Student Loan News, Updates and Blog Posts

After you file your FAFSA and receive your financial aid package from your school either you or your parents might be unhappy with the results. When this happens your first instinct might be to write an appeal to the financial aid office. While this might be the right move in some situations other people should think twice before making a call to the college.

With so many families experiencing unemployment and salary reductions the number of appeals that financial aid offices are seeing is on the rise. Financial aid officers realize that this is a hard time for many families and they are doing everything they can to meet the need of every student. It is important to put your families’ financial situation in perspective. Although everyone has a different situation you should think about your income in the grand scheme of things. If you are a parent, see if there are places in their budget where they can make sacrifices to send their children to school. If you are a student, see if you can save a little bit of money from your summer job to put towards your education.

If you still need to make an appeal there are a few things you can do effectively communicate your situation. First, make sure you know what you are appealing. To some families an appeal is an automatic reflex. Often times parents do not know what they are appealing, they just know that the package is not enough. Secondly, try to peak with a financial aid officer over the phone Many schools encourage parent phone calls and will field as many calls as possible. This is much easier at smaller schools, but larger schools try to accommodate phone calls as well. A phone call will make it much easier for you to understand the financial aid officer and for them to understand you. Finally, make sure you have clear documentation as proof of your current income. A financial aid officer will not be able to guess your income so it is important to present your families’ current situation as clearly as possible.

Last week I chronicled the various ways you can complete your FAFSA in a blog entitled FAFSA Applications.  One of those ways was mailing in your FAFSA.  But what happens next?  How long does it normally take to process when you mail in your FAFSA application?

Your FAFSA will be processed in two to three weeks. But, before mailing it, you should check to see if your school, or a school that you’re interested in, would submit your FAFSA electronically for you to speed up that process.

If you do not hear anything within three weeks of the date you submitted your application, check your status through FAFSA on the Web. You can also check your status by contacting the Federal Student Aid Information Center at 800-4-FED-AID.

File your FAFSA today!

If you are a parent of a prospective college student, or a prospective college student yourself, you should be starting to think about financial aid. You have probably heard people around you talking about FAFSA, Stafford loans, Pell Grants, scholarships, and alternative student loans. It might seem like you are the only one who does not know what is going on, but trust me you are not alone in your confusion. Applying for financial aid can be very stressful for families and filing the FAFSA is a task that most people dread.

In order to be eligible for any kind of Federal student loans or grants you must file the FAFSA. Many people play down the importance of the FAFSA, but it should not be taken lightly.  Mistakes on this form can end up costing you thousands of dollars in aid. Luckily there are people out there who know a lot about financial aid and might even be able to help you with the application process.

Many high schools and communities host financial aid and FAFSA workshops. These are usually free sessions run by the high school guidance department, a local college or outside consulting group. These workshops usually go over a general look at financial aid, applying for student aid, why you should file the FAFSA, determining financial need, and tips and techniques for filling out the FAFSA.

If you are perplexed by the financial aid process make sure you find out if your town is holding a workshop. If they are not planning one it may be beneficial to suggest it to the high school principal or guidance department. The U.S. department of education even provides resources and presentation materials that make hosting a financial aid night more manageable. After attending a financial aid or FAFSA session you will probably find out that you are not the only one who feels lost, but you will also probably feel more confident and ready to tackle the application process.

The day you can hoist your graduate degree overhead will be a proud day no doubt, but then the reality sets in.  How much did I borrow for this piece of paper exactly?

The truth is most students have no idea how much they borrowed.    Grants, federal loans, private loans, work-study, and scholarships fall under one giant umbrella to most.  Their philosophy is simple, why worry about it today when I can worry about it tomorrow?

Well, when tomorrow comes knocking it will serve you well to have a game plan.  Today we shall focus on federal loan deferment. Keep in mind that deferment is not a means to an end, but rather, a way to stay afloat if you are having trouble making your monthly loan payment.

There are two common deferment types that are utilized.  The first one is the Economic hardship deferment.  In order to qualify for this deferment type you must fall into one of the following categories:

• You are receiving payment under a federal or state public assistance program, such as Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Food Stamps, or state general public assistance.
• You are serving as a Peace Corps volunteer.
• You are working full-time and your total monthly gross income from employment must be less than or equal to the larger of (A) the monthly minimum wage rate or (B) 150% of the Poverty Guideline amount for your family size and state.

The second deferment type is loan forbearance which anyone can basically receive.   The big distinction between the two deferment types is that while in forbearance interest accrues on the principal and any capitalized interest. Your debt will continually increase while in deferment making your repayment period longer.  When you are in an economic hardship deferment no interest accrues on your subsidized loan portion.

You have 36 months of federal loan deferment entitlement regardless of which deferment you take advantage of and must reapply every 12 months if you wish to continue in your deferment state.

Yes, a third party with power of attorney for the borrower may sign a Stafford promissory note if the borrower is unable to sign.

Use of a power of attorney when signing an MPN limits the use of the MPN to
one loan. If the borrower submits his or her MPN through the school, the school must retain a copy of the original power of attorney and submit a copy with the MPN to the loan holder. A photocopy or a fax of the power of attorney is acceptable.

If the note is signed with a power of attorney, the student must authorize the
school in writing to credit the loan funds to his or her account at the school. In addition, the school must pay any remaining balance to the student for living expenses.

These days most students complete their FAFSA application form online.  However, you do have other options.  Let’s take a look at all three ways you can file your FAFSA.

• Online application which goes directly into the Central Processing System. This is the most popular option today.
• A Financial Aid Officer at your school can submit your application through FAA Access or CPS online. If you are not computer savvy this is probably the best way to complete your application.
• A Paper FAFSA application, which you can get through your school (although they can only request 50 copies each semester), by calling 1-800-4-FED-AID, or by simply (clicking here). For those weary about putting their personal financial details into the computer a paper application is probably for you.

Important note: You need a PIN number to complete your FAFSA online.  Your PIN number serves as your signature and should never be shared with anyone.  You can visit www.pin.ed.gov to request a PIN number.

Although your college age student is blossoming with independence and probably cannot wait to get out of the house, there are some aspects of going to college that he or she is going to need your help with. You have probably been urging  your child to search for scholarships, gather letters of recommendation, and fill out their applications on their own. These are all important parts of the college application process that they should be able to handle, but one thing that they will definitely need your help with is filing the FAFSA.

Submitting the FAFSA should be a top priority  for both you and your child. The FAFSA is a prerequisite to receive any federal financial aid including subsidized and unsubsidized Stafford loans and the Parent PLUS loan. In order to maximize the amount of aid your child is eligible for the FAFSA has to be filled out completely and accurately. Your child’s FAFSA must include your financial information. Since he or she is probably not aware of your tax information and probably does not know exactly how much you and your spouse make, it is important that you guide them to avoid any mistakes. It will benefit you because the more financial aid your child receives the less you will have to pay. Although you might end up doing a lot of the work, make sure your child is aware of the financial aid process because they will be committing to loans that they will be responsible for after graduation.

Today the FAFSA can be filled out online. This is helpful because the answers are reviewed electronically before the application is submitted leaving less chance for error. The application can be saved and accessed from any computer so that you and your child can complete it in more than one sitting.  Additionally, this year the FAFSA will be shorter and easier to fill out that it has been in the past.

Are your Mom and Dad not willing to file the FAFSA with you because they don’t want people knowing their earnings? Are they instead willing to co-sign on a private student loan?  If this is the case the logic behind their actions is illogical.  In fact, you should direct them toward this blog as I will chronicle why their judgment is severely lacking and will only hurt you in the long run.

• By filing the FAFSA you open yourself up for all types of financial aid which includes scholarships, grants, and work-study programs.
• When you file your FAFSA you become eligible for a federal Stafford loan which is in the students name only.  Mom and Dad do not need to co-sign for a Stafford loan like they would for a private student loan.
• You enjoy the security of a fixed interest rate
• You have three years worth of deferment time attached to a federal loan opposed to 1-year on average for private loans
• You may be eligible for 100 percent loan forgiveness if you work in certain fields. Private student loans do not offer forgiveness potential.

The one thing I will say about private loans is that interest rates are very low at this time which is one reason some parents prefer the private student loan to the federal, and if this is your logic it makes good sense.  In fact, after federal aid options are tapped many parents end up subsidizing the rest of their students education with a private loan.  This too is smart. But the parents who are steadfast on protecting their private information are doing so at the detriment of their child.

Below you will find two sample Graduate Stafford loan Award Breakdowns

Sample 1

Student’s Cost of Attendance is $19,000

EFC is $13,000

Student is eligible for:

$6,000 in subsidized funding, (COA-EFC)

$2,500 in unsubsidized funding

$10,500 in additional unsubsidized funding (same loan as the unsubsidized)

$19,000 total

Sample 2

Student’s Cost of Attendance is $23,000

EFC is $13,000

Student is eligible for:

$8,500 in subsidized funding, (COA-EFC  maxes out at $8500)

$12,500 in additional unsubsidized funding

$20,500 subtotal Stafford Loan Eligibility

Additionally the school may suggest a Grad Plus loan for the $2,500 shortfall.

Tuesday Rant – Opinion Piece

Here’s something you will never hear legions of die-hard fans chanting at a home game. We’re an average team – neither terrible or great. We’re somewhere in the middle – that’s not open for debate! Woo hoo!

No one wants to be in the middle yet the middle is where many of us find ourselves, the middle class that is. The middle class is where most Americans reside.  It’s where money gets tight.  And when it comes to financial aid, being stuck in the middle earnings category is like a death sentence. Ok, I may be going a bit over bored with that statement but it certainly has some serious disadvantages.

People who come from low-income families generally qualify for a wide array of financial aid because of their outstanding need. That need is based off the expected family contribution number (EFC) generated from the FAFSA.  In the case of low income families their EFC will come up zero qualifying them for maximum aid benefits. Federal aid, institutional scholarships, and work-study programs allow many to enroll in some of the top schools in the U.S. at a fraction of the cost.

On the other side of the coin you have those who come from high-income families. While they will not qualify for federal assistance the family can usually afford the cost of higher education with little problem. That only leaves the lonely middle class with their pockets empty.

For the middle class student scholarships are often your best bet, and it’s all about power in numbers.  Apply for as many as you can.  You can checkout a scholarship database that houses hundreds of scholarships or enroll in a free scholarship program that give money away each month.  True, the middle class may have to work a little harder to get the aid for school they so richly deserve, but the money is out there if you put the time and energy into the search, and I know you will.  The middle class is always willing to work a littler harder.