Student Debt in America

Nearly 70% of graduates from 4-year colleges are in debt with student loans. Close to 8 million students fail to file a Free Application for Federal Student Aid [FAFSA] every year.

Top 10 States Containing Grads with Student Debt

• South Dakota 81%
• North Dakota 80%
• Iowa 74%
• New Hampshire 73%
• Pennsylvania 71%
• West Virginia 71%
• Idaho 68%
• Maine 68%
• Ohio 68%
• Oregon 68%

In the span of one academic year 2004-2005, student increased their private loan debt by 30%

Ethnic Breakdown of Student Debt

Asian

• 51% that borrow < $30,500
• 9% that borrow >or= $30,500
• 40% without debt

Black

• 54% that borrow < $30,500
• 27% that borrow >or= $30,500
• 19% without debt

Hispanic

• 53% that borrow < $30,500
• 14% that borrow >or= $30,500
• 33% without debt

White

• 48% that borrow < $30,500
• 16% that borrow >or= $30,500
• 36% without debt

As of August 2010, the total student loan debt outstanding was estimated at approximately $849,000,000,000.

Source: onlineschools

Two weeks ago, students from the manufacturing program in Chicago’s Wilbur Wright-Humboldt Park vocational college attended a local job fair.

“Five of our students were hired in just one day,” said lead instructor Bryant Redd. The new hires are from a class of 41 students who are still four months away from completing a nine-month advanced certification program in computerized numerical control (CNC) machining.

In the program, students go beyond basic machining with classes in computer design, machine shop technology and machine shop math.

Manufacturers in the Chicago area are busier than ever lately, and they’re “begging” for more workers trained in advanced manufacturing skills like CNC machining, said Redd.

It’s not just in Chicago. Factory work has picked up considerably nationwide, making skilled workers a valuable commodity, said Marc Smierciak, associate dean of instruction at the vocational college.

“Employers right now need workers with these high-precision skills. But the mismatch is that most of America’s unemployed workforce doesn’t possess these skills,” Smierciak said.

So manufacturers are racing to trade schools like Wilbur Wright, one of only seven schools in Illinois that offer an accredited CNC course, and snapping up newly-minted factory workers as quickly as they can.

The demand for his graduates is so intense that last year’s CNC graduating class scored a 100% job placement.

“It’s a wonderful accomplishment for us,” said Smierciak. It was the first time the school achieved perfect placement in the program’s 15-year history. Smierciak expects this year’s graduating class to meet with similar success.

To get into the program, students need a high school diploma or the equivalent and can go part-time or full-time.

The starting salary for the new hires averages about $40,000 a year, with the potential to jump to $55,000 to $65,000 in less than two years, he said.

As word spread about last year’s record, the school is seeing a rush of new applications. “We usually enroll 20 students max per year,” said Smierciak. “We are at overcapacity right now with 27 students in the day program and 14 in the night one.”

Some of them are young high school graduates, while others are middle-aged displaced workers retraining themselves for in-demand skills.

Reynaldo Roman, 21, had been thinking about going to college to study electrical engineering when his friend told him about Wilbur Wright’s CNC course.

“I did some research on salaries,” he said. “After a four-year degree, I might be getting paid as much or less than I would as a certified CNC operator,” he said.

As the primary income earner in his family, Roman weighed his options, applied to Wilbur Wright and won a full scholarship to cover the $5,800 CNC program.

“I’m soaking in as much as I can,” he said. “I’m hopeful I’ll land a job after I graduate.”

Norma Trinidad, 50, lost her 23-year factory job after the company went belly up in 2010.

Once when she was at the local unemployment office, she saw a flier touting advanced manufacturing techniques. That got her thinking about updating her skills, particularly since she had done manual machining and knew that more manufacturers were looking for workers with higher-tech skills.

In the past year, Trinidad has acquired five certifications — some just took a matter of weeks — in new manufacturing techniques from another vocational school. Now, she’s Roman’s classmate at Wilbur Wright and on her way to earning three more certifications in high-precision skills.

“I am running out of unemployment. But I’m hopeful to get a job soon,” she said.

Jimmy Hodges, dean of applied technologies with Wallace State Community College in Hanceville, Ala., is also seeing high job placement with his graduates.

The school’s two-year accredited manufacturing program, costing between $8,000 and $10,000, includes machining, CNC and a course in tool and die making.

Hodges, a machinist himself, said Wallace is getting close to placing 100% of its students, too, driven by a pickup in auto and other manufacturing in the state.

He hopes these stats help change a persistent misconception about manufacturing. “Young people in the country think manufacturing is nasty and dirty,” he said. “Not so. It’s clean, high-tech, and the pay isn’t bad.”

Hodges’ son graduated from Wallace’s manufacturing program in 2005 and landed a $45,000 base pay job with an aerospace maker. “With overtime he’s making much more,” he said.

His daughter opted for a four-year degree in education from the University of Alabama.

Her starting salary as a 5th grade teacher is about $36,000, said Hodges, adding that she also has $45,000 in student loans.

“My daughter is an awesome teacher,” he said. “But who do you think got the better deal?”

Source: http://finance.yahoo.com

Student loan consolidation is a relevant and trending topic due to the high cost of student loans, low employment opportunities and the relatively low level of income fresh graduates generate. This article will discuss whether or not Perkins loans can be consolidated and if doing so will be advantageous for the student/borrower.

Can You Consolidate?

The answer is yes. Consolidation can be thru federal or private student loan consolidation programs. This is because there is no limitation placed by law for the consolidation of Federal Perkins loans.

What is Private Loan Consolidation?

Aside from the above mentioned a student may also choose to consolidate student loans with other types of loans. This can be thru a private lender or thru a banking institution. Again there are no limitations provided for by law but always make sure that you read the entire terms and conditions for the loan consolidation.

What is the Rationale of Student Loan Consolidation?

There are three main reasons for consolidating a loan. First, loan consolidation allows a consumer who is considered in default to be instantly made current. Second, it allows the consumer to bargain for better loan terms. Third it is convenient in that only one loan is payable instead of several.

Where to Find Helpful Information?

In order to get a better idea of this particular type of program, the reader has to read several articles from different websites. It is best to start with websites o related to the federal government. (i.e. Education Department, Federal Direct Student Loan Program, Federal Family Education Loan Program, Government Accountability Office). These websites will not only provide basic knowledge but in depth understanding of the pros and cons of consolidating Perkins loans with other student loan programs. After going thru these websites the reader can then read other private websites, blog sites and social networking websites for more information.

Should You Consolidate Federal Perkins Loan

A 5% fixed interest payment payable for a maximum period of 10 years starting a few months from graduation is a pretty decent interest rate and term. However if the student has other student loans as well as other outstanding obligations about to be or already in default then it would be best to average out the total interest payment as well as payment period to determine the actual total interest payment.

Next, shop around for loan consolidation offers, either student loan consolidation plans or private loan consolidation plans. Request for pre approval to determine the interest rate payable and then compare the same to the consolidated interest rate and period. If one, some or all of the pre approved loan has lower rates and/or more advantageous terms (i.e. ARM to fixed) then you may want to seriously consider consolidating the loan. Otherwise consolidating the same will be more a question of convenience rather than actual savings, in that you only pay 1 lender 1 time per month, rather than several lenders on different dates.

Perkins Loan Defined

A Federal Perkins Loan is a type of student loan that is given to qualified US citizens who meet specific requirements and can show actual financial need and/or hardship. The fund is partly subsidized by the government, equally funded by the qualified institution and also funded by repayments made by existing grantees. The usual payment period provides for a maximum of 10 years and the interest rate is fixed at 5%.

IBR Defined

The Income Based Repayment plan (IBR) became available beginning July 1, 2009 and was enacted to be an option to other payment plans such as the Income Sensitive Repayment plan (ISR) and the Income Contingent Repayment (ICR).  All three repayment plans are designed to provide specific tools for student loan grantees that are having a hard time paying for their student loans.

The Role of IBR

The IBR is intended for student grantees whose education qualifies them for lower income generating jobs or careers. This is done by:

1. Placing a cap on the regular installment payments based on the borrowers income or expected income.
2. Considering the household size as well as the income generated by the household
3. Interest rates are annually adjusted for the benefit of the grantee to be based on household size and income generated.
4. In most cases the installment payments do not go beyond 10% of the regular gross income. This applies to single borrowers (up to $50,000 annual income) and married borrowers (up to $100,000 annual income).

What is IBR Loan Forgiveness?

Under existing laws and backed up by jurisprudence, the maximum repayment period for an IBR plan is set at 25 years. However in some cases the actual repayment schedule of the student loan maybe more than that. When this happens the IBR mandates that the remaining balance be forgiven and the loan considered fully paid. However it bears stressing that any amount forgiven is still subject to tax because the law considers the same as revenue and taxes it as such.

Types of Student Loans that Qualify for IBR

The list of eligible loans includes federally funded and/or subsidized student loans such as Stafford loans, Grad Plus Loans BUT not Perkins loans! However a loophole to this limitation is that Perkins loans maybe consolidated using IBR provided the consolidation is originated using other qualified student loan types. For example, Mr. A has a Perkins loan and other types of privately funded student loans. This means Mr. A cannot qualify for IBR if he uses the Perkins loan as a basis to apply for IBR. However Mr. B has a Stafford loan and a Perkins loan. Mr. B then uses the Stafford loan as the basis to apply for IBR and includes the Perkins loan for consolidation. In this case IBR consolidation can now include the Perkins loan.

6 Thing You Should Know About Student Loan Debt

1. It’s Passed $1 Trillion, significantly higher than credit card debt.
2. It’s Nearly Tripled in the past decade alone.
3. In 20 years Tuition and Fee Have Doubled, yet median household income has risen only 2.1%.
4. Collectors can legally garnish up to 25% Of Your Wages if you default.
5. It’s the only form of debt that Cannot Be Discharged in bankruptcy in normal circumstances.
6. On 1 July 2012, Subsidized Stafford loan Rates Will Double if Congress does not act.

Student loan debt has an undeniable and significant suppressive effect on economic growth. The Student Loan Forgiveness Act of 2012 directly addresses this enormous boot on the neck of the middle class and represents a glimmer of hope for millions of Americans who, with each passing day, find that the American Dream is more and more out of reach.

Therefore, we, the undersigned, respectfully request that Congress bring H.R. 4170, the Student Loan Forgiveness Act of 2012, up for consideration and commit to holding a straight, up-or-down vote on it this year. Thereafter, we, the undersigned, respectfully request that President Obama sign this legislation into law.

H.R. 4170 THE STUDENT LOAN FORGIVENESS ACT OF 2012 INTRODUCED IN THE HOUSE OF REPRESENTATIVES ON MARCH 8, 2012 FREQUENTLY ASKED QUESTIONS

Does H.R. 4170 Cover Private Student Loans?

• Yes, if the borrower’s average adjusted gross income is equal to or less than their total education debt.

How is “discretionary income” calculated?

• Discretionary income is defined as the borrower’s, and the borrower’s spouse’s (if applicable), adjusted gross income exceeding 150% of the poverty line applicable to the borrower’s family size as determined under section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2).

Would the forgiven debt be treated as taxable income?

• No.

What would happen if I am unemployed or become unemployed?

• You would still qualify for enrollment in the program if you are unemployed or become unemployed.
• For those borrowers who would owe zero dollars based on their discretionary income, the Department of Education would make a case by case assessment of the appropriate minimum monthly payment. This minimum monthly payment, even if calculated at zero dollars, would be applied towards debt forgiveness.

Would there be caps on the maximum amount of forgiveness available?

• Yes and no. Under the bill, there would be no caps on the maximum amount of forgiveness available for borrowers who are currently in repayment or in school.
• For new borrowers, the bill imposes a debt forgiveness cap of $45,520 to incentivize students to make sound financial decisions and to encourage colleges and universities to lower the cost of their tuition.

How would H.R. 4170 impact interest rates on student loans?

• The bill would cap interest rates on federal loans at 3.4%.

Would I still be eligible to enroll if my loans are in default?

• Yes. Unlike the federal government’s program of Income Based Repayment (IBR), there is no requirement for the borrower to be current on his or her loans in order to qualify for enrollment in the new 10/10 program.

What if I’ve already paid the equivalent of 10% of my discretionary income for at least 10 years?

• Under the terms of this bill, those who have already paid the equivalent of at least 10% of their discretionary income over the prior 10 years totaling 120 payments would immediately qualify for forgiveness upon passage of the bill.

How are married couples’ incomes calculated for purposes of this plan?

• For married couples who file their income taxes jointly, loan payments would be calculated according to household income. Loan payments for married couples filing separately would be based on the individual borrower’s income.

As a parent who took out a Parent Plus Loan, how would this bill help me?

• You would be eligible to enroll in the program.

Would this bill restore bankruptcy protections for student loan debt?

• No. However, Rep. Hansen Clarke will be introducing a “Student Loan Borrower Bill of Rights” in the coming weeks which, if signed into law, would restore bankruptcy and other consumer protections for student loan debt. The “Student Loan Borrower Bill of Rights” would also propose a whole host of much-needed reforms to the student lending system.

Source: signon.org, http://hansenclarke.house.gov/sites/hansenclarke.house.gov/files/documents/10-10%20Plan%20FAQs.pdf

It is recommended to use this type of calculator before registering for any type of student loan, since it will show the difference of each loan programs. And as a reminder, when computing for private student loan rates, these usually have a variable interest’s rate and so it would be better to compute for a higher rate than what the program has. This type of student loan calculator can also be used to compute for monthly payments after graduation, for them to have a clearer picture of the whole effects of their student loans.

Fortunately nowadays, there are a lot of student loan interest’s rates calculators for 2012 that are available online, the student just have to put the information necessary for the amount to be computed. With the use of this type of interest’s rate calculator, it will clearly reflect, that the bigger the term of the loan the higher the interest rate is. By analyzing interest rates, the students will see the difference and benefits of having a high interest rate with a shorter payment period.

It will instantly give the students an idea, about the distinction of federal and private student loans. For 2012 for example, Federal Stafford loan has 6.8% fix rate, federal plus loans have 7.9% fix rate and federal Perkins loan has a fix rate of 5%. Having this type of information plus the use of the student loan interest’s rate calculator, anyone who is aspiring to get a perfect loan will be equipped with the knowledge they need to be able to decide well for their future plans.

Click here to view the embedded video.

Student Loans Debt

• Only Co-sign if you can pay back entirely
• Almost Impossible to eliminate debt, even in bankruptcy

• Scholarship grants and financial education assistance participated by schools and universities that have Title IV certification
• Money borrowed from federally backed student loan programs such as Parent PLUS Borrowings, Grad PLUS Borrowings, Stafford Borrowings and Perkins Credits
• Other education assistance acquired through the government

The national student loan database system is a very helpful tool to students especially when they have questions about their loans, clarifications and other related queries about financial aid to students. It contains helpful tips like how to manage your funds and other information that could help them better understand the structure of the student financial aid programs and other scholarship grants. Helping them understand how student loan programs work empowers them to strive hard at school and finish it on time so that they don’t get the trouble of having to extend their stay and their maximum student loan amount has been exhausted. This is also why providing avenue for students to view amounts pertaining to his loans, remaining balances in his account, accumulated disbursements and status of transactions is very crucial. It helps the student to be aware of his account and he has that awareness of the activities in his account, he is in the best position to manage his funds properly.

The national student loan database system is a very secure platform. The security features of the system include your unique Social Security Number, a Personal Identification Number and other personal details that are only unique and identifiable to your account.

This type of loans may differ when it comes to their interest’s rates, qualification and other factors. The student loan limits 2012 for federal student loan depends on several factors; for example if the student is considered dependent or independent, the time when they applied for it, their schools funding level and the students financial status.

For the Federal Perkins Loan Program, the annual limit for undergraduates is $4,000 each year and their lifetime limit or total amount they can get is $27,500. For professionals or graduate students its $8,000 each year and their lifetime limit is $60,000 and this may include any Federal Perkins Loan, they already borrowed when they were still undergraduates.

For Direct Subsidized Stafford Loan, the loan limit for students that are considered dependent is $3,500 first year; $4.500 on their second year and $5,500 for their 3^rd year and their borrowing lifetime limit is up to $20,500, depending on their degree and years in school. For Direct Subsidized Stafford Loan, the student loan limit for independent students is $23,000. Graduate students or professionals can get up $6,500 annually. Plus Loans are intended for the student’s parents and graduate students.

The annual limit depends on the cost of attendance, which is the approximated money that will be required by the school for the whole year which may include some other expenses as well.

For Direct Unsubsidized Stafford Loan, the loan limit for dependent students is $12,000 per year depending on the years in school and degree of the student. For Direct Unsubsidized Stafford Loan, students, graduates or professionals can get up to $12,000 annually, for undergraduates their limit for their 1^st year is $6,000, 2^nd year is $6,000, 3^rd year $7,000.  For private student loan limits, students can take out up to the cost of attendance, minus the other help the student gets which can be flexible.

Federal Loans are stricter when it comes to their student loan limits unlike private loans where students can use their borrowed money for any school related needs.

FAQ: Federal Funding

The federal government includes in the general appropriation act thru the education department’s budget, an item to be specifically allocated for the Federal Perkins loan. Once the budget is released to the proper departments the exact amount allocated is made available to accredited schools for discretionary disposal, subject to minimum guidelines, such as actual financial need, priority given to Federal Pell Grant recipients, required half time status (at least), etc.

FAQ: Federal Subsidy with Institution Contribution

A very important point to remember is that the Federal Perkins Loan program is only partially subsidized by the federal government. This is because the qualified school or institution usually matches the contributions allocated. Not to mention the fact that repayments made are applied to funding Perkins loan grantees.

FAQ: Program Description

The Federal Perkins loan program has at least 1,800 eligible institutions scattered throughout the United States territories. These institutions choose from low income student applicants based on minimum requirements, first come first served, academic achievement, etc. Stated simply, for so long as the institution follows minimum requirements set by the federal government they are free to provide for additional requirements for screening and qualification.

FAQ: Loanable Limit

The loan limit depends on the actual need of the grantee minus other subsidies granted. Stated differently the loanable amount will not exceed the actual needs of the grantee taking into consideration other grants given (i.e. Stafford loans, Plus loans, private scholarship programs). As a general rule the loan limit for:

1. Undergraduate studies: $4,000 per year, not to exceed  $20,000 in total
2. Graduate studies: $6,000 per year, not to exceed $60,000 in total taking into consideration the undergraduate total.

FAQ: Grantee Qualification

Not every student who has financial need can qualify. The applicant must meet the following qualifications:

1. The student applicant must be enrolled in an eligible school
2. The student must at least have half time status. This means he or she has 6 to 8 units or hours per semester.
3. The student must have met the selective status requirements
4. The student must be a citizen of the United States or an eligible non citizen (i.e. alien with student visa)
5. The student must not be in default on other scholarship loans.
6. Must meet the minimum academic performance set by the institution.
7. Must Fill Out a FAFSA form
8. Must submit a promissory note upon approval.

FAQ: Repayment Scheme

The maximum payment period for a Perkins loan is 10 years. The repayment starts several months after graduation to allow the student enough time to find gainful employment and the interest rate is 5% fixed. All these translate to the best loanable terms for a student. Please note that the 10 year limit also minimizes interest payment and allows the scholarship fund to circulate for the use of other grantees.