17 Aug 2010 - Proposed lease accounting rules could destablise the balance sheets of major retailers and airlines which could be forced to bring billions of pounds in liabilities on to their balance sheets.

The new rules, released today by the International Accounting Standards Board (IASB), aim to demystify lease accounting and could force major lessees and lessors to recognise greater liabilities in their published accounts.

The rules would likely hit the retail sector hardest with ten of the most well known supermarket chains – including Tesco, Sainsbury's and Morrisons – holding an estimated £45bn in lease commitments, according to a study of their published accounts.

Retailers are major lease-holders owing to the property they hold. Present accounting rules however offer them flexibility in how they record lease contracts.

The IASB hopes to tighten the rules and bring all leases on to the balance sheet in order to provide investors with a more accurate financial picture.

For some, this could wipe as much as 25% off pre-tax profits according to internally modeling cited by a Big Four auditor.

Julian Rose, head of asset finance at UK industry group the Finance & Leasing Association said retailers will be significantly affected under the proposed rules. He also cited airlines, rail operators and other transportation businesses as others likely affected by the proposed rules.

“If there is a need to do this, it is very important that the rules companies need to follow are as simple as possible,” he said.

Veronica Poole, audit partner with Deloitte said the standard could have a knock on effect on company’s key performance indicators.

“The result could be lower asset turn-over ratios, lower return on capital and an increase in debt-to-equity ratios which could impact borrowing capacity or compliance with loan covenants,” she said.

“It would also typically raise the EBITDA (earnings before interest, taxes, depreciation and amortisation) figure beloved by analysts.”

Giles David, chief financial officer, with high street retailer Brighthouse said he does not expect his new-look balance sheet to affect the attitudes of his investors.

“I’m not anticipating their view of the business performance to change,” he said.

“We are a privately owned business we have a sophisticated investors. We don’t broadcast our results, so there for we are able to have very decent conversations and we work very hard in being transparent.”

Mark Venus, global head of accounts payable at BNP Paribas and also a member of Leaseurope’s accounting committee, said the IASB had paid lip service to cost -benefit considerations in its proposals.

“This is very visible in the draft standard that has just come out,” he said.

“The proposals are more than 100 pages in length only a handful of paragraphs deal with cost - benefit analysis”.

Leasegroup estimated the European leasing industry was worth about €209 bn (£134bn) in 2009.

David Tweedie, chairman of the International Accounting Standard Board, said the proposals would result in better and more complete financial reporting information available to investors.

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AUGUST 7, 2010 - In July 2006, 25-year-old Christopher Bryski died.

His private student loans didn't. Mr. Bryski's family in Marlton, N.J., continues to make monthly payments on his loans—the result of a potentially costly loophole in the rules governing student lending.

As the college season nears, throngs of parents and students still are applying for private student loans, long used by students as an alternative to federal loans. But they may be unaware that in cases where the student dies, the co-signers often are obliged to pay off the balance of the loan themselves—a requirement typically not found in federal loans.

Many private student-loan lenders say they have a review process for cases involving disability or injury, and the new Bureau of Consumer Financial Protection will have an ombudsman in charge of private student loans. Yet neither the student-loan legislation passed in March as part of the health-care overhaul nor the financial-system overhaul passed in July requires lenders to discuss with the borrower and co-signer the consequences of a borrower's death or permanent disability, or require lenders to forgive private loans in those cases.

The Bryski case sparked the Christopher Bryski Student Loan Protection Act, sponsored by U.S. Rep. John Adler (D., N.J.) and introduced into the House of Representatives in May. The law, which has attracted co-sponsors from both parties, would require private student lenders—among the biggest are Sallie Mae, Citigroup Inc. and Wells Fargo & Co.—to explain to students the co-signer obligations in the event a borrower dies, as well as insurance options for loans and the circumstances under which loans can be discharged—though it wouldn't require lenders to forgive loans.

Sallie Mae, Citibank and Wells Fargo may require co-signers to continue paying private student loans after the primary borrower has died, though the lenders say they will look at cases individually. Wells Fargo doesn't offer medical forbearance, just a three-month period of hardship forbearance during which the interest compounds.

Sallie Mae—formerly a government-sponsored enterprise but fully private since 2004—recently introduced forgiveness in cases of death for its Smart Option Student Loan, but doesn't require it in its other private student loans. A Citi spokesman says, "We believe our policies are generally consistent with other industry participants."

Mr. Bryski, a three-sport athlete, took out $44,500 in private student loans and $5,000 in federal loans to attend Rutgers University in 2001. Joseph, his father, co-signed the loans for him. The family declined to name the lender that issued Mr. Bryski's private student loans because, his brother Ryan says, "we're not pointing fingers. It's not just our lender that does this."

While climbing a tree on June 17, 2004, the then-23-year-old Mr. Bryski fell five feet and sustained severe traumatic brain injuries. The accident placed him in a coma for four weeks, which turned into two years of being in a persistent vegetative state. At the time of the accident, Mr. Bryski was three years into his degree at Rutgers.

During those two years, Mr. Bryski's parents, Joseph and Diane, and his two brothers, Ryan and Joseph, say they juggled 12-hour shifts at the hospital and meetings with doctors with calls from creditors. From the hospital waiting room, Ms. Bryski says, she tried to call and settle her son's credit-card and student-loan payments.

"The bank said they wanted to speak with Christopher," Ms. Bryski says. "I told them, 'You can't speak to Christopher. He can't speak at all.' It's a horrible feeling."

Mr. Bryski had two credit cards with small balances that the family tried to have closed. Eventually, after the family had a lawyer write to the card companies, the balances were canceled. The card companies also refunded the amount the family paid on the account since Mr. Bryski entered the hospital.

Mr. Bryski's federal student loans were deferred as soon as the family submitted a note from a doctor detailing his permanent condition. They were forgiven completely upon receipt of Mr. Bryski's death certificate.

But when Ryan Bryski called regarding his brother's private student loans, a customer-service representative told him that the loans were eligible only for hardship forbearance, during which payments would be suspended for six months at a time and interest would compound on the balance at a variable rate.

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Michael Rubenstein for the Wall Street Journal

A portrait of Christopher and his mother, Diane.
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The terms of Mr. Bryski's loan also stipulate that since the loan was transferred to the co-signer, Mr. Bryski's father, the entire payment could be requested at once. Consolidation options also were much more restricted.

"We're not saying we won't pay the loan," Ms. Bryski says, "But why didn't they tell us that years ago? It's not fair."

On July 16, 2006, two years after his fall, Christopher Bryski died. The family packed up his apartment, took in his dog, Maverick, and held a memorial service. The calls to customer service regarding the private student loans seemed to go nowhere. A legal representative of the private lender then wrote to the family to inquire about the intentions of Mr. Bryski's estate. "He didn't have an estate," Ryan Bryski says.

"I told them I just lost my son," Ms. Bryski says. "I'm aching in pain, and this is what they're going to do to me?"

The Bryskis continue to make the monthly payments on the private loans, which have risen to $518 from $366 because of interest rate changes and to make up for forbearance periods. The family will end up paying $85,800 by the time the repayment plan ends.

"We didn't want to think of the unthinkable. Then it happened," Ms. Bryski says. "We don't want any other families to go through what we went through."

Families looking to borrow for college should first maximize grants and federal borrowing options, which have recently had their limits expanded and generally offer far better repayment terms than private loans. Federal PLUS loans now allow parents to borrow up to the full cost of attendance, minus any other financial aid a student receives.

Those who do use private loans should read the fine print carefully to be clear about their legal obligations as co-signers in the event of death or disaster. Borrowers can sign up for auto debit so that payments can continue even if parents don't have power of attorney. Should trouble hit, families trying to have their private student loans forgiven should ask for a review.

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Aug 07, 2010 - COLUMBUS, GA (WTVM) -The price you pay for an education can indeed be costly. Research shows fees at private colleges are up 5% this year to more than $26,000 and that's just for one year of tuition, room and board.

Expenses at public schools are around $7,000 per year, up 6.5 % from last year.

To cut costs, many co-eds opt for student loans, but they too come with a price tag in the form of interest. Well rules that kicked in earlier this summer may just give your budget a breather.

For Stafford and PLUS loans issued on or after July 1, 2006 and for those given out after July 1st of this year through June of 2011, here are the new rules that apply:

There's 4.5% percent fixed rate on Subsidized Stafford Loans. That's down from 5.6%.

Unsubsidized Stafford Loans are at a fixed rate of 6.8% for the life of the loan.

PLUS loans are also fixed at 7.9% percent.

For Stafford PLUS loans issued on or after July 1, 1998 and before July 1, 2006, the new interest rates for the period of July 1, 2010 through June 30, 2011 are:

Stafford in repayment status....2.4%, down from 2.48%.

Stafford in school, grace period or deferment status are at 1.87% down from 1.88%.

PLUS Loans in repayment status are at 3.27% down from 3.28%

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August 07. 2010 - Student loans are a part of everyday life for individuals seeking to fund their education in many parts of the world.

In the UAE, however, the traditional road for expatriate students has been to tap the family finances to pay for their higher learning.

But globalisation, the financial crisis and a growing prioritisation of education has resulted in a shift away from this attitude, leading the country’s banks and universities to band together to offer new ways for students to fund their studies.

Abu Dhabi Commercial Bank (ADCB) and Mashreq Bank recently linked with higher learning institutions to form partnerships that give families access to loans that will enable their children to pursue their educational dreams, despite their financial situation.

ADCB introduced its education loan, which is “designed to ensure that finance, or rather the lack of it, does not get in the way of the higher education aspirations of any meritorious student”, says Rahul Unny, the vice president for consumer banking at ADCB.

“We constantly endeavour to uphold the educational development in the UAE to embody the Government’s plan to build the new generation of students, enabling them to take part in the evolutionary process in the UAE.”

Mr Unny says ADCB’s education loan can be obtained without the commitment of a salary transfer. The minimum education loan amount offered by the bank is Dh10,000; the maximum amount is Dh150,000, depending on the student’s or parents’ eligibility. The loan can be repaid over a period of up to 60 months at 14 to 16 per cent interest.

So far, ADCB has partnered with the University of Wollongong in Dubai (UOWD), Intelligent Partners, Institute of Management Technology, the Manchester Business School and the American University of Ras Al Khaimah.

Mashreq Bank has partnered with Murdoch University and the Institute of Management Technology (IMT). The schools are in Dubai International Academic City.

“We realised that education is one of the highest priorities in our customer’s lives,” says Niranjan Mendonca, the head of retail assets at Mashreq Bank. “So we thought we should also focus on education in order to provide our customers an additional way to fund their education.”

Universities do not have to be linked to banks for students to access educational loans. They can approach any bank that offers a personal-loan facility to finance their education, but the advantage of these partnerships is to package the loans to benefit students.

“As a university we felt the need to enable everyone who is qualified, to be able to get quality education regardless of his or her financial situation. That is the main reason we had to get creative,” says Raghav Lal, the strategy and business development manager at Murdoch University.

Students at Murdoch University can apply for a loan from Mashreq Bank at an interest rate of 10 per cent. The average interest rate for educational loans from banks in the UAE ranges from 9 per cent to 12 per cent. But Murdoch students who take out a loan with Mashreq Bank receive a 15 per cent tuition fee discount for the first year of the loan, which helps to offset a large portion of the interest rate.

“Murdoch University’s basic premise is to always ensure all students are given equal opportunities,” says professor John Grainger, the pro-vice chancellor of Murdoch University. “In today’s financial environment, it is not uncommon to have cash-flow issues and we are extremely happy to be able to address such problems. The collaboration with Mashreq will enable students to pursue their qualifications regardless of any short-term concerns with funding.”

Students or parents interested in Mashreq’s education loan can apply for all or part of the tuition expenses. A minimum income of Dh7,000 is required for applicants, and repayments are affordable through flexible plans.

The loan programmes are mainly designed to benefit expatriate families since most Emiratis have their education funded by the Government.

“In the UAE, 60 to 70 per cent of the population is of South Asian origin and to these families education is very important, so these and other expatriates who are residents here are the ones who will benefit the most from our student loans,” says Mr Mendonca.

The Mashreq education loan covers the entire tuition expenses of applicants, while ADCB’s loans are capped at Dh150,000.

“With the partnership, the bank can finance part of our tuition, but there will still be some Dh30,000 that students will need to raise themselves,” says Manoj Mathew, the finance manager at UOWD. “We wished ADCB would cover the entire amount, but we were able to negotiate up to Dh150,000.”

Mr Mathew says UOWD students can also approach Dubai Islamic Bank, which offers a similar education loan.

The country’s universities and banks hope to expand these kinds of partnerships.

The programmes also will help professionals wanting to pursue specialised education or higher degrees. “Higher education should be accessible to all,” says Mr Mendonca.

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Aug 08, 2010 - CHARLOTTE, NC (WBTV) - An entire generation of today's college graduates are facing financial ruin, unable to climb out of a debt cycle started by high-interest student loans.

Their job perspectives are grim, and, in many cases, their interest rates are outrageous.

Web Extra: Get help with your student loan

Could this be the country's next "mortgage meltdown?"

A college degree used to be one of the keys to success - access to the American Dream. Then again, so did homeownership.

But, as a nation, we have $700 billion in student loan debt, and one in five people can't make their monthly payments.

It's a problem that could devastate the workforce, because there's a large class of educated workers out there with massive dents in their credit, something potential employers are monitoring more closely.

That truth almost ruined Bob Dickie.

Dickie, 54, once had the typical American mindset - he thought getting a college degree would be like getting a new lease on life, and that paying for it was easy as filling out a student loan application.

"The school promises the world to the student," he says. "You're going to make a great living, you're going to launch your career. All the stuff you see on TV."

So he went...and graduated in a recession. Dickie managed to get a job, but he wasn't making anywhere near what he needed.

"The pay was $10 an hour," Dickie says. "So paying rent and commuting 50 miles one way, there was just absolutely nothing left." But skipping student loan payments crumbled his credit.

"I mean, I had all the luxuries of upper middle class. Brand new cars, health care membership, home, I was used to the good life," he says. "After this experience, it just kind of tanked out."

Dickie's partner, Angela Money, tried to negotiate with his lender.

"They were very threatening to us," she says.

And Money says they wouldn't help by lowering payments. In fact, they hiked the interest rate. Dickie's debt just kept getting bigger.

Eventually, he managed to pay the loan off, but it still haunts him.

"Now, our battle is, we can't get it off his credit report," Money says.

"It can become a downward spiral," Dickie adds. "Because now employers are using your credit rating to see if you are a good candidate for employment."

"It's a Catch-22," adds Money. "So how can people do better and progress when things like this are happening?"

It's exactly the kind of question the country asked during the mortgage meltdown.

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