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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03.18.13 | Can You Refinance Student Loans?

You can refinance your mortgage, but can you refinance your student loans? The short answer is: possibly. Let me elaborate.

Refinancing is a tool commonly used by borrowers in the housing industry to lower interest rates. In regards to student loans, refinancing options are not widely available and depend on the type of loan you have.

Consolidating Federal Student Loans

Federal student loans (such as Stafford Loans) are not able to be refinanced but they can be consolidated. For federal loans, you must consolidate them through a Federal Direct Consolidation Loan which determines your new interest rate as a weighted average. Unfortunately, weighted averages do nothing to lower your rate.

However, there are still some benefits to consolidating your loans, such as:

  • It lowers your monthly payment by extending the term of the loan
  • It makes managing your repayment easier by combing multiple federal loans into one

Probably not the answer you were hoping for, but consolidation can be helpful to those struggling with high monthly payments.
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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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03.04.13 | 5 Easy Ways for Students to Save

Posted in College Life, financial aid tips, News, Student Credit by Student Loan Network Staff

Saving vs. SpendingDeveloping good saving habits starts when you’re young, but many students don’t know where to begin. While we know it can be tough to save money when college expenses keep growing, every little bit helps.

1. Automate your Saving

If you receive a regular paycheck from a part-time or on-campus job, see if you can allocate a portion to automatically deposit in a savings account. It doesn’t have to be a lot, but by putting a little bit away into a separate account, you’re more likely not to spend it and can even earn interest on the savings.

2. Use your Tax Refund Wisely

Did you just get your tax refund or are you patiently awaiting its arrival? It might be tempting to spend all of the “extra” money right away, but don’t! Put it directly into your savings account to build interest for when you really need it. That doesn’t mean don’t treat yourself to something nice, just keep it reasonable.
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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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02.15.13 | Evaluate College Costs with the College Scorecard

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

College ScorecardEarlier this week, President Obama talked about the new College Scorecard tool in his State of the Union Address. This new tool provides college data to students and families going through the college selection process and aims to provide some statistics that allow families to assess the return on investment.

Tool Features

The College Scorecard allows users to evaluate colleges on:

  • Costs
  • Graduation rate
  • Loan default rate
  • Average borrowing
  • Employment outlook

While historically, many families have chosen schools based on social environment, location, and academic programs, college costs are now a driving factor. The College Scorecard allows families to make better decisions around college expenses, by providing average borrowing and default rates of schools.
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01.14.13 | 5 Tips for Filing Your FAFSA

Posted in FAFSA, Financial Aid by College Kid

Person Typing on ComputerWith the holidays coming to a close, many of you are putting down the eggnog and starting to prepare for the upcoming year. All those who will be entering college in the fall, whether it be for their freshman or senior year, are trying to minimize the costs of school, and the FAFSA, or Free Application for Federal Student Aid, is one of the best ways to do that.

I’m back from my third semester of college to provide some tips for filing the FAFSA. So, without further ado, here are my five pieces of FAFSA advice.

1. Do It

Many families don’t file the FAFSA because they believe that they earn too much to qualify for federal aid. Income is only one of the factors that determines eligibility, so you should file the FAFSA regardless of income. Even if you only qualify for $500 of federal aid, this is certainly better than nothing.
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