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The www.FedPrimeRate.com Personal Finance Blog and Magazine

Friday, June 23, 2006

The Student Loan Consolidation "Single-Lender Rule" Has Been Repealed by H.R. 4939

On June 15, 2006, President Bush signed The Emergency Supplemental Spending Bill--H.R. 4939-- into law. The passing of H.R. 4939 means that the student loan consolidation Single-Lender Rule has been repealed, so now student loan debtors can consolidate their student loans with any lender they choose (click here for some more background on the Single-Lender Rule.)

Now that student loan debtors have the freedom of choice, NextStudent.com--the company which offers no cost student loan consolidation--urges borrowers to consolidate before consolidation rates rise on July 1, 2006 (only 1 week left!)

For more, here's a clip from yesterday's press release:

"The single-lender rule that prohibited student borrowers from consolidating their student loans with the lender of their choice was repealed June 15, 2006 when President Bush signed into law the emergency supplemental spending package, H.R. 4939. This has paved the way for student borrowers to consolidate their federal student loans with the lender of their choice at low interest rates before the July 1, 2006 rate increase of 1.84 percentage points.

In order to take advantage of the low interest rates, student borrowers now are urged to consolidate before the July 1 deadline, according to NextStudent, the Phoenix-based premier education funding company. The well-established company offers low rates and unmatched benefits and incentives to all student borrowers.

By consolidating before the deadline, student borrowers will avoid an interest rate hike that is the second-largest rate increase in the history of the federal student loan program. Some of the expected new rates include: a 6.8 fixed rate for Stafford loans disbursed on or after July 1, 2006, and an 8.5 percent fixed rate for PLUS loans disbursed on or after July 1, 2006.

With consolidation, a borrower’s various loans are combined into one loan and one monthly payment at a low interest rate that is locked for the loan’s life. Repayment terms can be extended and thousands saved over the long term.

NextStudent’s offerings of low rates, aggressive benefits and discounts along with top-notch customer service are unrivaled in the student loan industry. The company offers a 2.5 percent interest rate for qualified borrowers, when benefits are applied: 0.60 percent reduction for students who consolidate after graduation; 0.25 percent reduction with use of Auto Debit; and an additional 1 percent for making 36 consecutive on-time payments.

Student borrowers now can consolidate their loans through the lender of their choice. With less than two weeks until the July 1 deadline, student borrowers are urged to consolidate their loans to get the best rate and incentives before the rate increase.

About NextStudent

NextStudent, federal lender code 834051, is dedicated to helping students and their families find affordable ways to pay for college. NextStudent offers one-on-one education finance counseling and has a portfolio of highly competitive education finance products and services including a free online scholarship search engine, federally guaranteed parent and student loans, private student loans, both federal and private student loan consolidation programs, and college savings plans.

The NextStudent Scholarship Search Engine, one of the nation’s oldest and largest scholarship search engines, is updated daily, available free of charge, completely private – and represents 2.4 million scholarships worth $3.4 billion."

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Thursday, June 22, 2006

The Dark Side of 529 College Savings Plans

Every responsible parent worries about it: how to save enough money so that the kids have enough to pay for college?

You've probably heard of 529 College Savings Plans; maybe your financial advisor, a friend or a family member has recommended 529 plans as a great way to save for university fees--fees that seem to rise at an unreasonable rate each and every year.

But what if someone told you that 529 plans are a bad idea? What if a financial aid expert told you that 529 plans are a hazard to the average family, and must be avoided at all costs? Would you believe it?

Well, that's how author and college financing expert Reecy Aresty feels about 529 plans. More from Reecy's side of the argument can be found below in the snippet from today's press release:

"'529 Savings Plans are a financial hazard to the average family, and must be avoided at all costs.' So says Reecy Aresty, the nation’s foremost authority on college admissions and financial aid. He’s a veteran radio and TV guest pioneering a subject of immense concern to millions of families, and author of the ground-breaking new book, 'Getting into College and Paying for It!,' the only book of its kind available in Spanish.

With over 25 years of playing the financial aid game, Aresty says, 'In the financial aid formulas, students have no asset protection allowance. Every dollar they have will be assessed at 25% or 35% per year, depending on the college. If a family will qualify for financial aid, and most do, then those with money in 529 Savings Plans face a far worse fate - all that money (often $100,000 or more) which could have been legally repositioned outside the financial aid formulas will all be spent, often before graduation.'

A number of states have made contributions tax deductible with North Carolina and Pennsylvania next in line. But here’s the rub. A 529 Savings Plan is considered a parent asset when calculating financial aid eligibility, and families will lose 5.6% of the value every year in financial aid. What’s worse is that colleges treat money in a 529 Plan as a resource, reducing financial aid dollar for dollar.

When confronted with the facts, financial aid officers nationwide have made comments such as: 'Depending upon the value, there will be annual distributions to pay for tuition and fees.' 'Our calculations may vary from year to year.' And this disturbing remark from a prestigious school in New England: 'Financial aid is not the issue here, paying for the student’s education is.'

The sad truth is that literally tens of millions of dollars a year are unnecessarily wasted because families are not made aware of the consequences when setting up these accounts. Additionally, numerous brokerage firms have been sued and suspended for misrepresenting 529 Plans in general.

Getting Into College And Paying For It! exposes the truth. Reecy’s book has numerous admissions strategies to guarantee the student that all-important edge to the college of their choice at application time, because, 'all the financial aid in the world is worthless without an admission ticket.'

The following financial aid strategies have resulted in millions more for those who became aware: how to legally avoid the 35% assessment on student assets, how divorced and separated parents can legally cut the cost of college by up to 90%, and how to appeal unappealing financial aid offers and negotiate for the best possible financial aid package. Here’s what some of the media have said about Reecy and his book:

'Reecy Aresty is an informed, interesting, and complete source on all matters relative to circumnavigating and understanding the quagmire that funding for higher education is in this day and age.' Brad Shepard, WHYN News Talk 560, Springfield, MA.

'A helpful family guide to college financing: Don't despair if you have an acceptance letter, but not enough financial aid. Aresty says if you plead your case properly, you could increase your financial aid by thousands of dollars. That's The Savage Truth!' Terry Savage, TV commentator on CNN, CNBC, PBS, NBC, and Chicago Sun-Times personal finance columnist.

'Filled with trade secrets and insider information, it is more than just a guide but a virtual manual on how to send America's students to the college of their choice without spending their family's life savings. It should be required reading for every parent of a college-bound student!' Florida’s Education Times, The Voice of Education, Palm Beach County Edition.

Reecy’s company, College Assistance, Inc., in conjunction with College Funding Prep of Norfolk, MA presents free monthly seminars that take families from the first day of 9th grade up to and including attending college. For additional information or to request a review copy, please call Reecy Aresty at 561-672-7374."

For tips on saving for college, click here.

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Tuesday, June 20, 2006

My Highest FICO Score Ever: 719!

I recently checked my FICO credit score: 719, the highest FICO score I've ever had! I've got plenty of debt: credit cards, student loans, car loan--which tempers my excitement about my credit score. But if you're going to play the debt game, might as well play the game right!

I'm still renting, so every bump to my credit score should translate to a lower interest rate when I'm ready to own, if I decide to buy a $1,000,000+ home.

When will I be ready to own? Not any time soon, that's for sure. I understand all the benefits of owning a home, but I really can't stomach the idea of paying a bank $x,xxx,xxx for the principal, and another $x,xxx,xxx in interest charges for a mortgage. Just doesn't seem fair to me. So, if I do well with my businesses, I am hoping to have enough to just buy a decent-sized condominium for about $150,000 in the same neighborhood where I am living now (thankfully, I've seen a few in my price range recently.)

As if on queue, I'm starting to receive some highly attractive credit card offers from the major providers. Heretofore, the credit card offers I've been receiving have been good, but not spectacular. Now that my FICO credit score is 719, the offers are much better.

Just yesterday, I received an offer for a Chase®  branded Visa® Signature credit card. With this offer, I have the option of transferring my other credit card balances, and pay no interest on the transferred balance until October, 2007! Now that's hot (apologies to Paris Hilton, for stealing your catch phrase.) Furthermore, the go-to rate for this card--the annual percentage rate (APR) I would pay once the interest-free period terminates--is a sexy fixed rate of 8.99%! To give you some perspective on how great an 8.99% APR is, we'll probably have a national Prime Rate of 8.5% after August 8TH of this year. A credit card with an APR that's a mere 0.49 percentage point above Prime is...well...hot!

Of course, if you were smart enough to get a credit card with a fixed APR when the Prime Rate was 4% back in the summer of 2003, and your credit score was high, then you're probably one of the lucky few who now owns a credit card with an APR that's below the current Prime Rate. My credit score wasn't good enough to qualify for an ultra-consumer-friendly credit card offer back then, but, in early 2004, I was able to buy the car I've always wanted, and I was able to secure a 6% APR on that loan. Good stuff.

Well, folks: the game continues. My new goal is to have a FICO credit score that's above the 800 mark by the time the nation is ready to vote for a new President. Wish me luck (I'll need it!)

My Charted FICO Credit Score

For your viewing pleasure, I've posted below a screen capture of my charted FICO credit score:

Chart of my FICO credit score

When I lookup the reasons why my score is 719, I'm seeing the same two items:

  • The amount owed on your revolving/charge accounts is too high.
  • The proportion of balances to credit limits on your revolving/charge accounts is too high.
The second item is kinda' annoying, because I'm not even close to being maxed out with any of my credit card accounts. No big deal, really, but it's annoying to see it there.

That's it for now, boys and girls. I'll post more about my adventures with debt ASAP. Thanks for reading.

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