08.02.13 | The Usual Mistrust or a Preview of More Bipartisanship?

Posted in Financial Aid, News, Stafford Loan, Student Loans by David Levy

Federal Student Loan Compromise

This content was updated on 7/9 to reflect the passage of the Smarter Solutions for Students Act

With bipartisan support, on July 31, 2013, the House of Representatives passed H.R. 1911, the Smarter Solutions for Students Act (also known as the Bipartisan Student Loan Certainty Act, as amended by the Senate), by a vote of 392 to 31.

President Obama  signed the legislation into law on August 9, 2013.

Under the new law, interest rates on new loans each July 1 will be based on the last 10-year Treasury auction in the previous May. The specific interest rates will be as follows:

  • Undergraduate Students (Subsidized and Unsubsidized Federal Stafford Loans): 10-year Treasury + 2.05% with an 8.25% cap
  • Graduate and Professional School Students ( Federal Stafford Loans): 10-year Treasury + 3.6% with a 9.5% cap
  • Parents and Graduate/Professional School Students (Federal Parent and Federal Grad PLUS Loans): 10-year Treasury + 4.6% with a 10.5% cap

Based on the current 10-year Treasury rate, this will yield interest rates of 3.86%, 5.41% and 6.41%, respectively, for new loans this year, made after July 1, 2013. (more…)

02.11.11 | To Claim or not to Claim: College Loans and Taxes

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

Student Loan Taxes Can be ConfusingIt’s tax season again and one of the most common questions from students right now is whether or not they have to claim their financial aid (grants, loans, or scholarships) on their taxes. So to clarify, students have to claim on their IRS tax forms any money gained from services for which they received payment, investments, and self-employment income. Generally, amounts spent on education, scholarships, grants, and loans are non-taxable, though there are some exceptions. To note, most tax-free treatment of income, credits, and deductions require the student to be a degree candidate, but not all. (more…)

01.27.11 | Most popular student loans for college

Not everyone is aware of all the loan options available to pay for college. Here are just a few to consider:

1) Federal Stafford Loans – These are federally guaranteed student loans. You can apply for subsidized Stafford loans and the government will pay the interest for you while you are enrolled. This is a great option for students and the most popular loan program available.

2) Parent PLUS Loans – The Parent Loan for Undergraduate Students allows parents to borrow through the federal loan program to pay for their child’s education. The loan is in the parent’s name.

3) Private Student Loans – Private college loans are not sponsored by the government but offer an alternative sources of funds for those that may not qualify for federal aid or who need additional funds. Private school loans are often in the students name with the parent acting as a cosigner.

4) Perkins Loan – Perkins loans are another federal loan for low income students based on eligibility. These loan funds are limited so apply early.

5) Credit Cards – Believe it or not, approximately 30% of students/parents put a portion of the tuition bill on their credit card. While we don’t recommend this option, it is a reality. Once you graduate, consider consolidating your student loans to lower your monthly payment. The downside is you will pay more interest over the life of the loan by extending your repayment period. For additional resources, visit: www.studentloans.com, www.collegeloansolutions.com and www.gradloans.com.

10.12.10 | What is capitalized interest?

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

To begin let’s first delineate the difference between subsidized and unsubsidized Stafford loans.  If you received a subsidized loan for school NO interest will accrue while you are in school, sweet! If however you have an unsubsidized loan than you are not so lucky.  Granted you could elect to make interest only payments if you so choose while in school, but if you don’t that interest will later be added onto your principal amount, and overall will increase your debt.  Let’s take a look how.

So what is capitalized interest exactly?  When the interest is not paid during college, it is accrued and added to the principle balance. Capitalization occurs the day the deferment period is over and the interest accrued over the loan period is added to the original amount of the loan. This additional amount subsequently accrues interest, adding an additional expense to the loan.

Here is an example.

Loan amount: $6,000.

Interest per month: $20

Loan balance after 1 year: $6,240

Loan principal upon capitalization (let’s say after 2.5 years): $6,600

Then that $6,600 loan balance is used as the new benchmark instead of  $6,000.  Now the monthly interest may go up to $21.78.

This was just a very basic visual used to demonstrate the capitalization concept.  Actual balances and interest rate calculations may vary.

Confused about any other terms.  Check out the Student Loan Network Glossary.

Also, find more information on the Difference Between Subsidized and Unsubsidized Loans.

09.13.10 | What the FAFSA? Words of Wisdom about the Financial Aid Form

Posted in FAFSA, Financial Aid, Stafford Loan by Student Loan Network Staff

In my previous post, I gave a quick run down of the types of financial aid that I can apply for to help finance my education. Applying for federal aid will be my first step, so I want to start preparing my FAFSA form.

Why do I need to fill out a FAFSA form?

In order to qualify for federal aid for students, you must complete and submit the Free Application for Federal Student Aid (FAFSA) to the U.S. Department of Education. This form is used to calculate your financial aid eligibility based on the financial and demographic information for you and your family.

Once complete, the Department of Education will forward a record of the application to the school/schools you specify.

What can I do now to prepare my FAFSA?

While the FAFSA needs to be filed with your 2010 tax information (which you won’t get until at least January of next year), it is recommended that you get a head start on gathering the right information now. In fact, most of what you’ll need for the FAFSA can be taken care of now. You can also estimate your tax information based on this years forms, however, this is only recommended if you can make a very accurate guess.

Below is a check list for what you and your family can do now to prepare early for the college financial aid application process:

Financial Aid Deadlines: Begin gathering the deadlines for your financial aid applications. Each school may have different deadlines.

Tax Information: Grab your 2010 tax forms, and anything else you are preparing for 2011 as well. You’ll receive your W2′s in February of next year and you may want to update your FAFSA when that information arrives.

Asset and Demographic Information: This where you list the financial details about you and your family, including your assets and demographic information. For help with what this will entail, visit FAFSAOnline.com and send your parents here.

School List: You can tell the Department of Education to send your results to a maximum of 10 schools. You will have to list the schools by their school code, which can be found here: FAFSAOnline.com – School Code List. When you’re looking into schools and noting their deadlines, make sure you find their code as well.

FAFSA Pin: Both you and your parents need to sign up for a FAFSA Pin #. This number will be used to identify you throughout the application process, and you can get it early and put it away in a safe place!

Ok, now go! You can download the FAFSA form now. You may file it early, but you will have to then update the forms next year with your new tax information.

08.31.10 | Crash Course in Financial Aid for a Newbie

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

My mission: In one month, learn everything there is to know about the financial aid process, and federal student aid programs so that I can get a jump start on my applications.

Armed with: ejacobs (Student Advocate from FinancialAidForum.com), a variety of web resources that I found from the Student Loan Network, some books and packets, federal student aid guides, the web-o-sphere, and my peers.

Reason: I’d like to go back to school, but I’m not swimming in cash. I recently read that incoming students often underestimate how much financial aid they will get from the government and fail to take advantage of it. I’m determined to find the maximum amount of aid possible for my situation.

There are a variety of online resources I found helpful in the start of my learning process, and I will share some of them with you below. (more…)

06.10.10 | Should you Pay Back your Student Loans Early?

Posted in Financial Aid, Repayment, Stafford Loan by Student Loan Network Staff

Many graduating seniors are still in the midst of their six-month grace period before they have to begin student loan repayment. But for some lucky graduates who have secured a job and have the means, they may be interested in starting repayment before their grace period is up.

In almost all cases, the sooner you are able to start repaying your student loans, the better. There are no penalties or fees associated with early repayment, and in some ways, it can be beneficial.

You do not get a lower interest rate for repaying your student loans early, but if you think about it, the sooner you start, the less interest you pay long-term.

For many, student loan debt is one of the longest monthly debts they will face, and can take decades to fully pay off. There is nothing wrong with getting an early start. One way to make life easier is to consolidate your federal and private student loans. This will allow you a lower monthly payment.

Visit www.StudentLoanConsolidator.com to get started.

05.11.10 | Unemployed with Student Loans?

Posted in Consolidation, Stafford Loan by Student Loan Network Staff

It seems like a cosmic joke for many post-grads – you pay all this money for a college degree, you graduate, and now you can’t find a job.  Worse, you’re expected to start paying off those student loans.

One way to make life a little easier is to defer your student loans. Deferment essentially suspends student loan repayment based on certain situations, unemployment being one of them. You are allowed to defer your loans up to three years.

One of the drawbacks of deferment is that the interest rate remains variable and could adjust frequently by the time you are able to start making payments. However, if you consolidate your federal student loans prior to applying for deferment, you can lock in the interest rate and lower your eventual monthly payment.

Click here to consolidate your student loans.

Click here to download the deferment forms.

04.21.10 | Is Income-Based Repayment Right for you?

Posted in Stafford Loan, Student Loans by Student Loan Network Staff

If you are struggling to pay back your student loans, even after a consolidation, you might have wondered what are your options. One plan of attack is to apply for income-based repayment. But is it right for you?

What is income-based repayment? Basically, if your total student loan payments for the year is higher than 15% of your annual income, you can have your loan spread out further and your monthly payments lowered.  So if you are making $35,000 a year, the maximum student loan payments you can make each month should be no higher than $132.91.  If you are married, your eligibility for IBR is based on the combined annual income of you and your spouse. (To find out if your specific income qualifies, peruse our IBR chart here.)

Which of my loans are eligible for IBR? You can use IBR for all federal Stafford loans, GradPLUS loans and federal loans that have previously been consolidated. All private loans, including ParentPLUS  loans, are ineligible. Any loan, private or federal, that is in default will not be eligible for income-based repayment as well.

What are some of the perks of IBR? Well, aside from getting a lower monthly student loan payment, if your IBR payment is less than the monthly interest that accrues on the loan, the government will pay your unpaid interest on  for up to three years. If you are still making IBR payments after 25 years, your debt is forgiven.

Okay, so what’s the downside? Simply put, you will pay more interest for the life of the loan.  The lower monthly payments may help in the short term, but it won’t do nearly as much to pay down your loan balance as a standard monthly payment. That means more interest is added to your loan each month, and it will take far longer to pay it off totally.

Further, you will have to report your income each year to be eligible for IBR. If your income goes up you may lose eligibility and have to go back to a standard repayment plan.

Image credit: National Collegiate Scouting Association on flickr.

ScholarshipPoints code: YESIBR

04.02.10 | Your Student Aid Report and You

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

Within two to six weeks after you have completed your FAFSA, the Department of Education sends you a copy of your Student Aid Report (SAR).

The SAR will give you an idea of how much the federal government and colleges expect you to pay. Look for the EFC (expected family contribution) number. If it says 09000, for example, that means your probable share of annual tuition and fees will be $9,000. Here is what to do when the SAR arrives:

Make updates/corrections. If you need to fix any errors or amend the information you supplied on the FAFSA; now is the time to do it. This is particularly useful if you have recently completed your tax returns since you filled out the FAFSA, and some of your information has changed.

When you got to submit the corrections, you should also contact the schools to which you have applied. The colleges you selected will receive this report as well. As registration deadlines grow nearer, some colleges and universities might prefer you send a copy of the SAR directly to their financial aid office, with all corrections included.

Inform the schools of any new hardships. Remember that your FAFSA was based on last year’s income, so if you have experienced any particular hardships such as a job loss or costly medical injury, call the schools and state your case.

Don’t be afraid to negotiate. If you’re an exceptional student and think you can get a better aid package, don’t be afraid to do a little haggling over your aid from a certain school. Colleges may increase their aid offering to a student with an especially strong academic background. Explain your case to the school’s admissions office, and be prepared to show copies of better offers from other schools.

Seek out additional funds, if necessary. If your EFC is higher than expected, and you’re not sure you can pay, consider alternative methods, such as private student loans. Be sure to do some digging for scholarships as well.

If you sent in your FAFSA but haven’t received your SAR within two to six weeks, contact the U.S. Department of Education help desk at: 1-800-4-FED-AID. If you have any additional questions about your SAR, leave them in the comments or peruse our forums and our financial aid experts will assist you.