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Author Topic: MyRichUncle
pH
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I think there was a thread about this student loan company a long while back. Weren't they the ones with very aggressive marketing who used a percentage of your projected income for...oh, now I can't remember all the details. I know we've got a few financial aid folks around who've dealt with them, though.

MyRichUncle suspends private student loans.

-pH

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T:man
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... I have a rich uncle. [Embarrassed]
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rivka
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MRU is the company that slandered financial aid counselors everywhere in huge ads in such places as the NY Times. They also lobbied against a measure in the recent Higher Education Reauthorization Act that would have protected students from predatory lending practices by private lenders (the absence of which not only hurts students, but results in more work for FA personnel at schools in many cases, and sometimes loss of federal loans and grants for the student).

They are scum, their business model was obviously flawed from day one, and they stopped offering student loans a week or two ago (IIRC). And unlike many other lenders that have suspended operations, they overextended themselves so much that they are not even honoring existing loans.

No student lender is perfect, but most of them are decent. MRU disgusts me.

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pH
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I work at a school now, so I'm trying to learn as much about financial aid as I can. I went to school on scholarship, so I've never had personal experience with them.

Apparently Bank of America also suspended student loans?

What did MRU do that was considered predatory? If they aren't honoring existing loans, does that mean that students who have outstanding loans with them just don't get any more money for school? Do they have to pay it back immediately?

-pH

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rivka
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quote:
Originally posted by pH:
I work at a school now, so I'm trying to learn as much about financial aid as I can. I went to school on scholarship, so I've never had personal experience with them.

Get to know finaid.org. It's a MARVELOUS resource for students, parents, and financial aid professionals.

quote:
Originally posted by pH:
Apparently Bank of America also suspended student loans?

Over 30 lenders have suspended some or all of their student loan programs. (Some just federal, some just private, some just consolidation, and some more than one of the above.) B of A cut staff and stopped offering private consolidation loans, but I believe they're still originating other new loans. They may have cut off certain schools; several lenders (primarily Citibank and a few smaller lenders) have decided they will only give new loans to students at some schools and not others. (Generally based on volume and the school's default rate.)

quote:
Originally posted by pH:
What did MRU do that was considered predatory?

They discourage students from consulting with their school's financial aid department, and encourage them to take out loans that are not warranted by their school-related expenses. The originally-suggested portion of HERA that they (among others) lobbied to have removed from the bill would have required college officials to certify that a student needs the money he or she is preparing to borrow from a private loan provider (as they must for all federally guaranteed loans).

Removing that part of the bill means that it is too easy for students to borrow money they cannot afford to pay back and don't really need for school. Students in that situation commonly end up stuck in terrible financial straits -- and private student loans cannot be discharged in a bankruptcy. (The other part of the originally-suggested HERA loan provisions that didn't make it into the final bill would have changed that.)

quote:
Originally posted by pH:
If they aren't honoring existing loans, does that mean that students who have outstanding loans with them just don't get any more money for school? Do they have to pay it back immediately?

No, they are not (they CAN not) take back money they have already disbursed to schools on students' behalf. Existing loans can be sold to another servicer (and often are), but unless a student has gone into default, they cannot demand immediate repayment (and even in default there are options). What they have failed to do is disburse funds on new loans for the current academic year -- loans that were approved and all the paperwork was completed, but had not yet had their funds disbursed. A couple other lenders have had to cancel second disbursements (by law, all federal loans must be split into at least two disbursements), but I don't think any others canceled first disbursements of loans that had completed the approval process.

But yes, students who already have loans with them will have to find another lender (like the student in the article you linked did) for all future loans. BTW, MRU stopped offering federal loans months ago. It's only private loans that are a more recent issue with them.

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pH
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I've read through the financial aid handbooks, but they really only cover federal money. Plus, it's kind of hard to learn about specific companies sometimes unless you have somebody's first hand experience.

Yes, Hatrack financial aid gurus! Teach! Instruct! Impart your knowledge!

-pH

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Mucus
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Economists in the audience, correct my guess...

My loose understanding is that part of the credit crunch is that banks are no longer lending to each other, particularly US banks, because they do not trust each other to be able to properly value/trade things like mortgage-backed securities and credit swaps.
Are loans to students drying up a natural consequence (e.g. banks/lenders can't borrow as much money to then loan to students, so they cut off students that look like bad risks first and then move upwards) or is this some more indirect consequence?

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Bokonon
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Man, I'm kinda glad that my loans were all through the department of education Direct Loan service.

(And that I finally paid them off last month!)

-Bok

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rivka
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quote:
Originally posted by pH:
I've read through the financial aid handbooks, but they really only cover federal money.

That's why I suggested finaid.org, which is a private site, and covers all aspects of the financial aid system.

quote:
Originally posted by Mucus:
Are loans to students drying up a natural consequence (e.g. banks/lenders can't borrow as much money to then loan to students, so they cut off students that look like bad risks first and then move upwards) or is this some more indirect consequence?

From pH's link:
quote:
Unlike federal lending programs, private loans rely on liquidity from investors. Even though private loans are considered strong by industry standards, they are feeling the effects of a turbulent capital market.

"The only reason lenders had to stop making the loans was that they ran out of liquidity," said financial aid expert Mark Kantrowitz, who created FinAid.org.

"It's a contagion effect of the sub-prime crisis," said Kantrowitz. "It's an overreaction that has affected the student loan market."

quote:
Originally posted by Bokonon:
Man, I'm kinda glad that my loans were all through the department of education Direct Loan service.

For a while there was a slight benefit to students to use the FFELP system (about 1% difference in fees), but that isn't true anymore. Many schools have switched to DL in the past six months, and I know many more that are planning to switch soon.

quote:
Originally posted by Bokonon:
(And that I finally paid them off last month!)

Congrats! [Smile]
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fugu13
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I suspect there are a few things operating. One, less cash available, and student loans take a while to start paying off. Two, problems insuring and securitizing student loans. Three, suspicion about the stability of the federally mandated federal student loan buying agency.
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rivka
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quote:
Originally posted by fugu13:
Three, suspicion about the stability of the federally mandated federal student loan buying agency.

Do you mean guarantee agencies? Because the problems are affecting private loans (which have no federal backing) far more than Stafford or PLUS. And most of the problems with Stafford lenders have to do with Congress drastically reducing their cut last year.
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Kwea
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I am now even more worried about going back to school than I was, because without these types of loans I don't think I can afford to go to school.


Also, my schools lack of knowledge about FA is pissing me off. I just spoke to the persson who reviews transcripts, a necessary step BEFORE FA is processed, and despit what I had been told earlier this week she is 3 weeks behind as of yesterday.

It will be at least 3 weeks before she even processes my transcripts, and I am in limbo until she does. I can't apply for loans, or any other type of financial aid though the school until that step is done.


I am pissed.

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fugu13
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I'm referring to federal loans, but yeah, that's the least of problems.
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Farmgirl
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rivka

I think all my daughter's loans are Stafford. Are those federal, or private?

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rivka
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Kwea, with your credit scores, you should be fine. And while I know how incredibly frustrating it is to still be waiting, as someone who processes transfer credits, I have sympathy for her . . . this is a very rough time of year.
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rivka
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quote:
Originally posted by Farmgirl:
rivka

I think all my daughter's loans are Stafford. Are those federal, or private?

Stafford loans are all backed by the federal government, and their maximum interest rates are set by Congress. However, the money can either come straight from the Department of Ed -- what's called a Direct Loan -- or via a private lender (such as SallieMae, Citibank, Nelnet, etc.) -- that's a FFELP loan. Some schools use one program, some the other, and a few schools offer both options.

Again, loan funds that have already been disbursed are NOT at risk. And the vast majority of private Stafford lenders are continuing to make new loans without any disruption of services. Concerns about specific loans are best discussed with the FA department of your daughter's school. (Or you can send me an email, but I won't know any school-specific info.)

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Farmgirl
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yeah - I wondered. She has a new set of loans for this current semester/year, and she says everyone's financial aide papers just has "pending" next to their Stafford loan lines..
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rivka
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That may mean a few things. Among the possibilities:
  • The lender that she (and others) used last year may have stopped making Stafford loans, or may have stopped offering them at her school. That would just mean she'd need to choose a new lender.
  • School policy is to require written authorization before processing all Stafford loans. While no longer required by law, many schools have this policy as a CYA measure. If that is the case, she'll just need to complete the necessary form(s). (We call ours a Student Loan Request Form, and they usually have a name something like that.)
  • The maximum amount of Stafford was increased late last academic year. The school may be waiting to process loans until they find out which students want to increase the amount they are borrowing, now that they can.
  • Her school is one of the ones that just switched to Direct Lending, and they want to speak to students before disbursing their new loans.

She will be able to get a Stafford loan. The federal government has added several programs to schools to insure that every student keeps that option. However, it may take slightly longer than last year to get it set up.

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Miro
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Kwea - Do you know if you're eligible for the new version of the GI Bill? It's based on years of service since 9/11 (I think that at three years, you get the full benefit, less than that and you get partial benefits). The new version is a lot more generous than the old one and you need not have paid into it.
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Kwea
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I do not, as I left the Army in '95.
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Darth_Mauve
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I remember the debate over that new GI bill. After WWII the GI Bill paid for soldiers to go to college. Now it barely covers the cost of books. The defenders of the new bill said, "We don't have to increase the payments because we all know that college loans are so easy to get."
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Miro
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Oh, I didn't realize it was that long ago. Sorry.
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rivka
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The disconnect between (some members of) Congress' ideas of how financial aid works and how it actually does -- in large part because of the idiotic details of the laws these very same people passed -- is boggling.

OTOH, as of next year veteran's benefits will be excluded from consideration when calculating a student's income, etc., so that's a step in the right direction.

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Kwea
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No problem Miro, it was a good question. [Smile]
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