New Student Loan Bill is the Destruction of Capitalism

As you all know, I work for a student loan company. As we are all knee-deep in industry news on a daily basis, you can imagine my surprise when I heard about this Bill.

Now, at first glance this Bill (H.R. 5) sounds gravy to undergraduates. The benefits to this Bill include an interest rate drop from 6.8% to 3.4% over a four year period as well as an increase in the amount of Pell Grants available. That sounds good right? It will be cheaper to pay for school and there will be more free money available to pay for tuition. Well, not exactly. As you should expect, politicians promote Bills by only informing citizens about the perks.

By now you should be thinking, "What's it going to take to get these perks?" The answer is the breakdown of Capitalism in the Student Loan Industry. Specifically this Bill prevents "banks" from competing with each other. The Bill makes it more expensive for the private lenders to conduct business and this will most certainly hurt borrowers when it's time consolidate. The Direct Loan program that is being promoted through this bill does not offer any benefits for borrowers to consolidate. Private lenders currently hold that competitive advantage over the Direct Loan Program. They are able to offer rate reductions, cash back, and compelling customer service. They compete so that YOU the borrower get the best program out there.

Students are NOT affected while in school only after once they go into repayment. It does not increase the students ability to get student loan funding to pay school. Very few students are fortunate enough to go to college on a full ride scholarship. I personally went to school on two atheletic scholarships as well as an academic college. I went to a private school. Take a guess at what was left over with 85% scholarship. I'll give you a hint; three times more than what I paid for my car. My car is a Saturn Ion 2004.

The Bill ONLY affects the subsidized stafford loan which most middle class students do not qualify for. I know I have very little in subsidized loan debt as compared to my unsubsidized debt. A quick reminder; subsidised means the government makes the interest payments while you are in school and unsubsidized means you are responsible to pay on your own. While 5.5 million students will take advantage of this benefit, how many more aren't affected at all? If they were to increase the amount that students can borrow in Stafford loans by a large percentage wouldn't have to settle on their third choice or even Community College. It's not fair to students who have the mental capabilities to attend an elite school but are not eligible for federal aid because their parents income is above the threshhold. Think of the amount of students that are stuck in that Catch 22 and forced to take out loan after loan.

Consolidation isn't the devil. Considering I have experience in the Mortgage Industry, Consumer Debt/Bankruptcy, and now the Student Loan Industry I am well aware of the benefits to consolidation. Think about it like a refinance on your home. Most consumers are forced into taking high interest mortgages when purchasing their first home becasue their credit has not been established long enough. After signing up for adjustable rates that start low and increase substantially at the end of the term they are able to refinance into a better term and rate once they are out of their pre-payment penalty period. This can save homeowners anywhere to $100 to thousands each month which automatically increases the amount of disposable income for the household. What can that do??? You can pay off other high interest debt faster, open a retirement account, afford better healthcare, and even save for home improvements. The effects of a student loan consolidation mirror those of a refinance. You receive a tax deduction at the end of the year for all interest paid, your payment is lowered, decreased interest rate, lower DTI and more.

I will continue to write information on this subject simply because I know several people who are affected by this bill.

My night in Shining Mortgage Armour!!

First of all, there are so many Mortgage Companies out there who's sole purpose is to make money off of you. I have been in the Industry myself for about a year and at this point I've seen it all. As you have read in my earlier blogs; I am in the process of purchasing a house. Much to my dismay, after 3 to 4 weeks of working with a lender who I trust, respect, and also employs me part-time, I get an awesome little e-mail that lists my conditions to close. Knowing that it is a typical song and dance before any closing, I think nothing of it.

Well, I should have known better. My conditions to CLOSE were actually conditions for Initial Approval! You're propably thinking "What the heck does all of that mean??" Well my friends, let me enlighten you. When you first apply for a loan, a mortgage, a credit card, insurance of any kind, or whatever else you have to sign your life away so that the company you're applying through can justify giving you a 'I'm definitely going to default on this' type of rate, you must first fill out an application. Specifically with mortgages, you must list assets and liabilities. So if you have any lates or collections that have been haunting you for years-get them taken care of now. If nothing else, get started and get all supporting documentation. Oh and while your at it, save some time by writing up a letter of explanation telling them that your not a jerk that doesn't want to pay the bills and that there is actually a good excuse.

Ok, so as usual I'm on a random tangent...let's get back on track. Dings on your credit-bad. My situation was that the lender wanted me to show 6 months PITI(principle, interest, taxes, and insurance payments) in my bank account for atleast a 60 day period. Also, they wanted a medical collection that is under investigation by a govt. agency paid in full. Ha! What happened to looking at my application and seeing what I wrote was in my bank account? What even happened to looking at the SUPPORTING docs I provided that showed the medical collection existed? What's that, you wanted to take my money, overcharge me, and then roll me over and do me dry like you do all your other customers??? Sorry BOYS, not this chick. I've been in the industry long enough to know that those are conditions for initial approval and I'M OUT like a redneck Friday night at the dragstrip.(I can say that bc my lil' bro IS a Redneck and DOES spend every Friday at the drag strip racing his '86 Ford 5.0 GT Mustang) Here you can check out his car... http://profile.myspace.com/index.cfm?fuseaction=user.viewprofile&friendid=22690039&MyToken=d1e8048c-519b-4d66-8e82-279f84e7658b

So back on track again. After not being able to get a straight answer out of my lender who I won't name because I have a feeling I will be going to small claims court soon to get some of my money back...see the Stop ruining my life! post to see those details. Well amidst all of this I found the perfect lender, My Knight in Shining Mortgage Armour!! His name is Paul Pashley with desert heritage mortgage and I have so much respect for him. He's from Boston, so he tells you like it is, no dancing arond what could be. I have a lot of respect for East Coast business people, because I hail from VA. I DEFINITELY reccomend this guy. He had me approved "OFFICIALLY" in one day. I mean an ACTUAL underwriter looked at my application and said, "Green Team GO!" "Let's get this girl a house". So call him up, he saved my purchase when we only have 15 days to close. Not kidding people, he's the real deal. Here is his contact info:

Paul Parshley

Desert Heritage Mortgage

www.paulparshley.com

pparshley@metrocitiesmtg.com

Scottsdale, AZ

Feel free to ask any questions about the industry and I will answer as quickly as possible. I also work in the debt settlement industy so I can be helpful there as well. I know the pros and cons to refinancing vs. debt negotiation. I hope this was informative!