BY KARIN PRICE MUELLER
PROFILE No. 2
Married couple, age 32, with two salaries totaling $120,000 a year and two kids, ages 4 and 2. They owe $250,000 on their mortgage, $20,000 to a home-equity loan and $5,000 in credit cards. They have $30,000 in an emergency fund and both contribute the max to their 401(k) plans. They have no college savings.
What they should do: "Make sure that they have the maximum credit line available on the home equity line," Lynch says. "I like that they have $30,000 in the emergency fund which would be helpful in the event of a layoff, but they should pay off the credit card debt even if they have to reduce the contribution in the 401(k)."
What they shouldn't do: Anything drastic. "Continue to invest in their 401(k) account, maintaining a very diversified allocation. The next 6 months will be a buying opportunity for these long-term investors," Fraasa says.
Tuesday, September 30, 2008
Monday, September 29, 2008
Some examples of how to react to the crisis
BY KARIN PRICE MUELLER
It's okay to finally call this a financial crisis. It's okay to admit you're worried.
And this isn't another report telling you to sit tight and wait to see what happens or that you shouldn't worry, things will bounce back.
Rather, this is a time for measured moves, says Jerry Lynch, a certified financial planner with JFL Consulting in Fairfield.
"Don't be stupid. Do not sell all your assets and move into all cash. Do not 'double down' and go for it trying to make up for your losses," he says. "Have a good plan and stick to it."
To help, The Star-Ledger asked some financial advisers to offer advice for families with different money situations. Of course, no two families are alike, but we bet you can find elements of your own financial situation -- and adopt some of the suggestions -- in these profiles.
PROFILE No. 1
Single woman, age 24, with a salary of $40,000 a year. She rents an apartment and contributes 10 percent of her salary to her 401(k). She has $2,000 in a money-market account and has $35,000 in credit card and student loan debt.
What she should do: "Short term, I would suggest that she stops paying into the 401(k) plan at the level she is and pay down the credit card debt," Lynch says. "If the company has a match, do only that and start systematically paying off the high-interest credit card debt."
What she shouldn't do: Refinance her student loan. "She should continue to pay off the student loan at the current amortization," says Reed Fraasa, a CFP with Highland Financial in Riverdale. "After severe legislative cuts by Congress, plus the credit market deterioration, the federal student loan consolidation program is not an option."
It's okay to finally call this a financial crisis. It's okay to admit you're worried.
And this isn't another report telling you to sit tight and wait to see what happens or that you shouldn't worry, things will bounce back.
Rather, this is a time for measured moves, says Jerry Lynch, a certified financial planner with JFL Consulting in Fairfield.
"Don't be stupid. Do not sell all your assets and move into all cash. Do not 'double down' and go for it trying to make up for your losses," he says. "Have a good plan and stick to it."
To help, The Star-Ledger asked some financial advisers to offer advice for families with different money situations. Of course, no two families are alike, but we bet you can find elements of your own financial situation -- and adopt some of the suggestions -- in these profiles.
PROFILE No. 1
Single woman, age 24, with a salary of $40,000 a year. She rents an apartment and contributes 10 percent of her salary to her 401(k). She has $2,000 in a money-market account and has $35,000 in credit card and student loan debt.
What she should do: "Short term, I would suggest that she stops paying into the 401(k) plan at the level she is and pay down the credit card debt," Lynch says. "If the company has a match, do only that and start systematically paying off the high-interest credit card debt."
What she shouldn't do: Refinance her student loan. "She should continue to pay off the student loan at the current amortization," says Reed Fraasa, a CFP with Highland Financial in Riverdale. "After severe legislative cuts by Congress, plus the credit market deterioration, the federal student loan consolidation program is not an option."
Sunday, September 28, 2008
Q&A: How will Wall Street crisis affect average Americans?
By Kevin G. Hall
Q. Given all these risks, why isn't the government bailing out Lehman Brothers?
A. Bailouts are in the eye of the beholder. The Treasury Department and Federal Reserve determined that Lehman's problems had been well publicized since at least spring, other financial players had made adjustments to that and Lehman's failure thus didn't pose a risk of contaminating the broader global financial system the way the sudden failure of Bear Stearns would have if the feds hadn't intervened for it. But make no mistake, a bailout of Wall Street has been under way since last March, and deepened this weekend.
What the Federal Reserve began in March and expanded Sunday is the practice of taking all kinds of collateral in exchange for short-term emergency loans to investment banks. Previously, investment banks had never enjoyed this sort of borrowing because they aren't regulated the same way commercial banks are. The Fed now accepts as collateral a wide range of debt, securities and even the controversial mortgage bonds issued by the private sector and by Fannie Mae and Freddie Mac. The Fed also is now lending to financial institutions that it doesn't regulate.
That can be seen as a bailout because the Federal Reserve is putting lots of suspect collateral on its books. That puts the taxpayer on the hook should there be a failure.
Q. Is there any good news for consumers?
A. Yes. One immediate consequence of Monday's Wall Street earthquake is that oil prices sank sharply as investors fled anything considered a risky bet, despite Hurricane Ike's disruption of oil facilities in the Gulf of Mexico area. The price for contracts of next-month deliveries of oil fell almost $6 a barrel. If prices stay lower than $100 a barrel, inflation pressures should ease substantially. That means gasoline prices should drop in the weeks ahead.
Another positive is that pressure is building on the Fed to cut already historically low interest rates. It could happen Tuesday, when the Fed's rate-setting Open Market Committee meets, or it could come in October, but banks and corporations need capital, and cutting rates lowers the cost of obtaining it.
Source
Q. Given all these risks, why isn't the government bailing out Lehman Brothers?
A. Bailouts are in the eye of the beholder. The Treasury Department and Federal Reserve determined that Lehman's problems had been well publicized since at least spring, other financial players had made adjustments to that and Lehman's failure thus didn't pose a risk of contaminating the broader global financial system the way the sudden failure of Bear Stearns would have if the feds hadn't intervened for it. But make no mistake, a bailout of Wall Street has been under way since last March, and deepened this weekend.
What the Federal Reserve began in March and expanded Sunday is the practice of taking all kinds of collateral in exchange for short-term emergency loans to investment banks. Previously, investment banks had never enjoyed this sort of borrowing because they aren't regulated the same way commercial banks are. The Fed now accepts as collateral a wide range of debt, securities and even the controversial mortgage bonds issued by the private sector and by Fannie Mae and Freddie Mac. The Fed also is now lending to financial institutions that it doesn't regulate.
That can be seen as a bailout because the Federal Reserve is putting lots of suspect collateral on its books. That puts the taxpayer on the hook should there be a failure.
Q. Is there any good news for consumers?
A. Yes. One immediate consequence of Monday's Wall Street earthquake is that oil prices sank sharply as investors fled anything considered a risky bet, despite Hurricane Ike's disruption of oil facilities in the Gulf of Mexico area. The price for contracts of next-month deliveries of oil fell almost $6 a barrel. If prices stay lower than $100 a barrel, inflation pressures should ease substantially. That means gasoline prices should drop in the weeks ahead.
Another positive is that pressure is building on the Fed to cut already historically low interest rates. It could happen Tuesday, when the Fed's rate-setting Open Market Committee meets, or it could come in October, but banks and corporations need capital, and cutting rates lowers the cost of obtaining it.
Source
Saturday, September 27, 2008
Q&A: How will Wall Street crisis affect average Americans?
By Kevin G. Hall
Q. What about the shorter horizon?
A. The chief executive officer of Bank of America, Kenneth Lewis, said Monday that he didn't see the clouds parting for his industry until 2010. Banks that still have exposure to the complex mortgage bonds that are at the heart of the crisis continue to get hammered. That includes Charlotte, N.C.-based Wachovia and Swiss giant UBS.
This financial crisis is still rooted in bad mortgages that were packaged into bonds and sold to investors. As long as home prices keep falling, investment and commercial banks that own vast piles of those bonds will keep taking write-downs and their bleeding will continue.
Q. How do these banking-sector problems affect me?
A. Problems in the banking sector spill into the broader economy. As these complex Wall Street investments sour, banks need to keep more capital on hand to assure investors that they can weather any future losses from loan portfolios. That means banks are playing defense.
If you want a business loan, a car loan, a home loan, a student loan or virtually any other kind of loan, they're hesitant to lend, lest they wind up with more bad loans. With lending drying up, auto dealers are sitting with inventory they can't move and real estate agents are showing homes they can't sell. The economy is slowing as credit is squeezed.
The crisis feeds on itself. As banks and corporations are perceived to be short of capital and their stock prices fall, their need to raise capital grows even as lenders are defensive. That forces them to sell assets at low prices, and it becomes a vicious circle. That's what insurance and finance giant American International Group now faces.
Q. What about the shorter horizon?
A. The chief executive officer of Bank of America, Kenneth Lewis, said Monday that he didn't see the clouds parting for his industry until 2010. Banks that still have exposure to the complex mortgage bonds that are at the heart of the crisis continue to get hammered. That includes Charlotte, N.C.-based Wachovia and Swiss giant UBS.
This financial crisis is still rooted in bad mortgages that were packaged into bonds and sold to investors. As long as home prices keep falling, investment and commercial banks that own vast piles of those bonds will keep taking write-downs and their bleeding will continue.
Q. How do these banking-sector problems affect me?
A. Problems in the banking sector spill into the broader economy. As these complex Wall Street investments sour, banks need to keep more capital on hand to assure investors that they can weather any future losses from loan portfolios. That means banks are playing defense.
If you want a business loan, a car loan, a home loan, a student loan or virtually any other kind of loan, they're hesitant to lend, lest they wind up with more bad loans. With lending drying up, auto dealers are sitting with inventory they can't move and real estate agents are showing homes they can't sell. The economy is slowing as credit is squeezed.
The crisis feeds on itself. As banks and corporations are perceived to be short of capital and their stock prices fall, their need to raise capital grows even as lenders are defensive. That forces them to sell assets at low prices, and it becomes a vicious circle. That's what insurance and finance giant American International Group now faces.
Friday, September 26, 2008
Q&A: How will Wall Street crisis affect average Americans?
By Kevin G. Hall
Average Americans have a lot at stake in how the widening financial crisis plays out. Here are some answers to questions about it:
Q. What does all this Wall Street volatility mean to me?
A. If you have a 401(k), you shield some of your income from taxation through an IRA or a lot of your retirement savings are in stocks, you've already seen a sharp drop in the value of your nest egg. The Dow Jones Industrial Average is on pace for one of its worst years ever, but even if you've parked your cash in a bank, today's rising inflation is eroding its value.
Q. Is this like 1929, when the stock market's crash led to widespread bank failures and the Great Depression?
A. No. The interventions so far by the Federal Reserve and the Treasury, the existence of federal deposit insurance for national bank customer accounts and the willingness of Congress and the president to fight the downturn with fiscal policy all underscore that there are safety cushions in place that didn't exist 80 years ago. Still, today's financial turmoil could spread, and the economy could suffer more before stability returns.
Q. Will the collapse of Lehman Brothers make things worse?
A. It could, or it could make things better. The weekend meetings between top federal regulators and senior executives of Wall Street firms resulted in the surprise takeover of Merrill Lynch by Bank of America and a lack of suitors for Lehman. Some analysts feared a Great Depression type of financial-market meltdown Monday morning, but markets were orderly, not panicked, as news of the events sank in.
With the government-brokered sale of investment bank Bear Stearns in March, Bank of America's absorbing of Merrill Lynch and the bankruptcy filing by Lehman, Wall Street's weakest players have been pushed off the field.
Goldman Sachs, Morgan Stanley and JP Morgan remain the biggest traditional investment banks, and Merrill is expected to keep operating under its own name. The consolidation in investment banking has taken most insolvency concerns off the table, and over a longer horizon this could point toward a return to stability.
Average Americans have a lot at stake in how the widening financial crisis plays out. Here are some answers to questions about it:
Q. What does all this Wall Street volatility mean to me?
A. If you have a 401(k), you shield some of your income from taxation through an IRA or a lot of your retirement savings are in stocks, you've already seen a sharp drop in the value of your nest egg. The Dow Jones Industrial Average is on pace for one of its worst years ever, but even if you've parked your cash in a bank, today's rising inflation is eroding its value.
Q. Is this like 1929, when the stock market's crash led to widespread bank failures and the Great Depression?
A. No. The interventions so far by the Federal Reserve and the Treasury, the existence of federal deposit insurance for national bank customer accounts and the willingness of Congress and the president to fight the downturn with fiscal policy all underscore that there are safety cushions in place that didn't exist 80 years ago. Still, today's financial turmoil could spread, and the economy could suffer more before stability returns.
Q. Will the collapse of Lehman Brothers make things worse?
A. It could, or it could make things better. The weekend meetings between top federal regulators and senior executives of Wall Street firms resulted in the surprise takeover of Merrill Lynch by Bank of America and a lack of suitors for Lehman. Some analysts feared a Great Depression type of financial-market meltdown Monday morning, but markets were orderly, not panicked, as news of the events sank in.
With the government-brokered sale of investment bank Bear Stearns in March, Bank of America's absorbing of Merrill Lynch and the bankruptcy filing by Lehman, Wall Street's weakest players have been pushed off the field.
Goldman Sachs, Morgan Stanley and JP Morgan remain the biggest traditional investment banks, and Merrill is expected to keep operating under its own name. The consolidation in investment banking has taken most insolvency concerns off the table, and over a longer horizon this could point toward a return to stability.
Thursday, September 25, 2008
Banks in state report stability
BY DENNIS SEID
Too much debt
Taking on massive debt is not an ideal situation, because it is impossible to maintain the capital structure, and that's where companies like Lehman ran into problems - liquidity.
Said Cyree, "Lehman's was overleveraged - 30, 40, 50 to 1."
In fact, Lehman had $60 billion of bad real estate. It wasn't alone, however, as global banks have written off more than $300 billion in asset value since last year, according to The Associated Press.
And that's why banks doing business in Mississippi are doing just fine.
"Larger regional banks and community banks, too, also have something that those other banks don't, and that's stable deposits," Patterson said. "The bottom line is that Mississippi banks are stable, well-regulated and our deposits are safe."
Source
Too much debt
Taking on massive debt is not an ideal situation, because it is impossible to maintain the capital structure, and that's where companies like Lehman ran into problems - liquidity.
Said Cyree, "Lehman's was overleveraged - 30, 40, 50 to 1."
In fact, Lehman had $60 billion of bad real estate. It wasn't alone, however, as global banks have written off more than $300 billion in asset value since last year, according to The Associated Press.
And that's why banks doing business in Mississippi are doing just fine.
"Larger regional banks and community banks, too, also have something that those other banks don't, and that's stable deposits," Patterson said. "The bottom line is that Mississippi banks are stable, well-regulated and our deposits are safe."
Source
Wednesday, September 24, 2008
Banks in state report stability
BY DENNIS SEID
TUPELO - Ken Cyree had plenty to do Monday, but couldn't peel himself from watching the mayhem on Wall Street.
Cyree, the interim dean of the University of Mississippi School of Business and holder of the Mississippi Bankers Association Chair of Banking, was surprised at the financial meltdown he was witnessing.
"I'm in shock," he said Monday morning. He wasn't the only one.
By the end of the day, the Dow had dropped more than 500 points as investors reacted negatively to the bankruptcy filing of Lehman Brothers Holdings Inc. and the forced sale of Merrill Lynch to Bank of America.
"What can you say?" he said. "Look at what's happened to the Big Five on Wall Street. You had Bear Stearns a few months back, Lehman Brothers files for bankruptcy, Merrill Lynch is bought by Bank of America, J.P. Morgan was already bought by Chase ... Goldman Sachs is the only one who hasn't been affected as much.
"The point is, you don't make great returns for free, not with the amount of risk that's involved."
Financial companies made huge bets during the housing bubble, which burst a little more than a year ago. The subprime market yielded good returns -until reality hit. Since then, falling real estate values, rising foreclosures and a tightening credit market have squeezed those financial institutions to the point where we are today: Billions of dollars lost and thousands of people without jobs and homes.
But bank customers in Mississippi need not worry about the liquidity and financial strength of their banks, Cyree said.
"In general, banks in Mississippi are in good shape," he said.
One reason is that the real estate market in the state is stable. Another reason is that banks haven't participated in the subprime debacle that has claimed other banks and other financial firms across the country.
Aubrey Patterson, chairman and CEO of Tupelo-based BancorpSouth, said larger regional banks and community banks in the area have refrained from those risky investments.
"All the problems have roots in the subprime and real estate bubble," he said. "The presumption was that people would continue to make money; it was a contagion. By contrast, BancorpSouth, for example, has assets of $13.4 billion, and we only had $300,000 in subprime debt, which essentially is none."
Regional banks and community banks don't take the big risks that larger banks take and are more regulated, Patterson added.
"There is a distinction between Wall Street and Main Street," he said.
Robin McGraw, chairman and CEO of Tupelo-based Renasant Bank also added assurance, saying, "Although no one is immune to the credit crisis and what is happening within the national financial markets, banking consumers should know that, through the FDIC, their deposits are protected up to certain amounts ... Renasant, as with all FDIC-insured banks, is regularly and thoroughly examined by state and/or federal regulators who focus on institutional performance, soundness and risk management."
TUPELO - Ken Cyree had plenty to do Monday, but couldn't peel himself from watching the mayhem on Wall Street.
Cyree, the interim dean of the University of Mississippi School of Business and holder of the Mississippi Bankers Association Chair of Banking, was surprised at the financial meltdown he was witnessing.
"I'm in shock," he said Monday morning. He wasn't the only one.
By the end of the day, the Dow had dropped more than 500 points as investors reacted negatively to the bankruptcy filing of Lehman Brothers Holdings Inc. and the forced sale of Merrill Lynch to Bank of America.
"What can you say?" he said. "Look at what's happened to the Big Five on Wall Street. You had Bear Stearns a few months back, Lehman Brothers files for bankruptcy, Merrill Lynch is bought by Bank of America, J.P. Morgan was already bought by Chase ... Goldman Sachs is the only one who hasn't been affected as much.
"The point is, you don't make great returns for free, not with the amount of risk that's involved."
Financial companies made huge bets during the housing bubble, which burst a little more than a year ago. The subprime market yielded good returns -until reality hit. Since then, falling real estate values, rising foreclosures and a tightening credit market have squeezed those financial institutions to the point where we are today: Billions of dollars lost and thousands of people without jobs and homes.
But bank customers in Mississippi need not worry about the liquidity and financial strength of their banks, Cyree said.
"In general, banks in Mississippi are in good shape," he said.
One reason is that the real estate market in the state is stable. Another reason is that banks haven't participated in the subprime debacle that has claimed other banks and other financial firms across the country.
Aubrey Patterson, chairman and CEO of Tupelo-based BancorpSouth, said larger regional banks and community banks in the area have refrained from those risky investments.
"All the problems have roots in the subprime and real estate bubble," he said. "The presumption was that people would continue to make money; it was a contagion. By contrast, BancorpSouth, for example, has assets of $13.4 billion, and we only had $300,000 in subprime debt, which essentially is none."
Regional banks and community banks don't take the big risks that larger banks take and are more regulated, Patterson added.
"There is a distinction between Wall Street and Main Street," he said.
Robin McGraw, chairman and CEO of Tupelo-based Renasant Bank also added assurance, saying, "Although no one is immune to the credit crisis and what is happening within the national financial markets, banking consumers should know that, through the FDIC, their deposits are protected up to certain amounts ... Renasant, as with all FDIC-insured banks, is regularly and thoroughly examined by state and/or federal regulators who focus on institutional performance, soundness and risk management."
Tuesday, September 23, 2008
Student Loans Now More Important Than Ever
Applications for student loans are up nationwide and also here at Ozarks universities.
And in these tough times, more and more people are struggling with the debt they accumulated by getting an education.
An education is considered the second-highest investment of a lifetime, right up there after buying a home.
It's an investment many struggle with long after they leave campus.
All kinds of websites and companies offer advice on how to pay up, and we asked the experts the best way to do that.
Students see dollar signs everywhere they go on campus, and many say they constantly ask, "How am I going to pay for all this?"
"It's a hassle to have to go through it every year," MSU graduate student Julie Lamer says. "I really hate it."
It's Jackie Lewis' job to help students navigate the alphabet soup of student loans.
"The questions we get are mostly how much can they borrow," Lewis says. "They don't realize that those limits are set by the federal government."
Lewis says applications this year are up as more students realize they're eligible for aid, and her office has to keep up with the times.
"Avoiding scams," Lewis says. "This is something we direct students in making sure they avoid any kind of scam."
Lewis says she also advises students that it's the "Free" Federal Application for Student Aid, so any company or website that charges you to fill out the FAFSA is a scam.
And whether you already have your diploma or are still buying books, chances are those loans are somewhere in the back of your mind.
"Probably around $60,000," MSU graduate student Cody Carpenter estimates he will owe after he finishes school. "Does that scare you?" we asked. "Yeah, it does actually," Carpenter said.
"Most people will probably not even think about that loan from the time they graduate to the time they make that first payment," Mike Cherry of Consumer Credit Counseling Services says.
Cherry recommends checking with lenders every 60 to 90 days to see if consolidating your loans is a smart move.
"I have consolidated some of my loans already, my undergraduate loans, so hopefully I'll get a better APR," Lamer says.
Lamer says she did her research beforehand, but Cherry says consolidation is not for everyone.
"There's no need to consolidate debt unless you get a better rate," he says. "Unless you can get a better payment, there's no need to consolidate it just to have one loan."
And Lewis says even though waiting in line for help is a pain, don't turn down professional advice.
"We are right there with those students," Lewis says. "We've been through this program ourselves. We've been students."
Cherry recommends checking with the federal government or the Better Business Bureau to make sure a lender is reputable.
He says, unfortunately, the homework continues once you leave campus, but this is very necessary homework, especially because of junk mail and the internet.
Lewis says students have come to her with stories about how websites are charging more than $80 to fill out the FAFSA, and she says that is one big scam.
Source
And in these tough times, more and more people are struggling with the debt they accumulated by getting an education.
An education is considered the second-highest investment of a lifetime, right up there after buying a home.
It's an investment many struggle with long after they leave campus.
All kinds of websites and companies offer advice on how to pay up, and we asked the experts the best way to do that.
Students see dollar signs everywhere they go on campus, and many say they constantly ask, "How am I going to pay for all this?"
"It's a hassle to have to go through it every year," MSU graduate student Julie Lamer says. "I really hate it."
It's Jackie Lewis' job to help students navigate the alphabet soup of student loans.
"The questions we get are mostly how much can they borrow," Lewis says. "They don't realize that those limits are set by the federal government."
Lewis says applications this year are up as more students realize they're eligible for aid, and her office has to keep up with the times.
"Avoiding scams," Lewis says. "This is something we direct students in making sure they avoid any kind of scam."
Lewis says she also advises students that it's the "Free" Federal Application for Student Aid, so any company or website that charges you to fill out the FAFSA is a scam.
And whether you already have your diploma or are still buying books, chances are those loans are somewhere in the back of your mind.
"Probably around $60,000," MSU graduate student Cody Carpenter estimates he will owe after he finishes school. "Does that scare you?" we asked. "Yeah, it does actually," Carpenter said.
"Most people will probably not even think about that loan from the time they graduate to the time they make that first payment," Mike Cherry of Consumer Credit Counseling Services says.
Cherry recommends checking with lenders every 60 to 90 days to see if consolidating your loans is a smart move.
"I have consolidated some of my loans already, my undergraduate loans, so hopefully I'll get a better APR," Lamer says.
Lamer says she did her research beforehand, but Cherry says consolidation is not for everyone.
"There's no need to consolidate debt unless you get a better rate," he says. "Unless you can get a better payment, there's no need to consolidate it just to have one loan."
And Lewis says even though waiting in line for help is a pain, don't turn down professional advice.
"We are right there with those students," Lewis says. "We've been through this program ourselves. We've been students."
Cherry recommends checking with the federal government or the Better Business Bureau to make sure a lender is reputable.
He says, unfortunately, the homework continues once you leave campus, but this is very necessary homework, especially because of junk mail and the internet.
Lewis says students have come to her with stories about how websites are charging more than $80 to fill out the FAFSA, and she says that is one big scam.
Source
Monday, September 22, 2008
Uncovering Secrets to Finding Cheap Textbooks
Student Loan Network Publishes Guide With Tips for Saving up to 90%
Did you know that the International edition of a college textbook can save you as much as 90% off the cover price for the exact same book sold in your college bookstore?
This and many other tips, secrets, and tricks are featured in the Student Loan Network's new guide, "How to Find Cheap College Textbooks," a free resource available for college students everywhere at www.studentloannetwork.com/resources.
"Financial aid is about more than just helping students find student loans," said Joe Cronin, president and CEO of the Student Loan Network, an Edvisors company. "Anything that is likely to significantly impact what a college student or family will have to spend money on is something we aim to help with as much as possible. Certainly, things like federal student loans and private student loans are important, as are free scholarships such as our Scholarship Points program. But that also includes advice on how to conserve spending money by comparison shopping for college textbooks."
In addition to "How To Find Cheap College Textbooks," the Student Loan Network offers free guides on how to find scholarships, how to fill out the Free Application for Federal Student Aid (FAFSA), and many other free resources at www.studentloannetwork.com/resources.
Student Loan Network is one of the nation's fastest growing providers of student loans and related information. For more than ten years, we have helped students and their families access federal and private student loans, scholarships and consolidation funding for undergraduate, graduate and continuing education. Each year, more than 5 million students, parents, and financial aid officers make the most of their education experience through our loan products and free resources. Learn more about the Student Loan Network at www.StudentLoanNetwork.com.
The site mentioned should be considered by the students to shop for cheap books that also fit their requirements.
Did you know that the International edition of a college textbook can save you as much as 90% off the cover price for the exact same book sold in your college bookstore?
This and many other tips, secrets, and tricks are featured in the Student Loan Network's new guide, "How to Find Cheap College Textbooks," a free resource available for college students everywhere at www.studentloannetwork.com/resources.
"Financial aid is about more than just helping students find student loans," said Joe Cronin, president and CEO of the Student Loan Network, an Edvisors company. "Anything that is likely to significantly impact what a college student or family will have to spend money on is something we aim to help with as much as possible. Certainly, things like federal student loans and private student loans are important, as are free scholarships such as our Scholarship Points program. But that also includes advice on how to conserve spending money by comparison shopping for college textbooks."
In addition to "How To Find Cheap College Textbooks," the Student Loan Network offers free guides on how to find scholarships, how to fill out the Free Application for Federal Student Aid (FAFSA), and many other free resources at www.studentloannetwork.com/resources.
Student Loan Network is one of the nation's fastest growing providers of student loans and related information. For more than ten years, we have helped students and their families access federal and private student loans, scholarships and consolidation funding for undergraduate, graduate and continuing education. Each year, more than 5 million students, parents, and financial aid officers make the most of their education experience through our loan products and free resources. Learn more about the Student Loan Network at www.StudentLoanNetwork.com.
The site mentioned should be considered by the students to shop for cheap books that also fit their requirements.
Sunday, September 21, 2008
Risky Plan to Bail Out Non-Profit Lenders Gets Hearing
by Jason Delisle
An Unnecessary Solution
To demonstrate how influence trumps good policy let's consider one policy that Kanjorski promotes on behalf of non-profit lenders.
As part of ECASLA, Congress allowed private lenders to sell their loans to the Department of Education. The policy ensures that the federal student loan market remains liquid. Lenders are more apt to make federal loans if they know that there is a willing buyer who can give them cash for the loan if they need it. The Department chose to implement the loan purchase authority for new student loans (those issued for the 2008-2009 academic year) even though ECASLA gave it the authority to buy loans issued as early as 2003. Kanjorski has chastised the Department for not buying earlier issued loans, an action he claims would help non-profit lenders. In reality, the Department acted responsibly by protecting the interests of taxpayers; Kanjorski's proposal, on the other hand, would benefit lenders at taxpayers' expense.
If lenders were allowed to sell loans that they made prior to 2008, then they could cherry pick their least profitable and most risky loans and unload them on the Department, keeping only the best loans on their books. (Lenders have been doing something similar with federal consolidation loans for years, forcing delinquent borrowers into the direct loan program rather than making the loans themselves).
The White House Office of Management and Budget and the Department of Treasury recognized the potential for cherry picking scenario in their risk assessment of the loan purchase program. Loans issued prior to 2008 would likely have enough performance history for a lender to assess default risk and flip riskier loans to the Department. But lenders are less able to make such determinations for new loans that lack a performance history. As a result, the Department of Education limited its loan purchase agreement to 2008-2009 loans only.
In condemning the prudent course the Department has taken, Kanjorski puts the interests of non-profit student lenders before the interests of taxpayers. Meanwhile, students aren't having any problem getting federal student loans. Of course, the hearing isn't really about them anyway.
Source
An Unnecessary Solution
To demonstrate how influence trumps good policy let's consider one policy that Kanjorski promotes on behalf of non-profit lenders.
As part of ECASLA, Congress allowed private lenders to sell their loans to the Department of Education. The policy ensures that the federal student loan market remains liquid. Lenders are more apt to make federal loans if they know that there is a willing buyer who can give them cash for the loan if they need it. The Department chose to implement the loan purchase authority for new student loans (those issued for the 2008-2009 academic year) even though ECASLA gave it the authority to buy loans issued as early as 2003. Kanjorski has chastised the Department for not buying earlier issued loans, an action he claims would help non-profit lenders. In reality, the Department acted responsibly by protecting the interests of taxpayers; Kanjorski's proposal, on the other hand, would benefit lenders at taxpayers' expense.
If lenders were allowed to sell loans that they made prior to 2008, then they could cherry pick their least profitable and most risky loans and unload them on the Department, keeping only the best loans on their books. (Lenders have been doing something similar with federal consolidation loans for years, forcing delinquent borrowers into the direct loan program rather than making the loans themselves).
The White House Office of Management and Budget and the Department of Treasury recognized the potential for cherry picking scenario in their risk assessment of the loan purchase program. Loans issued prior to 2008 would likely have enough performance history for a lender to assess default risk and flip riskier loans to the Department. But lenders are less able to make such determinations for new loans that lack a performance history. As a result, the Department of Education limited its loan purchase agreement to 2008-2009 loans only.
In condemning the prudent course the Department has taken, Kanjorski puts the interests of non-profit student lenders before the interests of taxpayers. Meanwhile, students aren't having any problem getting federal student loans. Of course, the hearing isn't really about them anyway.
Source
Saturday, September 20, 2008
Risky Plan to Bail Out Non-Profit Lenders Gets Hearing
by Jason Delisle
Political Clout and the Non-Profit Lender
Kanjorski, like other Members of Congress, wants to help non-profit lenders, not for pressing policy reasons, but because of the political hold they have over Congress' home state constituencies. Many non-profits are intertwined with state governments and serve as big employers. By keeping non-profits in business -- protecting the federal subsidies these nonprofits receive through the federal loan program -- elected officials can take credit back home. But not all non-profits are using taxpayers' dollars wisely. A recent report by the Pennsylvania state auditor found that the Pennsylvania Higher Education Assistance Authority "created an elite compensation package for its executive staff that included excessive salaries and incentive payments not typical of a prudent state agency." This included salaries of close to $300,000 for both the president and CEO and over $200,000 for several executive vice presidents.
It is also important to note that non-profits gain political favor by hiring former Members of Congress. These individuals are hardly experts on the student loan industry, but have valuable Washington connections. In addition, non-profit lenders and their trade associations maintain a revolving door with the U.S. Department of Education, as well as key Congressional committees and offices. To be clear, we don't take issue with lobbying per se, or with organizations building effective lobbying staff. But lawmakers who are persuaded by such lobbying to enact policies that are not in the best interests of students and taxpayers should be called on the carpet.
Source
Political Clout and the Non-Profit Lender
Kanjorski, like other Members of Congress, wants to help non-profit lenders, not for pressing policy reasons, but because of the political hold they have over Congress' home state constituencies. Many non-profits are intertwined with state governments and serve as big employers. By keeping non-profits in business -- protecting the federal subsidies these nonprofits receive through the federal loan program -- elected officials can take credit back home. But not all non-profits are using taxpayers' dollars wisely. A recent report by the Pennsylvania state auditor found that the Pennsylvania Higher Education Assistance Authority "created an elite compensation package for its executive staff that included excessive salaries and incentive payments not typical of a prudent state agency." This included salaries of close to $300,000 for both the president and CEO and over $200,000 for several executive vice presidents.
It is also important to note that non-profits gain political favor by hiring former Members of Congress. These individuals are hardly experts on the student loan industry, but have valuable Washington connections. In addition, non-profit lenders and their trade associations maintain a revolving door with the U.S. Department of Education, as well as key Congressional committees and offices. To be clear, we don't take issue with lobbying per se, or with organizations building effective lobbying staff. But lawmakers who are persuaded by such lobbying to enact policies that are not in the best interests of students and taxpayers should be called on the carpet.
Source
Friday, September 19, 2008
Risky Plan to Bail Out Non-Profit Lenders Gets Hearing
by Jason Delisle
On Thursday, the U.S. House of Representatives Financial Services Committee is set to hold a hearing on auction rate securities -- a broken investment mechanism that non-profit student loan companies have relied on heavily for financing. The hearing is largely the brainchild of Rep. Paul Kanjorski (D-PA), a member of the committee who is using it to gin up support for federal policies to help non-profit lenders. This was evident from Kanjorski's initial press release on the hearing, in which he faulted the Bush Administration for failing to use "its full authority to help non-profit lenders like PHEAA," the primary student loan provider in the Congressman's home state.
Clearly Kanjorski thinks that the way the U.S. Department of Education enacted the Ensuring Continued Access to Student Loans Act (ECASLA), the law Congress passed last spring to help student loan providers weather the credit crunch, did not do enough to help non-profit lenders. We at Higher Ed Watch disagree. Instead, we believe Kanjorski has framed the non-profit lender problem in a dubious manner, and is proposing to solve this "problem," with a series of flawed solutions.
It seems that we have to keep reminding policymakers (and sadly, the media, too) that the one, and only, goal of the federal student loan program is to provide loans to college students that are more generous than those offered in the private market. That's it. So, yes, there would be a problem if students weren't able to get federal loans, which even top industry lobbyist John Dean agrees should be the "litmus test" of whether or not there is a "crisis."
But Kanjorski and many in the media have framed the problem in terms of lenders, not students. Certainly, some nonprofit lenders, including PHEAA, have suspended their lending operations this year because they've had trouble financing loans. This has forced students and colleges to find alternative lenders, but there has not been a breakdown in federal loan availability. Students have been able to borrow all the loans to which they are entitled.
Why the hearing then? It appears that Kanjorski believes that the student loan program is supposed to serve two sets of beneficiaries: students and lenders. By this logic, if non-profit lenders can't make loans, then the program isn't working -- even if students are able to obtain federal loans from other lenders.
Ultimately, we believe Kanjorski is acting for political reasons, not for fear that students are in danger of losing access to aid. After all, this wouldn't be the first time, as Higher Ed Watch has previously reported, that Kanjorski has done the bidding of the student loan industry.
Source
On Thursday, the U.S. House of Representatives Financial Services Committee is set to hold a hearing on auction rate securities -- a broken investment mechanism that non-profit student loan companies have relied on heavily for financing. The hearing is largely the brainchild of Rep. Paul Kanjorski (D-PA), a member of the committee who is using it to gin up support for federal policies to help non-profit lenders. This was evident from Kanjorski's initial press release on the hearing, in which he faulted the Bush Administration for failing to use "its full authority to help non-profit lenders like PHEAA," the primary student loan provider in the Congressman's home state.
Clearly Kanjorski thinks that the way the U.S. Department of Education enacted the Ensuring Continued Access to Student Loans Act (ECASLA), the law Congress passed last spring to help student loan providers weather the credit crunch, did not do enough to help non-profit lenders. We at Higher Ed Watch disagree. Instead, we believe Kanjorski has framed the non-profit lender problem in a dubious manner, and is proposing to solve this "problem," with a series of flawed solutions.
It seems that we have to keep reminding policymakers (and sadly, the media, too) that the one, and only, goal of the federal student loan program is to provide loans to college students that are more generous than those offered in the private market. That's it. So, yes, there would be a problem if students weren't able to get federal loans, which even top industry lobbyist John Dean agrees should be the "litmus test" of whether or not there is a "crisis."
But Kanjorski and many in the media have framed the problem in terms of lenders, not students. Certainly, some nonprofit lenders, including PHEAA, have suspended their lending operations this year because they've had trouble financing loans. This has forced students and colleges to find alternative lenders, but there has not been a breakdown in federal loan availability. Students have been able to borrow all the loans to which they are entitled.
Why the hearing then? It appears that Kanjorski believes that the student loan program is supposed to serve two sets of beneficiaries: students and lenders. By this logic, if non-profit lenders can't make loans, then the program isn't working -- even if students are able to obtain federal loans from other lenders.
Ultimately, we believe Kanjorski is acting for political reasons, not for fear that students are in danger of losing access to aid. After all, this wouldn't be the first time, as Higher Ed Watch has previously reported, that Kanjorski has done the bidding of the student loan industry.
Source
Thursday, September 18, 2008
Student Loan Debt Consolidation Options
Submitted by John Waters
As banks, insurance companies and other large corporate institutions receive federal aid and bailouts; the government is reminding student loan recipients of alternatives to avoid financial disaster. Options include debt consolidation and special jobs that promise to forgive some student loans.
FFEL Debt Consolidation
Since the passage of the Higher Education Act of 1965, lawmakers have been passing various pieces of legislation to fine tune their initial plan to make college affordable for more people. According to the Project On Student Debt (POSD), a bay area advocacy group, “As the consolidation loan interest rate formula has been modified by Congress, consolidation loans have evolved into a refinance benefit as well.”
The current Federal Family Education Loan (FFEL) program consolidation loan interest rate formula affords borrowers the opportunity to secure a fixed rate equal to the weighted average of the rates in effect on underlying (variable rate) loans being consolidated rounded up to the nearest one eighth of 1%. (See link below)
The POSD says that students considering a fixed debt consolidation loan should take advantage of “periods” of low interest rates. It does not make since to lock in a high fixed interest rate. Since the report was written in 2004, interest rates have dropped considerably.
College Cost Reduction and Access Act of 2007
Last September President Bush signed the College Cost Reduction and Access Act of 2007 allowing forgiveness of some student loan debt. One provision in that act allows students who are not in default to have their FFEL loans forgiven.
Both interest and principal of a Federal Direct Loan - including Direct Stafford, PLUS, or Consolidation Loan - can be erased after 10 years of employment with a public service job as defined in the CCRAA. These full time jobs include emergency management, government, military service, public safety, law enforcement, public health, public education, social work, public interest law services, child care, public library sciences, or any other job at an organization that is described in section 501(C)(3) of the Internal Revenue Code of 1986.
This is a good option for students.
As banks, insurance companies and other large corporate institutions receive federal aid and bailouts; the government is reminding student loan recipients of alternatives to avoid financial disaster. Options include debt consolidation and special jobs that promise to forgive some student loans.
FFEL Debt Consolidation
Since the passage of the Higher Education Act of 1965, lawmakers have been passing various pieces of legislation to fine tune their initial plan to make college affordable for more people. According to the Project On Student Debt (POSD), a bay area advocacy group, “As the consolidation loan interest rate formula has been modified by Congress, consolidation loans have evolved into a refinance benefit as well.”
The current Federal Family Education Loan (FFEL) program consolidation loan interest rate formula affords borrowers the opportunity to secure a fixed rate equal to the weighted average of the rates in effect on underlying (variable rate) loans being consolidated rounded up to the nearest one eighth of 1%. (See link below)
The POSD says that students considering a fixed debt consolidation loan should take advantage of “periods” of low interest rates. It does not make since to lock in a high fixed interest rate. Since the report was written in 2004, interest rates have dropped considerably.
College Cost Reduction and Access Act of 2007
Last September President Bush signed the College Cost Reduction and Access Act of 2007 allowing forgiveness of some student loan debt. One provision in that act allows students who are not in default to have their FFEL loans forgiven.
Both interest and principal of a Federal Direct Loan - including Direct Stafford, PLUS, or Consolidation Loan - can be erased after 10 years of employment with a public service job as defined in the CCRAA. These full time jobs include emergency management, government, military service, public safety, law enforcement, public health, public education, social work, public interest law services, child care, public library sciences, or any other job at an organization that is described in section 501(C)(3) of the Internal Revenue Code of 1986.
This is a good option for students.
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