Student Loan News, Updates and Blog Posts

Tuesday Rant (a tongue-in-cheek observation)

Believe it or not it’s still possible in 2009 to get three squares a day, a roof over your head, and a college degree for the bargain basement price of $0. So how can you get a piece of this all American pie? Simple. Get arrested.

Correctional education, perhaps the greatest perk of all for inmates, involves vocational training or academic education as part of a prisoners rehabilitation and preparation for life outside prison. It’s these educational programs that allow many inmates to emerge from behind bars in better shape, financially speaking, than many law abiding citizens who are struggling mightily to make ends meet due in large part to sizable student loans payments. Most graduate students these days carry debt totalling over $40,000 and face monthly payments in excess of $400.

Between teachers volunteering their time and publishers donating books, as is the case at San Quentin State Prison in California, inmates are getting a top flight education for free. How fair is that? I’ve got the perfect slogan for a state penitentiary. “Commit the crime. Do your college time. All on the taxpayers dime.”

I guess all that’s left is to determine which non deadly crime will get you 4-5 years behind bars. I’d really hate to see someone paroled early prior to getting their bachelors degree in criminal justice, that would be just tragic.

Monday Rant!

Why do graduate students need to submit letters of reference? The official reason is that letters of reference are designed to promote applicants qualitative abilities. What the school hopes to discover is specific descriptions and examples which illustrate a students potential to make a difference in the world. Personally, I find this part of the application process laughable.

Depending on the school, you’re required to submit 2 to 3 letters of recommendation. This antiquated, and in my view, irrelevant practice should die like the hornets in my gutter as any student with good grades can get a professor to essentially type a form letter.

If you’ve been out of school for a lengthy period of time you’re allowed to use work/personal references. I know three graduate students who actually typed their own letters of reference and then had their references sign it. The process is a joke and the professor’s many times are a joke too.

Having to rely on incompetent professors to ensure your entrance into these programs is simply ludicrous. Perhaps this process works at top tier schools where professors enjoy ego stroking themselves and their top students, who in turn enjoy the attention and need the validation; but at the State level the requirements should just be one letter of recommendation sent by the professor’s choice of media (I would say do away with the reference completely but I know that won’t happen).

Anyone who has gone to school knows that professors can be absent minded. My one reference requirement allows you to hedge your bet. With a one reference requirement you could ask three professors to write a letter, knowing that one would come through and not hold up the process for you. The extra letters (assuming they actually did them) could then be optional.

I realize schools are trying to delineate between worthy candidates, but the reference letter devalues this process. You might as well pick up a magic 8-ball and shake away. Will I get into graduate school magic 8-ball? “Ask again later.”

You know the market is tough when Harvard University is holding seminars on how to handle rejection. Yep, I’m afraid the days of the red carpet being rolled out for freshly minted college grad students are gone – or at least temporarily suspended.

Many experts advised while the job market was slumping it would be prudent to go back to school, beef up your skill set, get your MBA, and resurface ready to market yourself and land that high paying job. But those dreams appear to be just that – dreams.

What graduate students find awaiting them now is a heap of student loan debt and an even more competition job market than when they entered grad school. In April of ‘07 the unemployment rate was at 4.5%, opposed to the staggering 8.9% we currently see today (the highest it’s been since September ‘83). As good as your alumni network is you’re asking a lot to land a high paying job right now. More polished candidates with years of experience are scooping up those jobs, and doing so for thousands less than their degree would have garnered them a few years ago.

Things will turn around as Warren Buffet said earlier this year. “Amid this bad news never forget that our country has faced far worse travails in the past…and we’ve overcome them.” Buffet was referring to the two World Wars and Great Depression that has plagued our nation. But those words ring hollow to those who don’t have a billion in the bank. For them the future can’t get here soon enough.

If you are having trouble making ends meet (click here) for a free debt consultation quote.

Five most recent graduate financial aid blog posts:

Subscribe to RSS headline updates from:
Powered by FeedBurner

If you have been toying with the idea of getting your master’s degree online, I wanted to supply you with some important information that may assist you in getting closer to achieving your goal. First off, many online schools participate in the Federal loan program, which means you can borrow the low rate Stafford loans and the Graduate Plus loans to fund your graduate degree. This is a huge help to all of us who are struggling in this stalling economy and also for those who simply do not want to drain their savings.

There are many online schools to choose from and the best place to start is to research them all and see which ones offer the program you need. Click here for a database on online school’s and online degree programs for graduate students.

Taking classes online can be a very convenient avenue for many to take, especially considering you can take the class on your on time. Once you log in to your course, you can interact with other students in chat rooms and you can ask questions and interact with your peers, just as if you are were in the class room. Usually an online class is broken down into lessons, which you complete in order. There are scheduled tests that you take, which are often timed, or sometimes you may have assignments that you need to complete and email to the teacher by a certain date. These types of classes do take a lot of self discipline so if this is not your strong suit, I wouldn’t enroll in an online degree program.

Just to get an idea of how many schools offer the program you need, and what those programs cost, definitely check out this directory and feel free to visit the Financial Aid Forum where you can ask other students who have completed online degrees about their experiences with it.

One word for you. NO! You’ve got to love the financial aid forum where people post questions freely and ask me for my coveted advice regarding their financial aid and their student loans. I recently received an intriguing post that I thought should be shared with the general student population:

To Whom It May Concern
I have a question about paying student loans. I attend graduate medical school and now in debt of $200000. But I want to drop out since I dont feel it’s the right field for me. I wonder if I drop out and come back for school for accounting degree. How can I pay off the loan? Do they have income sensitive payment? If I cannot pay the loan can it be cancelled? Thank you.

I did not make this post up. And believe it or not, this poster is not the only one who is in this situation. I just don’t understand why it would take you $200,000 to realize that it is not the right field for you. $200,000 is a A LOT of money. It results in a student loan payment of $2300 per month. This is a classic example of someone who borrowed money with no concern about how it would be paid off. Blind borrowing I like to call it. It’s not smart and it hurts no one but yourself. This person (unless they win the lottery or inherit some serious dough) will probably default on the loans…because $2300 is a lot to have to pay per month. Heck, if he/she consolidates the loans the monthly payment would still be $1500 a month. Now I made some mistakes of my own (don’t we all??) and I am paying for them now. But my mistakes are manageable…200k is just way too much debt to take on if you aren’t 110% sure of the profession you are borrowing it for.

So for anyone else who has this problem…PLEASE know that you are responsible for paying that loan back even if you can’t afford to pay it. You can put the loan payments on hold for 3 years give or take but all in all you will need to pay that loan back. The results of not paying it will leave you financially paralyzed. You will not be able to buy a house, lease a car, or in some cases get a government job. Your tax returns will be seized and your paycheck can be garnished. This is not something you can sweep under the rug.

Is anyone else in this situation? Are you regretting the decisions you made? Please share your story and leave a comment….you might be able to save someone else from going down that same road.

Marketing yourself is the name of the game, and having an MBA is the equivalent to a flashing neon sign in a pile of bachelors degrees; it stands out.

Yes, other variables are considered when a hiring manager is looking for the right candidate. Experience, how you present yourself in an interview, and if you were referred by someone at the company are all important factors, but wearing that MBA crown is undoubtedly the best chance you’ve got. Imagine if they had an actual MBA crown you could wear, or perhaps a huge wrestling style MBA belt? Now that would be priceless!

According to a recent article in the Pacific Business News, MBA’s degrees are holding their value among young professionals. Nationally, MBA graduates on average earn $106,000, according to a survey by the Graduate Management Admissions Council. MBA’s open so many more doors.

My friend Brian who is an MBA student, not a graduate, landed a paid internship with an excellent company in Boston last month. They liked the fact he was enrolled in an MBA program. It’s a great way to spark up a conversation. I have a BS in Economics, but am currently studying toward my MBA in International Management. Now that has some cache. Sometimes just taking that one class can open an unexpected door. And once that door is open you can have some real fun.

Five most recent graduate financial aid blog posts:

Subscribe to RSS headline updates from:
Powered by FeedBurner

I am the moderator of a financial aid forum where students post all sorts of questions regarding their financial aid, their tuition, and basically anything else that relates to college. I recently have been seeing a lot of posts about how to cover graduate school programs, and even in some cases undergraduate programs that will cost in excess of 150k-200k. All I have to say to that is WHY? Why would you do that to yourself?

One person who posted wanted to go to Vanderbilt because it has a good name and a good reputation, but it was going to cost her $200k to get a bachelor’s degree; and when I say cost her, I mean that she has to pay it all…she didn’t get scholarships from the school, or grants from the government. She simply wanted to go to Vanderbilt and borrow $200k to complete her bachelor’s degree there.

It is one thing if you get in to a reputable school and they offer you an action packed financial aid package…leaving you with maybe $20k to pay a year…that is doable, but to borrow that much for a bachelors degree is just absurd to me (and I think it is just as absurd to borrow that much for a graduate degree as well). $200k in loans will give her a monthly payment of at least $1300, and that is only if she consolidates and stretches the loan out to 30 years of repayment. On the standard 10 year repayment her monthly payment will be $2400. There goes her financial future.

I recently filled out a Stafford loan entrance counseling form…and they had this neat little page that asked me how much I was planning on making per year once I am done with school. It also asks you how much you are planning to borrow. With a student loan debt of $35K it advised me that I would need to make at least $45k a year to afford my monthly payments. I have always said that people borrow way too much in loans when the degree they are getting will not provide them with a salary large enough to pay off their loan debt. A friend of mine is getting her graduate degree in teaching, and she is borrowing 60k to get it. Do you know any teachers that make upwards of 75k a year? Some teacher’s might be lucky to make this 10 to 15 years into their teaching career. So what will they do for those 15 years when the loan collectors are knocking on their door?

What are you willing to borrow to get the degree you want from the school you want to get it from? Where is the line drawn? Let’s hear it people.

Join the forum! I need help replying to posts, so if you feel confident in your financial aid knowledge or you just have a lot of experience dealing with the happy folks in your Financial Aid Office PLEASE JOIN.

Redeem your points!!! Code: EXCESSIVEBORROWING101

My friend’s girlfriend Jenny is attending Grad School and has been approved for a Graduate Stafford loan for $20,500, which is great. However, she may be eligible for the Teacher Education Assistance for College and Higher Education (TEACH) grant for up to $4,000, which would be even better. This grant is designed for students who intend to teach in a public or private elementary or secondary school that serves students from low-income families. The program was rolled out in 2008-2009. The conundrum Jenny is facing is how much money she should request.

Let’s say Jenny needs $10,000 for her Grad classes, has been approved for up to $20,500 in federal loans, and may receive up to $4,000 for the TEACH grant. How much money should she request?

Answer : $10,000. Request the highest amount you may need to cover your tuition. In this case we already know that figure is $10,000. The financial aid office at the school will notify Jenny at a later date, but before classes begin, if she will receive the TEACH grant, and if so for how much (the grant is based off your FAFSA and specific high-need area of study). So what if she finds out she is getting a TEACH grant for $2,000 right before the semester starts? Jenny has already requested $10K, and it is not prudent to take out more than you need.

Answer: Send the additional funds back. You may cancel all or part of your loan at any time by notifying your school before your loan is disbursed, and within certain time frames after your loan has been disbursed. These time frames, and procedures for canceling a loan, will also be explained in notices that the school is required to send you. In this case Jenny would be sending back 2K as she would only need to borrow eight thousand to go along with her grant money.  That means Donald Duck is hauling $2,000 back to the bank.

You’ve finally decided that now is the right time to get that graduate degree. You’ve put it off long enough and are mentally ready to commit the time and effort required. But before you get snug in that lecture hall there are a few t’s that need to be crossed and i’s that need to be dotted.

1) Admissions Test: You’re not getting in to any grad school if you haven’t taken your admissions test. Your major will determine which test you need to take to get in. Obviously if you’re a business major you’re not going to be taking the PCAT, which is the Pharmacy College Admissions Test. Instead you will need to take the GMAT. If you are unsure which admissions test you need to take read Knowing Your College Test (1 of 2) and Knowing Your College Test (2 of 2).

2) Selecting a Grad School: Find out which schools offer your graduate program. That may sound rather elementary but you’d be surprised how many students have their heart set on a particular school only to learn it doesn’t offer their program. U.S. News & World Report offers grad school rankings by location, tuition, school size, and test scores.

3) The Mighty Dollar: How much is this going to cost? If your company is not picking up the tab will you be able to afford the monthly payment when you get out of school? The Graduate Stafford loan and Graduate Plus loan are the most common loan options utilized.

4) Job Prospects: Perhaps the most important thing of all is knowing where your degree will take you. I know these days it is hard to predict with the economy in a state of flux, but knowing the demand in your field is important. You want a degree that will open doors not keep them closed.

After a while it’s easy to lose track of how much money you owe and who you owe it too. In fact many bury their heads in the sand until after graduation.

Well, if you were ever curious about how much interest you’ve been accring each month on your grad stafford loans feel free to peek your head up from your sandy refuge. Below is a simple illustration of how your monthly interest is accrued.

Lets see how interest accrues between payments on April 15 and May 15 with $20,000 in student loans at 6.8%.

Average daily balance: $20,000 x 6.8% = $1,360

Days between payments (30/365.25) = .08214

$1,360 x .08214

Monthly interest: $111.71

Please note any subsidized grad stafford loan does not begin accruing interest until after graduation.