FAP634: Sallie Mae Deal Falls Apart, Mail Bag, Rich Palmer

September 27, 2007 from admin

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Student Financial Aid News
+ From the Chronicle of Higher Education and virtually every other business wire: A $25-billion takeover of Sallie Mae that was announced in April was called off on Wednesday, the victim of a new law that will cut federal subsidies to student-loan providers.
+ President Bush is planing to sign the law, the College Cost Reduction and Access Act of 2007 (HR 2669), today. Among other things, the law will cut subsidies to for-profit lenders by 0.55 percent (The Chronicle, September 10). It is the second cut in federal subsidies to student lenders in the last two years.
+ The buyers said in a written statement on Wednesday that “the conditions to closing under the merger agreement, if the closing were to occur today, would not be satisfied as a result of changes in the legislative and economic environment.”
+ “We have told representatives of the Sallie Mae Board,” it continued, “that we are open to discussing a revision of the transaction that reflects this new environment.”
+ The April purchase agreement included a penalty of $900-million if either side pulled out of the deal. Sallie Mae officials did not return phone messages or respond to e-mail queries on Wednesday asking if they would pursue collecting the penalty.
+ SLM Corporation, the parent company of Sallie Mae, had warned in previous filings with the U.S. Securities and Exchange Commission that if HR 2669 was passed, it would hurt the lender’s profitability. In its announcement on Wednesday, Sallie Mae put numbers to those statements. The changes in the law will reduce “core-earnings net income between 1.8 percent and 2.1 percent annually for the next five years,” it said.
+ What does this mean for you? If you have Sallie Mae student loans, chances are that Sallie Mae will need to find ways to increase profitability of its loan portfolio - as will everyone in the student loan industry - in order to make mega-deals like this go through
+ Rates and fees for federal student loans are set by legislation, so lenders can make up the difference in places like late fees, penalties, removal of borrower benefits, shortening of the payment grace window, collections fees, etc.
+ The downside is that the new legislation and the breakup of the mega-merger incentivizes lenders to encourage late payments and defaults by students - just basic economics
+ It’s more important than ever to make your student loan payments exactly on time
+ Consider student loan consolidation if you need to reduce your monthly payments

Scholarship Update
+ The 2007 Blogging Scholarship Award
+ Application Deadline: October 6, 2007
* Student blog must contain unique and interesting information (no spam bloggers)
* Student blogger must maintain their own individual blog or blog on a community blog
* Student blogger must currently attending full-time in post-secondary education in the United States
* Student blogger must maintain a 3.0 GPA
* Student blogger must be U.S. citizen or permanent resident
+ Students with the drive, devotion, and passion, to put their individual voice into a blog satisfy many of the mainstream scholarship criteria attached to other more traditional awards, including creativity and imagination, motivation and passion, and technical savvy.
+ Details at our free college scholarship search site

Mail Bag
+ Stephen wrote in: I need a help with scholarship and grant to support my 2 children into private school, 9yrs and 11 yrs. Please and thanks
+ Check out our scholarship search secrets e-book
+ Brad writes in: As parents, our EFC far-exceeds the annual cost of our daughter’s education. We want her to be responsible for some of her education cost, but she doesn’t qualify for any grants or federal aid. Instead, we were offered a PLUS loan. Unless she takes out a private loan, are we out of luck on lower-interest financial aid?
+ Should have been offered an unsubsidized Stafford loan
+ Brad also writes in: A few weeks ago, you had Dr. Paul Wrubel on (which was an excellent interview by the way). He mentioned that for each child you have attending college at the same time, you could save a year’s worth of college. Did I hear that right? Was he talking about time or money?
+ Money - two kids in school at the same time can drastically change EFC calculations

Podsafe Music
+ Rich Palmer, Future Retrospect

Reminders
+ Add the show to your iTunes by visiting http://www.FinancialAidPodcast.com/itunes/
+ Register for PodCamp Boston for free
+ Private student loans available at any time - visit AlternativeStudentLoan.com
+ Stafford federal student loans at StaffordLoan.com
+ Student loan consolidation at StudentLoanConsolidator.com
+ FAFSA form tutorials and free help at FAFSAonline.com
+ Financial Aid Podcast Show Notes at FinancialAidPodcast.com.
+ The Financial Aid Podcast is a publication of the Student Loan Network.