By Don Vickers

Recently, I joined U.S. Rep. Peter Welch of Vermont in urging Congress to halt a planned hike in the interest rate on subsidized Stafford loans (federal education loans that go to students with the greatest financial need). Unless Congress acts, the rate will rise from 3.4 to 6.8 percent on July 1.

Congress’ decision will have huge implications for students throughout the country. If the rate is allowed to increase, a college education is going to become even more out of reach for students who need our help the most.

Take the case of a student who borrows $23,000 for college, the maximum available to undergrads using subsidized loans, and repays the loans during the customary 10 years:

• At 3.4 percent, the borrower would repay the principal plus $4,149 in interest, for a total of $27,149.
• At 6.8 percent, the borrower would repay the principal plus $8,746 in interest, more than twice the amount accruing at 3.4 percent, for a total of $31,746.

If the student extends his or her repayment period — for example, because of unemployment or underemployment — the interest mounts. Under a 20-year repayment plan, a 3.4 percent rate translates to $8,650 in interest and a 6.8 percent rate costs $19,021 in interest — almost as much as the original amount borrowed.

Apart from the subsidized loan discussion, but no less important, are interest rate challenges facing other federal loan customers:

• Undergrads with unsubsidized Stafford loans already pay 6.8 percent in interest. These “unsub” loans, in which interest accrues from the day the loan is made, are used by undergrads who do not qualify for a subsidy while attending school or who need more than they can receive in the subsidized program.
• Grad students with Stafford loans also pay 6.8 percent.
• Parents and grad students with PLUS loans, another type of federal loan available to supplement Stafford borrowing, pay from 7.9 to 8.5 percent in interest.

At his news conference, Rep. Welch was joined by several student and parent borrowers who, like VSAC, share his view that reasonable interest rates are vital to keeping higher education affordable. The same week, VSAC talked by phone with a father who was struggling to manage the federal PLUS loans he and his wife had taken out to help pay for two sons’ college educations.

It wasn’t so much the face value of the loans that had him concerned, but the interest rate. Given the high PLUS rate, the loans were costing the family $1,400 a month. Because no rate relief is in sight for this type of federal loan, the parent chose to pay off his PLUS loans by refinancing his home at about 3 percent interest. It frustrated him that he had to do this, but now the debt will cost him about a third of what he had been spending.

Ironically, the federal education loan programs were developed to provide students with access to low-cost financing and to enable parents to pay for their children’s education without putting their own homes and livelihoods at risk. The original goal was to provide rates and benefits that the private sector couldn’t match due to higher borrowing costs and underwriting restrictions.

So it is with sadness that we at VSAC hear from borrowers who feel forced to give up their federal loans for riskier forms of debt, or, in the worst case, to forego education altogether. Despite recent questions about the value of higher education, the depressed job market, the proper role for government in funding education, and whether students are borrowing responsibly, two things remain true.

Education beyond high school — not always a four-year degree, but some type of education or training — is still the best ticket out of poverty and toward a life of greater opportunity. And financial aid, whether in the form of grants, scholarships, or loans, will still be needed to help families make this important investment in the future. While we continue to debate the value of education and what more we can do to foster responsible borrowing, the federal government should not saddle students with unreasonable and unfair finance charges.

The third annual Parents, Educators, and Principals Conference will be held Tuesday, March 27, from 8 a.m. to 2:30 p.m. at Vermont Technical College in Randolph Center.

The conference provides an opportunity for parents and education professionals to learn how to improve family and community engagement in schools, thereby enhancing student success.

The day features two workshop sessions, each with seven topics to choose from; a keynote address by Joyce Epstein, a professor at Johns Hopkins University and the founder and director of the National Network of Partnership Schools; and a panel discussion on Burlington School District’s experience as a partnership school.

Sponsoring organizations are Vermont Student Assistance Corporation (VSAC) and its GEAR UP program, Vermont Principals’ Association, Vermont Family Network/Parent Information and Resource Center of Vermont (VFN/PIRC-VT), Vermont-NEA, Vermont Department of Education, and Voices for Vermont’s Children.

To register, visit www.vsac.org/ParentEducatorsPrincipalsConf by March 15. The fee, which includes lunch, is $50 per person or $200 per school team of four or more, including parents. Parents who need assistance with the fee may inquire about VSAC/GEAR UP or VFN/PIRC-VT scholarships by calling 1-800-800-4005.

In order to accommodate as many families as possible, VSAC hosts College Pathways in three locations on the following Saturdays:

·       March 17 at Saint Michael’s College in Colchester

·       March 24 at Castleton State College in Castleton

·       March 31 at Lyndon State College in Lyndonville

The program enables each student and parent to choose several workshop topics from nine available, and includes a free bag lunch. Among topics offered are writing a college application essay that stands out, strategies for taking SATs and ACTs, creating a college list that fits you, and demystifying financial aid.

The event begins with registration at 9 a.m. and concludes in the afternoon. Families are encouraged to register early, because workshops fill quickly. For more information or to register, visit www.vsac.org/CollegePathways.

Vermont Student Assistance Corporation (VSAC) spent many years providing education loans to Vermont students and parents through the Federal Family Education Loan Program (FFELP). We stopped making federal loans in July 2010 when the government switched to a system of “direct lending” to families through the colleges students attend.

One of the questions we received the most during our final years in FFELP was why federal loan interest rates had risen so high. Even though we no longer issue new federal loans, we still get that question. Many Vermonters assumed that direct lending would result in lower rates, but that was never part of the plan. Nor are there any rate relief proposals on the horizon.

The sad truth is that rates were, and are, high because the government makes substantial profit on the loans. For this academic year, the government borrowed money at rates ranging from about half of a percent to a little more than 2 percent. It then charged 3.4 percent to “subsidized” Stafford borrowers (undergrads with the greatest financial need), 6.8 percent to unsubsidized Stafford borrowers (other undergrads and grad students), and 7.9 percent to PLUS borrowers (undergrad parents and grad students). Next year, all Stafford borrowers, regardless of need, will pay 6.8 percent.

During much of VSAC’s tenure in FFELP, we were able to ease the burden of government-set rates by providing our borrowers with discounts, rebates, and fee waivers on their federal loans. We continue to discount pre-2010 federal loans that we still service. These benefits have saved our borrowers $154.5 million since 1995. In contrast, students who borrow through the direct loan program are offered only a minimal discount if they repay their loans using auto-debit.

The issue of interest rates has been completely lost in the hoopla over the administration’s recent proposal to offer federal borrowers two forms of loan relief. Unfortunately, the proposal skirts the real problem facing today’s students: graduating college with excessive debt and uncertain job prospects.

So what is being offered?

Students still in school will be eligible for an expanded, income-based loan repayment program that provides loan forgiveness after 20 years. This is wonderful, as long as you are able to qualify each year (meaning you spend all 20 years in low-wage professions). If your income rises, you not only lose eligibility for the program, but you are responsible for the substantial interest that built up while you made artificially low payments.

For students already out of college and repaying loans to lenders like VSAC, the proposal offers a quarter-percent incentive to transfer your loans to the government and another quarter percent for using auto-debit. However, these transferred loans will still cost upwards of 8 percent. More importantly, many VSAC borrowers who transfer loans will lose far more generous benefits than those the feds are offering.

During our years in FFELP, VSAC used a personalized approach to loan counseling. We advised students and parents on when to borrow, which loan types were most beneficial, how to minimize borrowing, and the pros and cons of consolidating loans once a student finished school. This was a labor-intensive exercise for VSAC, but enabled many of our borrowers to avoid unexpected pitfalls and expense.

In contrast, the administration wants to encourage as many borrowers as possible to transfer their loans to the government, regardless of each borrower’s unique situation. To do this, the government’s four national loan servicers would call every potentially eligible student to encourage him or her to come on board. So much for helping borrowers grasp the short- and long-term consequences of their loan decisions.

If the government is really interested in helping students, it should do three things: reduce interest rates on loans so that they more accurately reflect today’s low-interest environment; require loan servicers to provide real counseling, not just a sales pitch; and implement the vision of Vermont’s congressional delegation to make education more affordable by increasing grant aid and offering true loan forgiveness.

Students may owe Uncle Sam, but we owe them much more.

Don Vickers, a resident of Georgia, VT, is president and CEO of Vermont Student Assistance Corporation.

Contact: Irene Racz, VSAC director of public affairs, 802-542-2240

WINOOSKI — The Vermont Student Assistance Corporation (VSAC) has gone four for four on the federal grants it uses to help pay for career, college, and financial aid counseling services for low-income and other Vermonters.

Following a highly competitive application process that stretched for months, VSAC learned that all four of its federal outreach grants were renewed. Combined, the grants total $38 million:

·       Talent Search, part of the federal TRiO programs, was renewed for five years at $2.2 million. Talent Search serves middle school and high school students, their families, and their schools. VSAC has administered this program since its creation in 1969.

·       Educational Opportunity Center (EOC), also a TRiO program, was renewed for five years at $2.3 million. EOC, which VSAC has offered since its creation in 1991, serves adults seeking to further their education, change careers, and transition from public assistance.

·       GEAR UP, established in 1994 through legislation sponsored by former U.S. Senator Jim Jeffords of Vermont, was renewed for seven years at $32 million. Like Talent Search, GEAR UP serves a middle school and high school population, but through a different delivery model and with the promise of college scholarships for students meeting eligibility criteria.

·       The College Access Challenge Grant, VSAC’s newest federal funding stream, was renewed for two years at $1.5 million. This grant supports VSAC’s broad-based efforts to increase college aspiration, such as the award-winning Start Where You Are program for teens and the career planning professionals who guide them.

“We know these programs work, because students who participate in them pursue education at higher rates than their peer groups do,” said Don Vickers, VSAC president and CEO. “Unfortunately, there’s a tremendous need for these services in every part of the country, and only so much federal money to go around. Thanks to the support of Vermont’s congressional delegation, we did well in the application process and will be able to continue our important counseling work.”

By Don Vickers

The school year has begun, and Vermont Student Assistance Corporation (VSAC) is once again available to provide statewide services to families, new or continuing college students, and adult learners.

Saving for College

September is College Savings Month — an ideal time for parents, grandparents, or others to open an account in the Vermont Higher Education Investment Plan (VHEIP). VSAC administers this “529” college savings plan on behalf of the state of Vermont.

VHEIP offers six investment options, affordable minimum contributions, and state and federal tax benefits. Vermont taxpayers contributing to VHEIP by the end of December can apply for a state income tax credit when filing their 2011 returns.

Already a low-fee plan compared with other 529s throughout the country, VHEIP reduced fees on most options two years ago. Fees on the most popular investment option dropped further when overall VHEIP assets hit $150 million earlier this year.

Career and College Planning

VSAC offers college planning and career exploration information through online resources, a lending library, print publications, and personal assistance.

Families can consult our newly updated planning guide for grades 7–12, attend free workshops at schools throughout the state, and visit www.vsacroadmaps.org to access timely tips and sign up for e-mail reminders. A separate handbook is available for adults interested in exploring careers and seeking education or training.

Our popular College Pathways program, designed for high school sophomores, juniors, and parents but open to any prospective student, will be held at three locations in 2012: March 17 at Saint Michael’s College, March 24 at Castleton State College, and March 31 at Lyndon State College.

Our roving Start Where You Are “opportunisto” will continue to visit schools and teen centers throughout the state to encourage all Vermonters — not just those who consider themselves “college material” — to consider education or training beyond high school. Our award-winning companion Web site (www.startwhereyouarevt.org) has interactive features for teens and resources for professionals who assist students with career planning.

In addition, we invite schools, libraries, and other organizations to embed our “widget” on their Web sites, providing a direct link to frequently updated information from our site.

Funding for Education or Training

Although VSAC no longer offers new federal education loans, we continue to administer the state grant program for eligible students pursuing full-time, part-time, or non-degree study; about 150 scholarships available to Vermonters; and non-federal student loans. We also service an existing loan portfolio worth $1.9 billion.

VSAC has awarded all scholarships for the 2011–12 college year. However, students still in need of grant or loan assistance — or contemplating spring enrollment, rolling admissions schools, or training programs — can visit our Web site to complete necessary applications.

Students and families seeking funding for the 2012–13 college year can consult our newly updated paying for college guide and attend one of our presentations, held from late September through early January at high schools throughout Vermont. For dates and times, check our online calendar at www.vsac.org/events. A condensed version of our paying for college presentation will also be available at www.vsacworkshopsonline.org.

Our revised scholarships booklet for Vermonters will be available online in October, and we encourage students to begin researching scholarships at that time. Families who want a print version can contact VSAC in early November.

After January 1, families of students attending college in 2012–13 should fill out the Free Application for Federal Student Aid (FAFSA) — required for anyone who wants to be considered for federal grants, loans, and work-study — and the Vermont grant application. VSAC helps families complete these applications at “forms nights” at many high schools.

Although VSAC has become a leaner organization in the wake of changes in the federal education loan programs, we remain Vermonters’ comprehensive source of education and career planning assistance. We are pleased to continue serving the mission the state established for us in 1965: to help Vermonters access the information and financing they need to pursue education or training beyond high school.

Don Vickers, a resident of Georgia, VT, is the president and CEO of the Vermont Student Assistance Corporation.

In addition, due to President Obama’s disaster declaration, VSAC may be able to provide loan relief to some of its borrowers who have defaulted on their federal loans. To be eligible, borrowers must live in the counties designated by the president as eligible for individual assistance.

A forbearance allows a borrower to temporarily stop payments or pay a reduced amount. The borrower is responsible for the interest that accrues on the loan during the forbearance period.

VSAC stopped making new federal loans on July 1, 2010, when the government switched to “direct lending.” VSAC continues to service federal loans made prior to the switch as well as its existing private loan portfolio.

Vermonters affected by the storm who have federal loans with servicers other than VSAC should contact those servicers to explore forbearance eligibility.

For more information, call 800-798-8722.

VSAC — the Vermont Student Assistance Corporation — received word late last week that its federal Talent Search grant, set to expire in 2012, will be renewed for five more years. VSAC receives $443,887 a year for the program, and matches the federal dollars with its own resources.

Talent Search is part of a group of federal programs known as TRiO that help low-income students prepare for and succeed in college. VSAC has administered Talent Search in Vermont since 1969. The program identifies students in grades 6 through 12 who are motivated to continue their education but need help reaching their goals.

VSAC offers a second TRiO program, known as Educational Opportunity Center (EOC), for low-income adult learners. VSAC also applied for a new EOC grant, but hasn’t received a response yet.

Two other programs VSAC offers that assist middle and high school students — GEAR UP and the College Access Challenge Grant — are also up for renewal.

WINOOSKI — The Vermont Student Assistance Corporation (VSAC) is again offering a fixed-rate private education loan for students who need to supplement their federal borrowing.

The Vermont Advantage loan for 2011–12 offers three repayment options, each with a different interest rate: 7.5 percent for immediate repayment, 7.9 percent for interest-only payments; and 8.5 percent for deferred repayment. Origination fees range from zero to 5 percent, depending on the credit rating of the borrower’s cosigner.

Students eligible to borrow from VSAC are Vermont residents attending college in or out of state and nonresidents borrowing for attendance at a Vermont school.

More details and an online application are available at vsac.org/vermontadvantageloan.