Student Loans & Financial Aid info

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.

The Department of Education establishes annual and aggregate student loan limits for the various federal student loan programs. Stafford student loan limits vary depending on whether you are financially dependent on a parent or guardian or an independent.

To date, the total debt a dependent, undergraduate borrower can accumulate from all Stafford college student loans (subsidized or unsubsidized) combined is $23,000. The amount for an independent undergraduate however is $46,000. The limits will also vary for each year of study, depending on the programs length and the student’s year of study. As stated, these maximum borrowing limits are for the total of both subsidized and unsubsidized college student loans

There is a new law that increases the borrowing limits for unsubsidized Stafford college student loans first disbursed on or after July 1, 2008. The annual limit for unsubsidized Stafford college student loans for undergraduate dependent students is increased by $2,000.

This same increase of $2,000 will apply to any dependent students whose parents do not qualify to borrow a PLUS loans. This increase is in addition to the additional $4,000 or $5,000 (depending on how much school the student has already completed) that dependent students are allowed to get under current rules if their parents are unable to borrowing PLUS loans. The annual college student loan limits for independent undergraduate students looking to borrow unsubsidized Stafford college student loans will also go up by $2,000.

In 2005, Congress passed a law that has reduced and eventually will eliminate Stafford college student loan origination fees. Prior to this law, the fee limits were as high as 4%. The maximum fee for FFEL Stafford college student loan was reduced to 1.5% on July 1, 2007 (for college student loans disbursed on or after that date) and are going to drop again to 1% on July 1, 2008. The fee will be eliminated completely as of July 1, 2010. Similar changes will also be made to Direct Stafford college student loan fees.

Keep in mind that lenders are required to disclose the amount and method of calculating the origination fee. In addition, you should not be charged for any costs related to processing or the handling of the application or data required to determine your eligibility as to weather you can borrow or not.

Both the Direct and FFEL college student loan programs offer PLUS loans. These college student loans are available for parents that are borrowing for the education of there dependent undergraduate student enrolled in school at least half time.

In cases where parents are divorced or separated and they both want to borrow a PLUS loan, each parent is allowed to do so and should complete a separate application form. However, the total amount borrowed by both parents cannot exceed the PLUS loan limit, which is the cost of attendance minus any other financial aid received by the student.

Graduate PLUS loans are also available for graduate and professional students. Unlike Stafford college student loans, PLUS borrowers are usually required to pass a credit check. Unless the lender or financial institution determines that extenuating circumstances exist, you will not pass the credit check if you have:

• 90 or more days delinquent on the repayment of any debt; or if
• you have into a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a federal government college student loan debt, during the previous five years from the date of the credit report.
PLUS borrowers with poor credit history may still get a college student loan if they can find someone with a better credit history to co-sign for them.

Your education is going to be a major investment in yourself and your future. You are going to spending your limited resources now in the hopes that you will produce a positive return for the future.

Looking at the time and money you are going to invest in your education along with the personal and professional goals you are setting. Then, make sure you make the best investment you are able to. Borrow the minimum amount of college student loans necessary to fulfill your educational goals. Visit your college of choices financial aid office to help with all the chooses available.

Start preparing now for the financial aspects of your education. Even though your parents are going to be willing to handle your financial paperwork at this moment, it is better for you that you understand and become at least an equal participant in this financial process. If you do not, you will probably find that financing your education will become very much complicated and confusing.

Remember, you are going to be the one signing the promissory notes for any college student loans you borrow. Understanding the terms and conditions of those college student loans will help you avoid any problems that could arise during repayment. Once again, visiting your financial aid office will help you understand all. They are there to help answer any of your questions.

Keeping well organized records of your financial aid activities will go a long way toward managing your college student loans and achieving your financial goals for the future.

It is very important to keep all of your college student loan related documents such as:

• Applications
• Disclosure statements
• Income tax returns
• Notifications of lender change
• Repayment schedules
• Lender correspondence
• Promissory notes

It is also very important to keep track of all telephone calls or e-mail communications with your lender, holder, and servicer. You should log these items to include:

• The date and time of the call/message
• The reason for the call/e-mail
• The expected follow-up
• The full name of the person with whom you spoke or the e-mail address of the respondent
• A copy of the e-mail (if applicable)

You can develop a filing system that will work for you, something you can maintain and use. There are many books and Web sites available that will teach you about personal finance that will also contain information about how to set up a record keeping system. You can use individual file folders, portfolios, three-ring binders, manila envelopes, or filing cabinets. What ever will work for you and your situation.

Remember these three S’s of a record keeping system:

• Simple (make it simple to use)
• Secure (secure your records against fire or theft)
• Sustainable (make it something you will maintain over the long term)

These easy tips can be carried over to your adult living as well. Once you have graduated and have that great job you have been seeking , you can use these systems to keep your loans of various kinds in order. Keeping track of your finances do not have to be a drag. If you are organized it will be simple and you will always know were you stand. That is nothing but good stuff.

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

Although the FFEL program is federally funded, it is mostly administered through state and private nonprofit agencies called guaranty agencies. Guaranty agencies pay off the lenders when a borrower defaults, and in turn, they are reinsured by the Department of Education.

Federal Direct Student Loans are made directly by the federal government to the student, with the assistance of the school or other entity that originates the student loan. Lenders and guaranty agencies are not involved in this type of student loan.

These federal student loan programs are strictly regulated by Congress and the U.S. Department of Education. The maximum interest rates, and many of the important terms of federal student loans are set by Congress, and are similar programs. There are, however, a few important differences in available repayment plans for FFEL and Direct Student Loan borrowers.

Stafford Student loans are for undergraduate, graduate and professional students enrolled in at least half time. Federal Stafford 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 rights. There are a few differences with the repayment plans.

Stafford Student loans may be subsidized or unsubsidized. A subsidized student loan is awarded based on financial need and the government will pay the interest before repayment begins or even during authorized periods of deferment. Unsubsidized student loans are not awarded based on financial need, and the borrower is responsible for all interest. However the interest payments are usually deferred while the borrower is in school, but is added to the principal of the student loan when repayment begins.

For student loans first disbursed on or after July 1, 2006, Stafford student loans have a fixed 6.8% interest rate. This is the maximum interest rate allowed. Lenders can set lower rates though. Most Stafford student loans taken out before July 2006 have variable rates that have been capped at 8.25%.

Interest rates will gradually be reduced for Stafford subsidized student loans over the next few years. These cuts will apply only to student loans disbursed after 2007. You will not get the benefit of these reductions if you took out loans before 2007.

The new interest rates will be:
• 6% for student loans first disbursed July 1, 2008 to July 1, 2009
• 5.6% for student loans first disbursed July 1, 2009 to July 1, 2010
• 4.5% for student loans first disbursed July 1, 2010 to July 1, 2011
• 3.4% for student loans first disbursed July 1, 2011 to July 1, 2012.

The Department of Education has established annual and aggregate limits for the various federal student loan programs. Stafford student loan limits vary depending on whether you are financially dependent on a parent or not.

Currently, the total debt a dependent, undergraduate borrower can accumulate from all Stafford student loans combined is $23,000. The amount is $46,000 if you are an independent undergraduates. The limits will vary for each year of study, depending on the length of the program and the student’s year of study. These maximum borrowing limits are for the total of both subsidized and unsubsidized student loans. For full information on Stafford student loan limits, you can visit The Department of Education’s website.

A new law increases the borrowing limits for unsubsidized Stafford student loans first disbursed on or after July 1, 2008. The annual limit for unsubsidized Stafford student loans for undergraduate dependent students has been increased by $2,000.

Many lenders offer college student loan discounts to encourage borrowers to obtain their student loans from them.

The Higher Education Act of 1965 sets the maximum interest rates and fees on college student loans. However, nothing prevents a lender from charging lower interest rates and any applicability fees. The illegal inducements regulations prevent lenders from providing immediate rebates, which would be akin to paying borrowers for their college student loans. However, most lenders can work around these restrictions by instituting a one month delay in rebate style discounts, or by providing the discounts when the college student loan enters repayment or at other milestones.

Lenders offer college student loan discounts for competitive reasons. Originally, the competition was with the Direct College Student Loan program. However, with the repeal of the single holder rule, lenders are increasingly competing with one other for the highly profitable college student loan market.

Since the repeal of the single holder rule on June 15, 2006, borrowers are more able to consolidate their college student loans with any lender they choose, the originating lenders can face a risk of losing their borrowers to other lenders or financial institutions. In response offering better discounts on unconsolidated Stafford and PLUS college student loans, by instituting discounts that depend on longevity with the financial institution (e.g., interest rate reductions and principal reductions after so many months of repayment and waivers of the last six monthly student loan payments), and by requiring discounts to be repaid if you consolidate with other lender. The originating lenders can usually offer better discounts on unconsolidated Stafford and PLUS college student loans because lender margins are tighter on consolidation college student loans.

What Are Some Of The Most Common Discounts

The most common college student loan discounts include a 0.25% interest rate reduction for having your monthly college student loan payments direct deposited from your bank account (and also often requiring online electronic statement delivery). Many lenders will also waive the origination fees on Stafford College Student Loans. Depending on the guarantor, they can also waive the 1% default fee (previously “guarantee fee”).

Many lenders will also offer additional discounts for making all of your college student loan payments on time. For consolidation and PLUS student loans many lenders offer a 1% interest rate reduction after 36 months of on time monthly payments for as long as you continue to make the on time payments. The on time payments must be consecutive (no skips) and start when the college student loan enters repayment. A few lenders will also offer a repair option, which resets the on time payment clock, but most lenders require all the initial monthly student loan payments to be on time. For a Stafford college student loan, the most common discount will involves a 2% interest rate reduction after 48 months of on time monthly student loan payments for as long as you continue making on time payments. Recently the trend is to replace these interest rate discounts with principal reductions after you have reached a milestone, such as 3.33% principal reduction after 33 months.

Student Loan Debt Consolidation

When we speak of student loan debt consolidation, please keep in mind that we are discussing loan consolidation for college student loans. If you are looking to combine payments for other forms of consumer loan debt, you will have to choose another financial vehicle such as a home equity loan or a private loan through your bank.

Student loan debt consolidation enables you to combine all of your college student loans into one student loan. Essentially, your current college student loans are paid off and a new college student loan is put into place with the combined balance. Consolidating your college student loans has many advantages:

• A fixed interest rate
• An extended and income sensitive repayment plans
• A lower monthly payments based on extended repayment and low fixed interest
• Only one check to write
• Only one lender to work with

Of course, I am sure you would like to hear about the disadvantages as well, in my opinion, there are not any.

The following is a list of the eligible college student loans. If you have a private or alternative college student loans or some student credit card debt, you will not be able to consolidate those debts with your college student loans.

College Student Loans that will eligible for inclusion in the Federal Consolidation Program are:

• Subsidized Federal Stafford Student Loans
• Unsubsidized Federal Stafford Student Loans
• All Federal Direct Student Loans (Direct Student Loans)
• Federal Parent Loans for Undergraduate Students (PLUS)
• Federal Perkins Student Loans
• Health Professions Student Loans
• Health Education Assistance Student Loans (HEAL)
• Nursing Student Loans
• Federal Supplemental Loans for Students (SLS)
• Auxiliary Student Loans to Assist Students (ALAS)
• National Direct Student Loans (NDSL)
• Federally Insured Student Loans (FISL)
• Federal Consolidation Student Loans

Most Federal college student loans have variable interest rates. Those interest rates will be adjusted each year. A Federal Student Loan Debt Consolidation will have a fixed interest rate. The interest rate you will pay is determined at the time of consolidation application and is based on a weighted average of the interest rates you are paying on your current college student loans. As mentioned above, current rates are extremely low meaning that you will be able to “lock in” a low fixed interest rate with a student loan debt consolidation.

Finally, if you are currently delinquent or in default on your Federal college student loan, a student loan debt consolidation can cure your delinquency or default status, but only if your financial lender offers an income sensitive repayment plan and only if you meet certain pre-requisites.

I have given you quite a bit of information regarding a Federal Student Loan Debt Consolidation. Follow the guidelines and do the research. Different lending institutions will offer different options. Chose the option that best suites your financial situation. All else will just follow from there.

Start your research on the internet. There is so much information out there, look at all the options not just one.

What is a Federal Perkins Student Loan and What Can It Do for Me?

A Federal Perkins Student Loan is a low interest 5 % student loan for both undergraduate and graduate students with financial aid needs. Your school would be the lender. The student loan is made with government funds, and your school would also contribute a share of the funds. You are required to repay this type of student loan to your school.

How much can you borrow?

Depending on when you have applied, your level of financial need and the school’s funding level, you can borrow up to:

• $4,000 for each year of undergraduate study; however, the total amount you can borrow, as an undergraduate is $20,000.
• $6,000 for each year of graduate or professional study, or the total amount you can borrow as a graduate/ professional student is $40,000, including any Federal Perkins Student Loans you borrowed as an undergraduate.

Other than interest rates, are there any charges to getting this type of student loans?

No, you will not be charged any fees to take out this student loan. However, if you skip a payment, make a payment late, or make a partial payment, you will probably have to pay a late charge. If you continue to have a hard time making the payments as required, you will probably have to pay collection costs as well.

How will you be paid?

Your school can either pay you directly (usually by check) or credit your school account. Generally, you will receive the student loan in at least two payments during the academic year.

Can I cancel the student loan if I change my mind, even if I have signed the promissory note agreeing to the student loan’s terms?

Yes. Your school will have to notify you in writing whenever it credits your account with your Perkins Student Loan funds. The school must also send you this notification no earlier than 30 days before, and no later than 30 days after, the school has credited your account. You may still cancel all or a portion of your student loan if you inform your school you wish to do so within 14 days after the date your school sends you this notice, or by the first day of your payment period, whichever is later. Your school will be able to tell you the first day of your payment period. If you receive a Perkins Student Loan funds directly by check, you may simply returning the check.

When will I be required to pay back this student loan?

If you are attending school at least half time, you have nine months after you graduate, leave school, or drop below half time status before you will be required to begin repayment (you might have longer than nine months if you are on active duty with the military). This is called a grace period. If you are attending less than half time, check with your financial aid student office to determine your grace period. At the end of your grace period, you must begin repaying your student loan. You might even be allowed up to 10 years to repay.

Which College Student Loan Is Best for You?

Comparing college student loans is not always easy, as the college student loan terms will vary. Here are some things to consider when comparing college student loans.

1. Four Important Variables

The four most important variables to consider are the interest rates, whether college student loans are subsidized or not, college student loan fees, and the repayment options.

2. Interest Rate

The lower the interest rate, the less expensive the college student loan, and the less you will repay over time.

3. Subsidized or Unsubsidized?

College Student Loans based on financial aid need are subsidized. This means that the federal government will pay the interest on the college student loan while you are still in school. This benefit makes the college student loan much less expensive for you. If you qualify, always borrow a subsidized college student loan first.

4. Fees

Most college student loans have origination and other types of processing fees. This means that although you borrow (and must repay) the entire college student loan amount, say $2,500, you may only receive $2,400 after the fees have been deducted. It is most important to keep your eyes on the fees.

Repayment Plans and Options

Some plans offer a full range of repayment plans as well as other incentives, such as interest rate reductions for an on time payment. Before borrowing a college student loan, make sure you do understand the repayment requirements and all the options.

You Will Always Pay Back More Than You Have Received

Even with the favorable terms of a college student loan, whenever you borrow money, you will pay back more than you have received. Only borrow what you must have.

Find the Least Expensive College Student Loan

Always first, try for the least expensive college student loan. The least expensive college student loan is generally the college student loan with the lowest interest rate. In order, they are:

• Perkins College Student Loan
• Subsidized Stafford/Direct College Student Loan
• Unsubsidized Stafford/Direct College Student Loan
• Private College Student Loan

If you have access to a special college, student loan program from a college or private source, first find out the terms and compare it with the above college student loans.

File the FAFSA Free Application

If you are thinking about taking out a college student loan, file the Free Application for Federal Student Aid (FAFSA). If you do show need, the college student loan will be less expensive than if you borrow outside of this need. The federal financial aid rules will help guide you since the FAFSA is required before any college can approve an unsubsidized college student loan.

When it comes to a college student loan, it is your money that will be paying it back. So, please do the homework and lots of research. It is very important for you to obtain a college student loan that best suites your financial situation. If you do not have to worry about were the money is coming from and how you will pay it back, you will do much better in school.