Bye bye American Pie: students become the next victims of the credit crunch

[flashl]

American students borrowing money to go to college could be the next victims of the global credit crunch as investors back away from traditionally low-risk securities backed by student loans.

A state lending agency has suspended loans under a programme serving students at some 100 colleges and universities. Experts fear that others could follow.

...

Student loans are typically packaged into securities that have a floating interest rate determined through regular auctions - called the auction-rate securities market, worth an estimated $360bn (£183bn). In recent weeks, many of these bonds have been left unsold.

...

Justin Draeger, a spokesman for the National Association of Student Financial Aid Administrators, said: "Obviously we're concerned, we're troubled and we're going to continue monitoring the situation."

Guardian

[Vincardog]

1. Why oh Why are the Parasitic Financial companies feeding off our eduction system?

Why doesn't the USA loan the students their loans at a fixed 3% deferred until they graduate?

[jwirr]

2. That is the way they did it in the 70s. It worked. If they think we are

ever going to pull our nation out of this spiral down without educating the young they have a think coming. Other countries will not only have all the jobs they will also have all the thinkers.

[Lydia Leftcoast]

10. The rate was actually TWO percent

:sigh:

[Art_from_Ark]

13. I qualified for an NDSL (National Direct Student Loan) at 3% in 1979

I decided not to take it but if I had, it might have made my student life a little easier. :hi:

[Donnachaidh]

3. because the Repukes wanted to privatize the loans --

and what better chum to toss out to the banks than kids who really NEED the money to go to school.

[Vincardog]

5. The rePIGlickiers have privatized enough. Enough damage has been done.

WE have to take this country over and kick that shit to the curb.

[Donnachaidh]

4. Those ads offering huge amounts of money to students are OBSCENE.

"If you can't find the money in the seat cushions of your couch -- come to US. We'll give you up to 40K a YEAR for college. And if you get a co-signer you MIGHT get a better rate.

When did we allow the banks to racketeer our children? WTF?

[flashl]

9. Did you say racketeer our children?

Sallie Mae pays $2M in student-loan scandal settlement

April 11, 2007

ALBANY, N.Y. (AP) — The nation's largest student loan provider will stop offering perks to college employees as part of a settlement announced Wednesday in a widening probe of the student loan industry.

SLM Corp., commonly known as Sallie Mae, also agreed to pay $2 million into a fund to educate students and parents about the financial aid industry, and it will adopt a code of conduct created by New York Attorney General Andrew Cuomo, who is heading the probe.

Cuomo said the expanding investigation of the $85 billion student loan industry has found numerous arrangements that benefited schools and lenders at the expense of students. Investigators say lenders have provided all-expense-paid trips to exotic locations for college financial aid officers who then directed students to the lenders.

---

Sallie Mae to Sell Stock to Pay Off a Failed Bet

December 27, 2007

Sallie Mae, the troubled student loan giant, said Wednesday that it would raise $2.5 billion by selling stock in the public market and would use most of the money to pay off a disastrous bet that the company made on its common stock price.

Sallie Mae, whose formal name is the SLM Corporation, did not give details of the pricing or terms of the securities. Nor did it say whether the additional $500 million in capital would be enough to assure that its bond ratings would not be cut.

At the same time, Sallie Mae disclosed that it had already posted the cash needed to pay off the stock price wager. The fact that Citibank had required that move had not been disclosed, and was another sign of the problems the company faces at a time when regulation of the student loan business is increasing and Sallie Mae is finding it more difficult to sell securities backed by student loans.

Last week, Sallie Mae disclosed that Citibank had given it until Feb. 22 to satisfy the forward purchase contract for stock. In a filing with the Securities and Exchange Commission on Wednesday, it disclosed that it had put up cash to satisfy the promise.

---

Goldman Is Buying Stake in a Troubled Student-Loan Company

Dec. 22, 2007

Goldman Sachs on Friday agreed to buy a $260.5 million stake in the First Marblehead Corporation, shoring up the troubled student-loan company and sending its stock soaring.

The investment bank also agreed to extend a $1 billion credit line to First Marblehead, providing a crucial source of financing for the company. Shares of First Marblehead surged 66.4 percent on Friday, their largest one-day gain ever.

The sale will give Goldman a 16.7 percent stake in the company, which, along with the student-loan giant Sallie Mae, has been battered by the turmoil in the credit markets. The deal marks a homecoming of sorts for Goldman: the Wall Street bank helped take First Marblehead public in 2003.

First Marblehead and other servicers do not lend money to students. Instead, they bundle loans made by universities and banks into securities for sale to investors. Rising default rates and the spreading credit squeeze, however, have made it difficult to repackage these loans, sapping the company’s finances.

[Traveling_Home]

6. Harvard University

Isn't it about time we rethought the role of tuition and student loan indebtedness in light of these kind of financials.

"Harvard University's endowment earned a 16.7 percent return during the year ending June 30, 2006, bringing the endowment's overall value to $29.2 billion"

http://www.news.harvard.edu/gazette/2006/09.21/99-endowment.html


Here are the top 5 private schools

1. Phillips Exeter Academy...$1,000 million
2. Phillips Academy Andover...$700 million
3. St. Paul's School...$438 million
4. Hotchkiss School...$382 million
5. Deerfield Academy...$375 million

http://privateschool.about.com/od/financial/qt/endowments.htm


Why should anyone end up in debt for $100,000 for an education?

[LiberalEsto]

7. You can't find a fixed rate loan any more

A few weeks ago I tried to find a $3,000 private student loan for my daughter, who attends a community college.

There is NOTHING available right now except variable rate loans. Check Bankrate.com and see for yourself.

My interpretation is that with interest rates being low, lending institutions do not want to commit themselves to loaning out money to borrowers at these low rates. There's not enough profit for them.

With variable rate loans, they can squeeze more out of the borrowers when interest rates rise again. :mad:

We ended up having to pay her tuition out of our small savings. :mad:

I hate banks. Ever since * was elected, they have gotten out of control, charging exorbitant fees for every damn thing. They put secret holds on your own money so that if you go one penny over -- even though you think you have more than enough to cover a debit -- they charge you a fat $32 fee for the "overdraft". This is highway robbery. :mad:

[AnneD]

8. My senior age daughter....

receives at least 8 credit card notices a week. Fortunately, I taught her well-she will not be going into wage slavery. We have some 'seed' money to get her through junior college. She will have to work and pay for the last 2 years-but she has a good plan and doesn't mind hard work. She has been working for 2 years and pays for a lot of her own bills now. She knows how to budget her time and money. The places she has worked love her. She's on time, seldom absent, professional in appearance, puts in a good days work.

Unfortunately, many of the things you need to learn to get along in life are not taught in school. I let her babysit at 9 (I accompanied her) and she opened her first savings account at the credit union shortly after. When she achieved a certain level-I made her responsible for buying her friends and family gifts. She also opened a Roth IRA at 13 and she would help me do our budget. Schools cannot teach these things as we would wish. Parent have to take some responsibility here. I taught sex ed/aids prevention to my child to protect her. It was the same with the banking and Credit Card industry. I have my child's best interest at hears-they don't.

[Lydia Leftcoast]

11. Good for you

My father was not good with money (he seemed to have a math blind spot), and my mother didn't hold an outside job until I was 17, so I got NO early messages about handling money.

[AnneD]

12. Lack of knowledge in financial matters....

is a handicap in life. I had a few lessons (they didn't seem to stick as well as they should have) but I got a PhD in Life Economics-which I have made a point to teach my daughter. If she ever ends up pregnant or totally broke in other but the most dire of circumstances-she can't say she wasn't warned. When she walks out that door, she will be a fully functioning person, able to take care of herself.

Mom made sure we could function independently-we've passed it on to our kids. Mom loved us dearly-so dearly that she nudged us out of the nest to live our own lives and make our own choices. She loves to be included in our lives but she doesn't interfere either. When we get together, we laugh at some of the bone head things we have done-but we are always thankful to Mom for letting us make those choices. I know she has bit her tongue at times, and at times when asked, gave honest advice we didn't want to hear-but what a source of strength and wisdom. I hope to be that for my daughter as she grows older.