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College Dreams Can Become A Students Worst Nightmare
Student debt is choking millions of college graduates and college drop-outs,
alike. This topic is hardly discussed, as we are brought up to belive that we
should go to college & land that great “Dream Job” afterwards.
Living happly ever after is rarely the ending to this story.
Only 46% of students who enroll in college, ever see graduation day as, 54%
of them will drop-out without a degree. From those who do graduate with a
degree, less than half of them will find work in their chosen profession.
The burden of student loans will kick-in within six months of leaving college.
A reality which too few students and parents take into consideration before
Johnny & Sallie run off to college together.
This debt just dosen’t dissapear when they fail !!!!
FACT # 1 - Congress Removed The “Statue-Of-Limitations” For Student Debt
In 1998 under the Clinton Adminastation, congress passed legislation removing
the ”Statue-Of-Limitations” for student debt. Unlike most debt, this debt now
does not simply disappear after seven years, it can be chased down indefenatly
by collection agencies for the rest of your life.
FACT # 2 - It’s Almost Impossible To Discharge Student Debt In Bankruptcy
In 2005 under the Bush Adminastartion, congress passed legislation making it
almost impossible to include student debt into a personal bankruptcy. Unless
you can convince the court that it has imposed a “Undue Hardship”. Hard for
you to prove as “Undue”, when you signed the loan application.
FACT # 3 - Garnishment Of Wages and Intercepting Government Tax Returns
Collection agencies can garnish your wages, up to 15% of your income. By this
time interest and penalties have skyrocketed your balances to the moon. The
federal govenment has the right to withold your tax returns untill your balance
is fully satisfied.
THIS DEBT NEVER GOES AWAY !!!!!!!!
Parents and students should look real hard at the reality of this American Dream,
as the odds are stacked against you & may turn out to be an American Nightmare.
Is your child really “College Material”? Do they understand the consequences?
FAFSA stands for Free Application for Student Aid. FAFSA is an
application the asks numerous questions regarding the student’s
finances, as well as those of his or her family; these are entered
into a formula that determines the Expected Family Contribution
(EFC). A number of things are used to determine eligibility. Some
examples are family size, income, number in college, and assets.
President George W. Bush Speaks On The Brewing Student Loan Crisis
In his weekly radio address, President Bush spoke about the brewing
crisis in the student loan markets. WATCH VIDEO
In his address he mentioned the “Lender of Last Resort Program” for
student who cannot secure funding for college. He further mentioned
the need for the ability of the govenment to step in and buy the loans
when necesarry to provide liquidity to the system.
He also signaled to the Senate get something started, as the House of
has already passed the ”Insuring Continuing Accessing Student Loans
Act” and the Senate has yet to act on the issue.
The Presdent would need a bill on his desk, before June 1, 2008 to avoid
any major problems with loans for the September Semester.
Yesterday the Wall Street Journal reported on the student loan
crisis brewing in the United States, blamming the legislature for
passing the “College Cost Reduction and Access Act”, last fall.
This act reduced the interest rate paid by borrowers of Federal
Guaranteed Loans. Next congress convinced private lenders to
cut the rate for Stafford Loans by .70 Basis Points & cutting the
popular Consolidation Loan Products by .65 Basis Points.
The problemis, this action reduced profit’s in these products
making them less disierable products for investors who purchase
these assest backed securities. These are the market makers who
keep this wheel spinning. Without them, the wheel stops.
Now congress, ( The Same Guys That Caused This Mess ), are in
the process of putting together a Tax Payer Bailout to fix there
mess. The bill proposes that the Department of Education would
purchase those loans ( And There Risk !!! ) from the lenders with tax payer money.
Perfect example of why our Governmenthas no place in trying to
control prices in a Free Market Economy.
There is recent concern in congress to reslove the Student Loan Crisis,
as many high school seniors will be completing their loan applications
in the comming weeks. Many lenders have suspended their lending in
the area of student loans, sure to cause a problem in the short term.
Congress is aware of the probelms and are seeking solutions. President
George W. Bush supports legislation passed last week to allow the Dept
Of Education to purchase govenment guaranteed loans. The US Senate
is working on their verision and the Presdient is expected to sign it.
Sallie Mae Announces It Is Dropping Student Loan Consolidation’s
Student loan consolidation market just got a hair-cut, as Sallie Mae
the countries largest student loan lender announced it was getting
out of the student loan consolidation business. The move is sure to
hit millions of college graduates in 2008.
Sallie Mae had already announced in January, that it would be cut-
ting back on making students loans, taking a much harder look at
the students ability to pay back the loan.
Bank of America announced last week that it was also stopping its
student loan lending, joining 46 other feaderal student lenders who
have also ended their exposure to student loans.
With the sky-rocketing cost of college tuition and the credit crisis
hitting students in 2008, many students may have to wait untill
the business cycle corrects or until Uncle Sam come to the rescue.
2008 Student Loan Default Rate Projected To Increase
Increases in the student default rate are projected, as congress
extened the “Cohort Default Rate“, which projects the percentage
of college students defaulting on student loans. The extention will
move this gauge out to three years, rather than two years.
Colleges with a Cohort Default Rate of 25% for three years face a
possible loss of Federal Financial Aid for their institutions. This is
going to be an issue for students as funds for education get tight.
Students should apply as early as possible to avoid getting caught
in the cross-fire.
According to the Department of Education, recent statistics show
that over 54% of college students drop out by year six. The break
down shows that 30% of freshman student drop out the 1st year,
with sophomore dropping out at a rate of 18%. By the sixth year a
staggering 54% of students drop out.
That is an large amount of money being wasted each year, with the
students defaulting on their student loans & destroying their credit
ratings, its an ugly mess.
