It’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…)
03.05.09 | Deferring Your Stafford Loan
My friend Stephanie has some huge loan amounts to pay down. She jokes that the light at the end of the student loan tunnel has blown out on her. Poor Steph. She even has private loans to contend with. It’s just awful for her and I know she’s not alone.
For those of you who have both loan types I know you are struggling to survive. Pay the rent, buy food, make your utility bill payments, or pay down your student loan. I know which one on that list would be my last priority. Of course the problem with simply not paying your loans is that it damages your credit score, and that can impact the interest rate on other loans you are paying. Instead of burying your head in the sand in hopes of the problem just going away you should place your loans in a deferment state.
Most people don’t realize they have 3 years worth of deferment eligibility attached to their federal loans. There is an economic hardship deferment and a straight forbearance benefit attached. The economic hardship deferment is the better of the two options as any subsidized loans in your bundle will not accrue interest during the deferment period. Your lender will examine your debt to income ratio to see if you qualify.
A forbearance is also good, as it gets the job done, but interest accrues on the entire loan amount. Every student is eligible for a forbearance
So be responsible and utilize the benefits that come with your federal loan, that’s what they’re there for.
Five most recent Stafford loan help blog posts:
07.29.08 | Alternative to MEFA, Student Loan Network offers Federal and Private Loans in Massachusetts
With the news that MEFA (Massachusetts Education Finance Authority) is not able to make loans this year, (see: http://tinyurl.com/5soc5g)Â Massachusetts residents will be looking for funding options.Â We are happy to reassure our customers in Massachusetts that the Student Loan Network has a full suite of federal and private student loan products for funding this coming semester.Â In addition, we offer a variety of credit tools, student loan resources and educational guides to help you through the financial aid maze.Â For a list of these resources, visit: http://www.studentloannetwork.com/resources/
Financial Aid Professionals looking for options for their students, please visit:
07.15.08 | Responsible Money Management
As the hands of time march on, each of us become wiser; at least that’s the hope. We try our best to learn from past mistakes and accept valuable advice from family and friends who have traveled down that dirt road before us. Still, some lessons we just need to learn the hard way. I have had once such lesson I would like to share with you in hopes that you will not suffer the same fate.
I entered into a business venture with my father-in-law in 2006 and got burned badly. In this instance I am the one who traveled down that dirt road and got covered in mud when the dust cleared.
He and I bought a condo together in Naples, FL in 2006. As he was located right in Naples he took care of drafting the tenant lease (we had a tenant already in there), taking care of condo maintenance, and paying the mortgage. I basically served as the silent financial partner from Boston during this time. Everything was going well, or so I thought.
Now it’s important to note that the tenants rent was covering both the mortgage and condo fees so I was not required to send down any money. It seemed to be a perfect scenario, that is, until my place of employment was called for employment verification. What I didn’t know is that my father-in-law had experience financial hardship and was paying other bills with the tenant’s money while letting our property fall deeper and deeper into debt. In November of 2006 I discovered no payments had been made since June!
This episode damaged my credit by 75 points. Also, to compound the problem, I had to pay $6,200 to get the property out of foreclosure status. Half the money went to past due mortgage payments while the other half went to attorney fees. This was a hard life lesson learned for me. I thought I could trust my wife’s father. The man even contributed $10,000 toward our wedding. He would never do anything to harm his little girl or her husband, right? WRONG!
Here is my advice to you. If you ever enter a business venture with anyone open an online account to keep tabs on things or call customer service once per month to confirm your account is in good standing. Of course, you could also be the one who pays the bills (which I am currently doing) to make sure it gets done in a timely manner. Finally, you may consider a credit service like one of my friends to give you monthly credit alerts should anything negative hit (a monthly fee is involved). That way you will have the information in hand immediately.
Learn from me my friends. Here we are two years later and I’m still trying to get the mud off my jeans. I’ve already tried Tide, Wisk, ERA, Extra, Arm & Hammer, and Shout to no avail. Perhaps with time it will fade, but it will always be there.
06.13.08 | FAFSA comments in real time via Twitter
JanetIs: Glad the FAFSA isn’t due until the 30th.
@Janetis: Actually, the sooner you can file it, the better. There’s a limited amount of “free money” available each year, and once it’s gone, it’s gone. It’s allocated on a first come, first served basis.
andyduss: FAFSA can suck it!
dUbiAsIti: uuuuuuuuuuuuuuuuuuuuugh, i hate filling out the FAFSA! even when the gov’t has prefilled my answers and it’s easy as pie, i still HATE IT…
donkeypoof: importing music/FAFSA/nebraska driver’slicense?!
unsympathetic: finally filling out my FAFSA
bvaughn: Just finished my FAFSA for next semester… let’s see if the gov’t will give me any money to go to school!
@bvaughn: Don’t just wait on the government. Go find some money yourself – check out our free scholarship search book!
brandanger: wednesday got up cameto class had class til 11:35 work on FAFSA work on homework go out to eat with a friend
twistedmentat: Did my FAFSA. Sorry, Financial Institution, there ain’t no WAY yer squeezin’ eight large outta me.
mmemaledicta: Ok, so here’s what pisses me off about the FAFSA: They ask you for the totals of all accounts. What if rent hasn’t cleared? BS.
@mmemaledicta: They do ask you for the totals of all accounts, but that’s as of the day you file. If you know your rent will clear in a day or two, you can hold off filing the FAFSA until your rent has cleared and your checking account is back to normal.
craftyminx: FAFSA… Knew i forgot something
jeffmckown: Filling out the FAFSA sucks.
hyakurin: Watching CNN. Bored. Worried about FAFSA ******* me on my loans.
@hyakurin: There are a couple of loans, such as the PLUS loan, and private student loans, which do not require the FAFSA at all. If your award letter and student aid report come back with meager results, look into these loans, too.
merrickmonroe: @valor26: maybe not the school (yet), but FAFSA hq should watch out!
If you’ve got questions about the FAFSA, please ask! We’re here to help.
The FAFSA blog is sponsored in part by:
Five most recent FAFSA form help blog posts:
As of July 1, 2008, interest rates will be changing on federal student loans such as the Stafford loan. Here’s a quick rundown of the details:
For new Stafford loans:
- Subsidized: 6.0%
- Unsubsidized: 6.8%
For Stafford loans older than July 1, 2006:
- In grace period: 3.61%
- In repayment: 4.21%
For PLUS loans older than July 1, 2006:
- All older PLUS loans: 5.01%
If you’re just filing your FAFSA now, be aware that loan limits have increased as well; you’ll receive additional details from your school’s financial aid office in your award letter and financial aid package.
The FAFSA blog is sponsored in part by:
Five most recent FAFSA form help blog posts:
05.07.08 | New Stafford Loan Limits
Increase Annual and Aggregate Stafford Loan Limits
HR 5715, as passed by Congress, will increase the following loan amounts for loans first disbursed on or after July 1, 2008:
* Increases the additional unsubsidized Stafford annual limits by $2,000 for independent undergraduate students, and for dependent undergraduate students whose parents cannot borrow PLUS, but appears to reduce the additional unsubsidized limit for teacher certification to $6,000 for “undergraduate” students
Note – The original legislation also increased the additional unsubsidized Stafford annual limit for graduate and professional students by $2,000, but that provision was later eliminated by an amendment in the House
* Increases unsubsidized Stafford limits for dependent students by introducing additional unsubsidized amounts of $2,000
* Increases aggregate unsubsidized loan amounts for undergraduate dependent students from $23,000 to $31,000 (minus subsidized borrowing) but does not appear to extend additional unsubsidized funds for preparatory coursework or teacher certification for these students.
* Increases aggregate unsubsidized loan amounts for undergraduate independent students from $46,000 to $57,500 (minus subsidized borrowing) .
As far back as 2001, Congress, looking at incredibly high interest rates on federal student loans (8.25% statutory maximum on the Stafford loan, 8.5% on the PLUS loan) decided to legislate a mandatory fixed rate of 6.8% on Stafford loans beginning July 1, 2006. At the time, it seemed like a good idea to legislators to try “fixing” market prices. Prior to that legislation, Stafford and PLUS loans had variable rates of 2.3% and 3.1% + the 91-day Treasury Bill rate at the last auction in the month of May.
Fast forward to today – 2008. With the economic uncertainty, the 91-day Treasury Bill’s current rate is a shockingly low 0.21% (as of noon 3/20/08). If Stafford loan rates were still variable rate loans and rates were set today, the Stafford loan would have a variable rate of 2.51% – lower than student loan interest rates have ever been. For students now paying 6.8%, a rate of 2.51% would mean paying about $50 less per month on $20,000 in federal student loans. Had Congress also left student loan consolidation alone (not reducing subsidies to lenders, thereby reducing availability of consolidation loans to students) that same rate change would mean paying 56% less interest for the life of the loan.
This is a lesson for all of us – when government attempts to manage free markets, unintended consequences may result, and those consequences may be financially quite harmful in the long term.
02.20.08 | Will student loans go away?
There’s been much talk recently about some student loan companies withdrawing from the student loan marketplace, and whether students will be materially harmed by a smaller marketplace. The short answer? No.
Federal student loans such as the Stafford loan are unaffected by changes in credit insofar as the borrower is concerned. Stafford federal student loans have no credit requirements.
As for private student loans, there will almost certainly be changes in who is eligible for private student loans. Higher credit limits and cosigners required are the most likely outcomes, and in fairness, that’s not a bad thing. It is in no one’s best interests to issue a loan to someone who cannot repay it. The borrower loses, the bank loses, everyone loses, so if students and families with poor credit are turned down for a private loan, it will mean they need to energize their scholarship search efforts to make up shortfalls in financial aid.
If you haven’t done so already, be sure to file your FAFSA, too.
A question recently came up on the blog – if a student loan company goes out of business, do the loans need to be repaid?
The answer is an unequivocal yes. Except for a few rare circumstances (such as a loan being fraudulently issued) borrowers are always obligated to repay the loan.
More often than not, if a student loan lender goes out of business, the loans are sold as part of the company’s liquidation. They’re treated just like office furniture or any other tangible asset, and buyers will buy the loans (and the potted plants and desks). The borrower will receive notification that their Stafford loan has been sold or transferred to a new company, and that they must now make payments potentially to a new address.
That’s one of the many reasons why it’s important to stay in touch with your lender and keep them updated on your address and contact information – otherwise, you could potentially go into default on your federal student loans and not even know it.