$555,000 in Student Loan Debt

The Wall Street Journal published an unsettling article about Dr. Michelle Bisutti’s staggering $555,000 in student loan debt.  While the initial loan amount was about $250,000 for medical school, her total amount due has skyrocketed due to her deferring her loans to finish her residency and defaulting on some of her payments.  While this may not happen to someone who just takes out a student loan for an undergraduate degree, it is a good reminder to “read the fine print” of all of your loan documents.
A good way to determine future college cost and possible student loan amounts is to use an on-line calculator.  NYTimes.com has a great college cost calculator that can help determine the future expense of a college degree.
Loan debt and tuition increases all play a huge factor in determining the value of a college degree.  Since there is so much money on the line, it is more important now than ever to make the right decision during your college search process.  Let us know if we can help!
Katherine Price
Educational Consultant
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End Student Loan Scams

An editorial in today’s New York Times supports President Obama’s plan to remove the private sector from the business of providing student loans. Instead, the government will lend directly to students, through the intermediary of the colleges and universities.
This seems very sensible to me, and pretty much the only way to eliminate the scams and profiteering that have characterized the student loan industry.
If the government is loaning the money, the government should control how it is lent.
Here’s today’s editorial in the Times.
What do you think should be done?

Spitzer Sparks Debate on How to Pay for College

Eliot Spitzer has not completely disappeared in disgrace. He still has the mentality of Don Quixote or the Lone Ranger, riding out to right all wrongs.

His latest fight for justice is to battle The way Americans pay for college, posted at Slate.com.

Here’s a snippet:

Marketed under the decidedly unappealing name of “income-contingent loans”—how about we call them “smart loans” instead?—the concept is simple: Instead of paying upfront or taking loans with repayment schedules unrelated to income, students would accept an obligation to pay a fixed percentage of their income for a specified period of time, regardless of the income level achieved. Suppose a university charged $40,000 a year in annual tuition. A standard 20-year loan in the amount of $160,000 (40,000 times four) would produce an immediate postgraduate debt obligation of $1,228.50 per month, or $14,742 per year, not sustainable at a salary of $25,000 or anything close to it. Under a smart loan program, the student could pay about 11 percent of his income, with an initial payback of $243 per month, or $2,916 per year, which is feasible at a job paying $25,000. If, after five years, the student’s salary jumped to $100,000, payments would jump accordingly and move up over time as income increases. After 20 years, assuming ordinary income increase, the loan would be paid off.

This proposal is pretty radical. But like the health care system in the US, the higher education system is something of a mess right now.

Actually, the two messes are related, because as a people-intensive business, higher education is saddled with steadily rising health care costs that it must pass along to the consumer. In fact, if one looks closely, the rise of college tuition closely mirrors the rise in health care premiums in the US.

One thing Spitzer

No matter what one thinks of his private choices, Spitzer is a smart guy who has a lot of intelligence to inject into this debate. And unlike Don Quixote, Spitzer has a track record of knocking down a few of those windmills.

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How Americans Pay for College

Sallie Mae and Gallup released a new annual survey on how families in the US pay for college. It yields a great deal of information.  One of the problems in analyzing this data, however, is the huge variety of colleges student attend, the financial circumstances of those families, and the enormous varance in the price of tuition at colleges.
Inside Higher Ed has a very concise summary of the report in its article today. You can read the entire report here.

Claremont-McKenna and Lafayette: Changes in Financial Aid

Two more colleges have readjusted their financial aid policies in the wake of Harvard’s decision to woo the middle classes by offering richer aid packages (which I wrote about here). The changes were reported in Inside Higher Ed:

Two more colleges have joined the growing number pledging to eliminate loans for low-income students. Claremont McKenna College announced Monday that it would eliminate loans from the aid packages of all current and new students, effective this coming fall. Lafayette College on Monday announced that it would eliminate loans in the packages of students from families with incomes of up to $50,000 and limit to $2,500 a year the loans in aid packages of families with incomes of between $50,000 and $100,000. Lafayette also announced plans to increase the size of its faculty by 35 positions (or about 20 percent) over five years, without increasing the size of the student body.

Families concerned about paying for college should take note of these changes at many of the nation’s most selective and well-endowed colleges. They are becoming more affordable.
However, also keep in mind that these financial aid changes will also lead to higher application numbers and increasing selectivity at these colleges. Harvard’s applications were up 19% this year over last, and you can expect that all the colleges with revamped aid policies will experience similar increases next year.
Mark Montgomery
College Counselor
Montgomery Educational Consulting

Columbia Joins the Bandwagon and Changes Financial Aid Policies

Columbia University announced today that it was joining its Ivy League sister institutions in revamping its financial aid policies to make the University more affordable for the middle class. Families with incomes of less than $60,000 will pay nothing. Families with incomes of less than $100,000 will see a significant increase in the amount of aid awarded. And all institutional loans will be replaced by grants.Columbia University
Since Harvard announced changes in its financial aid policies (see my post here), other well-heeled institutions (e.g., Dartmouth, Yale, Bowdoin, Stanford) have followed suit. Expect others to join in.
Stay tuned.
Mark Montgomery
Independent College Counselor