Government to Sell Off Student Loan Book: What does that mean for us?
Gordon Brown marked the first day of the new political session by announcing a fire-sale of Government assets including the student loan book, a move that has led some to question the merits of the Government’s recession-beating plan.
The announcement, which will see roughly £3bn worth of Government-held assets sold to private investors, means that the student loan book will become the responsibility of a private company that will then become accountable for the collection of all outstanding student loans. Future loans will continue to be administered by the Government.
This is not the first time that such an idea has been in the pipeline. Between 1997 and 1999, Gordon Brown sold £4bn worth of student loans in an attempt to reduce the mountain of public debt. The idea was also mooted in 2007, but was rejected as being a bad deal for the taxpayer. It seems pertinent to question why conditions are deemed to be more favourable now, at a time when selling prices are much lower than in a buoyant market.
The basic theory behind the sale of the student loan book is that it will raise money in the short term, with a quick sale providing money for the taxpayer. It is painfully obvious that something has to be done as the treasury needs a fresh injection of funds to help combat the public debt; however, this particular plan is flawed. Any potential buyer would pay the government less than the full value of the loans (it has been estimated that they will be sold at around 95% of their value) meaning that the Government would lose out in the long run and that any private company would profit from the interest gained from loan repayments. Put simply, students would pay the same amount of money as before, but a portion of this money would line the pockets of a private company rather than being put back into Government and being used for common benefit.
Interestingly, Labour is not the only party that supports this move. The Conservatives have stated that the move was “probably necessary”, though a spokesman emphasised that this would only work if a raft of spending cuts were also implemented. The Liberal Democrats are the only mainstream party that oppose the stripping of Government assets under the present conditions. Spokesman Vince Cable warned that “this is not a good time to sell assets” and commented that “the Government have a terrible record with the history of gold sales and the sale of QinetiQ. There is now a proposal to sell land in a market in which development land is at about 15 to 20% of its peak value. Is that not an absolute guarantee that the Government will not get value for money?”
The Chief Secretary to the Treasury, Liam Byrne, outlined a plan to raise £3bn from assets within the next two financial years. This seems to contradict the 2007 valuation of the student loan book, which at £6bn was considered twice as much as is expected to be received for the whole package of assets in today’s markets.
The main issue will be the timing of any sale, for the time frame of the asset stripping will prove to be vital if the Government wish to receive fair compensation for the sales. While they cannot afford to wait too long to sell (though all of the assets mentioned have been touted before as items for sale, with little result) they would be foolish to sell at the bottom of the market, when prices are at their lowest.
This has not stopped them before and unfortunately is unlikely to stop them now. But the question still remains: why are we selling anything at the moment if it’s not going to be worth it?
Monish
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Tuesday, December 1, 2009
College graduate's loan debt climbs to record levels
College graduate's loan debt climbs to record levels
Jessica Hiddleson never thought she'd be on food stamps after graduating from college.
But with $18,000 in student loan debt and a part-time minimum wage job, the 22-year-old needed the help. She deferred her loan payments, but she still can't afford her rent in Ashland, so she's moving home to Albany and her parents next month.
Hiddleson and other new college graduates are getting a tough reality check as they hit the toughest job market in decades while saddled with record loan debt.
A national report released Tuesday shows just how hard it is for them: More than 60 percent of Oregon's 2008 graduates in public and private colleges took loans averaging $21,029. That is the 22nd highest debt rate in the nation, and just slightly lower than the national average – a record high of $23,200.
Aggravating the problem is their difficulty in finding jobs that enable them to pay off their loans. National unemployment rates for college graduates ages 20 to 24 rose from 7.6 percent in 2008 to 10.6 percent this year, according to the report by The Project on Student Debt, part of the Berkeley-based Institute for College Access & Success.
"It's pretty rough," said Hiddleson, who graduated from Southern Oregon University in June. "I'm pretty much taking whatever jobs I can get, and I'm thankful for them."
Oregon doubled the funding for state grants for college students in 2008-09 with the intent of lowering the student debt load for graduates. Since then, state funding has fallen and record numbers of students have applied for aid, causing the state to turn down some eligible students and reduce grants to others.
At the same time, tuition has gone up significantly. Many campuses have increased financial aid to ease the impact on low-income students.
At Oregon State University and the University of Oregon, new financial aid programs cover the full price of tuition and fees for low-income students. Those programs might help lower the average debt loads at those schools in the future, financial aid officials at both schools said.
More than 800 UO students and 3,000 OSU students are in the programs this year.
"Even if tuition does go up, our neediest students will not feel like their loan indebtedness will be a hurdle for them," said Elizabeth Bickford, UO's director of student financial aid and scholarships.
Her counterpart at OSU, Doug Severs, said he recommends students look carefully at their expected earnings after graduation and monthly loan payments before taking out student loans.
Still, over a lifetime, they will earn more with a college degree than without one.
"I haven't seen a student who said, 'I'm not going to go to college because of this level of debt,'" he said.
Aaron Powell, a junior at Portland State University, did everything he could to keep his college costs down: He delayed college to join the U.S. Army and get GI Bill benefits; he started at a community college where tuition is lower, and he now works part-time.
But Powell, 27, still expects to graduate owing $20,000 in student loans, a debt load that might prevent him from going to law school.
"It really comes down to dollars and cents," he said. "Am I going to have enough money to finish my four-year degree and go on to law school?"
He also has about $22,000 in personal debt and he's considering filing for bankruptcy.
"I'm already in the red now," he said. "If they increase (tuition), I'm done."
Reed College reported the state's lowest debt load, $17,296, and the highest tuition, $36,420, in 2008.
Reed limits loans because "it's certainly more attractive to look at Ph.D programs when you're $17,000 in debt than when you're $40,000 in debt," said spokesman Kevin Myers. "That's a big mountain"
Reed plans to spend $18.5 million on financial aid this school year, up from $12.9 million five years ago.
Graduates of Southern Oregon University in Ashland had the highest reported debt load in the public university system in 2008, despite having the lowest tuition that year, according to the report.
SOU's spokesman, Jim Beaver, said he suspects the reported $26,000 average debt load is not accurate, but he could not reach financial aid officials Tuesday to check it.
Hiddleson put off law school or graduate school to give herself time to work and pay off some of her undergraduate loans. But she can't do that with a part-time job that pays $8.40 an hour, the state's minimum wage, as an arts and crafts coordinator for an after-school program.
She applied to join the Peace Corps, which would allow her to defer her loans again and cancel some of what she owes.
"I wanted to do service for two years and think about what to do for the rest of my life," she said.
Hope this can be solved at a very short period.
Jessica Hiddleson never thought she'd be on food stamps after graduating from college.
But with $18,000 in student loan debt and a part-time minimum wage job, the 22-year-old needed the help. She deferred her loan payments, but she still can't afford her rent in Ashland, so she's moving home to Albany and her parents next month.
Hiddleson and other new college graduates are getting a tough reality check as they hit the toughest job market in decades while saddled with record loan debt.
A national report released Tuesday shows just how hard it is for them: More than 60 percent of Oregon's 2008 graduates in public and private colleges took loans averaging $21,029. That is the 22nd highest debt rate in the nation, and just slightly lower than the national average – a record high of $23,200.
Aggravating the problem is their difficulty in finding jobs that enable them to pay off their loans. National unemployment rates for college graduates ages 20 to 24 rose from 7.6 percent in 2008 to 10.6 percent this year, according to the report by The Project on Student Debt, part of the Berkeley-based Institute for College Access & Success.
"It's pretty rough," said Hiddleson, who graduated from Southern Oregon University in June. "I'm pretty much taking whatever jobs I can get, and I'm thankful for them."
Oregon doubled the funding for state grants for college students in 2008-09 with the intent of lowering the student debt load for graduates. Since then, state funding has fallen and record numbers of students have applied for aid, causing the state to turn down some eligible students and reduce grants to others.
At the same time, tuition has gone up significantly. Many campuses have increased financial aid to ease the impact on low-income students.
At Oregon State University and the University of Oregon, new financial aid programs cover the full price of tuition and fees for low-income students. Those programs might help lower the average debt loads at those schools in the future, financial aid officials at both schools said.
More than 800 UO students and 3,000 OSU students are in the programs this year.
"Even if tuition does go up, our neediest students will not feel like their loan indebtedness will be a hurdle for them," said Elizabeth Bickford, UO's director of student financial aid and scholarships.
Her counterpart at OSU, Doug Severs, said he recommends students look carefully at their expected earnings after graduation and monthly loan payments before taking out student loans.
Still, over a lifetime, they will earn more with a college degree than without one.
"I haven't seen a student who said, 'I'm not going to go to college because of this level of debt,'" he said.
Aaron Powell, a junior at Portland State University, did everything he could to keep his college costs down: He delayed college to join the U.S. Army and get GI Bill benefits; he started at a community college where tuition is lower, and he now works part-time.
But Powell, 27, still expects to graduate owing $20,000 in student loans, a debt load that might prevent him from going to law school.
"It really comes down to dollars and cents," he said. "Am I going to have enough money to finish my four-year degree and go on to law school?"
He also has about $22,000 in personal debt and he's considering filing for bankruptcy.
"I'm already in the red now," he said. "If they increase (tuition), I'm done."
Reed College reported the state's lowest debt load, $17,296, and the highest tuition, $36,420, in 2008.
Reed limits loans because "it's certainly more attractive to look at Ph.D programs when you're $17,000 in debt than when you're $40,000 in debt," said spokesman Kevin Myers. "That's a big mountain"
Reed plans to spend $18.5 million on financial aid this school year, up from $12.9 million five years ago.
Graduates of Southern Oregon University in Ashland had the highest reported debt load in the public university system in 2008, despite having the lowest tuition that year, according to the report.
SOU's spokesman, Jim Beaver, said he suspects the reported $26,000 average debt load is not accurate, but he could not reach financial aid officials Tuesday to check it.
Hiddleson put off law school or graduate school to give herself time to work and pay off some of her undergraduate loans. But she can't do that with a part-time job that pays $8.40 an hour, the state's minimum wage, as an arts and crafts coordinator for an after-school program.
She applied to join the Peace Corps, which would allow her to defer her loans again and cancel some of what she owes.
"I wanted to do service for two years and think about what to do for the rest of my life," she said.
Hope this can be solved at a very short period.
Thursday, November 26, 2009
How to Use Peer-to-Peer Student Loans to Pay for College
How to Use Peer-to-Peer Student Loans to Pay for College
With the amount of available credit in the United States shrinking dramatically over the last year, banks have become much more selective about what type of loans they are willing to provide. Private student loans were one of the first types of loans that banks stopped offering because of the risk associated with providing loans to individuals that don’t necessarily have an immediate means of repaying the loans.
As a result, the only student loans that many students have been able to take out are publicly-backed Stafford loans. These loans are rarely enough to cover the full cost of tuition, leaving many families without an immediate means to pay for college. If you are having trouble finding a private student loan online, there may be a few alternative sources where you could get private student loans that you haven’t considered.
There are now a number of companies, such as Prosper, Lending Club and Fynanz that provide students the opportunity to borrow money from individuals to pay for the college in the form of peer-to-peer student loans. With these services, students create a listing for a loan on a peer-to-peer loan website and then individual investors can opt to fund part of the peer-to-peer student loan that the student is hoping to take out.
With Prosper or Lending Club, the loan that the student will be taking out will start repayment immediately and amortize fully over a three year period. Some of the peer-to-peer lending firms that deal exclusively in peer-to-peer loans, such as Fynanz, may provide students some deferment options which will make it so that they don’t have to repay the loan immediately, and instead students can begin repaying the loan after college.
Typically the interest rates that students will repay on their loan are comparable to what student would pay if they were to take out a private student loan from a bank.
Publicly-backed loans from traditional lenders should be the first choice for students looking for financing options to pay for college, but peer-to-peer student loans can provide a great secondary financing option for students that need additional funding for college.
Monday, November 23, 2009
Federal direct student loan consolidation- Credit Card Debt Consolidation Loans - Expert Guidance for Your Debt Problems
Debt consolidation counseling is the first step towards opting for a best debt consolidation program. It is after counseling, that the debt consolidation company will formulate a proper plan, as per your situation, to help you. The debt consolidation counseling will include, first taking information from you about your debts, credit card dues and credit rating and then carefully reviewing that information. After that, they will prioritize your requirements and accordingly lay options before you. They will then give you debt consolidation quotes, which will include the interest payable and their charges, whatsoever.
Counseling - The Way to Go
When you go for debt consolidation counseling, you are asked to fill up a form, giving details about your debts and other liabilities. After analyzing your exact situation, the counselor discusses with you, the pros and cons of the different best debt consolidation programs. At this stage, the debt consolidation company gets in touch with the creditors of the borrower and settles reasonable repayment terms with them. This may include, either lowering the interest rate or extending the duration of the loan. The creditors usually agree, when contacted by these firms, as a half paid debt is better than a bad debt.
Different Debt Consolidation Options
Debt consolidation usually comprises of consolidating your entire existing loans or debts into one loan and paying a single monthly payment towards them, at a lower interest rate. Credit card debt consolidation combines all your credit card debts together and similarly makes a single payment. This can be done in case, you find yourself capable to make that minimum monthly payment. If the client is deeply in debt and is unable to shell out any amount on monthly basis to pay off his debt, then the option of debt consolidation loan is granted to him.
Debt consolidation counseling also helps you to understand the downside of debt consolidation. Often, you have to pay high interest rates on your debt consolidation loan and credit card debt consolidation loan due to your poor credit rating. You also need to pay the fee and charges for the services taken. However, this is a little amount to pay for the serious debt problem. Once all your debts are consolidated, you are once again able to spend some money on other important things. You are able to start afresh as you stop spending sleepless nights.
Debt consolidation counseling helps you get professional advice for appropriate steps to get out of an existing debt problem. The counselors of the debt consolidation services would help you to evaluate and understand all available debt consolidation options such as, credit card debt consolidation, compare free debt consolidation quotes and then select the best debt consolidation program as per your requirements.
We Have Helped 4 Million US People
Consolidate Debt, Become debt free from stress of multiple debts...!
Apply Now for a Free Debt Consolidation Quote & Counseling
Counseling - The Way to Go
When you go for debt consolidation counseling, you are asked to fill up a form, giving details about your debts and other liabilities. After analyzing your exact situation, the counselor discusses with you, the pros and cons of the different best debt consolidation programs. At this stage, the debt consolidation company gets in touch with the creditors of the borrower and settles reasonable repayment terms with them. This may include, either lowering the interest rate or extending the duration of the loan. The creditors usually agree, when contacted by these firms, as a half paid debt is better than a bad debt.
Different Debt Consolidation Options
Debt consolidation usually comprises of consolidating your entire existing loans or debts into one loan and paying a single monthly payment towards them, at a lower interest rate. Credit card debt consolidation combines all your credit card debts together and similarly makes a single payment. This can be done in case, you find yourself capable to make that minimum monthly payment. If the client is deeply in debt and is unable to shell out any amount on monthly basis to pay off his debt, then the option of debt consolidation loan is granted to him.
Debt consolidation counseling also helps you to understand the downside of debt consolidation. Often, you have to pay high interest rates on your debt consolidation loan and credit card debt consolidation loan due to your poor credit rating. You also need to pay the fee and charges for the services taken. However, this is a little amount to pay for the serious debt problem. Once all your debts are consolidated, you are once again able to spend some money on other important things. You are able to start afresh as you stop spending sleepless nights.
Debt consolidation counseling helps you get professional advice for appropriate steps to get out of an existing debt problem. The counselors of the debt consolidation services would help you to evaluate and understand all available debt consolidation options such as, credit card debt consolidation, compare free debt consolidation quotes and then select the best debt consolidation program as per your requirements.
We Have Helped 4 Million US People
Consolidate Debt, Become debt free from stress of multiple debts...!
Apply Now for a Free Debt Consolidation Quote & Counseling
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