News You Need to Know: Daily Roundup, Wed., Oct. 4th

Rate reduction offer on student loan consolidation

A student loan consolidation firm will offer a 1.85% rate reduction on consolidation loans for students that are still in their grace period. Student Financial Advisors, LLC will extend the offer only to students who have over $10,000 in federal student loans and are out of school, but still in their six month grace period. Students cannot have previously defaulted on or consolidated their loans. MyRichUncle, another student loan company, also offers discounted federal loan rates 1% reduction on federal Stafford loans and 1.75% on federal PLUS loanswithout Student Financial Advisors conditions.

New law in California changes community college funding formulas

A new California law that changes funding formulas for community colleges was unveiled yesterday. Governor Arnold Schwarzenegger has signed the law, which replaces a highly unequal funding system for community colleges established 28 years ago. Previously, the state had used local district cost reports to determine funding levels, resulting in large discrepancies in funding between colleges. Under the new system, funding is based on fixed costs, such as the number of students and campuses, and then adjusted according to specific district needs, such as rapid growth in enrollment. Students in selected non-credit programs will receive funding equal to those enrolled in credit courses, whereas previously they were counted at only 50 percent of the per-student appropriation level.

PHEAA under investigation by Inspector General

Yesterday, the U.S. Department of Educations Inspector General began an investigation of the Pennsylvania Higher Education Assistance Agencys (PHEAA) student loan accounting practices. Previous audits of New Mexicos loan agency and Nelnet found that both were illegally benefiting from a 9.5 percent guaranteed interest rate on student loans financed by tax-exempt bondsa guarantee that was supposedly eliminated by Congress in 1993. PHEAA is being investigated for the same practice, which may have resulted in the agency overcharging the government and taxpayers hundreds of millions of dollars for subsidy payments. Secretary of Education Margaret Spellings did not require New Mexicos agency to return the overpayments, and she has yet to make a decision on the Nelnet case.