Student Loans

Michael Dannenberg in APM's Marketplace | Student Loans Are Getting Whacked

Communications — Thu, 17 Apr 2008 11:50:00 -0400

New America in the News:

APM's Marketplace | Student Loans Are Getting Whacked

Bank of America and a unit of Citigroup have joined a growing list of lenders cutting back on student loan programs. At the same time, the House passed an emergency bill that would enable lenders to have more cash to keep making loans. John Dimsdale reports.

TESS VIGELAND: OK, here's another side-effect of the credit crunch: Student loans are getting whacked. Today Bank of America and a unit of Citigroup joined a growing list of lenders cutting back on student loan programs. Also today the House passed an emergency bill to give the Education Department more authority to buy up student loans. That way, presumably, lenders would have more cash to keep making them. John Dimsdale reports from Washington.

JOHN DIMSDALE: Today the Bank of America joined the dozens of lenders who've recently withdrawn from the federally-guaranteed student loan business. Yesterday, the nation's largest student lender, Sallie Mae, announced a $133 million loss in the first quarter of this year. That compares to more than $100 million in profits last year. But the editor of HigherEdWatch.Org, Michael Dannenberg, isn't worried yet.

MICHAEL DANNENBERG (Director of the Education Policy Program at the New America Foundation): There are a couple thousand student loan providers -- federal student loan providers. There are two fail-safe systems in place. There's definitely a crisis for some individual lenders, but that's different from actual students. Theoretically, something very bad could happen down the road, but we're not there yet. . .

Steve Burd in U.S. News | Look Twice at Loan Advice

Communications — Tue, 15 Apr 2008 07:13:00 -0400

New America in the News:

Look Twice at Loan Advice (U.S. News & World Report)

. . . Stephen Burd, a senior research fellow at the New America Foundation, says many colleges are affordable without the help of private loans at all. Plus, Burd adds, federal loans also are due only after graduation, and the subsidized ones don't accrue interest while students are still in school, as most private loans do—a fact not mentioned in the ads. . .

Steve Burd in CQ Weekly | "In Student Loan Market, A Direct Approach"

Communications — Sun, 06 Apr 2008 13:51:00 -0400

New America in the News:

In Student Loan Market, A Direct Approach (CQ Weekly)

. . . But private lenders who need help face a dilemma. "Lenders are sort of putting themselves in this weird spot, where on the one hand they're raising huge alarms on the viability of their program, and on the other hand are trying to make sure they don't scare schools into the direct loan program," said Steven Burd, a senior research fellow at the New America Foundation. more

Michael Dannenberg in Inside Higher Ed | 'Hedging Bets on Student Loan Availability'

Communications — Thu, 13 Mar 2008 13:02:00 -0400

New America in the News:

Hedging Bets on Student Loan Availability (Inside Higher Ed)

. . . “I think he’s doing the right thing in seeking to calm fears of parents or financial aid officers scared by newspaper headlines, and by demonstrating that Congress is ready to act should there be widespread problems for students themselves, as opposed to some lenders,” said Michael Dannenberg, director of the Education Policy Program at the New America Foundation. Dannenberg said that Kennedy’s plan should be viewed not as opening the door to students’ borrowing more but as allowing them to shift their borrowing to less-costly federal loans rather than more expensive private ones. . .

New America Foundation in Inside Higher Ed | 'A Student Loan Credit Crunch — But for Whom?'

Communications — Wed, 12 Mar 2008 08:34:00 -0400

New America in the News:

A Student Loan Credit Crunch — But for Whom? (Inside Higher Ed)

. . . “Students with poor credit ratings, particularly those at trade schools whose graduates have poor repayment track records, might be unable to find a willing private student loan provider,” the New America Foundation’s Education Policy Program wrote on its blog this month. “All students, however, who apply for a private student loan with a creditworthy co-signer should be able to obtain a loan and obtain it at a lower interest rate than they otherwise would receive. Private student loan borrowers who don’t have a creditworthy co-signer and who are pursuing academic programs at schools with dubious job placement and loan repayment track records should consider lower cost education options.”

The idea suggested in the New America post — that the credit crunch isn’t a major problem because it is affecting mostly students at for-profit colleges, and should actually prod students who take out costly private loans at for-profit schools to enroll instead in community colleges or other lower-cost institutions — has been a subtext of some of the discussion surrounding the credit crunch, and reveal just how differently the crisis is perceived in various quarters. . . .

Michael Dannenberg in University Wire news | "Student Loan Field Takes Defense"

Communications — Wed, 05 Mar 2008 15:55:00 -0500

New America in the News:

Student Loan Field Takes Defense (University Wire)

. . . Michael Dannenberg, director of the education policy program for the New America Foundation, a nonpartisan think tank investigating the student loan crunch, said the media had merged private student loans and federal student loans' susceptibility to the housing crisis, noting federal loan recipients won't be affected. He scolded the press for creating a sense of fear. "The bigger danger is that the fear, if not panic, could depress college access for students who think they can't get a loan," Dannenberg said. . .

Stephen Burd of New America Foundation's Higher Ed Watch.Org Blog Receives National Education Reporting Award for Investigating

Communications — Wed, 27 Feb 2008 17:11:00 -0500

Higher Ed Watch.Org's staff writer and a lead investigator on the 2007 student loan scandals, Stephen Burd, is the winner of a 2007 National Award for Education Reporting, the Education Writers Association announced on Monday. Burd is a Senior Research Fellow with New America Foundation's Education Policy Program and a former Senior Writer at The Chronicle of Higher Education. Burd's two award winning articles from April 2007 appear here on the Higher… more

USA Today Quotes Stephen Burd on Private and Federal Loans

Communications — Tue, 30 Oct 2007 07:16:00 -0400

New America in the News:

Student loans are often categorized as good debt, because a college education is considered a sensible long-term investment. ...

But it's important to understand that not all student loans are alike. Federally guaranteed student loans, known as Stafford loans, have fixed interest rates, now 6.8%, and flexible repayment terms. Any full-time college student, regardless of family income, can take out a Stafford loan.

Private student loans, which are often offered by the same lenders that provide federal loans, are more expensive. Interest rates are variable, so there's no limit on how high they can go. And repayment terms aren't as flexible as they are for federal loans.

Yet despite these drawbacks, private student loan borrowing has soared in the past decade. This year, private loans accounted for 29% of all loans taken out by undergraduates, according to a report released last week by the College Board. ...

The amount of federal money that students can borrow is limited, and those limits haven't kept up with increases in college costs. As a result, some students who attend high-cost schools rely on private loans to pay for expenses not covered by their federal loans.

But that doesn't entirely explain the growth in private loans. An analysis by the American Council on Education found that one in five undergraduates with private loans didn't first take full advantage of federal loans.

So why do borrowers take out higher-cost loans? Marketing probably plays a role. Many lenders advertise private loans on television and over the Internet. ...

In addition, recent cuts in government subsidies have made federal loans less profitable for lenders. Consequently, lenders may become even more aggressive in marketing their private loans, says Stephen Burd, senior research fellow for the New America Foundation, a policy institute. ...

For the complete article, please follow this link.

Forked Tongue

Education Policy — Mon, 29 Oct 2007 22:21:00 -0400

When it comes to private student loans, loan giant Sallie Mae speaks out of both sides of its mouth. Case in point: Sallie Mae officials say they go out of their way to persuade students to exhaust their federal student loan eligibility before taking out more costly private loans. Not exactly.

It's true that on its website and in some of its marketing material, the company urges students to follow "Sallie Mae's 1-2-3 approach to paying for college," which recommends that they first apply for grants and scholarships, then for federal loans, and if a gap remains, then,… more

New America in The Chronicle of Higher Education on Sallie Mae

Communications — Fri, 26 Oct 2007 07:34:00 -0400

New America in the News:

The student lender Sallie Mae, after trying to force colleges in at least three states to provide it with contact information for potential student borrowers, is backing down.

The company, which is the nation's largest student-loan provider, described the shift in strategy after a Washington-based policy group revealed this month that the lender had filed a New York Freedom of Information Law request asking community colleges in the State University of New York system to provide it with student names, telephone numbers, and mailing and e-mail addresses. ...

The company filed its demands for the information late last month, around the time that President Bush signed legislation cutting more than $20-billion from the subsidies provided to lenders in the federally guaranteed student-loan program.

Sallie Mae said it wanted the student contact data to help it make more students aware of all their low-cost loan options. The company has acknowledged, however, that as a result of the federal subsidy cuts, it expects its future profitability to depend more heavily on its ability to write unsubsidized private loans that are marketed directly to students. ...

Sallie Mae's pursuit of the student data was revealed by the New America Foundation, a Washington-based policy group. The lender, after being asked about the report, issued a written statement saying it was acting in the best interest of students. The company said it wanted to make students aware of their ability to obtain federal grant money, and of the maximum amount of federally guaranteed loans, before they accept higher-cost private loans.

The company sent the freedom-of-information requests "to colleges and universities in states where we have seen a significant increase in deceptive marketing practices and misinformation about student loans," it said in the statement.

"If a school decides to willingly share the nonsensitive information, their students will receive information that reinforces the importance of first exhausting free money and federal loan options before turning to private education loans," the company said.

Such data requests are nevertheless discouraged under new ethics guidelines that the National Association of Student Financial Aid Administrators has been promoting in the aftermath of the student-loan scandals revealed this year. ...

For the complete article, please visit The Chronicle of Higher Education website.