Student Loan Help

It depends when the child is going to be born if the student will earn a dependent or independent status.

The relevant language from the Application and Verification Guide states, “Students who have legal dependents are independent. Legal dependents comprise children (including those who will be born before the end of the award year) of the student who receive more than half their support from the student.

So if the baby will be born before the end of the award year than you may be granted an independent status to get more funds for school, provided you are supporting yourself.

If you still live at home and Mom and Dad are supporting you than the unborn child will most likely be listed under “family size” and that would keep your status dependent as you would still be dependent.

In the wake of the changes in the economy and the increase in students going to college, the face of college campuses has changed along with the times.  Student’s have more options and flexibility for classes such as hybrid classes and getting their degree online. There have been changes that range from different majors offered to increased tuition, to a change in administration at many colleges across the U.S. Outlined below are the 5 top changes that are being seen at colleges and universities throughout the states:

1. Demographics: There are more students over the age of 25 than ever before; recent surveys suggest 40% of the student population is over the age of 25. Also the female to male ratio is said to be 60-40.
2. Community College & Proud of It: gone are the days when you do whatever it takes to get into that prestigious school. People don’t want to burden themselves with debt anymore, especially in an uncertain economy. There is also less judgment on where a person has a degree from when searching for a job. It’s the degree that matters, not really where the degree is from. (no including if you went to an IVY league school..that tends to make a difference).
3. Internet in the Classroom: Many professors have moved away from note writing on the blackboard and turned to planned out PowerPoint presentations, online videos and displays, and even using an online plagiarism tool to scan student’s work for plagiarism (watch out kids!).
4. Online Classroom Influx: The number of students getting their degree in the comfort of their own home has increased dramatically over the past 5 years…so to has the legitimacy of these degrees. This change has allowed  many people to continue to work full time and still earn a degree.
5. Purchase a college: These days parents and adult students are looking at college as a personal purchase…something they buy. If they aren’t fully satisfied with any aspect of it (grades, professor, administrative issues), the consumer speaks up and fights to change it. If a school is disorganized and run poorly, a student will transfer out instead of pushing through it. Hey…your paying for it, so you might as well be satisfied. This also has forced colleges to do everything possible to make the consumer/student content.

What about you? Share your experiences by leaving a comment…or add  ones I didn’t write about. If you are a returning student I would love to hear your comparison of college now as opposed to 5 or 10 years ago.

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Online education has undergone a metamorphoses in recent years, not unlike the ugly caterpillar that blossoms into a beautiful butterfly. The concerns once raised by skeptics centering around the validity and relevance of an online degree in the marketplace have since been quelled. Questions now tend to focused on payment options. I think you may be surprised to learn just how easy it is to finance your online education.

Many online schools participate in the Federal Student Aid grant and loan programs, just the same as any certified ground campus you may attend. That means for schools such as the University of Phoenix, Kaplan University, American Intercontinental University, Argosy University, Walden University, Keiser University, Capella University, Everest University, and Grand Canyon University, just to name a few, federal loans are at your disposal. They are all Title IV certified schools that offer federal aid to their students.

To qualify for federal aid you simply complete your FAFSA and list the school or schools (up to four) that you are interested in attending. The school(s) will then receive a copy of your student aid report from the Department of Education which they use to determine your federal aid eligibility. But for those who do not qualify for federal aid, or don’t qualify for enough, private loans are also available to you.

Private loans serve as a great supplement or alternative to federal loans. And with interest rates at historic lows there has literally never been a better time to borrow the funds needed to help cover the cost of tuition, books, and other direct educational needs.

It is also a good idea to sign-up for as many scholarships as possible. Here at the Student Loan Network we give away free scholarships every month ranging from $500 to $10,000 to eligible students. What students love most is that you don’t need to hold a certain GPA or submit an essay to qualify. If you attend a certified Title IV school located in the U.S. you are automatically qualified. Don’t miss out. To register (click here).

Follow your dreams and find the online degree program that’s right for you.

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As we head into the warm summer months, many students will be turning their focus to seasonal employment, family vacations, and long days at the beach. Student loans rarely find a place on the summer checklist. I’d like to tell you that’s because students have squared away their financial affairs beforehand, but I don’t want to lie to you. Many students just choose to worry about it later, which can leave you scrambling in the fall. So before you engage in your mental holiday lets first take a quick look at the student loan process to make sure you are all set.

1. Make sure you’ve done your paperwork. All federal student loans like the Stafford loan require the completion of the FAFSA. If you haven’t done so, visit www.FAFSAonline.com for tips and suggestions on how to complete this important form and maximize your federal aid.

2. Get your credit cleaned up. While the Stafford loan doesn’t have credit requirements, PLUS and private student loans do, and chances are there’s at least one thing on your credit history that you can clean up to improve your eligibility for these loans.  Learn how to improve your credit score here

3. Determine who’s paying. For Stafford loans, the student is always the primary borrower and has the sole responsibility for repaying the loan after school. For PLUS loans, the parent is the borrower with the student having no legal responsibility to repay the loan. For private student loans, the student is the primary borrower while the parent serving as the cosigner; so while the parent has some obligation if the student doesn’t pay, it’s still principally the student’s obligation. For this reason, some parents prefer to borrow private student loans over PLUS loans.

4. Determine which is the better rate. Work out the numbers as to which of your borrowing options is going to be the best for you, both during and after school. Take a look at this example to see how private student loans and federal loans compare:

http://www.privatestudentloans.com/compare/private-vs-stafford.php

5. Apply for your student loans sooner rather than later. Financial aid offices have never been busier, so the sooner you can get your paperwork done, the sooner you’ll know what other financial aid options you’ll need to pursue. Here’s a handy, one-stop shopping page for you to get to every loan option available:

http://www.studentloannetwork.com/apply/

Bonus tip: ScholarshipPoints members can enter the code SUMMERTIM for 10 sweet points.

It is no surprise that the default rate on Federal student loans is the highest it has been since 1998. It can be kind of tough to make your monthly loan payments when you don’t have a job. With unemployment rising, so to is people’s inability to keep up with their student loan payments. The good news? You do have options if you can’t pay. To find out what your options are you first need to determine whether you have Federal loans or private loans or both.

If you are unsure what type of loans you have, be it Federal or private student loans, then you will need to do 2 things. First, you should check the national student loan database, which will pull up every Federal student loan you have ever borrowed. To access this database you will need your four digit FAFSA pin and your social security number. If you do not know your PIN number you will have to visit the Department of Education’s PIN site first. Once you have figured out what loans are federal, you may want to check your credit report to see if you have any private student loans. If you only got loans by filling out the FAFSA each year then most likely you do not have any private loans. To access a free credit report the best site is annual credit report.com. If you find that you have both federal and private loans, you need to deal with each type of loan separately. Federal loans are entirely separate from private loans, even if they are serviced by the same company.

So what are your options? For your Stafford loans, grad plus loans, and even parent plus loans, you have 2 main deferment choices: unemployment deferment and economic hardship deferment. You also have in school deferment options if you decide to go back to school. In order to apply for one of these options, you will need to either apply online at your loan servicer’s website, or you will need to download a form from their website and mail it in (you can get your loan servicer name directly from the nslds website). In school deferment forms typically need to be mailed in because they must be stamped by your school.

If you apply for a deferment and you are not approved, then you still have options. Forbearance is your next best bet, and you have up to three years of forbearance time with federal loans. Forbearance consists of putting your loan payments on hold. Interest will accrue on the loan and if you do not pay the interest during this period it will be capitalized no more than four times a year. This means that the interest accrued will be added to the principal balance and you will essentially be paying interest on interest. You can typically put your loans on forbearance simply by requesting one through your loan servicer. Remember that you have up to three years of forbearance time.

For private loans, deferment and forbearance options vary by each loan company, and typically provide less time than with federal loans.  You should contact your private loan company to see what your options are.

If you currently have a federal loan or loans in default, and you can’t afford the monthly payments that the debt collection agency is demanding, you should call the US Dept of Education’s default center at 1800-621-3115. They can buy your defaulted loan from the agency and work out a rehabilitation program with you. If you just ignore your defaulted loan then eventually the government will garnish your paycheck and take your tax returns and part of your social security benefits.

I found this article from the Washington Post and found it to be interesting because it gives insight from the financial aid administers view. It also backs up my theory that students should (and probably need) to start considering schools because of their cost, and not focusing all on the school’s reputation. While you may not realize it now, student loans can be seriously affect your financial future, and borrowing excessive amount of student loans to attend a private university may not always make sense for you and the career path you have chosen.

College: How to Pay for It

By Stacey Garfinkle

The college decisions are mostly in and there’s lots of good news for the high school class of ‘09: Many private colleges accepted more applicants than usual this year. The bad news is the reason why: the recession.

Colleges this year are expecting the economy to affect the numbers of teens who choose to attend their schools. Surveys point to families looking much closer at financial aid packages. “Students are shopping around — no doubt about it,” Phil Day, president of a financial aid administrators association, told The Post.

And that’s exactly what they should do, according to Seth Allen, the dean of admission and financial aid at Grinnell College. Allen is also a member of the Board of Directors of The Common Application. Here’s some of a Q&A with him on financial aid:

Q: How should families approach financial aid? What can they expect?

Allen: The first thing I think, there are families out there who make a reasonable income. They feel comfortably well-off. They might be inclined not to apply for financial aid. That’s a mistake. A two-income household with one child that makes over several hundred thousand dollars is not likely to qualify for aid. But somewhere south of that, even families who earn $150,000 to $180,000, they really should sit down and fill out the Free Application for Federal Student Aid (FAFSA) — that’s the base instrument almost universally used by colleges/universities for need qualifications.

Step Two: While I’m sure financial aid offices don’t want to be inundated, there seems to be a hesitancy to engage financial aid offices about what might be available and if a family might qualify. Without FAFSA data, the aid office can’t give a specific recommendation, but they can talk to a family in general and give very good guidance to the family about what they might expect. A typical aid package is composed of three components: Grants from the college or university are typically the largest. The money is given to the student and family to fill part of the gap between what the college expects the student to pay and total cost of attendance. The second component is loans. Students, especially very needy students, are packaged with favorable loans and low interest rates [Sallie Mae recently changed the payback policies for its student loans so that students make interest-only payments while they are in school rather than fully deferring payments]. The third component is a job on campus, which is typically packaged as a federal work study job. The government earmarks money to colleges and universities to subsidize college jobs.

On their Web sites, colleges will often report out the average need-based package. That can give families a sense. They shouldn’t read it as “if I apply, that’s what I’ll get.” But it is a proxy about the kind of package they might expect to see.

So, what should a family do if their 529 accounts have plummeted?

Allen: Colleges would take the 529 as an asset specifically earmarked into college and factor that into family contribution. Most financial aid is not done on a real-time basis. It looks back at the previous year and what was available at that time goes into the calculation for the next year. Could a family make an argument if their savings and 529 have gone down dramatically? They probably could. And if the college has the resources to meet that need, it would be likely to do that.

Families now are going to feel far needier than they’ve felt in years, collectively. Colleges recognize that. At the same time, some of the income that colleges have relied on from endowments has gone down as well. I’ve heard from many institutions that they are going to put more funds to financial aid. At the same time, those are not limitless funds. Families need to be aware that colleges don’t have the same strong income that they’ve had in prior years [donations and endowments are down]. There’s potential this year more than in the past that they won’t be able to fund that gap.

What else should families consider?

Allen: Financial aid officers have the ability to make professional judgment calls. Families fill out an FAFSA and a CSS profile, send that in, and that helps the financial aid office make a calculation. Oftentimes, family situations aren’t that neat and tidy. Families have expenses that put pressure on finances that make the federal calculation of need not workable. If they have other kinds of qualified expenses, they can submit documentation to the financial aid office that establishes those expenses as legitimate and they can take that into consideration to recalculate. That’s one way families can find ways to afford college this year.

For example, a student might have a sibling at a private school. That’s not automatically taken into consideration and isn’t asked for on an FAFSA form. Many colleges consider that a legitimate expense and can take that off of the family’s income. That will make the family more eligible for a larger aid package.

Another example is the cost of living differentials in different parts of the country. The basic costs of living in D.C. are far higher than if you lived in the Harrisburg, Penn., area. Not every aid office will have a policy to do something with that information. But families could make a case for the allowances given housing and cost of living costs in your area. Where they may not help is something that’s clearly a voluntary choice — for instance, I live in New York and I want a break because I live in the West side in a very expensive apartment. You could live in less expensive place in New York.

What about other government aid?

There’s not a lot at the moment that we really know for sure with the new administration and secretary of education. But there are some nice things in the stimulus package that would be good for families to understand.

• Pell Grants: For very low-income families, the federal government grant is increasing by roughly $600 dollars from this year to next year. That will help make college a little more affordable.
• American Opportunity Tax Credit: This is up to $2,500 for families and is partially refundable. Very low-income families can get up to $1,000 back. So, it doesn’t help on the front end. However, the income levels on this have been raised dramatically. Under old tax credits, income levels were under $100,000. Under the new plan, the adjusted gross income is up to $160,000 for married couples. It should hit a broader swath of the middle class who, I think, is acutely feeling the pinch of these college costs. For full article click here.
  

If you haven’t heard, one of President Obama’s proposed changes for the Stafford loan program is to eliminate the FFEL program, which stands for the Federal Family Education Loan Program. This basically consists of private lenders who lend out Federal loans. Currently there are 2 types of programs that lend Federal loans, FFELP and Direct loans. Direct Loans are loans lent directly from the government. The President has proposed to eliminate the FFEL program and run all Stafford loans out of the Direct program. About $76 billion in loans has been lent out for this current school year, of which only $26 billion was lent by Direct Loans. Here is a recent article posted by the Wall Street Journal that details how politics are already playing a role in this fight between companies from the FFELP and the Direct Loan Program:

Private lenders Brace for Fight Over Student Loan Role

By ROBERT TOMSHO

With the Obama administration proposing to cut private lenders out of the federal student-loan business, financial companies are intensifying efforts preserve their role.

Private lenders in the so-called Federal Family Education Loan Program, or FFELP, have lent more than $56 billion in the current school year. The federal government has lent about $20 billion directly. In his budget, President Obama says the government, which pays billions of dollars of subsidies to FFELP lenders, would save money by eliminating the program using private companies.

The latest skirmish in the contentious political battle erupted Thursday when the U.S. Department of Education released preliminary data comparing FFELP loan-default rates with those in the federal direct loan program.

The data indicated a 5.3% default rate in the direct lending program for the fiscal year ended Sept. 30, 2007, compared with a 7.3% default rate for FFELP, which has been the primary source of college financial aid since it was launched in the Johnson administration during the 1960s.

Industry analysts attributed the difference to the mix of schools in the two programs, with the FFELP program lending more to students from for-profit schools. They tend to have higher default rates than other student borrowers.

Private lenders and their trade groups were caught off guard by the data’s release and portrayed it as a strategic maneuver designed to advance President Obama’s plan to eliminate FFELP.

Brett Lief, president of the National Council of Higher Education Loan Programs, a trade group representing FFELP lenders and loan guarantee agencies, said he could not recall the department ever releasing preliminary default rates or separate numbers for the two programs.

“We have never seen the rates broken down,” Mr. Lief said. “It’s unfortunate that the rates are being released before there is an analysis of them,” he added. “This is very serious stuff and I’m saddened that it has come out like this.”

Some outside observers agreed that politics played a roll. Default rates “become a critical issue as folks are talking about a new model for student lending,” said Tim Ranzetta, president of Student Lending Analytics, a research concern based in Palo Alto, Calif. “I’m sure that’s probably why the department put these numbers out.”

Department of Education officials said they released the loan-default data in response to a U.S. Freedom of Information Act request from The Wall Street Journal as well as inquiries from members of Congress.

In response to the release, SLM Corp., the mammoth student lender better known as Sallie Mae, issued a study of its own Thursday. It indicates that borrowers who took out FFELP loans through Sallie Mae were 30% less likely to default on them than borrowers who used the federal direct loan program. Sallie Mae attributed the difference to default prevention programs it uses in conjunction with state loan-guarantee agencies.

Robert Shireman, a senior advisor to Secretary of Education Arne Duncan, said he had not read the Sallie Mae study and could not comment on whether it is accurate.

On Thursday, the Consumer Banking Association, a trade group that represents many FFELP lenders, sent members of Congress a petition signed by 2,500 college financial aid administrators, parents, students and others. The petition urges Congress to reject the president’s proposal to eliminate FFELP.

The president himself is being lobbied by elected officials such as James B. Lewis, New Mexico’s state treasurer. In a letter Thursday to the president, Mr. Lewis, a Democrat, praised the personal service and debt counseling offered by FFELP providers in his state and said the program’s end “would be detrimental to the success of our college-bound students and to the health of the economy, with our state experiencing the loss of over 170 jobs.”

Industry observers say the debate over FFELP’s future is likely to be long and complex. The Congressional Budget Office recently estimated that ending the program will save the government nearly $100 billion over the next decade. President Obama — whose own estimate of the savings is about half that — has said he will use the savings to increase funding for federal Pell grants for low-income students.

The potential boost for Pell will make it difficult for members of Congress on both sides of the aisle to oppose the elimination of FFELP, said Terry Hartle, a senior vice president of the American Council of Education, a trade group representing colleges.

He added, however, that many of the state guarantee agencies that help service FFELP loans have strong political support in their home states and noted that, in a recent letter to colleges, Sallie Mae suggested that additional money for Pell might be found within the federal loan system while still maintaining elements of FFELP.

“It’s certainly possible Congress would eliminate the program,” Mr. Hartle said. “But it’s equally possible – and perhaps more so – to wring more savings out of the program and put the savings into Pell.”

So what do you guys think? An important note to make is that even though the Stafford loan has two different programs right now, the loan terms do not vary. Your interest rate with Direct loans is the same as your interest rate for a Stafford loan from a private lender.  So sound off on this guys/girls…it is sure to be in the news more and more as this fight wages on.

Recently, President Obama has been talking about his plans to make college more affordable for families and students. The President’s plan is to increase the Pell grant, and make Federal student loans more accessible to students. Students from Kent State University recently asked Obama about his plans and when exactly those changes would take effect:

President Obama is pushing his budget proposal to overhaul the entire education system throughout the U.S. His plan would affect students of all ages with a goal of improving education levels all across the U.S. starting with preschool aged children. In a recent speech to the US Hispanic Chamber of Commerce, Obama began to divulge what exactly he has in mind for this giant overhaul. He spoke of a 5 tier reform plan that touches on what seems like every stage of the educational process. The President was quoted as saying, “We have let our grades slip, our schools crumble, our teacher quality fall short and other nations outpace us…The time for finger-pointing is over. The time for holding ourselves accountable is here.”

The 5 reform points that he spoke about are as follows:

1. Increase investments in early childhood programs such as Headstart etc.

2. Holding students accountable for higher/tougher testing standards

3. Increase teacher training and recruitment, and offer “merit pay” (teachers that produce more results will get paid more than others). Along with that, ineffective teachers would be let go if they fail to improve.

4. Renew his campaign for the support of charter schools. (definition of a charter school = Charter schools are elementary or secondary schools in the United States that receive public money but have been freed from some of the rules, regulations, and statutes that apply to other public schools in exchange for some type of accountability for producing certain results, which are set forth in each school’s charter). President Obama also proposed longer school days.

5. For Higher Education he wants to increase the annual Pell Grants maximum to $5550, and push for students from working families to receive a $2500 tax credit.

I can only imagine that the republicans must be reeling…especially about the money for Headstart. Also included in early investments was an idea to have registered nurses visit the homes of single moms regularly to make sure their children are healthy and ready for school life. Not a bad idea, but who will run this program? I will say that he has a point when it comes to holding students and teachers accountable for their performances. Have you ever had a bad teacher? I have, and it made me lose any interest I may have had in the subject at hand. Frankly our country collectively cannot really afford to have children caring less about school than some of them already do.

For those students that are fortunate enough to go on to college, Obama has some plans there as well. The Pell grant is a Federal grant given to students who exhibit more financial need than others; this “financial need” is determined when you fill out the FAFSA (Free Application for Federal Student Aid). Obama proposes to raise the annual maximum amounts on that grant from $4,731 for the 2008-2009 school year to $5350 for the 2009-2010 school year, and then increase it again to $5500 for the 2010-2011 school year. The unsubsidized loan amount for dependent students is currently $2,000, but Obama’s stimulus plan will add an additional $2000 to that, which will help a lot of students out whose parents cannot afford to help them through college. The President also proposes to eliminate the FFEL loan program (private lenders who lend Federal loans) and have all Federal loans run through Direct Loans (the U.S. Department of Education’s Loan program); but wait, there is more….the Perkins loan, which is another federal loan awarded based on need, is typically run through the college itself, but Obama is proposing to shift that loan program so it is run through the government. Now I have my loans from my undergraduate degree with Direct loans, and the customer service is definitely not top notch. I am wondering how the Department of Education is going to manage all the loans that are currently in the FFEL program AND all the Perkins loan and still make sure that those loan programs don’t fall at the waist side. I personally do not see it happening…and didn’t Clinton propose this at one point, but it failed?

A student tax credit is also part of this the Presidents budget proposal, which would put an extra $2500 in students’ pockets. This is definitely helpful to any student in school, and it can also serve as an incentive for someone to go back to school and finish their education.

This new budget proposal has a lot of big ideas, some of which already have the necessary platforms to execute the new plans. Others however do not. It seems like all the ideas would help to improve the education system in the US, but the road to get there might be a long and bumpy one.

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At this time last year the prime rate, which is the benchmark widely used to determine the interest rate on a number of loans, was a respectable 6%. Today, that rate is a jaw dropping 3.25%, the lowest it’s been since 1955. To put that in perspective Dwight Eisenhower was our President, a first class postage stamp cost 3 cents, and Marty McFly was desperately trying to get back to the future. I guess the more things change the more they stay the same. But how can you benefit from a low prime rate?

Many private student loans are tied to the prime rate index, and since the prime is at historic lows the cost of borrowing is significantly lower than it has been in years. This fact has parents and students debating whether they should take out a private or federal student loan. Undoubtedly your qualifications and priorities will serve as your guide when making this important decision, but there are some key factors and benefits to consider during your deliberation process.

Information provided by the Student Loan Network for general information purposes only.

As you can see, variable interest rates for private student loans start at 2.75% (because the prime is 3.25% and rates start 1/2 point below prime). However, the catch-22 for many Americans is that while this favorable rate exists it is not attainable.

Low interest rates are reserved for those with strong FICO scores, an endangered group which dwindles by the day. Millions of Americans have been defaulting on loans over the past 18-months sending their credit score into a damning abyss. A compromised credit score essentially disqualifies you from the most salutary interest rate in the market. And it’s not just the borrowers with a scar on their credit history that are facing new hurdles; the pinch is being felt across the board. Those with stellar credit are adjusting to new requirements as well.

Most lenders, regardless of the individuals credit score, are requiring a co-signer on all applications to protect themselves. But finding two credit worthy applicants is a harrowing task in today’s market, which makes federal loans the only realistic option for many desperate students.

Federal loans serve as a dynamite need-based option for those seeking funds for school. You don’t need a co-signer, and eligible students can actually qualify for more funds if their parent or guardian has poor credit. To qualify for a federal loan you must complete a FAFSA, and must also attend a qualified Title IV school. That said, federal loans do have a few drawbacks.

First off, the maximum yearly allotment is relatively small in relation to the cost of tuition, and will most likely only cover a fraction of the tuition cost. Next, the interest rate is fixed and can not be decreased for the life of the loan. Third, some lenders charge a 1% origination fee off the topic. And lastly, many feel the current Stafford loan rates, which range from 6% to 6.8%, are outlandishly high in this market.

As you can see each loan type has its advantages and disadvantages.  Just be sure to do your homework before you sign on the dotted line.  If you do you’ll be sure to ace your tests inside and outside of the classroom.

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