40,000 Mass. College Students Left Without Loans

Massachusetts college students who have worked hard through high school and on their SATs and college essays just received another challenge: finding loan money. The Massachusetts Educational Financing Authority (MEFA), which has been providing student loans to Massachusetts residents for the past 26 years will not be lending any money to college students for the fall semester. This news comes well after college financial aid applications are due, and is leaving new and returning college students without private loans.
To give you an idea of the scope of the problem, last year, MEFA was the source of $510 million in loans to Massachusetts students attending college. MEFA provides private lending to Massachusetts residents attending colleges in-state and out-of-state.

“At this time we regret that MEFA has been unable to secure funding due to increasingly difficult capital markets conditions,” Tom Graf, Executive Director of MEFA wrote in the announcement.

Massachusetts Educational Financing Authority (MEFA), a non-profit organization, had been offering Massachusetts college students and parents which were both low and fixed. According to MEFA, they will are still trying to secure funding for spring semester loans.

What Massachusetts Students and Parents Can Do

This is a huge red flag that indicates our economy is continuing its downward spiral. The money these students were counting on was not free money or scholarship money. It was loans. Loans they have to pay back with interest. Now they can’t even do that. MEFA assures students that there is other money out there. But now that college students are about a month away from the beginning of school, and have their college bills in hand, where can they turn so late in the game?

1. Call the MEFA Hotline

MEFA has a toll-free number for Massachusetts college students and parents to call for information. The phone number is 800-809-0571.

2. Seek a Federally-Funded Loan

MEFA also recommends that students and/or their parents attempt to secure a federally-funded loan first.

3. Contact the School’s Financial Aid Office

The school’s financial aid office should also be able to provide information to Massachusetts college students and parents who are left without loans.

4. Ask for an Extension

Massachusetts college students and parents who were relying on a MEFA loan should call the bursar or payment office at the college and request an extension on the bill or ask for a payment plan Massachusetts colleges should be aware of the situation.

5. Contact American Student Assistance

The Loan Information Center at American Student Assistance (ASA) may be reached by calling 800.999.9080. According to the ASA, Federal Family Education Loans are still available to college students.

6. PLUS Loan

Parents of college students may also consider applying for a federal PLUS loan.

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Refinancing Loans Vs. Home Equity Loans

If you are a homeowner, there are many loan products that can work to your advantage; sometimes the most difficult part is picking the right product that fits your needs the best. Two loan products that are extremely popular are refinancing loans and home equity loans. Here is some information on both their similarities and differences.
Refinancing loans is usually the process of taking out a second loan in order to pay for the older loan, using the same property as collateral. The major advantage for refinancing your home is to benefit from a lower interest rate or better terms. Many homeowners purchase homes when they either had a lower credit score or when the market offered only higher interest rates. If your current credit score has improved or the banks and lenders are offering much lower interest rates, a refinancing loan may be a great way to lower your monthly payments, effectively reducing the amount to repay.

A home equity loan is similar to a refinancing loan in that you use your home to secure the loan and if you fail to repay the loan, the bank can sell your home to recoup its losses. However, home equity loans are usually not for the entire value of the home, but only for the equity (equity is the current value of your home, less any debt). For most homeowners, the use of home equity loans is different than refinancing loans. Homeowners take out equity loans to make big ticket purchases such as additions to a home, tuition for college or to renovate a kitchen. While there are cash out options for refinancing loans, most refinancing loans are to save money and not to use the equity that has appreciated on their property.

Home equity loans are usually a little less expensive, due to the fact that less money is being loaned. While fees such as closing costs and the appraisal are similar to a refinancing loan, there are usually no points involved. For refinancing loans a fee called points can be requested by the lender or bank. A point is usually equal to 1% of the loan amount and it is not uncommon to be charged by the lender 2, 3 or more points to refinance a loan.

The great part about being a home owner is the many options that are available to you; however, it is always important to make sure you consider all your options to find the one that best fits your needs.

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