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Guarantee Student Loans

Misty Said:

Student Loans and the current Financial Crisis.?

We Answered:


If you're asking about private educational loans, then you're definitely on to something - it is far more difficult right now to get a private educational loan than it has been as little as 6 months or a year ago.

Understand what's going on - a student loan is a high risk loan for any lender. Think about what they're doing - they're lending a large sum of money to an applicant that has neither the income to repay the loan, or the credit history to indicate that the loan is likely to be repaid. Any time a bank makes an educational loan, they're gambling that the borrower is going to finish school, get a decent job, and actually pay the loan on time.

That's what you call a totally unsecured loan, and that's very risky. When you buy a house or a car, the bank takes a security interest in the thing you bought - it's what they call collateral. If you don't pay - the bank repossesses the house or the car, and they can sell them to recover at least part of what you owed. What can they do with your education? Come take your diploma away?

Also remember - this is how the banks got into the huge financial mess - making risky loans to people who swore, up, down and sideways, that of course they would repay the loan. Lenders aren't playing that game right now, so unless you have the kind of income that would allow you to actually repay the loan - and a credit history that shows that you honor your financial obligations - you're not going to find many (if any) banks that will lend you ten or twenty or fifty thousand dollars.

This is the power of the federal guarantee - and it's why banks will continue to make Stafford Loans. If you're a lending risk, that becomes the government's problem - the bank walks away with their money.

Good luck to you - I hope that helped.

Alma Said:

list of lenders no longer offering FFEL loans?

We Answered:

Finaid has a list of lenders who have dropped out of FFELP.…

Sonia Said:

What happens when a student loan is cancelled due permanent disability, but the student is rehabilitated?

We Answered:

You are in luck. I had a student loan discharged due to disability. After 7 years, I was well enough to go back to school. Currently I am in school, and I receive financial aid and student loans. However, you cannot have your loans written off a 2nd time for the same illness. It would have to be a different illness. Lots of paperwork is required to become eligible again for loans but it can happen.

Jaime Said:

Are student loans really designed to assist students or has it become an elaborate scam to steal tax dollars?

We Answered:

Federal guaranteed student loans are meant to assist students and families afford a college education. When used appropriately by students, parents and institutions, it is a good way to help students cover school expenses and pay over time with tax deductible and favorable interest rates.

However, as with all industries, there are dirty dogs out there who have found loop holes and back doors to run all kinds of scams to milk students, parents, the government and institutions of hard earned money.

Right now there is a lot of attention being paid to the FFELP loan program. Because of this, financial aid administrators are being painted as underhanded, dirty dealing, greedy bureaucrats fattening the coffers of their institutuions and individual bank accounts. Nothing can be further from the truth. The vast majority of us are hard working, over worked, underpaid and attentive to student and family needs in funding college education. We are charged with the responsibility of complying with the ever changing rules of the feds in administering financial aid programs while assiting students. This is by no means an easy task but we do it because we want students to get good information and we want them to be able to attend college. I personally work very hard to dispense good information about financial aid here and in presentations. We are not the bad guys.

The current scrutiny of those in our profession is seriously misplaced. If you really want to see the dirty dealings, examine the alternative education loan industry. You will quickly notice that there is little attention being paid to an industry that is confusing and fleecing millions of students and parents and bilking them out of billions of dollars! Personally, I think all of this scrutiny is a smokescreen to divert attention away from this industry.

This is just my opinion. Thanks for the outlet.

Susan Said:

What are the chances that the gov wont make good on dispersing student loans next semester?

We Answered:

The government doesn't provide the money to make Stafford loans, the government's only role is to guarantee repayment. With few exceptions, Stafford loans are made by individual lenders who elect to participate in the government's Stafford lending program.

The reality is that government guaranteed loans are the loans MOST favored by lenders - if the lenders continue to cut back on their lending activity, it won't be government guaranteed loans that they'll be cutting back on.

The lenders are worried about the qualify of loans that they make - but in the case of government-guaranteed loans, the government assumes all the risk of non-payment.

If there is one thing you don't have to worry about in life, it's whether the lenders will be making Stafford loans next semester.

Now, if you want something you can worry about - the Department of Education has informed Congress that they anticipate coming up about $6 billion short on Pell Grant funding next year, because so many more students are qualifying for need-based assistance. Unless Congress increases funding for student aid, the DOE may need to tighten up the rules on Pell qualification, or cut the amount of money awarded under the program.

It's not my place to encourage you to vote for a particular candidate in the upcoming election, but I will tell you that there is a significant difference between the 2 candidates in terms of their educational proposals. It would be worth your time to read up on those plans, and consider educational financing when you make your decision. Whatever you do - please get out and vote. It's important that the priorities of our young people get an appropriate hearing in the halls of government. When young people don't vote, they have no voice in Washington.

I hope that helped - don't worry about your second semester government loan financing.

Now private loans...hmm......

Deborah Said:

Can you declare bankruptcy when it comes to student loans?

We Answered:

declaring bankruptcy doesn't help with your student loans.
In fact, if the student loan people think that you aren't going to pay them they are one of the few credit agencies that can have your wages garnished without taking you to court over it. It really is NOT COOL. As long as you do the best that you can and send them some money to keep them appeased you should do alright although that won't really help you get out of debt. But bankruptcy won't help you in this case.

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