The rate of borrowers who will default on student loans is higher than short-term government estimates indicate, reports the The Chronicle of Higher Education. According to their data, 20 percent of government loans that started repayment in 1995 have gone into default. The rate is even higher for students attending two-year colleges.

Defaulting on student loans leads to serious personal and financial burdens. Borrowers become ineligible for additional federal aid and can have their wages and tax refunds seized by the government. It also ruins future credit ratings, making it difficult to obtain mortgages, car loans or credit cards.

Loan money that is not recovered by the government must come from taxes. At the end of the 2009 fiscal year, $50.8 billion of student loans were in default.
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We could all use some good news when it comes to money these days. And even if it’s not your own money, the federal government is taking steps to make borrowing money for student loans cheaper and easier to get and much simpler to pay off.

Here’s why:

On July 1, the federal government lowered the interest rates on many student and parent loans, and took out the middle-man by awarding loans directly through the government itself rather than through a bank.

The only downside is that there will be a bit of a learning and processing curve on the shoulder’s of the schools’ financial aid offices as they learn about the new rules and spend more time answering parents’ questions. So expect longer phone times and maybe mixed messages from school administrators during the first few months of the academic school year. Read the rest of this entry »

It’s no secret that most graduates are in debt. By the time you walk across the stage in cap in gown you have likely built up several thousands in student loans. According to the Project on Student Debt, students, on average, are $23,200 in the hole by the time they get their degree. So instead of cringing when you get your first letter from Sallie Mae, you should educate yourself. Here are some tips on how to manage your student debt:

1. Know what you owe: Go to the National Student Loan Data System at to find out how much you owe. The website will be able to keep you up to speed on all the loans you have taken out so far. You should also know the different federal student loans you have, the lenders on each of the loans and the interest rates one each of them.

2. Never default on a student loan: There’s never a good reason to default on a loan. No matter what your financial situation is, lenders have several repayment plans, including a 36-month economic hardship deferment plan. Keep in mind that once your loans become delinquent, you lose the right to deferment and have to deal with those pesky collection fees. Read the rest of this entry »

Alright everyone, I have a confession to make. I am a Conservative. Especially when it comes to how our government spends money. I don’t think there should be government incentives to buy new cars or new houses. I don’t think there should be millions of government handouts. It makes me ill to see how high our national debt is. (It’s almost $13,000,000,000,000.00 right now, and rising every day.) And, I hate to say this, because I know how many people are excited about the new government regulation of student loans, but I can see it easily driving up our national debt even more.

The new Education Reform Act places the government in charge of regulating student loans. As part of the Student Aid and Fiscal Responsibility Act, the federal government will lend directly to students, according to Al-Jazeerah.com. This is really good for students who take out loans in order to attend college because it will put a cap on the amount of loans they must repay each year and will lessen the financial strain of earning a higher education. It also provides funding for minority and community colleges that desperately need it. Those are definitely good things. Read the rest of this entry »

Image Via Luke Sharrett/The New York Times

Just this past Tuesday, President Obama signed a landmark piece of education into law.

The new education reform act overhauls the federal student loan program by expanding Pell Grants and making it easier for students to pay their outstanding student loans after graduation. The bill also increases funding support to community colleges and minority schools.

While the education reform act is great news for students, not everyone is cheering.

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While it’s not morally right to feel better because of another’s misfortune, this story may have students across the country feel just a bit better about the amount of money they will owe in student loans upon graduation.

According to the Wall Street Journal, Michelle Bisutti, a 41-year-old woman from Columbus, Ohio borrowed $250,000 to pay for medical school in 1999. The debt has since increased to $555,000.

Part of the spiraling effect is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates, according to the Wall Street Journal. While in school, her loans accumulated interest with variable rates ranging from 3 percent to 11 percent.

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There is a certain level of disconnect with reality in the citizenry of the United States. We pat ourselves on the back, proudly boasting that we are “the best country in the world.” And while that may be true to some extent – people have amazing opportunities and freedoms here – an inability to see that it might be possible that we aren’t always the best in everything we do may be holding us back. Nowhere is that more true than the United States’ lagging educational system.

According to a 2006 investigation by the ABC program 20/20, a Gallup Poll survey showed that 76 percent of Americans were completely or somewhat satisfied with their kids’ public school.

Now, here comes the disconnect:

In 2002, the United Nations Children’s Fund (UNICEF) issued a report on the state of education in 24 industrialized nations. The United States ranked 18th out of 24 nations. The report was based on results from three surveys that tested 14- and 15-year-old’s literacy and their abilities in essential mathematics and science.

“A child starting school in Canada, Finland, or South Korea has both a higher probability of reaching a given level of educational achievement and a lower probability of falling well below the average,” UNICEF said in a written statement.

Let that sink in for a moment. We’re in the bottom 25th percentile for education. Read the rest of this entry »

Another spring semester is about to start. We are half-way through the school year, which means we are half-way to summer break. It also means that it is almost time to start filling out those FAFSA forms for next year.

What is the FAFSA? The FAFSA stands for Free Application for Federal Student Aid.

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As a college student, I have three main financial concerns: earning money, spending money, and saving money for college. Thanks to Upromise, two of my concerns are now combined into a system that makes saving for college so much easier!

Upromise is a free service that both parents and students can use to “earn” money for college by spending money on things you do everyday.

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Applying for student loans can be very confusing and difficult. Do you need a subsidized loan or a Perkins loan? A Stafford or a private? Here’s a quick rundown of what the different types of student loans are.

Stafford Loans: These are federal loans. They come directly from the government through the Federal Family Loan Program. These require the FAFSA to be completed by the student.

Subsidized Loans: These are a type of Stafford loan and are designed for students who demonstrate financial need. While students are in school, the government pays the interest on these loans. Read the rest of this entry »