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Can I transfer a Parent PLUS Loan?
30 Jul 2010 at 2:10pm
Many parents, who take out the Parent PLUS Loan, believe they could always transfer the loan to the child, once he or she has graduated and secured a reasonable income. Unfortunately, that is not the case. The PLUS Loan is the responsibility solely of the parent, and is taken out in the parent’s name. He or she is the borrower, not the student.
One option, if finances become an issue for the parent, is to simply have the student reimburse the parent for the cost of the monthly payment, but continue to make the payments in the parent's name.
If, as a parent, you would prefer a loan that allows you to eventually transfer the repayment obligation, consider a private student loan. These loans are in the student’s name, and depending on the lender, generally have a cosigner release option. After a certain number of consecutive on time payments, the parent (as a co-signer) can apply to be released from the loan, making it entirely the student’s obligation for repayment.
       
Repayment Options for the Parent PLUS loan
3 Jun 2010 at 2:46pm
If you are a parent who has taken out a PLUS loan to cover some of your child's education, you might be wondering what methods of repayment are available to you. While many parents opt for standard repayment, there are other options as well:
The Graduated Repayment Plan allows you to start out with lower monthly payments that gradually increase over time until the loan is paid in full. The required monthly payment is calculated based on your loan debt and interest rate.
The Income-Sensitive Repayment Plan bases your monthly payment on your yearly income and your loan amount. You are eligible for this plan only if you monthly loan payment is greater than ten percent of your annual gross income.
The Extended Repayment Plan provides eligible loan borrowers with payment relief through an expanded repayment term of up to 25 years.
Visit ParentPLUSLoan.com for more information on repayment, and don’t forget to consolidate if you have more than one federal loan.
       
Parent PLUS or a Private Student Loan? What should I pick?
6 May 2010 at 1:38pm
If your child received their financial aid award letter and there weren’t enough digits on the page to cover tuition, you are definitely not alone. The cost of college continues to steadily grow every year, but financial aid has not kept the same pace. As a result, the gap between aid and cost continues to grow.
Once your child has exhausted the annual maximum for Stafford loans, the next step is to look at credit-based options to bridge the financial aid gap. Fortunately for you, there are quite a few lenders that all must compete with each other to make money and therefore give you an opportunity to minimize the interest rate on a new loan.
If you’ve read a few posts on this blog, you know the score on Parent PLUS loans, but what about private student loans' There are a few notable differences' and in some cases they can become more attractive than their federal counterpart.
Major Differences:
- Private student loans have variable interest rates (meaning they change with the index they are associated with' most commonly LIBOR or the Prime)
- They come from banks instead of the Department of Education
- Many banks offer special incentives to make a private student loan more worthwhile
At the moment, interest rates are quite low due to the Fed attempting to put the economy back on a growth track out of the recession. This means that the indices are at historical lows and with a creditworthy borrower, you can secure a great interest rate that can be as much as 5% lower than a Parent PLUS loan.
If you want to learn more about some of the incentives that private lenders offer, check out this blog on the Student Loan Network.
The bottom line is just do some research before you take out a loan. In many cases, you can save thousands of dollars in interest if you shop around.
       
Parent PLUS Loan Rejected. What Now?
26 Apr 2010 at 10:49am
 Getting a loan rejection letter can be very disheartening and exhausting after the work you put into helping your child(ren) pay for their education. However, there are still ways to gain more financial aid through what is called an “appeal” process.
Most schools have these in place and you can get the specific details through their financial aid department. The most common way this process is handled is by sending in proof of income and a formal letter stating exactly where your finances are at, and why you or your child needs more money for school. It is best to do this process as early as possible because as the months move forward toward the beginning of the academic year, the financial aid pie is allocated to students on a first-come basis.
Some things that you should definitely do/include in the letter:
Detail about change in finances — if you lost 20% of your income… say so. That would make a substantial change in your family’s EFC and could potentially net your child a lot more money.
A brief description of you and your child’s efforts to raise money for school. Be genuine. If you show that you are making an effort (applying for scholarships, asking banks, etc.) you are much more likely to get more in return.
Last, but not least: make the letter clean, grammatically-correct and professional. It makes your request look more polished and let’s face it… people are more inclined to read and give attention to something that is easily legible and compelling.
       
Can a Parent PLUS loan be transferred?
15 Apr 2010 at 1:57pm
One question we get a lot regarding Parent PLUS loans is whether or not the payments can be transferred to a child. The answer, sadly, is no. Parent PLUS loans are federal-based loans taken out by the parent in his or her name, and will remain so throughout the duration of the repayment.
However, as a parent, there are options if you are unable to pay, or expect you will be unable to pay back a PLUS loan.
If you have yet to take out a PLUS loan, you might be better off applying for a private student loan if you are concerned about being unable to make payments in the long run. With a private student loan, you can apply to be released from the loan after a set number of consecutive payments and have the remaining sum transferred to the student.
If you are parent who has already taken out a PLUS loan, you could establish a payment plan with the student, whereby the parent pays the loan back directly to the lender, and then the student reimburses the parent.
Do you have any other questions about the Parent PLUS loan' Post them in our Financial Aid forum!
       
Parent PLUS Loans are the Best Alternative
9 Apr 2010 at 10:08am
If your child is in school, or will be entering school, the problematic financial aid “gap” between total cost of attendance and awarded aid can sometimes grow to a frustrating size. From personal experience at a private college in downtown Boston, I averaged about $7,000 to $10,000 in unmet expenses per year that had to be solved through alternate means.
There are a variety of options to handle this extra cost, including private student loans and personal loans, but based on feedback from parents and the economy, the best choice is a Parent PLUS loan. Here are a few reasons why this type of loan is more popular with families putting children through college:
1) They have a fixed interest rate.
In a turbulent and recovering economy, variable rate loans can be a ticking time bomb. Having fixed interest means that over the entire life of the loan, you will have stable payments and no surprises.
2) The credit check is easier to pass.
This one probably is debatable, but there is a general consensus that the credit check for Parent PLUS loans seems to be more relaxed than the inquiry most private banks use for private student loans. There have been many reports of parents who were declined private student loans being offered Parent PLUS loans, with sub-prime credit scores (620+) and higher.
3) They have flexible repayment plans.
This is arguably the best reason to take out a Parent PLUS loan versus a private offering. Between Income Based Repayment and several other very flexible and generous pay plans, the federal loan is a much more attractive option for most parents and families.
       
Running Out of Time for the FAFSA
5 Mar 2010 at 2:33pm
Attention parents! Today marks March 5, and school financial aid deadlines are here, or very close. The majority of schools require all paperwork to be in during this month in order to fairly distribute financial aid and have plenty of time to assemble students’ award packages.
So, what can you do to make sure it all goes smoothly'
1. Make sure your taxes are filed.
This may be a “what'” moment if you are new to the FAFSA process and/or this blog, but in order for your child or ward to file their FAFSA, they need information from you. Specifically, they need your Annual Gross Income figure from your 1040 or 1040EZ form.
If you are the type to hold off on filing taxes until April’s cutoff date, you are putting the student in a diminished position to get the maximum amount of aid possible for the upcoming school year. If you absolutely must hold off, have them file with the previous year’s numbers and then submit an amended FAFSA as soon as your taxes are complete. You can find all the relevant forms and processes on FAFSAOnline.com.
2. Gently, but firmly remind your child.
Nobody likes paperwork. However, if you and your family need aid money from the government or school to pay for your child’s education, you can’t afford to let the FAFSA sit on the back burner. If necessary, you should put a day on your calendar (in the very near future) to sit down with them and help them complete it; this will ensure it gets done, and is filled out correctly.
If you need any advice, or would like to know more about how the FAFSA works, check out the FAFSAOnline.com blog for lots of relevant and interesting posts.
       
A Parent?s FAFSA Checklist
7 Jan 2010 at 3:14pm
As a parent in the midst of FAFSA season you are probably wondering what your role in the financial aid process should be. Here is a quick checklist to make sure you are on the right track:
- Obtain your own FAFSA PIN number at www.pin.ed.gov. Your PIN will act as your electronic signature on your child’s online FAFSA.
- File your taxes as early as possible, but do not delay the FAFSA due to your taxes not being done. You can estimate your financial information on the FAFSA, but you will have to finalize it later.
- Help your child complete everything on their “to do” list.
- File the FAFSA online- it is much easier and faster and your information is 100% safe.
- Examine the bill from the school your child chooses and make she you understand all of the fees and how they will be paid.
       
Use Christmas to teach your children about budgeting
22 Dec 2009 at 2:49pm
This morning I read an interesting article on CNNmoney.com about using Christmas as an opportunity to teach children about budgeting. In my opinion, budgeting is a skill that far too many kids go to college without.
Many children off all ages believe that Christmas is a time to get everything and anything they want. However, it is important to instill the concept of limits in them. Children should know that their parents do not have an unlimited amount of money and they will probably not get everything on their Christmas. Teach them how to prioritize what they really want.
You can also teach your kids how to budget their money when buying gifts for others. Teach them to set aside an ultimate amount of money they can spend and divide it among the people they want to buy for.
Hopefully after years of Christmas budgeting they will take the lessons of moderation with them to college and into their adult life.
       
Are you ready for the FAFSA?
21 Dec 2009 at 12:47pm
 FAFSA season is right around the corner! Are you ready' If not FAFSA4caster is a website that will help you prepare. FAFSA4caster allows you to essentially do a test run of the real FAFSA. After you have gathered and submitted all of your information it will give you an estimate of your eligibility for financial aid. This FAFSA trial will help you cut down on costly FAFSA errors. After January 1, 2010 when you are ready to apply or you can conveniently transfer all of your information over to FAFSA on the Web. FAFSA4caster also gives you the option to apply for a FAFSA PIN and helps you increase your knowledge of the financial aid process.
       
It?s July 23rd, Do you know where your loans are?
23 Jul 2010 at 3:07pm
Did you know that because nearly all private student loans have variable APRs, your interest rate could have changed several times in the past 2 years'
Confused about reform and consolidation?
17 Jun 2010 at 4:40pm
If you’ve heard the word about the reform currently in progress across the country, you probably are aware of the end of the FFEL program and exclusive federal consolidation returning to the Department of Education. If not, read this page on upcoming changes to get acclimated.
One question we get a lot is, “If FFEL is [...]
New Grads, Start Thinking About Consolidation
9 Jun 2010 at 3:30pm
Consolidation has two main benefits that can be of enormous financial help to you both in the present and the future: the improvement of your credit rating and lower net monthly payments.
What NOT to do when Consolidating your Student Loans
27 May 2010 at 1:31pm
There are a great many benefits to consolidating your student loans, such as the convenience of making one or two monthly payments as opposed to six or seven, the lower monthly payment. But there are some cases where you have to be careful.
Graduating? Consider student loan consolidation.
19 May 2010 at 3:32pm
Depending on the amount (and type) of loans you took out for school and the repayment plan you selected, the monthly payments may still be out of your reach by the end of your grace period.
Should I Consolidate my Private Student Loans?
7 May 2010 at 2:21pm
Federal student loan consolidation is fast, easy, free and highly recommended to lower your monthly payment. Private student loan consolidation is a bit trickier. Here are some notes to remember if you choose to go down this road.
How to Get Your Student Loans Forgiven
28 Apr 2010 at 1:03pm
Imagine waking up tomorrow and discovering you don't need to pay back your federal Stafford, PLUS and Perkins loans. For many Americans, that dream is a reality, thanks to a number of programs that allow you to have some, if not all, of your loans forgiven.
From Our Forums: Consolidation Question Quartet!
27 Apr 2010 at 10:16am
There was a great question in our loan consolidation forum this week from a new user with lots of loans from medical school. James recently finished his Master’s degree as a physician assistant (congratulations!) and wrote to us looking for some consolidation advice:
I have the following types of federal loans:
Subsidized Stafford
Unsubsidized Stafford
Grad PLUS
Previously consolidated federal [...]
Have a Consolidation Question?
20 Apr 2010 at 11:45am
If you aren’t already familiar with our Financial Aid Forum, it is an awesome resource for answering questions about virtually every kind of financial aid or loan a student can take out toward their education.
We have three dedicated Student Advocates (myself included) that are available Monday-Friday to help out and an informed user base of [...]
Did you know you can get IBR on a Federal Loan Consolidation?
13 Apr 2010 at 1:59pm
It’s true! If you are unfamiliar with Income Based Repayment (IBR), I would recommend reading my blog and then consulting the Student Loan Network’s handy payment estimator chart under the new repayment plan.
Why is IBR better than the normal plan'
There are a couple reasons why. First, IBR takes your income into account when it computes [...]
Get the Most College Financial Aid - ABC News
2 Sep 2010 at 5:54am
Local students benefit from private colleges' financial aid - USA Today
2 Sep 2010 at 2:16pm
Cornell to Match Financial Aid Offered by Ivy League and Other Peer Schools -...
3 Sep 2010 at 1:52am
Private colleges 'act local' with financial aid - The Associated Press
30 Aug 2010 at 3:53pm
Eddie Bernice Johnson says chief of staff reviewed scholarship applications -...
3 Sep 2010 at 9:08am
Russian government to allocate $10M financial aid to Kyrgyzstan - 24
2 Sep 2010 at 10:53pm
Lasell College agrees to settle lender gift allegations - Boston Globe
3 Sep 2010 at 12:48am
College Student Financial Aid comes via ASHRAE scholarships. - ThomasNet Indu...
3 Sep 2010 at 7:32am
Dollars & Sense - MSU State News
3 Sep 2010 at 10:08am
MSU State News |
![]() Dollars & Sense
MSU State News
After committing to MSU, a large number of students face a decision of whether to take out financial aid to pay for the increasing cost of higher education. ...
and more » |
Financial aid checks to be distributed Friday in Fletcher - The Ranger
2 Sep 2010 at 10:13pm
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Education Reconciliation: The Student Aid and Fiscal Responsibility Act
22 Jul 2010 at 3:24pm
Now more than ever, Americans need affordable, quality education opportunities to help make our economy strong and competitive again. President Obama has identified an opportunity to make historic investments in our economic future by making college dramatically more affordable ' at no cost to taxpayers.
The Student Aid and Fiscal Responsibility Act, which was included in the health care reconciliation bill that passed on March 21, 2010 by a vote of 220-211 and signed into law on March 30, 2010, embraces the president's challenge. It will help us reach his goal of producing the most college graduates by 2020 by making the single largest investment in federal student aid ever. Specifically, these provisions will:
Invest the bill's savings to make college affordable and help more Americans graduate
* Invests $36 billion over 10 years to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $5,975 by 2017. Starting in 2013, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index. This includes an investment of $13.5 billion to fund a shortfall in the Pell Grant scholarship program due to increased demand for the scholarship.
* Invests $750 million to bolster college access and completion support for students. It will increase funding for the College Access Challenge Grant program, and will also fund innovative programs at states and institutions that focus on increasing financial literacy and helping retain and graduate students.
* Makes federal loans more affordable for borrowers to repay by investing $1.5 billion to strengthen an Income-Based Repayment program that currently allows borrowers to cap their monthly federal student loan payments at 15 percent of their discretionary income. These new provisions would lower this monthly cap to just 10 percent for new borrowers after 2014.
* Invests $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate.
* Invests $2 billion in a competitive grant program for community colleges to develop and improve educational or career training programs.
Provide reliable, affordable, high-quality Federal student loans for all families
* Converts all new federal student lending to the stable, effective and cost-efficient Direct Loan program. Beginning July 1, 2010, all new federal student loans will be originated through the Direct Loan program, instead of through the federally-guaranteed student loan program. The Direct Loan program is a more reliable lender for students and more cost-effective for taxpayers.
* Keeps jobs in America. Under the bill, 100 percent of Direct Loans will be serviced by private lenders. Lenders will compete for contracts to service all federal student loans, which will guarantee borrowers high quality customer service and preserve jobs. Unlike loans made by banks, Direct Loans can only be serviced by workers in the U.S. Last year, Sallie Mae was forced to bring 2,000 jobs back to U.S. soil to win a direct loan servicing contract. Sallie Mae is now one of four private banks servicing 4.4 million direct loans.
Meet Pay-As-You-Go fiscally responsible principles and reduce the deficit
* Saves taxpayers $61 billion over the 10 years by switching to the cheaper Direct Loan program, according to the Congressional Budget Office. In addition to investing in college aid, these provisions will also reduce the deficit by at least $10 billion over 10 years.
(Source: http://edlabor.house.gov/)
Obama Cuts Out the Student Loan Middleman
30 Mar 2010 at 12:31pm
Today, we mark an important milestone on the road to health insurance reform and higher education reform ... With the bill I signed last week, we finally undertook meaningful reform of our health care system. With this bill, and other steps we've pursued over the last year, we are finally undertaking meaningful reform in our higher education system ... By cutting out the middleman, we'll save American taxpayers $68 billion in the coming years. That's real money -- real savings that we'll reinvest to help improve the quality of higher education and make it more affordable. President Obama
Today, President Obama signed into law the Health Care and Education Reconciliation Act. What does this mean' It's an overhaul of the student aid system. Students can now take out loans directly with the fedral government. This ends the subsidized program for the student loan industry that banks and other financial institutions have been enjoying for a long time. All new federal student loans will be direct loans from private intitutions but under control by the Department of Education through performance-based contracts.
Student Loan Advice: Consolidation - Myth vs. Reality
19 Nov 2009 at 11:34am
Good stuff from blog.studentloannetwork.com:
There has been a lot written and said about federal student loan consolidation over the years. The point of this blog is to debunk three common mythes floating around the Internet about consolidation benefits.
The consolidated interest rate changes every July 1.
MYTH. The reality is variable rate Stafford loan rates are subject to change each July 1, which directly impacts your consolidated interest rates.
Like a home mortgage I can refinance my student loans multiple times
MYTH. The realty is that it's a one shot deal. When you consolidate your federal loans you are locked in for life at the interest rate. I know, seems pretty ridiculous doesn't it'
I need to consolidate within six months of leaving school or I'll lose my eligibility
MYTH: Consolidating within six months may be beneficial to students with variable interest rate Stafford loans due to the fact that a lower interest rate is extended to you during that six month window (2% versus 2.5%). However, it is not required that you consolidate within six months. You have an indefinite time frame in which to consolidate your student loans.
Quick Student Loans - Don't be Hasty
17 Sep 2009 at 6:09pm
Google "fast student loans" or "quick student loans" and you'll find a link to thinkfinancial(dot)com as your # 1 result at the time of this writing. Go to that site and you'll only find a link to a SunTrust private student loan application page. Think about it. You're in a hurry to get money to go to college as soon as possible and before you know it; you are likely to be looking at SunTrust student loan application. Is SunTrust your best option in this situation' Let's investigate.
Looking at an August 2009 review of student private loan providers, SunTrust ranked right in the center with 5 lenders below them and 5 rated above them. The best loans were all from federal credit unions. Before turning to a bank, definitely check out your neighborhood federal credit union for quick student loans.
Before making this crucial money decision, there are other important issues you must consider. Try getting someone with a good credit score to co-sign the loan with you. Traditional wisdom says never to co-sign a loan because of the risks. Still, if you have proven yourself to be a responsible individual in the past, maybe you can sweet talk a relative into "partnering" the loan with you. Even without a co-signer, quick student loans can be obtained but at a price. That price is a larger rate of interest and big time consequences due to missed payments. So, count the cost before you dive in too deep.
Be certain all other streams of money have been found before turning to quick student loans. Among these are college scholarships, federal loans, work study opportunities, and federal grants. There really is free money out there for college if you search for it.
Make sure you make a smart choice for your major. History degrees usually don't serve people for paying off quick student loans. You have to go after a degree that will land you a high paying job. A business degree is about the lowest you should go if a student loan is supporting your education. I'm even a little leery of that. Engineering, law, and of course medicine are your best money making degrees.
Lastly, think about starting out at community college for the first half of your schooling. The first two years of school are generally the same whether you are at a four year university or a two year community school. The price is a lot cheaper and often you receive better individual attention in your classes at a community college.
For good or bad, quick student loans are usually life changers. Be very careful before committing to one. Being impulsive has the potential of destroying your life for years to come.
Tips To Help You Apply For A Federal Student Loan
2 Sep 2009 at 5:07pm
1) Apply online using www.fafsa.ed.gov.
2) Check deadlines. Be aware of your state's and your school's application deadlines. While there is no deadline for applying for federal student aid, you should apply as early as possible after January 1 of each year that you will attend college. Some state and school aid is awarded on a first-come, first-served basis.
3) Collect the information you need to complete the FAFSA:
* Your Social Security number and your parents' Social Security numbers;
* Your driver's license number, if you have one;
* Your alien registration number, if you are not a U.S. citizen; and
* Your federal tax returns and income information
4) Check your FAFSA. After you complete the FAFSA, you will receive a Student Aid Report (SAR). Review the information carefully and make any necessary corrections.
5) Respond immediately to any request from your school for additional information.
(Source: federalstudentaid.ed.gov)
FFEL and Direct Loan Interest Rates Effective July 1, 2009
2 Sep 2009 at 4:15pm
Fixed Rates for Loans First Disbursed on or After July 1, 2006
Subsidized Undergraduate Loan: First Disbursed 7/1/2008 to 6/30/2009: 6.00%
Subsidized Undergraduate Loan: First Disbursed 7/1/2009 to 6/30/2010: 5.60%
Subsidized Graduate Loan: 6.80%
Unsubsidized Undergraduate Loan: 6.80%
Unsubsidized Graduate Loan: 6.80%
Direct PLUS Parent Loan: 7.90%
Direct PLUS Graduate Student Loan: 7.90%
FFEL PLUS Parent Loan: 8.50%
FFEL PLUS Graduate Student Loan: 8.50%
Variable Rates for Loans First Disbursed Between July 1, 1998 and June 30, 2006
These rates were calculated based upon statutory formulas and equal the bond equivalent rate of the 91-day Treasury bills auctioned on May 26, 2009, plus certain statutory percentage add-ons. The 91-day Treasury bills were auctioned at 0.178 percent, rounded to 0.18 percent.
Subsidized (Repayment/Forbearance): First Disbursed 7/1/08 to 6/30/09: 4.21%
Subsidized (Repayment/Forbearance): First Disbursed 7/1/09 to 6/30/10: 2.48%
Subsidized (In-school/Grace/Deferment): First Disbursed 7/1/08 to 6/30/09: 3.61%
Subsidized (In-school/Grace/Deferment): First Disbursed 7/1/09 to 6/30/10: 1.88%
Unsubsidized (Repayment/Forbearance): First Disbursed 7/1/08 to 6/30/09: 4.21%
Unsubsidized (Repayment/Forbearance): First Disbursed 7/1/09 to 6/30/10: 2.48%
Unsubsidized (In-school/Grace/Deferment): First Disbursed 7/1/08 to 6/30/09: 3.61%
Unsubsidized (In-school/Grace/Deferment): First Disbursed 7/1/09 to 6/30/10: 1.88%
PLUS Parent Loan: First Disbursed 7/1/08 to 6/30/09: 5.01%
PLUS Graduate Student Loan: First Disbursed 7/1/09 to 6/30/10: 3.28%
Notes:
*Interest rates on Stafford and PLUS loans disbursed before July 1, 1998, are calculated using different statutory formulas, percentage add-ons, or both.
*Generally, interest rates on Consolidation Loans are fixed rates calculated based on the weighted average of the loans being consolidated rounded up to the next higher 1/8 percent, not to exceed 8.25 percent.
(Source: studentaid.ed.gov)
Prioritizing your Debt
11 Apr 2009 at 12:06am
I saw a good foundational article today at MSNBC on their Today page.
If you have several different types of debt ' say, a credit card balance on a card with a 17% interest rate, a car loan with a 12% rate, and a student loan at 9% ' pay off the loan with the highest interest rate first. One strategy you may want to consider is stretching out your student loan payments over 15 years instead of 10 years by signing up for the Federal Direct Consolidation Loan program. (To see if you're eligible, call the Department of Education at 800-4FED-AID.) This will reduce your monthly student loan payment and leave you with extra cash. Use this money to pay off your credit card balance faster. Once you've gotten rid of your credit card debt, start paying off your auto loan faster. After you wipe out that loan, too, increase your student loan payments to at least their initial levels.
If you're looking at a lot of different types of debt, it's important to stay disciplined to these principals.
U.S. Secretary of Education Margaret Spellings Takes Steps to Ensure Students...
3 Feb 2009 at 8:00am
The U.S. Department of Education is ensuring students and their families continue to have uninterrupted and timely access to Federal student loans by taking steps to maintain stability in student lending through both the Federal Family Education Loan Program (FFELP) and Direct Loan Program.
"We recognize that the current economic situation has created real financial challenges for students and their families, who are increasingly concerned about how they can secure loans to help cover college costs," said Secretary Spellings. "I want to reassure students and their families that Federal student aid - both grants and loans - remains available to eligible students."
As credit markets for student loans continue to tighten, there is a growing concern among schools, students and lenders about the availability of funds for the 2009-10 academic year. With lenders currently committing loan volume to schools for the upcoming academic year, the Department of Education, in coordination with the Treasury Department and the Office of Management and Budget, is using the authority of the extended Ensuring Continued Access to Student Loans Act.
"The unprecedented credit market conditions throughout the past several months have clearly impacted the student loan market. These necessary measures will allow for more liquidity in this market and should help to prevent the financial turmoil from hurting opportunities for our students," said Treasury Secretary Henry M. Paulson, Jr.
The Department of Education will replicate for the 2009-10 academic year the successful loan purchase and participation interest programs announced in May 2008 for the 2008-09 school year. To date, these programs have supported nearly 50 percent - or $8.7 billion - of the FFELP loans disbursed thus far this year.
In addition, the Administration intends to provide liquidity support to one or more conforming Asset-Backed Commercial Paper (ABCP) conduits to purchase and provide longer-term financing for FFELP loans. While details of this conduit are forthcoming, it is intended that all fully-disbursed non-consolidation FFELP loans awarded between October 1, 2003 and July 1, 2009 will be eligible for inclusion. Loans in the conduit will be financed with new issues of Asset Backed Commercial Paper. Support for the program will come from the Department of Education, which will enter into a forward commitment to purchase eligible student loans from the conduit in the future at a prearranged price. These programs will protect taxpayers by ensuring there is no net cost to the Federal government.
The Administration is working diligently on these programs so that students and their families can be assured that Federal funds will continue to be available to help pay for higher education and ensure that our students will be better prepared to pursue their dreams in today's competitive global economy.
For more information on these programs, please view the fact sheet at http://www.ed.gov/students/college/aid/ecasla-facts.html.
Student loan woes
19 Nov 2008 at 10:16am
A survey administered by the scholarship-matching website FastWeb found that nearly half of student loan applications are being denied. According to the survey, one of the primary reasons students borrow private loans is because they have maxed out the federal Stafford Loan, a problem that has long been known to burden middle-income families. The survey shows that the government is failing to provide needed financial assistance.
Nearly half of Stafford Loan borrowers who said they maxed out their federal loan stated that they had to turn to private loans as result. These figures show that the average middle-income student is starting or has started to face obstacles in obtaining college funding.
Government has left the average middle-income family unable to finance higher education. Pell Grants are available for low-income students, but for middle-income students, the federal Stafford Loan has indeed become a scarce resource. Grants are often not offered to middle-income students, and when the Stafford Loans dry up, students are forced to turn to private loan alternatives.
The Department of Education needs to find a way to raise the allowed amount for a single student to borrow in Stafford Loan funding ' perhaps even high enough so private loans will no longer be needed. To increase the private student loan appeal, banks should be rewarded for offering often non-profitable student loans to needy students. If these actions are taken, middle-income families would sleep soundly knowing the government has invested in their children's futures ' and their futures, as well.
(mndaily)
Paulson and Spellings Joint Statement
11 Nov 2008 at 3:38pm
Continuing constraints in our capital markets have posed challenges for students and student lenders throughout the last year. We recognize that education is the foundation of a strong American workforce and we must not let challenges in our capital markets hinder our students' opportunities. Given these ongoing concerns, the Administration is taking a series of steps to support the student loan market.
Earlier this week, President George W. Bush signed H.R. 6889, the extension of the Ensuring Continued Access to Student Loans Act. We appreciate Congress providing the Department of Education, in coordination with the Treasury Department and the Office of Management and Budget, renewed temporary powers to use federal funds to ensure students and families continue to have access to student loans.
The loan purchase and participation interest programs implemented over the last few months have helped ensure that Federal student loans were available to students enrolling in postsecondary institutions for the 2008-2009 school year, and Federal student lending is exceeding last year's pace.
Our financing program has supported just over 40 percent of the Federal Family Education Loan Program (FFELP) loans that have been disbursed this year. Over 800 lenders have enrolled in our loan purchase program. Almost $51 billion of federally guaranteed loans have been originated for the current school year, up from approximately $45 billion for the same period last year.
Over the next few months, schools and lenders will be making decisions for the 2009-2010 school year. Using our newly extended authorities, the Administration is moving aggressively to support the continued availability of funding for federal student loans in the next school year with the goal of restoring the government guaranteed student loan market to normal operations. We are working on an expedited basis and will make further announcements in the coming weeks.
Students Expect 10+ Years of Student Loan Debt
29 Oct 2008 at 7:39am
CollegeGrad.com--the #1 entry level job site--today released its second annual survey results on how long college students anticipate it will take them to pay off their student loans. Fifty-one percent of student loan recipients say it will take them more than 10 years to pay off their student loans. Although last years numbers were similar, the 51 percent represents a five percent increase from three years ago.
Considering the increase in interest rates for federal student loans, combined with the ever-increasing sticker price of a college education and a faltering economy, it's not surprising that students are faced with larger student loan bills upon graduation, and a lengthier payback period.
"The financial pressures being placed on college graduates are growing each year," CollegeGrad.com Spokesperson, Adeola Ogunwole said. "Being weighed down with debt after college makes quickly finding a post-graduation job a priority for most students."
With only a six-month grace period before having to begin payments on their loans, it is critical for graduates to quickly begin earning a steady income. Graduates are faced early-on with some of the tough financial realities of the real world. Ogunwole points out, "finding a job that produces a steady income is very important in establishing the credit needed when applying for home and, or car loans."
(...More)
Community College Student Loan Rates
1 Aug 2008 at 11:51am
As college tuition rates have increased, many two-year college students have been forced to take out loans. Because about one-quarter of two-year colleges do not participate in the federal loan program, these students are forced to take out private loans, which are riskier and more expensive; work while attending school; use credit cards; or, drop out of school. Of those students who completed a community college degree in 2003-04, 33% had student loans; the average amount was $9,061, according to an analysis of federal data by the Project on Student Debt.
The American Association of Community Colleges, which represents 1,200 two-year institutions, claims that colleges do not participate in the federal loan program due to concern for the consequences of debt and default for students, especially those who take remedial classes, for whom dropout and default rates are higher. In addition, colleges participating in the program could be barred from other federal aid programs if too many of their students default. This is especially concerning for schools with a large number of low-income students.
(Source: http://www.aacrao.org/transcript/index.cfm'fuseaction=show_view&doc_id=3946)
Student Debt Q&A
15 Jul 2008 at 3:40am
How you are assessed as a credit risk will be based on whether you defaulted on your student loan. Government income tax refunds can stop and you may acquire wage attachments if you fail to take your student loan seriously and default on it. If you follow a few simple guidelines you can easily avoid defaulting on your student loan. You can avoid defaulting on your student loan if you just stay in contact with the lender.
If you let your lender know immediately you're having problems, it's unlikely you will need to default. I too had financial problems keeping up with the payments on loans I had acquired whilst a student. A few of my friends thought the situation was quite funny because they couldn't see how the finance company could reclaim an education. Defaulted student loans usually start with this type of glib attitude towards the debt.
To avoid defaulting on your loan, contact your lender before it gets to this stage. After everything, I just felt relief after the lender had agreed to a deferment. The company was very helpful and they assigned an agent to me who assisted me with the deferment process.
It only took a week to have the payments suspended until I could re-commence at a later date. Although defaulting on my student loan wasn't what I wanted, I knew that other financial institutions would not be quite as accommodating. I was aware that other agencies would not be so accommodating but I had managed to sort out my student loan.
(Source: cardprocredit.com)
Key Things To Consider Before Taking a Student Loan
14 Jul 2008 at 3:35pm
by Sarah Parker (www.oneiricissues.com)
The rising costs of college tuition have made it almost a necessity to apply for a student loan today. Students not only have tuition costs, but the cost of books, meals, gas, cell phones, recreation, etc. The variety of student loans enables students to take care of their varying college expenses. A student loan however, is a loan that must be repaid under specified circumstances.
The first thing you need to consider is your credit rating or credit history. A poor credit history can adversely affect your student loan application. Some lenders will look at your credit history; some don't. It all depends on what kind of student loan you apply for. Thus, if you have a poor credit history, look into student loans that don't consider your credit report or credit score a top requirement.
Guaranteed Student Loans, also known as Stafford Loans have a low interest rate. A student can apply for a subsidized or unsubsidized student loan. A subsidized loan means the government pays the interest for you while you are in school. The subsidized student loan is based on the students financial need. An unsubsidized student loan means you will be charged interest while you are attending school. The principal must start being paid after you have finished school. Both types of student loans need to start repayment six months after the student has finished college.
Federal Parent Loans or PLUS loans as they are known is a student loan not contingent on your income, but lenders do consider personal credit history. Parents or guardians who have a dependent child enrolled in college at least part-time are eligible for the PLUS loan. The interest rate is 9% or less.
Well the truth is student loan consolidation is not the answer for everyone who has a student loan. Federal loans should consolidated separately from private loans. It may be more beneficial in some cases not to consolidate student loans. Student loan consolidation counselors get paid the big bucks to help you figure out this information. However this article is designed to help you develop a better understanding of everything about getting a student loan including student loan consolidation.
Citigroup affiliate Student Loan Corp. to cut 89 jobs
11 Jul 2008 at 3:53pm
Student Loan Corp, a division of Citibank, plans to cut 89 jobs from its Perinton operation, the company said Thursday.
The jobs represent almost one-quarter of Student Loan's local employment and their elimination is part of a company-wide restructuring and cost-cutting effort. Overall, 174 jobs are being cut, including some at Student Loan headquarters in Stamford, Conn., and at Citibank in South Dakota.
Citibank's subsidiary is just one lender that is either slashing costs to stay in the student loan business or getting out of the business entirely because of new challenges in making a profit. Sallie Mae, the largest student lender, has already laid off about 1,000 employees.
A statement on the planned cutbacks said Student Loan Corp. remains committed to the business and will provide the "same level of superior customer service that schools and borrowers have come to expect ... over the past 50 years."
(more)
Debt Consolidation Overview
11 Jul 2008 at 2:50pm
If you're in way over your head, debt consolidation is a viable option.
You have to understand though that there is a tradeoff of easing your current pain.
http://banking.about.com/od/loans/a/debtconsolidate.htm
Debt Consolidation Programs
From Justin Pritchard,
Your Guide to Banking / Loans.
FREE Newsletter. Sign Up Now!
Overview of Debt Consolidation Programs
Readers are always asking about debt consolidation programs. What are they and what do you need to know about them'
Debt consolidation programs are usually just a big loan that pays off other smaller loans. They can be very beneficial to borrowers, but these programs also have their pitfalls.
When to Use Debt Consolidation Programs
Debt consolidation programs are good for a few situations. If you are paying several different loans off, your life may be easier if you consolidate everything into one loan. You'll only get one monthly statement and make one payment.
Also, you'll find that your monthly debt payments decrease if you use a debt consolidation program that stretches your payments out over a longer period of time. This means that you'll pay out less each month and you can free up some cash.
A tempting (and sometimes successful) strategy is to use a debt consolidation program to manage various high-rate revolving debts. As an example, you might have numerous credit card balances with high interest rates. With a debt consolidation program, you might be able to get a handle on that debt and lower the interest rate that you're paying. In general, credit cards have higher rates and secured loans (such home equity loans) have lower rates.
Things to Remember About Debt Consolidation Programs
Using debt consolidation programs can help you or hurt you. You should be very aware that all these programs do is shift your debt ' a debt consolidation program does not eliminate your debt. You owe the money and will have to pay it back sooner or later.
One pitfall of a debt consolidation program is that you may feel like you have less outstanding debt. For example, you'll notice that your credit cards once again have generous amounts of available credit. If you use this credit you'll only dig yourself into a deeper hole.
You should also be aware that you may end up paying more total interest if you use a debt consolidation loan. If you stretch out your payments over a longer period of time, it is possible that your total interest cost will be higher. Of course, it may be worth it to you if you can more easily manage your cash flow today.
Finally, remember what you're risking by using one of these programs. Often, you'll use a home equity loan or a home equity line of credit to consolidate your debt. The consequences of falling off the payment schedule can include the loss of your home in some cases. Credit card companies can't take your home. However, if you pledge your home as collateral in a debt consolidation program then your house is fair game.
How to Find the Best Debt Consolidation Programs
There are a variety of choices, and you should shop around to find one that fits your needs. If you need some ideas on where to start, try this plan:
Local credit unions or banks that you already have a relationship with. These are reliable sources that are likely to give you a fair deal.
Banks that you don't already have a relationship with. They might offer you a good deal in order to win your business.
Mailers offering debt consolidation programs. These lenders already want your business ' they've mailed you an offer because something about you fits into their desired profile.
An internet search for 'debt consolidation'. Just be careful and be sure you don't get scammed.
In addition to shopping around, you can ensure that you get the best deal by managing your credit. Loans are hardest to get when you need them the most. I suggest visiting the Loans page if your credit needs any work.
More Resources
Build Credit
Simple Interest
Phishing Scams
Help With Debt Consolidation Programs
A Tax Break With Debt Consolidation Programs'
Using a Second Mortgage With Debt Consolidation Programs
2nd Mortgage Quick Tips
Beat the college loan crunch
8 Jul 2008 at 7:34am
(Money Magazine) -- For families with children heading off to college, this has been the year from hell. First, a record number of applicants made 2008 the most competitive year ever for college admissions. Then the credit crunch hit the college market in a big way, igniting fears of a drought in financing for all students this fall.
Spurred by dwindling demand for packaged loans from investors and cuts on federal subsidies, more than 100 lenders in the government college loan program have pulled out of the market. Private lenders are leaving the college market too - 27 so far. Those who remain are making it tougher to qualify for loans, while jacking up rates and reducing discounts.
The result: If you're counting on a loan to pay tuition bills this fall, you're probably anxiously holding your breath, waiting to see if you'll be able to borrow what you need at a rate you can afford.
Is it harder to get a student loan' Tell us.
Well, Mom and Dad, you can officially exhale now. You'll be fine, if you just play it right. Unlike the crisis in the mortgage market, where politicians continue to argue about how to help without actually doing much, Uncle Sam in recent weeks has swooped in with a practical damage-control plan for college borrowers.
(More from CNN)
Can a PLUS Loan be discharged (canceled)?
23 May 2008 at 10:30am
Yes, under certain conditions. A discharge (cancellation) releases your parents from all obligation to repay the loan.
Your parents' PLUS Loan can't be canceled for these reasons: You didn't complete your program of study at your school (unless you couldn't complete the program for a valid reason'because the school closed, for example), you didn't like the school or the program of study, or you didn't obtain employment after completing the program of study.
For more information about loan discharge or repayment: If your parents have a Direct PLUS Loan, they should contact the Direct Loan Servicing Center at 1-800-848-0979, or go to www.dl.ed.gov. If they have a FFEL PLUS Loan, they should contact the lender or agency holding the loan.
(Source: studentaid.ed.gov)
Is it ever possible to postpone repayment of a PLUS Loan?
21 May 2008 at 9:29am
Yes, under certain circumstances, your parents can receive a deferment on their loans.
If they temporarily can't meet the repayment schedule, they can also receive forbearance on their loan, as long as it isn't in default. During forbearance, their payments are postponed or reduced.
Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance apply to both Stafford Loans and PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance. If they don't pay the interest as it accrues, it will be capitalized (that is, added to the principal amount of the loan, and additional interest will be based on that higher amount).
How do my parents pay back these loans?
19 May 2008 at 9:29am
They'll repay a FFEL PLUS Loan to a private lender or loan servicer. They'll repay their Direct PLUS Loan to the U.S. Department of Education's Direct Loan Servicing Center. To read more about repayment options under both programs, read the PLUS Loans section in Funding Education Beyond High School: The Guide to Federal Student Aid.
When do my parents begin repaying the loan?
16 May 2008 at 10:27am
Generally, the first payment is due within 60 days after the loan is fully disbursed. There is no grace period for these loans. Interest begins to accumulate at the time the first disbursement is made. Your parents must begin repaying both principal and interest while you're in school.
Other than interest, is there a charge to get a PLUS Loan?
14 May 2008 at 11:27am
Your parents will pay a fee of up to 4 percent of the loan, deducted proportionately each time a loan disbursement is made. For a FFEL PLUS Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the PLUS Loan Program in your state) to help reduce the cost of the loans. For a Direct PLUS Loan, the entire fee goes to the government to help reduce the cost of the loans. Also, your parents may be charged collection costs and late fees if they don't make their loan payments when scheduled.
What's the PLUS loan interest rate?
12 May 2008 at 11:26am
For PLUS Loans disbursed on or after July 1, 2006, the interest rate is fixed (at 7.90 for Direct PLUS Loans and 8.50 percent for FFEL PLUS Loans). For PLUS Loans disbursed between July 1, 1998 and June 30, 2006, the interest rate is variable and is determined on July 1 of every year. For 2007-2008, the variable rate for these PLUS Loans (in both the Direct and FFEL programs) is 8.02 percent. Interest is charged on a PLUS Loan from the date of the first disbursement until the loan is paid in full.
Who gets my parents' loan money?
9 May 2008 at 3:25pm
Either the U.S. Department of Education (for a Direct PLUS Loan) or your parents' lender (for a FFEL PLUS Loan) will send the loan funds to your school. Your school might require your parents to endorse a disbursement check and send it back to the school. In most cases, the loan will be disbursed in at least two installments, and no installment will be greater than half the loan amount. The funds will first be applied to your tuition, fees, room and board, and other school charges. If any loan funds remain, your parents will receive the amount as a check or in cash, unless they authorize the amount to be released to you or to be put into your school account. Any remaining loan funds must be used for your education expenses.
How much can my parents borrow?
7 May 2008 at 10:24am
The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. If your cost of attendance is $6,000, for example, and you receive $4,000 in other financial aid, your parents can borrow up to $2,000.
Crash Course in Financial Aid for a Newbie
31 Aug 2010 at 4:22pm
Incoming student seeks resources to go from financial aid newbie to guru in one month. See what she finds...
Should I Repay my Stafford Loans Early?
6 Aug 2010 at 2:41pm
For many recent graduates, the grace period before they must begin repaying their Stafford Loans won't come to a close until the fall, most likely in November. But for the lucky few who have already secured a job and an income, there might be a temptation to start repayment a few months early. So should they do it'
2010-2011 Federal Student Loan Interest Rates
28 Jul 2010 at 1:38pm
Hello folks! In our rush of excitement over the passing of SAFRA, we forgot to blog about this year’s federal student loan interest rates.
Here is the complete listing, all in one place for convenience:
Undergraduate
Unsubsidized Direct Stafford Loan: 6.80% APR
Subsidized Direct Stafford Loan: 4.50% APR
Graduate
Unsubsidized Direct Stafford Loan: 6.80% APR
Subsidized Direct Stafford Loan: 6.80% APR
Direct Graduate [...]
A Handy Dandy Federal Direct Loans Guide!
23 Jul 2010 at 2:42pm
Hi readers! If you’re confused by the federal Direct Loans switchover currently in progress, you’ll be happy to know that we’ve put together a guide to the steps required to apply for and receive federal direct loans.
Download the Direct Loans Guide PDF »
You will need Adobe Reader (or other PDF software like Apple Preview) to [...]
Just one week until Student Aid Reform kicks in!
24 Jun 2010 at 12:29pm
We're now just one week away until the student reform changes officially start going into effect.
Were your Stafford loans enough?
23 Jun 2010 at 4:56pm
Seeing as it is the end of June, most of you have received your financial aid award letters and know what your federal loans look like for the upcoming academic year.
So, did you receive enough money in Stafford loans' Keep in mind that there are annual limits for each category (subsidized and unsubsidized) and you [...]
Get Info on your Federal Loans Online
18 Jun 2010 at 3:08pm
Can't remember how much of your graduate school tuition will be covered by a Stafford Loan' Want to know when your next PLUS loan disbursement will arrive' You can access all of your federal loan details online through the Department of Education's National Student Loan Data System (NSLDS) database.
Ready for a rate cut? One?s coming in July!
17 Jun 2010 at 4:21pm
As you can see, it doesn't sound like much, but it makes a big impact in the long run. Quadruple the savings above and the deal becomes bigger and bigger.
Should you Pay Back your Student Loans Early?
10 Jun 2010 at 1:07pm
Many graduating seniors are still in the midst of their six-month grace period before they have to begin student loan repayment. But for some lucky graduates who have secured a job and have the means, they may be interested in starting repayment before their grace period is up.
Don?t Forget About Federal Work-Study
3 Jun 2010 at 10:51am
Federal work-study isn't often brought up when discussing paying for college, but it is an amazingly useful and convenient avenue for cash.
What's that sound? Student loan debt tick, tick, ticking up. - Washington Post
3 Sep 2010 at 1:05am
Your Kid's College Loan: Who Should Foot The Bill? - San Francisco Chronicle
2 Sep 2010 at 10:30am
A fairer deal for college students - Washington Post
2 Sep 2010 at 6:00pm
Student Loan Scrutiny Could Hurt Washington Post - BusinessWeek
2 Sep 2010 at 4:28pm
California student loan program now in the hands of a Minnesota firm - Examin...
3 Sep 2010 at 6:56am
The Student Loan Racket: Now in One Easy to Understand Graphic - Above the Law
3 Sep 2010 at 10:29am
Student Loan Confusion Lingers - 33 KDAF-TV
2 Sep 2010 at 10:11pm
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![]() Student Loan Confusion Lingers
33 KDAF-TV
RICHARDSON, TEXAS - The federal government passed legislation in the spring to make the student loan process easier. But some students say it's not quite ...
and more » |
The Student Loan Scam - Wealth Daily
3 Sep 2010 at 11:13am
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![]() The Student Loan Scam
Wealth Daily
And while I know that no one put a gun to thier heads when they signed the loan docs, I also know that the majority of them do it chasing down dreams of ...
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Terminology of the Student Loan Tax Deduction - Credit Loan (blog)
3 Sep 2010 at 10:55am
Facts Or Fiction: Is Buck 'Too Extreme'? - KMGH Denver
2 Sep 2010 at 9:25pm
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