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notes from a small island

curiouswombat in whirlybirds

Money, Money Money...

I wonder if the current credit squeeze on both sides of the Atlantic will make finances for our students harder?

Petzi sent me this link to do with student finance in the USA.

One British bank (HSBC) has already stopped giving interest-free over-drafts to students - I don't know about any of the others.

I have heard a rumour, unsubstaniated but from an ex-teacher, that our own I-o-M government might be going to means-test its payment of student fees in future.

::waits hopefully for daughter to get job in future to keep me in a manner to which I would like to be accustomed, after all this pay-out for her education...!::


The credit crunch here shouldn't prevent any eligible students from getting a federally-funded student loan, although the companies that are pulling out of the market are whining because they can no longer earn huge profits. There are not-for-profit agencies, one of them run by the government itself, that can step in and provide loans.

The real crunch is in the private loan market, which has been growing rapidly along with the cost of postsecondary education. Once kids have borrowed the maximum the government will underwrite, they go to lenders who charge high interest rates. Many of them fled the business even before the credit crunch because the Democratic Congress was investigating them. Others are being more careful who they lend to because these are unsecured loans. Therefore, I don't know if lack of availability is entirely a bad thing because it may keep some students from overborrowing. No one should leave school with $100k in debt and a Philosophy degree.
Nursing students in our state are given the opportunity to have a portion of the final two years of their tuition reimbursed if they sign up with a sponsoring hospital and contract to work for them for two years.

If a student knows where she wants to go, it's a marvelous way to get a degree with little outgo. Our daughter doesn't know where life will take her and is considering letting that money pass her by. She is paying her own way, so we are trying very hard not to interfere, but it seems a shame not to take advantage of such a sterling opportunity. It isn't often in life one is offered a substantial amount of free money!
I think it is a good idea too. Two years gauranteed work as a staff nurse in a familiar hospital is more a bonus than a big weight to carry, I reckon.

In Britain nursing students are treated slightly differently to ordinary ones - many of them get a bursary and so do not have the overwhelming debt when they qualify - but the bursary is not big.
My daughter was looking at a government job that would help her pay for loans (she's studying international relations) but the follies of this administration have soured her on the idea. I hope she'll think again, because we need motivated people to rebuild some of the damage.

I don't think they realize how much that money means until they're out on their own.
kids have borrowed the maximum the government will underwrite, they go to lenders who charge high interest rates.
I think British kids may well do something similar - I'm not sure what the top amount is that they can borrow as a proper student loan (government funded and no interest or need to pay back until earning slightly more than the minimum wage) - but many of them do seem to also have big bank loans on graduation.

No one should leave school with $100k in debt and a Philosophy degree.

Amen to that.

F is entitled to about £4,750, I think. Not actually enough to pay her rent for the year. Beyond that there's an overdraft - she's with HSBC! Then there's the £3,000 top-up, which is now higher than that as it's allowed to go up at the rate of inflation. So her government-underwritten loans add up to around £8,000 a year, crudely-speaking. We pay her rent and she more or less manages to live on the loan and what she earns waitressing once or twice a week. Her total debt when she leaves university will thus be in the vicinty of £24,000, not counting overdraft or any money we can find to help out. It makes me very cross.
I thought it must be about that much - that's something like our maximum grant and the amount that we have to promise to make their living expenses up to to get their fees paid.

We have £5,400 covenanted to her every year ( basically the max we are allowed) and she actually gets more like £7,500 a year from us in total, plus whatever she earns herself, and last year she also got a tax credit of about £400 - to her great joy! As her fees are paid, so far she is on course for not owing anything at the end of her BA, unless she gets an overdraft during the second half of it. Which, she recognises, makes her a very unusual student.
So England doesn't have free upper level education like Norway does? Somehow I always thought they did except for really fancy places. I'm apparently really out of it in that regard.

And yes, I assume my children will devote their lives to making me totally comfortable while they work their tails off. ;)
We used to. In my day we paid nothing for our tuition and, as my parents were not high earners, I also had a full grant of money for my living expenses.

Then the Conservative government introduced loans rather than grants for living expenses - and the Labour government(!) introduced fees for tuition, originally at a maximum level of £1,000 per year, now at a maximum of £3,000 per year.

This is the Labour government who would be encouraging young people of all ages to go into higher education, and the same Labour government who keep complaining about young people being in debt....
No, I don't live in Norway, but my older brother went there for their highest degree after our college, and it was free for him also. Of course their taxes are a lot, but it seems like it helps even out the playing field.
I'm not scared, I've got a whole year and a half before my daughter leaves for college.

Wait, yes I am. :-(
Personally I think one of the most important things is for them to have some concept of earning - many of my daughter's friends have jobs for 15 or 20 hours a week, as well as attending lectures etc. D-d actually doesn't have a job during term time, but works full-time for much of her breaks.

There being money in the mix that they have earned helps them be more thoughtful about spending it, I reckon.
I agree -- being responsible for your own earning and spending makes a person much more responsible and adult (usually).
Congress is working to get the Direct Loan program (the one directly financed by the government, no private lenders involved) geared up to fill in for any lenders that leave the program. They have an income-contingent repayment plan that is linked to the amount reported as earnings to the IRS each year. Some people pay nothing while out of work or working for low wages.

Also, Congress wants to increase the amounts students can borrow under the government-funded programs, which are a better deal for students all around.
Sounds like a good idea, except ... government is doing it. You know they're going to either screw it up, or pay out some outrageous amount of overhead.

(That's not totally fair, I'm sure there's some kind of effecient, well-run government program that always runs smoothly. Stop giggling, I'm serious.)

You'll be sorry you raised this subject

I happen to know a lot more about this than you ever wanted to know!

I've got issues with the way the Direct program is run, but for the sake of my job I probably shouldn't go into that in public anywhere, even under a pseudonym:) Besides, I have issues with the way all the programs are run.

Direct Lending isn't a new program. It's been around for a while and has a good percentage of the overall lending volume. It was rocky when it was first started, but now customer complaints are no greater than for most of the commercial lenders, and less than some of the big private sector lenders.

The main problem the Direct program has had is that the commercial lenders have offered incentives like paying the initial loan fees or slight interest cuts for all on-time payments, which made the commercial loans cheaper for students. (The commercial lenders lobbied Congress to make it illegal for Direct to offer the same incentives.) However, the commercial lenders are now dropping those incentives. Direct Lending was also the best bet for borrowers who were in default and wanted to consolidate their loans, so they have many high risk borrowers, but are also a good choice for people in trouble who want to repair their credit.

There are a lot of partisan arguments about whether the FFEL (commercial) or Direct program costs the taxpayers more. Common sense says that Direct Loans would be cheaper because commercial loans are set up to make a profit and the government reimburses lenders in case of default so there's no risk to the lenders. The government winds up trying to collect all the worst of the defaults. For actual numbers on program costs, I'd go with what the GAO has to say, since they are the government's accountants:


Re: You'll be sorry you raised this subject

Oh, I usually am sorry when I raise subjects. :-) but how else is one to learn things?

Basically I think services should be provided in the way that gets the job done with the least expense, but of course it's usually way more complicated than that. Thus the possibility that studies are being slanted by "methodology" ... although it sounds more to me like the Republicans are just upset at being proven wrong. (I should point out that I'm registered Republican. You have to register as something, to vote in Indiana's primary, but now that I'm a town councilman I guess I'm part of the machine.)

Often private ventures can do a job better and cheaper by competing and taking out levels of red tape, but of course the whole point of their existance is to make a profit. Both the companies and the government have to be watched very, very closely for people who care more about lining their pockets than about taking care of the customers. It sounds like in this case the commercial lenders have turned it into a monopoly, which takes away the advantage of using them. That being the case, this is one anti-government person who wold have to rule in government's favor. But I'm still going to make fun of them.

Meanwhile, it would be helpful if they'd listen to the ideas of people who have problems with how programs are run!
Oh, and there's my favorite financial aid program -- Work Study. You get a job at the school or working with a local non-profit, the school pays your wages, the government reimburses the school.
Oh? My girlfriend expressed an interest just yesterday in helping the local women's shelter -- sign her up!

January 2013



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