betsy devos secretary of education

What to Expect on Student Debt From Betsy DeVos, New Secretary of Education

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Lawmakers just confirmed the most controversial secretary of education in recent U.S. history, putting Betsy DeVos in charge of America’s public school system and the nation’s trillion-dollar student loan program.

Following protests from teachers across the country and harsh comments from Democratic lawmakers, the Senate confirmed Betsy DeVos to lead the Department of Education by a vote of 50 to 50, with Vice President Mike Pence, in a historical first for a cabinet nomination, breaking the tie. Her well-documented support of increasing public funding for private schools occupied most of the headlines and protest signs, but DeVos will also oversee the country’s student loan forgiveness programs — which touches millions of Americans — and even after her confirmation hearing earlier this month, little is known about how she plans to approach the issue.

“Thousands of Americans are defaulting on student loans every single day and it is something that simply cannot be ignored,” said Rohit Chopra, the former student loan ombudsman at the Consumer Financial Protection Bureau. “While much of the attention around her confirmation is focused on K-12 issues, higher education is going to have to be front and center given the upcoming reauthorization of the Higher Education Act.”

Lawmakers are likely to reauthorize the Higher Education Act — the broad statute that governs higher education and the student loan program — this year after delays. While that process is overseen by Congress, it is driven in part and influenced by the Secretary and her priorities.

When it comes to DeVos, it’s hard to say exactly what those are. In written answers to questions posed by Sen. Patty Murray, a Democrat from Washington state. DeVos provided a few hints as to the direction her policies might take. She described free colleges and debt-elimination proposals as “in stark contrast” to approaches that address the core issues in higher education. DeVos also criticized the rising cost of college and praised alternative paths to higher education that don’t center on the brick and mortar four-year school.

Still, much remains unclear about her positions on the student loan program. One of her most notable comments on student debt so far, was a mistaken data point. During her confirmation hearing DeVos twice said that student loan debt ballooned 980% over the past eight years. The reality is outstanding student loan debt has jumped by roughly 100% between 2008 and 2016.

“It’s concerning,” Ben Miller, the senior director of postsecondary education at the Center for American Progress, a left-leaning think tank, said of the flub, “because we can’t tell if she’s giving a bad performance or if she’s got bad staff behind her.”

One possible explanation for how DeVos and her staff came to the 980% number is by focusing solely on the growth in the Direct Loan program, a specific type of federal student loan, said Jason Delisle, a resident fellow at the American Enterprise Institute, a conservative think tank. (Between 2007 and 2011, that program grew roughly 1000%, his figures show.) Still, that’s concerning because it either signals that DeVos and her team are confused about the various elements that make up the loan program or because they don’t believe that loans made by private banks and guaranteed by the government are actually federal student loans, Delisle said.

The second scenario would be more troubling, said Delisle. In 2010, the Obama administration moved the federal student loan program entirely to Direct Loans — or loans made directly to students by the government. Before that, the bulk of federal student loans were made by private banks, but guaranteed by the government. Critics of the old system have said that it benefited banks while costing students and taxpayers.

“Ever since [the switch], the Republicans have tried to make the case that, that was a bad move,” Delisle said. “There might be a hint in what Betsy DeVos said that she’s inclined to see it that way too.”

When asked to clarify DeVos’s calculations following the hearing, the transition team appeared to walk back DeVos’s characterization of the growth of the student loan program, saying she was referring to the increase in college costs over the past several decades. Regardless of the reason, her gaffe is cause for concern, Miller said. “You should at least understand the thing you’re trying to operate.”

 

Miller said he also worries that DeVos’s lack of knowledge on higher education would make her susceptible to special interests. For-profit education companies spent roughly $5.7 million on lobbying in 2015, according to the Center for Responsive Politics, an organization that tracks money in elections. During her confirmation hearing, DeVos expressed reservations about defending the recently implemented gainful employment regulations developed by the Obama administration, which aim to hold for-profit colleges accountable when they fail to provide students with good outcomes.

DeVos will also be responsible with overseeing a program created by the Obama administration to make borrowers whole when colleges mislead them. Officials developed regulations after pressure from activists in the lead up to the collapse of major for-profit college chain Corinthian Colleges. In written answers to questions posed by Murray, DeVos said she would “review” those regulations and “utilize those tools to ensure a fair review that protects all parties, including student and taxpayer interests.”

“Students will be keeping a close eye on whether the new secretary gives them refunds when they’ve been defrauded or if she’ll side with political donors,” Chopra said.

Critics will also be watching DeVos’s approach to issues in which she once had a financial stake. A billionaire, DeVos’s vast financial holdings, which include positions in businesses ranging from a student loan debt collector to embattled blood-testing startup Theranos to the Chicago Cubs, have been a sticking point for Democrats. She’s agreed to cut ties with 102 companies and investment vehicles that could be affected by the Department of Education. But Senate Democrats said that was not enough and asked her to provide detailed information about her holdings, particularly given her role overseeing and awarding lucrative contracts with participants in the student loan industry.

Still, some, including Delisle, argue concerns over potential conflicts of interest are overblown. “Someone with billions of dollars is unlikely to be swayed by moves in a very small sliver of her portfolio,” he said, adding that her detractors want to have it both ways. “Critics want to say she has no experience in any of these areas, but also say that she has all of these conflicts of interest because she’s intimately involved with these companies.”

DeVos first test in her role overseeing the agency’s relationship with private companies may be in the way she approaches the contracting process currently under way to decide which companies will take part in the student loan servicing system. The Obama administration attempted to overhaul the servicing contract to push companies to be more receptive to borrowers’ needs. It remains to be seen whether the Trump administration will continue that process or abandon it.

Mostly though, higher education leaders and policy makers are in wait-and-see mode as DeVos takes the helm and perhaps, the controversy over her nomination settles. Delisle said he doesn’t expect to get a better understanding of the Trump administration’s approach to higher education and college costs until the president submits his budget to Congress.

“The big concern is she is a neophyte in this area,” Miller said.

This article originally appeared on Marketwatch.com and was written by Jillian Berman.

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Trump Student Loan Forgiveness 101

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Trump Student Loan Forgiveness 101

Some college students may be protesting Donald Trump’s election, and some may be cheering, but whether they’re a fan of the 45th president of the United States, there’s a good chance they’re wondering what he plans to do about student loans. As a candidate, Trump’s stance on college affordability and debt was a bit vague, especially compared to Hillary Clinton’s call for tuition-free higher education. But he has offered a few hints about how he might address the $1.3 trillion in student loan debt Americans currently have hanging over their heads.

The biggest clue to how Trump might reform the student loan system came during a speech he gave in Columbus, Ohio, on October 13. At that event, he said something must be done to keep staggering amounts of student loan debt from derailing people’s lives.

“Students should not be asked to pay more on their loans than they can afford and the debt should not be an albatross around their necks for the rest of their lives,” he said. “And that’s what it is.”

Trump’s solution to the “albatross” of college debt? A rejiggered income-based repayment plan, where borrowers would pay slightly more per month but enjoy a shorter time to loan forgiveness.

 

Changes in the Student Loan Forgiveness Plan

It looks like Donald Trump’s student loan repayment plan will be pretty similar to the plan that already exists; with beneficial alterations.

  • Trump does not want the federal government profiting off student loans any longer
  • Trump calls for the elimination of the Department of Education
  • Trump wants to punish schools financially if their students fail to repay their loans, believing it’s beneficial for colleges to have “skin in the game” and be held partially responsible if their students default on their loans

As graduates struggle to pay their staggering student loan bills, Trump proposes a revised version of the current income-based student loan repayment plans.

In a recent speech to a group of high school and college students, Trump called for a student loan forgiveness plan similar to the one in place; with a few minor changes.

The current plan, under Obama Student Loan Forgiveness, caps borrowers monthly payments on their student loans at 10% of their discretionary income for 20 years.

Trump has proposed an increase in monthly payments from 10% to 12.5% of the borrower’s income however, and most notably, he lowers the payment program from 20 years to 15 years.

Trump explains, “If borrowers work hard to make their payments for 15 years, we’ll let them get on with their lives.”

He has said he gets asked about student debt more than any other issues on the campaign trail and understands the magnitude of the problem.

When asked about the logistics he added, “the plan will be paid for by lowering federal spending on ever-rising college tuition and fewer defaults on student loans.”

The government is already offering income-driven repayment plans for struggling borrowers that forgives student loan debt after 120 consecutive payments made on the loans.

This has proven extremely beneficial for the graduates that aren’t able to afford their monthly payments and who would otherwise be forced to pay their loans back within the standard 10 year repayment plan.

Lowering the monthly payment amount and extending the repayment length from 10 to 20 years, has been crucial for a great deal of American’s struggling with their loans.

Trump is also calling to hold universities accountable on the percentage of their endowment that they spend on administrative costs versus spending that directly impacts students.

“If colleges refuse to take this responsibility seriously, they will be held accountable, including by reconsidering whether those with huge endowments deserve to keep those endowments tax exempt. We have a lot of power over the colleges. And they’re not doing the job of cost cutting,” Trump said.

A campaign aid explains that Trump will call for the withholding of federal funds to colleges that do not do enough to lower tuition costs. Holding these colleges responsible gets to the root of the problem, proving his is one of the better plans proposed in recent history.

Trump also said he would “take steps to push colleges to cut the skyrocketing cost of tuition.” He has made it very clear that he doesn’t want the federal government profiting off student loans any longer and he believes the tuition cost is the fault of the government.

 

 

ITS NOT TOO LATE TO APPLY FOR LOAN FORGIVENESS

There is no guarantee that Donald Trump will keep in place the Obama Administration’s federal student loan forgiveness programs. Check your eligibility for loan forgiveness below to potentially have your monthly payments reduced to $0.00/mo.

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Student Loan Debt: The Invisible, Incredible Drain on Investment

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In investment annals, the story of student loan debt isn’t too often told, let alone treated with any sense of urgency. After all, what do portfolios, capital gains or passive income have to do with paying off the package that makes college education possible?

Here’s an after all, then, for the oblivious financial managers and investment pundits of the world: “After all” that debt to pay off each and every month – and it’s hit record levels unforeseen a generation ago – America’s newly minted college grads are lucky if they have a few quarters left over for milk money.

“I believe we have a higher education bubble,” says Derrick Handwerk, managing partner of Handwerk Multi Family Office in Lansdale, Pennsylvania. “When the average family cannot afford the average education or a home, that is a bubble. The government is enabling the prices of a bachelor’s degree to grow significantly above inflation by having loans available that many students cannot pay off when they graduate.”

 

Such as: “I work with many physicians coming out of medical school with more than $150,000 in debt and the prospect of lowered incomes due to the Affordable Care Act,” Handwerk says.

A look at the numbers. Statistics from the Institute for College Access and Success tell a big part of the story. For the class of 2014, the debt figure per student hit $28,950 per borrower, with seven out of 10 students owing money. Over the last decade, student loan debt has grown at twice the rate of inflation; tuitions have risen at roughly the same rate going back 40 years. By many estimates, the per-student debt figure has surpassed the $30,000 mark.

“Total student loan debt in the U.S. currently stands at more than $1.3 trillion, a staggeringly large number that represents millions of college graduates unable to work toward financial independence from financial institutions,” says Jeffrey Zucker, an angel investor and president of Green Lion Partners in Grand Junction, Colorado. “It’s not surprising that people with student loans are less able to invest their savings in profitable ventures.”

Put another way: If you could chip away at $10 a second, $1.3 trillion would take more than 3,200 years to pay back. Actually, it would take a lot, lot longer. The debt figure is skyrocketing by some $2,700 a second.

Not even stock in Alphabet (ticker: GOOG, GOOGL) can keep pace with that. Nor can this story you are reading; a student loan “debt clock” at FinAid.org updates the figure every second. $1.36 trillion is likely a few weeks away.

Trend likely will continue. And where the rubber hits the road, a new survey of 5,000 current college students by Allianz Global Assistance reaches this conclusion: “Student loan poverty” may not end soon. After tuition, about one in four students reported not having extra money to spend. Nearly half (44.6 percent) are paying for their education entirely – and some 12 percent don’t even know how much they owe.

Is all this avoidable? Perhaps. Loans need not represent a last-resort option, even though they’re the first thing too many students lean on before the first bill arrives.

Jeremi Gill, who graduated The King’s College in 2015 with a bachelor of arts in political philosophy and economics, no doubt put the latter major to work for him. “I was lucky to get out with only $11,000 in loan debt,” he says. “And I started knocking that off right away.”

Gill, who is single and 22, worked multiple jobs throughout college and continued to do so after graduating. He still does today. “I make sure to pay half of every month’s paycheck to my loans, and the other half for living expenses and travel.” As for investing, he’s started through the smartphone app Acorns. (Its founder, millennial Jeff Cruttenden, hit on the idea while still in college himself.)

 

Acorns takes whatever Gill spends from linked credit and debit card purchases and rounds it up to the nearest dollar. The change gets invested in six different funds based on risk tolerance. It’s especially targeted towards young investors wary of brokerage houses.

Gill counts himself as one of those.

“Talking to an investing professional is intimidating,” Gill says. “The few times I have, they speak a different language than you, are not upfront with fees, and you almost get the feeling you are being cheated out of your money in some way. They do not exude trust.”

While that credibility gap remains a huge obstacle for financial advisors, many professionals do have the best interests of young graduates at heart – as well as the next in line.

 

Make loans last resort. “The big thing for future college students is to exhaust all other resources prior to taking out a student loan,” says David Almonte, member of the AICPA’s National CPA Financial Literacy Commission. And those resources are many: “scholarships, grants, financial aid, student work programs, and part-time jobs” among them.

Let’s take a page from Gill’s playbook: A gig earning just $100 a week, if poured straight into tuition, would offset $20,000 over four years.

Or, students can opt for starting their first two years at community college before moving on to a more prestigious university. “And if they live at home, they can have the degree for less than $50,000 total,” Handwerk says.

Investment options. Those ideas, good as they sound, don’t directly answer the question of how college graduates can find money to invest. If it’s a choice between Alphabet Class A stock at $713 a share and the rent, guess which one wins out 99.9 times out of 100?

Yet some investments come through passive, painless methods for grads who land full-time jobs.

“According to a 2014 report by the American Benefits Council, nearly 80 percent of full-time workers have access to employer-sponsored retirement plans,” says James Capolongo, head of deposit products and pricing at TD Bank and based in Mount Laurel, New Jersey. “If your employer matches up to a certain percentage, contribute at least the minimum required to take advantage of your company’s match. It’s free retirement money.”

“While paying for financial advice may seem out of reach, even young professionals should strongly consider at least a one-time consultation with a financial professional,” says Anthony Criscuolo, a certified financial planner and portfolio manager with Palisades Hudson Financial Group’s Fort Lauderdale, Florida, office.

“Just as you entrust your health to a doctor or your car to a mechanic, a check-up with a financial pro can pay for itself in establishing a sound long-term financial plan,” he says.

And in much the same way as you’d find an ace mechanic, word of mouth might prove one of the best avenues around. Sure, it won’t pay off today’s loan bills right this minute, let alone this decade.

 

But if you get the right guidance now, Criscuolo says, it can definitely set a new course, “and will prevent problems down the line.”

 

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Is DeVry Screwing Over Students?

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In the last 10 years, student loan debt has nearly tripled, rising to an astonishing $1.2 trillion. A high percentage of this debit is owed by students at for-profit universities such as DevRy University, which is a division of the DeVry Education Group that owns multiple other organizations such as Ross University, American University of the Caribbean, Carrington College, and the Chamberlain College of Nursing. According to a 2012 report by the United States Senate Health, Education, Labor and Pensions committee 22 percent of students at for-profit schools will default on a loan payment within the first three years, as compared with about 9 percent of students at a nonprofit college.

For-profit institutions such as DeVry operate as a business, with shareholders and a corporate organizational structure, that sell education as a product. With profit being the major incentive, DeVry must find ways to attract students to enroll, spending large amounts of their total revenue on sales and marketing. DeVry is in fact one of the largest advertisers on google. Acceptance rates are high and tuition is about twice the cost as that of non-profit institutions, with only about 31.5 percent of students graduating versus 57 percent of students at non-profit institutions.

Many students that attend for-profit institutions such as DeVry get training, but no jobs. Many debt holders have accumulated loans they cannot ever afford to pay back. Because DeVry is publicly traded, the pressure is on for them to make a profit to make their shareholders happy. Another reason tuition is so costly is the salary for the leaders in the company. DeVry University President Daniel Hamburger earned $6.4 million in 2012. In contrast, the president at Harvard university earned about $900,000 – and she is one of only four presidents at public universities to earn such a high salary.

The disproportionate enrollment of minority students means that individuals that are already poor and underpaid are creating profits for these companies and their leaders. Meanwhile, students who enroll in these for-profit institutions and do not graduate (the majority don’t) have nothing to show for their education but more debt.

Within the past year, DeVry University has been under investigation by the Attorney General in both Illinois and Massachusetts. They’ve been named in numerous lawsuits in California, and they’ve been heavily regulated by the presidential education administration. One lawsuit claimed the campus leadership would bribe admissions counselors who exceed enrollment quotas, which in turn would lead to instances of “over-promising and under-delivering” to current and potential students.

Administrative studies revealed that in 2008, of the 64,722 students enrolled at DeVry University, 52.2% (or 33,795) withdrew by mid-2010. This same review also revealed that DeVry spent $2,989 on instruction per student in 2009, comparable to $4,054 per marketing a student. In 2010, 80.9% of DeVry University’s total revenue was comprised of federal education funds. In 2011 the university itself received a net income of $330 million dollars total.

Former testimonies of students who did not graduate with a degree from DeVry University have revealed a number of similar internal characteristics. Difficulty when trying to contact personnel regarding financial aid assistance, and neglect regarding assistance in academic advising were a common complaint among these students. Most complaints with DeVry University from students who withdrew, seemed to be the general feeling of misleading educational opportunities within the university. If you feel you were a victim of these predatory lending practices.

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Student Loan Services can help determine if you might qualify for the student loan forgiveness. Our team of dedicated student advocates will help reduce your monthly cost to the minimum amount possible until such a time that forgiveness may be a possibility.

Student Loan Services matches thousands of graduates with federal programs that are offered by The Department of Education to consolidate and lower their current Federal student loans. We help you take advantage of the latest regulations put in place by Congress and President Obama and potentially save thousands of dollars. Debt is hard to ignore. When you’re staring down a ballooning credit card balance and fending off insistent phone calls from angry creditors, it can be an all-consuming enemy. See what we can do for you!

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Obama Administration Deals Huge Blows to Corinthian Colleges

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Corinthian Colleges, Inc. owns Heald, Everest, and WyoTech colleges

Under the Obama Administration, the Department of Education has been very hard on for-profit colleges. The tough new regulations have Corinthian Colleges in hot water. Corinthian Colleges is now saying its goodbyes and is going to attempt to sell 85 of its campuses and close a dozen more.

Corinthian Colleges, Inc. is one of the largest post-secondary education companies in the United States. It operates colleges under three different names, none of which are “Corinthian”. The schools are called Everest, Heald, and WyoTech. Over 70,000 students enrolled at different branches of the schools are going to be affected by the termination.

Corinthian’s immediate issues started in January when authorities from the Department of Education asked for top to bottom data about individual Corinthian students including their participation records, the occupations they wound up getting and their Social Security numbers.

Government authorities examined the data to determine whether the revenue driven school was complying with regulations connecting federal student loans to different measurable outcomes for students and graduates.

For reasons unclear, Corinthian failed to provide the records request to the satisfaction of Department of Education officials. The DOE responded by placing a hold on Corinthian’s federal aid funding for 21 days. This hold, combined with lower enrollment and pre-existing financial issues, caused a major cash flow problem for the company.

The for-profit education sector has been facing immense pressure in recent years. While part of the pressure is due to slumping enrollment, the companies have brought much of the heat on themselves because of business practices that range from questionable to downright predatory.

Corinthian Colleges is COCO in the Nasdaq. This shows their major decline in the last year on the stock market. Source: Google Finance
Corinthian Colleges is COCO in the Nasdaq. This shows their major decline in the last year on the stock market. Source: Google Finance
The Consumer Financial Protection Bureau announced it is suing Corinthian Colleges for illegal predatory lending. The Bureau is demanding that the school forgive more than $500 million in student loans. According to the CFPB’s complaint, Corinthian Colleges convinced students to enroll in the school by inflating its job placement rates. It even paid employers to hire graduates for at least one day in order to boost its numbers.

Meanwhile, Corinthian Colleges’ tuition and fees — which can climb to as high as $75,000 for a bachelor’s degree — are higher than what federal loans generally cover, forcing many students to take out private loans from the school. These loans, called “Genesis loans,” came with origination fees of 6% and interest rates of around 15% as of 2011 — much higher than the 3% and 7% charged on federal loan.

And it doesn’t stop there; after extending these loans to cash-strapped students, Corinthian Colleges allegedly used illegal and abusive tactics to collect on that money while students were still enrolled in school.

The CFPB found that Corinthian College employees have pulled students who were delinquent on their payments out of class, informed professors about the debts and blocked students from using computers or even receiving diplomas. Unlike other colleges, private student loans extended by Corinthian College come due once a student begins classes, the CFPB said.

The Department of Education had already been looking into Corinthian Colleges’ practices, and is currently working with the school to sell and close down its more than 100 campuses, where approximately 74,000 students are enrolled. If you were enrolled in one of these schools and feel you may be victim of these predatory lending practices, give us a call at (800) 940-8911.

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What can Student Loan Services do for you?
While details of this lawsuit are being worked out, Student Loan Services can help determine if you might qualify for the student loan forgiveness as a result of the lawsuit. And in the meantime, our team of dedicated student advocates will help reduce your monthly cost to the minimum amount possible until such a time that forgiveness may be a possibility.

Student Loan Services matches thousands of graduates with federal programs that are offered by The Department of Education to consolidate and lower their current Federal student loans. We help you take advantage of the latest regulations put in place by Congress and President Obama and potentially save thousands of dollars. Debt is hard to ignore. When you’re staring down a ballooning credit card balance and fending off insistent phone calls from angry creditors, it can be an all-consuming enemy.