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Your Money: Explaining New Federal Student Loan Rules

October 27, 2011 by NewsMaker Leave a Comment

But if the questions sent to our Bucks blog from indebted people are any indication, any change in Student Loan Land almost inevitably leads to enormous confusion. Many questions had to do with whether private loans, the kind that come from banks and often have higher and variable interest rates, are part of these changes. Nothing is changing with those loans.

This is crucial, since many of the people in the worst sort of trouble — the ones you’ve read about with six-figure balances — often have both private loans and federal loans.

Instead, only those with different kinds of federal loans — an estimated 5.8 million borrowers — will be able to consolidate them into one loan under the new plan and also save themselves a bit of money.

Borrowers also remain befuddled about the confusing eligibility requirements of a two-year-old program that limits the monthly payment for certain federal student loan borrowers based on their income and then forgives any remaining debt after 25 years.

Starting sometime next year, the limit will be cut by a third for certain borrowers, and that will lower payments. Also, loan forgiveness will happen after 20 years. (The income-related changes were already scheduled to happen in 2014, but they will occur sooner now.)

Today, at least 450,000 people participate in the federal income-based repayment program that started about two years ago, though there are probably many more borrowers who are eligible but don’t know about it or haven’t figured out how to sign up.

I’ve answered as many of the reader queries as I can below, and will answer more on the Bucks blog in the coming weeks.

Q. Who is eligible?

A. People with at least one federal loan that they borrowed directly from the federal government and at least one that originated with a bank or other lender. If you have a bunch of bank-issued federal loans but no loan directly from the government, you can consolidate them under an older federal program, but it won’t save you as much money.

The PLUS loans that some graduate students have taken out in recent years are eligible. Perkins Loans and many federal loans for people entering health professions are not eligible. And again, private student loans are not part of the mix here either.

Also, if you’re in default on the loans, you won’t be eligible.

Q. How do I know what kind of loan I have?

A. Don’t be embarrassed to ask, since many people have forgotten or never knew in the first place. Call your lenders now and ask them. The Education Department plans to inform all eligible borrowers in January as well. If you haven’t heard from them by the end of that month, call them at 1-800-4FEDAID (1-800-433-3243) and ask.

Q. Is there a limit to the number of federal loans I can consolidate?

A. No.

Q. What will I save if I consolidate under the new program?

A. It depends, and the formula for calculating your new interest rate is complex.

First, you’ll subtract 25 basis points (a quarter of a percentage point) from the interest rate of your federal loan that a bank or other lender originated. You can also subtract another 25 basis points for both those bank loans and any loans that came from the federal government directly if you agree, once the loans are consolidated, to let the federal government (which will be the new lender of record) pull the payment automatically from your bank account each month.

The new rate will then be a weighted average of the two (newly discounted) rates from the two different types of loans, based on the balances of each loan.

Q. When can I sign up, and for how long?

A. Enrollment should begin in January and is scheduled to end on June 30, 2012.

Q. Can this help me make more of my federal loans eligible for forgiveness if I work in certain public service jobs?

A. Yes. The only federal loans that are eligible for that forgiveness plan are ones in the federal direct program, which is where you end up when you consolidate your federal student loans in this fashion. By consolidating, older federal loans that banks originated for you would then become eligible.

Q. What if I recently consolidated? Can I unconsolidate to take advantage of this new discount?

A. No.

Q. Who is eligible for these income-based repayment plans in the first place?

A. Eligibility is based on something known as “discretionary” income, which the federal government defines as anything above 150 percent of the poverty level. The poverty level depends on your state and the size of your family. The big idea here is to only allow people to qualify whose income makes it hard to afford their full federal student loan payments. (Private loans do not factor into income-based repayment.)

All of this is outlined in plain English on IBRinfo.org, a Web site maintained by a nonprofit group called the Project on Student Debt. Your lender or the company servicing your loan will decide whether you’re eligible.

Q. What is changing with these programs as a result of Wednesday’s announcement?

A. Currently, people who qualify pay no more than 15 percent of their discretionary income toward federal student loan payments each month. You only have to make payments for 25 years, even if there’s still a balance left.

The new plan will lower the cap to 10 percent of discretionary income and waive any balances after 20 years of repayment. (Again, better deals are available for people who are working in certain public service jobs.)

Q. Any other catches?

A. Yes. This new income-based plan is not available to people who graduated in 2011 or earlier and have no plans to take out any new federal loans. Instead, you must have at least one federal loan from no earlier than 2008 and also take out one more in 2012 or later to qualify.

Graduate students are eligible, too, but you have to have taken your first loan out no earlier than 2008 to qualify, in addition to taking out at least one more in 2012 or later. So if you’re a sixth-year doctoral student, this might not work for you. That said, you might be eligible for the older, less generous plan.

Also, here too, your loans can’t be in default. This was disappointing to Robert Applebaum, the founder of forgivestudentloandebt.com. His two-year-old movement along with the petition he started on the White House’s Web site helped inspire the adjustments to the federal loan programs.

“Income-based repayment is fantastic if all you have are federal loans and are current on your repayments,” said Mr. Applebaum, 37, who lives on Staten Island and is current on his own student loans. “But people are drowning in debt and penalties, and the government has made it so that first you have to get your head above water. Another step could have been to eliminate that requirement, and they didn’t.”

Q. What if I still have questions?

A. The financial aid ace Mark Kantrowitz of finaid.org has posted his take on the announcement on the Choice blog. Otherwise, call the Education Department and keep an eye on studentaid.ed.gov and the Project on Student Debt’s Web site for more details as they become available.

Article source: http://feeds.nytimes.com/click.phdo?i=68bf28fb951a358965d1c0cb3920174b

Filed Under: Your Money Tagged With: banks, confusion, federal student loan

DealBook: Kelly Steps Down at Bank of New York Mellon

September 1, 2011 by NewsMaker Leave a Comment

Bank of New York Mellon’s chief executive and chairman, Robert P. Kelly, has stepped down, the bank said on Wednesday, citing “differences in approaches to managing the company.”

Mr. Kelly, 57, a longtime bank executive who had once been seen as a candidate to to run Bank of America, had been chief executive since Bank of New York merged with Mellon Financial of Pittsburgh in a $16.5 billion stock deal in 2007. In December 2009, he sent a memo to employees saying that while he had been approached by another bank, “I firmly concluded that my place is here at BNY Mellon.”

Gerald L. Hassell, 59, the bank ’s president and a board member since 1998, has been appointed chairman and chief executive.

Bank of New York Mellon is one of the world’s largest custodial banks, with $26.3 trillion in assets under custody and administration and $1.3 trillion in assets under management.

Article source: http://feeds.nytimes.com/click.phdo?i=fa64bf5ed68b0ab8aa403f7d35719568

Filed Under: Business News Tagged With: banks, mellon bank, trillion

Economix Blog: For Some Banks, Prices Are Below 2008

August 20, 2011 by NewsMaker Leave a Comment

Mizuho Financial, Japan: -24% from 2008-’09 low, -26% since the beginning of 2011

Sumitomo Mitsui, Japan, -16%, -24%

Mitsubishi UFJ, Japan, -8%, -20%

Credit Suisse, Switzerland, -4%, -42%

Crédit Agricole, France, 0%, -36%

Bank of China, China, +4%, -9%

Commerzbank, Germany, +5%, -57%

Sumitomo Mitsui, Japan, +7%, -24%

Bank of New York Mellon, U.S., +7%, -36%

Société Générale, France, +16%, -48%

Industrial and Commercial Bank of China, +23%, -3%

UBS, Switzerland, +35%, -12%

Lloyds Bank, Britain, +42%, -57%

Banco Santander, Spain, +52%, -23%

UniCredit, Italy, +54%, -42%

Banco Paribas, France, +58%, -31%

Hang Seng Bank, Hong Kong, +61%, -15%

Nordea Bank, Sweden, +66%, -27%

HSBC, Britain, +68%, -22%

Morgan Stanley, United States, +76%, -40%

Deutsche Bank, Germany, +76%, -30%

Bank of America, United States, +122%, -48%

Citigroup, United States, +170%, -24%

Wells Fargo, United States, +191%, -24%

Barclays, Britain, +194%, -42%

Article source: http://feeds.nytimes.com/click.phdo?i=bfeae9335cf9dd97abd4766e144c6173

Filed Under: Economy News Tagged With: banks, commercial bank of china, mellon

You’re the Boss Blog: Are Young Entrepreneurs Getting Enough Help?

August 18, 2011 by NewsMaker Leave a Comment

Today’s Question

What small-business owners think.

We’ve just published an interview with Neil Blumenthal, a young entrepreneur who recently went to Capitol Hill to talk about how important young entrepreneurs are to the economy. One of the founders of Warby Parker, an online eyewear company based in New York, Mr. Blumenthal and Hannah Seligson discussed, among other things, what politicians don’t understand about business, what he had to promise the Small Business Administration he wouldn’t do with his borrowed money, and what the Bloomberg administration is doing right. (You can read more small-business conversations here.)

At one point, Mr. Blumenthal noted that his company had struggled to get a loan backed by the Small Business Administration because the company did not yet have two years of tax returns.

“Isn’t that a reasonable request when you’re talking about using taxpayer dollars to guarantee a loan to a private company?” Ms. Seligson asked.

“I understand where the banks are coming from,” Mr. Blumenthal responded. “It probably was necessary to implement hard and fast rules to stop the bleeding when the crisis hit, but they should be looking at the policies and thinking: does this make sense now?”

What do you think?

Article source: http://feeds.nytimes.com/click.phdo?i=996ee82bdde742e734e26eb852055d06

Filed Under: Small Business Tagged With: banks, capitol hill, tax returns

China’s Boom Beginning to Show Cracks, Analysts Say

June 20, 2011 by NewsMaker Leave a Comment

Several economists in China have recently lowered their growth forecasts for this year and next year to about 8.5 percent, down from earlier forecasts of 9 to 10 percent, while also warning about the possibility of a sharp rise in nonperforming loans at the nation’s big state-owned banks.

On Monday, for instance, Credit Suisse said data recently released by the Chinese central bank showed that credit in China had expanded at “alarming levels,” far more than previous government estimates suggested. Credit Suisse downgraded its profit forecasts for Chinese companies and state-owned banks, as it warned of slowing growth for the overall economy.

The reports come at a time of heightened concern about slower growth in other parts of the world, including the United States, Europe and Japan.

Since the financial crisis, China has been the world’s leading growth engine. But for much of the past year, China has been trying to rein in overly aggressive bank lending as way to tame soaring inflation and property prices.

Those tightening measures have not only weakened growth in China, analysts say, but have also begun to expose a host of other problems in the nation’s financial system.

While few analysts expect China’s growth to slow to below 8 percent in the next year, they still paint a troubling picture. The Chinese stock market has been in a slump for much of the last two years, the property market looks weaker and inflation is running at a 34-month high.

Analysts said exports have begun to show signs of weakness in recent weeks. Credit Suisse said Monday that China’s export growth could be flat in the coming months, partly because of weaker demand in the United States and Europe.

Credit Suisse’s new figures also indicate that off-balance-sheet lending, much of which took place outside the banking system, pumped a large amount of additional credit into the financial system last year. As a result, Credit Suisse downgraded its ratings of Chinese companies and the big state-controlled banks, and warned of a possible rise in bad loans.

Vincent Chan, the head of China research at Credit Suisse, said that the nation’s economy might avoid a “hard landing” but that growth over the next year was likely to be less robust.

“The market consensus is for a soft landing and two or three quarters of slowing down, then a growth rebound,” Mr. Chan said in a telephone interview Monday. But, he said, “we’re saying that after that, the growth may not re-accelerate and the indebtedness may be more serious.”

Earlier this month, Wang Tao, the chief economist in China at UBS, said China’s economy was still strong but warned that over the next few years, loans to local government investment companies could result in as much as $460 billion in nonperforming loans.

Although Beijing used state-run banks to bolster growth after the financial crisis hit in late 2008, the central government is ordering them to help rein in growth.

Chinese banks have already raised interest rates and set aside larger reserves. The government is expected to announced additional measures in the coming months.

While those moves could help slow inflation, they will also probably weaken growth by driving up borrowing costs in China. That could hamper private companies and property developers, which have been among China’s biggest sources of growth.

Last week, Standard Poor’s, the credit ratings agency, lowered its outlook on Chinese property developers, predicting that in some parts of the country property sales could drop sharply as a result of tighter credit and government curbs.

Another growth driver — local government investment in infrastructure projects — has also come under scrutiny from regulators because of worries that overly aggressive spending on new roads, bridges, tunnels, subways and showpiece projects could lead to a wave of nonperforming loans to municipalities.

Businesses, meanwhile, are trying to cope with rising labor costs, energy shortages and higher borrowing costs.

Those conditions could change if the government decides to loosen monetary policies and ramp up growth, the way Beijing did in early 2009. But Mr. Chan at Credit Suisse says the size of China’s debt could restrain regulators and lead to a longer period of slower growth.

Asked whether nonperforming loans — or N.P.L.’s — are set to rise, Mr. Chan said: “A rise in N.P.L.’s is a must. The question is, how much will they rise?”

Article source: http://feeds.nytimes.com/click.phdo?i=535863fec5b81199797afa73416075cb

Filed Under: Business News Tagged With: banks, credit suisse, growth forecasts

Bucks: Monday Reading: Bargains on European Cruises

June 20, 2011 by NewsMaker Leave a Comment

June 20

Monday Reading: Bargains on European Cruises

Bargains on European cruises, two big banks exit reverse mortgage business, fewer rewards for debit card holders and other consumer-focused news from The New York Times.

Article source: http://feeds.nytimes.com/click.phdo?i=6e60bbef1a5ae251400e2af9cf8fda0d

Filed Under: Your Money Tagged With: banks, bargains, cruises

Advertising: Now Banks Take a Turn at Coupons

June 14, 2011 by NewsMaker Leave a Comment

A company called BillShrink has worked with more than 2,000 banks to offer a new service — part loyalty card, part daily deal — called Statement Rewards. Under the program, online bank statements may include deals and discounts for bank customers based on their recent spending.

If, for example, a customer spent more than $100 at Starbucks in a month, Starbucks could offer a $5 coupon, complete with a small corporate logo, right under the statement’s listing for the last Starbucks purchase.

The same deals could appear on a smartphone so a customer walking near a Starbucks could see how close they were geographically — and financially — to getting a discount at the nearest store.

In the process, marketers gain access to preferred customers, while the banks and BillShrink get a small piece of each transaction. And the consumer now receives a bank statement, which most people regard as confidential and private, that is loaded with advertising.

The service comes at a time when marketers are increasingly moving to offer daily deals and loyalty programs to their customers and banks are reeling from legislation that has curbed fees they charge to consumers and retailers.

“The banking world is in a very tumultuous situation,” said Schwark Satyavolu, the co-founder and chief executive of BillShrink. “They need to do things that are consumer friendly, where the consumer actually gains when they make some revenue.”

BillShrink worked with Jack Henry Associates on the service, which will be introduced this week. In addition to the geo-location technology that allows deals to be sent to smartphone applications, marketers can also track customers’ purchases and set silver, gold and platinum reward levels that give bonuses for each level. They can also dangle future rewards in front of customers in exchange for a few more purchases at a retailer.

Customers will be able to use their debit cards to redeem their rewards, eliminating the need to carry multiple loyalty cards. “Your debit card or credit card becomes the master loyalty card,” Mr. Satyavolu said.

Despite the obvious marketing angle, the service may also help consumers think more favorably about the banks they do business with, said Deborah Wood, the general manager of marketing and industry research for Jack Henry Associates. “The consumer probably hasn’t looked at the bank as a way to save money,” Ms. Wood said.

The bank deals may appear intrusive to some users who are wary of aggressive marketing techniques, but users will be able to opt out of the service. Jack Gillis, the director of public affairs at the Consumer Federation of America, said the deals were indicative of a larger trend — the prevalence of advertising in our lives.

“Is there an advertising-free space we can live in?” Mr. Gillis asked. But given the ubiquitous nature of advertising, consumers have become increasingly accustomed to highly tailored ads. “If in fact you are purchasing things from a retail establishment, you are probably going to appreciate a discount,” Mr. Gillis said.

Daniel J. Kim, the founder and chief concept officer for Red Mango, a frozen yogurt company, said the company was considering using the Statement Rewards platform precisely because it allowed the company to offer deals based on how much customers spend and where they are located. “I think there’s a tremendous opportunity for personalization,” Mr. Kim said. “Before social media we just didn’t have access to this type of consumer.”

Jack Henry’s network of banks reaches nearly seven million customers in the United States and the range of banks included in the initial stage hold $7 million to $30 billion in assets. The average bank in the BillShrink program holds $500 million to $1 billion.

Article source: http://feeds.nytimes.com/click.phdo?i=10bcb4b959f4c5f13f11079789186746

Filed Under: Business News Tagged With: banks, jack henry associates, marketers

Bucks: Wednesday Reading: Rare E.Coli Cases In U.S. Rose Last Year

June 8, 2011 by NewsMaker Leave a Comment

June 08

Wednesday Reading: Rare E.Coli Cases In U.S. Rose Last Year

Number of rare E.Coli cases rose last year in U.S., banks and tech companies rush to replace security tokens, thawing frozen meat in hot water and other consumer-focused news from The New York Times.

Article source: http://feeds.nytimes.com/click.phdo?i=58afc073cbf307bd7c7dbc62600fafd3

Filed Under: Your Money Tagged With: banks, hot water, security tokens

You’re the Boss: Wells Fargo Bankers Will Take Your Questions

May 26, 2011 by NewsMaker Leave a Comment

Today, we’re publishing an interview The Agenda conducted with Wells Fargo’s two top executives for small-business lending, Marc Bernstein and Doug Case. Small-business owners have criticized big banks — and Wells Fargo is among the biggest — for doing little to help them through the most difficult days of the recent recession, but Mr. Bernstein and Mr. Case were resolute. Whatever the merit of the complaints against the banking industry, the officials said, the complaints were misdirected when it came to Wells Fargo.

“We are cognizant that the situation was ripe for people to feel like we weren’t serving them, and we tried to do whatever we could reasonably do to help our customers,” said Mr. Bernstein. “But Wells Fargo has been committed to small-business lending for a quite a while now, and we know here that we don’t help our customers, our communities or shareholders by declining a good loan.”

We’d like to know what you think. And so, for that matter, would Mr. Bernstein and Mr. Case. The bank executives have agreed to answer questions from You’re the Boss readers. Please read the interview, then post your questions here. We’ll deliver the questions to them, and post their answers in this space.

Article source: http://feeds.nytimes.com/click.phdo?i=9a8406f3538557d0a71b534dc62585ce

Filed Under: Small Business Tagged With: banks, doug case, small business owners

Filed Under: Economy News Tagged With: banks, debut, indignities