Your Questions About Direct Loan Servicing

Nagesh answers:

USC, as well as most other private colleges, is expensive for several reasons.

One of them is that USC (and it’s peer universities) spends more than most public colleges on facilities and educational resources. As a result, students at USC tend to have less difficulty registering for classes and participating in smaller classes. A look at the common data set can demonstrate this; 5.3% of USC classes have more than 100 students, while 11.5% of UCLA’s classes have more than 100 students. As a result, you can expect to get more faculty attention at a private university than you would at a public university. That said, these are, naturally, generalizations; there are many private schools with large classes and many public colleges with relatively small classes (the service academies and UC Berkeley are good examples of this).

The second reason is that public colleges are subsidized by the government. The effect on the cost of college is fairly obvious. Government funds cover many of the costs that, at private universities, are covered almost exclusively by a combination of alumni donations and tuition payments. As such, public colleges can charge significantly less to in-state students.

Lastly, USC and the majority of prestigious private colleges (NYU is one of the only exceptions, to my knowledge) are “full-need”. This means that students who cannot be expected to afford the cost of attendance receive grants to cover all of the costs that the student cannot cover themselves (though some, USC included, package a small loan as well). As a result of this policy, the sticker price must be raised in order to raise enough money to cover the grants for middle class and low-income students. If three fourths of the students are not paying full tuition, those wealthy enough to be able to do so will naturally need to pay more, which further drives up the sticker price.

To answer your second question, though the previous paragraph has already largely answered it, yes, you certainly can afford USC. In fact, as a low-income student who was accepted to USC last spring (although I chose to attend elsewhere), I received financial aid that covered all of the cost of tuition and some of the cost of room and board. The financial aid package ended up asking my family to cover $3,000 a year and included a loan that was around $6,000 per year. As such, you absolutely CAN afford USC so long as you are sure to apply for financial aid.

Having said all of this, you shouldn’t attend a school due to its prestige. There are many reasons both to attend USC and not to attend it (the cost, as I’ve showed is not among them). Prestige should not be a significant factor; as a student at Princeton, I can attest to the fact that my school’s prestige does not affect my day-to-day life nearly as much as one would assume. It is true that you would have an easier time finding a job, but the effect is heavily exaggerated. What is more important is your major and work experience. That said, if you’re interested in studying business to go into finance, the prestige absolutely can save you a large amount of effort you otherwise might have to spend networking.

Nagesh answers:

In my experience, there is no such thing as a free lunch. When Bank of America allows you to Keep the Change, they are getting it back from you somewhere else (higher interest rates, higher fees, etc.)

I would be very cautious about signing up for a program like this because it sounds like someone trying to make a buck by victimizing students somewhere else. The raffle makes it seem even more like a scam. I don’t think I would take the risk for the sake of a couple of dollars off my account. It also doesn’t seem like a practical idea since it would be pretty difficult for a private business to get access to students’ accounts to make the deposits–the government is pretty tough about security and privacy.

Nagesh answers:

This page has some information on ways you can get part of your loan cancelled. Mostly for teachers or other “public servant” type employees, but it’s worth a look.
Http://studentaid.ed.gov/PORTALSWebApp/students/english/repaying.jsp

I have not heard about anything in the bailout plan, at least not yet.

Wait, I found something. On that page, there is info on the income-based repayment plan, and says it goes into effect July 1, 2009, so it might be what you heard about.

Income-Based Repayment (IBR): This new repayment option (the income-sensitive repayment plan in the FFEL program and the income-contingent repayment plan in the Direct Loan program will continue to be available to borrowers) is available as of July 1, 2009, to all FFEL and Direct Loan borrowers who have a partial financial hardship, except for FFEL or Direct Loan parent PLUS Loan borrowers or a FFEL or Direct Loan Consolidation Loan borrowers, who repaid parent PLUS loans through the Consolidation Loan. Under this plan, your required monthly payment amount will be based on your income during any period when you have a partial financial hardship. Your monthly payment amount may be adjusted annually. The maximum repayment period under this plan may exceed 10 years. If you repay under this plan and meet certain other requirements over a specified period of time, you may qualify for cancellation of any outstanding balance on your loans. Contact the Direct Loan Servicing Center (for Direct Loans) or your FFEL lender (for FFEL Program loans) for more information about the Income-Based Repayment Plan.

Nagesh answers:

The best thing for you to do is to call Wells Fargo directly. They should have a contact number on their website: https://www.wellsfargo.com/help/phone_dir
(you should scroll down to the section that has “student loans” on it and call them).

You might be first directed to an automated voice message that will ask you to press a bunch of numbers before being able to talk to an actual person who is a customer service representative. Be patient because sometimes they get a lot of calls. They are usuall friendly, and will be willing to help your situation out.

Nagesh answers:

I am assuming these are federal student loans. Federal student loans (stafford, plus, etc) have to be serviced in accordance of what he US Dept of Ed says. This is what consolidastion does regardless of what company:

1. Locks in the current interest rate you have (rounded to the next highest 1/8%). If you have mult interest rates, you will get a weighted average.

Since you receive a lower interest rate during in school or in grace, it is wise to consolidate during your grace period, BUT at the end of your grace period. Since consolidations take 30-45 days to go through, it is wise to time your consol smartly. Apply for your consolidation 45 days before your first payment due date. This will ensure that you lock in your current “in grace” rate AND keep your full 6 month grace period.

NOW – here’s what you getting in the mail – SPAM

They can offer you a reduction for auto debit from your checking account (.25% – most student loan comanies do this anyways- consolidation or not)

They can offer a discount for on time payments.

The US Dept of Ed uses ONE company to service their loans. That company is William D Ford, The Direct Loan Program. Now YOU can choose to go through someone else, but you may face your loan being sold left and right – an how can you make on time paymwnts with that??

I worked for Direct Loans for 7 years. We are scrutized closely by the federal government. They made sure we serviced the loans correctly and fairly.

Whomever you choose, I would ask a million questions, read everything they give and remember that once you’ve consolidated, you cannot re-consolidate and you are locked in.

Direct Loans ph # 1-800-848-0979