Student Loans & Financial Aid info

Avoiding Student Loan Debt and Choosing the Right College

Today there seems to be more financial aid assistance available than ever before: more federal aid, institutional incentives, as well as more scholarships. Even by taking advantage of all of the above options, many college students still come up short. Unfortunately, college students often find themselves strapped with a huge financial burden that can weigh up to $100,000 before they even reach their twenty-first birthday. That is a lot to look forward to upon graduating. You ask, what is the solution? Educating yourself about the many alternatives and options that can help you save money and lower that debt.

Being informed about the many options available should be your first step in saving on the cost of tuition. For many students, college is just about obtaining a diploma. For others, it is simply about campus life, parties, and opportunities to get involved in sports. If you want to minimize the amount of college student loans that you take out to fund your education, you need to determine what sacrifices you are going to be willing to make that will help you achieve this. This will not be optional; to save money in college you will most likely need to give up some college luxuries in order to lighten your financial burdens.

You should consider the below questions:

Why is college so important to me? As stated above, college does mean different things to different students. Is college important because it will help you obtain your dream job or is it important because you will be the first in your family to go to college? The answer to questions like these can help you determine what purpose college will serve in your life. Simply put, the less attached you are to a particular college or university the better because there are many options available for college students who are willing to look outside the box.

Where do you see yourself in ten years? If you see your future as a construction worker or you want to be an aesthetician, then maybe there is no need to fork over $50,000 dollars in tuition. Unless you are completely in it for the academic benefit, college for you may not be the right chose. However, if you do plan to become a teacher, doctor or engineer, you probably realize that obtaining a diploma is a crucial and important step in the direction of your goal. Another important consideration is that for more general degrees such as English, education, and communications, the prestige of the college is not nearly as important as it is for those pursuing specialized degrees in chemistry or medicine. Meaning you may be able to save yourself from footing the bill for an unnecessarily name brand tuition.

What do you want your college experience to look like? Some college students are seeking an independent college career; one that provides flexible scheduling options and a workload that will be balanced with a part-time job. Other college students, like fraternity boys, sorority girls, and football players want to be totally submerged in the college atmosphere. These college students intend to eat, sleep, and play on the college campus. For the college student looking for this experience it may be harder to minimize a college student loan as not every college will cater to such a lifestyle, and typically those that do will cushion their tuition to compensate. If you are of the independent college student breed, you will likely find that there are hundreds of options that help to make college more affordable.

Most universities and colleges will offer a Federal Direct Stafford Student Loan (Federal Direct Subsidized and Unsubsidized Student Loans) as a participant in the William D. Ford Federal Direct Student Loan Program. When you borrow a Federal Direct Student Loan, you are borrowing from the federal government by receiving funds directly through your college or university. There are colleges and universities that will not participate in the Federal Family Education Student Loan program (FFEL).

Under the Federal Direct Student Loan Program, you will have many different options for repayment; therefore, you can select the repayment plan that is best for your particular financial circumstances. For more information regarding repayment options, you can talk to the financial aid office at your school.

Federal Direct Subsidized Student Loan

The Federal Direct Subsidized Student Loan is a need based federal student loan awarded only to college students who demonstrate a financial aid need. Undergraduate, graduate, and professional college students who have unmet financial need will be considered for this student loan up to the amount of the college students’ borrowing limit. All borrowers must be U.S. citizens or eligible non-citizens enrolled at least half time and maintaining a Satisfactory Academic Progress for Financial Aid Assistance Eligibility. In addition, borrowers must meet all other requirements listed on the Student Rights and Responsibilities pamphlet your school will provide to you.

Federal Direct Unsubsidized Student Loan

The Federal Direct Unsubsidized Student Loan is a non-need based federal student loan that cannot exceed the educational cost of attendance minus other financial aid assistance. Undergraduate, graduate, and professional students who are not eligible for any Subsidized Student Loan or are eligible for only a portion of the annual student loan limit for the Subsidized Loan may apply for the unsubsidized student loan as well. Undergraduate annual Unsubsidized Stafford student loan limits are increased for student loans initially disbursed on or after July 1, 2008. Borrowers must be U.S. citizens or eligible non-citizens enrolled at least half time and maintaining Satisfactory Academic Progress for Financial Aid Assistance Eligibility. In addition, borrowers must meet all other requirements listed in the Student Rights and Responsibilities pamphlet your financial aid assistant will give you.

Additional Unsubsidized Student Loan for Health Profession Students

Additional unsubsidized amounts are available for college students enrolled in the health professions colleges. This would include the Colleges of Medicine, Dentistry, Optometry, Pharmacy and Veterinary Medicine. College students in these professional programs may receive up to a maximum of $20,000, as long as it does not exceed the cost of attendance.

The aggregate subsidized and unsubsidized student loan amount is $224,000.

The Application Process

File the FAFSA or Renewal FAFSA to be considered for a Federal Subsidized Direct Student Loan or Unsubsidized Direct Student Loan.

Basic Borrowing Limits

Borrowing limits will depend on class rank and academic level, and vary for undergraduates and graduate as well as professional college students. Special rules will apply to college students taking coursework through the Office of Continuing Education (CEd) and graduate nondegree coursework.

The Office of Student Financial Aid Assistance uses the National College Student Loan Database Service (NSLDS). Consequently, your student loan award will reflect any loans borrowed at any college or university previously attended. Refer to your Student Aid Report (SAR) for your student loan aggregates.

Federal College Student Loans

Your federal financial aid assistance award letter will inform you about the federal college student loans for which you qualify for. There are five types of college student loans that you may see on your federal financial aid assistance award letter.
• Federal Perkins College Student Loans
• Federal Stafford College Student Loans
Subsidized Federal Stafford College Student Loans
Unsubsidized Federal Stafford College Student Loans

Federal Perkins College Student Loans

Federal Perkins College Student Loans are for students with the greatest financial aid need. These college student loans are made by the college or university using government funds.

A few Federal Perkins College Student Loan facts:
• You must complete the FAFSA to find out if you qualify for a Federal Perkins College Student Loan.
• The college student loan amount is based upon funding available to a college or university.
• There is no origination or guarantee fee.
• The interest rate will be fixed at 5.00%.
• Repayment will begin nine months after you graduate, leave school or drop to less than half time.

Federal Stafford College Student Loans

Your college or university will participate in one or the other program that provides a Federal Stafford College Student Loan. The main difference between the two programs is who funds the college student loan. Your school will inform you of the program it does participate in and how to apply for a Federal Stafford College Student Loan.

Your school may participate in either the:
• Federal Family Education College Student Loan Program (FFELP) where banks, credit unions and financial institutions fund the college student loans.
• William D. Ford Federal Direct College Student Loan Program (Direct Student Loan) where the U.S. Department of Education will provide the money for the college student loan through the college or university.

Subsidized/Unsubsidized

There are two types of Federal Stafford College Student Loans: Subsidized and Unsubsidized.

Subsidized Federal Stafford College Student Loans

Subsidized Federal Stafford College Student Loans are based on financial aid need. While attending school and during the six-month grace period after you have graduated, drop to less than half time or leave school, the government will pay the interest on your Subsidized Federal Stafford College Student Loan.

Unsubsidized Federal Stafford College Student Loans

Unsubsidized Federal Stafford College Student Loans are not based on financial aid need. You will be responsible for paying the interest that accrues while you are continuing to attend college. You will, however, have the option either to pay the interest while you are in school or to add it to the principal amount of your student loan.

Federal Stafford College Student Loan Facts

A few Federal Stafford College Student Loan facts:
• You must complete the FAFSA.
• The interest rate is fixed at 6.80%.*
• Repayment will begin six months after you graduate, leave school or drop to less than half time.

For undergraduate Subsidized Federal Stafford College Student Loans with disbursements made on or after July 1, 2008, and before July 1, 2009, the interest rate will be fixed at 6.00% for the life of the college student loan.

A Student Financial Aid Assistance Program’s mission is to support a College’s mission of putting the needs of college students at the fore front of any decision making process. In maintaining this mission, the Financial Aid Assistance and Scholarship Program personnel can assist any college student in securing the necessary funds to pursue their educational goals at any college or university. This program is committed to providing quality service, reliable consumer information and complete access to all information on a large variety of higher education financial aid assistance sources. In addition, they have committed themselves to working with all communities by providing financial aid assistance workshops, information, and consultation to college students, parents, high school counselors, as well as the general public.

I have put together the following terms to help you understand the Federal College Student Loan Programs:

Subsidized Stafford College Student Loan – This is a need based student loan on which the interest will be paid by the government while you are in school at least half time, during the grace period and during any periods of deferment.

Unsubsidized Stafford College Student Loan - You are responsible for paying the interest on an unsubsidized loan while you are in school, during the grace period, during deferment periods and during repayment. Interest can be paid either while you are in school, or it can be postponed and paid after graduation or withdrawal from school. If you do choose to postpone payment of the interest, it will be capitalized once you do enter repayment. Both the Subsidized and Unsubsidized Stafford College Student Loans will have a variable interest rate that will adjust every July 1 and cannot and will not exceed eight and a quarter percent.

Capitalizing Interest – This term is a process where a lender will add any unpaid interest on a college student loan to the principal, which will increase the outstanding balance of which interest will accrue daily.

Parent College Student Loans for Undergraduate College Students (PLUS) - A PLUS Student Loan is a low cost federal college student loan taken out in the parent’s name to cover the cost of education that is not satisfied by other financial aid, for instance Stafford College Student Loans. It will have a variable interest rate that is adjusted every July 1 and cannot exceed nine percent. Parents will become eligible based on their credit history and not income.

Entrance Counseling – First time borrowers of Stafford College Student Loans must complete an Entrance Counseling. Entrance Counseling will simply educate the borrower on their rights and responsibilities as Stafford College Student Loan borrowers. In many cases you can complete your entrance counseling online by accessing it online at your college of choices website.

Exit Counseling - Borrowers who are withdrawing, graduating or dropping to less than half time enrollment will have to complete an Exit Counseling. You can complete Exit Counseling online as well at most college’s online website.

Default - Failure to pay your college student loan back according to the terms disclosed in your promissory note will results in a default. You are in default on your college student loan if your payments are 270 days past due or if you have failed to comply
with other terms of the student loan.

Veteran’s education benefits will be treated as resources, not income, for Federal student financial aid purposes. What this means is veterans should not report their veteran’s education benefits as income on the FAFSA. The FAFSA will include separate questions that ask about the monthly benefits and the number of months of benefits still expected during the school year (July 1 to June 30). However, there will be a few exceptions.

Section 480(c)(2) of the Higher Education Act of 1965 (HEA) defines veteran’s education benefits to include, but not limited to, the following veteran’s benefits:

• Reserve Officer Training Corps scholarship. (US Code, Title 10, Chapter 2)
• Selective Reserve. (US Code, Title 10, Chapter 106)
• Selective Reserve Educational Assistance Program. (US Code, Title 10, Chapter 107)
• Reserve Officer Training Corps Program. (US Code, Title 37, Chapter 2)
• Montgomery GI Bill - active duty. (US Code, Title 38, Chapter 30)
• Vocational Rehabilitation. (US Code, Title 38, Chapter 31)
• Post-Vietnam Era Veterans. Educational Assistance Program. (US Code, Title 38, Chapter 32)
• Dependents Educational Assistance Program. (US Code, Title 38, Chapter 35)
• Restored Entitlement Program for Survivors (or Quayle benefits). (Public Law 97-376, Section 156)
• Educational Assistance Pilot Program. (Public Law 96-342, Section 903)

The HEA specifies in Section 480(b)(4) that these benefits will not be reported on Worksheet B of the FAFSA. These benefits are typically considered to be resources. All other veterans’ benefits, such as income earned from the Veterans Affairs Student Work-Study Allowance Program (VASWSAP) and veterans non-education benefits (e.g., Disability, Death Pension, or Dependency & Indemnity Compensation (DIS)) will be reported in Worksheet B of the FAFSA as untaxable income.

It is important to understand that although veteran’s education benefits are not reported on Worksheet B, there is a special question on the FAFSA that will ask about veteran’s education benefits. This question asks for the number of months of benefits and the amount per month. A common error that does occur is to report the annual amount of benefits, as opposed to the monthly amount. If the monthly amount varies, do an average by calculating the monthly figure by dividing the annual figure by the number of months of benefits. The answer to this particular question does not affect the EFC.

It is also important to understand whether a benefit is treated as a resource or as income. Resources will reduce need-based financial aid dollar for dollar. So if you do include a resource as income on the FAFSA, you will be penalized twice: once because it will increase your Expected Family Contribution (EFC) and once by having the resource reduce your Federal student financial aid eligibility.

Much of the questions on veteran’s education benefits occur in the sections that deal with over awards. Over awards occur when the total of a college student’s financial aid and resources exceeds his or her demonstrated financial aid need. When an over award occurs, the school is required to reduce the financial aid package to compensate for it. Basically, this is just a fancy way of saying that every dollar that is classified as a resource will reduce the college student’s need-based financial aid by a dollar.

The over award regulations for Title 34 concerning General Provisions for the Federal Perkins College Student Loan, FWS, and FSEOG Programs specify that resources will include any veterans education benefits paid under US Code Title 38, Chapters 30, 31, 32 and 35. This does includes the Montgomery GI Bill benefits. However, an exception is made to not have it count as resources any veterans education benefits that were included in the calculation of the college student’s expected family contribution .

In addition, the regulations specify that the college or university may exclude as a resource any portion of a subsidized Stafford College Student Loan that is less than or equal to the amount of the student’s Montgomery GI Bill benefits.

After graduating, leave school, or dropping below half time enrollment, you will have a six-month grace period before you must begin to repay your college student loan. During this period, you will then receive payment information, and you will be notified of your first payment due date. You alone are responsible for beginning repayment on time, even if you do not receive this information. Payments will usually be due monthly.

During the grace period on a subsidized college student loan, you will not have to pay any principal, and you will not be charged any interest. In addition, during the grace period on an unsubsidized college student loan, you do not have to pay any principal, but you will be charged interest. You can choose to either pay the interest or it will be capitalized (added to your principal college student loan balance, thus increasing the amount you will owe).

How Do I Pay Back My College Student Loans?

You will repay your FFEL Stafford College Student Loan to a private lender or a student loan servicer. You will repay your Direct Student Loan to the U.S. Department of Education’s Direct Student Loan Servicing Center. Both the Direct Student Loan and FFEL programs will offer four repayment plans you may choose from, but the terms will differ slightly. You will receive information that is more detailed on your repayment options during your entrance and exit counseling sessions your school will provide to you.

What If I Have Trouble Repaying The College Student Loan?

Under some circumstances, you may be able to receive a deferment or forbearance on your college student loan, as long as it is not in default. A deferment simply means no payments are required at the time. You will not be charged interest for a subsidized FFEL or Direct Stafford college student loan. If you have an unsubsidized Stafford College Student Loan, you are responsible for the interest during deferment.

If for some reason you are temporarily unable to meet your repayment schedule (for example due to poor health or other unforeseen personal problems), but you will not be eligible for a deferment, your lender may grant you forbearance for a specific limited time period.

Can My Stafford College Student Loan Ever Be Discharged Or Canceled?

It can, but only under some specific circumstances. Your college student loan cannot be canceled because you simply did not complete the program of study at the school (unless there is a valid reason you could not complete the program such as the school closed, for example), or because you did not like the school or the program of study, or you simply did not obtain employment after completing the program of study. There must be a very valid reason for a discharge or cancellation of your college student loan. Be wise in your decisions about your college student loan before you make rash decisions that will only hurt you in the future. An unpaid college student loan can be a huge credit debt for you in the future, if you do not pay it off.

Direct Student Loans and Federal Family Education College Student Loans (FFEL) are the two largest government federal college student loan programs. FFELs are guaranteed college student loans made by a private lender. This means the government will reimburse the lender when a borrower defaults, or otherwise fails to pay back the loan. However, before being reimbursed, lenders are required to make certain efforts to collect for the college student loan.

Although the FFEL program is a federal program, it is generally administered through state or private nonprofit agencies referred to as guaranty agencies. Guaranty agencies will pay off the lender when and if the borrower defaults, and in turn, are reinsured by the Department of Education. The U.S. Department of Education can provide a list of state guaranty agencies.

Federal Direct Student Loans are made directly by the federal government to the college student, with the assistance of the school or any other entity that has assisted in the origination of the loan. Lenders and any guaranty agencies will not be involved in this process.

Both federal college student loan programs are highly regulated by Congress and the U.S. Department of Education. The maximum interest rates, and many of the important terms of federal college student loans are set by Congress, and are similar in both the programs. There are a few important differences in available repayment plans for FFEL and Direct Student Loan borrowers. You must be in the Direct Student Loan program to qualify for any public service forgiveness.

Stafford college student loans are for undergraduate, graduate and professional college students enrolled at least half time. Federal Stafford College Student Loans are made to students through the Direct Student Loan program and the FFEL program. FFEL and Direct Stafford student loans have the same loan limits, deferment, and cancellation programs. There are some subtle differences in respect to the repayment plans.

Stafford college student loans can be subsidized or unsubsidized. A subsidized student loan is awarded based on financial need and the government will pay all the interest before repayment begins or during authorized periods of deferment. Unsubsidized student loans are not awarded on the bases of financial need, and borrowers are responsible for all interest. Interest payments will usually be deferred while the borrower is still in school, but is added to the principal of the loan when repayment begins. Borrowers can choose to either pay interest while in school or during an authorized period of deferment to avoid the capitalization.

Interest rates for a Stafford subsidized loan will gradually be reduced over the next few years. These cut will apply only to new loans disbursed after 2007.

The new interest rates will be:

• 6% for student loans first disbursed July 1, 2008 to July 1, 2009
• 5.6% for loans first disbursed July 1, 2009 to July 1, 2010
• 4.5% for loans first disbursed July 1, 2010 to July 1, 2011
• 3.4% for loans first disbursed July 1, 2011 to July 1, 2012.

The Department of Education has established annual and aggregate limits for the various federal college student loan programs. Stafford college student loan limits will vary depending on whether you are financially dependent (not being supported by parent) or independent.

As of July 1, 2008, the total amount of Stafford college student loans, including both subsidized and unsubsidized, that undergraduates can borrow is up to $31,000 for dependent college students and $57,500 for independent college students. Subsidized student loans can be no more than $23,000 of this aggregate amount. The limits will vary for each year of study, depending on the length of program and the student’s year of study. For more information on Stafford college student loan limits, visit The Department of Education’s official website.

Most college students will borrow money, or take out a college student loan from a number of sources. Unlike free forms from federal financial aid, like grants or scholarships, college student loans will have to be repaid at some point. Not only will the total amount borrowed need to be repaid, but also it must be paid with interest as well. Typically, a college graduate will spend 10 or more years repaying a college student loan.

A higher education is without a doubt will be one of the most expensive investments you will ever make in your lifetime. According to the National Postsecondary Student Aid Study (NPSAS), 65% of a four year undergraduate college student will take out a college student loan to help them pay for college.

Guess what? College student loans are not exclusive to only undergraduates. In fact, parents have college student loan options and graduate college students require even more financial advantages than undergraduates do.

Types of College Student Loans

College student loans will commonly include a federal student loan, a private student loan, and loans for college students with bad or poor credit, student consolidation loans as well as alternative student loans.

Federal College Student Loans

The Federal Family Education College Student Loan Program (FFELP) is designed to provide American college students as well as their families with additional financial aid that is funded by the federal government. Federal college student loans include Stafford College Student Loans, Perkins College Student Loans, and the Federal College Student Consolidation Loan. College students are automatically considered for these particular loans when they file the annual FAFSA. The Stafford College Student Loan comes in two versions: the subsidized and the unsubsidized and is the single most used college student loan; almost every student will qualify for some kind of federal financial aid through the Stafford College Student Loan program.

Benefits of a federal college student loan will include low interest rates, lowered fees and more lenient payback policies. Unlike standard loans from your bank or financial institution, federal college student loans will have a more flexible repayment term that will make paying for college a much more manageable reality. In addition, federal college student loans are not required to be repaid until after you have graduated.

Private College Student Loans

A private student loan, such as those offered by banks, credit unions, and financial institutions were designed to fill the gap between the amount received from a federal college student loan, grant and other forms of federal financial aid. However, private college student loans do require the borrower or co-borrower to have good credit and will often come bundled with high interest rates and extra fees. For this reason, a federal college student loan is always to be considered first. When used appropriately, private college student loans can help a college student pay for extra educational costs, such as textbooks, computers, even room and board and transportation.

Just know it is always very important to weigh your options and make the decision that makes since for you as well as your particular financial situation.

There was a time in history were bad credit might have meant that it would be almost impossible for a college student and or their parents to quality for necessary college student loans in order to fund an advanced education. Fortunately, for many of us, a number of factors regarding the higher educational system has changed and the ability of college students and or parents with a poor credit history to obtain the college student loan necessary for an education is now much more possible through a variety of bad credit college student loan tools.

For many college students with bad credit, two of the best options available are actually provided for by the U.S. federal system. These student loans are the Federal Stafford College Student Loan and Federal Perkins College Student Loan; both of which are low interest college student loans.

With the Federal Stafford College Student Loan all college students are eligible for this student loan and while the interest rate will be determined at the time the loan is made; college students can be reassured by the fact that the rate is capped at a modest 8.25% This is a great savings over a private bad credit student loan; where a college student may be penalized with higher interest rates due to their poor credit rating. The amount of money that a college student can borrow depends on two major factors:

• The requirements of the college student
• The college student’s year in college (Upper class men are typically allowed to borrow larger amounts than Lower class men)

The Federal Perkins College Student Loan will also be a low interest college student loan with interest rates offered at around 5%. This type of college student loan is actually made through the college or university the student is attending; however, it is partially funded by the government.

If a college student should find that their college or university does not participate in the college student loan programs provided by the government, private lenders and financial institutions also offer their own bad credit college student loan program. The one disadvantage to a private student loan for individuals with poor credit is that they normally will have a much higher interest rate. Since the government does not guarantee these college student loans, the lenders will typically raise the interest rate in order to provide protection in the event that the borrower does default on the student loan.

While this can be a major downside when it comes time to pay back the college student loan, private bad credit college student loans are not without many advantages:

• College students may be able to obtain a larger student loan than would be possible through a government college student loan
• Non-degree certification programs and training courses are more often eligible.

The point is bad credit or good credit. We all have the opportunity to obtain a college student loan. We just need to know were to go and how to get the information that will best help you in your particular financial situation.

For many college students, financial aid can greatly affect their decision as to whether or not they will attend college, or which institution they do attend. Because of the importance, the decision to apply for a financial aid program, and which program to accept, should be made only with a total and complete understanding of the process, requirements, benefits, and responsibilities.

When you do apply for financial aid from federal financial aid programs, some of your information will be verified with certain federal agencies, including the Social Security Administration (for verification of social security numbers and U.S citizenship status). If the information does not match, any discrepancies must be resolved before you can receive any federal student financial aid.

Information is also checked with the National Student Loan Data System (NSLDS) to verify that you are not currently in default on a federal college student loan, have not received an overpayment on a federal grant, and have not borrowed more than the total limit allowed.

If you have received federal, state or University financial aid funds, you must make satisfactory academic progress throughout your program in order to continue to maintain your eligibility. Go can go to Satisfactory Academic Progress (SAP) for a complete explanation of these expectations.
After you have submitted your application for financial aid, you will need to submit the renewal FAFSA each and every year to continue to receive the financial aid. If there are any changes in your family’s income, household size, and or the number of family members enrolled in college, your financial aid eligibility can either increase or decrease depending on the situation.

In addition, there will be variations from year to year in the financial aid funds that will be available from federal, state and or University sources. These variations could require adjustments in financial aid awards.

If you are a non-degree graduate college student or a graduate college student paying the program fee, you might be eligible for some other college student loans. You can visit the “Non-Degree and Program Fee Students” on the internet for details.

They will primarily use two factors to determine the amount and types of financial aid you may receive: the cost of attendance and the expected family contribution (EFC).

The cost of attendance will include tuition and fees as well as room and board, books and supplies, and personal and transportation expenses. You can visit university costs at your schools website for a more complete listing of tuition, fees, and expenses.

Your expected family contribution (EFC) is a figure calculated by the U.S. Department of Education. They arrive at the EFC dollar amount by combining information from your Free Application for Federal College Student Aid (FAFSA) with standardized financial analysis for federal college student aid programs.

Financial aid services will subtract your EFC from your cost of attendance; the difference is your eligibility for federal financial aid, including federal, state, and institutional funds. In addition, they will also consider your year in school and your enrollment status when determining your need.