On Wednesday, under the College Cost Reduction and Access Act of 2007, the repayment of college loans will become a whole lot more manageable for lower income wage earners.

New Options

The new Federal Student Loan Forgiveness Law is set to help student repayment in two significant ways:

• Lowering the monthly student loan payment on federal student loans (Income Based Repayment or IBR); and

• Canceling remaining loan debt after 10 years for those who have entered public service (Loan Forgiveness for Public Service).

Income Based Repayment (IBR)

Income based repayment (IBR) offers enormous potential reductions in the monthly payments for high debt/low income borrowers. Designed for those with “partial financial hardship,” IBR limits annual educational debt payments to 15% of a borrower’s discretionary income. For the purposes of the law, discretionary income is defined as adjusted gross income minus 150% of the poverty level for the borrower’s family size.

Under the IBR plan, the loans eligible for consideration include: all Federal Direct Loans (FDL) and federally guaranteed loans (FFEL) including subsidized and unsubsidized Federal Stafford loans; Federal Grad PLUS loans (but not Parent PLUS loans); and Federal Direct Consolidation loans. Federal Perkins Loans are only eligible when part of a Federal Direct Consolidation Loan.

The Detroit Free Press offers the following as an example of the potential savings:

Take a college grad who has $40,000 in federal student loans and an adjusted gross income of $30,000 each year.

If we use this example, the grad would pay $171.94 a month using the new plan — compared with $460.32 with a standard 10-year repayment plan or $277.63 a month for an extended 25-year repayment plan.

As a person receives annual salary increases, the monthly payment would rise only according to the percentage of salary increase. In the case of a married couple, each would be eligible for the program and the eligibility would be dependent on each individual’s situation, not the combined income of the two individuals.

The new IBR option goes into effect July 1, 2009. Members of the Class of 2009 become eligible within two months of graduation.

Loan Forgiveness for Public Service Employees

In addition to repayment reduction under the law, students entering public service are also eligible for loan forgiveness. Upon entering full-time public service, once a borrower makes 120 qualifying loan payments on a Federal Direct loan (including Federal Direct Consolidation loans), the unpaid balance remaining including the accumulated interest on the loan is forgiven. The worker must remain in public service for the entire ten year period and the 120 payments timeframe but there is no limit to the amount to be forgiven.

The time period for public service is retroactive to October 1, 2007 meaning those borrowers who have already elected public service may begin counting the ten year period at that point. Some restrictions occur for those who had already consolidated their loans and those restrictions may move the eligible period forward to July 1, 2008.

In the case of loan forgiveness, only Federal Direct loans (including Federal Direct Consolidation loans) are eligible. Payments made on federal loans in the Guaranteed (or FFEL) program are not eligible for the loan forgiveness aspect (only eligible for IBR).

A Major Step Forward

The new law represents an enormous positive development for those students who have accumulated significant federal college debt yet have limited income. To learn more about the program and examine the calculation process visit:

• Georgetown Professor Phil Shrag’s law review article detailing IBR and Loan Forgiveness for Public Service Employees (pdf).
• The IBR monthly repayment calculator.
• Federal direct consolidation loan information and applications.

Our hat goes off to Sam Lee, a graduate student, and to Inside Higher Ed, for shedding some more light on the shaky college rankings game. Lee had noticed that the University of Southern California ranked lower than seventh on all of the graduate level engineering category subfields yet somehow managed to earn the number seven slot on the U.S. News and World Report College Rankings.

Lee’s questioning led Inside Higher Ed to contact both U.S. News and USC to see if it could get to the bottom of the matter. Turns out the large number of the engineering school’s professors that were reportedly also members of the National Academy of Engineering helped push the USC rankings to seventh.

But while USC reported to U.S. News 30 professors belonging to the academy and the school’s web site listed 34 such professors, Inside Higher Ed, through a very simple fact check, was able to determine that these figures were entirely inaccurate.

For reporting purposes, the school was supposed to be sending along the number of full-time faculty members that met the prestigious status. Turns out, of the 34 listed on the web site, 17 did not meet the criteria set forth by U.S. News.

U.S. News immediately acknowledged that if the school did have fewer faculty members in the academy than had been reported, the engineering college’s ranking would indeed fall. The exact drop would of course depend on the final numbers reported and how they related to competitor schools.

And in one of the most important acknowledgments for students to hear, officials for the magazine also indicated they were not in the business of verifying the accuracy of the reports from schools. Instead, they trust the schools to be institutions of integrity and simply take what is reported at face value. Of course, they also base their rankings on the information provided.

This episode comes on the heels of the surprising candor of a Clemson official who publicly expressed how the rankings could be gamed (including the very issue expressed here, the accuracy of the reported data). That story was all over the internet in prompt fashion as was a followup admonishment from school officials.

Ultimately, the lesson for students is not to put too much emphasis on these rankings. Especially now that it is clear that those doing the ratings acknowledge they do not verify the information provided.

There is little doubt that test preparation can affect your SAT exam scores. Students seeking admission to the most selective universities have been known to pay significant sums of money for personal tutorials to ensure they are well-prepared for these all-important tests.

While it is clear that preparation does matter, those with limited budgets simply cannot afford the costs associated with private tutorial services. But those on a budget should not ignore this important test preparation – they just need to seek out the most cost-effective options.

Options to Consider

First, students should gain access to sample tests. These practice exams help students become acquainted with the format of the tests and the styles of questions being asked. Familiarity is a real key to reducing the overall anxiety that comes with taking such important standardized tests.

Students can gain access to one copy of the exam free at the Peterson’s College site. You will need to register and you will be limited to but one sample but it is a great place to start and again the point of emphasis is that the test can be accessed free of charge.

Two of the agencies offering private tutorial options have entered the video game market. Students looking for additional test prep practice options can turn to the Princeton Review for My SAT Coach and to Kaplan Test Prep for the game FutureU.

The games are from two gaming industry giants, Ubisoft and Aspyr. FutureU which is currently available for download to a PC or Mac computer but the My SAT Coach is available only for Ninetendo DS. Both will set the user back about thirty bucks.

A standard, cost-effective option that many students and parents swear by is the College Board’s $19.95 “Official SAT Study Guide.” The reason that most find it the item to purchase is the booklet provides four critical elements.

The guide first offers a basic tutorial on the test-taking process. Second, it contains a math review of the key topics that students can expect to see.

Third, it gives students the chance to practice taking timed tests. Finally, it is similar in format to the real process: it is done without a computer using the traditional pencil and paper format that is a hallmark of the SAT.

Other such options do exist. There is the Princeton Review’s Cracking the SAT, Barron’s SAT 2400, Gruber’s Complete SAT Guide, and Kaplan SAT Premier Program. Each works in a similar manner.

Other Important Considerations

If students find that they are weak in the vocabulary areas, they can turn to another tech option, a new site called VerbaLearn. While there is no attempt to tie the building of vocabulary to the actual style of testing one faces on the SAT, access is free and the site is designed to prepare students for any nationally-normed test (SAT, ACT, and/or GRE). The key to making this site effective is to spend time on vocabulary building then return to the actual sample tests to determine if you have indeed built your fundamental vocabulary to a more appropriate level.

Lastly, there is always the issue of self-motivation. Those with a desire to prepare and an ability to structure their own time will find all of these more cost-effective tools great options to consider.

If on the other hand structure isn’t your strongest suit and procrastination an issue, you may well want to consider the test-preparation classes and their related-tutorials. The only issue to remember is that this latter option is the most expensive way to go.