05.16.13 | Elizabeth Warren Calls for Student Loan Changes

Posted in Financial Aid, News, Stafford Loan, Student Loans by Student Loan Network Staff

Last year at this time, the big issue in the news was the impending doubling of student loan interest rates. The interest rates of Subsidized Stafford Loans were set to double from 3.4% to 6.8%. Before this could happen, Congress stepped in, temporarily lowering them for another full year.

That extra year of low rates is now coming to a close, and rates are once again set to double. This is why Senator Elizabeth Warren has introduced the Bank on Students Loan Fairness Act. This act would allow students to borrow at the same rate as banks, which is about “one-ninth the amount that students are asked to pay”.

Here is a quick list of what this bill seeks to do:

  • The bill would charge students a rate equal to the rates banks are getting from the government (for subsidized loans only)—a rate of less than 1%.
  • Loans would be funded through the federal reserve, with administration by the Department of Education

Senator Warren gives an excellent overview in her introduction of the bill to the Senate Committee. Watch it below.

04.25.13 | The 6 Costliest Student Loan Mistakes

Posted in Financial Aid, Repayment, Scholarships, Student Loans by Student Loan Network Staff

Damaged Piggy BankMistake #1: Not comparing college costs

Colleges all write their financial aid award letters differently. Some count student loans as self help, others may include it in your financial aid total. Comparing your awards, item to item, can give you a better picture of where you stand financially with a school. Feeling ambitious? Figure out how much student loan interest will accrue over 4 years at each school to see how your choice can affect you when you graduate.

Mistake #2: Not applying for scholarships throughout college

The biggest student loan mistake you can make is taking out more than you need to. Many students stop searching for scholarships after their freshman year, but by applying regularly, you’re more likely to win money for school and need to take out less loans over your college career.
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04.16.13 | When to Get Student Loans

Clock Tower in SpringFamilies everywhere are currently sweating over financial aid award letters, trying to decipher aid and make the huge decision about which school is the right choice for both the student, and family finances. However, once the college decision is made, there is still a lot to do, including applying for student loans!

To help families through this award letter season, here is a breakdown of how and when to accept—or apply for—all types of student loans.

Perkins and Stafford Loans

When to Accept: April-May for Fall semester
How: For these loans, students can simply accept their loan amounts through the financial aid office. To finalize the acceptance and before they can receive the loan funds, students must complete a Master Promissory Note (MPN) online at StudentLoans.gov and complete an entrance counseling session as directed by the school.
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04.11.13 | Parents, 5 Financial Lessons for Your College Student

As a parent, you are faced with one of life’s greatest challenges: preparing your child for financial responsibility. When your child leaves home for college, they will explore their independence in more ways than one. Learning the financial facts of life can be confusing and can take years. You can help prepare your child for financial independence by sharing these important lessons.

1. Create a budget
The first step to financial responsibly is by making sure you do not spend more than you have. You can empower your child by helping him/her establish a budget for college. Consider how much income the student has (including loans, scholarships and financial aid), then add up the items you are budgeting for to see if the student can afford them. Here are some things to consider budgeting for:

  • Tuition
  • Food
  • School supplies
  • Laundry
  • Phone
  • Entertainment
  • Transportation (cabs/bus)

Managing and sticking to a budget will teach your child to make good financial decisions and will provide them with a sense of control.

2. Keep track

Creating a budget is half the battle – sticking to it can be the hardest part. A good tip to share with your child for sticking to their budget is to keep track of all spending. There are a variety of tools available besides bank accounts that can help with money management. Mint.com and LearnVest are two great tools that allow you to organize your finances, set a budget and alert you when you’re getting off track.

3. Be smart about plastic

If your child does not already have his/her own bank account, this will be the first step. Once they establish their own checking account, they are ready to determine how they will pay their bills. There are a variety of different payment options. The most commonly used payment method for college students are debit cards, since there is debt risk associated with credit cards. Take the time to explain the advantages and disadvantages to using both:

Debit Card Credit Card
When is money taken from account? Immediately- automatic deduction from account At a later date- Money is borrowed with a line of credit.
Can you accrue debt? No- but you can overdraft Yes
Can you establish credit history? No Yes- build a credit score as you pay bills
Are there rewards? No Yes- earn points/rewards when you make purchases. Used to get cash back, discounts, miles, etc.
Are there risks? Minimal- easier to keep track of funds since money is automatically deducted for each purchase. Higher- more difficult to keep track of spending because you pay back what you borrow at a later date. Easier to accrue debt.

3. Pay bills on time

It is important to explain to your child that not paying bills on time can have a negative impact on their financial future. Explaining the importance of establishing a good credit history early in life is an invaluable lesson.  Your child will need to have good credit history in order to qualify for a private student loan if they need more funds for college, buy a new car, apply for a job or take out a mortgage for a house later in life. It is important to explain to your child that in order to establish good credit, they must pay their bills on time and in full.  Even a late phone bill can negatively affect their credit score.

5. Borrow what you need

If your child has taken out a loan for college, it is important to stress that they will need to pay back that money, along with the interest accrued, once they graduate.  With that said, it is key to emphasize that they should only borrow what they need or they will quickly find themselves under mountains of student-loan-debt situation after graduation. If your child finds him/herself in a situation where they need more money for school, there are other ways to fund their education than borrowing such as finding a job and applying for scholarships. If they do borrow, make sure to exhaust all federal loan options first, especially subsidized Stafford loans, which do not accrue interest while a student is in school.

04.10.13 | Stafford Loan Déjà Vu: Interest Rates Set to Double Once Again

Posted in Financial Aid, Private Student Loans, Stafford Loan, Student Loans by Student Loan Network Staff

2012 Interest Rate Increase

Last year around this same time, a hot story in the media was the impending interest rate increase for Federal Direct Stafford Loans. Subsidized loans were at 3.4%, and with legislation running out, were set to double to 6.8% — the same as their unsubsidized counterparts. Luckily for students, Congress extended the lower interest rate for another year.

Projected Rates for 2013–2014

Once again, subsidized student loan interest rates are facing an impending increase, and are still up in the air. Without action, students may see an increase to 6.8% for the 2013–2014 academic year. This means that the only difference between subsidized loans and unsubsidized student loans would be that the former will not accrue interest while in school or in a grace period.

At this time it is unclear what actions may be taken to prevent student loan interest increases. We could see another one-year extension of the lower rate, or a system overhaul may even be possible. However, if nothing is done by July 1, 2013, students can expect to see the higher rate take effect for all new subsidized loans.

The Future of Federal Student Loan Rates

Private student loan rates are currently based on an index rate (such as the Prime or LIBOR indeces) plus a set margin. This allows for flexibility based on the current market. Federal student loan rates do not follow this structure, and are not tied to any economic factors, making it difficult to set competitive and affordable rates for borrowers.

To rectify this, organizations such as the New America Foundation have submitted proposals for better ways to handle federal loan interest rates. The proposals include tying interest rates to 10-year treasury notes and securities. Rates would be determined similarly to private student loans, with a variable base, plus a proposed margin of 3.0%.

While it is unclear which, if any, of these proposals will be enacted, it’s possible that borrowers could see more affordable rates in the near future.

For more information on interest rate proposals, read Solving the Interest Rate Quandary: Two Feasible Proposals on NASFAA.org.

04.05.13 | Happy Financial Literacy Month!

Posted in College Life, Financial Aid, News, Student Credit by Student Loan Network Staff

Piggy Bank in GrassDid you know that April is Financial Literacy Month? With the recent economic struggles, it’s clearer than ever that many students (and even parents) need some personal finance training, stat! According to the National Financial Educator’s Council:

“About thirty-four percent of parents have taught their teen how to balance a checkbook, and less than that has explained how credit card interest and fees work and ninety-three percent American parents with teenagers report worrying that their children might make financial missteps such as: overspending or living beyond their means.”

While parents can be a good starting point, “Around sixty-nine percent of parents admit to feeling less prepared to give their teenager guidance about investing than they do having the ‘sex talk’ with them.” Yikes!

In the spirit of Financial Literacy Month, we want to help you learn to manage your money! To kick things off, here’s a list of some great websites designed to teach you those much-needed money skills!

My mother always told me, “Don’t put it on a credit card if you can’t afford it in cash” and I’m free of credit card debt to this day! Share your wisdom and tell us some of your own personal finance tips by leaving a comment below!

Don’t forget to be on the lookout for more personal finance posts in the coming weeks or check out last year’s Financial Literacy Blog Series!

Source: http://www.financialeducatorscouncil.org/financial-literacy-statistics.html

03.28.13 | How Repealing DOMA Could Affect Financial Aid

Posted in College Life, FAFSA, Financial Aid, News by Student Loan Network Staff

This week has brought a flood of news on gay rights as Supreme Court justices review the Defense Of Marriage Act (DOMA). The repeal of DOMA would bring many benefits to same-sex families, such as death benefits, tax incentives, and health insurance coverage.

What does this have to do with financial aid? A lot, actually.

An increasingly common issue in the financial aid application process is how LGBT families file the FAFSA.

Because of DOMA, financial aid for same-sex families is determined differently and can lead to non-uniform aid awards. When filing the FAFSA, both parents (if married) are required to provide their financial information. In the case where marriage is not federally recognized, only one parent would be able to file for the student, leading to increased financial aid for the family. What’s more, any financial support from the other parent would be reported as untaxed income and subject to different treatment in the aid calculations. The same logic applies to married students.

If DOMA is repealed, the application process would be streamlined for all married couples. Financial aid would take all financial support for the student into account, and the question of “which parent should file the FAFSA” would be eliminated for these families.

This also means that same-sex families might get less financial aid, because financial awards would be based on both parents’ income and assets, not just one.

Clearly DOMA has far-reaching impacts for college students and their families, as repealing DOMA would mean uniformity in the financial aid process for all married couples.

03.26.13 | 10 Things You Didn’t Know About Financial Aid

Posted in Financial Aid, financial aid tips, Repayment, Student Loans by Student Loan Network Staff

Piggy Bank With Graduation CapThe financial aid process can be tough to navigate, and like many students out there, you may not know all of the ins-and-outs. To help you make the most of your financial aid, we compiled a list of some noteworthy facts.

1. You must maintain Satisfactory Academic Progress (SAP)

To stay eligible for financial aid, there are certain criteria you have to maintain. Many students know about the qualitative measures such as minimum GPA, but there are also quantitative criteria students must meet. For example, a student must not exceed 150% of the credits required for their program of study, and this includes attempted credits. This means that too many withdrawals, failed, or incomplete courses can impede your eligibility for financial aid. Make sure you know your school’s SAP policy to keep your financial aid on track or check out this example from the University of Minnesota.

2. Males must register with the Selective Service

Some students don’t realize this until it’s too late, but in order to receive financial aid, male students 18 and older must register for selective service. If you don’t register by the time you’re 26, you will be unable to receive federal financial aid funds. After that, it’s incredibly difficult to regain eligibility, if at all.
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03.06.13 | Sequester Impacts on Financial Aid

Posted in Federal Work-Study, Financial Aid, News, PLUS Loans, Stafford Loan by Student Loan Network Staff

As you may have heard by now, the recent sequestration has huge implications for education across the board, and Higher Ed. is no exception. The budget cuts that took effect on March 1, 2013 will affect most types of federal student aid, including Federal Work Study (FWS), Federal Supplemental Education Opportunity Grants (FSEOG), Service Grants, TEACH Grants, and the Direct Student Loan Program. Fortunately for many students, Pell Grants were specifically exempt from the budget cuts.

Here’s a brief overview of what to expect from student aid programs going forward:

Federal Work Study and FSEOG Programs

Budget cuts of $86 million do not only mean a reduction in the FSEOG program, it could also mean a loss of on-campus employment for as many as 33,000 students if colleges do not step in with funding. While these campus-based programs are funded through the remainder of this year, program cuts will take affect for the 2013-2014 academic year.

Iraq – Afghanistan Service and TEACH Grants

For both of these federal grants, funding has been reduced for any award first disbursed during the sequester. It should have no impact on grants first disbursed before the cuts took effect.
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02.26.13 | Make the Most of College Savings

Posted in Financial Aid, financial aid tips, News, Student Credit by Student Loan Network Staff

February 25 – March 2, 2013 is America Saves Week, and to kick things off, student loan giant Sallie Mae released a national study on how Americans save for college. In “How America Saves for College: 2013” the statistics show that although most families are optimistic about their college savings, few are taking advantage of their options today. According to the study “Most college savers remain optimistic about their ability to save and plan to increase their savings in the next five years, though two-thirds don’t have a plan to achieve their goals.”

How Families are Saving

Much of the data has been compiled into an infographic, which shows a variety of ways families save, and the types of accounts they’re using. Of the families saving for college, only 27% choose 529 college savings plans. Other savings vehicles include general savings accounts, checking, investments, and even retirement accounts.

How America Saves for College

Best Ways to Save

Parent-Owned Accounts
Savings in the student’s name is assessed at a much higher rate than parent savings when applying for financial aid. While a maximum of 5.6% of parent assets count against a family, a whopping 20% of a student’s assets are used in financial aid calculations. When possible, keep funds out of the student’s name, and take advantage of incentivized savings vehicles over checking accounts, for example.
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