Student Debt Crisis http://studentdebtcrisis.org Your One Stop Hub For Student Debt Issues Sun, 17 Aug 2014 02:08:44 +0000 en-US hourly 1 Despite Accusations Of Fraud And Deception, Will Globe University Be Expanding To Your State? http://studentdebtcrisis.org/globe-university-expanding-to-18-states/ http://studentdebtcrisis.org/globe-university-expanding-to-18-states/#comments Sun, 17 Aug 2014 02:08:44 +0000 http://studentdebtcrisis.org/?p=2002 Globe University, minnesota school of business, flip a district, fire kline, retire kline,

If you live in California, Colorado, Florida, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Maine, Michigan, Missouri, North Carolina, North Dakota, New Jersey, South Carolina, Texas, Virginia, or Washington, the answer is probably yes. That’s because, this year, the owner of Globe University has registered to do business in these 18 states. The company lists “employing online instructors” as their specific purpose for doing business in Missouri, so presumably, it plans to do the same in the 17 other states.

Globe University and Minnesota School of Business are part of a collectively owned group of about 30 proprietary colleges that make up the Globe Education Network (GEN). It has been an incredibly bad past few years for these schools which have faced numerous accusations of deception and fraudulent behavior. News of this has most likely been one of the causes for enrollment to plummet on Globe campuses.

Since 2010, enrollment at the 20 Globe/MSB campuses has plummeted from over 10,000, to just 4,900. In June, the school was also forced to close their Shakopee, Minnesota campus due to such low enrollment. By expanding to new states, the school would be able to bring in new revenue from outside states, where students may not be aware of legal issues, nor Globe University’s reputation of profiteering off the backs of students and taxpayers.

In addition to numerous accusations of fraud and deception, Globe University and sister schools have been accused of leaving students deep in debt while also questioning Globe University’s accreditation and placement numbers. The school has faced lawsuits from former deans of the school, current and former students, and most recently, the Minnesota Attorney General for allegedly misleading criminal justice students and selling them a degree which does not even prepare them for a career as a police officer. According Minnesota Attorney General, Lori Swanson’s press release

The schools offer associate and bachelor’s degrees in criminal justice costing $35,100 and $70,200, respectively. Ads for their criminal justice program show people in police uniforms apprehending suspects and administering field sobriety checks. The schools recommend their criminal justice program to prospective students who tell the schools they want to become police officers, even though it is impossible for a student who graduates from the schools to become a police officer in Minnesota without obtaining a degree from another certified institution…Some students who enrolled in the schools so they could become police officers incurred tens of thousands of dollars of debt with no ability to become licensed as a police officer in Minnesota after graduation.

As Swanson points out, Globe University students pay much more for their education, and graduate with about twice the average student debt of public colleges. An associate’s degree at Globe typically costs between $35,000 and $42,000, while students can expect to pay between $70,000 and $89,000 for a bachelor’s degree.

The suit also describes a sales culture where admissions representatives are trained to “master the art of selling,” and compared tactics used as“reminiscent of sales boiler rooms.” This culture seems to parallel accusations made in previous lawsuits against the company. In 2012, Globe’s COO, Jeanne Herrmann told MPR News, “Their job is to enroll students…So after we have worked with them to help them move toward performance in their role, if they’re not performing, then yes, they can be terminated.” Earlier this year, I uploaded the Globe Education Network’s Admission Representative Training Manual, which people can read at StudentDebtCrisis.org/Globe.

Though officials at the school deny accusations, the Minnesota Attorney General has over 40 affidavits from people accusing the school of wrongdoing. With Globe University expanding into more states, it should be interesting to see if these attorneys general pay stricter attention to a school that keeps finding itself accused of fraud and deception.

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This also appeared on Huffington Post at http://www.huffingtonpost.com/kyle-mccarthy/despite-accusations-of-globe-university_b_5672480.html.

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How the Student Debt Crisis Stacks Up Against the Mortgage Crisis http://studentdebtcrisis.org/how-the-student-debt-crisis-stacks-up-against-the-mortgage-crisis/ http://studentdebtcrisis.org/how-the-student-debt-crisis-stacks-up-against-the-mortgage-crisis/#comments Thu, 07 Aug 2014 20:41:08 +0000 http://studentdebtcrisis.org/?p=1999 The average Minnesotan student leaves school $31,497 in debt. Nationally, some students are strapped down by as much as $100,000 in student loan debt. The $1.2 trillion in outstanding education debt is more than that of the rest of the world‘s student loan debt combined.

Expert Mark Kantrowitz has suggested not borrowing more for an education than the expected starting salary. But salaries are not keeping up with the rise in tuition. Bloomberg reports that the rate of increase in college costs has been “four times faster than the increase in the consumer price index.” It also notes that “medical expenses have climbed 601 percent, while the price of food has increased 244 percent over the same period.”  Another way to look at it is that in the last 30 years, the cost of a college degree has increased 1,120 percent.

The student-loan crisis may be worse than the 2008 mortgage crisis.  Today’s students are tomorrow’s homeowners and most of them are strapped with school loan payments and or default which makes them ineligible for home loans.   Currently, student loan debt totals more than U. S. credit card debt. Student loans can’t be discharged in bankruptcy and are very hard to have waived on a hardship basis.  The amount of debt and delinquencies are climbing.  Nearly 1 in 5 households is paying off student-loan debt.

Congress should be acting on this, and fast.  Chairman of the Workforce and Education Committee Rep. John Kline should be addressing the problem of student debt, instead of penning bills to increase student loan interest rates.

Read more about Minnesota’s student debt problem here…

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Mitch McConnel Doesn’t Care about Student Loan Borrwers! http://studentdebtcrisis.org/mitch-mcconnel-doesnt-care-about-student-loan-borrwers/ http://studentdebtcrisis.org/mitch-mcconnel-doesnt-care-about-student-loan-borrwers/#comments Wed, 06 Aug 2014 19:04:37 +0000 http://studentdebtcrisis.org/?p=1973

Allison Lundergan Grimes  is really taking it to Sen. Mitch McConnell, and her heated meeting with the Senate Minority Leader at a Kentucky picnic proves it. The two competitors met at the 2014 Fancy Farm Picnic, a unique gathering that forced the candidates to meet face to face. Both Grimes, and McConnell, took a combative stance in front of a polarized audience, however the passionate Grimes successfully criticized the Senator for his abandonment of Americans who are struggling to handle their student debt.

“When it comes to our students being able to afford college”, she told the crowd, “Mitch McConnell doesn’t care”.

And she’s right, last month Sen. McConnell told a town hall in Buckner, KY that he “ruled out forgiving obligations” for Americans who cannot afford their debt, despite having acknowledged that the cost of college was “outrageous”. This shouldn’t be a surprise, the Senator’s record is littered with attempts to block student debt legislation. Last month he blocked Elizabeth Warren’s refinance bill, he has struck down several other attempts to protect student loan interest rates, and the Senator’s ability to create gridlock on the issue is immense.

Not only is McConnell actively blocking legislation that could help student loan borrowers now, he has even encouraged Americans to attend cheaper for-profit universities that carry more financial risk. The Senator said he was a “fan” of for-profits, adding the insult that “not everybody needs to go to Yale”. For-profit colleges make up 13 percent of college students, they account for 31 percent of student loans, and about half of loan defaults.

His opponent, Allison Lundergan Grimes, has gained huge support from student loan debt champion Senator Elizabeth Warren, who traveled to Kentucky to back the candidate after her bill was blocked by Senate Republicans. This new wave of support over the issue has seemed to instill some extra confidence for Mrs. Grimes, who used the Kentucky picnic to take direct aim at Senator McConnell.

Click here to read more on Senator McConnell’s stance on student loans.

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Treasury Pushes to Help Borrowers, Still isn’t Enough http://studentdebtcrisis.org/treasury-pushes-to-help-borrowers-still-isnt-enough/ http://studentdebtcrisis.org/treasury-pushes-to-help-borrowers-still-isnt-enough/#comments Tue, 05 Aug 2014 21:08:49 +0000 http://studentdebtcrisis.org/?p=1968 The U.S. Treasury, which finances more than 90 percent of new student loans, is exploring ways to make repayment more affordable as defaults by almost 7 million Americans and other strapped borrowers restrain economic growth.

Leading the effort is Deputy Secretary Sarah Bloom Raskin, who became the department’s No. 2 official in March after more than three years as a Federal Reserve governor. As higher-education debt swells to a record $1.2 trillion, Raskin, 53, is alert to parallels to the mortgage crisis.

Back then, “we would see signs on telephones polls with 1-800 numbers urging homeowners to call to stop foreclosures. People generally got into more trouble when they used those services,” she said in an interview. Driving past the same telephone poles recently, she saw signs “urging people to call a 1-800 number for helping paying student loans.”

Raskin has reason to worry: Most of those loans are backed by the federal government. In addition to trying to facilitate stronger growth, she’s focusing on the impact such debt has on government’s financing needs and ways to improve servicing and collection.

Among the options under consideration is boosting participation in underused Education Department programs that reduce monthly payments by tying them to a percentage of income for those who struggle, while extending the term of the loan.

The Treasury and Education departments are working with tax preparers Intuit Inc. (INTU) and H&R Block Inc. to reach borrowers during the tax-filing process and provide information about student loan repayment options.

For the Treasury, which finances $100 billion of new student loans every year, a pressing need is forecasting repayments more precisely so it can better determine how much money to raise from capital markets.

“The income-based plans provide borrowers with good options to keep their loans current, and keeping those loans current is very important from the perspective of the U.S. government’s balance sheet,” Raskin, the Treasury’s highest-ranking woman ever, said in the July 16 interview. “We need precision around how much we have to raise in order to meet the demand for student loans.”

Critics such as Richard Vedder, director of the Washington-based Center for College Affordability and Productivity, a nonprofit research group, say the administration’s efforts fail to address the core issue: education costs increasing faster than inflation and income…

Continue reading at Bloomberg…

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Colleges are full of it: Behind the three-decade scheme to raise tuition, bankrupt generations, and hypnotize the media http://studentdebtcrisis.org/colleges-are-full-of-it-behind-the-three-decade-scheme-to-raise-tuition-bankrupt-generations-and-hypnotize-the-media/ http://studentdebtcrisis.org/colleges-are-full-of-it-behind-the-three-decade-scheme-to-raise-tuition-bankrupt-generations-and-hypnotize-the-media/#comments Thu, 31 Jul 2014 06:00:37 +0000 http://studentdebtcrisis.org/?p=1792 Tuition is up 1,200 percent in 30 years. Here’s why you’re unemployed, crushed by debt — and no one is helping

The price of a year at college has increased by more than 1,200 percent over the last 30 years, far outpacing any other price the government tracks: food, housing, cars, gasoline, TVs, you name it. Tuition has increased at a rate double that of medical care, usually considered the most expensive of human necessities. It has outstripped any reasonable expectation people might have had for investments over the period. And, as we all know, it has crushed a generation of college grads with debt. Today, thanks to those enormous tuition prices, young Americans routinely start adult life with a burden unknown to any previous cohort and whose ruinous effects we can only guess at.

On the assumption that anyone in that generation still has a taste for irony, I offer the following quotation on the subject, drawn from one of the earliest news stories about the problem of soaring tuition. The newspaper was the Washington Post; the speaker was an assistant dean at a college that had just announced a tuition hike of 19 percent; and the question before him was how much farther tuition increases could go. “Maybe all of a sudden this bubble is going to burst,” he was quoted as saying. “How much will the public take?”

Oh, we would take quite a lot, as it happened. It was 1981 when the assistant dean worried in that manner—the very first year of what was once called the “tuition spiral,” when higher ed prices got the attention of the media by outpacing inflation by a factor of two or three. There was something shocking about this development…

Continue Reading at Salon…

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Upcoming Changes to Student Loan Terms http://studentdebtcrisis.org/upcoming_changes/ http://studentdebtcrisis.org/upcoming_changes/#comments Wed, 23 Jul 2014 18:38:26 +0000 http://studentdebtcrisis.org/?p=1938 The Institute for College Access and Success (TICAS) has given a press release that wants to make it easier to understand this years’ changes to student loan terms. This includes increased interest rates and higher fees. TICAS has done a great job outlining the most important changes, as well as recommendations for reform…

July 1 Brings Higher Rates, Other Changes for New Federal Student Loans

Interest rates and fees rise, subsidized loans won’t accrue interest during grace period

 Oakland, CA – July 1 is when most changes to federal student aid go into effect for the coming school year.  Several are lined up for 2014-15, including higher interest rates on new student loans for undergraduates, graduate students, and parents. The Institute on College Access & Success’ (TICAS) Project on Student Debt has created a new easy-to-read chart with interest rates, loan amounts, and other useful information about federal loans issued in 2014-15.

 In 2013, Congress changed the interest-rate rules for federal student loans. Rates for new loans are now set each year based on the 10-year U.S. Treasury note rate in the spring of that year plus a fixed percentage that varies based on the loan type. Those rates are then fixed for the life of the loans.

“Federal student loans are still the safest way to borrow for college, with fixed rates, flexible repayment options like income-based repayment, and consumer protections like discharges when schools close,” said Lauren Asher, TICAS president. “But with interest rates on the rise, federal loans are expected to cost students and families more over time than if Congress had simply left them alone last year. Without clear information about the benefits of federal loans, news of rising rates may lead more borrowers to take on much riskier private loans instead.”

The rates for new loans this year are lower than if Congress had let the old rules stand, but beginning next July, the rates on some loans are expected to be higher than under prior law. According to Congressional Budget Office (CBO) projections, rates for new loans will rise substantially over the next decade and generate $127 billion in government profits at borrowers’ expense.  Under prior law, interest rates would have consistently been 6.8% for all Stafford loans and 7.9% for PLUS loans. Under current law, CBO projects rates for undergraduates to exceed 6.8% by 2017, and rates for graduate students and parents to top their old levels in 2015, just one year from now.

 

The changes coming on July 1 also include some good news for students and families:

  • For new subsidized loans, interest won’t accrue during the six-month grace period before the first payment is due.  (This benefit was temporarily eliminated for subsidized loans issued in 2012-13 and 2013-14.)
  • The maximum Pell Grant will increase by $85 to $5,730 (up from $5,645), financed by savings from cutting costly middlemen out of the student loan process back in 2010. However, even with this increase, the maximum Pell Grant will cover less than a third of what it costs to attend a four-year public college, the smallest share since the program began.

 

And here’s how the higher loan costs break down for federal student loans issued in 2014-15:

  • Fixed interest rates

o   Stafford loans for undergraduates: 4.66% (up from 3.86% for loans issued in 2013-14).

o   Stafford loans for graduate students: 6.21% (up from 5.41% for loans issued in 2013-14).

o   Parent and Graduate PLUS loans: 7.21% (up from 6.41% for loans issued in 2013-14).

  • Origination fees

o   Because of budget sequestration enacted by Congress in 2011, origination fees will rise for federal Direct loans disbursed on or after October 1, 2014. For Stafford loans the fee will be 1.073% of the loan principal (up from 1.072%); for PLUS loans it will be 4.292% (up from 4.288%).

TICAS’ 2013 white paper includes detailed recommendations to keep federal student loans affordable, streamline the loan program, and better target benefits, as well as broader reforms to increase college affordability and completion.

For more information on new student loan terms check out TICAS’ site here...

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CFPB Now Accepting Complaints Against “Debt Relief” Services http://studentdebtcrisis.org/cfpb-now-accepting-complaints-against-debt-relief-services/ http://studentdebtcrisis.org/cfpb-now-accepting-complaints-against-debt-relief-services/#comments Wed, 23 Jul 2014 18:13:05 +0000 http://studentdebtcrisis.org/?p=1931 The CFPB has announced that they’re accepting complaints from consumers experiencing problems with third-party debt relief companies, including companies promising to help student loan borrowers in distress. They have published a consumer advisory warning borrowers in distress that they do not need to pay a fee to get help with their federal student loans.

  • Enrollment in alternative repayment programs, like Income-Based Repayment (IBR), is available at no cost to federal student loan borrowers.
  • Debt relief companies do not have the ability to negotiate with your creditors in order to obtain a “special deal” under these federal student loan programs. Payment levels under IBR and other federal income-driven repayment plans are set by federal law.
  • Any claims by debt relief companies to the contrary may be misleading and potentially a violation of law.

In recent weeks, these companies have received scrutiny from state attorneys general and banking regulators. A growing number of student loan borrowers have expressed concern about debt relief companies that charge high up-front or monthly fees to enroll them in alternative payment plans like Income-Based Repayment, free options available to all borrowers with federal loans.

Borrowers can now submit complaints about these companies at:

consumerfinance.gov/complaint/#other-service

The Bureau requests that companies respond to complaints within 15 days describing the steps they have taken or plan to take. The CFPBexpects companies to close all but the most complicated complaints within 60 days.

Learn more about the CFPB battling student loan scams at their site…

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New Rules for Loan Rehabilitation http://studentdebtcrisis.org/new-rules-for-loan-rehabilitation/ http://studentdebtcrisis.org/new-rules-for-loan-rehabilitation/#comments Wed, 23 Jul 2014 17:46:55 +0000 http://studentdebtcrisis.org/?p=1928 The loan rehabilitation program is an important way in which American’s who already have student debt can continue to follow their higher education goals. However, 600,000 borrowers defaulted last year alone and many believe they have zero options. Here are some changes to rehabilitation programs, detailed by resource StudentLoanBorrowAssistance.org, that aim to help borrowers.

1.  Direct Loan rehabilitation now requires a written agreement (this was true of FFEL before, but not Direct Loans)

2.  There is a specified method for calculating reasonable and affordable payments using the 15% income based repayment (IBR) formula.

Here is how this should work:  Once you request rehabilitation, the collector should then ask you for your most recent adjusted gross income (AGI) or other income (e.g. public assistance).  The collection agency will use the IBR calculator (based on the 15% IBR formula) to come up with a preliminary rehabilitation payment.  If you agree to this amount, you will then need to submit documentation either of AGI or alternative documentation of income.

You can object to this amount, but then you must provide documentation of your income and expenses using a new form.  However, be advised that your payment will likely increase after the rehabilitation period if you choose this route.  At that point, you can request deferment if you qualify or forbearance if you cannot afford the regular IBR payments, but these are time limited options.  You should think carefully about whether it is a good time to rehabilitate if you don’t think you will be able to afford IBR payments after the rehabilitation is completed.

Under the new system, despite what the collection agencies may say, you do not have to be eligible for IBR in order to make the 15% IBR calculated payments during the rehabilitation period.  Collectors will be using the 15% IBR formula (and the IBR calculator) as a proxy to determine reasonable and affordable payments.  It is important to understand that this is not the same as applying for the IBR program.  And if you have a parent PLUS loan or are otherwise not eligible for IBR, you should understand that even though the collector will use the 15% IBR formula to determine your payments during your rehabilitation, your payments will likely go up after rehabilitation is completed.

The loan holder may tell you that you have to make a “good faith” payment while they are waiting for you to submit documentation of your income. This is your choice.  You do not have to make this payment.  However, you may want to do this so that you can get started with the nine month rehabilitation period.  Be advised that these payments will count toward the nine months only as long as the final rehabilitation payment amount is not higher than the amount you are paying as  a “good faith” payment.

If you are having your wages garnished, you have a one time right to have the garnishment suspended if you make five required rehabilitation payments

Once the payment is established, the collection agency sends a written rehabilitation letter and the rehabilitation plan begins.  You still have to make nine payments within a ten month period in order to complete the rehabilitation period and get out of default.

The new rules and new commission system should help address the common problem of collectors claiming that higher payments are required in order to rehabilitate.   This is wrong. The law has always said that borrowers only have to pay reasonable and affordable amounts.  There is no minimum amount that the loan holder must charge.  Too often, the collectors have simply ignored the law in order to maximize their profits. The new rules should be an improvement.

More student debt resources at the National Consumer Law Center’s site…

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Good Luck Getting Guidance from the Department of Education http://studentdebtcrisis.org/good-luck-getting-guidance-from-the-department-of-education/ http://studentdebtcrisis.org/good-luck-getting-guidance-from-the-department-of-education/#comments Tue, 22 Jul 2014 19:35:37 +0000 http://studentdebtcrisis.org/?p=1917 The New Student Loan Fixers
A few years ago, a man in his late 20s, who prefers not to be named, felt he was drowning in his student debt. He took out federal loans as an undergraduate, and then borrowed more money to go to law school. He was a smart guy, and after he graduated, he landed a good job at a big law firm. But he was nearly $200,000 in the hole. He began a conventional repayment program that ran him roughly $1,500 a month. On paper, the process seemed easy enough, but he soon became mired in a Byzantine maze that would make Franz Kafka blush.
When the man began paying off his debt, he was directed to several servicing companies, which the Department of Education contracts to manage student loans. Periodically, without explanation, he would receive a notice in the mail saying one of his loans had been transferred to a new servicer. After a while, he couldn’t keep track of who was handling each loan. Complicating matters further, he couldn’t get any guidance on what were his best options. The payment program he was on didn’t come close to touching the principal amount he owed. It seemed he would never get his head above water.

“I felt helpless,” he recalls. “The people you speak to sound like they’re in a call center. It was like they were literally reading off a screen. It seemed they didn’t know anything they couldn’t easily pull up.”

The Department of Education relies on servicing companies to provide clarity and guidance—that’s why they get paid with American tax dollars. But borrowers rarely get the assistance they need. According to a recent survey of student debtors, 20 percent find the terms of their repayments confounding. It’s no wonder, then, that defaults are on the rise: In 2013, they reached the highest level in two decades for recent borrowers, bringing the grand total of those in default to 7 million, nearly 10 percent of the entire student loan population. As a result, there’s an emerging new field of legal expertise—call it student loan law—in which attorneys help borrowers navigate a labyrinthine system, get them on the right path and save them as much money as possible. Put another way: They’re effectively doing the job of the Department of Education…

Continue Reading at Vocativ…

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Suit: Companies Duped Victims Struggling With Student Loan Debt http://studentdebtcrisis.org/suit-companies-duped-victims-struggling-with-student-loan-debt/ http://studentdebtcrisis.org/suit-companies-duped-victims-struggling-with-student-loan-debt/#comments Fri, 18 Jul 2014 20:20:44 +0000 http://studentdebtcrisis.org/?p=1913 Two companies that promised to help Americans struggling with student loan debt instead allegedly pocketed their money and did little or nothing to help them, in a scheme that one state regulator warned is an emerging area of fraud nationwide.

Illinois Attorney General Lisa Madigan filed lawsuits Monday against the companies, First American Tax Defense LLC of Chicago and Broadsword Student Advantage LLC of Frisco, Texas, alleging they charged large upfront fees for bogus services or for government programs that consumers could have obtained for free. The suits are the first of their kind aimed at an industry that has drawn scrutiny from federal and state authorities.

The lawsuits contend that the companies preyed upon people who were desperate to lighten their student loan burdens. The companies allegedly charged consumers illegal upfront fees as high as $1,200 or tacked on monthly recurring fees, claiming they could reduce or eliminate their student loan debt or consolidate their loans. Representatives of the companies could not be reached for comment Monday…

Continue Reading at ABC News…

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