April 15, 2015
Say good-bye to your tax refund if you have past-due student loans.
In most cases, creditors are unable to touch tax refunds. Not so with student loans.
While credit card companies and other private debt collectors are barred from garnishing money coming to taxpayers from Uncle Sam, some federal and state creditors can help themselves to tax refunds via a process known as ‘offsetting.’ Under the Treasury Offset Program, these entities get a whack at your tax refund if you have an outstanding debt in certain categories, including:
- past-due child support payments
- back taxes
- any unemployment compensation owed to the state
- past-due student loans
This is another reason to pay your student loans on time, or better yet, make sure you only take on as much debt as you can afford to pay back.
April 13, 2015
While most colleges that use the CSS/Financial Aid PROFILE do include the value of your home in calculating eligibility for financial aid, there are some exceptions.
PROFILE Schools That Ignore Home Equity*
- Bard College
- Bucknell University
- California Institute of Technology
- DePauw University
- Hamilton College
- Harvard University
- Princeton University
- Santa Clara University
- University of Virginia
- Washington University, St. Louis
- Whitman College
*This list was compiled last year, and changes may have occurred since then.
Additional information about how other PROFILE schools treat home equity can be found by clicking the link above.
- Schools that only use the FAFSA (Free Application for Federal Student Aid) to determine eligibility for financial aid do not use home equity in the calculation.
- Schools that use the CSS/Financial Aid PROFILE to determine eligibility usually use home equity in the calculation, but often the amount is capped as a percentage of a family’s income.
Running the Net Price Price calculator for a particular college will usually show if home equity is counted, but the best way to be sure is to ask the school.
Schools can be flexible in awarding financial aid, and Lynn O’Shaughnessy reminds us of this important point:
By the way, how schools treat home equity can also depend on how desirable an applicant is.
Lynn O’Shaughnessy, “Will Your Home Equity Hurt Financial Aid Chances?”, The College Solution, August 7, 2014.
March 10, 2015
High school history teacher Kate LeSueur wrote that she wishes to “enlighten” us “on the discrepancy between the price of my education and the salary of an altruistic career such that of an educator”.
She compared a master’s in education with a master’s of business administration, pointing out that individuals with MBA degrees typically enjoy substantially higher salaries and lower student debt levels.
Why is it that we both went to school for the same amount of time and both earned master’s, yet my degree costs more and I get paid significantly less? I am not arguing that I deserve $90,000 a year — only that the cost of my education should be comparable to my salary. Society expects us to accept a fate guaranteeing small paychecks and large student loan bills. I am writing to say, America, we aren’t going to accept it much longer.
I find it hard to accept the rather sweeping statement that teaching is an altruistic career. Although teacher unions have long maintained the message that all their efforts are “for the children”, I don’t buy it. I’m not claiming that teaching is rampant with evil, money-hungry people, but neither are most other professions. A typical MBA working to keep his employer profitable is no less deserving of special adoration than is a typical teacher. And many people who earn generous salaries show their altruism in other ways, such as donating their time and money to worthy causes.
Furthermore, it’s troubling when the government gets in the business of deciding which jobs deserve special treatment, like the most generous Income Based Repayment benefits that are reserved for government and nonprofit employees. George Leef points out the consequences of this politicized meddling.
… Whenever the government gets involved in an activity that is not properly any of its business, we get the infamous trio: waste, fraud, abuse, and then the politicians feel the need to meddle still more in an effort to solve the problems they’ve created. The federal student-aid programs are a perfect illustration. Repayment of loans is being politicized, with easy terms for students provided they make the “right” choices in employment. That will only further misallocate resources and help to keep the higher-education bubble inflated.
Kate LeSueur, “The price of a good education, $80K and counting”, cleveland.com, March 01, 2015.
February 26, 2015
Americans are having more trouble paying off their student loans than their mortgages or any other type of debt.
As student debt balances continue to grow . . .
. . . student loan defaults have overtaken those for all other types of debt.
America’s total student loan debt is now nearly $1.2 trillion. One reason the burden is difficult to pay off, Fed researchers wrote: “Student debt is not dischargeable in bankruptcy like other types of debt … Delinquent or defaulted student loans can stagnate on borrowers’ credit reports.”
The number of student borrowers almost doubled over ten years.
The surge is fueled by more people borrowing — and borrowing larger amounts. The number of borrowers rose 92 percent between 2004 and 2014, according to the Fed researchers. The average student loan balance grew 74 percent.
Danielle Paquette, “Americans are having more trouble paying off their student debt than their houses”, Washington Post, February 19, 2015.
February 25, 2015
The Obama administration projects that the increased use of student loan forgiveness programs will cost taxpayers $22 billion next year.
… Primarily because of the recent growth in enrollment in the program, projected long-term revenues from the federal direct student loan portfolio were reduced by almost $22 billion compared with the best guess from the previous year….
This looks like ‘a big quasi-bailout’
That’s a big quasi-bailout, increasing the deficit nearly 5 percent. The White House budget office was unaware of any larger re-estimates since the current scoring rules for credit programs went into effect in 1992. As a January Politico Magazine feature on the government’s unusual credit portfolio reported, the Federal Housing Administration has stuck more than $75 billion worth of similar re-estimates onto Uncle Sam’s tab over the last two decades, most of them after the recent housing bust led to a cascade of FHA-backed mortgage defaults. But it’s never had a one-year shortfall quite as drastic as this.
Borrowers are made out to be innocent victims of “circumstances beyond their control”.
Regardless of which accounting method is used, the federal government is expecting to write off billions of dollars in future student loan balances under the program in order to reward public service employment and protect borrowers from economic circumstances beyond their control.
It’s not as if a student loan bailout should come as a surprise. Here’s a question from 2011.
Is a student loan bailout inevitable?
Seeing the trend lines, Mark Gimein wrote this four years ago.
Eventually both private lenders and the government will be on the hook. The government has already moved to ease some loan terms. It will need to find more, especially for those snookered into paying for degrees worthless in the job market. The private loans, meanwhile, will simply blow up. We may as well start figuring now how graduates, taxpayers, lenders, and schools will split the bill.
Taxpayers just took on $22 billion, and there’s probably more to come.
Related: “Politicized federal student loan program bails out ‘deadbeats’”
Kevin Carey, “Flip Side of Reducing Student Debt Is Increasing the Federal Deficit”, New York Times, February 10, 2015.
Michael Grunwald, “The College Loan Bombshell Hidden in the Budget”, Politico, February 05, 2015.