Wednesday, January 29, 2014

What You Need to Know About the Pending Student Loan Bill of Rights

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As the toll of student loan debt creeps up to $1.2 trillion(!) of debt, the government continues to take steps, hoping to avoid another recession.  In early December of 2013, Senators Dick Durbin, Elizabeth Warren, Barbara Boxer, and Jack Reed proposed a bill of rights for borrowers of student loans. 
The first thing to note is that January is likely when you will apply for your student loans for the next academic year.  This legislation has only been proposed (it has not gone through the legislative process or been enacted into law), and will be unlikely to affect the terms of your past and current agreements.  Secondly, this legislation focuses primarily on private student loans, and therefore may not help you much if you only take out federal loans.
The first several pages of the bill regard a proposed set of new regulations for private lenders and how they service student debt.  Mostly these regulations require private lenders to educate borrowers on long-term options, repayment plans, and consolidation (most of which is typically provided in the terms of the loan agreement).  Additionally, lenders may be required to pay 5% of its defaulted student loans if their default rate was between 15 and 20 percent (but this does not mean you personally get to miss a payment).
The next section is the student bill of rights.  This area includes rights such as:

    • The right to alternative repayment options to avoid default
    • The right to be informed about key terms, conditions, and repayment options
    • The right to know who is servicing your loan and be able to contact them
    • The right to consistent monthly payment calculations and availability to promotional offers and advertisements
    • The right to grace periods when loan servicers are changed or a debt cancellation occurs due to borrower death or disability
    • The right to lender accountability including resolution of errors and private loan certification.
The final section has similar regulations as the ones for private loans, but also requires that new rules be drafted with a goal to minimize costs to borrowers.  The bill also requires loan servicers to send letters to borrowers about their repayment options, which is something the Department of Education already has in place.
Will these changes really change the debt burden of students and graduates?  Probably not.  It will be helpful for private lenders to provide more repayment options than forbearance and default, but the debt isn’t going to disappear.  Salaries are not enough to dig new graduates from the mountain of debt they are under.  And, most of these notification requirements are available within the terms of your loan agreement.  If you read them, then there shouldn’t be any surprises, which is what I think most of this legislation is trying to prevent…surprises.  The 46-page piece of legislation may look to some as a miracle, but this is far from an escape clause in your loan agreement. 
Last night’s State of the Union Address had a large focus on fixing the current state of student loans. Therefore, you should expect more legislation similar to the student loan bill of rights to be popping up.  Keep apprised of the changing policies and do your research.  If you actually understand what you are signing, then you will be less likely to borrow large amounts and can appropriately prepare for future payments.  To read the proposed bill, click HERE.

Wednesday, January 22, 2014

4 Steps for Early Summer Associate Interviews

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If you’re a 1L, you have one semester of law school under your belt.  Where you fell in rank (if your school ranks after the first semester) or your grades will define whether or not you are eligible for early on-campus interviews for upcoming summer associate positions.  It seems a bit harsh for employers to base their decision on so little (maybe 5 exams?), especially when things could change in the second semester…right?  Regrettably, those first exams are the only thing that illustrates your ability to understand the law.  They tell the employer how you are doing compared to your classmates as well as the likelihood of your success in law school and with that firm.  Fortunately, if you did extremely well during your first semester, you will likely be recruited this month for on-campus interview season.  As summer associate positions are dwindling across the nation, it is important that you prepare thoroughly for your interviews.  Whether you are going to do interviews now or have to wait until the end of the spring semester, these tips will help you.
1.      Get your paperwork in order.  Polish up your résumé and writing samples. Have career counselors and your legal writing professor check over these and ask for critiques on how to make your documents stronger.  Get copies of your transcripts as well.  Study all of these materials so you can answer any question that might arise, be it a legal issue or case from your writing sample or a blip on your résumé.  Expenses: invest in quality paper and a quality printer.  Since you should bring these materials with you on the interview for the interviewer’s convenience, your documents should be professional.
2.      Suit up.  Get your suit to the dry cleaner early so it is ready for last minute interviews.  If you don’t have a suit, purchase a solid color (black, gray or navy) so you can mix and match it with tops and/or ties already in your closet and get multiple uses out of it.  Expenses: purchase of a suit and/or dry cleaning bill.
3.      Practice!  Come up with questions and professional answers.  Practice them.  This way when your nerves take over, you’re less likely to stumble, mumble, or sound stupid.  Research everything you can about the firm and the person conducting the interview.  Come up with questions you would like to ask.  Remember, this interview is both ways and you want to be sure this firm will be helpful to your goals.  Practice with trusted mentors, career counselors, and established attorneys you may know to get critiques and differing points of view.  Expenses:  Free.  HERE are some good questions to get you started.
4.      Follow up.  Be sure to send professional Thank You cards to interviewers and anyone who may have taken time to help you practice.  After sending the thank you, do not pester the employer about their decision.  Many times, the interviewer will state when you will likely hear back from them.  If they do not mention a time, feel free to ask during the interview or wait 3 to 5 days or up to a week before asking about your status.  Expenses:  Invest in professional stationary for your Thank You notes.
Take these four steps and be your best professional self, and you could have summer associate listed on your résumé by next fall.

Related Articles:  A Midsummer Associate’s Dream

Thursday, January 16, 2014

10 $$$ Ideas for POCS (Parents of College-bound Students)

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Please welcome today’s special guest contributor, Wendy David-Gaines, blogger and author for Parents of College-bound Students (POCS).  Wendy and I are making a joint effort to help decrease student loan debt for parents and students relying on loans to finance their education.  Visit her website to read my article: 7 Tips to Help Your Child Decrease Loan Debt BEFORE Graduation. Enjoy!

Status quo ideas
Both colleges and the government have sought to lower college costs for families by treating higher education as big business selling an expensive product which becomes a large consumer purchase. Colleges offer varying discounts to tuition in the form of institutional aid that reduce the cost of attendance (COA) or sticker price on a case-by-case basis. Federal and state governments developed financial aid programs to help eligible students pay their college bills.

Neither of these ways has been successful in making college more affordable. Costs continue to rise or have already surpassed a financial safety zone for students at all income levels. A tuition discount of $10,000 may seem generous but does not go far if faced with a $50,000 annual bill. Student and parent loans are considered part of financial aid. They help the bill get paid today but can add thousands of dollars in interest and fees to the principal that will have to be paid back.

Think tank ideas
A think tank recently addressed the problem of PLUS loans for parents of undergraduate students. Parent PLUS loan seen as parent trap describes the key recommendations for Parent PLUS loans reforms.

Higher education should enhance futures, not endanger them financially. Students need access to college but their college dreams shouldn’t put parents at financial risk.
The combined think tank report The Parent Trap and event discussing college affordability, inspired me to add my ten college affordability options for students.

Developing problems
Interest rates for federal student and parent loans are now tied to the market place so rates will rise as the economy improves, whether or not borrowers’ financial situation improves. Education debt follows students throughout their lives. For example, the government can seek repayment with social security benefits.

The federal government is developing a new college rating system with the hope of tying the rating to distribution of financial aid. This may hurt public colleges with lower graduation rates and higher loan default rates.

Fresh ideas
Families paying high college costs and loading on debt should not be the only answer to achieve necessary higher education and attain a financially secure future. Some new thinking for parents, students and public policy is a must to solve the college cost problem.

Here are my 10 fresh ideas for families to do now, plan for the future, and ask others to step it up.

1. Go sideways Many colleges collaborate with other schools to form a consortium. This allows students extra perks like taking courses at a more expensive college while paying the lower tuition at the school they attend. The practice of cross-college collaboration is growing, Inside Higher ED recently reported as colleges with tight budgets seek to share resources without merging. Parents may be familiar with the practice when multiple local schools do something similar with academic and extracurricular programs or bus service contracts.
2. Be savvy If colleges and governments treat higher education as a business purchase, so should students and their parents. Take a cue from savvy house and car (both of these costs also have hugely escalated) shoppers and turn down offers of admission from schools that don’t make it affordable to attend. All institutions need to fill their classrooms and consumers can and do influence product sales. Appeal too low financial aid awards: demonstrate desire to attend but make it clear attendance is impossible without affordability.
3. Go where you are wanted Best college/student fit means the place where students will thrive and receive best chance to achieve success. The most overlooked criteria is the degree in which the college wants the student. Schools show their appreciation with large institutional financial aid awards, honors programs, class choice priority, and special academic, cultural, research, internship, and employment opportunities.
4. Relocate States often substantially reduce public college tuition costs for residents. The catch is state requirements for residency must be met and student residence usually depends on parent state of residence. Parents wanting to provide their child a choice to attend a great public college in another state should begin researching a move to meet state residency requirements that could save thousands of college dollars.
5. Start early Parents can’t expect their child to do their best if he is not invested in the college process. Students should know college costs and their expected part in paying for their higher education. They need a strong work ethic for studies and a job. This article shows two middle-school students began a business with the goal of paying for college. They are staying motivated, making some extra spending money, gaining valuable skills, and adding to their college application activities resume.
6. Make it free Public education is not a new concept; it just ends at the12th grade. Yet a college degree is now valued the way a high school diploma used to be. President Obama has said it, economists have predicted it and the marketplace is demonstrating it. So urge your representatives to redirect a large portion of current financial aid to cover the cost of public community college tuition for two years. All students who seek an Associates Degree would get one free and the price could be easily covered according to an article in The Atlantic. The figures from the think tank and Department of Education data prove the math works.
7. Support new tax deductions There are some limited education tax deductions including provisions for interest on loans. What about a deduction for loan principal paid for college degrees? Many states allow a tax deduction for contributions to state-sponsored 529 college savings plans. In Nebraska, a bill was recently introduced to deduct principal paid on loans used to obtain a graduate degree for the first 10 years after a resident had earned the degree.
8. Create new civilian service option The government picks up the higher education tab in exchange for military service, trades community service for payment of student loans under programs like Americorp, and forgives student loans for working in certain professions like nursing, teaching, public service under specific conditions. Urge the government to develop a new but similar program with a broader civilian service commitment that would build back a strong and eager work force.
9. Ask others Encourage your child to find businesses, organizations and groups that want to invest in her. Take a lesson from new fund-raising sites and offer projects in exchange for donations to help pay for college. This also will build her college application resume.
10. Refuse loans Send a strong message to representatives that your family is not interested in financial aid that offers loans with high interest rates and fees. These things are not true aid but methods of paying. Interest and fees can add thousands to the cost of borrowing during repayment. Soon Congress will be reviewing the higher education law so let your voice be heard now.

Before the perfect storm of increasing college costs destroys your family’s finances, consider my $$$ ideas for POCS (Parents of College/college-bound Students) and head over for Jenny’s super tips to save you more!!!
Wendy David-Gaines, aka POCSmom, provides information and insights about the parent role in the college process to make it less stressful and more fun for the college-bound and their families. She is founder of, author of Parents Of College Students survival stories, and Long Island mother of two children who have graduated from college with self-supporting jobs. She is the Long Island College Prep Examiner for