Student Loans & Financial Aid info

As the cost of a college education continues to rises, and federal college student loan limits fail to keep up, the private student loan business has grown very quickly. These private college student loans are used to fill the gap between available federal financial aid assistance and what students and families can afford to pay out-of-pocket for higher educational costs. However, these private student loans lack the more affordable, fixed interest rates, and flexible repayment options that federal college student loans will have. Prospective borrowers should exhaust all federal grant and federal college student loan options (including PLUS loans) before considering any private college student loans.

Banks and other financial institutions will make private student loans without any financial backing from the federal government. Interest accrues on all private college student loans from the time they are disbursed, although interest costs can sometimes be deferred and capitalized when you are ready to begin repayment. There are many different types of private student loans, each program with its own rules and specific requirements. Private college student loans are also called private label or alternative student loans, and are often provided by the same lenders that also will provide federal FFEL student loans. Because the government will not subsidize private college student loans, the rates and terms are not regulated the way they are for federal college student loans, which makes private student loans more risky and expensive.

What kind of interest rates, fees, and cash limits will you receive? Private student loan terms and conditions, including interest rates and fees, will generally be based on your credit history or your co-signer’s credit history. This means that low income students or those with some negative credit histories will likely receive college student loans that are more expensive. Like government college student loans, private student loans are supposed to be used specifically to finance postsecondary education (including books, transportation, and room and board). You will need to check your school’s estimated cost of attendance and consult with the federal financial aid assistance office before deciding on a private student loan amount.

Private student loan lenders may pressure or even require you to get a co-signer. A co-signer is someone such as a relative, friend or someone else who agrees to be responsible for your debt. Co-signers must understand that they will become responsible for paying back the debt just as if they have received the money.

There are a few very important differences between government college student loans and private student loans. If you take out a private student loan, you will not be eligible for the same types of discharge options available for federal financial aid student loans. The same will be true for deferment and forbearances. It is very important that you read your student loan contract very carefully to learn about your private student loan’s particular terms, conditions, benefits, rates, fees, and penalties. Private college student loan lenders will have to honor any promises they make about terms and benefits.

Many students are eligible for some kind of free financial aid assistance or a college student loan, either in the form of need based grants, or merit based scholarships. However, grants and scholarships will not always provide enough funds to cover rising college tuition and costs. After you have applied for and received all the possible free financial aid assistance, it might be time to take out a college student loan to meet the balance of your college educational expenses. Federal and state governments have devised guaranteed college student loan programs that allow students to borrow money at a lower interest rate to make up the difference that free financial aid assistance will not cover. However, before you decide to borrow money through a college student loan, there are some important things to consider:

• What are the interest rate charges?
• How long do you have to repay the student loan?
• Does repayment begin during or after you have completed college?
• What is the minimum payment required per month once payment does start?
• Will your income after college cover all of the expenses, including student loan payments?

At the time of disbursement, college student loans may seem like free money because repayment is not required immediately. However, it is important to remember, that you will eventually have to repay all the money you have borrowed, not to mention the interest. Some borrowers may think that the government is too big and bureaucratic to keep track of all the college student loans they issue. Unfortunately, in the past this was often the case. Yet, even though recent legislation has increased the total amount of college student loan money available, default rates have been dropping, standing currently at about 7 percent.

To not join those who do find themselves deeply in debt, a good thing to do before you decide to borrow money is to very seriously consider your current financial situation and then project what your future income and expenses could be like once you have graduated from college and start your new career. While this will certainly be a difficult task to accomplish, it just might prevent you from extending yourself beyond your financial means. To financially plan your future, you must estimate the total cost of your education, then estimate the amount of money you will expect to earn after graduation in your chosen profession. Now deduct your future cost of living expenses to determine how much money you have left for monthly college student loan repayments. A financial adviser or student loan officer at a bank or financial institution can help you with any of these formulas.

As you see, it really is quite easy to get started. Make sure you ask all the questions and compare all college student loans that have been offered to you. Whether it is a government college student loan or a private student loan, they will all be different. Above all, have fun and learn something. Do your self a favor now, because it will only enhance your future.

If you think your student college federal student financial aid paperwork reads like a Greek 101 exam, you are not alone. Sorting through the Free Application for Federal Student Aid (FAFSA) form can be a little confusing at best and an incomprehensible nightmare at worst.

If you have not filed an FAFSA yet, you need to get on it. This form must be completed if you want your son or daughter to be eligible for federal and state financial aid. A lot of federal student financial aid is distributed on a first come, first served basis, so the sooner you file the better off for your student to be.

After filing, you will then receive a Student Aid Report (SAR). Your SAR report will also be available online at the FAFSA Website.

This report will summarize the information submitted on the FAFSA and will also list your expected family contribution (EFC), which is the amount of money the government will expect your family to pay for college educational costs. The EFC is used to determine your student’s eligibility for federal student financial aid.

Be sure you are sitting down when you open that envelope; the money you will have left after the EFC is deducted will not be too far from the poverty thresholds determined by the Department of Health and Human Services.

The first thing you should do is make sure the information on the SAR report is complete and correct. In case of any errors, resubmit the form to the central processor as soon as you can. Corrections will go through in a couple of weeks, and each college that your student applies to will have access to all the updated information.

Student’s who have estimated their earnings may need to re-submit the form if their guesses were far off. A quick glance at your W-2 forms should tell you how close your estimates really are. Most students should not have a problem since their final pay stub of the year will show how much they have earned for the year.

Most colleges and universities will start sending out admission acceptance letters in March and federal student financial aid award notices will come very close behind. Expect a federal student financial aid award letter to arrive within about two weeks of an acceptance letter. Many schools send out acceptance and federal student financial aid notifications on the same day.

In a federal student financial aid package, a college or university will try to make up the difference between the cost of attending school and a family’s expected contribution as will be spelled out in a SAR report. Some will do better than others do. Three schools with similar costs may offer completely different federal student financial id packages.

Much will depends on a student’s past grades, a family’s federal student financial aid need and how much federal aid is actually available from a school. Private schools will tend to have deeper pockets than state schools. Many middle class families could find themselves in a hard spot. They will have too much money to qualify for a need based financial aid, but too little money to cover college costs on their own. Therefore, parents or students — or both — take out private student loans.

If your student is determined to go to an Ivy League school, you do not need to despair. Following Princeton’s lead in 2001, all of the Ivy League schools have adopted a need blind acceptance and most will also offer grants (which do not have to be paid back) instead of private student loans to qualified students.

The expected family contribution (EFC), is the amount of money that a family is expected to contribute toward the price of a student’s education from there income and assets. There is a different financial aid need analysis formula for each of three student groups:

• Dependent Students
• Independent Students W/no Dependent
• Independent Students with Dependent

The EFC will consist of two parts: the parental contribution and the student contribution. Generally, a family contribution refers to both Parent and Student combined. For independent students, there would be no parent contribution.

Assets will usually be excluded from the EFC calculation for those with an adjusted gross income being below $50,000. When assets have been taken into account, the EFC formula will provide an asset protection allowance according to your age and marital status. The typically usual family receives an asset protection allowance of $45,000. This amount will be subtracted from the parents’ total net worth of assets and, of the remainder; only 12 percent will be considered available assets for educational expenses. Independent students with children will also receive the asset protection allowance, but the assessment rate is now only 7 percent.

In comparison, if you are a dependent student or independent student with no dependents you will be expected to contribute 20 percent of the total assets, since it will be assumed that these students have saved their money for the purposes of paying for their higher education.

What assets will they be using to calculate the EFC?

• Real Estate other than the family residence
• Investments
• Family owned business with more than 100 employees
• A Farm that the family does not live on
• Current cash, savings, and checking accounts
• Educational IRA or savings plans, if owned by the student’s parents

The following assets will not be included:

• The value of IRAs and other Retirement plans
• Home Equity (the difference between home value and home debt)
• Farm Equity for a farm in which the family lives (the difference between the value of the farm and the debt against the farm)
• Family owned business with fewer than 100 employees
• Cash value of Life Insurance Policies

To determine the amount of income that would be available for educational purposes, both parents and students are given offsets against income. Offset will include taxes (federal, state, local, FICA), employment expenses, and an income protection allowance. For parents and independent students that do have dependents, the income protection allowance can range from $15,000 to $45,000, based on the family size and number of family members that are enrolled in college.

After they have subtracted the offsets from the total income, the remaining income is called the available income. For parents and independent students that do have dependents, the available assets are added to the available income to get to the adjusted available income (AAI). A portion of this amount will be multiplied by 22 to 47 percent (plus an additional predetermined assessment) to arrive at the total contribution. Unfortunately, the higher the income, the higher the percentage used.

Dependent students as well as independent students without dependents are expected to contribute 20 percent of their available income and receive a more limited income protection allowance:

• $3,080 for dependent students
• $6,220 for single independent students
• $6,220 for married independent students with both enrolled
• $9,970 for married independent students with one enrolled

What income will be used to calculate the EFC?

• Adjusted gross income, if taxes filed, or total wages
• Non-taxable income, including earned income credits, public assistance, contributions to tax-deferred pension and savings plans, IRA deductions, any child support, untaxed portions of retirement distributions and other items listed on the financial aid application

The following income will not be included:

• Food stamps or subsidized housing
• Student financial aid awards, including need-based work study earnings
• Federal education tax credits
• Child support paid to another household

The Nursing Student Loan (NSL) program is available those that are a U.S. citizen, U.S. national, or permanent resident who are enrolled at least half time as an undergraduate or a graduate student in a nursing degree program. You can be awarded up to $2,500 per academic year, depending on your financial need. The annual limit increases to $4,000 during your final two years of the nursing degree program. The total NSL maximum is $13,000. The interest rate will be 5 percent and interest does not accrue during periods of deferment. For consideration for a nursing school loan, you must report parental data on the FAFSA, even if have had independent student status.

Each and every time you accept a nursing school loan (NSL), you will be mailed a paper promissory note and a loan disclosure form that you will be required to complete and return before your nursing school loan funds will be disbursed to you.

If you have accepted a nursing school loan award, a promissory note will be required. A promissory note is a legal and binding contract for your promise to repay the nursing school loan according to the terms listed on the note. The promissory note will give details on the nursing school loan amount, interest, and repayment terms.

Promissory notes can usually be accessed online; however, paper promissory notes will also be available by contacting your lender.

For some nursing school loans, you will have to complete a master promissory note, which will be good for one or more nursing school loans for one or more academic years. Other nursing school loans require a new promissory note for each loan. Be sure to check with your University e-mail account and follow the instructions you have received to complete your promissory note(s). Your nursing school loan funds will not be disbursed until your submitted loan documents have been confirmed by the University or College of your choices Office of Student Finance.

With most Nursing Student Loans you will be required to attend an exit interview when you:

• Are ready to graduate.
• Leave the University (even if it is just temporary).
• Drop your registration below half time enrollment.
• Transfer to another school.
• Leave for a National Student Exchange (NSE) experience.

Exit interviews will usually be conducted on campus by Student Financial Office and are required of all borrowers from federal and University nursing student loan programs. At an exit interview, you will receive information regarding the rights and responsibilities of the borrower and a lender and servicer. You will also be told about repayment, deferment, and cancellation of your nursing student loans. For University based loans, your repayment terms will include length, interest rate, outstanding balance, and payment amounts.

Federal regulations and University policy do require student financial offices to maintain documentation that you have attended an exit interview. For University based nursing student loans, you will be required to complete and sign various different forms. If you have not completed the paperwork, a hold will be placed on your record.

If you have borrowed from the William D. Ford Federal Direct Loan Program, you will have to go online to www.dlservicer.ed.gov to complete an exit interview. Your Financial Aid Office staff can provide general information on the Federal Direct subsidized and unsubsidized loans in their exit interviews, however the financial aid office will not handle exit interviews for that particular loan program.

Exit interviews are required if you have borrowed from any of the following student loan programs:

• Federal Perkins Loan
• Health Professions Student Loan
• Nursing Student Loan
• Primary Care Loan
• University Trust Fund Loan

A federal college student loan will allow a student and their parents to borrow money to help pay for college through student loan programs that are supported by the federal government. They will usually have lower interest rates and offer very attractive repayment terms, benefits and many different options. Generally, repayment of a federal college student loan does not begin until after the student has left or graduated from school. Federal college student loans can be used to pay many school expenses such as tuition and fees, room and board, books, supplies and transportation.

Federal college student loans are given to students through two kinds of programs: the Direct Student Loan Program and the Federal Family Education Student Loan Program. Both programs will essentially offer the same type of college student loans with similar loan terms and borrower benefits. Your school will choose the college student loan program in which it will participate. In both programs, college student loan funds are provided to you through your school.

A private student loan is a non-federal college student loan issued by a lender or financial institution such as a bank or credit union. Private student loans will often have variable interest rates, will always require a credit check and will not provide the benefits of federal college student loans.

Federal college student loans will offer borrowers multi benefits you will typically not find in a private student loan. These will include a low fixed interest rate, income-based repayment plans, and student loan forgiveness and deferment options, including deferment of college student loan payments when a student returns back to school. These are just some of many different reasons why a student and parents should always exhaust federal college student loan options before considering a private college student loan.

To get a federal college student loan, you will have to complete the Free Application for Federal Student Aid (FAFSA). The best and easiest way to complete the FAFSA is online at www.fafsa.ed.gov. There, you will identify schools that you are interested in attending. When your FAFSA has been processed, the schools you have identified on your application will receive your information. The school will then contact you and let you how much financial aid is available for you, including grants, scholarships, work opportunities and federal college student loans. Should you choose a federal college student loan, your school will provide you with instructions on the next step, including how to select a lender.

Undergraduate college student loan limits range from $3,500 to $10,500 per year depending on particular factors, including the student’s year in college. Some graduate students will be able to borrow up to $20,500 each year. Parents can also get federal college student loans to help pay for the remainder of college costs that would not be covered by their children’s other financial aid assistance. This kind of loan is called a PLUS loan. In addition, graduate students can obtain a PLUS loan to help pay for their own education.

While the application process may be easier in some instances for a private college student loan, federal college student loans usually will have lower interest rates and a better repayment term and options than private college student loans will not have. Additionally, schools will use the information provided on the FAFSA to determine the eligibility for other kinds of financial aid assistance that could be provided by the federal government, from your state, or even from the school itself. This financial aid can include grants, scholarships and work opportunities.

The high cost of a law school education requires most law students to rely on educational loans such as financial aid to finance at least part of their studies. Although the best sources of information on possible funding are law schools themselves, I have put together some information to introduce you to the financial aid process and some of its resources that might be available for you. Remember, the earlier you begin researching possible student loan options and completing both your income tax return and other necessary forms, the more likely you are to secure the needed monies to further your education.

There will be several issues to consider before actually applying for financial aid.

• While federal student loan programs for students pursuing graduate and professional degrees do not need parental financial statements, law schools themselves will vary widely in the information they will use to compute financial aid packages. Many will request and require financial information from your parents or others who have provided support for you, even if you have been out of school and on your own for a while.
• Large amounts of consumer debt on credit cards, outstanding debts, or a bad credit rating may affect your ability to borrow the money needed.
• If you are planning to enter a low paying public interest legal job after completing your J.D., you may want to investigate student loan forgiveness programs at some law schools, which assist graduates who take such jobs in repaying law school educational student loans.

The application process for most forms of financial aid will begin with the Free Application for Federal Student Aid (FAFSA). This is available from any college financial aid office or online (fafsa.ed.gov/). You will have to complete your income tax return for the most recent year before you begin to fill out the FAFSA application. Some law schools may also require you and your parents to apply through the Access Group (accessgroup.org) or the College Scholarship Service Financial Aid Profile (collegeboard.com). These are need analysis services that will gather information to determine eligibility for institutional financial aid (scholarships and grants). In addition, some schools may have their own financial aid applications.

Need Based Aid

There are three types of student loans available through either the Federal Direct Student Loan Program (FDSLP) or the Federal Family Education Student Loan Program (FFELP):

1. Subsidized Federal Stafford Student Loan: Students with demonstrated financial aid need can borrow up to $8,500 per year; the federal government pays the interest while the student is in school.
2. Unsubsidized Federal Stafford Student Loan: Students are allowed to borrow up to a combined total of $18,500 in subsidized and unsubsidized student loans. Students may pay the interest or let it accrue while in school.
3. Perkins Federal Student Loan: This student loan is available to students at certain schools only, the amounts are determined by an individual basis and the federal government pays the interest while the student is in school.

All of these college student loans are offered under the same terms; Federal Direct student loans, however, are disbursed through individual law school financial aid offices instead of through banks or other traditional lenders.

Private student loans can often carry an origination fee. Origination fees are a one time charge based on the amount of the student loan. They can be taken out of the total student loan amount or added on top of the total student loan amount, often at the borrower’s preference. Some lenders can offer a low interest, 0 fee loan, but these are usually available only to those with a high credit scores (800 or more). Each percentage point on the front end fee gets paid once, so you are not paying interest on it, while each percentage point on the interest rate is calculated and paid throughout the life of the student loan. Some would say this makes the interest rate more critical than the origination fee.

In fact, there is an easy solution to the fee vs. rate question, all lenders are legally required to provide you a statement of the APR (Annual Percentage Rate) for the private student loan before you sign a promissory note and commit yourself to it. Unlike the base interest rate, this rate includes any fees that will be charged and can be thought of as the effective interest rate including actual interest, fees, and so on. When comparing private student loans, it may be easier to compare APR rather than interest rate to ensure an apple to apples comparison is done. The APR is the best yardstick to compare private student loans that have the same repayment term; however, if the repayment terms are different, APR becomes a less than perfect comparison tool. With different term loans, consumers often look to total financing costs to understand all of the financing options.

Eligible private student loan programs generally issue student loans based on the credit history of the applicant and any applicable cosigner/co-endorser/co borrower. This is in contrast to federal student loan programs that deal primarily with need based criteria, as defined by the EFC and the FAFSA. For many students, this is a greater advantage to private student loan programs, as their families may have too much income or too many assets to qualify for federal financial aid but insufficient assets and income to pay for school without the assistance.

Additionally, many international students in the United States can obtain private student loans (they are ineligible for federal student loans in many cases) with a cosigner who is a United States citizen or permanent resident.

The terms for alternative student loans vary from lender to lender. A common suggestion is to shop around on all the terms, not just the ones that have “rates as low as…” tactics that are sometimes little more than bait and switch. Examples of other borrower terms and benefits that vary by lending institutions are deferments (amount of time after leaving school before payments start) and forbearances (a period when payments are temporarily stopped due to financial or other hardship). These policies are based solely on the contract between lending institution and borrower and not set by the Department of Education policies.

Federally subsidized consolidation loans are not available for alternative or private student loans, though several lenders offer private student consolidation loan programs. Borrowers of privately subsidized student loans can face the same restrictions to bankruptcy discharge as for government based loans. New legislation makes it clear that these student loans are, like federal student loans, not dischargeable under any bankruptcy. Even before the legislation was passed, private student loans that were guaranteed in whole or in part by a nonprofit entity are still non-dischargeable in bankruptcy (and most private student loans, regardless of the lender, were indeed guaranteed by a nonprofit).

Each year, college bound students will receive offers of financial aid from colleges who have accepted them as students. In addition, every year, enrollment and financial aid offices across the country wait for one of two responses from the student and their families.

Usually the first response is; Is this the most we qualify for? The second response is in the form of a matriculation fee, also called a “deposit.” Colleges hope students respond favorably to their financial aid packages, and send the required deposit fee, saving them a chair in that school. However, families are usually considering their first offer of financial aid a starting point for bargaining with the colleges. How does a college award financial aid? How would a family know if this is the best offer a college can give them?

Financial aid is made up of three main components:
(1) Merit Scholarships,
(2) Grants, and
(3) Self-help. Generally, merit scholarships are intended to reward the student for academic achievement in high school as well as extra-curricular involvement. College has many different definitions of achievement and many different methods of awarding merit scholarships. Some colleges do not offer merit awards to families with no financial aid need. Others will limit merit scholarships to non-athletes. Check with the colleges you are considering for the exact method they use to determine ones eligibility, if any, for the different merit programs they will offer.

Grants, on the other hand, are generally a need based award. Like merit scholarships, grants are not paid back to the college. Again, every college uses many different methods of determining financial aid need against the total college price: tuition, fees, room, and board, etc.

The third component, self help, is made up of all other sources such as college student loans and work study. When all forms of financial aid are compiled for a particular student, the remaining net cost is commonly known as expected family contribution. This is often considered to be the amount that families or the student must pay to make up the difference between the college’s total award and the remaining charges left on the annual charges for attending that particular college.

Each college will have an award ceiling it will set for individual student packages. The ceiling is the total amount of financial aid, from all sources, that will be awarded to that particular student. What will make up the ceiling? Financial aid need, determined by the Federal Methodology (FAFSA), or by other required financial aid applications, is one factor. Another would be academic quality determined by the individual college on variables unique to that college alone. There could be special considerations, such as alumni status, athletic ability , musical or art talent, demographic and ethnic issues, and thousands of other variables can be found in the models colleges will use to determine who qualifies for what institutional financial aid.

Your goal as a consumer is to try to reduce the list price and know the final net cost of attendance for the different colleges you are seriously considering attending. Once you have the system down each college uses to determine your net cost, the decision about which college to attend is usually one of value. Weigh the net cost at each college against what you and your family are considering to be the most important values. The college that matches your values, needs, goals, and offers the most reasonable cost for those values, will most likely be the one you will choose to attend.

With an average student loan debt of approximately $20,000 weighing on a students shoulders and savings at an all time low, college student borrowers often view their post graduate existence as a difficult one. At the critical juncture of a student loan repayment, financially drained graduates with tight incomes can feel the financial pinch as they juggle job hunting, business launching, home purchasing, and family building. A powerful debt management tool known as student loan debt consolidation is a viable option at any debtors’ disposal. Surprisingly, a recent survey found that 41% of college graduates had never heard of the federal student loan debt consolidation program, and that only 35% of those had taken advantage of this form of student loan refinance.

University graduates who have tapped into financial aid will gain much from a college loan debt consolidation, which combines existing student loans into a new single student loan. Student loan debt consolidation is easy, since:

1) There will be no credit checks or application fees involved, and
2) The applicant is not required to have collateral, be employed, or have a co-signer. The discussion below highlights the numerous benefits reaped by the average college student who chooses to consolidate a college student loan.

Borrowers will be aloud to select a manageable monthly amount that is tailored to their specific income needs. With the help of a student loan debt consolidation calculator, they can determine the number of years they would need to pay off the college student loan at that amount. An extended repayment period will enable them to reduce their monthly payments by as much as 60% in many cases. This will allow more disposable cash that can be put towards credit card bills, mortgage or rent payments, as well as auto, food and utility expenses.

Student loan debt consolidation will help to facilitate payments since borrowers will only have to issue one check to one lender, rather than to multiple lenders on different due dates.

By consolidating their college student loans, graduates will benefit from a great interest rate reduction.

For the majority of college student loans, the standard repayment term will be 10 years. Consolidation enables borrowers to extend the period up to as much as 30 years. By stretching out the repayment period, monthly payments are significantly dropped and become extremely easier, particularly for degreed individuals on entry level salaries.

Student loan debt consolidation can boost a student’s credit rating; this is because previous student loans have been paid off. When student loan debt consolidation takes place, the creditor will pay in full the student’s existing student loans and combines them into one new student loan. The student borrower no longer has numerous open student loans with a limited payment history. Previous student loans are listed as having been paid in full and this will give rise to an improved credit history and an overall enhancement of the student’s credit profile. With the improved credit score and history, graduates can now enter into future credit transactions with very little hassle.

Borrowers who consolidate there student loans can lock in a fixed rate of interest for the loan’s term. This is financially a good thing in that graduates are protected from any future increases in the interest rate.

Most lenders exempt borrowers who consolidate there student loans from pre-payment penalties for early or larger payments. Graduates are granted the privilege of deciding the period during which they will repay their debt in full.

Individuals who consolidate their college student loans can save time and money by opting for automatic withdrawal from their checking account. Usually this will allow their interest rate to be reduced by .25% when they authorize the automatic deduction of payments.

The interest that student loan debt consolidation will create is usually tax-deductible.