Student debt: Scams hit students struggling to pay back loans

Source: Student debt: Scams hit students struggling to pay back loans

Student loan debt has ballooned in the past few years. The Federal Reserve reported recently that Americans owe more than $1.45 trillion in student loans, making it the second-largest segment of U.S. debt (second only to mortgages).

While many students are financing their college education through a mixture of scholarships, grants, loans, personal savings and help from their families, there can be a lot of confusion about the student loan process.

That confusion can make borrowers prone to being victimized by predatory companies, who make false promises of relief and assistance. That’s why federal and state regulators and private watchdog organizations are taking a team approach to battle a variety of frauds and scams directed at students and their families.

The Federal Trade Commission recently announced “Operation Game of Loans,” which included 36 separate actions, including seven FTC cases and other casesbrought by chief law enforcement officers in 11 states and the District of Columbia. In total, the FTC reports, the scams collected about $95 million in illegal fees from consumers.

“Winter is coming for debt relief scams that prey on hardworking Americans struggling to pay back their student loans,” said Maureen K. Ohlhausen, FTC acting chairman. “The FTC is proud to work with state partners to protect consumers from these scams, help them learn how to spot a scam, and let them know where to go for legitimate help.”
Federal actions included cases brought against five companies, including California-based A-1DocPrep Inc., Alliance Document Preparation and Student Debt Relief Group; as well as Florida-based American Student Loan Consolidators and Student Debt Doctor. The companies have been charged with a variety of offenses.
For example, the FTC charged A1DocPrep with contacting consumers while claiming to represent the U.S. Department of Education, while “targeting distressed homeowners” and making false claims they could prevent foreclosure.
Others are charged with making false promises of loan forgiveness; charging illegal upfront fees to assist with reducing student loan balances; and collecting Social Security numbers and other sensitive information to be used to “hijack consumers’ accounts while cutting them off from their loan servicers or the U.S. Department of Education.”

In addition, the FTC announced they had sued two Florida-based operations that allegedly targeted borrowers with fraudulent or ineffective services, while collecting millions in fees.

While Mississippi was not among the states listed in the recent announcement, it’s likely that Mississippians have been victimized by these scams. To help consumers avoid becoming a victim of fraud, the FTC advises us to beware of promises that a company or organization can promise fast loan forgiveness, which often comes from a telemarketer, email or direct-mail piece that claims to be affiliated with the U.S. Government. Scammers can duplicate an official seal, so don’t be fooled.

“Consumers should never pay an upfront fee for help,” continues the agency, “and should not share their FSA ID — a username and password used to log in to U.S. Department of Education websites — with anyone.”

Borrowers can find out about — and apply for — deferment, forebearance or discharge programs for free directly from the U.S. Department of Education or their loan servicer.

For more information about repaying your student loans, visit https://studentaid.ed.gov/sa/repay-loans.

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It’s FAFSA time again

Source: It’s FAFSA time again, clarionledger.com

By now, you’d think we’d have gotten used to the Free Application for Federal Financial Aid, known more simply as FAFSA. The FAFSA is required for college students who are seeking any type of federal financial aid, and — on the surface, at least — seems like a straightforward process. But this annual ritual still gives heartburn to parents across the nation; my wife and I have been through it four years running.

Every October, FAFSA opens its online application process for the coming school year, and parents and students go online to claim their share of an estimated $150 billion in financial aid. Families must reapply every year, using information from tax returns and submitting information about their households, income and the student’s financial situation. All this information is used to determine the family’s Expected Financial Contribution to the student’s education.

For several years, the FAFSA allowed applicants to electronically “link” their FAFSA to their tax returns using something called the “IRS Data Retrieval Tool,” which cut down significantly on the amount of paper that families needed to submit. But IRS took down the tool in March, citing security concerns. The action took almost everybody by surprise, prompting angry emails and letters from parents and Congressmen. (The concerns were not unfounded; three people were arrested in 2016 for trying to use a similar service to file fraudulent tax returns.)

But the office of Federal Student Aid, which administers the FAFSA process, reports that the data retrieval tool is up and running and is available for the 2018-2019 school year application process, which opened Oct. 1. It’s still unavailable for parents or students trying to complete or amend a 2017-2018 form.

“Verification” is another hurdle which many parents will face. Edvisors.com reports that about a third of FAFSA filers are selected for verification each year. Being selected for verification is a pain and can delay your application, but it’s not a reason to panic. Edvisors.com notes that the U.S. Department of Education uses a “risk model” looking at 14 factors to determine which applications are selected. In addition, some colleges and universities select additional applications to verify some portion of the applications. Some people skate through their entire college experience without ever having to face verification, while others deal with it multiple times.

If you’re selected for verification, Nerdwallet lists five areas in which you may have to submit additional information: tax information, the number of people (including the student) in your household; Supplemental Nutrition Assistance Program benefits; and child support and high school completion status. If you’re required to verify tax information for 2017-2018, you will have to submit a paper copy of your tax forms; for the upcoming year, you should be able to use the “Data Retrieval Tool.” You’ll need to complete a verification form the school will supply. Check carefully to make sure everything is complete and accurate.

 And it’s important to stay on top of the process. Most sources I consulted for this column suggest that you check in frequently with the FAFSA site, even after you’ve completed your application, and don’t assume that everything is fine just because you haven’t heard anything. The verification process this year caused a significant backlog at my son’s school, with the university’s financial aid office reporting a six-week delay in disbursing aid to students selected for verification.

And if you’re the parents of a high school senior with college plans, it would be a good idea to go ahead and start the process now. For some advice, visit https://get2college.org/fafsa-2/.

It’s back to stores for back to school

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Chris Todd, Clarion-Ledger

via It’s back to stores for back to school, clarionledger.com

PDF: The_Clarion-Ledger_State_20160730_A002_0

For the past several weeks, retailers have been gearing up for the onslaught of parents trying to make sure their kids are well-equipped for the school year. Well-prepared moms and dads who planned ahead will be sitting comfortably at home in the next few days happily sipping their sweet tea, while the rest of us plunge into the nightmarish stampede of parents desperately trying to find the right 3-by-5 cards or the correct brand of No. 2 pencils specified on their kids’ supply lists.

According to some retail experts, this back-to-school season should provide a much-needed infusion of cash, as financial worries have eased for some. According to a recent study by the National Retail Federation, K-12 and college shopping trips are expected to yield nearly $76 billion, well above last year’s $68 billion.

“Families are still looking for bargains, but there are signs that they are less worried about the economy than in the past,” NRF President and CEO Matthew Shay said. “Heading into the second half of the year, we are optimistic that overall economic growth and consumer spending will continue to improve as they did in the first two quarters of the year. We fully expect retailers to be aggressive with offering great deals both in stores and online for back-to-school shoppers. And retailers will keep a close eye on inventory levels as families spread out their shopping throughout the summer.”

The organization enlisted Prosper Insights and Analytics for the annual survey, which found that families with children in grades K-12 plan to spend an average of $673.57 on apparel and accessories, electronics, shoes and school supplies, up from last year’s $630.36 for a total of $27.3 billion, according to the survey. That’s almost a 10 percent increase over last year’s tally.

There is also expected to be a surge in spending, which coincides with states’ sales-tax holidays, in which consumers can avoid paying sales tax on certain items. Mississippi’s sales tax holiday is this weekend and allows tax-free sales of clothing and footwear up to $100.

The NRF notes that it has observed over the years that each year’s back-to-school spending follows a pattern, in which families typically splurge on supplies one year, followed by a year in which they avoid making larger purchases on more-durable items such as backpacks and computers. The pattern then repeats itself; this year is expected to be a “stock-up” cycle.

According to the survey, K-12 consumers plan to spend $9.54 billion on clothing (purchased by 95 percent), $8.27 billion on electronics such as computers or calculators (57 percent), $5.12 billion on shoes (94 percent) and $4.37 billion on school supplies such as notebooks, folders, pencils, backpacks and lunchboxes (96 percent). Parents say they will spend an average $235.39 on clothing, $204.06 on electronics, $126.35 on shoes and $107.76 on school supplies.

Even with the expected good performance, parents are still bullish on spending money and will be looking for sales. “The budget-conscious consumer is not forgetting about price, quality or value, and we continue to see this when it comes to back-to-school shopping,” Prosper Principal Analyst Pam Goodfellow said. “That is why many parents are taking advantage of shopping early, scouring ads and websites for the best deals, and taking advantage of free shipping with online purchases.”

Among other findings from the study:

More families are getting their shopping done early.  Nearly three-quarters of parents started their shopping several weeks ago, with the number of procrastinators down to about 22 percent.

More parents are shopping online. Nearly half of parents have shopped online for school supplies, or plan to. Still, most shoppers choose discount stores.

Older students = more expense. College students and families with children in college plan to spend an average of $888.71, according to the survey. “Whether it’s laptops for class or mini-fridges for the dorm, college simply costs more than the lower grades,” Shay said. “Some of these big-ticket items can last all four years, but when they need to be replaced it’s a bigger investment than pencils and lunchboxes. But retailers are ready to help students and parents alike stretch their dollars and make the investment in college pay off.”

For more on our back-to-school shopping plans, visit https://nrf.com/news/top-trends-2016-back-school-and-college-shopping.

Companies scam those seeking high school diplomas

avoid-real-estate-scams-lead-funnel-success-path-education.jpg

successpatheducation.com

via Moak: Companies scam those seeking high school diplomas, clarionledger.com, 2/19/2016

PDF: Online high schools

Depending on our experiences, the term “high school” likely brings to mind a flood of memories that might be positive, negative or a mixture. But for some people who never had a chance to finish high school, getting a General Educational Development (GED) or similar certification can be a major milestone on the road to a better future.

If you’re interested in getting your diploma, there are many resources out there. In every community, there are numerous programs, and many institutions of higher learning offer assistance. But some students have found out the hard way that just because someone says they can help you get your GED, doesn’t mean it’s a good investment.

This week, the Federal Trade Commission shut down two online “high schools” which the agency has labeled “diploma mills” because they allegedly charged fees to students but didn’t deliver as promised. Students signing up for the programs with names like West Madison Falls High School, Columbia Northern High School, Stafford High School (and many others) paid from $135 to $349, only to get a certificate later found to be worthless.

“The defendants took advantage of people who wanted a high school diploma,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “If a company says you can get a diploma in no time at all or by simply taking an online test, it’s almost certainly a scam.”

Currently, GED programs are administered by the GED Testing Service, a partnership between Pearson USA and the American Council on Education. The program reports that nearly 800,000 students take GED tests each year.

In its complaint, the FTC alleges the for-profit companies bought a number of websites under names that made them appear to be legitimate online high schools, and used the terms “GED” and “GED Online” to raise their profile in online searches.

Students would take four untimed, unmonitored multiple-choice tests, the agency alleged, requiring that students answer 70 percent of each test correctly. “For some ‘high schools,’ noted the FTC’s complaint, ‘when students fail to meet that standard, they are redirected to the test once more, and this time, the correct answers are highlighted for students to change their answers.  Other ‘high schools’ provide students with an online ‘study guide’ that, when used, also highlights the correct answer for students to select.”

Once tests had been completed, students would be directed to a set of menus that would lead them to think they would be given credit for their “life experience,” for example, knowing how to balance a checkbook would translate into credit for accounting coursework, and a response of “Listen to Music Occasionally,” would mean credit for a music appreciation course.

Once students had received the “certificates” and tried to use their newly earned credentials to get jobs, apply for college or join the military, they found the diploma was worthless because it wasn’t recognized. In some cases, the companies claimed accreditation from nonexistent accrediting bodies.

The FTC has requested in federal court that the court issue a temporary restraining order to stop the operations and freeze their assets. Two sets of defendants were named: Stepping Stonez Development LLC, also doing business as American Certification Specialists; Intentional Growth  LLC; Capitol Network Distance Learning Programs LLC; and Capitol Network Digital Licensing Programs LLC, Veritas Sales Inc.

If you’re considering getting your GED online, it might be a good idea to visit the FTC’s website on the topic at http://www.consumer.ftc.gov/articles/0539-high-school-diploma-scams. To determine what resources are available, visit www.ged.com.

Miss. student loan forgiveness reveals a mess

via Moak: Mississippi student loan forgiveness, clarionledger.com, 12/3/2015

PDF: EDMC Student Loans

There’s a lot of money to be made in the business of for-profit education. This fast-growing industry has found the increasing demand for college degrees can be lucrative, garnering billions from students looking to enhance their resumes in an increasingly-competitive environment. Many of those students receive financial assistance, including federal student loans. But with the rapid growth of the industry have come increasing concerns about some for-profit institutions. Regulators have cited concerns about recruitment practices, sketchy quality and lack of accountability, among other issues.

In mid-November, a company named Education Management Corp. (EDMC) reached an agreement with 40 attorneys general to significantly reform its recruiting and enrollment practices and forgive more than $102 million in student loan debt from about 80,000 students nationwide. That amount will include $1,229,321 in loan forgiveness for about 1,358 Mississippi former students, Mississippi Attorney General Jim Hood revealed in a recent news release.

Pennsylvania-based EDMC operates 110 schools in 32 states and Canada through four education systems, including Argosy University, The Art Institutes, Brown Mackie College and South University.

The agreement will require EDMC to significantly revise its recruiting and enrollment practices. It mandates added disclosures to students, including a new interactive online financial disclosure tool; bars misrepresentations to prospective students; prohibits enrollment in unaccredited programs; and institutes an extended period when new students can withdraw with no financial obligation. EDMC also settled a $95 million civil suit brought by the U.S. Department of Justice. (It should be noted that EDMC did not agree with the findings of the extensive investigations.)

“This civil enforcement action holds EDMC accountable for what we allege were unfair and deceptive recruitment and enrollment practices,” Hood noted. “EDMC’s practices were unfair to our state’s students, and they were also unfair to our nation’s taxpayers who backed many of these federal student loans that were destined to fail. This is a rigorous agreement that not only provides some relief to a large number of former students through loan forgiveness, but helps ensure that the company will make substantial changes to its business practices for future students.”

“This case not only highlights the abuses in EDMC’s recruitment system; it also highlights the brave actions of EDMC employees who refused to go along with the institution’s deceptive practices,” U.S. Attorney General Loretta Lynch said at a news conference announcing the settlement of the federal “whistleblower” lawsuit. That investigation stems from 2007, when a recruiter and the EDMC employee who trained her came forward with allegations the school recruited students who were unlikely to succeed, using recruiters who were promised illegal enrollment-based incentives.

The state investigations, begun in January 2014, followed numerous complaints from current and former EDMC students, and provided a window into a disturbing pattern of alleged behavior.

“Our investigation gave us a pretty clear picture of how EDMC lured prospective students into its programs, and how many students left the program with unfulfilled promises and oftentimes tremendous debt,” Hood said. “We think this agreement addresses our biggest concerns about the company’s business practices and puts in place new transparency and accountability.”

Under the agreement, EDMC must abide by a number of provisions, including:

  • Not make misrepresentations concerning accreditation, selectivity, graduation rates, placement rates, transferability of credit, financial aid, veterans’ benefits and licensure requirements. EDMC shall not engage in deceptive or abusive recruiting practices and shall record online chats and telephone calls with prospective students.
  • Provide a single-page disclosure to each prospective student that includes the student’s anticipated total cost, median debt for those who complete the program, the default rate for those enrolled in the same program, warning about the unlikelihood that credits from some EDMC schools will transfer to other institutions, the median earnings for those who complete the program, and the job placement rate.
  • Require every prospective student utilizing federal student loans or financial aid to submit information to the interactive Electronic Financial Impact Platform in order to obtain a personalized picture of the student’s projected education program costs, estimated debt burden and expected post-graduate income.
  • Reform its job placement rate calculations and disclosures to provide more accurate information about students’ likelihood of obtaining sustainable employment in their chosen career.
  • Not enroll students in programs that do not lead to state licensure when required for employment or that, due to lack of accreditation, will not prepare graduates for jobs in their field.
  • Require incoming undergraduate students with fewer than 24 credits to complete an orientation program prior to their first class.
  • Permit incoming undergraduate students at ground campuses to withdraw within seven days of the beginning of the term or first day of class (whichever is later) without incurring any cost.
  • Permit incoming undergraduate students in online programs with fewer than 24 online credits to withdraw within 21 days of the beginning of the term without incurring any cost.
  • Require that its lead vendors, which are companies that place website or pop-up ads urging consumers to consider new educational or career opportunities, agree to certain compliance standards. Lead vendors shall be prohibited from making misrepresentations about federal financing, including describing loans as grants or “free money;” sharing student information without their consent; or implying that educational opportunities are, in fact, employment opportunities.

To be eligible for loan relief, you must have been enrolled in an EDMC program with fewer than 24 transfer credits; have withdrawn within 45 days of the first day of your first term; and your final day of attendance must have been between Jan. 1, 2006, and Dec. 31, 2014.

The agreement is expected to provide an average of $1,370 per person in loan forgiveness.

Wallethub: Mississippi’s 2-year college system rocks

Via Wallethub: Mississippi’s 2-year college system rocks, on Clarionledger.com, 9/2/2015

PDF: The_Clarion-Ledger_State_20150903_C002_1

Usually, Wallethub.com studies give me heartburn. The popular finance website is constantly issuing studies which rank states and cities on various factors which affect quality of life, and Mississippi is often in the bottom few – if not dead last. Since I love this state so much, it hurts a little to see the Magnolia State listed at the bottom of – yet – another poll.

But news from Wallethub today brought a smile, and it’s about something we already knew: Mississippi’s two-year college system is, overall, the best in the nation.

Taking top honors in the 2015’s States with the Best & Worst Community College Systems poll, Mississippi’s system of community and junior colleges shines in a study measuring various factors at 670 two-year institutions nationwide, including cost and financing, classroom experience, education outcomes and career outcomes. The study was based in part on data collected by the University of Texas at Austin’s Community College Survey of Student Engagement.

Individually, five Mississippi institutions landed in the top 100. (Taking top honors was North Florida Community College.) One Mississippi school (Itawamba Community College) ranked in the top 10 nationwide (6th), while Southwest Mississippi Community College (my alma mater, I’m proud to say) was ranked 15th in the nation overall.  Also in the top 100 were Northeast Mississippi Community College (79th); Mississippi Gulf Coast Community College (82nd); and East Central Community College (96th). Also appearing in the study were Jones Junior College (197th), and Hinds Community College (234th). Wallethub noted that not all the nation’s 1,500 or so community colleges could be included in the study, so only seven of the state’s 15 community colleges were included.

“We’re thrilled and elated to be recognized in this way,” said Itawamba president Mike Eaton, who has been at the school 41 years, and president of the 6,000 student institution since 2013. “I think it’s a tribute to all these people and leadership that has always been there; this didn’t happen overnight. We have a remarkable staff and board of trustees, and to have the support of the counties we serve is tremendous.”

Community colleges have come into their own in recent years, but have been a quiet success story for decades. While quietly plugging away for about a century, our 15 community colleges have made a real difference in the lives of Mississippians. According to the Mississippi Department of Archives and History (a good article by Dr. Ben Fatherree is at http://bit.ly/1N7wEu1), most of these schools sprang from “agricultural high schools” established to provide education to local residents. Taking on the role of “junior college”, all but one later changed their names to “community colleges” to match their new roles.

Thousands have not only sought the services of community colleges to prepare them for the rigors of four-year institutions, but many have gone to community college to get career and technical training or re-training. And recently, with the increased focus on the value of technical training, community colleges found themselves perfectly positioned to take on the new role.

And an investment in community college can pay off. According to some studies (http://bit.ly/1AroLuJ), people with community college degrees in some fields start out with salaries that were as great as — or even bigger than some with four-year degrees. Of course, either path (or some combination) may be the best course for a given student. But with the increasing costs of education, many people are looking harder at getting at least part of their education at two-year institutions, which may provide an education of comparable quality, often for less money, in smaller classroom settings and in convenient locations.

“We’ve always known that we have a jewel in our community college system,” noted Steve Bishop, president of Southwest Community College. “It just gives more validity to that now that we’ve been recognized in this way.”

Bishop added that, while he’s proud of the recognition for his school, the trophy belongs to the system as a whole. “It speaks volumes when all 15 of us work together – we’re all on the same team,” he noted.

And the formula for success, both Eaton and Bishop agreed, is simple: attract quality faculty and staff, and bring everyone around the common purpose of taking care of the students’ needs. “We’re doing missionary work at our community colleges,” Eaton noted. “Our system is providing great service to the people of Mississippi.”

So, whether or not a two-year institution was part of your college experience, we can all be proud of the legacy and leadership that comes out of our community college system. If the golden age of community colleges has indeed begun, the Magnolia State is leading the way.

Millennials delay milestones due to student loans

via Moak: Millennials delay milestones due to student loans.

If you’re a parent trying to help your college student navigate the choppy waters of financing college, it can be daunting. The Federal Financial Aid form, known as FAFSA, is itself tricky and often infuriating because of the maze of online security you must navigate. And if you happen to be selected for random “verification” of your FAFSA data (as we were this year), that can add even more gray hairs to your head.

Unless your student is among the lofty few who cries when she gets anything lower than an “A” or if you’re either independently wealthy or below the poverty line, you might not be stressing out over it. Scholarships, savings and grants will usually fill the bill in those cases.

Some of us were smart enough to start putting money aside when they got their little bundles of joy home from the hospital. But for most middle-class families, paying for college usually requires an eclectic mix of scholarships, mason-jar funds, largesse from family and friends — and loans. Today’s average college graduate will have barely had time to unpack boxes in their new apartment (or their parents’ house) before they get their first bill from their student loans.

Increasingly, that debt is putting a substantial crimp in their plans. While they may be young and idealistic, they may have to put off saving the world for a while because they have to pay back those loans.

A new study released by Bankrate.com shines some light on this disturbing trend. More than half of millennials with current debt from student loans are reporting they have “delayed major life events” because of that debt. Those milestones include rites of passage such as buying their first home or car, starting a retirement nest egg or even getting married and having children. The trend is not just present among millennials; older Americans are also likely to be carrying student debt well into middle age, where it can potentially crash into retirement.

Economists and policy makers should worry about this, because the longer new graduates wait to enter the economy, the longer it takes them to start contributing, investing in the economy on a larger scale and paying taxes.

“Student debt is often portrayed strictly as a millennial issue, but the truth is that Americans of all ages have put their lives on hold due to student debt,” said Steve Pounds, Bankrate.com analyst. “Delaying major life milestones such as buying a home or saving for retirement doesn’t only affect the individual and his or her family; it also has ill effects on the overall economy.”

A key finding about the study is that many people with student debt never really received good information about the risks and responsibilities of student loans in the first place. As with any credit, responsible borrowing also carries with it the necessity of understanding just what you’re getting into. Deferral, (which allows students to defer making any payments until after graduation) can provide a false sense of security, and is really just kicking the can down the road. But eventually, the bills will come.

More than half of student loan borrowers in the Bankrate.com survey say they didn’t receive enough information or advice about the financial risks of taking on education loans. Sixty-six percent of millennials, more than any other age group, have this complaint.

A lot of people are in this boat, and it is getting a lot of attention. Famously, one man named Lee Siegel decided earlier this year he’d had enough after being hounded by bill collectors trying to collect on 40-year-old student loans. He announced in a New York Times op-ed that he was not going to pay any more, and urged others to do the same.

His stance garnered him near-universal (and justified, in my view) outrage from nearly all quarters, but does point to an increasing frustration with a system that encourages people to finance skyrocketing education costs with loans against their future earning potential. And the aforementioned study details some of the implications of encouraging young people to begin their careers in a financial hole.

The fact is, though, there are alternatives to financing your college education with unmanageable debt:

Make sure you exhaust all alternatives. Many sources of funding, such as grants and scholarships, don’t have to be paid back. You don’t necessarily have to be in the top tier of your class to qualify, and some programs are specifically to help students from a particular geographic area, course of study or other criterion.

A four-year college may not be necessary. Mississippi has one of the best community college systems in the country, many of which offer programs to qualify you for all types of careers — many of them lucrative. And community colleges can be more affordable than four-year institutions, and have exclusive financial aid offerings as well. Consider military programs as well — many of them will finance college for you in exchange for a specified commitment after graduation.

Shop wisely. If you are getting a loan, shop around. Some private lenders have programs that offer excellent interest rates and options.

Mississippians have an excellent program that helps link Mississippi families and students with information and advice about going to college. Get2college.org can be reached at (601) 321-5533, in central Mississippi; (228) 875-4441 in south Mississippi; and (662) 349-2789 in north Mississippi. It’s a must-visit for any family who is trying to navigate the college-financing maze, and is well worth your time.

Student loans may leave students, parents struggling to pay

via Student loans may leave students, parents struggling to pay, clarionledger.com, 2/18/2015.

Paying for college is tough. The high cost of tuition, coupled with rising costs of everything from on-campus parking to residency rates, can put a serious dent in parents’ financial portfolios and can hobble a recent graduate with crushing debt. You will probably find it much easier to handle if you were wise enough to start aggressively saving for college when your child was still in the cradle, if you are independently wealthy, if your kid is a genius or if you had a really generous family.

Unfortunately, however, most of us aren’t in that boat. The dream of college for many Americans is financed through a combination of scholarships, grants, loans and grocery money. Students from middle-class families may be carrying a hard-earned sheepskin after slogging through their coursework, but often find that they are carrying something else along with their diploma: a bill to pay back their student loans.

Even students who find themselves with a well-paying job may find it difficult to pay back the student loan debt which hits like an oncoming train after graduation. And many aren’t able to pay it at all. A couple of weeks ago,Forbes wrote about the increasing rate of student loan defaults. The article noted that the U.S. Department of Education’s budget documents project that more than a quarter of undergraduate Stafford Loan recipients will default at some point during the loan. This comes after overall student loan default rates actually went down last year, but like a storm gathering on the horizon, the numbers spell trouble.

So I consulted some experts to get some advice. “Despite what you may have heard, student loans are not all bad; after all, student loans are an investment in your own future!” notes Jennifer Rogers, Director of Student Financial Aid at the Mississippi Institutions of Higher Learning (IHL). “But knowing how much or how little to borrow can be tricky and the right amount of loans will vary by person.”

Rogers recommended The Project on Student Debt website, an initiative of the Institute for College Access and Success. This organization gathers information on student loans. According to their figures, nearly 70 percent of college seniors nationwide who graduated in 2013 had student loan debt, with an average of $28,400 per borrower. Mississippi’s rate was lower, with about 57 percent of Mississippi students graduating from 4-year institutions carrying some debt after graduation.

Nationally, Mississippi ranked 34th in the nation of 48 states ranked for the highest rate of debt (with 1 being the highest rate of debt and 48 being lowest). That’s not bad, except when you consider the actual average Mississippi graduate’s debt of $27,571 per borrower, making us 19th in the list. (To get a ranking of debt among Mississippi 4-year institutions, http://www.Collegeinsight.org has a sortable list of Mississippi institutions, but debt information is only included for nine institutions of 23 listed.)

According to the U.S. Department of Education, on average about 16.3 percent of Mississippi students default on their loans, with higher rates (23.3 percent) among those graduating from two-year public institutions. The rates for four-year public institutions is 12.3 percent, with 11.4 percent of private-institution graduates and 13.3 percent for proprietary schools.

Rogers gave some tips to consider when considering loan options:

  • All loans are not created equal. Look at interest rates and repayment options.
  • Students get into trouble with loans when they borrow more than they need. When a loan is offered, you don’t have to accept the entire amount. If you only need an extra $3,000 to cover the dorm, don’t take out a $5,000 loan just because that is what is offered. Borrow enough that you can focus on doing well in your classes and finishing on time rather than on working three jobs to cover your costs.
  • Stay the course and finish your degree. If you take out a loan for a degree you never finish, remember that you still have to repay the loan. That could help motivate you to go ahead and get your money’s worth.

And if you do find yourself unable to make your loan payments, the best advice is to not ignore the problem; it won’t go away. “Students who are in trouble absolutely have to talk with their lender first,” says Michael Gaer, creator of Collegefinancing.com and president of New Jersey-based Gaer Financial Group (quoted from Bankrate.com). “They can’t just walk away from it because it’s going to affect their credit score. It’s going to affect their entire lives.”

Rogers has similar advice. “Students should contact their loan servicer at the first sign of trouble,” she says. “Federal loan servicers have a number of tools available to help students repay their loans successfully. Students should contact their loan servicer immediately and consolidate their loans when possible. In many cases, students are also eligible for income-based repayment plans.”

Here are a few more tips, from http://www.Bankrate.com:

  • Being honest opens up a variety of options. As Rogers noted earlier, federally-backed loans come with some options that may not be available to borrowers with non-student-loan debt. For example, deferment orforbearance may be available for you, allowing you to delay payments or temporarily reduce them. In addition, lenders of federal student loans are required to allow you to change your payment plans once a year.
  • Ask about payment plans. Since most student loans carry a standard 10-year repayment plan, you have the option to change that. In some cases, you may be allowed to stretch payments up to 25 years (but that’s a really long time to be paying college debts.) Currently, the federal government offers five types of repayment plans, the most recent of which is the income-based repayment plan, which caps payments at 15 percent of your monthly “discretionary” income.

The bottom line is that you have a lot of options, and delinquency and default can cause serious damage to your credit. If you find you’re in over your head, the Consumer Financial Protection Bureau and the U.S. Department of Education have teamed up on a tool they call the Student Loan Debt Collection Assistant. The tool guides you through a simple interview, to show you your options. Visit http://1.usa.gov/1Ky96IN to get started.

Court halts online high school diploma mill operation that may have made $11 million

Students looking to broaden their horizons by getting a high-school diploma face a plethora of options, thanks to the increasing number of online options for getting your diploma.  But, as students of the prestigious-sounding “Jefferson High School Online” and “Enterprise High School Online” found out recently, getting a legitimate diploma over the Internet is a tricky proposition.

Last week, a U.S. District Court in Florida halted operations of the companies, which had allegedly grossed $11 million from “marketing and selling fake high school diplomas online to consumers nationwide.” The court took the action at the behest of the Federal Trade Commission (FTC), which seeks a permanent injunction to put them out of business and make restitution to their customers.

“A high school diploma is necessary for entry into college, the military, and many jobs,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “These defendants took students’ money but only provided a worthless credential that won’t help their future plans.”

According to the FTC’s complaint, the two companies have sold online high school diplomas since 2006 using multiple names, charging between $200 and $200 for a diploma. “Their websites claimed that by enrolling in the defendants’ programs, consumers could obtain ‘official’ and accredited high school diplomas and use them to enroll in college, join the military, and apply for jobs,” the FTC noted in a news release. (link to: http://www.ftc.gov/news-events/press-releases/2014/09/ftc-action-halts-online-high-school-diploma-mill-made-11-million)

Diploma mills are nothing new, of course. The Internet has spawned thousands of web-based operations which claim to be able to give you legitimate credentials, easily and at a relatively low cost for years. The problem is that many of these for-profit businesses are just there to take your money, and anything you earn is likely to be worthless.

Diploma mills often manufacture their own sham “accrediting” bodies, adding to the confusion. When you take your diploma-mill degree to a potential employer, you’re likely to get a cold reception; employers are increasingly digging deeper into resumes to ensure that your credentials are legitimate.

But there are also many legitimate institutions which are doing great work by helping online students. So, how do you know?

The FTC gives these pointers in its online resource (link to: http://www.consumer.ftc.gov/articles/0206-diploma-mills#The): Look for these red flags:

  1. No Studies, No Exams, No Interaction. Getting a degree has always taken a lot of hard work, and that hasn’t changed. And, although many legit institutions will give you some credit for life experience, it’s probably going to be minimal.
  2. Flat Fee. Legitimate schools charge by the credit, course, or semester. Beware of claims that you can get a degree for a flat fee.
  3. No Waiting. Beware of claims that you can get a degree or diploma in a very short time.
  4. Pushy Advertising Tactics. If they have to use aggressive sales tactics, pop-up ads or telemarketing, keep on looking.

And for a list of institutions that are actually accredited, visit the Council for Higher Education Accreditation at http://www.chea.org/search/search.asp

Talk about finance with your college-bound student

via Talk about finance with your college-bound student, clarionledger.com, 8/26/2014.

Things are about to change around the Moak household. No. 1 son is getting ready to head off to college, and we are facing what all first-timers face when sending a child off to school. Along with the bewildering array of choices about meal plans, residence halls, class choices and activities — not to mention how to pay for all those choices — we are trying to help him navigate the waters of financial independence. He has his own bank account we set up a couple of years ago. It’s linked to ours, so we can keep an eye on expenses and send cash if he needs it. But like most young adults, he’s eager to write his own story.

And it’s a good idea that he does so. Establishing a personal financial history is a keystone in learning good financial habits. Any college freshman should by now be able to write checks, make deposits and withdrawals, and — if he or she had a job in high school — discover the thrills and chills associated with making decisions about spending his or her own money. According to the Consumer Financial Protection Bureau (CFPB), more than half of high school graduating seniors already have a bank account, anyway.

Let’s face it: having your own money for the first time is exciting, and some students go overboard. So it would be a good time to have a conversation with your student about the wise use of money. (Of course, most parents know that advice to 18-year-olds is likely to be met with rolling eyes and protests, but try anyway; it will be some years before they realize you actually may know a thing or two, but something may sink in.) The CFPB has some good advice about this topic.

So, here are a few things to discuss:

• A first step: establishing a bank account. Experts advise setting up an account before school starts. Keep in mind that you don’t have to use a bank suggested by your school. Contact your school’s bursar’s or finance office and find out how to set up direct deposits. Whether money comes from financial aid, college savings such as a 529 Plan or other sources, having direct deposit capability is much quicker, safer and convenient than relying on the school to generate a paper check.

• When selecting an account, be wary of words like “free” or “easy”. Although there are some generous offers by banks to help entice students, check the fine print carefully to make sure you know the limits, and what happens when he bounces a check or she uses her ATM card too much. An on the subject of ATM fees, look for deals. Many banks will waive or reimburse ATM fees, even those from other institutions.

• For students, convenience is the key. Thanks to ATM networks, Internet banking and remote deposits, it is entirely possible to have a relationship with a bank in which you never see a teller or drive to a branch (if they have branches at all). Some banks are totally on the web, so don’t overlook them in your research. Still, there is something solid about doing business with a bank which has a presence in the community, and people you can talk to. It all depends on your student’s preferences.

• Don’t overlook credit unions. Often, credit unions are set up at or near the college campus. Credit unions can have competitive rates and a good choice of services.

• The banking industry really, really wants their business. In recent years, a lot of new services have arisen to attract young people. An example is Kasasa Tunes, which reimburses music download purchases (up to a minimal amount). Keep in mind that, although the initial lure of such perks might loom large in the eyes of your download-crazy student, it could be a teachable moment to talk about marketing tactics, and how it’s important to compare financial products on the basis of the day-to-day services, not how cool they may look.

• Talk about credit. When I was a student, credit card companies would often have tables set up on campus, offering T-shirts and other freebies, and direct mail from credit card companies was highly effective. Thanks to the CARD Act of 2009, those activities are curtailed (especially if they’re under 21), but students are still in danger of making bad decisions about credit. So don’t overlook talking to your student about responsible credit use. Good habits can start now. (Click here for a good list of topics.)

• Trust is a two-way street. Our college students are adults, and we parents must treat them as such. That means trusting them with money. Now, you may not believe your student is capable of making good decisions, but he may just prove you wrong if you give him a chance. On the other hand, you’ve probably earned his trust; after all, you have changed his diapers, sat up late nights working on science fair projects and spent untold hours worrying, praying and being his biggest fan. Trust is often easier said than done, but it has to start somewhere. So, intrepid fellow parents of the college-bound: I salute you. And remember, we’re all in this together.