Best Loans May Be Outside University Preferred list

Obvious, but bears repeating:
Colleges and universities do not always push students toward the lenders with the best rates, Bloomberg News Columnist John Wasik said.

In many cases, because of marketing agreements, students are given a list of preferred lenders, generating the perception that they are the best loans available because they are chosen by the school.

The best deals are often to be had outside financial aid offices, certified public accountants said.

House Reauthorizes Vocational Ed

Congress voted strongly to reauthorize the Vocational Education Act, which Bush recommended getting rid of.
From Congressman George Miller's press release:
"President Bush wanted to eliminate this program entirely, which would have cut $1.3 billion from programs that train today's workers and future workers for high- wage, high-skill careers." The bill supports high school and post-secondary programs.

I saw an ad for one of these programs on the subway the other day, training women for nontraditional jobs like electricians and engineers.

Geraldo at Large

I didn't get to meet Mr. Rivera but the clip's on the website. Mostly about credit cards.

David Brooks is Full of It

I was crafting a response to David Brooks's column on why tuition assistance for families having trouble paying for college is useless, but this TimesSelect reader did it for me:

James Hathaway, Charlotte, N.C.: Predictably, you are making excuses for why the government shouldn't be spending money, though there is a clear need for the expenditure. Yes, there are many social reasons why some students fail to complete college besides finances, but that doesn't mean that there isn't a desperate need for financial support. For those of us who are not in the standard tax bracket for financial conservatives, the cost of college — even the cheapest state schools — has become prohibitive, and continues to become more so. Many of the social problems you cite are really red herrings, either issues that are insoluble — for instance, the divorce rate — or prohibitively expensive to fix, like public education.

I've been working in higher education for over 20 years and have seen the stress that college cost puts on even highly motivated students. Many work full-time while trying to carry a full course load and then — guess what? Yes, many are poorly prepared and many are unmotivated, but the financial burden is generally one of the most likely straws to break the camel's back.

More to the point of the current legislation, as Congress continues to cut things like Pell Grants, is the fact that unless something is done quickly, the number of students who drop out or who don't apply at all is going to increase rapidly. My own children have guidance counselors who advise vast swaths of their charges to go to community college instead for the first two years because it is cheaper in the long run. But it's actually not. You worry periodically about the future competitiveness of America — think about this a bit the next time before you create more spin for why it is futile to support education in America.

MyRichUncle Backlash

The Chronicle says the nation's financial aid administrators aren't happy that MyRichUncle took out an ad saying they have special relationships with lenders and don't always steer students toward the best deal.

"In its advertisement, MyRichUncle says some financial-aid administrators take "kickbacks" and "payola" from lenders who wish to become exclusive providers of loans on the administrators' campuses. None of these charges is particularly new. Over the past several years, Democratic lawmakers, student-loan watchdog groups, and even some loan-industry officials -- as well as the Education Department's own inspector general's office -- have urged the Education Department to be more aggressive in ensuring that lenders abide by rules that prohibit them from offering colleges inducements to secure applicants for federal loans. Despite these misgivings, department officials have largely refused to regulate in this area, leaving it up to the loan industry to police itself (The Chronicle, October 17, 2003, and November 28, 2003)."

Here's the kicker: Two financial aid advisors go on to say, well, even if MyRichUncle offers the best loan deal going right now, they won't tell students about it--because MRU hasn't established the right relationship.

""I told their representative not to visit me," said David R. Gelinas, who is the financial-aid director at the University of the South and also a member of [NASFAA]s board. "I told him that I found their approach to be offensive."
Walter O'Neill, assistant vice president for financial aid at Roosevelt University, agreed. "There's going to be a backlash against the company because they have shown that they don't have integrity or credibility.""

How is it showing a lack of integrity or credibility to publicize widely known and substantiated charges about an industry where you're trying to do something different? It's like a plumber in an ad saying, "some plumbers will overcharge you. They inflate the bill cause they're getting kickbacks from suppliers. Ask a plumber these questions to find out how independent they are. And trust us, cause we're telling you this."

Colleges Step Up to Ease Burden for Interns

Yay!
Internships have displaced casual hourly jobs as the more typical summer experience for college students — one that may provide valuable professional contacts or even lead to full-time employment after graduation. In a survey by Vault.com, which tracks student employment trends, 62 percent of college students planned to do an internship this summer, up from 41 percent two years ago.

But as many as half of all internships are unpaid or low-paid, career counselors say. Some students even effectively end up paying tuition to do unpaid internships because some companies, concerned about labor laws, require students to receive academic credit for the experience. And so college administrators nationwide have become more concerned about access to internships at all socioeconomic levels. The solution, they say, is to provide financial assistance.

“It’s all about equality,” said Lanch McCormick, the associate director of undergraduate career services at Yale, which also subsidizes summer internships. “It’s all about being able to offer these opportunities to all students.”

That's right, and that's great. But what about asking companies in these industries to contribute, too?

More on Interest rate competition

This article suggests " The higher interest rates on federally guaranteed student loans may make private loans a more affordable alternative because they may include lower interest rates."

I wonder if that's true. Right now private loans are running almost 1.5% on average above federal student loans. But the interest rate hike and especially the fixed rate does leave room for price competition.

Truth in Advertising

I wrote aboutMyRichUncle, an upstart student loan company founded by two 20-somethings (full disclosure, one of whom is a friend of a friend) in Fast Company about six months ago. Back then their angle was private loans with low rates and their own proprietary lending criteria:

Their proprietary software predicts student income based on transcripts, school, course of study, and other data; a business student with stellar grades might get a .25% reduction over a pottery student with a spotty record. Khan and Garg believe they can drive down defaults by knowing their borrowers better, but they also offer unique sweeteners: They can get you your money in five days (versus several weeks with traditional lenders) or make interest-rate reductions if you choose automatic payments. MRU’s basic variable APR was 6.38% in January 2006, near the lowest in the industry.

Yesterday MRU had a 2-page ad in the Sunday New York Times announcing their entry into the federal student loan business. A couple of things made me say, "wow!" One is that they are to my knowledge the first company ever to discount federal student loans, 1.5 to 2 points below the federally allowable rate. The second is that with a full page list of questions to ask your student financial aid administrator, they are publicizing to students and families all of the shady practices that go on between lenders and schools, and making sure people know that they have a right to choose a lender beyond their school's "preferred" list.
In current circumstances, I still think a student should usually choose a direct student loan because of the extra protections available. But I am very into what MRU is doing. It's great for students to have a real alternative.

Article on Sallie Mae's Growing Clout

IN the NYT business section. A little credulous and ignoring some of the political issues in there, such as this graf:

Changes in the law — including longer repayment periods on loans, bankruptcy overhaul [TRY: THE ELIMINATION OF BANKRUPTCY PROTECTION FOR BORROWERS] and the rise of products that let students refinance their debts at more manageable rates — have not only brought default rates to record lows but also attracted swarms of new lenders. And during the Clinton administration, the federal government itself got into the direct lending business, essentially competing with the banks.

Colleges that Profit when Student Loans Grow

Interesting press release from the National Direct Student Loan Coalition. Maybe right-wingers who think that government spending is the real problem in the student loan equation should look into reforming the loophole that allows colleges to profit directly by lending loans to their students.

The National Direct Student Loan Coalition Calls on Congress to Fix the Eligible Lender Trustee Loophole

In defiance of the intent of Congress when it recently passed restrictions on the School as Lender (SAL) program, some colleges and universities have found a loophole that allows them to garner profits from their student borrowers far in excess of what they could ever make through SAL.

Using an eligible lender trustee to manage their lending function for them, schools can bypass SAL restrictions imposed by Congress and lend not only Stafford to their graduate students, but PLUS loans, Graduate PLUS loans, and undergraduate Stafford loans as well. The U.S. Department of Education has confirmed to the Coalition that they consider this activity legal under current law.

When it created the School as Lender option in the Federal Family Education Loan Program (FFELP), Congress did not intend to create a major profit center for institutions of higher education, but simply to ensure that institutions could potentially serve as lenders of last resort to their students when banks refused to do so. Fortunately, the need for serving as a lender of last resort no longer exists.

School as Lender is in and of itself bad public policy – it is harmful to students who often have higher loan fees than through traditional federal programs, harmful to taxpayers when the less expensive Direct Loan Program volume decreases, and harmful to institutions of higher education who jeopardize their credibility through a profit-scheme that is rife with conflict of interest and inherent incentives to increase the cost of education.

In addition, this eligible lender trustee loophole has the potential to not only decrease loan volume in both DL and traditional FFELP, but could inevitably lead to the weakening and ultimate demise of the FFEL program itself.

Congress must quickly move to close this eligible lender trustee loophole to protect the integrity of the federal student loan programs.

Adult Dorm Life

NYT, on 20somethings sharing apartments in a building in Harlem:

Asked how adult-dorm life differed from college-dorm life [29-year-old], Mr. Fenn said: “You’re not really at the same place where you were psychologically. Now, for me, I’m kind of wondering: When does this end? When do I get to be able to buy a place and settle down?”

also interesting...

New York City has long been a magnet for the young, well educated and ambitious. According to a report published by the Census Bureau in 2003, nearly 132,500 young, single, college-educated people poured into the New York metropolitan area between 1995 and 2000, more than into any other metropolitan area in the United States.

“Sometimes we underestimate how important that is in generating the city’s creativity,” said Frank Braconi, chief economist for the city comptroller’s office. “To the degree that housing costs become a barrier to that group, it can in the long run sap us of that creative potential that we would otherwise have.”

What surprised me about this article wasn't any of the facts but the rents people are paying for "affordable" housing. $850 a month? That's why you have to shack up as quickly as possible, so you can share a one bedroom or a studio. When I first moved here, in 2002-2003, I was living for awhile with five people in a three-bedroom apartment.

Live Blogging at the Campus Progress Conference-the change track

I couldn't be there but you can read about it here. I like this idea of a panel about "Making Change a Career."

"They all made it sound so easy (other than the whole graduating magnum cum laude from Harvard Law) and maybe that's because it is: find what you want change, what needs to be changed, and do it." Well, that's the thing, i guess--If you can afford to graduate magnum cum laude from Harvard law without $200K in debt, then yes, there are some awesome opportunities out there to0 do well and do good. If you can't then there are still awesome opportunities out there, but it's gonna harder.

I was talking to pioneering social entrepreneur, Bill Drayton of Ashoka, for a story the other day and he told me that he's extremely optimistic about young people lining up for opportunities in the change-the-world industry. "People see that this is the best job available. It has the fastest growing salaries-- gaining on the private sector--values and work line up perfectly, there's so much demand, almost no glass ceiling, and your colleagues are high value, not cynical." This guy David Bornstein wrote a book called How to Change the World about an explosion in the nonprofit or pro-social sector. "Around the world, the fastest-growing segment of society is the nonprofit sector, as millions of ordinary people--social entrepreneurs--are increasingly stepping in to solve the problems where governments and bureaucracies have failed."

Big news--and good news, for anybody who's young ambitous and worried like me about the future.

The View

This Friday, July 14, you can catch me on the first five minutes of ABC's The View. Booking on this show has been an interesting process--far more prep for this "chat" show than for any of the news programs I've been on. I'll see how it goes.

National Shitstorm

WaPo: " A Driven President Faces a World of Crises."

I am hard-pressed to think of any other moment in modern times where there have been so many challenges facing this country simultaneously," said Richard N. Haass, a former senior Bush administration official who heads the Council on Foreign Relations. "The danger is that Mr. Bush will hand over a White House to a successor that will face a far messier world, with far fewer resources left to cope with it."

And they're just talking about international issues here, not the national debt, social security, health care, global warming or energy dependence

Making Connections

I recently heard from a couple of interesting and somewhat related writers/bloggers: Kevin Smokler (news, books, movies, websites, cultural commentary, etc) and "The Liberal Arts Dude." ("About the trials and tribulations of being a Liberal Arts graduate in the job market. Sound advice, amusing stories and information that relate to young adults feeling their way around the job market for the first time.")