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Ralph Miller
Submitted 2011-10-17 14:18:56 Right now, college-bound students in Florida (where I live) and across the country are getting bombarded with ads for student loans from companies such as Monticello and Astrive: "$40,000 in Two Days!" "Better Rates if Your Parents Co-Sign!"
This coincides, of course, with college acceptances. Many parents and students are opening letters telling them they've been admitted to the college of their choice, only to have that brief elation met with the [url=http://www.moncleroutletosterblade.com]moncler[/url] harsh reality of having no clue about how the heck they're going to afford college.
One such option is applying for financial aid. Unfortunately, the "rules of the game" behind how to maximize the money you're eligible for are complicated, to say the least. Most families [url=http://www.achbanker.com/hollister.php]hollister france[/url] (78-90% , according [url=http://www.mquin.com/gzparis.php]giuseppe zanotti[/url] to some industry estimates) fill out the FAFSA and other forms incorrectly. This results in the student receiving less aid than he or she would have normally qualified for, or, sometimes, no aid at all.
All too often, the student turns to alternative means of college funding: private student loans. However, you need to think twice if you're planning on financing your college education this way.
Before you sign your life away, take a deep breath and consider what you might be getting yourself into.
Most parents and college-bound students do not realize that student borrowers are not-so-distant cousins to headline-making borrowers with subprime mortgages. Many experts, present company included, believe that the student loan market is poised to experience the devastation currently affecting the subprime mortgage industry.
Granted, [url=http://www.thehygienerevolution.com/barbourparis.php]barbour paris[/url] I don't know too many folks up at night thinking about the commonalities shared by college students and subprime mortgage holders. I am and, let [url=http://www.mxitcms.com/abercrombie/]abercrombie milano[/url] me tell you, the similarities are alarming.
For starters, student borrowers and subprime mortgage holders are ill-advised on financial matters (present company excluded, of course) - specifically, the consequences of their borrowing decisions.
It is not exactly news that that adjustable-rate mortgages (ARMs) resetting to high interest rates are the main culprit behind late payments, defaults, foreclosures and ruined credit.
Here's how it works - mortgage companies offer low teaser rates to get homeowners in the door, but frequently, the initial required payments are not even enough to [url=http://www.thehygienerevolution.com/barbourparis.php]barbour[/url] pay the interest on the loans. It gets worse.
Next, when the ARM adjusts upward, homeowners are forced to refinance to try and make their monthly payments. This worked for years, because it was relatively easy to qualify for new mortgages, but this rosy scenario screeched to a halt simultaneously with the collapse of the secondary mortgage market, slumping real estate values and a slowing economy.
The result: subprime borrowers were denied credit, were forced to stay in their unpayable loans and pushed into default or, unfortunately, foreclosure. Right here in Florida and across the country, college graduates burdened by student loans face similar problems. Just like the [url=http://www.gotprintsigns.com/abercrombiepascher/‎]abercrombie pas cher[/url] mortgage companies, student lenders offer a low teaser rate which adjusts upward (it's almost always [url=http://www.htqxj.com/plus/view.php?aid=22072]jordan pas cher Rama Yade réplique aux déclarati[/url] up, not down, unfortunately!) after the introductory period.
Next comes the inevitable late payments, non-payments, defaults and ensuing credit problems. It's a slippery slope! The result - payments get jacked up a few years [url=http://www.ilyav.com/uggsoldes.php]boots ugg pas cher[/url] after the loan originated. And the [url=http://www.mquin.com/saclancel.php]lancel[/url] new spiked payment almost always catches the borrower by surprise. Just like their subprime borrower counterparts, student loan holders are unable to make payments once the loan adjusts upward.
In most cases borrowers of both student loans and subprime mortgages claim that they were misled about the [url=http://www.ld0760.com/home.php?mod=space&uid=257627][/url] terms of their loans. They cry that [url=http://www.sandvikfw.net/shopuk.php]hollister sale[/url] the lenders withheld vital information, or glossed over important information.
To their credit, and in response to these claims, lawmakers are starting to call for increased disclosures and information from the student lending industry.
Don't hold your breath, however. [url=http://www.hnxcxx.com/prev/E_GuestBook.asp]jordan Sel[/url] This could take years. Your best bet to protect yourself is using [url=http://www.ilyav.com/uggsoldes.php]ugg pas cher[/url] your own brain - asking the right questions, listening to the answers. "What is the interest rate?" "When can the loan adjust, if at all?" "What happens if I can't make a payment?"
To be fair, many student lenders offer this information voluntarily, which helps borrowers make better choices. But this is the exception, not the rule.
Another favorable trend is that many colleges and universities have become more proactive and supportive in educating students about all the details surrounding student loans. Many schools have made available a "borrowing consultation" offered by their financial aid advisor. And in some instances, particularly among the elite higher education institutions, the financial aid packages feature little or even no loans, opting instead for "free" money awards - scholarships and grants. Harvard is one such institution leading the way.
It's clear that there is no easy solution for this problem. However, it's imperative to be mindful of the example set by the subprime mortgage meltdown, and avoid the consequences that accompany irresponsible and borrowing and lending.
College Pete and I are extremely debt-adverse and strongly urge you [url=http://www.mquin.com/gzparis.php]giuseppe zanotti pas cher[/url] to do anything possible to minimize, or flat-out eliminate, borrowing for college. Think twice before you sign for that loan!