Making matters worse?

Politicians that lack a gasp of the essential dynamics of credential inflation will not make any headway minimizing the burden of student debt.

Glen S. McGhee, Dir., at FHEAP, at 8:25 am EST on February 19, 2007

The trade press may have been thrown off by this hearing because it sought testimony from people who are in touch with Americans who are trying to pay for college, and who as citizens have an interest in how the Higher Education Act is (or is not) serving the nation, as opposed to the usual panel of special, narrower interests. I had nothing to do with putting the panel together, but I found it refreshing to hear from Suze Orman and Tamara Draut.

The other panelists can speak for themselves, but I did not take issue (as suggested) with Suze Orman’s remarks about the need for clarity over competition that is confusing and in many cases does not really exist. My remarks on competition were directed at correcting some of the misunderstandings about where competition exists and where it does not. My written testimony makes it clear that I value openness and moving away from arguments about anachronistic programs in favor of addressing growing problems associated with private loans and the devastating consequences of so-called enrollment management.

I know my testimony has been well received in some quarters of the Department of Education, but I expect it to be bitterly opposed in others. There is a new battle for the soul of the Department. Will it remain excessively committed to its partnership with lender interests (as documented in 2006 by the Inspector General), or will it align itself with students and families as it begins to make HEA reauthorization proposals to the Congress?

A lot of people would have been more comfortable with a hearing about HEA minutiae, so as to squeeze out debate on bigger questions. I hope that’s not the case with the trade press. It was to the Senate’s credit that it began hearings with a broader view of what is at stake.

Jon Oberg, at 10:55 am EST on February 19, 2007

They completely missed the boat

The two issues in the Federal Student Loan system that are hurting citizens the most were not even given a mention in Friday’s hearing:

1. Profit gauging from defaulted loans by both the lenders (or their collection companies). This is ruining people’s lives.

2. Illegality of Refinancing student loan debt. This is the competition that we need.

The way things are going, it looks like the people who are fleeing the country, considering suicide, and being strongarmed into paying triple, quadruple (or even far more than) their original debt by the student loan mafia. These people, the citizens who have already been through the system and are getting stolen from under the protection of law.

When arriving at the scene of a Train wreck one should treat the most injured first. I could not be more disappointed with how the hearings went.

Alan Collinge, Founder at StudentLoanJustice.Org, at 4:30 pm EST on February 19, 2007

Suze Orman??? — Out of the frying pan, into the fire!!

I talk to students and parents of students, all day long. We offer one thing — education on Financial Aid. We let them know what their Rights are under the Higher Education Act, how it all works and how to use it to their advantage. We promote low-to-no debt education plans...yes, it can be done...but, students and families simply need unbiased guidance.

We are not-for-profit, so we have no vested interest in any monies that they recieve for their education. Being a true advocate “FOR THE STUDENT” and not “for the lenders” or “for the guarantors” or “for the schools", is the only thing that ensures the student gets the BEST possible options for their particular situation. Suze Orman, regardless of her financial guru status, does not understand the intracacies of the student financial aid industry. I have a recorded clip of SuzeO, answering a letter from a student with a ton of federal loans. I save it for one reason: To show families so that they understand, that even the brightest financial advisors will give BAD ADVICE in certain circumstances. In this case, she advises the student to take out a home equity loan to pay off their student loans. I understand the implied tax advantages, but by following that advice, the student gives up their federal rights to deferment, forbearance, forgiveness and cancellation on the loans. Basically, by following that train of thought, if something goes financiallly wrong, the borrower’s only recourse is...WHAT???? Sell their home? Worse, go through foreclosure? Bankruptcy? Suze, where are you going with this???

We stress Early Planning, Savvy Execution & Efficient Management...PERIOD! You cannot start planning postsecondary education funding in the student’s Senior year of high school and think they are going to get the most cost effective financing. We begin working with students, one-on-one, as early as 6th grade. We work with parents of toddlers to devise a plan that will allow the student to go through college without eating Ramen noodles everyday and best of all, leave school without the burden of thousands of dollars in debt hanging over their heads.

As for too many choices...students have fewer choices than you think. Yes, there are literally thousands of lending options, however; so many colleges and universities have their Entrance & Exit interviews set up directly through giants like Sallie Mae and Nelnet, when students “electronically sign” at the completion of the “course", they are also signing up for student loans to cover the balance of their studies not covered by scholarships, grants & work-study programs. No, its not the actual Promissory Note, but it might as well be. Students do not realize that they do not have to accept the loans, they think that is just part of the process.

Even with the overturn of the Single Lender Rule, these mega-lenders are still driving students into their vaults.

Reform needs to come in the form of Default Education, so that students who were not informed properly about the intracacies of the financial aid system, do not find themselves paying 2 1/2 times the interest they would be paying if they had simply known what to do when they could not make their payments...And in allowing students that are STUCK with a fixed rate of 8.25% or above, to refinance their loans at today’s lower rate. These groups are the ones that are struggling the most and could help the economy of the federal aid program the best!

Senator Kennedy is definitely on the right track by tying student loan repayment to the student’s income. If a college degree increases a students income by 1,000,000.00 more per year than a non-graduate, then the value of education is certainly worth giving up a percentage of your income to pay for it!

It is a fact, fewer students are attending due to lack of knowledge about the student aid process and simply the fear of debt. It is a fact, more graduates are shying away from public service oriented positions because they need to make Suze Orman’s salary to pay for their student loans.

Bobbie J. McClure,Director Financial Aid 101, Inc."Buiding a Foundation for Success”

Bobbie J McClure, Director at Financial Aid 101, Inc, at 11:06 am EST on February 21, 2007