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Law School Problems, Proposed Reforms Could Affect Colleges

Extending gainful employment regulations could help ensure the federal government receives a good return on its investment in legal education.

Extending gainful employment regulations could help ensure the federal government receives a good return on its investment in legal education.

We’ve mentioned before that law school might be the canary in the coal mine when it comes to broader problems with postsecondary education.

Some of the problems that law schools may face in the near future because of the massive student loan debt students are racking up and some of the reforms that have been proposed may also be coming soon to a college near you.

One avenue of potential trouble for law schools is that the federal government may decide it is not getting its money’s worth from student loans. Kyle McEntee, executive director and co-founder of Law School Transparency, recently calculated the massive investment the federal government has made in law schools via student loans.

According to his figures, the federal government disbursed $4.88 billion in loans to law students during the 2012-13 academic year. He estimates the federal government will provide another $4.47 billion during the 2013-14 year, a time of declining law school applications.

[Get tips and advice on paying for graduate school.]

However, these huge numbers are a drop in the bucket of the federal budget. The Department of Education disbursed $112 billion in student loans in fiscal year 2012 alone; law school student loans make up only about 4 percent of that disbursement. And the total amount of federal higher education student aid for fiscal year 2013 will be around $100 billion more than that.

Furthermore, assuming the Bipartisan Student Loan Certainty Act of 2013 goes into effect and sets new market-based rates for student loans, the Congressional Budget Office estimates the government (which is expected to make a nearly $51 billion profit this year off student loans) will again start making billions of dollars off the overall federal direct loan program beginning in 2017.

[Understand how the government calculates the cost of student loans.]

Some argue that new income-driven repayment plans such as Pay As You Earn – which limits monthly payments to 10 percent of a borrower’s discretionary income and provides taxable forgiveness after 20 years – could result in the federal government losing money on law student loans in the long run. Though the Student Loan Ranger doubts that will be the case, those losses will not amount to much in the context of the overall federal student loan budget.

Given all that, the Student Loan Ranger would strongly argue against proposals made by the New America Foundation and others to eliminate PLUS loans for graduate and professional students. The amount of money saved would be trifling and, rather than lowering the cost of graduate and professional schools, would probably force law students to rely instead on riskier private student loans.

One avenue of federal intervention we support and think is more likely to occur is the extension of gainful employment regulations to law schools. These regulations, which remove eligibility for federal student aid to schools with truly bad employment outcomes, currently only apply to vocational programs.

This could be an effective means of ensuring the federal government receives a good return on its investment in legal education, given the employment woes of law school graduates.

[Learn about proposals that would eliminate student loans.]

Gainful employment would also accelerate market corrections that are rapidly ushering in a new era for law schools. Declining enrollment, driven by the increased public awareness of the risky combination of high student debt and lack of legal jobs, is affecting the economic viability of the law school model and may well result in a handful of law schools going out of business.

McEntee has posited that law schools may soon have divide into “elite” and “practice-oriented” tiers and that faculty will be forced into more flexible and part-time employment. Law professor and legal education critic Brian Tamanaha believes law schools will have to make a choice between decreasing enrollment while maintaining academic quality and rankings and maintaining enrollment yet sacrificing academic quality and rankings.

In the meantime, the cost of college continues to increase, borrowers continue to struggle to repay student loans (take a look at our e-book, “Take Control of Your Future” for information and advice on repayment) and the underemployment of college graduates continues. If these trends continue, it becomes more likely that federal government reforms and increased market pressures will also begin to reshape undergraduate education.

Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works’s educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.

Fitch Publishes 2nd Quarter 2013 Edition of a Student Loan Report Card

Stocks Close Mixed, though Post Best Jul Since 2010; FB Ends Below $38Reuters

Stocks modernized in flighty trade on Wednesday, pulling a SP 500 to within a few points of 1,700, after the …

House ready to lower rates on student loans

WASHINGTON (AP) — The cost of borrowing for college is about to drop.

The House on Wednesday was expected to give final congressional approval to bipartisan legislation linking student loan interest rates to the financial markets. The impact: lower rates for most students now but higher ones down the line if the economy improves as expected.

“This is a win for students and taxpayers,” said Rep. John Kline, the Republican chairman of the House Committee on Education and the Workforce.

The top Democrat on that committee joined Kline on the House floor to urge colleagues to back it. “It saves students and families money,” said Rep. George Miller, D-Calif.

Undergraduates this fall would borrow at a 3.9 percent interest rate for subsidized and unsubsidized loans. Graduate students would have access to loans at 5.4 percent, and parents would borrow at 6.4 percent. The rates would be locked in for that year’s loan, but each year’s loan could be more expensive than the last. Rates would rise as the economy picks up and it becomes more expensive for the government to borrow money.

But for now, interest payments for tuition, housing and books would be less expensive if the House passes the bill, as expected. The next step would be to send it to the White House, where President Barack Obama is expected to sign it into law.

The chamber earlier this year passed legislation that is similar to what the Senate later passed. Both versions link interest rates to 10-year Treasury notes and remove Congress‘ annual role in determining rates.

“Campaign promises and political posturing should not play a role in the setting of student loan interest rates,” said Rep. Virginia Foxx, R-N.C. “Borrowers deserve better.”

Negotiators of the Senate compromise were mindful of the House-passed version, as well as the White House preference to shift responsibility for interest rates to the financial markets. The resulting bipartisan bill passed the Senate 81-18.

The earlier House-written student loan bill passed the GOP-led chamber 221-198, largely along party lines. Eight Republicans crossed party lines to vote against it; four Democrats voted in favor of it.

With changes made in the Senate — most notably a cap on how interest rates could climb and locking in interest rates for the life of each year’s loan — Democrats were expected to join Republicans and back the bill.

Interest rates would not top 8.25 percent for undergraduates. Graduate students would not pay rates higher than 9.5 percent, and parents’ rates would top out at 10.5 percent. Using Congressional Budget Office estimates, rates would not reach those limits in the next 10 years.

Even with those protections not all Democrats will back it, cautioned House Democratic leader Nancy Pelosi. She said this “isn’t the bill we would have written, but it is a bill that can pass and will have Democrats voting for and against.”

The White House has endorsed the deal, despite objections from consumer advocates that the proposal could cost future students.

“The bottom line is that students will pay more under this bill than if Congress did nothing, and low rates will soon give way to rates that are even higher than the 6.8 percent rate that Congress is trying to avoid,” said Chris Lindstrom, higher education program director for the consumer group US PIRG.

Rates on new subsidized Stafford loans doubled to 6.8 percent July 1 because Congress could not agree on a way to keep them at 3.4 percent. Without congressional action, rates would stay at 6.8 percent — a reality most lawmakers called unacceptable.

The compromise that came together during the last month would be a good deal for all students through the 2015 academic year. After that, interest rates are expected to climb above where they were when students left campus in the spring, if congressional estimates prove correct.

The White House and its allies said the new loan structure would offer lower rates to 11 million borrowers right away and save the average undergraduate $1,500 in interest charges.

Democrats were already talking about changing the deal when they take up a rewrite of the Higher Education Act this fall. As a condition of his support, Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin won a Government Accountability Office report on the costs of colleges. That document was expected to guide an overhaul of the deal just negotiated.

The House, too, planned to address costs.

“Enactment of the Senate bill in no way means our work is done,” Miller said. “This bill helps reduce costs to students and families, but it does not solve the long-term student loan debt crisis.”

The Congressional Budget Office estimated the bill as written would reduce the deficit by $715 million over the next decade. During that same time, federal loans would be a $1.4 trillion program.

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Follow Philip Elliott on Twitter: http://www.twitter.com/philip_elliott

Student loan concede heads toward final vote

By PHILIP ELLIOTT
Associated Press

WASHINGTON (AP) – A understanding that gives college students and their relatives revoke seductiveness rates for loans is streamer toward a final vote.

The House was approaching Wednesday to take adult a bipartisan concede that links tyro loan seductiveness rates to a financial markets. Immediately, many borrowers would see revoke rates for classes this year than last, nonetheless a costs are approaching to stand in entrance years if a economy improves as expected.

“This is a feat for students and taxpayers, and we demeanour brazen to a bill’s quick thoroughfare in a House,” pronounced Rep. John Kline, a Republican authority of a House Committee on Education and a Workforce.

Undergraduates this tumble would steal during a 3.9 percent seductiveness rate for subsidized and unsubsidized loans. Graduate students would have entrance to loans during 5.4 percent, and relatives would steal during 6.4 percent. The rates would be sealed in for that year’s loan, though any year’s loan could be some-more costly than a last. Rates would arise as a economy picks adult and it becomes some-more costly for a supervision to steal money.

But for now, seductiveness payments for tuition, housing and books would be reduction costly if a House passes a bill, as expected.

The cover progressing this year upheld legislation that is identical to what a Senate after passed. Both couple seductiveness rates to 10-year Treasury records and mislay Congress’ annual purpose in final rates.

Negotiators of a Senate concede were aware of a House-passed version, as good as a White House welfare to change shortcoming for seductiveness rates to a financial markets. The ensuing bipartisan check upheld a Senate 81-18.

Republican House Speaker John Boehner has signaled his congress should support Senate changes to a progressing bill. So, too, has Rep. George Miller of California, a tip Democrat on a House preparation panel.

The House-written tyro loan check upheld a GOP-led cover 221-198, mostly along celebration lines. Eight Republicans crossed celebration lines to opinion opposite it; 4 Democrats voted in preference of it.

With changes done in a Senate – many particularly a tip on how seductiveness rates could stand and locking in seductiveness rates for a life of any year’s loan – Democrats were approaching to join Republicans and behind a bill.

Interest rates would not tip 8.25 percent for undergraduates. Graduate students would not compensate rates aloft than 9.5 percent, and parents’ rates would tip out during 10.5 percent. Using Congressional Budget Office estimates, rates would not strech those boundary in a subsequent 10 years.

Even with those protections not all Democrats will behind it, cautioned House Democratic personality Nancy Pelosi. She pronounced this “isn’t a check we would have written, though it is a check that can pass and will have Democrats voting for and against.”

The White House has permitted a understanding and President Barack Obama is approaching to pointer a check into law, notwithstanding objections from consumer advocates that a outline could cost destiny students.

“The bottom line is that students will compensate some-more underneath this check than if Congress did nothing, and low rates will shortly give approach to rates that are even aloft than a 6.8 percent rate that Congress is perplexing to avoid,” pronounced Chris Lindstrom, aloft preparation module executive for a consumer organisation US PIRG.

Rates on new subsidized Stafford loans doubled to 6.8 percent Jul 1 since Congress could not determine on a approach to keep them during 3.4 percent. Without congressional action, rates would stay during 6.8 percent – a existence many lawmakers called unacceptable.

The concede that came together during a final month would be a good understanding for all students by a 2015 educational year. After that, seductiveness rates are approaching to stand above where they were when students left campus in a spring, if congressional estimates infer correct.

The White House and a allies pronounced a new loan structure would offer revoke rates to 11 million borrowers right divided and save a normal undergraduate $1,500 in seductiveness charges.

Democratic senators were already articulate about changing a understanding when they take adult a rewrite of a Higher Education Act this fall. As a condition of his support, Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin won a Government Accountability Office news on a costs of colleges. That request was approaching to beam an renovate of a understanding only negotiated.

The Congressional Budget Office estimated a check as created would revoke a necessity by $715 million over a subsequent decade. During that same time, sovereign loans would be a $1.4 trillion program.

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Follow Philip Elliott on Twitter: http://www.twitter.com/philip_elliott

Copyright 2013 The Associated Press. All rights reserved. This element might not be published, broadcast, rewritten or redistributed.

How to Get a Mortgage With Bad Credit

Today, there is still a ubiquitous accord that to buy a home we need to have 20% down and a good-to-excellent credit history. The good news is we indeed don’t need a vast down remuneration or great credit in sequence to squeeze a home with rival marketplace terms.

Let’s demeanour during a characteristics of what a debt lender deems to be bad credit when it comes time to validate for a debt loan.

A debt company’s clarification of bad credit competence not be what a consumer considers to be bad credit. A credit measure of 620 or aloft is compulsory to successfully obtain a mortgage. By a same token, a 620 credit measure is deliberate by a lender to be reduction than perfect, though it’s still probable to get a debt with that score.

Your credit measure determines two vital things for a debt company:

  1. Loan module — either it’s a compulsory or FHA-type mortgage
  2. Pricing — this includes your seductiveness rate and any additional charges demonstrative of a credit measure (the reduce a credit score, a aloft a seductiveness rate and/or intensity charges)

Your credit story is a subsequent cause in last either or not your loan will be approved. Is there a settlement of previous credit delinquencies? Are there balances on closed-out accounts? It’s common for a consumer to have a 620 credit score, and have a unchanging chronological settlement of derogative credit. Interestingly, this chairman would have a some-more formidable time receiving debt loan capitulation than someone with a 640 credit measure with no story of delinquencies other than a foreclosure from a integrate of years before.

In sequence of priority, lenders will demeanour during a credit measure to establish that home loan you’re authorised for. Next, a finish credit overview will be taken into care to establish what questions might or might not arise in a underwriting preference process. The underwriting routine will be looking for “what happened,” “why it happened” and a destiny “likelihood of continuation or repeat non-repayment.”

Common Credit Red Flags for Lenders

Pattern of Delinquencies — A record of late payments is probable to work around, though some-more lender inspection will be given to a distance of your down remuneration and your debt-to-income percentage.

Student Loan Late Payments — If we had a late remuneration on your tyro loans within a past 12 months, we might be some-more expected to be authorized for compulsory financing. Government financing — like FHA — does not take pleasantly to derelict sovereign debt.

Mortgage Late Payments -- One late remuneration in a past 12 months is permitted, so prolonged as it can be explained and, if necessary, entirely documented.

Foreclosure – 36 months from a date of a foreclosure you’ll turn authorised for a 3.5% down FHA loan; for a VA loan, 48 months and no income down required; compulsory loans need 7 years no matter a down payment.

Short sale – It takes 36 months from a date of a brief sale until you’re authorised regulating a 3.5% down remuneration FHA loan; 24 months with a VA loan; 24 months on a compulsory loan with a smallest down remuneration of 20%.

Bankruptcy – With Chapter 7 (Chapter 13 is reduction common), we have 24 months from a date of liberate until you’re authorised regulating a 3.5% down FHA loan; 48 months on VA loans (still no income down required); and 48 months on compulsory loans, no matter a down payment.

Why You Can Get a Mortgage With Bad Credit

There’s a thing called financier overlays, that are adjustments to discipline and/or pricing combined in preference of a lender. This is precisely because one lender can do a loan for someone with bad credit and minimal (or no) down payment, and another lender can't do a loan in some instances.

Overlays serve strengthen lenders opposite intensity destiny waste from a home loans they originate, preserving distinction margins and buyback risk (an eventuality in that a imagining lender is forced to buy behind from a financier if a loan they done was not entirely documented). Investor overlays tie a screws on borrowers’ ability to borrow. Put another way, it shifts risk — that translates to cost — on to a consumer by means of tying a ability to steal around aloft loan fees, reduced squeeze price, or reduce debt ratio, to name a few.

Note: Every debt lender has financier overlays, it’s a inlet of how debt companies operate, a pivotal is to work with a lender whose overlays are minimal.

Homebuyer Homework

  1. Know your credit score, initial and inaugural (you can guard your measure for giveaway regulating a use like Credit.com’s Credit Report Card). Obtain a duplicate of your credit news (which we can do for giveaway by AnnualCreditReport.com), this will assist we in selecting a suitable lender.
  2. Get as many ancillary support as probable surrounding your credit hurdles so a story can be explained from A to Z.
  3. When vocalization with a intensity lender, be really specific. Do not be fearful to share each fact of your needs and concerns, giving a many finish outline possible. Find out upfront if they have any additional conditions with courtesy to credit history, as doing so could save we substantial time and money.

More from Credit.com

  • The First Thing to Do Before Buying a Home
  • 11 Tips to Rebuild Your Credit
  • How Fast Can You Buy a Home?