it ends up costing students for years. The public universities have turned into huge centers of corruption for state governments with kickbacks for construction contracts. All these Masters and Phds, yet no one is looking at the economics of the situation. Perhaps evryone is blinded by their loyalty to the university to hold them up to accountable standards. A national epidemic it seems.

Posted by: morganja | October 25, 2006 12:37 PM

I was being sarcastic -- sorry it didn't come across that way. I work for a large law firm where the partners pull down close to $1 million a year. The only drawback is you have to sell your soul to be a lawyer. Give up your life. They enter 60-80 hours a week on client work. Our office is staffed 24/7. If you call here at 3:00 am on Saturday morning, somebody will answer the phone. Many are married to other lawyers because nobody else can stand them, therefore doubling their wealth. I'm merely a low-life support staff and make more than most Government lawyers. It's not a field I'd want to go into myself. I only work here because I have a mortgage and have to support myself so I guess I'm no better than they are.

Posted by: Southern Maryland | October 25, 2006 12:48 PM

Morganja...you may have a point...I recall seeing an article recently which stated that college tuition has increased 35% over the past five years. These are the types of price increases that existed in healthcare until the early 80s when the government, as the largest insurer, stepped in. While this is a different, unregulated market, I wonder if we will see a consumer backlash against these schools to keep their costs in line? It should be interesting to see what happens in about five years when supply and demand (graduation HS seniors and college freshman slots) become more balanced. Some schools (e.g., the Ivies) won't notice, but other schools should see some pain.

Posted by: Lester Burnham | October 25, 2006 01:03 PM

I think people need to start weighing their options in a more realistic light. I graduated from a prestigious college several years ago, and I'm currently pursuing my Master's degree while working full time. I had a number of choices, two of which were: 1. an expensive, prestigious private university where I'd be a full-time student with a $65,000 loan hovering over my head; or 2. a moderately-priced local university of moderate reputation, where I could enroll as an evening student while working full time. Guess which I chose? The latter. Sure, the prestigious name lured me, but it just didn't merit the $65,000 tag that came with it because I'm not even going into law, medicine, business, engineering, or some other lucrative field that would help me recoup what I spent. I gave up the prestige in exchange for financial freedom- I bought a house while going to school, paid my tuition while working, and will soon graduate with a Master's degree that's all paid for!

Posted by: a grad student | October 25, 2006 02:04 PM

I also join the ranks of those who invested in a post-graduate degree only to realize lackluster salaries and mounting student loan payments. By entering the Federal sector, my post-MBA salary is not a whole lot more than it was before I went back to school, except now the loan payments are mounting. I've refinanced the Federal loans at a low interest rate, but they hardly covered the price of tuition, let alone books and living expenses during those 2 years. Private "MBA Loans" funded the rest, and those are locked in at 7-8%. There's precious little information on the tax implications and refinancability of these private loans.

I'm glad I got my BA at a state school. But MBA programs at state schools are not really less expensive than those in private universities, so there's really no way to win.

Posted by: MBA in D-E-B-T | October 25, 2006 02:15 PM

I've been out of undergrad for almost 14 years, and it sounds like things have changed drastically. I took out the maximum in one kind of federal loan each year of school, and more of another type of federal loan in order to pay for my education. It was inconceivable that I would have to go to a private lender (then again, we were pretty poor, so we qualified for the second type of loan, and I decided to go to a Big 10 state school whose out-of-state tuition was half the tuition at the private school I got into).
I think I am definitely better off for having been able to take out the loans. It was challenging the first few years, but doable.
I am definitely glad that I did not finance a graduate degree with loans. I don't think that on top of undergrad would have been worth it. Instead, I got a job with tuition benefits that covered my masters, then took a position at a university to get free tuition for the PhD. While I'm still working on the last degree, and it's taken me longer, I got some really valuable experience from working and going to school.

Posted by: things have changed | October 25, 2006 02:34 PM

The spiraling cost of higher education has already resulted in a migration to community (aka "junior") colleges at least for the first two years. Provided you can attend a school that provides transferrable credits, you can complete your education at a four-year school and save a LOT of money. The universities won't change their practices until they notice that their freshman classes are shrinking.

Posted by: CT | October 25, 2006 03:17 PM

If you're borrowing to earn/buy a degree in business, law, science, or medicine, you may be OK. But there's a superabundance of unemployed and underemployed bachelors, masters, and doctorates in the humanities out there. An MBA who can figure out how to make a profit using this cheap/free labor source should do very well--at least under the current administration.

Definitely don't believe the college catalogs; analyze labor/employment data in your field, state, and locale. Know that the "new" employment is "underemployment," sub-forty-hour jobs that prevent labor from unionizing or collecting unemployment! Since they can't qualify for unemployment, the underemployed are not counted as such in Federal employment figures.

Of note: there's a "dirty little secret" about WHO will teach those college courses you are about to pay top dollar for! Contingent academics are most of who's teaching in colleges and universities, working for 1/3 the wage of FT academics without benefits or offices, and often employed by several colleges at once-- allowing colleges to fill the seats and to make the lenders happy.

In a "pyramid scheme," degree holders who fail to find work in their field enlarge the pool of contingent labor, further driving the wages down.

Cultural institutions have mastered the art of using unpain/low paid internships to get work done for less, and businesses are eager to catch up.

Get a degree if there's real opportunity behind it, but don't put your life in hock to stand in the bread line!

Posted by: Borrowing? What's the degree worth? | October 25, 2006 03:19 PM

Has the cost of knowledge now exceeded the cost of ignorance?

Probably not. I could be a close thing, however, depending on what other debt the student accumulates. Credit card companies love to hook students, many of whom come out of high school with no real knowledge of the concept of money. Also, the potential income, and work experience, that could be gained by going straight into the job market from high school, is something to consider.

Posted by: Matt M | October 25, 2006 03:35 PM

Because I went to a private college and law school, I had over $100K in debt upon graduation even though I had partial scholarships. I would have done things much differently (like working and going to school part time) if I had fully appreciated the fact that so much debt means that Sallie Mae, in a sense, owns your first-born. And, no, I'm not in the poor house, but my salary is a modest government one, as I do not work for a large firm. But, I'm tempted...

Posted by: Another poor lawyer | October 25, 2006 04:19 PM

Give me a break. Financial aid is not that complicated.

Furthermore, Welcome to the real world! (which means you need to learn how to read the fine print)

You're adults now, so start acting like it.

Yes, I have student loans myself. Yes, I understand the processes involved. Most of the stuff here sounds like a bunch of whining to me.

Seems like everyone these days thinks the world owes thems something. Be glad you were not born to a poor mother in Africa who is HIV positive, or in India in one of the lowests castes, or in the Gaza strip, or in ... (you get the point).

Stop wasting your time whining. Get to work to pay off your debt and contribute something positive to the world.

Posted by: Grow Up! | October 25, 2006 05:04 PM

Is it whining to ask why bankruptcy for private student loans has been outlawed by Congress?

Is it whining to ask why Student Loan Company CEO's are buying baseball teams, and making $100 million donations?

Is it whining to ask why the two chairmen of the Congressional Education Committees are paying their family members hundreds of thousands of dollars from campaign contributions from student loan companies?

I suggest that growup goto

studentloanjustice.org/victims.htm

to see what this legislation has done to people.

Posted by: studentloanjustice.org | October 25, 2006 11:30 PM

Reconsolidation loan gimmicks you shall be aware of

If you are thinking about reconsolidating your loan, getting a student loan consolidation or whatver else kind of loan (like, wedding etc.) there are things to watch out for, and often you have to read the fine print to find them. Here are some marketing gimmicks some consolidators will use to get you to do a consolidation loan:

• "Apply by this deadline!"
Well, the fact is THERE AREN’T APPLICATION DEADLINES in student loan consolidation. Just keep in mind that interest rates may change every July 1st, so it’s a good idea to check if rates are going to change that year and determine if you should apply before the loan interest rates change.

• "Apply online and get great interest rate benefits!"
Some loan consolidators may require you to apply for a loan online in order to receive interest rate discounts. Plus, if they send you an application confirmation via email, and if your email address is deemed undeliverable twice in 48 hours, then you may not get the discounts!

• "Get an 0.25% interest rate reduction by doing business electronically."
That’s great but you might LOSE that 0.25% reduction if you simply change your email address and they get a bounce back when they try to send your notice or statement. Be sure you understand your obligation to the consolidator in order to keep your reduction.

• "Avoid late fees...pay with auto-debit."
With auto-debit, watch your bank account balance! When the lender tries to auto debit your bank account and there are insufficient funds you may get a late fee from both the consolidator and your bank. Be sure to read the fine print to get specific details on their auto-debit program.

• "No fees to apply for our consolidation loan!"
Not charging fees is a requirement with federal loans. No one charges a fee for a federal consolidation loan.

• "Important information about YOUR student loan interest rates!"
Some loan consolidators attempt to mislead you into thinking that you’re being contacted by the lender of your education loans and that there are changes to your loans. Their hope is that you will contact them so that they can offer you their loan instead. Check out these lenders carefully before applying for a loan.

• Mailings that use seals or logos to imitate the government, a college or university.
Some loan consolidators do this to entice you to open their mailings. Be sure to really check out their logo and fine print to ensure you know who you are dealing with before applying for a loan.

• "Get Deferment or Forbearance Insurance."
Be on the lookout when some loan consolidators may play-up their services. If a loan consolidator offers you Deferment or Forbearance Insurance, they are basically "offering" you deferment or forbearance, which is a standard feature of consolidation loans and is offered by all lenders. Be sure to compare apples-to-apples and understand the actual benefits that your may receive with a loan product.

Remember: If it sounds too good to be true it probably is… read the fine print, ask questions and get it in writing!