Foreign Student Recruiters Come Under Fire

As more and more international students cross our nation’s borders to pursue a degree at our universities, the motives of foreign student recruiters are being questioned.
 
Higher education recruiters usually come in the form of an agency or company that is designed specifically for locating students and persuading them to attend a particular institution. Once that student relocates, acquires student loans, and pays the school its costs for tuition, the recruiters get a portion of the check—much like a finder’s fee.
 
But the problem some are having with recruiting agencies is that they’re sending unqualified individuals back to the States, who, in some cases, cannot even speak English. Then they take on large amounts of debt through the use of student loans and find themselves unable to progress in the programs. This in turn leads the student to dropping out or to forcing them to take out more student loans so they can attend for longer periods of time, hoping they can correct their downward trajectory before the institution itself gives them the boot.
 
Peggy Blumenthal, an executive vice president at the non-profit institute of International Education, explained to Fox News that recruiting agents “have a very large incentive to deliver a student who may not be the best fit.”
 
Recruiters typically get cut a check on a head by head basis, so they have no incentive to keep the student’s best interest in mind. Rather, they focus on numbers, as the more students they send back to the States, the higher the chance they have to get a check.
 
But some universities who use the services of foreign student recruiters come to their support.
 
According to Fox News, David Meinert, associate dean of Missouri State University’s business school, says university leaders “can focus on developing and delivering curriculum instead of going out and recruiting students and developing individual sponsors.”
 
Meinert asserts that recruiters are “able to deliver as an intermediary something that we [the university] would have trouble delivering.”
 
Coinciding with Meinert’s claim, many smaller or local colleges simply don’t have the funding to promote their academics to the world. But with the help of foreign recruiting agencies, they can still get the opportunity to teach foreigners.
 
But as with all forms of business, some bad apples ruin the bunch. “There are very good recruiters out there who are very solid and do all the right things,” explained George Wolf, vice president of enrollment management at Westminister College, to Fox News. “And then there are recruiters out there just to make a buck.”
 
So long as foreign students come to America and receive a good education, the student loans they take out can be justified and recruits can carry on with their business. The problem arises when a foreigner takes on massive amounts of student loan debt, is unable to obtain an education, and if forced back to their country in worse off shape than they arrived in.


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Lawyer's Student Loan Repayment Program Hurting

For lawyers in Washington D.C., a program called the Loan Repayment Assistance Program (LRAP) has always served as an aid to help pay off student loan debt. But for the first time since its creation, LRAP is unable to pay off eligible lawyer’s monthly loan debt.
 
LRAP provides aid in the form of payment towards monthly student loan bills for lawyers who work to alleviate poverty in underprivileged areas. When LRAP began in 2007, the average amount of student loan debt their eligible applicant’s had was $92,000. Today, the average amount is $119,000.
 
“Law school has gotten more expensive and we’re seeing it,” said Katia Garret, executive director of the D.C. Bar Foundation, to the LA Times. “While that debt load has increased, the average salary of our applicants in each of those years was the same.”
 
LRAP acquires money by appealing for donations from law firms and corporate legal departments. That money is then turned around to help alleviate the ever-rising cost of law school to those lawyers who wish to serve the public and earn a wage that would make it hard to pay off their student loans.
 
The annual wages to qualify for LRAP cannot exceed $65,000, and the average rests $49,000.
 
That annual income is a surprising pay cut from what these lawyers could potentially make if they went with a private law firm. According to Garret, “You can get six figures as first-year associate at some big law firms,” reported the LA Times.
 
A few years ago, Lauren Onkeles-Klein, an attorney at the Children’s Law Center, received help from LRAP. “A lot of nonprofits can’t afford to pay competitive salaries,” Onkeles-Klein told the LA Times. “LRAP was a gamechanger for me to be able to stay here for so long, be able to do the work I love, and not have to look elsewhere to do work I don’t want to be doing because that work pays more.”


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Secretary of Education Offers Student Loan Encouragement

Arne Duncan, the U.S. Secretary of Education, gave a speech at the Fayetteville State University Winter Commencement about the importance of obtaining a college education in today’s economy and job market.
 
Using Michelle Obama as an example, he explained how she had people telling her “not to reach too high” due of the odds stacked against her: poor test scores, her gender, and because she was from the south side of Chicago.
 
But Duncan explained that despite the comments from those trying to persuade her otherwise, the First Lady refused to let their negativity impact her pursuit for obtaining an education and reaching for her dreams.
 
He then tackled the subject of student loan costs and the public’s negative outlook on financing a college education.
 
“Remember that, in the long run, a college degree is still the best investment you can make in your future,” Duncan said. “On average, students with bachelor degrees are projected to earn about one million dollars more over their lifetime than student with only a high school diploma.”
 
He offered encouraging news about helping students manage their student loan debt by explaining the Obama administration’s Pay as You Earn plan. “Our Pay as You Earn proposal would give 1.6 million students the ability to cap their loan payments at 10 percent of their discretionary income beginning later next year,” he told the student listeners.
 
Then as if sensing the fears many have about the future of America and its working force, he explained the goals and thought process of the Department of Education by saying, “We want people to be able to follow their heart and passion—and not just chase a big paycheck because they have to pay back loans. America can’t afford to lose that talent. Please think about public service, think about teaching, and think about the impact you can have in molding the lives of the next generation.”
 
To further push students into the public service sector, Duncan told the listeners about the 10 year student loan forgiveness program available to those employed as a teacher.

His speech ended with a word directly opposite from those the First Lady received when she was young: one of encouragement, as he expressed his and the college staff’s sense of pride seeing each of the students before him.


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FICO Says Student Loans May Weigh Economy Down

A survey commissioned by FICO expresses concern over the growing instability of the student loan market, and predicts future student loan delinquencies to weight the U.S. economy down.
 
Now that student loan debt has overtaken credit card debt with a total $750 billion outstanding, FICO’s survey revealed 67 percent of respondents expect delinquencies to rise.
 
“Evidence is mounting that student loans could be the next trouble spot for lenders,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs, in a FICO news release. “A significant rise in defaults on student loans would impact as well as taxpayers, who could be facing big losses due to these defaults. Our survey results underscore the ongoing challenges that millions of American households face as they true to cope with their debt during these uncertain times.”
 
Respondents were also asked about the affect global economies may cause on the U.S. economic recovery. When asked about what they believe could cause a double dip recession for the U.S., 38.8 percent of respondents said the Eurozone debt crisis was the most likely trigger.
 
The survey also revealed a stunning 65 percent of respondents feel the global influence of Chinese consumers would overtake U.S. consumers within 5 to 10 years.
 
“Whether it’s debt trouble in Europe or economic growth in Asia, there are significant implications for the near-term and long-term strength and health of the U.S. economy,” said Jennings. “There are risks, challenges and opportunities all around us. To compete in this increasingly complex global environment, we’re seeing more U.S. companies embrace innovative analytic technologies to help them understand and navigate the global playing field.”
 
FICO also reported the outlook on other lines of credit and financing. 47 percent believe mortgage delinquencies will rise in the next year, while 45 percent fear credit card delinquencies will rise. Auto loans were seen as the least volatile by FICO’s survey group, as only 33 percent expect those to rise. 


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Illinois Attorney General to Sue Westwood College

The Illinois attorney general, Lisa Madigan, has filed suit against Westwood College. The for-profit higher education institution, which has four Chicago-area campuses, has drawn the attorney general’s ire as a result of misleading students and offering “false promises.”
 
With tuition for a criminal justice degree at Westwood costing $71,610 compared to $12,672 at the College of DuPage, Westwood students took out student loans costing five times as much as they would have at local community colleges. Students claim they were pursued very aggressively by Westwood recruiters, often getting multiple calls a day until the student agreed to come in for a tour. Additionally, there are claims that the schools misrepresented its accreditation, job-placement rates, and job opportunities.
 
“Many Illinois students who tried to better themselves through a criminal justice education at Westwood now find themselves saddled with more than $50,000 in student loans, and no way to pursue a law enforcement job because their Westwood education was not regionally accredited and therefore was not recognized by other regionally accredited colleges or lawn enforcement employers, such as the Chicago Police Department, the Illinois State Police and many suburban police departments,” said the attorney general’s office in a summary of the suit, according to the Chicago Tribune.
 
Fifteen students have come together to file this complaint with the attorney general. Several of these students made an appearance at a public hearing with the attorney general where they described their—each claiming to have upwards of $60,000 in student loans remaining, and a degree from an unaccredited institution that is not being accepted as valid with any employers.
 
“We continue to cooperate with the Illinois [attorney general] to resolve any outstanding issues,” Westwood responded in a statement. “We are proud of our legacy of helping students obtain their educational goals. We have hundreds of graduates working in the private and public criminal justice field throughout the state of Illinois.”
 
The lawsuit is seeking a complete reimbursement from Westwood to Illinois students who participated in their criminal justice program. The attorney general is also seeking to revoke, forfeit or suspend the criminal justice program and assess a civic penalty of $50,000 per violation of the state’s Consumer Fraud Act, reports the Chicago Tribune. 
 


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Student Loan Rates May Rise This Summer

Unless Congress acts very soon, the interest rates assigned to federal student loans are scheduled to double this summer.
 
Due to a 2007 law that enacted interest rate reductions for undergraduate subsidized Stafford loans, government-backed student financing is currently offered at an interest rate of 3.4 percent. But that law is scheduled to expire this year, which will result in the interest rate doubling, propelling them to a level that hasn’t been seen since 2007: a discouraging 6.8 percent.
 
In Tuesday’s presidential State of the Union address, President Obama tried to encourage lawmakers to consider and act on this issue. But, as of now, Congress has yet to acknowledge it, and may be apprehensive to extend the rate reduction since passing such a law again would cost the country $5.6 billion a year, according Mark Kantrowitz of FinAid.Org in a CNN Money article.
 
In fact, in the recent past Congress has already eliminated federally subsidized student loans for graduate students, and cut $8 billion out of the Pell Grant program that helped low-income students fund their education.
 
“[Since] Congress just passed legislation cutting student financial aid funding, it’s unlikely they’ll pass legislation increasing student aid funding,” said Kantrowitz, according to CNN Money.
 
Setting aside Congress’s recent voting record pertaining to the student loan industry, another factor that may be pushing their votes away is the fact that President’s Obama’s additional proposals included with this rate-reducing law would total to at least $10 billion a year.
 
But in the wake of student loan protests, letting the rate hike occur could prove to be detrimental to the country’s morale.
 
“In this tough economy, people are concerned about the cost of college and the burden of debt to follow,” Lauren Asher, president of the Project on Student Debt, told CNN Money.
 
Two-thirds of students graduated in 2010 with an average student loan debt of $25,000. If the rate hike occurs, students can expect to pay an additional $5,000 over a 10 year period, said Ascher.


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Student Loan Debt Prevents Obtaining Home Loans

As the nation’s student loan debt quickly approaches $1 trillion, it’s no wonder why the low interest rates on home mortgages aren’t providing the expected boost in home sales that experts initially predicted.
 
Roshell Schenck, a Ph.D graduate with a degree in pharmacy currently earns an annual salary of six-digits, but can’t qualify for a home loan to provide shelter for her daughter and herself, reported Bloomberg. Despite the fact that she makes $125,000 a year, she has more than $110,000 in student loan debt, which is putting a real strain on her income and potential borrowing opportunities.
 
“I’d love to buy and can afford to buy,” Schenck told Bloomberg.
 
Willing and able borrowers seem to be a rarity these days, but it seems that even if borrowers have the desire and the funds to purchase a house, banks want little to do with borrowers if they have outstanding student loans.
 
Since loans used for education are being viewed with greater scrutiny than other types of outstanding financing, Schenck is unable to get approved. “It’s almost impossible for me to get a loan,” she explained. “My debt is crushing my chances of purchasing a home.”
 
The Trillion Dollar Mark
 
Because the demographic that makes up most of the “first-time” homebuyers tends to be of the younger generation, they often carry student loan payments. Graduates or not, this higher education financing has found commonplace amongst the nation’s new adults, but as banks are seeing defaults rise, they’re very wary about issuing mortgages to those indebted with these loans.
 
“Students coming out of college are burdened with more debt than traditionally they have been, and they are also coming into an economy that is underperforming previous recoveries,” said Rick Palacios, a senior analyst at John Burns Real Estate Consulting LLC in Irvine, CA, to Bloomberg. “These things pile on each other and tell us it’s not going to help the housing recovery right now.”
 
Particularly as the $1 trillion mark comes closer and closer, and experts are predicting a student loan bubble being formed.
 
“Just as the housing bubble created a mortgage debt overhang that absorbs the income of consumers and rtenders them unable to engage in consumer spending that sustains the economy, so too are student loans beginning to have the same effect, which will be a drag on the economy for the foreseeable future,” said John Rao, vice president of the National Association of Consumer Bankruptcy Attorneys, in a Bloomberg article.
 
Driving Away the Fix
 
But cautious or not, driving away first-time homebuyers from the mortgage market is crippling the housing world.
 
“Potential first-time homebuyers have been disproportionately affected by the very tight conditions in mortgage markets,” said Ben Bernanke at a homebuilders conference last week, according to Bloomberg. “First-time homebuyers are typically an important source of incremental housing demand, so their smaller presence in the market affects house prices and construction quite broadly.”
 
Despite the fact that current student loan borrowers are being turned away from the mortgage market, some remain optimistic.
 
“The dream feels like it’s farther out of reach than I ever thought it would be,” said Shenck. “[But still,] I haven’t given up hope of one day owning my own home.”


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New Data Says Student Loan Default Higher Than Thought

The student loan default rate may be much higher than studies have shown, said the Federal Reserve Bank of New York on Monday.

The Fed originally reported the student loan default rate right around 14.4 percent. That number was derived from the 5.4 million defaulters from the 37 million current students and graduates who are currently carrying college loans.

But researchers are saying that percentage is misleading.

Traditionally the default rate has been determined by considering the status of all student loan carriers. But that method lumps those who are not required to make any payments in with those who are “current” on their payments.

Current students and those who within a six-month grace period upon graduating have their federal student loans deferred, and are exempt from making any payments. The New York Fed found that when those not currently required to make payments on their student loans are omitted from the “non-delinquent” bracket and removed from the calculations all together, the default rate jumps to 27 percent.

That means more than one out of every four students cannot afford their student loan payments.

If federally-guaranteed student loans are taken out of the equation all together, the default rate hovers around a relatively modest 5.1 percent, but that’s double what it was just five years ago.

Moody’s Investors Service believes that rate will remain high so long as there is high unemployment.

According to Equifax, the average student borrower owes $23,300. But the NY Fed revealed that 167,000 people carry a student loan debt of more than $200,000.

“Given that student loans are an indispensible tool for educational advancement, this form of debt will remain a critical policy focus for generations to come,” said the NY Fed in their report.

Indeed, as this form of borrowing swells at an unprecedented rate, we very well may see the upcoming presidential elections filled with talk about this growing bubble.


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CFPB Wants to Hear Student Loan Complaints

The Consumer Protection Bureau (CFPB) opened their website up to receive borrowers’ complaints on student loans.

The CFPB recognizes that there are problems with the student loan industry. While federal student loans offer many opportunities to alleviate high monthly payments, financing front private institutions usually do not offer options similar in nature.

The CFPB hopes the public’s personal stories and honest complaints will shed light on what needs to be corrected, particularly when it comes to private student loans, which often escape government oversight and regulation.

Any complaint filed with the CFPB will be forwarded to the submitter’s lenders and the CFPB has claimed they will work hand-in-hand with those lenders to get a response. While the new protection bureau wants consumers to know that they cannot make debt disappear, they hope this complain process will, at the very least, bring attention to students’ struggles.

Given the popularity of student loan complaint websites already in existence, the government agency should have no shortage of content to work with. Already the CFPB’s page is filled with comments from angry student loan borrowers who are struggling to find help.

To file a complaint with the CFPB, submit a complaint on their website, or call their toll-free number at 1-855-411-CFPB.

While students wait for action and response, they can visit some of the CFPB’s online tools meant for students to use in order to manage their debt. The Student Debt Repayment Assistant has been created specifically with the intention of easing borrower’s payment problems. They have also launched a Know Before You Owe: student loans page, which contains a library of information that both prospective and current students should find helpful.


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Countdown to Higher Student Loan Interest Rates Continues

Unless Congress acts soon, students will see the interest rate on federally subsidized Stafford loans increase from 3.4 percent to 6.8 percent. This doubling of student loan interest rates will be the result of legislation setting an interest rate cap expiring come July of this year.

If the interest rate of student loans doubles, those paying for their college career with federal financing will see a massive uptick in their monthly bills. Worry over this surge in price has prompted more than 130,000 letters to be mailed to Congress, pleading the government to stop the interest rate legislation from expiring.

“I will be put back into buying a house and saving up for my expenses later on in life, and life as we know, is very unexpected. Adding that variable [doubled interest rates] definitely limits my ability to be successful,” said Tyler Dowden, an 18-year-old freshman at Northern Arizona University, in a press conference.

According to the Michigan-based news source M-Live, Jennifer Mishory, a director for a non-profit aimed at representing people between the ages of 18 and 34, says the possibility of a rate hike is a huge problem. She claims that many students are already struggling to pay back their student loans, and this rate hike will only hinder their efforts further.

But despite student’s cries, house representatives are not facing an easy decision.

Rep. John Kline, R-Minn., chairman of the House Education and the Workforce Committee, told The Associated Press the interest rate increase is the “result of a ticking time bomb set by Democrats five years ago.” Referencing legislation passed in 2007 that artificially lowered rates for federal student loans to 3.4 percent, he warns that somebody is going to have to pay the bill.

“We must either allow interest rates to rise on student loans, or stick taxpayers with another multi-billion dollar bill,” explained Jennifer Allen, a spokeswoman for Kline, in an email to The AP.

The cost for keeping rates so low is right around $6 billion every year.

Whoever receives the brunt of this interest rate bill is not going to be happy. If the rate reduction continues, the general public, many of whom are suffering from a slumped economy, would be forced to shoulder yet another financial blow. If it subsides, the nation’s students will suffer through more expensive student loan bills.


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