Here are the best articles from around the web this week talking about student loans…
For the week ending Friday April 26, 2014
Student Loan News:
1. Student Loans Can Suddenly Come Due When Co-Signers Die, a Report Finds:
For students who borrow on the private market to pay for school, the death of a parent can come with an unexpected, added blow, a federal watchdog warns. Even borrowers who have good payment records can face sudden demands for full, early repayment of those loans, and can be forced into default.
Most people who take out loans to pay for school have minimal income or credit history, so if they borrow from banks or other private lenders, they need co-signers — usually parents or other relatives. Borrowing from the federal government, the largest source of student loans, rarely requires a co-signer.
The problem, described in a report released Tuesday by the Consumer Financial Protection Bureau, arises from a little-noticed provision in private loan contracts: If the co-signer dies or files for bankruptcy, the loan holder can demand complete repayment, even if the borrower’s record is spotless. If the loan is not repaid, it is declared to be in default, doing damage to a borrower’s credit record that can take years to repair. Read full entry: http://www.nytimes.com/2014/04/22/us/student-loans-can-suddenly-come-due-when-co-signers-die-a-report-finds.html
2. The Big Dupe: What's the Truth About Student Loans?
Student debtors, you're being duped. The government isn't sitting on any student loan profit despite what Senator Warren says. She wants the government to stop taking advantage of you, but it's the other way around. You are taking advantage of the government every time you don't pay your student debts. You have already taken any profit the program ever had.
Perhaps the good senator is referring to the $41 billion the government reported as profit last November. No self respecting banker would call that profit because it takes no account of bad debt.
Everywhere in the world, except the federal government, a lender has to build reserves against bad debts. Those reserves are expenses that eat away at profits. But in the upside down world of student loans, the U.S. government marks every single loan in arrears for 270 days as a good loan. Get more: http://www.huffingtonpost.com/bob-hildreth/the-big-dupe-whats-the-tr_b_5193437.html
3. Students seek loan forgiveness in overwhelming numbers:
Enrollment in federal student loan debt forgiveness programs skyrocketed nearly 40% in the last six months, the U.S. Education Department told The Wall Street Journal, as education costs rise.
The programs—particularly the one revamped by President Barack Obama in 2011, Pay As You Go—forgive federal student loans after borrowers have paid a certain percentage of their income for a certain number of years. They aim to make sure people aren’t prohibited from working in public sector jobs by hefty debt loads or paying loans into retirement, but they could reportedly cost the federal government as much as $14 billion a year.
Despite a sluggish job market, the cost of education has risen to seemingly astronomical rates in recent years, up 6% in 2014 alone. According to the College Board, a “moderate” budget for college topped $44,000 for private institutions and $22,000 for a public university. Read more: http://www.msnbc.com/morning-joe/students-seek-debt-forgiveness-costs-surge
Student Loan Blog Posts:
1. Thousands of student loans going into default even without missing a payment:
During college, millions of students are forced to take out loans to pay for tuition.
However, many kids cannot get a loan on their own and rely on a parent or relative to be a co-signer.
While federal loans typically don’t require a co-signer, most private loans do.
According to a 2012 report from the Consumer Financial Protection Bureau, about 90 percent of new private student loans are co-signed.
Experts say even if borrowers are current on their payments, some graduates are being placed in default. Get full story: http://kfor.com/2014/04/22/thousands-of-student-loans-going-into-default-even-without-missing-a-payment/
2. Are There Any Credit Card Rewards for Paying Off Student Loans?
Credit cards are synonymous with incurring debt, not paying it off. And that’s no coincidence. It’s too easy for credit card users to get into serious debt when their credit card balance accumulates over time. As an unsecured debt that is never tax deductible, the costs of credit card interest payments can be staggering.
This is a post for people with student loans who may be able to use credit card rewards to help pay off their loans while using the cards for basic expenses and paying them off in full every month. However, for people who have a hard time avoiding the temptation of over-using the credit card, it doesn’t make sense to aim for credit card rewards of any kind — you’ll simply wind up with more debt. Go here: http://blog.readyforzero.com/are-there-any-credit-card-rewards-for-paying-off-student-loans/