Archive for ‘need-based aid’

May 11, 2015

Pinterest is also for college scholarships!

by Grace

20150506.COCPinerest1Suzanne Shaffer give us “10 Scholarship Boards to Follow on Pinterest”.

Check it out!

May 6, 2015

It’s hard to make students understand the severity of college debt

by Grace

The New York Times ran an article in which student loan borrowers explained what they wish they had known before taking on debt.

Federal law makes debt counseling mandatory for first-time borrowers,  but “because the topic is dense and the department’s content is devoid of anecdotes, it’s tough to make the lessons stick”.  Most colleges use the Department of Education’s online counseling module, which apparently most students find difficult to navigate and comprehend.  What type of counseling would work to make students clearly realize what they were getting themselves into before it was too late?

The ideas from the article seem helpful, but some of them, like requiring a course during the first year of college, are only applicable after the money has been borrowed.  Plus that recommendation seems to be overkill and costly.

A TG report, “A Time to Every Purpose“, gives some other suggestions for colleges, including these:

  • Delivering supplemental counseling, ideally in a face-to-face setting, in order to help answer questions
  • Providing sample budget sheets using local cost-of-living expenses

Ultimately, it is the student’s responsibility to take the time to fully understand the implications of college debt.  Maybe students who borrow should have to pass a pre-entrance exam that covers practical knowledge about how loans will affect their personal financial situation.

Related:  “College students are ignorant about how student loans work”

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Ron Leiber, “Student Loan Facts They Wish They Had Known”, New York Times, May 1, 2015.

April 29, 2015

Estimating income tax information for early FAFSA filing

by Grace

It’s best to file your FAFSA early because colleges may run out of financial aid funds for later applicants.  But filing early often means that income tax information must be estimated and then later corrected.

Estimating your income may be a simple matter of using the previous year’s number and adjusting slightly.  Or, if your financial circumstances have changed considerably it may require more work.  FAFSA has an income estimator on their site that may be helpful.

After income taxes are filed, you must submit corrected information to FAFSA.  In most cases, you can use their IRS Data Retrieval Tool for a relatively painless process.  Otherwise, the process is more time-consuming because you will need to request that a copy of your tax return be sent to your school.

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 Alexandra Rice, “Taxes and the FAFSA: What You Need to Know”, U.S. News & World Report, March 30, 2015.

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April 21, 2015

Evaluating college financial aid award letters

by Grace

Among its “tips for deciphering financial-aid letters”, the Wall Street Journal includes information that can be useful in evaluating student loan offers.

Difference between subsidized and unsubsidized federal student loans

The federal government pays interest charges on federally subsidized loans while a student is in school, for example, which can help borrowers substantially. Such loans are generally given to students who demonstrate some kind of financial need, but students don’t need to come from low-income families to qualify.

Just over 34% of undergraduates with family income of at least $100,000 received subsidized Stafford loans at colleges where total annual costs, including tuition and room and board, were at least $30,000 in 2011-12, according to an analysis by Edvisors of the most recent federal data available. Just 12% of such students received the loans when attending less-expensive colleges.

Unsubsidized federal loans can be less desirable because interest accrues while the student is in school, which—if unpaid—could result in a significantly larger balance by the time the student graduates. Some colleges don’t include unsubsidized loans in financial-aid offers.

Colleges and universities also may offer their own loans, which may or not be preferable. Compare and contrast the terms on offer, including the interest rate and when interest charges begin to boost the outstanding balance.

Check out this link for the full article:

Annamaria Andriotis, “How to Play the College Financial-Aid Game”, Wall Street Journal, April 17, 2015.

April 15, 2015

You could lose your tax refund if you have a past-due student loan

by Grace

Say good-bye to your tax refund if you have past-due student loans.

In most cases, creditors are unable to touch tax refunds. Not so with student loans.

While credit card companies and other private debt collectors are barred from garnishing money coming to taxpayers from Uncle Sam, some federal and state creditors can help themselves to tax refunds via a process known as ‘offsetting.’ Under the Treasury Offset Program, these entities get a whack at your tax refund if you have an outstanding debt in certain categories, including:

  • past-due child support payments
  • back taxes
  • any unemployment compensation owed to the state
  • past-due student loans

This is another reason to pay your student loans on time, or better yet, make sure you only take on as much debt as you can afford to pay back.

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Aron Macarow, “You Can Lose Your Tax Refund if You Have Student Loans”, Attn:, March 21, 2015.

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April 13, 2015

Only some colleges count home equity in financial aid calculations

by Grace

While most colleges that use the CSS/Financial Aid PROFILE do include the value of your home in calculating eligibility for financial aid, there are some exceptions.

PROFILE Schools That Ignore Home Equity*

  • Bard College
  • Bucknell University
  • California Institute of Technology
  • DePauw University
  • Hamilton College
  • Harvard University
  • Princeton University
  • Santa Clara University
  • University of Virginia
  • Washington University, St. Louis
  • Whitman College

*This list was compiled last year, and changes may have occurred since then.

Additional information about how other PROFILE schools treat home equity can be found by clicking the link above.

Summary:

  • Schools that only use the FAFSA (Free Application for Federal Student Aid) to determine eligibility for financial aid do not use home equity in the calculation.
  • Schools that use the CSS/Financial Aid PROFILE to determine eligibility usually use home equity in the calculation, but often the amount is capped as a percentage of a family’s income.

Running the Net Price Price calculator for a particular college will usually show if home equity is counted, but the best way to be sure is to ask the school.

Schools can be flexible in awarding financial aid, and Lynn O’Shaughnessy reminds us of this important point:

By the way, how schools treat home equity can also depend on how desirable an applicant is.

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Lynn O’Shaughnessy, “Will Your Home Equity Hurt Financial Aid Chances?”, The College Solution, August 7, 2014.

April 6, 2015

Stanford just became free for more students

by Grace

Stanford University just got more affordable for upper middle-income families.

Stanford University announced last week that tuition will be free for students whose families earn less than $125,000 a year. The standard had been $100,000. Students whose families’ annual incomes are lower than $65,000 will also be exempt from paying room and board, up from the current $60,000 cutoff.

Wealthy students help pay for the free ride received by other students. 

… Stanford is able to fully subsidize the tuition of these students because of the high number of wealthy students who attend….

Cost of attendance at Stanford before financial aid is “roughly $65,000″ per year.

Of course, before getting the great tuition deal, students will have to gain admission at the “Toughest College to Get Into in the United States”.

… Stanford University is the toughest college to get into in the nation. Yes, harder to get into than Harvard.

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Fred Imbert, “Stanford just made tuition free for these students”, CNBC, April 2, 2015.

Liz Dwyer, “What’s the Toughest College to Get Into in the United States? Hint: Not Harvard”, TakePart, April 01, 2015.

March 25, 2015

Tips for older student loan borrowers

by Grace

How can older Americans sidestep student debt trouble?

With the need to retool career skills or pursue new vocations, more Americans are taking on loans to finance education later in life — for new degrees, certificates or course work called continuing education units to improve knowledge in demanding professions.

According to the Government Accountability Office, student debt held by those 65 and older has risen significantly in recent years, growing to about $18.2 billion in 2013, from about $2.8 billion in 2005. While it’s not known how much of that is the result of college loans co-signed for children or grandchildren, a good portion is for continuing education. Before the last recession, the working-age population pursuing “re-entry” courses jumped 27 percent over a decade, according to the Education Department.

The New York Times’ advice for senior citizens seems to be the same that younger student loan borrowers should follow.

… “Do a cost-benefit analysis. How will it maximize my earnings? Will I be able to service the debt?”…

“Evaluate your postgraduate payment plan,” Mr. Weber suggests. “What will your salary be after graduation? Will there be an immediate payoff in terms of a higher salary?”…

You can overpay for a degree or certificate that will yield little career advancement or salary increases. Mr. Weber warns against for-profit colleges that market aggressively and says their programs and graduation rates should be carefully vetted.

The federal government offers some flexibility in paying back loans, including income-based repayment (IBR).

But what happens after you’re out of school with continuing education debt if you can’t increase your income or don’t start earning money right away?

If you have federal loans, you can qualify for a break from payments until you can start paying them down. See the Education Department’s federal student aid website to explore the options.

Another option is income-based repayment, available only for federally guaranteed loans. Private loans are the least flexible in terms of repayment.

Retired borrowers may be more likely to qualify for IBR.

“If you’re at or near retirement, your income may be lower, which may affect your ability to repay your loan,” she said. “There is income-based repayment available, which can make repayment more manageable, but can also extend the repayment period, leading to more interest accrual. It’s something to keep in mind as you plan for the future.”

Since assets are not counted in determining eligibility for IBR and similar debt relief programs, senior citizens with substantial home equity and retirement accounts may find it easy to qualify.

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John F. Waskimarch, “Managing Student Loan Debt as an Older Adult”, New York Times, March 19, 2015.

March 19, 2015

New ‘Student Aid Bill of Rights’ makes it easier to pay back student loans

by Grace

The Obama administration’s new “Student Aid Bill of Rights” will “simplify the process to apply for income-based repayment”, a move likely to shift more of the burden for paying back student loans from borrowers to taxpayers.  That is just one of the new benefits for the 40 million borrowers holding $1.3 trillion in student debt.

President Barack Obama announced a new “Student Aid Bill of Rights” Tuesday, directing the Department of Education and other federal agencies to undertake initiatives in three areas to help improve affordability for the estimated 40 million borrowers with federal loans. “We’re going to require that the businesses that service your loans provide clear information about how much you owe, what your options are for repaying it, and if you’re falling behind, help you get back in good standing with reasonable fees on a reasonable timeline,” Obama said during his speech at the Georgia Institute of Technology Tuesday afternoon.

This is the government’s rather magnanimous promise:

A Student Aid Bill of Rights

  1. Every student deserves access to a quality, affordable education at a college that’s cutting costs and increasing learning.
  2. Every student should be able to access the resources needed to pay for college.
  3. Every borrower has the right to an affordable repayment plan.
  4. And every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans.

Summary of changes:

1. Create a centralized website that makes it easy to file complaints and to see all your student loans in one place….

2. Try having federal employees collecting debts instead of private contractors…

3. Make it easier for borrowers who become disabled to get their student loans discharged….

4. Ensure that the private debt collectors hired by the Department of Education apply prepayments first to loans with the highest interest rates, unless the borrower requests a different allocation.

5. Make it easier for students to get IRS information to qualify for income-based student loan repayment.

6. Clarify the rules under which students who declare bankruptcy can get their student loans reduced or eliminated….

While I disagree with some of the federal student loan program’s fundamental policies, it’s nice to see the government take the initiative for more clarity and transparency.

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Kelli B. Grant, “Student loan initiatives could benefit 40M borrowers”, CNBC, March 10, 2015.

Kim Clark, “6 Ways the New ‘Student Aid Bill Of Rights’ Will Help Borrowers”, Money, March 10, 2015.

March 16, 2015

Most borrowers take more than 10 years to repay student loans

by Grace

The standard maximum repayment time for federal student loans is 10 years, but in reality most borrowers take longer.

The vast majority of former students entering repayment on their federal student loans in 2012 picked 10-year plans. The numbers were higher for former students from two- and four-year programs, up to 90 percent of which picked the standard 10-year plan.

Recent history indicates that many of those borrowers will be repaying their federal student loans for far longer than 10 years. With a lackluster economy, tepid wage growth and vast numbers of Americans still looking for full-time work, some federal policymakers fear current borrowers will need more time to repay their loans than previous generations.

20150314.COCStudentLoanRepaymentTimes2

Just last month the Obama administration predicted “the increased use of student loan forgiveness programs will cost taxpayers $22 billion next year”. Student loan forgiveness programs allow reduced monthly payments that typically extend the repayment period beyond ten years.

Here’s a listing of federal student loan repayment time frames.  Click the links to find more details. 

REPAYMENT PLAN TIME FRAME
Standard Repayment Plan Up to 10 years
Graduated Repayment Plan Up to 10 years
Extended Repayment Plan Up to 25 years
Income-Based Repayment Plan (IBR) Up to 25 years
Pay As You Earn Repayment Plan Up to 20 years
Income-Contingent Repayment Plan Up to 25 years 
Income-Sensitive Repayment Plan Up to 10 years

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Shahien Nasiripour, “These 9 Charts Show America’s Coming Student Loan Apocalypse”, Huffington Post, 08/20/2014.

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