A relatively new and Web-based form of lending could offer cash-strapped students an alternative way to finance tuitions and other college expenses.
Called "social lending," the concept involves borrowers seeking funds from people they might know personally, such as family and friends. Also called "peer-to-peer" lending, social lending could involve a firm setting up an online auction for the student borrower who would get a loan based on the maximum amount of interest he or she would be willing to pay.
The concept should provide some relief since students and their parents are now scrambling to find financing in a tough economic climate.
States short of tax revenue are cutting funds to provide loans and some, such as California which is a severe budget crisis, are piling on new fees to the 2009-2010 tuitions that some students have already paid. Other states with serious student loan issues include Michigan, Utah, Illinois and Pennsylvania.
“We have ways to get money but many students just don't know about the kinds of services firms such as ours offer,” says Tiffany Fox, a spokeswoman for San Francisco-based Prosper.com, which sets up online auctions that allow bidding on loans students custom design for themselves.
Prosper.com has built up to 850,000 members involved in all types of lending from credit card debt consolidation to home financing to student loans since it was founded in February 2006, Fox says.
Students with a minimum credit score of 640 can write loan applications for up to $25,000 that they would pay at a fixed rate in three years. No deferrals are allowed. The loan application is then put up for auction and the winners are those proposing the highest interest rate that the students are willing to accept, Fox says. Those bidding could include family and friends of the student.
Virgin Money, a Waltham, Mass.-based social lender, helps borrowers and would-be lenders such as family set up workable contracts. Virgin Money can set up a promissory note describing the terms of the loan such as the interest rate, methods of payment and payment tracking. British billionaire Richard Branson's "Virgin" business empire owns the firm.
No credit checks are done since they are assumed to be the duty of the lender. In the case of a default, the lender can call in the note or sue. Following a similar plan is GreenNote, now owned by TuitionU, which uses Web-based social networks to help students get loans. A borrower sets up a profile and posts his needs on a network, asking friends if they can contribute $100 or more. GreenNote then collects and documents the funds and turns the money over to the school.
Fixed interest rates are 6.8 percent, typically for 10-year terms. Payments can be deferred and there is a grace period of six months after graduation to start making payments. According to spokeswoman Evie Smith, GreenNote also gives students access to more than 80 credit unions.
One unique idea just starting out at Harvard University uses the Web to link student borrowers with alumni who want to contribute to their alma mater by helping them make direct students loans. Called UniThrive, the system involves the student borrower setting up as loan profile that is then turned over to willing alumni who can pledge anything from $50 to the loan's full amount. UniThrive collects the money for the school. The student borrower updates his lenders five times a year on his academic progress. Loans are typically 0 percent interest and are paid back within five years of the student's graduation.
Social lending sprouted several years ago, but got a big boost last year when the credit crisis hit. Badly damaged by their exposure to subprime mortgage lending, banks became tight with loans and demanded much higher standards of lenders. Turning to personal family and friends for money became a natural alternative.
With education funding also in crisis, social lending could be a useful alternative.
“Recent changes in retail bank lending have created the opportunity for a new and diverse group of resource providers to offer their financial support in connecting with students to help pay for education,” says Brian Cox, chief business development officer of TuitionU.com. “In the past few weeks as the college tuition bill comes due, we have experienced a spike in activity not only from students, but schools and new resource providers.”
Source
Wednesday, October 28, 2009
Thursday, October 15, 2009
Sallie Mae wants loan-reform changes
nside the Delaware offices of Sallie Mae, more than a few workers are all too familiar with the realities of "downsizing," thanks to their days working at the state's shrinking credit card banks.
But this time, the threat to their jobs isn't coming from within.
The executives and employees of the student lender -- which employs 640 at the Stanton center it opened last year -- say the real danger is in Washington, where lawmakers are considering a bill that would hand much of the lender's business over to federal bureaucrats.
On Monday, they rallied employees and launched a petition drive to have the bill changed.
"Sallie Mae is happy here in Delaware," Al Lord, Sallie Mae's CEO, told employees at the rally. "The company nonetheless needs your help. ... What we're really talking about is growing or not growing. I have very big and very positive plans for Delaware."
That plan eventually could include making the Delaware site one of five main Sallie Mae outposts as part of a companywide facility consolidation, he said. That possibility would dim if Congress approves the bill requiring that all federally subsidized student loans be made directly by the government, a step the Obama administration believes will save $87 billion over 10 years.
While conceding that some change is inevitable, Lord said he wants Congress to consider an alternative bill that would achieve savings by putting government in charge of raising capital for the loans, while Sallie Mae and others retain their roles in making and servicing the loans.
For that to happen, Sallie Mae has said, the support of Sen. Tom Carper will be crucial. Sallie Mae wants Carper to introduce the alternative legislation, but hasn't won a commitment despite persistent pressure.
"We're told in Washington that he's the guy that can make it happen," Lord said. "But no one wants to appear to be taking on the president now."
Source
But this time, the threat to their jobs isn't coming from within.
The executives and employees of the student lender -- which employs 640 at the Stanton center it opened last year -- say the real danger is in Washington, where lawmakers are considering a bill that would hand much of the lender's business over to federal bureaucrats.
On Monday, they rallied employees and launched a petition drive to have the bill changed.
"Sallie Mae is happy here in Delaware," Al Lord, Sallie Mae's CEO, told employees at the rally. "The company nonetheless needs your help. ... What we're really talking about is growing or not growing. I have very big and very positive plans for Delaware."
That plan eventually could include making the Delaware site one of five main Sallie Mae outposts as part of a companywide facility consolidation, he said. That possibility would dim if Congress approves the bill requiring that all federally subsidized student loans be made directly by the government, a step the Obama administration believes will save $87 billion over 10 years.
While conceding that some change is inevitable, Lord said he wants Congress to consider an alternative bill that would achieve savings by putting government in charge of raising capital for the loans, while Sallie Mae and others retain their roles in making and servicing the loans.
For that to happen, Sallie Mae has said, the support of Sen. Tom Carper will be crucial. Sallie Mae wants Carper to introduce the alternative legislation, but hasn't won a commitment despite persistent pressure.
"We're told in Washington that he's the guy that can make it happen," Lord said. "But no one wants to appear to be taking on the president now."
Source
Monday, September 28, 2009
Resolving student loan defaults
Once you default on your student loan, you may feel you have no options. As one of my readers said, you might feel like a "hamster in a wheel."
You can't sit back and hope the problem will go away. It will not.
Interest continues to accrue, and collection costs of up to 25 percent of the loan balance can be added to if your loan goes to a collection agency.
If you are in this situation, ask your lender about "rehabilitation."
Through rehabilitation, you can come to an agreement to make payments that are affordable to you and acceptable to the lender.
If you live up to your part of the bargain, the loan comes out of default status.
That's significant. Rehabilitation stops wage garnishments and other offsets (which we discussed in last week's column) and reinstates eligibility for forbearance and deferment. And, importantly, your credit report is adjusted to show that your loan is no longer in default after the rehabilitation.
Let's focus on rehabilitating three types of federal student loans: FFEL, Direct Loans and Perkins.
- FFEL loans. When Federal Family Education Loans default, they are assigned to a guaranty agency for collection. A guaranty agency administers the FFEL program in the state in which you live. FFEL loans are Federal Stafford, Federal Consolidation and Federal PLUS loans.
Source
You can't sit back and hope the problem will go away. It will not.
Interest continues to accrue, and collection costs of up to 25 percent of the loan balance can be added to if your loan goes to a collection agency.
If you are in this situation, ask your lender about "rehabilitation."
Through rehabilitation, you can come to an agreement to make payments that are affordable to you and acceptable to the lender.
If you live up to your part of the bargain, the loan comes out of default status.
That's significant. Rehabilitation stops wage garnishments and other offsets (which we discussed in last week's column) and reinstates eligibility for forbearance and deferment. And, importantly, your credit report is adjusted to show that your loan is no longer in default after the rehabilitation.
Let's focus on rehabilitating three types of federal student loans: FFEL, Direct Loans and Perkins.
- FFEL loans. When Federal Family Education Loans default, they are assigned to a guaranty agency for collection. A guaranty agency administers the FFEL program in the state in which you live. FFEL loans are Federal Stafford, Federal Consolidation and Federal PLUS loans.
Source
Tuesday, September 15, 2009
On Your Side: Federal student loans offer flexibility, low-interest
"I know a lot of kids that have that and need that to get through college."
He and his family prepared for Augusta State by looking into student loan options.
"I have a Parent PLUS loan, which my mom gets, roughly about $10,000, because the differential between in-state and out of state is huge."
Without it, he may not be going for a degree in business.
"I'm not sure I'd be back in school, actually."
He admits it will be expensive later, but he doesn't have to pay now. Some other federal loans provide payment flexibility without the burden of high rates.
Subsidized Stafford Loans: A low-interest option for students who qualify based on income. The government will pay interest until 6 months after graduation, when students must pick up the amount of the loan plus interest. No credit check.
Unsubsidized Stafford Loans: For any student. You won't have to pay interest until 6 months after you graduate, when you'll also be responsible for the amount of the loan. No credit check.
PLUS Loans: For parents or graduate students who qualify.
Consolidation Loans: Allow you to combine many loans into one monthly payment.
All loans are low-interest loans and also promise a greater flexibility than private loans, which usually carry higher interes rates.
Even though Jerelle will be paying the $10,000 later -- he says education will pay off more.
"I think it will be worth it. I'd have gotten my education, got a good job, made my family proud."
Source
He and his family prepared for Augusta State by looking into student loan options.
"I have a Parent PLUS loan, which my mom gets, roughly about $10,000, because the differential between in-state and out of state is huge."
Without it, he may not be going for a degree in business.
"I'm not sure I'd be back in school, actually."
He admits it will be expensive later, but he doesn't have to pay now. Some other federal loans provide payment flexibility without the burden of high rates.
Subsidized Stafford Loans: A low-interest option for students who qualify based on income. The government will pay interest until 6 months after graduation, when students must pick up the amount of the loan plus interest. No credit check.
Unsubsidized Stafford Loans: For any student. You won't have to pay interest until 6 months after you graduate, when you'll also be responsible for the amount of the loan. No credit check.
PLUS Loans: For parents or graduate students who qualify.
Consolidation Loans: Allow you to combine many loans into one monthly payment.
All loans are low-interest loans and also promise a greater flexibility than private loans, which usually carry higher interes rates.
Even though Jerelle will be paying the $10,000 later -- he says education will pay off more.
"I think it will be worth it. I'd have gotten my education, got a good job, made my family proud."
Source
Monday, July 13, 2009
PRIVATE SCHOOL LOAN DEBT CONSOLIDATION: WONDERFUL CASH MANAGEMENT WAY
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Source
Basically, a categorical target of a in isolation propagandize loan debt converging is to gush your complete loans as great as fees as great in to a singular elementary powerful loan. This way, we can get absolved of your tensions as great as we need to compensate a singular as great as usually monthly monthly payment for your in isolation propagandize loan. This trickery is generally accessible for such students who have been in debt of multiform in isolation loans as great as additionally looking a brand new choice to compensate their university fees. In fact, we have been authorised to request for a in isolation propagandize loan usually when we have to put off assorted loans during opposite seductiveness rates. Private propagandize loan debt converging is great income government which saves your income as great as time by a loan consolidation.
It is not usually this; there additionally might be additional fees fondness with transferring a change of any of your loans to a in isolation propagandize loan debt consolidation. It is apropos some-more renouned day by day in all over a universe as great as students have been availing it to get absolved of their mixed debts. Moreover, there have been countless benefits compared with a in isolation propagandize loan debt consolidation. The really initial as great as tasteful great is which it assembles all your well-developed debts in to a singular imbursement. Secondary, it reduces a seductiveness rates upon your debts as great as creates your loan a handier one.
Overall, a in isolation propagandize loan debt converging is a great choice for students for posterior their preparation along with removing absolved of their all loans. Moreover, it is additionally accessible for students with bad or bad credit jot down though they would need to safeguard a lenders to compensate a monthly installments upon time. It is a hassle-free as great as easy loan, given it is generally written for students as great as offering them during low seductiveness rate. Go for in isolation propagandize loan debt converging to obtuse your debt burden, as once we have graduated we have to begin profitable behind your loans.
Source
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