Student Loan News, Updates and Blog Posts

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.

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.

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.

So much of life is being in the right place at the right time.  The guy behind you at the convenient store may be the one to scratch that winning lotto ticket while you may be the one that gets hit pulling out of the parking lot.  It’s all about timing.  It’s all relevant.  It’s all this thing we call life.

America has seen a surge in the average age of students enrolling in college (non-traditional) over the past few years since the economy went south.  For once being older may work in your favor.

When completing the FAFSA, if you are under the age of 24 you are listed as a dependent student, unless you are emancipated or married for the most part.  That’s why many students get so frustrated.  Those who are say 22 and living on their own still need to list their parents information on their FAFSA despite the fact that their parents are not helping pay for college.  It doesn’t really seem fair.  But for all of you nontraditional students (ages 25 or older) you can rejoice.

Gone are the days of listing your parents income.  Finally you can cash in on the fact that you barely have enough money for a slice of pizza on a Friday night.    And if you have children, even better.  All of these factors work in your favor to help maximize the federal aid you are eligible for.   And you thought getting old was a bad thing.

File Your FAFSA

One of the most common statements I hear from my college friends is that their parents never let them fill out a FAFSA. This is a frequent and sometimes costly mistake that students and their parents make when financially planning for college. The following are a few of the main reasons why people do not file the FAFSA and why you should not fall into the same trap.

Reason #1: I will not be eligible for financial aid.
According the Department of Education, approximately 1.5 million students who would be eligible for the Pell Grant do not complete the FAFSA. Could you be one of these people? The only way to even be considered for Pell Grants, Perkins Loans and Stafford loans is by filling out a FAFSA. Additionally, many colleges offer other kinds of financial aid that is not need based, but you still might need to submit a FAFSA to qualify. Some of these scholarships and grant programs are strictly designed for students who have been denied federal aid.

Reason #2: My parents do not want to disclose personal financial information.
This is probably the excuse I hear most often. The good news is that the information that you submit with your FAFSA is strictly confidential. Only a handful of people ever see the information. Try to be proactive in helping your parents understand the benefits.

Reason #3: The FAFSA is long and complicated. Filling it out will not be worth my time.
Although the FAFSA involves gathering a lot of information and can take a significant amount of time you should not dismiss it. College is going to be hard so the FAFSA will be good practice! In all seriousness, the FAFSA is free so why not take a couple of hours to talk to your parents, gather the necessary information, and fill out the form online. You could find out that you are eligible for a lot of financial aid. Also, changes are coming for FAFSA in 2010 so it will be shorter and more manageable than it was before.

When you hear the term “federal student aid” that can be classified into one of three categories.

Grants: Free money that doesn’t have to be repaid, except in some cases when you withdraw from school.

Work-study: You earn money to pay for your education.

Loans: You borrow money for school, which you must repay with interest.

With students scrambling for ways to pay for college one option does exist, although it may not be your first choice. Uncle Sam is still looking for recruits for the military and willing to pay you money toward your education to boot. I actually tried this route when I was 17, but was medically discharged before I even boarded my flight to the Great Lakes due to the discovery of a circulation problem I have called Raynaud’s.

So how does the Post-9/11 GI Bill work exactly? I’ve outlined the specifics for you below.

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. You must have received an honorable discharge to be eligible for the Post-9/11 GI Bill. The Post-9/11 GI Bill will become effective for training on or after August 1, 2009. This program will pay eligible individuals:

• tuition & fees directly to the school not to exceed the maximum in-state tuition & fees at a public Institution of Higher Learning. see chart listing 2008 – 2009 maximum rates.
• a monthly housing allowance based on the Basic Allowance for Housing for an E-5 with dependents at the location of the school.
• an annual books & supplies stipend of $1,000 paid proportionately based on enrollment
• a one-time rural benefit payment for eligible individuals.

This benefit is payable only for training at an Institution of Higher Learning (IHL). If you are enrolled exclusively in online training you will not receive the housing allowance. If you are on active duty you will not receive the housing allowance or books & supplies stipend. This benefit provides up to 36 months of education benefits, generally benefits are payable for 15 years following your release from active duty.

For more information you can visit the United States Department of Veterans Affairs.

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I’m happy to say I don’t hear this claim often, about children forging their parents name on student loans, but I do hear it enough that I felt it was blog worthy. Parent Plus loan are probably the most victimized loan type.

The Parent Plus loan lists the parent as the primary borrower on behalf of the student. Students generally become familiar with the Parent Place loan when they see it listed on their Awards Letter from school. Awards letters generally outline work-study, scholarships, grants, and loans (such as the Stafford and Parent Plus loans), that students and their parents may qualify for.

Repayment on the Parent Plus loan does not begin until the student is out of school (this repayment change went into effect last summer), so the student could literally take out a loan in the parents name each year without the parent being the wiser until the bill comes rolling in after graduation.

If you fear your student has signed you up for a federal loan and want to check you may contact the Department of Education at 800-433-3243 and request to speak with the borrower tracking department. If you confirm that a loan has been taken out in your name you may contact the DOE’s Office of Ombudsman, as they help resolve disputes and solve other problems with federal student loans. They may be reached at 877-557-2575.

It was Benjamin Franklin that quipped, nothing is certain but death and taxes, but in the world of financial aid the FAFSA is at the top of that short list. Completing your FAFSA is an absolute must. Without it I can tell you with great certainty that you will not receive federal grants or loans, so kudos to you for getting that done.

For those who have not yet completed the FAFSA, or wish to review our tips for effectively filing your FAFSA, in order to maximize your financial aid benefit package, (click here). Remember, you can always resubmit your FAFSA with updated data, which may lower your EFC (we’ll discuss EFC in greater detail shortly).

For the rest of you that completed and submitted your FAFSA and are wondering what to do next; you’ll have to wait as the Department of Education processes your application. When they’re finished they will send both you and the schools you highlighted on the FAFSA a three page report called a Student Aid Report (SAR).

The SAR is a report of what the government believes you can afford to pay out of pocket for college in the form of EFC, or Expected Family Contribution. This number is located in the top right hand corner. The lower the EFC number the greater the financial need.

As mentioned, the SAR is also sent to the colleges of your choice (up to six schools max), from which they create a financial aid awards letter detailing what aid they’re able to offer you. You will most likely receive this awards letter in the mail.

The awards letter is a comprehensive breakdown of all school related expenses, scholarship and grant money you qualify to receive, work-study eligibility, as well as the financial resources the school feels you have at your disposal to pay for one year of attendance. They also give recommendations as to the best loan options available.

The most common loan option students take advantage of when paying for school is the Stafford loan, which is divided into two categories, subsidized and unsubsidized.

Subsidized Stafford loans are awarded based on financial need. You will not be charged interest before you begin repayment or during periods of deferment. The federal government “subsidizes” (or pays) the interest during these times. No payments are expected on the loan while you are enrolled as a full or half time student.

Unsubsidized Stafford loans are not awarded based on financial need. Any eligible student can take out Unsubsidized Stafford Loans. You will be charged interest from the time the loan is disbursed, to the time the loan is repaid in full. No payments are expected on the loan while you are enrolled as a full or half time student.

Learn more about Stafford Loans.

For the upcoming 2009-2010 academic year the interest rate for subsidized Stafford loans, for undergraduate students, is fixed at 5.6%. If you fall into the unsubsidized category you will be extended a 6.8% fixed interest rate.

Private loans have also become a very attractive alternative these days with the prime rate at a 55-year low. Most private loans do require a co-signer. But the key is to send your FAFSA to as many schools as possible in hopes of fielding some attractive offers and limiting the amount of funds you need to borrow.

If you list multiple schools on your FAFSA you can use one school’s offer (awards letter) against another to try and land a better deal. Most schools generally set a May 1 deadline, which is why the financial aid officers refer to April as haggle month. Students and parents generally try to haggle for a better deal before the May 1 deadline.

So as you can see the FAFSA is just the beginning of the financial aid process, with many more steps in tow. But unlike the little engine that could, which repeated its motto I-think-I-can, as it climbed over that mountain top, I-know-you can! I know you can get thru the financial aid process, although sometimes it can seem daunting and overwhelming. You can do it, I just know you can.

Apply for a Federal Stafford Loan Now.

For all you hungry scholarshippoints members out there enjoy this code worth 10 points, FAFSADONE.

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There is a new economics stimulus Bill that has been introduced into the House of Representatives, that could potentially increase your student aid package that you receive from your school.

The stimulus bill, would be part of the “American Recovery and Reinvestment Bill of 2009″ which is being designed to hopefully save millions of jobs, jump start the economy, and (cross your fingers) give you more financial aid:)

Here are the details:

• Raise Pell grant maximum by $500 (from $4,850 to $5,350)
• Increase unsub max amounts by $2000
• provide $490 million dollars extra for work study for undergrad and graduate students
• Provide $50 million to help the Dep’t of Ed administer new and surging student aid programs through this ever changing educational environment

Sounds pretty good to me…except the Stafford loan sub and unsub limits still don’t come any where close to covering tuition at a private university. Thoughts on this new proposal?