Financial bonanza

The U.S. hedge fund Pershing Square Capital Management, which is locked in a proxy fight at Canadian Pacific Railway, has added a former U.S. railroad executive to its slate of nominees for directors.

In a news release Monday, Pershing Square said Stephen Tobias, who served as chief operating officer and vice-chairman of Norfolk Southern Corporation, would bring four decades of railroad experience to the board of directors.

The move comes less than a week after CP Rail officials held an investor day meeting in Toronto, touting its current 15-member board of directors, all of whom who are up for reelection at CP

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Total student loan debt has topped $1 trillion … but there’s no need to panic.

Most borrowers have a reasonable amount of debt, and the total balance is not likely to cause major damage to the economy like the mortgage crisis did, experts say.

"I don’t think it’s a bubble," said Mark Kantrowitz, publisher of Finaid.org, a financial aid website. "Most students who graduate college are able to repay their loans."

This is not to say that there aren’t problems with student loans, which now exceed the amount of credit card debt and auto loans. Students are taking on more debt, on average, and more than a quarter of borrowers are behind on their payments. And a hefty debt load could delay recent graduates’ purchase of a home or starting a business.

But all the talk of a crisis or bubble in the student loan industry is exaggerated, experts say.

There’s no doubt that student loan balances are rising fast, bucking the trend of other consumer debt, which fell during the Great Recession. In 2007, the total level of student loan debt was about $600 billion.

But more people are going to college these days, said Sandy Baum, senior fellow at the George Washington University School of Education. This is prompted in part by the economic downturn: When people lose their jobs or the economy turns shaky, a lot of folks return to school to learn new skills or bolster their resumes.

I’m worse off than my parents

In the fall of 2010, there were 22 million undergraduate and graduate students in college, the U.S. Department of Education reported this week. Two years ago, the figure was 19 million.

"Enrollment has increased dramatically, so of course debt is growing," Baum said.

More undergrads also needed to borrow to finance their educations, especially since tuition costs have also been rising fast. Some 82% of first-time, full-time students received financial aid in the 2009-2010 school year, up from 76% two years earlier.

Their individual debt load is on the rise, as well. The average amount of student debt in 2010-11 was $27,200, up 54% from a decade earlier, according to Finaid.org.

But that figure is skewed by a relatively small number of people who have high debt loads, said Kantrowitz payday loans for self employed. They are mainly graduate students, people who took out a lot of private student loans and those who have been in default for years. Only 10% of borrowers have more than $45,000 in loans, Kantrowitz said.

Some 90% of new student lending comes from the federal government, and the amount undergraduates can borrow is generally capped at $31,000.

What’s raising red flags is that the default rates on federal loans are climbing. They hit 8.8% in 2009, nearly double the rate five years earlier, according to the most recent Department of Education figures. (See CNNMoney’s Economy blog for ways to manage your loan payments.)

This jump is being fueled in particular by for-profit colleges, which have default rates of 15%, prompting federal officials to put in new rules. Now, schools with excessive default rates can lose their eligibility for the federal loan program.

Still, heavy debt loads can make it tough for young adults to establish themselves, especially these days. The Great Recession has made it tougher for young adults to find a job.

The unemployment rate for those age 16 to 24 with bachelor’s degrees stood at 8.1% in February, up from 4.6% four years earlier. Many others find themselves underemployed.

"Having a lot of student debt can make a person’s life very difficult," said Lauren Asher, president of the Project on Student Debt.

But workers with bachelor’s degrees earn about $650,000 more over their lifetime than their peers who only have high school diplomas, a recent Pew Research Center analysis found.

"It’s an economic investment," said Sarah Turner, professor of economic and education at the University of Virginia, Charlottesville. "It’s not going to work for everyone, but on average, it has a high return."

Kantrowitz expects defaults to climb for another year, before starting to decline. That’s because the economy is slowly strengthening and unemployment rates are coming down.

"The defaults are not unexpected, considering the aftermath of the downturn," he said. 

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FOLLOW THE MONEY

How $3 million in federal disaster relief may help finance incentives for international cargo flying from Lambert-St. Louis International airport.

1. Missouri received $98 million in federal community development funds after flooding in 2008. The money could be spent in certain places, including Lemay in south St. Louis County.

2. The state will allocate $3 million of this to an already planned — and county-financed — streetscape improvement project in Lemay.

3. St. Louis County, which had planned to pay for the Lemay improvements with $3 million in tax revenue from River City Casino, takes that money and instead uses it to create an incentive fund for cargo flights same day payday loans.

4. The incentive fund will be doled out to freight forwarders who fill outbound international cargo flights from Lambert. Details are still being worked out.

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On Sunday, the United States gets a distinction no nation wants — the world’s highest corporate tax rate.

Japan, which currently has the highest rate in the world — a 39.8% rate on business income between national and local taxes — cuts its rate to 36.8% as of April 1. The U.S. rate stands at 39.2% when both federal and state rates are included.

Quiz: What the rich really pay in taxes

"The change in and of itself is not that important, but there’s some symbolism involved in being the highest in the world," said Eric Toder, co-director of the Tax Policy Center, a non-partisan think tank. "There’s certainly been a long-term trend of our rate getting higher relative to everyone else."

But despite the headline number, the statutory rate only tells part of the story.

Loopholes and other special treatment for different kinds of businesses mean that businesses pay an effective rate of only 29.2% of their income, which puts the United States below the average of 31.9% among other major economies, according to analysis by the Treasury Department.

Tax reform: Why it’s so hard

And the Organization for Economic Cooperation and Development, the multinational group that tracks global economic growth, estimates the United States collects less corporate tax relative to the overall economy than almost any other country in the world.

Some economists argue that tax collection relative to gross domestic product is the more relevant measure. That’s because different accounting rules around the world mean what’s counted as income in one country isn’t counted in another, making comparisons of tax rates misleading.

Still, both Democrats and Republicans argue that the corporate tax rate should be lowered as a way of promoting greater economic growth, so that multinational companies have incentive to invest more in their U.S. operations than overseas. President Obama has proposed cutting the corporate rate to 28%, Republican challenger Mitt Romney proposes a 25% rate.

Obama’s tax plan

Both sides are in agreement for the need to reduce the loopholes and other exemptions that shield companies from paying taxes on all their income. That kind of reform could increase corporate tax collections, or at least leave them unchanged, even with a lower rate.

But reaching agreement on that kind of tax reform has proved to be virtually impossible, especially during an election year.

Romney’s tax plans

For example, President Obama wants to impose a minimal tax on the overseas profits of U.S. companies to discourage them from moving operations offshore to tax havens. Romney and the Republicans oppose that proposal.

So the United States is virtually certain to have the title of the world’s highest corporate rate, at least until after the presidential election. 

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Lions Gate Entertainment seized a pot of gold.

When the film and television production company bought Summit Entertainment in January, the deal brought bankable teen franchises “The Hunger Games” and “Twilight” under one roof.

The first of four “Hunger Games” films broke the record for a non-sequel over the weekend with a $155 million haul in the U.S. and Canada. That beat expectations and gave it the third highest opening weekend ever. And the “Twilight” finale is set for release in November.

These two movies could generate about $450 million in profit combined, estimates Cowen & Co. analyst Doug Creutz. The adventures of bow-wielding heroine Katniss Everdeen alone could translate to 6 to 7 years of higher earnings, Creutz says, adding that Lions Gate may post its first profit in five years when its fiscal year ends on March 31.

More than two-thirds of Lions Gate’s revenue comes from the movie business, so its first blockbuster means a lot. It had been getting by with staples like Tyler Perry comedies and the “Saw” horror series.

The rest of Lions Gate’s revenue comes from television productions such as “Mad Men,” which kicked off its fifth season Sunday. Although the company doesn’t reap ad revenue from the hit TV show, success with audiences keeps it in demand as a production company. It also boosts sales of DVDs and licensing revenue from reruns.

Plus there’s another show in the hopper: Charlie Sheen’s “Anger Management,” which debuts in June on FX. If the first 10 episodes go well, the company will automatically be signed up for several years of work.

Lions Gate’s stock is up more than 75 percent this year. Not surprising, given the huge buzz leading up to the release of “The Hunger Games.”

Still, with a better-than-expected opening weekend, several analysts nudged their profit estimates up for Lions Gate. Some said the stock should hit $16 or higher over the next year.

Shares were up 47 cents, or 3.2 percent, $15 in midday trading Monday.

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TOKYO

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A growing number of colleges are taking extreme measures to attract more students by cutting tuition or speeding up the rate at which they graduate.

While some private colleges are introducing double-digit percentage cuts in tuition or freezing prices altogether, other schools are offering three-year degree programs or four-year graduation guarantees.

In part, these schools are responding to consumers’ concerns about the rising cost of college, said Tony Pals, spokesman for the National Association of Independent Colleges and Universities. "These types of initiatives have been used to some degree in the past, but have become increasingly prevalent since the economic downturn — and we expect to continue to see them spread," he said.

But colleges have their own motivations as well. By offering a more competitive price, they are ultimately hoping to attract more students — and increase their bottom line, said Mark Kantrowitz, publisher of financial aid website Finaid.org.

"This is about boosting enrollment, local competition and improving an individual school’s finances rather than any noble purpose," Kantrowitz said.

While making school more affordable for students has become more common, it’s still far from a widespread trend. Many more schools continue to hike tuition, he said. Overall, tuition at private colleges has been increasing more than 4% each year for the past three years, according to the National Association of Independent Colleges and Universities.

Tuition at a discount: After seeing enrollment decline for the first time in a decade, the University of Charleston, in West Virginia, cut its tuition by 22% to $19,500 per year.

In addition, Seton Hall University in New Jersey, Lincoln College in Illinois, and Pennsylvania’s Cabrini College have all slashed tuition by at least 10% for the upcoming academic year.

5 colleges slashing tuition

But there’s a tradeoff: "Temporary tuition cuts and freezes are usually accompanied by financial aid cuts — so the money isn’t all going back to students," Kantrowitz said.

The University of Charleston, for example, may be slashing tuition but it’s also reducing the amount of financial assistance that’s available to students to $10 million from $15 million.

Instead of making cuts, other schools are freezing tuition at current levels or giving students four-year tuition guarantees.

For the upcoming academic year, Burlington College in Vermont is guaranteeing it won’t increase tuition for four years. Mount Holyoke College in Massachusetts is also holding tuition steady — its first tuition freeze since 1968.

"[C]olleges and universities cannot continue to threaten access and add to already burgeoning loan burdens for students," Mount Holyoke president Lynn Pasquerella said in a statement.

Pals said at least 14 additional colleges have frozen tuition for the upcoming school year — the highest number of tuition freezes on record cash advance flexible payments.

Other colleges are joining forces with community colleges to increase enrollment and lower costs for students.

Baylor University in Texas, for example, is offering a pilot program this fall where students can take most of their classes at a local community college for a year or two before transferring to Baylor, where they will eventually graduate.

Texas students enrolled in the program that take 12 hours at McLennan Community College and three hours at Baylor will pay about $20,000 per year — less than half of Baylor’s $45,000 annual cost, including tuition, fees, and room and board.

A degree in four years or less: With average tuition at four-year private colleges costing $28,500 a year, according to the College Board, failing to graduate on time is a costly proposition. As a result, some colleges are reducing the time it takes to graduate or guaranteeing that students will get their degree in four years.

Beginning next year, Ashland University in Ohio is granting bachelor’s degrees that can be completed in three years instead of four — saving students an estimated $34,000 in tuition costs and giving them a year’s head start in the work force.

College 101: Everything you need to know

Ohio’s Baldwin-Wallace College is introducing a "Four-Year Graduation Guarantee" program this fall. Under the program, the school guarantees that students who meet certain requirements, like maintaining a GPA of 2.0 or higher, will graduate in four years. If not, the college will pay for the extra time.

Some colleges are taking it a step further by offering joint-degree programs that allow students to graduate with both a bachelor’s and master’s degree in four years. Simmons College in Boston is offering joint-degrees in areas including social work and public policy, while Wilson College in Pennsylvania is launching a program that lets students graduate with both a bachelor’s and master’s degree in humanities.

Meanwhile, Lipscomb University in Tennessee is reducing the number of credits students need to take to graduate on time from 132 hours to 126 hours for the 2012 school year — the equivalent of about two classes.

How much does college actually cost?

While tuition cuts and freezes likely won’t have an impact on the quality of the education that the colleges provide — unless enrollments increase so much that the student-to-teacher ratio climbs too high — some fast-tracked degrees are another matter, Kantrowitz said.

"If you eliminate core requirements to become more job-focused, it may allow you to cut a semester off, but the purpose of core requirements is to teach the very basic skills like the ability to write and read critically that also have an impact on job performance," he said.  

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The government announced Thursday a 275 million Australian dollar ($288 million) subsidy for General Motors Co. to guarantee it continues to manufacture cars in Australia for another decade through its subsidiary Holden Ltd.

As part of the deal, U.S.-based GM said in a statement it has agreed to invest more than $1 billion in car manufacturing at its Melbourne and Adelaide plants until at least 2022.

Holden will use the government assistance to design and build two new cars for the global market after 2015, the statement said.

Prime Minister Julia Gillard said GM had considered closing its entire design and manufacturing operations in Australia.

Australian manufacturers including Holden have been losing exports due to the strong Australian dollar, which has been bolstered by record Chinese industrial demand for minerals and energy.

Holden is one of seven global GM operations that designs, builds and sells vehicles for domestic and international markets.

The federal government will provide AU$215 million while the Victoria and South Australia state government will provide the remainder.

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Federal Reserve Chairman Ben S. Bernanke stands to gain two lieutenants with expertise on financial markets if the Senate confirms President Barack Obama

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India will claim capital gains tax on cross-border acquisitions completed in the past six years through an amendment after Vodafone Group Plc (VOD) won a case against such levies, according to Finance Secretary R.S. Gujral.

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