1. Where can I get a copy of the FAFSA? The online version of the FAFSA is available at http://www.fafsa.ed.gov. FAFSA forms may also be available at the local college or in a high school career or counseling center.
2. Are photocopies of the FAFSA acceptable? No. Only the original FAFSA form produced by the US Department of Education is acceptable. Photocopies, reproductions, facsimiles and electronic versions are all not acceptable.
3. How soon after January 1 should the FAFSA from be sent in? Is it better to wait until the income tax forms have been completed? Send the form in as soon as possible after January 1. Do not wait until your taxes are done. Although it is better to do your taxes early, it is ok to use estimates of your income, so long as they aren't very far off from the actual values. You will have an opportunity to correct any errors later on the Student Aid Report (SAR). If you wait too long, you might miss the deadline for state aid which is March 2 for California.
4. My parents are separated or divorced. Which parent is responsible for filing out the FAFSA? If your parents are separated or divorced, the custodial parent is responsible for filling out the FAFSA. The custodial parent is the parent with whom you lived the most during the past 12 months. Note that this is not necessarily the same as the parent who has legal custody. If you did not live with one parent more than the other, the parent who provided you with the most financial support during the past twelve months should fill out the FAFSA. This is probably the parent who claimed you as a dependent on their tax return.
5. My parents are divorced, and the parent I'm living with has remarried. Does my step-parent have to report his or her income and assets on the FAFSA? Yes, provided that the parent you're living with is the one filling out the FAFSA. If the step-parent is married to your custodial parent at the time you fill out the FAFSA they must report their income and assets, even if they weren't married to them in the previous year.
6. My custodial parent remarried and signed a prenuptial agreement that absolves the step-parent from financial responsibility for my education. Why does my step-parent have to provide financial information on the FAFSA? Prenuptial agreements are ignored by the federal need analysis process. After all, two individuals (parent and step-parent) cannot make an agreement between them that is binding a third party (the federal government). The federal government considers the step-parent a source of support regardless of any prenuptial agreements to the contrary. If a step-parent marries the parent, he or she is considered responsible for supporting the parent and children, even if he or she is unwilling to do so.
Ron Them College Planning News
Saturday, December 29, 2007
15 FAFSA Tips and Pitfalls
1. Read the instructions and questions carefully
2. Meet financial deadlines
3. Apply for two pin numbers --- one for the student and one for the parent
4. A common error is to leave a field blank. All income questions must be completed. If the answer is zero or the question does not apply to you, write 0.
5. Use your legal name as it appears on your Social Security card. Using a nickname or any other name will cause a processing delay. Be careful of putting parent's Social Security number in place of the student's.
6. Be careful to write your Social Security Number and date of birth accurately and clearly. Any error will cause processing delays.
7. The words "you" and "your" on the FAFSA always refer to the student, not the parent.
8. Make sure you have the school's institutional forms completed with the same information.
9. Don't hide assets.
10. Be honest. Some schools verify 100% of the student's financial aid applications through the use of tax returns and federal verification documents.
11. Claim that the student lives with lower earning parent, if the parents are divorced.
12. Report as earned income Box 1 instead of Box 5 of the W-2 form.
13. Don't leave the drug question blank.
14. Another common error is to report taxes withheld or tax due instead of taxes paid. The total of your withholdings can be higher or lower than the taxes paid. Be sure you report the taxes paid.
15. Refer to www.finaid.org for additional information and directions.
Homer Sweeney The College Plan
2. Meet financial deadlines
3. Apply for two pin numbers --- one for the student and one for the parent
4. A common error is to leave a field blank. All income questions must be completed. If the answer is zero or the question does not apply to you, write 0.
5. Use your legal name as it appears on your Social Security card. Using a nickname or any other name will cause a processing delay. Be careful of putting parent's Social Security number in place of the student's.
6. Be careful to write your Social Security Number and date of birth accurately and clearly. Any error will cause processing delays.
7. The words "you" and "your" on the FAFSA always refer to the student, not the parent.
8. Make sure you have the school's institutional forms completed with the same information.
9. Don't hide assets.
10. Be honest. Some schools verify 100% of the student's financial aid applications through the use of tax returns and federal verification documents.
11. Claim that the student lives with lower earning parent, if the parents are divorced.
12. Report as earned income Box 1 instead of Box 5 of the W-2 form.
13. Don't leave the drug question blank.
14. Another common error is to report taxes withheld or tax due instead of taxes paid. The total of your withholdings can be higher or lower than the taxes paid. Be sure you report the taxes paid.
15. Refer to www.finaid.org for additional information and directions.
Homer Sweeney The College Plan
Questions About Applying for Financial Aid
1. I probably don't qualify for aid. Should I apply for aid anyway? Yes. Many families mistakenly think they don't qualify for aid and prevent themselves from receiving financial aid by failing to apply for it. In addition there are a few sources of aid such as unsubsidized Stafford and PLUS loans that are available regardless of need. The FAFSA form is free. There is no good excuse for not applying.
2. Do I need to be admitted before I can apply for financial aid at a particular university? No. You can apply for financial aid any time after January 1. To actually receive funds, however, you must be admitted and enrolled at the university.
3. Why can't I submit my financial aid application before January 1? The need analysis process for financial aid uses the family's income and tax information from the most recent tax year to judge your eligibility for need-based financial aid during the upcoming academic year.
4. Do I have to reapply for financial aid every year? Yes. Most financial aid offices require that you apply for financial aid every year. If your financial circumstances change, you may get more or less aid. After your first year you will receive a "Renewal Application" which contains preprinted information from the previous year's FAFSA. Note that your eligibility for financial aid may change significantly, especially if you have a different number of family members in college. Renewal of your financial aid package also depends on your making satisfactory academic progress toward a degree, such as earning a minimum number of credits and achieving a minimum GPA.
5. How do I apply for a Pell Grant and other types of Federal need-based aid? Submit a FAFSA. To indicate interest in student employment, student loans, you should check the appropriate boxes. Checking these boxes does not commit you to accepting these types of aid. You will have the opportunity to accept or decline each part of your aid package later. Leaving these boxes unchecked will not increase the amount of grants you receive.
6. Are my parents responsible for my educational loans? No. Parents are, however, responsible for the Federal PLUS loans. Parents will only be responsible for your educational loans if you are under 18 and they co-sign your loan. In general you are responsible for repaying your educational loans. On the other hand, if your parents (or grandparents) want to help pay off your loan, you can have your billing statements sent to their address. Likewise, if your lender or loan company provides an electronic payments service where the monthly payments are automatically deducted from a bank account, your parents can agree to have the payments deducted from their account. But parents are under no obligation to repay your loans. If they forget to pay the bill on time or decide to cancel the electronic payments agreement, you will be held responsible for the payments, not them.
7. Why is the family contribution listed on the SAR different from the family contribution expected by the university? The federal formula for computing the expected family contribution is different from those used by many universities. In particular, the federal formula does not consider home equity as part of the assets, yet many private colleges will take home equity into consideration for their institutional funds.
8. If I take a leave of absence, do I have to start repaying my loans? Not immediately. The subsidized Stafford loan has a grace period of 6 months and the Perkins loan has a grace period of 9 months before the student must begin repaying the loan. When you take a leave of absence you will not have to repay your loan until the grace period is used up. If you use up the grace period, however, when you graduate you will have to begin repaying your loan immediately. It is possible to request an extension to the grace period but this must be done before the grace period is used up. If your grace period has run out in the middle of your leave of absence, you will have to start making payments on your student loans.
9. I got an outside scholarship. Should I report it to the financial, aid office? Yes. If you are receiving any kind of financial aid from university or government sources, you must report the scholarship to the financial aid office. Unfortunately, the university will adjust your financial aid package to compensate. Nevertheless, the outside scholarship will have some beneficial effects. At some universities outside scholarships are used to reduce the student loan level.
10. Are work-study earnings taxable? Yes, the money earned from Federal Work-Study is generally subject to federal and state income tax, but exempt from FICA taxes. The student should be careful to report amounts based on the calendar year, not the school year.
11. Is it legal for a 17-year -old student to sign a promissory note for a student loan, even though the student has not yet reached the age of majority? Normally, a minor cannot be held liable for a contract that they sign. However, in 1992 the Higher Education Act was amended to permit eligible students to sign promissory notes for their own student loans. As such, student loans represent one of the few exceptions to the so-called "defense of infancy".
Ron Them - The College Planning News
2. Do I need to be admitted before I can apply for financial aid at a particular university? No. You can apply for financial aid any time after January 1. To actually receive funds, however, you must be admitted and enrolled at the university.
3. Why can't I submit my financial aid application before January 1? The need analysis process for financial aid uses the family's income and tax information from the most recent tax year to judge your eligibility for need-based financial aid during the upcoming academic year.
4. Do I have to reapply for financial aid every year? Yes. Most financial aid offices require that you apply for financial aid every year. If your financial circumstances change, you may get more or less aid. After your first year you will receive a "Renewal Application" which contains preprinted information from the previous year's FAFSA. Note that your eligibility for financial aid may change significantly, especially if you have a different number of family members in college. Renewal of your financial aid package also depends on your making satisfactory academic progress toward a degree, such as earning a minimum number of credits and achieving a minimum GPA.
5. How do I apply for a Pell Grant and other types of Federal need-based aid? Submit a FAFSA. To indicate interest in student employment, student loans, you should check the appropriate boxes. Checking these boxes does not commit you to accepting these types of aid. You will have the opportunity to accept or decline each part of your aid package later. Leaving these boxes unchecked will not increase the amount of grants you receive.
6. Are my parents responsible for my educational loans? No. Parents are, however, responsible for the Federal PLUS loans. Parents will only be responsible for your educational loans if you are under 18 and they co-sign your loan. In general you are responsible for repaying your educational loans. On the other hand, if your parents (or grandparents) want to help pay off your loan, you can have your billing statements sent to their address. Likewise, if your lender or loan company provides an electronic payments service where the monthly payments are automatically deducted from a bank account, your parents can agree to have the payments deducted from their account. But parents are under no obligation to repay your loans. If they forget to pay the bill on time or decide to cancel the electronic payments agreement, you will be held responsible for the payments, not them.
7. Why is the family contribution listed on the SAR different from the family contribution expected by the university? The federal formula for computing the expected family contribution is different from those used by many universities. In particular, the federal formula does not consider home equity as part of the assets, yet many private colleges will take home equity into consideration for their institutional funds.
8. If I take a leave of absence, do I have to start repaying my loans? Not immediately. The subsidized Stafford loan has a grace period of 6 months and the Perkins loan has a grace period of 9 months before the student must begin repaying the loan. When you take a leave of absence you will not have to repay your loan until the grace period is used up. If you use up the grace period, however, when you graduate you will have to begin repaying your loan immediately. It is possible to request an extension to the grace period but this must be done before the grace period is used up. If your grace period has run out in the middle of your leave of absence, you will have to start making payments on your student loans.
9. I got an outside scholarship. Should I report it to the financial, aid office? Yes. If you are receiving any kind of financial aid from university or government sources, you must report the scholarship to the financial aid office. Unfortunately, the university will adjust your financial aid package to compensate. Nevertheless, the outside scholarship will have some beneficial effects. At some universities outside scholarships are used to reduce the student loan level.
10. Are work-study earnings taxable? Yes, the money earned from Federal Work-Study is generally subject to federal and state income tax, but exempt from FICA taxes. The student should be careful to report amounts based on the calendar year, not the school year.
11. Is it legal for a 17-year -old student to sign a promissory note for a student loan, even though the student has not yet reached the age of majority? Normally, a minor cannot be held liable for a contract that they sign. However, in 1992 the Higher Education Act was amended to permit eligible students to sign promissory notes for their own student loans. As such, student loans represent one of the few exceptions to the so-called "defense of infancy".
Ron Them - The College Planning News
Wednesday, December 12, 2007
True Cost of College Cut
There is now hard evidence that the true cost of college will be cut in the 2008-09 school year for some middle and upper middle class families. True cost is defined as the difference between Cost of Attendance and grants,scholarships and other aid that does not have to be paid back. Harvard just announced that a family making upwards of $180,000 that is paying $30,360 this year will pay about $17,500 next year.
This cut is the direct result of the Higher Education Act of 2007 signed earlier this year that requires the Department of Education to investigate colleges with large endowments and report if they have been providing enough tuition support for current students. Colleges did not want to be singled out as hoarders and have begun to act. Some colleges announced plans to guarantee that tuition will not rise during the student's tenure while others plan to replace loans with grants. These are worn out strategies that have been heard before and failed. It is clear however with the action taken by Harvard to make college more affordable, elite expensive colleges will have to cut their true cost of college to remain competitive.
For decades Congress has heard complaints about the hideous cost of college. Their solutions haven't worked. In fact making money easy to get for college by providing guaranteed low cost loans may have been the biggest contributing factor to the continual rise in cost.
What changed? People with money have influence and send their children to elite colleges. Congress listens to people with influence and agreed that the high cost of these elite colleges should be studied. Harvard then decided to spend more of their $35 billion endowment for tuition support. Let's put that figure into perspective. A million seconds is roughly 12 days whereas a billion seconds is approximately 32 years. Will this new tuition initiative be enough to avoid the Crimson from being called "The Hoarders?"
This cut is the direct result of the Higher Education Act of 2007 signed earlier this year that requires the Department of Education to investigate colleges with large endowments and report if they have been providing enough tuition support for current students. Colleges did not want to be singled out as hoarders and have begun to act. Some colleges announced plans to guarantee that tuition will not rise during the student's tenure while others plan to replace loans with grants. These are worn out strategies that have been heard before and failed. It is clear however with the action taken by Harvard to make college more affordable, elite expensive colleges will have to cut their true cost of college to remain competitive.
For decades Congress has heard complaints about the hideous cost of college. Their solutions haven't worked. In fact making money easy to get for college by providing guaranteed low cost loans may have been the biggest contributing factor to the continual rise in cost.
What changed? People with money have influence and send their children to elite colleges. Congress listens to people with influence and agreed that the high cost of these elite colleges should be studied. Harvard then decided to spend more of their $35 billion endowment for tuition support. Let's put that figure into perspective. A million seconds is roughly 12 days whereas a billion seconds is approximately 32 years. Will this new tuition initiative be enough to avoid the Crimson from being called "The Hoarders?"
Monday, December 10, 2007
Don't Wait . . . Apply for Pin Numbers Today!
If you plan to file the FAFSA form electronically for federal and state student aid for the 2008-09 school year now is the time to obtain your PIN numbers if you have not already done so in the past. Obtain one number for the parent and one number for the student. The FAFSA form will be rejected unless both the parent and student sign the document. Go to http://www.pin.ed.gov/ and follow the directions.
Saturday, December 8, 2007
University of California Admissions Update 12/07
Although the priority filing period for fall 2008 has closed, some UC campuses are still accepting applications to some programs and majors.
UC Merced and UC Riverside : Open to freshman and transfer applicants in most majors
UC Davis, UC Irvine and UC Santa Cruz: Open to transfer students in most majors
UC Santa Barbara: Open to transfer applicants at the junior level
UCLA: School of Nursing open to transfer students at the junior and senior levels
UCLA: Athletic Department: Opening for head football coach
For more information about open majors and deadlines,check
http://www.universityofcalifornia.edu/admissions/download
UC Communications
UC Merced and UC Riverside : Open to freshman and transfer applicants in most majors
UC Davis, UC Irvine and UC Santa Cruz: Open to transfer students in most majors
UC Santa Barbara: Open to transfer applicants at the junior level
UCLA: School of Nursing open to transfer students at the junior and senior levels
UCLA: Athletic Department: Opening for head football coach
For more information about open majors and deadlines,check
http://www.universityofcalifornia.edu/admissions/download
UC Communications
Friday, December 7, 2007
Is Investing In Property for College Still A Good Idea?
Many families have found in the past that buying a house or condo that they could afford near a college was a good idea because it was an investment, and for the student it meant additional freedom and an opportunity to create a credit history that a college could not provide. This has been a very popular strategy especially for students attending public schools out of state because in many cases, it allowed families to pay in-state rather than out-of-state tuition, a savings annually of around $15,000.
Real estate is currently in a slump. Attitudes about mortgages are changing. Are students being given too much responsibility? The following four questions addresses these concerns to help determine if investing in a condo or house for college is a good idea for your family.
Question #1 ARE YOU FINANCIALLY SECURE?
To become financially secure is to own your home so that you can provide security for your family. It is now possible for many families to pay off their 30 year mortgage in 8 to 12 years using the Money Merge Account system. With a house free and clear it frees up those funds paid monthly for the mortgage and with the availability of a Home Equity Line of Credit provides insurance in case of unemployment, job transferring and short term ill health. Other options are unlimited. You can build your retirement fund, make investments, buy additional property, fund college, a new car and home improvements.
Before MMA it was nearly impossible to pay off a 30 years mortgage early so families would refinance when they needed a large sum of money. This was a very popular strategy especially when refinancing to a lower interest interest rate and consolidating other debts. There were some drawbacks to this approach the biggest being that for a $300,000 loan you would pay back a total of $647,515 over 30 years. Another disadvantage was the fact that the amount the family could refinance was limited by their ability to pay. To obtain an additional $100,000 for their $200,000 mortgage at the same interest rate would cost an additional $599.55 a month.
Question #2 WHAT IS TOO MUCH FREEDOM?
Your college student may have all the good intentions to keep the house neat and clean. Peer pressure sets in and all of a sudden there are meetings, gatherings and then parties being held at the house. Serious property damage becomes a real possibility. A few years ago families living near a college in Kalamazoo, Michigan could not literally give their property away because of the damage caused by students living in the area.
Question #3 CAN YOU MAKE A PROFIT IN FIVE YEARS?
If this question was asked a few years ago the answer would have been a resounding yes in most areas of the country without hesitation. But ask the families that just sold short term living around the University of California Irvine campus. According to The Orange County Register they lost 13.7% and the loss was about 17% in the Cal State Fullerton area.
If you bought a condo with a $200,000 30 year 6% mortgage your payments would be $1199. a month. After five years you would have paid $71,946. P&I and have $13,891 of equity in the property. Factor in the cost of buying and selling property and it would seem almost impossible to make a profit unless the property appreciates substantially.
Question #4 WHAT HAPPENS IF THE WRONG COLLEGE IS CHOSEN?
This would be a nightmare. All you can do is hope. You would have three choices.
1) Hope you can sell the property immediately and keep the losses to a minimum.
2) Keep the property and rent it to other students hoping they will care for the property.
3) Have your student stay and make the best of a difficult situation and hope for success.
Real estate is currently in a slump. Attitudes about mortgages are changing. Are students being given too much responsibility? The following four questions addresses these concerns to help determine if investing in a condo or house for college is a good idea for your family.
Question #1 ARE YOU FINANCIALLY SECURE?
To become financially secure is to own your home so that you can provide security for your family. It is now possible for many families to pay off their 30 year mortgage in 8 to 12 years using the Money Merge Account system. With a house free and clear it frees up those funds paid monthly for the mortgage and with the availability of a Home Equity Line of Credit provides insurance in case of unemployment, job transferring and short term ill health. Other options are unlimited. You can build your retirement fund, make investments, buy additional property, fund college, a new car and home improvements.
Before MMA it was nearly impossible to pay off a 30 years mortgage early so families would refinance when they needed a large sum of money. This was a very popular strategy especially when refinancing to a lower interest interest rate and consolidating other debts. There were some drawbacks to this approach the biggest being that for a $300,000 loan you would pay back a total of $647,515 over 30 years. Another disadvantage was the fact that the amount the family could refinance was limited by their ability to pay. To obtain an additional $100,000 for their $200,000 mortgage at the same interest rate would cost an additional $599.55 a month.
Question #2 WHAT IS TOO MUCH FREEDOM?
Your college student may have all the good intentions to keep the house neat and clean. Peer pressure sets in and all of a sudden there are meetings, gatherings and then parties being held at the house. Serious property damage becomes a real possibility. A few years ago families living near a college in Kalamazoo, Michigan could not literally give their property away because of the damage caused by students living in the area.
Question #3 CAN YOU MAKE A PROFIT IN FIVE YEARS?
If this question was asked a few years ago the answer would have been a resounding yes in most areas of the country without hesitation. But ask the families that just sold short term living around the University of California Irvine campus. According to The Orange County Register they lost 13.7% and the loss was about 17% in the Cal State Fullerton area.
If you bought a condo with a $200,000 30 year 6% mortgage your payments would be $1199. a month. After five years you would have paid $71,946. P&I and have $13,891 of equity in the property. Factor in the cost of buying and selling property and it would seem almost impossible to make a profit unless the property appreciates substantially.
Question #4 WHAT HAPPENS IF THE WRONG COLLEGE IS CHOSEN?
This would be a nightmare. All you can do is hope. You would have three choices.
1) Hope you can sell the property immediately and keep the losses to a minimum.
2) Keep the property and rent it to other students hoping they will care for the property.
3) Have your student stay and make the best of a difficult situation and hope for success.
Monday, November 19, 2007
A Few Things To Know About Student Loan Consolidation
A consolidation loan is just what it sounds like: You can take two or more outstanding loans and re-finance them into one. To a college grad that is overwhelmed with multiple student loans that are coming due, loan consolidation is an enticing option. When you consolidate, a lending institution pays off your existing balances and replaces them with a new, consolidated loan.
CONSOLIDATING OFFERS SEVERAL BENEFITS:
1. You have just one check to write each month and just one repayment plan to track.
2. You lock in a fixed interest rate that takes the sweat out of variable-rate loans. When interest rates are low, consolidating loans can save a great deal of money.
3. You can extend your repayment timetable from 10 years up to 30 years, depending on the size of your debt, so you can shrink your monthly payments. A consolidation loan may lower your monthly loan payments by as much as 40 percent.
FEDERAL VERSUS PRIVATE CONSOLIDATION
The key terms for federal consolidation loans do not vary by lender: no application or origination fees are allowed and there are no prepayment penalties. Federal law sets the period of time for paying back the loans and sets a ceiling on the interest rate.
Private consolidation lenders, on the other hand, are not subject to those terms and may include variable rates and any number of fees. Also, some benefits of a federal consolidation loan, such as interest subsidies on deferred loans, are not available on private loans.
CONSOLIDATION FREQUENTLY ASKED QUESTIONS
With all the hype, student loan consolidation isn't for everyone. Here are some frequently asked questions and answers that may help you in deciding if this is for you.
SHOULD I CONSOLIDATE?
If you need more cash in your pocket right now, consolidation can help by extending the life of your loan and reduce your monthly payments. Be aware, the length of your repayment terms will depend on the amount of debt you have, and you may not be able to extend at all. But if interest rates are low, you can lock in long-term savings, since less of your money will go to interest. You may also have access to a new repayment schedule that's a little easier on your wallet. If you don't care about the extra cash and just want a consolidation for the simplicity of a single monthly payment, you can use any savings to pay down the principal. There are no prepayments penalties for student consolidation loans.
WHEN IS CONSOLIDATION A BAD IDEA?
If you have only a couple more years or a few thousand dollars to go until you pay off your student loans, consolidation is probably not a great idea. Switching to a new lending institution might eliminate any benefits you've earned, like lower interest rates for on-time payments over the years. Consolidating could take away the opportunity for you to have a Perkins Loan forgiven or reduced. If you can handle your monthly loan payment as is, carefully investigate how consolidating will change the total amount you're expected to repay.
WHO CAN CONSOLIDATE MY LOANS?
You can get a consolidation loan from any private lending institution with government approval, or from the Department of Education. But, not all consolidators are the same. Some offer favorable terms such as interest-rate reduction for making on-time payments or choosing automatic withdrawal; others may offer repayment plans that better fit your financial situation. http://www.finaid.org/ maintains a list of student loan institutions, including large banks; private companies like Sallie Mae; and state education system lenders like the California Student Aid Commission http://www.csac.ca.gov/. You should do research and be able to negotiate the most favorable terms. Public and private loans can't be combined, but if you have multiple private loans, you can consolidate those, too; contact your lending institutions to find out how.
WHEN SHOULD I DO IT?
If you're just finishing college, you'll want to consolidate your loans after you graduate but before your grace period ends, so that you can take advantage of the lower in-school interest rate. You'll need to complete all the paperwork and have it processed and approved before repayment begins. The downside is that your grace period will end once your consolidation loan goes through. If you've already been paying off your loans for a while, you can consolidate at any time.
HOW CAN I GET THE BEST INTEREST RATE?
The interest rate on your consolidation loans is the weighted average of the interest rates on the loans you have now, rounded up to the nearest 1/8 of a percent and capped at 8.25 percent. Interest rates are determined by the federal government and change each year on July 1.
CAN I CONSOLIDATE MORE THAN ONCE?
Current law dictates that you can only consolidate once, so if you consolidate at a 6% interest rate and rates later drop to 3 percent, you're out of luck. There are two exceptions: if you've since gone back to school and acquired new student loans, or if an outstanding loan was excluded from your original consolidation. In those case, you may be able to consolidate again.
CAN I CONSOLIDATE MY STUDENT LOANS WITH MY SPOUSE'S?
A married couple can jointly consolidate their loans, but it may not be a good idea. To do so, you'll both have to agree to assume full responsibility for payment of the debt. So if your marriage ends in divorce, your loans will still be living together and one ex-spouse will be held responsible if the other refuses to pay.
WILL I LOSE THE INTEREST SUBSIDY ON MY SUBSIDIZED LOANS?
No. Although your existing loans will be packaged as one larger loan, your subsidized and unsubsidized loans are grouped so that you won't be held responsible for extra interest on subsidized loans.
HOW IS LOAN SERIALIZATION DIFFERENT FROM CONSOLIDATION?
With loan serialization, a single lender buys your student loans and "stacks" them; you maintain your original terms and interest rates, but pay the loans off one at a time, starting with the loan with the worst interest rate. Unlike with refinancing, serialization won't lock in a good interest rate. Perkins Loans cannot be serialized.
WHAT FEES CAN I EXPECT TO PAY?
You shouldn't pay origination or any other fees to get a consolidation loan.
HOW CAN I APPLY FOR A CONSOLIDATION LOAN?
Most lending institutions, including the federal government, offer both online and paper applications. If you have all Direct Loans, you can even apply by phone. Along with basic personal contact information, you'll need to be able to provide data on the type of loan you have, the balance, and the current loan holder. You will be asked to provide your employer's name and contact information, the name of your school, and the names of several references. Ask the lender you've chosen for an application, complete it, and then wait for them to send you the paperwork to sign. Go over everything carefully for accuracy, because the lending institution will check to verify that the information you provided is true. Once your loan has been approved, you'll receive notification and a new repayment schedule from your new loan holder.
Complied by the NICCP
CONSOLIDATING OFFERS SEVERAL BENEFITS:
1. You have just one check to write each month and just one repayment plan to track.
2. You lock in a fixed interest rate that takes the sweat out of variable-rate loans. When interest rates are low, consolidating loans can save a great deal of money.
3. You can extend your repayment timetable from 10 years up to 30 years, depending on the size of your debt, so you can shrink your monthly payments. A consolidation loan may lower your monthly loan payments by as much as 40 percent.
FEDERAL VERSUS PRIVATE CONSOLIDATION
The key terms for federal consolidation loans do not vary by lender: no application or origination fees are allowed and there are no prepayment penalties. Federal law sets the period of time for paying back the loans and sets a ceiling on the interest rate.
Private consolidation lenders, on the other hand, are not subject to those terms and may include variable rates and any number of fees. Also, some benefits of a federal consolidation loan, such as interest subsidies on deferred loans, are not available on private loans.
CONSOLIDATION FREQUENTLY ASKED QUESTIONS
With all the hype, student loan consolidation isn't for everyone. Here are some frequently asked questions and answers that may help you in deciding if this is for you.
SHOULD I CONSOLIDATE?
If you need more cash in your pocket right now, consolidation can help by extending the life of your loan and reduce your monthly payments. Be aware, the length of your repayment terms will depend on the amount of debt you have, and you may not be able to extend at all. But if interest rates are low, you can lock in long-term savings, since less of your money will go to interest. You may also have access to a new repayment schedule that's a little easier on your wallet. If you don't care about the extra cash and just want a consolidation for the simplicity of a single monthly payment, you can use any savings to pay down the principal. There are no prepayments penalties for student consolidation loans.
WHEN IS CONSOLIDATION A BAD IDEA?
If you have only a couple more years or a few thousand dollars to go until you pay off your student loans, consolidation is probably not a great idea. Switching to a new lending institution might eliminate any benefits you've earned, like lower interest rates for on-time payments over the years. Consolidating could take away the opportunity for you to have a Perkins Loan forgiven or reduced. If you can handle your monthly loan payment as is, carefully investigate how consolidating will change the total amount you're expected to repay.
WHO CAN CONSOLIDATE MY LOANS?
You can get a consolidation loan from any private lending institution with government approval, or from the Department of Education. But, not all consolidators are the same. Some offer favorable terms such as interest-rate reduction for making on-time payments or choosing automatic withdrawal; others may offer repayment plans that better fit your financial situation. http://www.finaid.org/ maintains a list of student loan institutions, including large banks; private companies like Sallie Mae; and state education system lenders like the California Student Aid Commission http://www.csac.ca.gov/. You should do research and be able to negotiate the most favorable terms. Public and private loans can't be combined, but if you have multiple private loans, you can consolidate those, too; contact your lending institutions to find out how.
WHEN SHOULD I DO IT?
If you're just finishing college, you'll want to consolidate your loans after you graduate but before your grace period ends, so that you can take advantage of the lower in-school interest rate. You'll need to complete all the paperwork and have it processed and approved before repayment begins. The downside is that your grace period will end once your consolidation loan goes through. If you've already been paying off your loans for a while, you can consolidate at any time.
HOW CAN I GET THE BEST INTEREST RATE?
The interest rate on your consolidation loans is the weighted average of the interest rates on the loans you have now, rounded up to the nearest 1/8 of a percent and capped at 8.25 percent. Interest rates are determined by the federal government and change each year on July 1.
CAN I CONSOLIDATE MORE THAN ONCE?
Current law dictates that you can only consolidate once, so if you consolidate at a 6% interest rate and rates later drop to 3 percent, you're out of luck. There are two exceptions: if you've since gone back to school and acquired new student loans, or if an outstanding loan was excluded from your original consolidation. In those case, you may be able to consolidate again.
CAN I CONSOLIDATE MY STUDENT LOANS WITH MY SPOUSE'S?
A married couple can jointly consolidate their loans, but it may not be a good idea. To do so, you'll both have to agree to assume full responsibility for payment of the debt. So if your marriage ends in divorce, your loans will still be living together and one ex-spouse will be held responsible if the other refuses to pay.
WILL I LOSE THE INTEREST SUBSIDY ON MY SUBSIDIZED LOANS?
No. Although your existing loans will be packaged as one larger loan, your subsidized and unsubsidized loans are grouped so that you won't be held responsible for extra interest on subsidized loans.
HOW IS LOAN SERIALIZATION DIFFERENT FROM CONSOLIDATION?
With loan serialization, a single lender buys your student loans and "stacks" them; you maintain your original terms and interest rates, but pay the loans off one at a time, starting with the loan with the worst interest rate. Unlike with refinancing, serialization won't lock in a good interest rate. Perkins Loans cannot be serialized.
WHAT FEES CAN I EXPECT TO PAY?
You shouldn't pay origination or any other fees to get a consolidation loan.
HOW CAN I APPLY FOR A CONSOLIDATION LOAN?
Most lending institutions, including the federal government, offer both online and paper applications. If you have all Direct Loans, you can even apply by phone. Along with basic personal contact information, you'll need to be able to provide data on the type of loan you have, the balance, and the current loan holder. You will be asked to provide your employer's name and contact information, the name of your school, and the names of several references. Ask the lender you've chosen for an application, complete it, and then wait for them to send you the paperwork to sign. Go over everything carefully for accuracy, because the lending institution will check to verify that the information you provided is true. Once your loan has been approved, you'll receive notification and a new repayment schedule from your new loan holder.
Complied by the NICCP
Thursday, November 15, 2007
Good News for Stanford Applicants
Many schools that compete with Harvard and Princeton just got more competitive. According to a report in the Wall Street Journal, "early action" applications are up 36% at Yale, 42% at the University of Chicago, 16% at Boston College, 30% at Georgetown and 12% at Norte Dame. The good news for Stanford applicants is the fact that applications are down slightly from last year.
Last year both Harvard and Princeton announced that they would abandon their early admissions programs in an effort to increase access for disadvantaged students. Unlike early decision programs which are binding early action programs allow students to wait until National Deposit Day May 1, 2008 to make a final decision.
Homer Sweeney
Last year both Harvard and Princeton announced that they would abandon their early admissions programs in an effort to increase access for disadvantaged students. Unlike early decision programs which are binding early action programs allow students to wait until National Deposit Day May 1, 2008 to make a final decision.
Homer Sweeney
Tuesday, November 13, 2007
Seven Question To Ask the Financial Aid Officer
Do your financial due diligence while visiting prospective colleges. College visits are one of the most important steps in the process towards college selection. Too often, however, they consist of a student-guided tour that is carefully planned yet shallow in substance. If you've accompanied your college-bound child, don't leave campus until you have visited the financial aid office.
Call the financial aid office ahead of time to make sure that a financial aid officer (FAO) will be there to help you. People sometimes find FAOs more difficult to deal with than other administrative people. Keep in mind that they are often caught between a "rock and a hard place," trying to help out everyone as much as possible. They have a tough job, so be patient and diplomatic when dealing with them. Face-to-face contact now may "pay off" in the spring of your child's senior year.
Don't forget: When you're asking financial aid questions, ask the financial aid office instead of the admissions office. Don't trust what you hear from admissions about financial aid or vice versa. They may have a general idea, but not all the details.
THE QUESTIONS
By asking a FAO these questions at each school in which your child is interested, you will get a much better idea of the ones that are financially feasible for your child to attend. Once you have had a couple of these dialogues with FAOs, you'll get more comfortable with it and will be able to discern the "good answers" from the less attractive ones.
1. WHAT ARE THE FINANCIAL AID DEADLINES?
This soft opening question will reveal what forms you need to submit, to whom, and when. There may be both the usual ones, the FAFSA and PROFILE, plus the college's own forms. There may also be different forms for need-based aid and merit-based aid. It's best to clarify all this in your mind now. By the way, it usually works out that the more forms they require, the more money they have - but also the tighter they may be with it.
2. WHAT IS YOUR COST OF ATTENDANCE (COA) FOR THE CURRENT YEAR?
If your child is a junior, colleges won't have the numbers for the freshman college year until April or even June of the senior high school year, so you will have to base your estimate on this year's numbers. There are precisely six components to a college student's complete budget:
Tuition - Fees - Room and Board - Books and Supplies - Personal expenses - Transportation.
Many budgets you will see include only Direct Costs (which are the first three items listed) and what you will pay directly to the bursar's office. However, the Department of Education requires that colleges fully inform you as to all of the above costs, so find out specifically what those amounts are.
3. HOW MUCH OF AN INCREASE IN THE COST OF ATTENDANCE (COA) DO YOU PROJECT FOR NEXT YEAR?
When you ask this, ask to get the components separately. Tuition and room and board increases are independent of each other. For example, at one school they may expect an increase of 5 percent in tuition and fees, but a 10 percent increase in room and board. Even if it makes little difference in dollars, just asking detailed questions like this gives the impression that you know what you are talking about.
4. DO YOU USE YOUR OWN INSTITUTIONAL METHODOLOGY TO DETERMINE NEED?
If you ask this question, the FAO will know that he is having a conversation with an educated customer! Your goal here is to get a sense of how deeply they will delve into your financial profile.
5. ARE YOU ABLE TO MEET 100 PERCENT OF FINANCIAL NEED?
If they say "no," find out why, and get details. Is it "first come, first served"? What's the average percentage of need they can meet? What percentage are grants and what are loans? Do they have a dollar amount they leave as a gap (unmet need) for everyone?
6. IN WHAT ORDER DO YOU CREATE THE FINANCIAL AID PACKAGE?
That is, when creating the package, do they first fill the aid package up with loans, or do they figure a grant for the student first? The answer to this question may tell you a few things. A financially strong school that wants your child to attend will say "grants before self-help." But so will a college that understands good marketing - they know that's what you want to hear. Most colleges will actually begin to build the financial package with student loans, no matter what they claim. You may learn more from how the answer is given, rather than what is said.
The University of California builds their financial aid packages starting each student with a $9600 loan for the current 2007-08 school year.
You should also ask if the financial aid office treats parent loans (PLUS Loans) as an option when figuring how the school will meet your need. If so, this is a financial sleight of hand, which usually means that the school simply doesn't have the money. Remember, PLUS loans are for helping your Expected Family Contribution (EFC) after the aid given is subtracted from the full cost of attendance, as outline in Question 2. Families implementing the MMA program do not need PLUS loans and very seldom need to consider student loans. Information about the MMA program can be found at www.U1stfinancial.net/TheCollegePlan.
An important fact to keep in mind is that the higher your child is in the applicant pool, the greater the chance for more grant assistance. This is called "financial aid leveraging" in financial aid parlance. So you and your child should remember to apply to colleges where he will stand above other applicants like being in the top 75th percentile in test scores. Check out www.nces.ed.gov/ipeds/cool to discover were your child stands in regard to test scores for each school of interest.
7. DO YOU OFFER MERIT SCHOLARSHIPS, AND HOW DO YOU TREAT PRIVATE SCHOLARSHIPS THAT MY CHILD MAY EARN ON HIS OWN? (You may have to visit Admissions office with this question.)
If a Merit Scholarship is being awarded, it normally goes into the package first, reducing the amount of need-based aid. Find out if a merit award reduces the self-help in the package, or if it replaces other need-based grants. A true Merit Scholarship can go beyond the "need" level which means that it can lower your EFC. If it doesn't go beyond your "need" level then the college is being misleading by advertising a need-based award as non-need based. Or at least the award is limited by need, which in effect limits the need-based grant.
Note: The Ivy 's and some other prestigious schools do not offer Merit Scholarships. The scholarships and grants offered at these schools are based on the particular formulas they use to determine need.
If you can get accurate answers to these seven questions you'll be prepared to sit down with your future college student and discuss the academic, social and financial pros and cons of each college.
Written by Eric Goodhart of Smart College Planning, Lunenburg, MA
Call the financial aid office ahead of time to make sure that a financial aid officer (FAO) will be there to help you. People sometimes find FAOs more difficult to deal with than other administrative people. Keep in mind that they are often caught between a "rock and a hard place," trying to help out everyone as much as possible. They have a tough job, so be patient and diplomatic when dealing with them. Face-to-face contact now may "pay off" in the spring of your child's senior year.
Don't forget: When you're asking financial aid questions, ask the financial aid office instead of the admissions office. Don't trust what you hear from admissions about financial aid or vice versa. They may have a general idea, but not all the details.
THE QUESTIONS
By asking a FAO these questions at each school in which your child is interested, you will get a much better idea of the ones that are financially feasible for your child to attend. Once you have had a couple of these dialogues with FAOs, you'll get more comfortable with it and will be able to discern the "good answers" from the less attractive ones.
1. WHAT ARE THE FINANCIAL AID DEADLINES?
This soft opening question will reveal what forms you need to submit, to whom, and when. There may be both the usual ones, the FAFSA and PROFILE, plus the college's own forms. There may also be different forms for need-based aid and merit-based aid. It's best to clarify all this in your mind now. By the way, it usually works out that the more forms they require, the more money they have - but also the tighter they may be with it.
2. WHAT IS YOUR COST OF ATTENDANCE (COA) FOR THE CURRENT YEAR?
If your child is a junior, colleges won't have the numbers for the freshman college year until April or even June of the senior high school year, so you will have to base your estimate on this year's numbers. There are precisely six components to a college student's complete budget:
Tuition - Fees - Room and Board - Books and Supplies - Personal expenses - Transportation.
Many budgets you will see include only Direct Costs (which are the first three items listed) and what you will pay directly to the bursar's office. However, the Department of Education requires that colleges fully inform you as to all of the above costs, so find out specifically what those amounts are.
3. HOW MUCH OF AN INCREASE IN THE COST OF ATTENDANCE (COA) DO YOU PROJECT FOR NEXT YEAR?
When you ask this, ask to get the components separately. Tuition and room and board increases are independent of each other. For example, at one school they may expect an increase of 5 percent in tuition and fees, but a 10 percent increase in room and board. Even if it makes little difference in dollars, just asking detailed questions like this gives the impression that you know what you are talking about.
4. DO YOU USE YOUR OWN INSTITUTIONAL METHODOLOGY TO DETERMINE NEED?
If you ask this question, the FAO will know that he is having a conversation with an educated customer! Your goal here is to get a sense of how deeply they will delve into your financial profile.
5. ARE YOU ABLE TO MEET 100 PERCENT OF FINANCIAL NEED?
If they say "no," find out why, and get details. Is it "first come, first served"? What's the average percentage of need they can meet? What percentage are grants and what are loans? Do they have a dollar amount they leave as a gap (unmet need) for everyone?
6. IN WHAT ORDER DO YOU CREATE THE FINANCIAL AID PACKAGE?
That is, when creating the package, do they first fill the aid package up with loans, or do they figure a grant for the student first? The answer to this question may tell you a few things. A financially strong school that wants your child to attend will say "grants before self-help." But so will a college that understands good marketing - they know that's what you want to hear. Most colleges will actually begin to build the financial package with student loans, no matter what they claim. You may learn more from how the answer is given, rather than what is said.
The University of California builds their financial aid packages starting each student with a $9600 loan for the current 2007-08 school year.
You should also ask if the financial aid office treats parent loans (PLUS Loans) as an option when figuring how the school will meet your need. If so, this is a financial sleight of hand, which usually means that the school simply doesn't have the money. Remember, PLUS loans are for helping your Expected Family Contribution (EFC) after the aid given is subtracted from the full cost of attendance, as outline in Question 2. Families implementing the MMA program do not need PLUS loans and very seldom need to consider student loans. Information about the MMA program can be found at www.U1stfinancial.net/TheCollegePlan.
An important fact to keep in mind is that the higher your child is in the applicant pool, the greater the chance for more grant assistance. This is called "financial aid leveraging" in financial aid parlance. So you and your child should remember to apply to colleges where he will stand above other applicants like being in the top 75th percentile in test scores. Check out www.nces.ed.gov/ipeds/cool to discover were your child stands in regard to test scores for each school of interest.
7. DO YOU OFFER MERIT SCHOLARSHIPS, AND HOW DO YOU TREAT PRIVATE SCHOLARSHIPS THAT MY CHILD MAY EARN ON HIS OWN? (You may have to visit Admissions office with this question.)
If a Merit Scholarship is being awarded, it normally goes into the package first, reducing the amount of need-based aid. Find out if a merit award reduces the self-help in the package, or if it replaces other need-based grants. A true Merit Scholarship can go beyond the "need" level which means that it can lower your EFC. If it doesn't go beyond your "need" level then the college is being misleading by advertising a need-based award as non-need based. Or at least the award is limited by need, which in effect limits the need-based grant.
Note: The Ivy 's and some other prestigious schools do not offer Merit Scholarships. The scholarships and grants offered at these schools are based on the particular formulas they use to determine need.
If you can get accurate answers to these seven questions you'll be prepared to sit down with your future college student and discuss the academic, social and financial pros and cons of each college.
Written by Eric Goodhart of Smart College Planning, Lunenburg, MA
Thursday, November 8, 2007
"Helicopter" Parents Shocked!
College planning can be both an economic and emotional shock. Parent's have heard about economic sacrifice. They really had no idea. First they find out that financial aid for the most part is government propaganda. . . mostly loans making college more expensive. The government decides how much a family is expected to pay for college. This is called EFC. A family of four making around $100,000 a year would have an EFC of about $21,000. If a family doesn't have $21,000 floating around loans are available so both the parent and student's debt grows each year. Don Betterton Director of Financial Aid and Admissions at Princeton for many years said, "that EFC is only the first step in getting to what really matters . . . the family's actual yearly payment to the college. Unfortunately, the actual payment can easily vary by thousands of dollars from the EFC. And to make matters worse, the out-of-pocket expense is almost always higher."
The tremendous financial burden of college can be very emotional and quickly turn to hysteria once parent's become aware of the fact that they have no control. In high school is was easy to follow a student's progress, college is just the opposite. Those attempting are usually labeled "helicopter parents." Colleges do not have to be cooperative because they have the law on their side. Students are legally considered adults at age 18 and college administrators say federal and state privacy laws generally prohibit them for sharing student information.
In 1974 Congress passed the Family Education Rights and Privacy Act or Ferpa. This anti-family law eliminated parent's rights to know about their student's education record which includes grades, transcripts and reports of disciplinary action and campus violations. The law does allow colleges to break confidentiality in case of a "health and safety emergency" and if there is a drug or alcohol violation.
Colleges can choose to share information with parents who claim students as a dependent on their tax returns which is common. Sounds reasonable! Most colleges however don't see it that way. Colleges tell parents that they are not required to share information because it is the philosophy that college is a place for young people to become independent.
The best way a family can handle the shock value of starting college is to plan ahead.
- Investigate the Money Merge Account program if you currently have a first mortgage
You can find that "Magic $100,000" for college without refinancing, increasing monthly payments, altering your current cash flow or taking out a college loan.
- Explore colleges and ask questions that are important to you. If confidentiality is crucial then research the policy of the college.
- Discuss confidentiality with your student and reach a family decision on whether to grant the college written permission to share information.
- If the college does not offer a waiver form, help your student draft a letter to sign.
Friday, October 26, 2007
College To Cost the Government and Families Less?
The Democrats in Congress just passed an overhaul of federal student aid. Signed by President Bush last month, the College Cost Reduction and Access Act of 2007 cuts interest rates on certain student loans in half, increases grants to poor students and creates a new loan -forgiveness program. The cost estimated at about $20 billion over the next five years is paid for largely by significant reductions in the subsidies to banks, other lenders and possibly students who do not qualify for need based aid.
Until the regulations for this new law are written anticipated changes are speculative. One thing is clear. There are going to be many changes on how student loans will be handled including the strong possibility that banks and other financial institutions will be eliminated and all college loans will be processed through the government. What comes first --- health care or student loans?
At the present time, millions of students and graduates have Stafford Loans. Both subsidized and unsubsidized Stafford's currently have the same interest rate. Subsidized Stafford's are for students who qualify for need based financial aid which the government pays the interest while the student is in college. Interest accrues in the case of Unsubsidized Stafford's with results being slightly higher balance and monthly payments after the student leaves college.
The new law clearly states that Subsidized Stafford loan interest rates will drop to 3.4% by 2011-12 from the current rate of 6.8% a very nice savings. Nothing is said about the Unsubsidized Stafford. Will the government also continue to subsidize students who do not qualify for need based aid? Or will these students be paying upwards to 8.25%
This brings up another question. Why even worry about college loans? There is a much better way called "The Magic $100,000." which is accomplished without refinancing your current mortgage, increasing your monthly payments or altering your current life style. Check us out at www.TheCollegePlan.org.
Until the regulations for this new law are written anticipated changes are speculative. One thing is clear. There are going to be many changes on how student loans will be handled including the strong possibility that banks and other financial institutions will be eliminated and all college loans will be processed through the government. What comes first --- health care or student loans?
At the present time, millions of students and graduates have Stafford Loans. Both subsidized and unsubsidized Stafford's currently have the same interest rate. Subsidized Stafford's are for students who qualify for need based financial aid which the government pays the interest while the student is in college. Interest accrues in the case of Unsubsidized Stafford's with results being slightly higher balance and monthly payments after the student leaves college.
The new law clearly states that Subsidized Stafford loan interest rates will drop to 3.4% by 2011-12 from the current rate of 6.8% a very nice savings. Nothing is said about the Unsubsidized Stafford. Will the government also continue to subsidize students who do not qualify for need based aid? Or will these students be paying upwards to 8.25%
This brings up another question. Why even worry about college loans? There is a much better way called "The Magic $100,000." which is accomplished without refinancing your current mortgage, increasing your monthly payments or altering your current life style. Check us out at www.TheCollegePlan.org.
Subscribe to:
Posts (Atom)