Generation Debt

This morning on Good Morning America, resident financial guru Mellody Hobson did a spot on student loan consolidation. While the linked article on the GMA website mentions the one-time cosolidation rule in passing, Ms. Hobson mentioned it a bit more in her spot this morning, stating that it was a drawback that wasn't really a drawback, since it's so unlikely that rates will go down once a borrower consolidates. As we know, however, thousands of borrowers beg to differ.

More articles have come out regarding the effects of student loans on the lives of borrowers long after graduation, including one from The Arizona Republic, one in The Columbus Dispatch, one in the Times-Tribune of Scranton, PA, and one in USA Today.

There's some good news for first-time consolidators, however, in the form of the repeal of the single holder rule. This allows borrowers to shop around for the best deal on consolidation, instead of requiring them to consolidate with their original lender. A step in the right direction, to be sure.

In other legislative news, Senator Clinton has introduced S. 3255, The Student Loan Bill of Rights Act of 2006, which is another step in the right direction, but still seemingly doesn't address the issue of allowing refinancing of previously consolidated loans. One lender has decided to take matters into its own hands on this issue, and has filed a lawsuit in the U.S. District Court for the Southern District of New York against the Department of Education and Secretary Margaret Spellings: "The lawsuit requests a temporary injunction against a ruling that eliminated some consolidation options on March 31, three months before the July 1 deadline. The suit also challenges the constitutionally of the Higher Education Act, the congressional bill that brought about these changes, because the House and the Senate did not pass identical forms of the bill."

*National Student Debt Clock is up to over $422 billion.

Posted by Diana at 11:16 AM | Permalink

Hey everyone -

I've been contacted by a producer from a North Carolina Public Radio talk show regarding the issue of student loan debt. She is interested in personal stories from people who've taken out loans to pay for their education. If you'd like to tell your story (I did), drop me an email at DianaCLAA@aol.com and I'll get you her contact information. Thanks.

Posted by Diana at 05:42 PM | Permalink | Comments (1)

As graduation time approaches (or, er, is already here), articles about student loans are popping up all over. Aside from the usual advice-laden paragraphs advising college grads to consolidate now so they can lock in interest rates before July 1, and advising high school grads to be careful about borrowing for college, there are a couple of more interesting things out there to read:

-This article in the Northeast Mississippi Daily Journal, in addition to advising college-bound folks to avoid borrowing, also shines a little light on the for-profit monster that is Sallie Mae ("now a private corporation whose profits put Exxon to shame"): "The loans have been helpful to millions. They've also become a nightmare to tens of thousands. ... It's not unheard of for a student who has borrowed $25,000 to be facing double that much in arrearages - even after making sporadic payments for four or five years."

-The Christian Science Monitor reports on the "albatross" of student loans: "With hefty repayments in their future, however, many students...are walking away from low-paying government, nonprofit, and teaching jobs. ... Accumulating loan debt even pushes back many of life's milestones, according to a survey that Baum conducted in 2002 for Nellie Mae, a major student lender, which is now a subsidiary of Sallie Mae. The report found that 38 percent of graduates held off buying their first house because of student loans, 14 percent put off marriage, and 21 percent delayed having children.

'We are the first society in history to take our brightest and start them out in debt,' says Allan Carlson, president of the socially conservative Howard Center in Rockford, Ill. 'That's just stupid public policy. We should encourage them to grow, not hold them back.'"

-The Mercury News reports on a recent survey which shows that "[a]lmost seven out of ten respondents are paying off student loans or have spouses who are, and the average outstanding balance is greater than $29,000. Almost 40 percent of graduates with college debt expect to take more than 10 years to pay off their loans."

-Maybe some folks in Washington are paying attention, though, as is evidenced by this Letter to students from Senator Edward M. Kennedy: "Current law, for example, does not allow borrowers to "reconsolidate" - i.e., refinance - a consolidated student loan, but it should. Borrowers who consolidated their loans at higher interest rates in the past deserve to be able to refinance their loans again when interest rates go down, just as homeowners take advantage of lower rates by refinancing their mortgages. I'm also working to reduce interest rates for all student loan borrowers. Lenders are making record profits under the government's college loan program, and restricting student loan benefits is an unfair way to reduce the federal budget deficit."

*National Student Loan Debt Clock is at almost $420 billion and counting...

Posted by Diana at 03:06 PM | Permalink | Comments (1)