Jeff Mictabor is an enthusiast on the topic of student loan issues in the news. He has been writing for the past 10 years for a variety of education publications. He now offers his writing services on a freelance basis.
Credit unions, in increasing numbers, are developing partnerships with private student loan companies like Sallie Mae and Credit Union Student Choice to deliver private student loan products to credit union members. In one such agreement, Southeast Corporate Federal Credit Union, which itself has more than 400 member credit unions, will offer private student loans through Sallie Mae.
Private student loans, non-federal education loans issued by banks and private lenders, are designed to assist students who have exhausted their federal student loan options. Private student loans can be used to cover up to 100 percent of a student’s approved educational expenses.
Credit Unions Offering Flexibility in Student Loan Programs
Some credit union private loan programs are being structured to appeal to families with more than one student in college by enabling parents to make multiple withdrawals on a single line of credit worth as much as $75,000. In addition, credit union–backed student loans are eliminating loan origination fees and offer both in-school student loan repayment and deferred, post-graduation repayment plans.
In-school repayment options enable students to reduce the overall amount of interest their private student loan accrues before they graduate. According to Sallie Mae, students who begin college loan repayments while still in school can reduce their student loan debt by 30 to 50 percent over traditional student loan payment plans, which defer repayment until after a student has graduated or left school.
Investors Looking to Private Student Loans’ Long-Term Growth
The prospects for private student loan companies and student loan securitization are improving marginally. The National Credit Union Administration (NCUA) recently sold a bond worth nearly $1.2 billion that was backed by student loans, after previously relying on commercial and residential mortgages to secure its bond sales.
Credit rating agencies are less sure that private student loan companies represent a good risk; however, many analysts remain optimistic about the long-term investment potential of private student loans.
Fueling investor confidence in the longer-term prospect of the private student loan market is the growing demand for student financial aid as record numbers of students are entering college each year.
Indeed, private student loans may gain market share in a more immediate future than analysts had been predicting.
On Capitol Hill, the U.S. Senate is currently struggling to pass a continuation of its earlier spending authorization to fund the Department of Education’s federal Pell Grant program, which awards government-issued college grants to financially needy and lower-income students. The current authorization expires December 18.
If the Senate fails to reauthorize the funding proposal at its current level, students who are eligible for a Pell Grant may find their Pell Grant award reduced or eliminated. With less Pell Grant aid available to them, many of these students would then need to take out more money in student loans in order to pay for college and complete their degree.
Congress is already considering elimination of the Pell Grant program altogether, as recommended by President Obama’s National Commission on Fiscal Responsibility and Reform.
The bipartisan panel, which recently forwarded its final report to Congress, recommended that the federal government reduce federal education grants based on a student’s pre-college family income in favor of more government-issued student loans, which would need to be paid back, replenishing the government’s coffers, and that would be more attuned to a borrower’s post-graduation earning potential.
However, spending appropriations for an expanded federal student loan program may face stiff opposition in the Republican-led House of Representatives.
As Congress wrestles with the funding needs and long-term future of both federal grant and federal student loan programs, private student loan companies are positioning themselves to fill in any emerging federal financial aid funding gaps.
private student loans, student loan repayment calculator, federal Pell Grants
Mastering Student Loan Debt Through Prepayments
Navigating the financial landscape of higher education can be daunting, especially with the looming specter of student loan debt. With two-thirds of college graduates burdened by loans, the average debt hovers around $25,000, including both principal and accrued interest. However, strategic prepayment can significantly mitigate this financial strain, potentially reducing the repayment period from a decade to just seven years or less.
Paying for College: Evaluating Your Financial Aid Package
Prospective college students who have filled out their applications for federal student aid (the application known as the FAFSA) should now be receiving information about their financial aid packages for the upcoming school year.
Student Loan Debt Collections Come Up Short
The U.S. Department of Education is reporting that its current student loan debt collection contract produced more revenue in the first 15 months of operation than the previous debt collection contract did for the same period of time, but debt collection revenues are still below the department’s projections.
