Death of the student loan market has a date June 30 2010

[permison]

The following is just a few of the provisions from the new reconciliation "bill" up for "Vote" this Sunday. So what does this mean for the Flight training market? I suspect this is the death toll for most flight schools. You think getting a loan for flight training is tough now. Just you wait till after June 30th. I'd be interested to hear what people plan to do should this monstrosity (that isn't fit to wipe my butt with) pass.

 

SEC. 2201. TERMINATION OF FEDERAL FAMILY EDUCATION LOAN APPROPRIATIONS.

Section 421 (20 U.S.C. 1071) is amended— (1) in subsection (, in the first sentence of

the matter following paragraph (6), by inserting ‘‘,except that no sums may be expended after June 30, 2010, with respect to loans under this part for which the first disbursement is after such date’’ after ‘‘expended’’; and (2) by adding at the end the following new sub20 section:‘‘(d)

 

TERMINATION OF AUTHORITY TO MAKE OR INSURE NEW LOANS.—Notwithstanding paragraphs (1)

through (6) of subsection ( or any other provision of law—‘‘(1) no new loans (including consolidation loans) may be made or insured under this part after June 30, 2010; and ‘‘(2) no funds are authorized to be appropriated, or may be expended, under this Act or any other Act to make or insure loans under this part (including consolidation loans) for which the first disbursement is after June 30, 2010, except as expressly authorized by an Act of Congress enacted after the date of enactment of the SAFRA Act.’’.

 

SEC. 2202. TERMINATION OF FEDERAL LOAN INSURANCE PROGRAM.

Section 424(a) (20 U.S.C. 1074(a)) is amended by striking ‘‘September 30, 1976,’’ and all that follows and inserting ‘‘September 30, 1976, for each of the succeeding fiscal years ending prior to October 1, 2009, and for the period from October 1, 2009, to June 30, 2010, for loans first disbursed on or before June 30, 2010.’’.

[AndrewT]

Do you have a link to the original document? It looks like the end of a certain loan program, but maybe not the death note for all loans. Certainly private loans will still be available to whoever they deem credit worthy. Overall though, yes, this doesn't seem to be a good time to get funding for much of anything, but at least the commercial and investment banks got to clear their bad debt with tax payer money, right?

[permison]

Sorry that probably would be helpful. Here you go. http://www.foxnews.com/projects/pdf/031810...onciliation.pdf

 

You'll need to go to page 116 in the document where the education section starts. As you read through it you will find the end of all gov support for the private student loan programs.

[AndrewT]

Well, thats certainly going to suck for people who don't have a spare 40k in their pocket. I wonder what the training situation is like abroad

[adam32]

I'm still pretty sure the whole thing will get overturned in the Supreme Court. Idaho is already prepared to sue the FEDs and 37 other states have legislation pending...

[AndrewT]

Perhaps, but there is no denying that loans for flight training are hard to get right now without having really good credit/assets or a strong cosigner. Couple that with pilot pay, and it makes less and less sense to get into this whole aviation thing.

[permison]

I think one positive thing that might come out of this is that there will develop a demand for pilots at some point in the future. With so few being able to obtain thier ratings those who have already earned or are close to completing thier ratings will be in demand at some point.

[jumpngonuts]

I'm just waiting for the day where I can't get 100LL for under $10/gal or even at all.

[adam32]

I think one positive thing that might come out of this is that there will develop a demand for pilots at some point in the future. With so few being able to obtain thier ratings those who have already earned or are close to completing thier ratings will be in demand at some point.

 

Maybe, but there won't be any jobs since no operators will have any money to hire anyone...someones gotta pay for the $2.5 TRILLION dollar "bill"...

[permison]

If this passes the education market is really screwed. Let me explain why. The private education loan market exists because most loans are guaranteed by the government. It limits the loaning company's exposure to risk. By removing the government guarantee the exposure to the loaning company goes up exponentially with "0" (ZERO) collateral to cover their loss. What are they going to do if you default on the loan? Not to mention these loans become just like credit card loans in terms of rules.

 

So here is what I think will happen. We are going to see a complete shutdown for a couple of years of anything except for federally or state funded schools like collages. Why, because it will take time to implement a new system for making student loans outside of the normal education system. A couple of years at least. While the health care crap goes into operation a few years down the road there is no preparation time for the changes to the education loan system. It stops "DEAD" on June 30th. Who is ready for that? Who could be ready for that by June 30th.

 

Can your school survive two or even one year with no new students? Few people will be able to get loans. Most schools will not be able to survive without students coming in. I'd bet something along the lines of 75% of flight schools will go under. It's going to be a blood bath. Add to that what will happen to the value of your training helicopter. That means R22s, R44s, Schweitzers, the new Rotorway, all lose their value and the longer these ships sit not flying the worse they get and the harder to sell. With all the schools going out of business the used market is going to be flooded with used training ships. We saw the market value of the R22 tank after Silver state. It's going to be a lot worse in the coming year.

 

If this turd of a bill passes, silver state will look like a pebble on the road of this industry. Someone please tell me I am wrong because I sure want to be.

[Tenacious T]

Some 141 schools will probably survive, at least they can get GI Bill money

[permison]

Some 141 schools will probably survive, at least they can get GI Bill money

 

I think you're proving my point. Sure 141 schools will have access to some funding, but is that 25% of the schools? And how many can survive on just GI Bill students? How many coming out of the military in the next few years will be looking to become professional helicopter pilots? Almost all current military pilots only need to take a test coming out of the military so what do they need a school or loan for? So that just leaves the poor private, airman or seaman who has to shoot for the whole pie. Correct me if I am wrong but the GI Bill doesn't pay for the private certificate (I seem to recall something about the rules changing recently). So where does the new student come up with the money for the private? What does a private certificate cost these days? Thirteen, fifteen thousand at a minimum? I've seen it as high as Twenty five thousand, and that is "JUST" for the private!

 

I think the saving grace for this industry will be from the hiring companies who will have to start funding training.

[Tenacious T]

I think you're proving my point. Sure 141 schools will have access to some funding, but is that 25% of the schools? And how many can survive on just GI Bill students? How many coming out of the military in the next few years will be looking to become professional helicopter pilots? Almost all current military pilots only need to take a test coming out of the military so what do they need a school or loan for? So that just leaves the poor private, airman or seaman who has to shoot for the whole pie. Correct me if I am wrong but the GI Bill doesn't pay for the private certificate (I seem to recall something about the rules changing recently). So where does the new student come up with the money for the private? What does a private certificate cost these days? Thirteen, fifteen thousand at a minimum? I've seen it as high as Twenty five thousand, and that is "JUST" for the private!

 

I think the saving grace for this industry will be from the hiring companies who will have to start funding training.

 

Not debating your point, just adding to the discussion. Hopefully this improves the post CFI job market, at some point like you say companies may have to offer funding sources in exchange for a contract. Post 9/11 GI Bill pays for all training including private and 141 schools train a lot of foreign students but small 61 schools will probably vanish as you say.

[AndrewT]

Correct me if I am wrong but the GI Bill doesn't pay for the private certificate (I seem to recall something about the rules changing recently).

 

 

I remember reading somewhere that the new rules say no financing for flight school. Though, I saw this on another internet forum, so take it with a large grain of salt.

 

Can you imagine if half the schools folded up? It'd kill the R-22 resale market, even more unemployed CFI's....maybe I should look at the military again.

[permison]

I remember reading somewhere that the new rules say no financing for flight school. Though, I saw this on another internet forum, so take it with a large grain of salt.

 

Holy cow! It might be true! This from the Veterans Assoc GI Bill website.

http://www.gibill.va.gov/GI_Bill_info/programs.htm#Flight

 

Not available under the Post-9/11 GI Bill or Dependents Education Assistance program

 

This benefit is available for Flight Training such as:

 

•Rotary wing qualification

•B747-400 Qualification

•Dual Qualification

In order to qualify, you must have a private pilot's license and valid medical certification before beginning training. VA will reimburse you for 60% of the approved charges.

 

Payments are issued after the training is completed and the school submits information to the VA.

 

The Post-9/11 GI Bill is for individuals with at least 90 days of aggregate service on or after September 11, 2001, or individuals discharged with a service-connected disability after 30 days.

(This from http://www.gibill.va.gov/GI_Bill_Info/benefits.htm#CH33)

[fry]

Discontinuing the federal FFEL program won't have any additional impact on RW flight training. First because the FFEL program is only available for federally guaranteed student loans...Stafford and PLUS loans. Only flight training at accredited institutions would qualify for those loans and there is very little of that going on. Secondly, the FFEL program...in which private lenders make loans with a federal guarantee...is being discontinued so that the feds can take over the loan process and make direct loans. History has shown that when the feds take over a program the number of eligible participants increases and that is likely what will happen with student loan lending. Although they still may not allow lending for flight training.

 

But the conclusion that flight schools will continue to close their doors is probably correct. Although not because of anything the feds are doing. The days of easy-money lending are over and private loans...far and away the source of nearly all flight school lending...will only be available to those borrowers with adequate income, co-signors and credit history.

 

There will also likely be no impact on future pilot availability from the closing of flight schools. That's because there were too many schools started during the easy-money days for the actual number of pilot slots out there in the market. This excess training capacity will continue to dry up as the wannabe birdmen are unable to get financing. What will remain will be only the best capitalized and the largest schools...probably only those with 141 certs.

[RagMan]

The regular Montgomery G.I Bill regulations for financing flight school still applies. The whole 60% reimbursement thing only after you have attained your PPL continues to remain in the bill. Now, the new Post 9-11 GI Bill will NOT cover flight training solely, however your training will be covered as long as it is being taken at an Institute of Higher Learning (Colleges or Universities) and you are pursuing an aviation related major. What the VA fails to mention, and I had to find out by calling and speaking with a VA G.I Bill Rep, is that the Post 9-11 G.I Bill will also cover flight training through a private flight school, so long as the individual taking the training is also pursuing an aviation related major at an accredited Institute of Higher Learning. The private flight school HAS TO BE ACCREDITED with the College or University for which you are seeking an aviation related major. As I stated, I had to talk with a VA G.I Bill Rep over the phone to get that information about the private flight school and funding using the Post 9-11 G.I Bill. I don't have a link to back that information up, but you are more than welcome to call the VA and talk with them. Though, I can't guarantee they will tell you the same thing, because they are just government workers. Hell, the first 2 VA Reps I talked to were reading right out of a damn pamphlet that I had already read online.

 

I myself am currently working to get approved with a local flight school and a community college through the Post 9-11 G.I Bill.

[r22butters]

Having worked in the lending industry I have to say that a lender would have to be pretty stupid to lend money for the training of a job who's starting pay is less than a fry-guy at McDonalds, but then again, I haven't met very many intelligent people in the lending industry, so don't lose hope.

[TimW68]

Due to recent legislation and economic conditions, UVU must transition away from the Federal Family Education Loan Program (FFELP). Because of this, we will begin using the Federal Direct Student Loan Program (DL) for some students for summer semester loans and for all students for fall semester loans.

 

This is the announcement I just received from UVU, I will be talking with the financial aid dept. on Monday with regard to the DL program, and I will update with the info I receive.

[heligirl03]

The regular Montgomery G.I Bill regulations for financing flight school still applies. The whole 60% reimbursement thing only after you have attained your PPL continues to remain in the bill. Now, the new Post 9-11 GI Bill will NOT cover flight training solely, however your training will be covered as long as it is being taken at an Institute of Higher Learning (Colleges or Universities) and you are pursuing an aviation related major. What the VA fails to mention, and I had to find out by calling and speaking with a VA G.I Bill Rep, is that the Post 9-11 G.I Bill will also cover flight training through a private flight school, so long as the individual taking the training is also pursuing an aviation related major at an accredited Institute of Higher Learning. The private flight school HAS TO BE ACCREDITED with the College or University for which you are seeking an aviation related major. As I stated, I had to talk with a VA G.I Bill Rep over the phone to get that information about the private flight school and funding using the Post 9-11 G.I Bill. I don't have a link to back that information up, but you are more than welcome to call the VA and talk with them. Though, I can't guarantee they will tell you the same thing, because they are just government workers. Hell, the first 2 VA Reps I talked to were reading right out of a damn pamphlet that I had already read online.

 

I myself am currently working to get approved with a local flight school and a community college through the Post 9-11 G.I Bill.

 

This is the case, although it took awhile for everyone to get it figured out! The problem is that there are so few flight schools who are immediately able to offer it. As with anything else gov't related, it can take a year plus for a school to establish the necessary affiliation with the college/university. The schools who used UVU already are your best bet. Others are trying desperately to get hooked up with them or other local community colleges so that they can accept the Post 9/11 bill. What I am not clear on is whether or not a 2yr degree is acceptable or must it be a 4yr degree? And do they repeal your benefits if you finish flight school and move on without finishing the degree program (while not wise, I suppose it could be a temptation)?

 

I think if they truly thought things through and had any idea how this industry plays out, the bill would require you to specifically pursue a NON-aviation related degree, so that you might come out with a truly viable back-up plan!

[adam32]

I'm still wondering what student loan programs have in common with healthcare reform??!! What other crap is stuck in this 3000 page bill!!??

[permison]

Someone pointed out to me we have a saving grace come Nov elections. We can vote every single person who voted for this bill out of office. Then the bill can be repealed. However I don't know what that will mean for recovering the educational loan system.

[fry]

However I don't know what that will mean for recovering the educational loan system.

 

What is it you think needs "recovering"? Federal student loans are not going away...the feds are just going to offer them directly without the involvement of banks. Here's a blurb from the New York Times describing the student loan portion of the health care bill:

 

The student loan bill would allow the government to lend directly to students, bypassing payments to private lenders. It would also redirect billions of dollars to expand the Pell grant program for low-income students and to pay for other education initiatives.

 

If anything there will more student loan money becoming available...the feds love to give money away. There may...in time...even be more loan money available for flight training. If those in the flight training industry were smart they would hire a lobbyist who could start banging on the doors in Congress to get the industry a place at the trough.

 

But either way...relying on students with private loans or having available students able to get government money...only the large schools or those operators with work other than just instruction...are going to survive.

[permison]

What is it you think needs "recovering"?

 

What will need to recover is the 75% or more of flight schools that will not be able to survive because no student can get a loan (although some of the herd could use a culling). Very few flight schools will be able to survive the 6 months to a year (or more) before loans for flight training become available.

 

If this bill passes come June 30th the entire private student loan system shuts down this will overwhem the Direct Federal loan system. Anyone who doesn't already have a loan to cover their costs will be unable to gain funding until such time as the Guberment gets it's act together and hires people to support the demand. So as I said before few schools will be able to survive this period between June 30 2010 and whenever the goverment gets it's act together.

 

As you pointed out "only the large schools or those operators with work other than just instruction...are going to survive." That's less than 25% of the exsisting schools. So a further ton of CFIs and used training ships are going to be dumped on the market.

 

Hopefully I am playing chicken little here but somehow I doubt it.

[adam32]

The Dept of Education will be the 7th largest bank in America...welcome to the USSA!!