Most comments about the effects of this financial crisis on higher education have focused on the possible drying up of student loans. However, the impact on the ability of students and their families to pay for college will likely extend, including whether many families can still use home equities to pay for college and how the downturn in the stock market affects the growing dependence on family savings for tuition and other expenses. The financial crisis will also involve large ramifications for many aspects of institutional finance such as whether endowments and gifts continue to grow as they have in the recent past, as well as how colleges and universities price themselves.

Complicating this discussion is the lack of comprehensive or reliable data on the effects of the current financial squeeze on any of these resources for higher education. But each of these plausible effects is worth investigating and policymakers ought to consider how to deal with them.

Student Loans

Three basic kinds of student loans now exist in the United States—two of them created in federal legislation. The largest source of student borrowing in the United States is the federally guaranteed program first established in 1965. The private lenders are insured against most losses via federal and state guarantee arrangements; these loans account for more than half of all student loans in the United States, which now amount to nearly $100 billion annually.

In the 1990s, the federal government created a direct-loan program working directly with institutions to provide loans to students. Although this federal program now represents less than one-fifth of all student borrowing, it has introduced competition into the marketplace as private lenders and servicers can no longer threaten to vacate the student-loan field if their legislative demands and needs are not met.

Private loans without federal involvement or guarantee have been the fastest-growing component of the student-loan market in the United States in recent years, for they have been used to make up for the difference in what colleges charge and what aid is available from various sources, including federally based loans. These private loans have mushroomed over the past decade to account for 20 percent or more of the total student borrowing.

Based on statistics provided for the 2007/08 academic year, the current financial crisis seems to have had thus far a relatively modest impact. The federal student loan volume grew by about 10 percent between 2006/07 and 2007/08. By contrast, private loans reached a plateau, and volume stayed fairly level. This status reflects the fact that most students and parents had made their borrowing arrangements for the current academic year before the worst of the crisis hit.

In the 2008/09 academic year, student borrowing will likely be affected by recent events in the financial markets. Clearly, private student loans will be most affected, as the credit crunch will most likely impact non guaranteed and non subsidized loans. Private nonguaranteed lending may drop by half or more over the upcoming year as previously available sources of capital will dry up and disappear. The effect of this drop-off will be most pronounced for students in higher-priced private institutions and for-profit trade schools, where in recent years a growing number of students and parents have come to rely on private loans to make up the difference in federal loan limits and the higher prices charged at these institutions. At private, nonprofit institutions, tuition and fees now average $25,000 per year, and total costs of attendance including charges for housing and meals average nearly $35,000. Annual costs at for-profit trade schools—on average, $13,000 in 2008/09—are less than at private nonprofit institutions but still twice as much as the tuition and fees charged at public four-year colleges and universities, which average $6,600 in 2008/09.

By contrast, federally guaranteed loans and direct-loan volume have only marginally been affected by recent events. In fact, Congress this year took steps to ensure the continued availability of federal capital so that students could be assured that loans will be available next year and the following year.

Home-Equity Lines of Credit

With the rapid increase in tuition over the past quarter century and the even more rapid growth in housing prices over the past decade, lines of credit based on the value of a family’s home equity have become an increasingly popular way for many American parents to pay for college. Under this arrangement, parents can borrow against the portion of the value of their home that exceeds what they owe on it. Also, those using home equity lines of credit qualify to take tax deductions on the interest they pay on these lines of credit under current tax rules. Although precise data are not available, a reasonable estimate is that this form of finance provides perhaps $10 billion dollars in loans used to help pay expenses related to higher education.

But the current financial crisis is likely to put a real squeeze on this popular source of student finances. Many banks are simply reluctant to lend in a market where the value of houses—the collateral for these loans—has dropped sharply, making this form of financing much more problematic. It is reasonable to assume that the amount available through this source to help parents pay for college also will drop sharply in coming years, at least by one-quarter and perhaps by as much as half.

Drawing on Savings

Because of the high and growing prices for higher education in the United States, parents increasingly realize they must save while their children are young in order to pay for at least some of their college costs. This saving takes many forms including investing directly in stocks and bonds and through participation in mutual funds, retirement accounts, and pension funds. The use of savings for college in the United States has further expanded through the enactment of a series of provisions that extend tax benefits for savings allocated into designated college savings accounts. But the recent loss in stock market values of more than one-third from previous highs could have a huge negative impact on the ability of many parents to pay the high prices of college in the United States.

As in the case of home equity lines of credit, the amount of savings used to pay for college has expanded sharply in recent decades. The next year or two will be marked by re-evaluations of how family savings will be used in the future to pay for college. A reasonable surmise is that the changing financial situation will have a greater impact on where students go to school than whether they continue their educational career at the post secondary level. Thus, parents may be more likely to tighten their belts and ask or require their children to attend public institutions located in state where tuition and fee levels are one-fourth of what private colleges charge. Again the effect is likely to be most evident in the admissions process for the 2009/10 academic year as students and their families make plans for next year.

In sum, the financial crisis could affect the plans and decisions of hundreds of thousands if not millions of current and prospective students in the United States, regarding whether and where they enroll in post secondary education. The institutions most likely to be affected are those in the private sector because of the higher prices they tend to charge, but enrollments in all types of institutions will be affected by recent financial events here in the United States. It would not be surprising to discover similar if perhaps milder effects in many other countries experiencing the effect of worldwide financial difficulties.

Source: Article by Arthur M. Hauptman

In our easy money, credit rich culture we’ve conditioned ourselves to think about a loan and the size of the monthly payments, not paying enough attention to the interest charges. Even though they seem small, the amount in interest you pay monthly can become significant when you have large loans or many loans.

If you currently have a number of loans such as car payments, credit cards, lines of credit and the like the total monthly payments can become overwhelming. You can take out a loan to help yourself without going even deeper into debt so you don’t find yourself robbing Peter to pay Paul. A debt consolidation loan can be your answer.

Debt consolidation loans, when done correctly, won’t put you any deeper into debt,  and your will find yourself in a little better position financially than you were before. You borrow no more than you already owe and you pay a lower rate of interest and make lower, possibly much lower, monthly payments. 

There are other strategies for debt help. You can seek to have loan terms revised, pursuing lower interest rates and lower monthly payments. This cam be done either on your own or with help of a third party. You’ll normally owe the same amount but will get payment terms which are more in your favor. To be thoroughly successful in doing this, you need to make sure that you are disciplined with your money management habits. If you default you may not get a second chance.

Whichever consolidation loan or strategy you go with, you need to be careful about how it is backed up. For example, third parties might seek to tie the repayment of debt obligations to the deed for your home. Make sure you understand the fine print, the structure of your consolidation is key.

As enticing as a home equity loan may seem, and they are actively promoted, make certain you’ll be able to handle the payments. Just be aware that if you’re putting your home up for collateral, you must make your payments to be sure foreclosure is not in your future. 

Whatever you do it’s imperative that you structure your household budget so you are able to pay off the loan. Change your spending habits by avoiding the habit of using credit to pay your way. If you don’t do these things you’ll soon be back where you started, possibly worse off. If you to change your habits you have a much better chance of getting through these hard times unscathed. Above all, don’t start borrowing all over again. It’s time to start cutting up the plastic.

How Negotiate Terms To Payoff Your Debts

You can do this, directly, or you can hire a professional debt negotiator, or arbitrator . It is not uncommon to pay 50% or less of the principal on your debt as settlement in full. 

If you have access to money to use to make lump sum payoff of your debts, then this will save you the most money in interest, and principal payments, of any debt relief program outside of bankruptcy. You should keep in mind, however, that some creditors may report your settlement to the major credit bureaus. However, when trying to get out of debt, and protect your credit as much as possible, debt settlement can be the most economical option for you.

Determining What You Can Afford

Some of the more common ways to get money to do a lump sum payoff is through savings, tax refunds, second mortgages, home equity loans, or refinance of an existing mortgage , among others. 

Professional Debt Negotiator Services can set up payment plans, similar to debt consolidation services, and negotiate with your creditors once you have saved their minimum balance to settle a debt. You can eliminate your debt with savings of 40-60% or more.

Which Debts To Settle?

Usually the best debts to settle first are the ones which charge higher interest rates, and that will make the most dramatic change in your monthly budget. If you are behind on any payments, consider these debts also since eliminating the debt, also eliminates the delinquency. 

Evaluating & Hiring Professional Services

If you are shy, or just want some help, professional settlement services are the way to go. 

Debt negotiation services have more resources and knowledge to help you get the best payoff for your debt. They know what the bottom line is on which creditors will accept 30% of what you owe, and which ones will demand 70%, or 100%! It can be well worth the investment to have a professional debt negotiator, or arbitrator negotiate your settlement. 

Professional debt settlement services will also set up payment plans, similar to a debt consolidation company. You would make monthly payments, and once your balance reached the minimum needed for settlement of an outstanding debt, professional debt negotiator, or arbitrator would negotiate the settlement amount and arrange payment in full. 

Using debt settlement can trim your payoff time down from 5 to 7 years through a debt consolidation service or consumer credit counseling services to less than 3 years through professional debt settlement.

Most high school seniors and their families have not made final college plans for next fall. But they know this: It’s probably going to cost more than they had planned.

Even in good economic times, states and colleges have largely failed to hold tuition increases in line with inflation. Now as the slumping economy forces states to slash spending, students can expect the sharpest increases in years.

Families are calling on colleges to absorb as much of the burden as possible instead of passing the extra costs on to students.

“In my business, my customers are asking me for price concessions,” said John Schock of Raleigh, N.C., who works in sales for a company in the automotive industry and whose son is looking at colleges. He said colleges “have an obligation as well.”

Final prices will not be set until state budgets are finished in the coming months, but the trend is clear. InCalifornia, the governor’s proposed budget would raise university fees around 10 percent. Florida’s governor is trying to give several state schools more power to raise prices. And universities in both states plan to cut enrollment slots.

Other states could not wait until fall and have passed unusual midyear increases, including a whopping 14-percent increase in New York.

In previous recessions, state-supported institutions have raised tuition between 8 and 10 percent annually for several years running, said Nick Johnson of the Center on Budget and Policy Priorities in Washington.

“This recession is worse. This state fiscal crisis is worse than last time, so we would expect state tuition increases to be larger than in past years,” Johnson said.

Students could see some relief at private universities, which may have less room to raise prices without losing business or looking greedy. Augustana and Princeton are among schools that have already announced their lowest tuition increases in at least 25 years. Merrimack College and Benedictine University have announced freezes for next year.

But four in five American college students attend public schools.

Many colleges are making budget cuts, but that’s hardly good news for students. It means larger classes and, in states like California, fewer admission slots in the state system.

Jim Boyle, president of the membership and advocacy group College Parents of America, said next year will be especially painful because so many families have lost college savings in the stock market, or can no longer tap home equity loans because of the real estate crash.

Donna Kopec, who lives in the Chicago suburb of Palatine, Ill., planned to use a mutual fund her parents opened for her daughter to help pay expenses at the University of Wisconsin-Madison. But that fund has lost one-third of its value, and an e-mail from the school about economic conditions left her alarmed — particularly because she has three younger children.

“We’re probably going to have to take some options off the table (for the other children) unless things change,” said Kopec, who works in book publishing. “It’s not easy.” She hopes President-elect Barack Obama will implement campaign promises such as offering college grants in exchange for community service.

Low-income students in particular could also get help from Obama’s proposed economic stimulus package, which may include measures to improve college affordability, such as increasing the amount of Pell grants.

State and college officials insist they know families are hurting.

“We’re going to run into access and affordability issues, which we’re already seeing hints of,” said John Hayek, interim vice president of finance for Kentucky’s Council on Postsecondary Education. He predicted Kentucky would hold increases below last year’s figures: about 5 percent at community colleges and 7 to 10 percent at universities.

In the current academic year, the average list price for tuition and fees at four-year public colleges rose 6.4 percent to $6,585, according to the College Board.

At private colleges, prices rose 5.9 percent, to $25,143, though financial aid can reduce net costs substantially — to about $14,900 on average at private schools.

Parents are frustrated that the extra dollars paid by families to public institutions are mostly just replacing vanishing state money, rather than buying a better education, according to a new report being released Thursday by the Delta Project, a nonprofit group studying college costs.

The report finds tuition rose 29.8 percent at public research universities from 2002 to 2006, but education and general spending per student rose just 8.4 percent.

Meanwhile, the share of college budgets going to administration and students services — as opposed to instruction — rose.

“Students are paying more and arguably getting less,” said Jane Wellman, executive director of the Delta Project.

Brit Kirwan, chancellor of the University of Maryland system, is luckier than many of his counterparts: Maryland’s public colleges have not raised tuition for three years. So the state may have more flexibility to adopt a modest tuition increase.

But Kirwan insists everyone will share in the austerity.

“We have to keep the lights on and pay health care and other benefits and utility bills, but we’re not expecting to do much more than that,” he said. “With what’s going on in our country, there’s an obligation here to make it possible for kids to go to college.”

Source : Yahoo!News - By JUSTIN POPE, AP Education Writer

These loans have specific characteristics that make them unique in the financial industry. They provide financing at reduced interest rates. The interest rates can be so low that you would be surprised, but we will get back to this subject later on. These loans also provide easy payments that turn reimbursement into a simple task as the installments are always affordable without much sacrifices.

Furthermore, the requirements for approval are less harsh. There are loans that do not even require a credit pull. No credit verification loans are offered during Christmas and have become very popular because they can be approved within less than a day. But this also means that bad credit applicants, no credit applicants and even those with a past bankruptcy can also get approved without hassles or delays.

Looking for low interest rate loans? How about no-interest loans? Yes, during Christmas seasons there are lenders offering loans absolutely for free. You are surely thinking that nothing comes for free so I will explain how they profit from these loans. What lenders usually do is offer higher amount loans at no charge with rather restrictive repayment programs. Thus, when a portion of the borrowers cannot afford the repayment, they agree with them to refinance the loan and settle a new repayment but they obviously charge interests on the new refinanced loan because by then, the Christmas holiday is over.

It is the refinancing they profit from knowing that there will be a good percentage of borrowers that will need to resort to refinancing. However, if you plan ahead and do your budgeting right, you can really take advantage of these loans and be one of those that will not need refinancing. But beware of those lenders that offer free or no-interest loans but charge a processing fee. If it is only a small fee, it is ok. However, if the fee is so high that it can easily account for all the interests that they supposedly are not charging you, you should refrain from applying.

If you need financing during Christmas and the amount you need is not that high, you should resort to Christmas loans because they provide the best terms during these special times. As soon as the holiday ends, regular interests are charged and obtaining the funds will be significantly more expensive. If you need high loan amounts, then you will probably be better off with a home equity loan, but if your need for funds is limited to a couple of hundreds up to two thousands or a little more, Christmas loans will provide you with an inexpensive or even free source of funds. It is an excellent opportunity that you should not let pass by.

Interest deduction is one of the areas that has been strongly affected by this tax reform legislation. Since tax year 1991, interest on consumer debt has not been deductible for income tax purposes.

In order to minimize the impact of these limitations, it may prove advantageous for you to shift your debt by means of a home equity loan — borrowing money using your home as collateral. The law allows your interest payments on these home equity loans to be fully deductible up to $100,000.

You are not even compelled to use the money for home improvements. It may be used to clear personal debts, to fund a college education, to pay medical expenses, or to purchase items on a cash rather than a credit basis. The real benefit to you is the deductibility of the interest payments.

Bear in mind that home equity loans are generally repayable over 15 years. Other types of debt tend to have a shorter repayment period. As a result, the total amount of interest paid may be higher with home equity loans. However, the interest rates on a home equity loan, including origination fees, tend to be significantly lower than other consumer debt.

If you do not require a large sum, you may be interested in establishing a “home equity line of credit.” You only withdraw the money as you need it, so your interest payments are reduced.

You must examine these options carefully, however, recognizing that these loans are secured by your home.

Also, if you use a home equity loan to pay off credit card debt, consider canceling most of your credit cards to avoid the temptation to build new debt.

Before moving ahead, determine whether this shifting of debt is in your best interest, and seek professional advice on whether it will subject you to the alternative minimum tax.

If debt-shifting is suitable for you, consider taking advantage of these cost-effective means to borrow money.

This material was written and prepared by Emerald Publications.

Borrowing from your retirement fund – Dipping into your source of future security to pay present day bills is almost never a good idea. Your retirement fund is designed for just that – your retirement. Dipping into this great source of future investment to pay credit card bills simply does not make sense.

One of the things that makes borrowing from a 401(k), 403(b) or other retirement plan so unattractive is the fact that most plans bar participants from making future contributions until the loan is paid. Not only will this set you back on your retirement savings, but you will lose the important tax savings on your retirement plan contributions. And you will lose not only the money you would have otherwise invested, but all the appreciation that money would have made.

Using a home equity line of credit – While using a home equity line of credit may seem like a good idea due to the low interest rates and potential tax deductibility, this is also generally a major mistake. The most obvious reason this is so is that a home equity line of credit is secured by the roof over your head. Unlike credit card debt, which is unsecured debt, a home equity line of credit is secured by your home. If you default on your credit cards, the worst the bank can do is take you to court to try to recover the money. If you default on a home equity line of credit, however, the bank has the right to take your home away.

To make matters even worse, the interest rate on a home equity line of credit is adjustable, and you could really get hurt if interest rates rise. A sudden spike in interest rates could put that affordable monthly payment out of reach, and consequently put your home at risk.

• No health insurance or inadequate coverage. Medical bills are a factor in one out of five bankruptcies. 
• Maxing out on your credit cards or charging more than you can pay off each month. Credit card debt is one of the major factors in many bankruptcies. A good rule of thumb is to use no more than 30% to 40% of your available credit at any one time. This gives you flexibility in case of job loss, illness, divorce, or other threat to your income. 
• Over-using home equity loans. Think twice before you use your home equity loan or line of credit for items other than home improvements. Make sure you can afford the payments comfortably. 
• No emergency fund. If you live from paycheck to paycheck with little or no savings for emergencies, you’re at higher risk of going bankrupt. 43% of American households have less than $1,000 saved, an alarming statistic. 
• Paying the minimum balance on your credit cards. Since it can take 20 to 30 years to pay off your credit card balance when you pay only the minimum payment, if that’s all you can afford to pay, you really can’t afford to buy whatever it is you’ve been buying. 
• Co-signing a loan for someone else. Co-signing loans is a common factor in many bankruptcies when the person you co-signed for defaults on the loan payments and you’re held responsible by the lender. 
• Tax lien or foreclosure on your home, or repossession of a car or other item you failed to make timely payments on. These are signs that you’ve lost your grip on your financial situation. Take them seriously. 
• Borrowing too much on student loans. You may end up finding your student loan payments so high you can’t afford your living expenses.

The key to avoiding bankruptcy or other, less dire but no less unpleasant financial problems is to have a firm grip on your finances by following these eight tips:

1. Avoid impulse spending. 
2. Don’t use a credit card unless you have the cash to pay it off.  
3. Tear up credit card offers you receive in the mail. 
4. Set up a budget and stick to it. 
5. Don’t buy more house than you can comfortably afford. 
6. Make sure you’re adequately covered by insurance (medical, homeowners, auto). 
7. Don’t make speculative or high-risk investments. 
8. Don’t incur joint debt with others who have questionable financial habits.

The Calculation of Home Equity

The mathematical calculation needed to obtain the resulting available equity on your home is quite simple: to the actual value of your property, you need to subtract the amount of remhoaining debt on your mortgage. But though it is a mere subtraction, the complexity for those who are not familiar with real estate resides on the securing of the figures needed to perform the calculation.

Common mistakes are for example the use of the purchase price instead of the current value, or the matching of the debt already paid on your mortgage with the amount of available equity regardless of the facts that interests are included and that the property’s value may have increased also. Therefore, it is important to know where to obtain the information you need.

Basically, the property needs to be appraised by a real estate agent. Many agents are willing to appraise your property for free but you can easily obtain a quite accurate figure by inquiring about recent purchase prices of similar properties on the neighborhood. And as regards to the remaining debt on your mortgage loan, you can ask your lender about this figure at any time and they are obliged to provide you with the information. You just need to ask for it.

With the above information at hand you can easily subtract both figures and obtain the amount of home equity available for requesting a loan. Each lender will require this info to provide you with a loan quote and prequalifying your for a loan. Thus, if you know beforehand which lender you want to apply to, you can leave all the trouble of assessing your available equity to them.

125% Financing Is Feasible?

You may have heard about 125% financing. This implies that your mortgage and the home equity loan combined add up to 125% of your property’s value. How can this be done? Imagine that you take a secured equity loan till 100% is reached and you add up another 25% unsecured. The interest rate of the last one will be higher. But if you combine both loans into a single loan you can obtain a lower rate and the lender gets to secure the remaining amount once you have cancelled sufficient installments or once the value of the property reaches the amount of outstanding debt.

These loans however are not easy to qualify for because till the value of the property raises or the debt drops, a significant amount of debt remains unprotected. Therefore, you should expect approval only for those with fair to perfect credit. If your credit is below average, chances are that you will get declined.

Cash In Your Home Equity

Equity is the difference between the amount of debt secured with a property and the actual property’s value. Home equity is thus available property value that can be used to secure other financial products. There are two financial products that can take advantage of available equity in order to provide additional financing apart from a mortgage loan: an equity loan or cash-out refinancing.

A home equity loan is an additional loan usually known as second mortgage that resorts to the equity vacant on your property to guarantee the repayment of the loan. Loans based on equity provide high loan amounts but are limited to the amount of existing equity. Nevertheless they surely can provide the necessary funds for home restorations or improvements. Also, as an alternative to these loans you can use an equity line of credit which will provide you with a revolving account perfect to use for home improvements and redecoration.

Cash-out refinance home loans are a different kind of product. By refinancing you are cancelling the previous mortgage and replacing it with a new loan product. With cash-out refinance home loans, you make use of the available equity in your property and get a loan with a higher amount than the previous outstanding debt and thus, the extra funds can be used for any purpose including home renovation.

Non Equity Solutions for Home Renovation Financing

If you do not have sufficient equity available on your home or you just do not want to use your property as collateral for a loan because you fear foreclosure, there are alternatives available that are unsecured and thus do not require you to put any asset as collateral for the loan. However, bear in mind that as opposed to home equity loans and lines of credit or cash-out refinance home loans, unsecured loan products charge higher interest rates and therefore will end up being more expensive. Moreover, the interests on unsecured loans are not tax deductible like the interests on loans based on equity.

Nevertheless, if you want to resort to unsecured financing, there are unsecured personal loans and unsecured lines of credit available for home renewal or home improvements. The requirements for approval may be a little stricter than those of secured loans and lines of credit but still, approval is not that harsh. There are even unsecured personal loans and lines of credit for home improvement specially designed for those with bad credit, no credit or past bankruptcies. Though the requirements for approval on those loans are simple and thus qualification is guaranteed, the interests you will have to pay for the money owed are significantly higher and can even double the rates charged by credit cards.