Thursday, November 1, 2012

What could go wrong? Top 5 ways your College has a problem.

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Wednesday, October 31, 2012

Aggregate student loan limits: Federal and Private loans

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AppId is over the quota
July 24th, 2012 by Ken

There is a life-time cap for student loan eligibility.

It is referred to as the “Aggregate Limit”

This is the point where a student is no longer eligible to receive any more loan funding. They are maxed out.

It’s basically the same as having a max limit on a credit card. Lenders simply establish a maximum amount and will not lend any further than that.

Here are the limits for the Federal Direct Loans Program, the first stop for student lending:

Quick note on Parent Plus Loans… As indicated above, aggregate limit can be affected by Parent Plus loan denials. If the Parent is credit denied for a Parent Plus loan, the student becomes eligible for an additional $4,000 in unsubsidized Stafford loans as a Freshman or Sophomore, or if they are Junior or Senior status they are eligible for an additional $5,000 in unsubsidized Stafford loans. Because of this additional feature to the Federal loan program, aggregate limits had to be adjusted

What about private loans?

Private loans have program guidelines including aggregate loan limits.

A private lender will have a maximum lifetime loan limits that can be provided to a student from their specific private loan program, but will also have a separate aggregate limit to account for all other federal and private loans that may have been applied for as well. A student may borrower from several different lenders, but eventually they will reach a maximum aggregate limit of all loans combined, and would no longer be eligible for additional private loans based on company policy. This policy will vary from different private lenders.

Avoid over borrowing: Just because you have a maximum aggregate limit does not mean you should borrow up to that amount in loans. These limits are put in place to stop borrowers from continually borrowing. At some point, a student needs to just start paying the debt back. Borrowers should focus on using as little loans as possible while attending school, and begin aggressively repaying them even while still attending.

That being said, areas like the medical field may require extensive training and years of schooling. For that reason, they are eligible for additional federal loans above and beyond other graduate degree programs. Their aggregate limit has been extended.

Tags: aggregate limit, borrowers, credit card lenders, denials, federal direct loans, federal loan program, life time, loan eligibility, max limit, maximum lifetime, parent plus loan, parent plus loans, private lender, private lenders, private loan program, private loans, sophomore, student loan, time cap, unsubsidized stafford loans

Some highlights of the new and improved “Federal Student Aid” website

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AppId is over the quota
July 23rd, 2012 by Ken

It’s been in the works for months now, but it is finally here.

Arne Duncan, Secretary of Education, tweeted out the news… brings up a new homepage, and greets the viewer with easily navigable topics. Let’s take a closer look:

How do I prepare for college? This area covers topic such as the income increase accompanying degree completion, career choices that can actually create that income, a financial aid flow chart to help familiarize the process, and some checklists coinciding with the student’s progression through high school.

What types of aid can I get? This section offers a review of federal, state, institutional, and non-profit based resources that students can access in order to gain as much financial aid as possible.

They have a handy Overview of the Financial AId Process Video, to get new students acclimated to the process. Probably the most important part of the video is that it reminds students that federal student loans are indeed loans that are supposed to be paid back, even though they are awarded as part of a financial aid package.

Do I qualify for Aid? Most people are aware that financial aid is out there, but many become discouraged with the process when they hear that not everyone qualifies for as much as they would want, or need. This section as a bit more heavy hitting, as it address reasons why someone may not be eligible for financial funding. But beyond reasons for rejection, it is important to know standard eligibility criteria. Issues like citizenship status, disabilities, military service and more are all covered here.

How do I apply for aid? So you are ready to file the FAFSA! It’s not as hard as it may seem to be, but it may be tedious. It’s best to be prepared to handle the process by reading up and watching a video. A little bit of preparation can go a long way to make sure this critical application is completed.

Also provided, a handy deadline information schedule to make sure important dates are met. Always remember, file the FAFSA early and do so every year through graduation. Losing out on financial aid because of a late FAFSA is just a waste.

How do I manage my loans? This is the big topic on everyone’s mind, and they have extensive information available here. Important topics include repayment plans, loan consolidation, deferment and forbearance, forgiveness, and understanding default. If a student is borrowing for college, these are areas they need to understand fully.

Areas for improvement:

This new website has just rolled out, and it is an impressive offering. However, it could use some adjustments.

The promotion of earnings based on degree is important, but very generalized: Not every degree can create the same earnings. It’s important that students recognize real incomes based on degrees pursued. Dig deeper by checking out to get more exact information.

What about debt vs earnings? This is a major issue that I have addressed in prior posts. Borrowers need to explore more employment statistics and average incomes to get an idea of appropriate debt based on degree. The federal student aid website does connect to MyNextMove a site maintained by the National Center for O*NET Development, on behalf of the U.S. Department of Labor, Employment and Training Administration (USDOL/ETA). While this is a good start, it was found that much of the employment information remains incomplete. Borrowers have to do more than research from this one site.

How about beginning loan repayment while in school? While the loan repayment section clearly states what options are available, a major issue that should be brought up is beginning loan repayment while in school. For many undergraduates, this will be the new normal in the future. Beginning loan repayment while in school is a credit building opportunity, and can help lower total debts before the student even graduates. The Direct Loans program allows for total loan deferment for Stafford loans while in school, however, many students may lose track of their loans outstanding because they have such deferment options. More students should be made aware of the option to begin repayment while in school and should know how beneficial it can be. This point was not readily promoted on the site, but should be added to help promote this valuable concept.

Tags: based resources, career choices, checklists, citizenship status, closer look, critical application, degree completion, disabilities, eligibility criteria, fafsa, federal student loans, financial aid package, handy overview, little bit, military service, new students, rejection, secretary of education

Cosigner release on private student loan applications

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AppId is over the quota
July 16th, 2012 by Ken

Given that this time of year is college bill pay season, there are many families searching for a funding solution. But between the heat, busy jobs, vacations and other summer distractions, it’s easy to overlook very critical information about a private student loan application.

Today's Class Topic: Cosigner release

A feature that needs to be considered whenever applying for a private student loan is cosigner release. This has been a big topic for many families given the increasingly large amount of debt that students may require to complete school. Finding better ways to manage debt has become a priority not just for students, but also for those that cosign. Let’s take a look at some important points.

1. What is cosigner release? Cosigner release is the ability to remove the cosigner from a loan agreement at a future date. For many borrowers of private loans, a cosigner is necessary because the primary borrower is a student with limited credit history. Since the borrower cannot be approved by themselves, a cosigner is added to the application to help approve the loan, but they become responsible for repayment of the loan if the primary borrower is unable to repay the loan. Many cosigners would like to know they have an exit plan available.

2. Why is it important for private student loans? When a cosigner is added to a private student loan application, the obligation is recorded on their credit report. This may affect the cosigner’s ability to extend credit to other areas like car loans and home loans until this obligation is settled either by loan repayment or a cosigner release. A student loan can take 10 years or more to repay, but the cosigner may not want to wait that long until they can be removed from the debt. Consider a family with multiple children attending or about to attend college. A parent could become overextended as a cosigner for one child and be unable to cosign for the next child because they have too many pre-existing credit obligations. Cosigner release can help free up credit so that a parent can complete other necessary loans in the future while preventing a family war from erupting.

3. How does it work? A cosigner release from a loan application generally requires three major requirements to be fulfilled.

Minimum number of on time principal and interest payments: The borrower must demonstrate solid repayment habits by making a specified number of full loan payments once they enter normal repayment mode after graduation.Primary borrower has strong enough credit: Before a cosigner will be released from a loan application, generally the primary borrower must have strong enough credit to be “approved” first. This means the primary borrower would need to meet credit requirements to be approved for this loan without a cosigner. Primary borrower credit must be in good shape, and they must be earning a minimum income requirement.Submit a written request for release: Once the borrower meets the minimum requirements, they need to submit the request to the loan provider before the review is initiated. Lenders do not remove cosigners until the request is submitted and all credit and repayment requirements are met, so make sure to follow up with this last requirement.

4. Some features to look out for:
Before committing as a cosigner, scrutinize the minimum requirements for the cosigner release. Find out how many months of on time principal and interest payments are required before release is granted. Consider the timing involved with multiple children in college at the same time. Mom or Dad may need to stagger their ability to individually cosign different applications depending on how many children there are, and the gap between each one entering school, if any. Then consider when the future clearance for debt obligations is optimal. Will it be for a 1st mortgage, 2nd mortgage or HELOC? How about a car loan? The point is that a cosigner should plan out the use of their credit in the future to prevent being over-leveraged when credit is most necessary, as to ensure future loan approvals with the lowest rate available.

Additionally, look for similar features in private student loan consolidation. It may be that the primary borrower needed a cosigner to get approved for a private loan to pay tuition, but after graduation, the borrower may be able to get approved for a private loan consolidation that would no longer require a cosigner. The old student loan applications are fully paid by the consolidation, removing the cosigners obligation and shifting the debt solely to the primary borrower on a stand alone basis.

Finally, if getting a cosigner release as quickly as possible is a priority, make sure the primary borrower begins repayment of loans while in school to begin building a positive credit history as soon as possible. This can help them to transitions to being credit approved for loans in the future on a stand alone basis, as long as income is available.

Tags: 10 years, bill pay, borrowers, car loans, cosigners, credit history, credit report, distractions, exit plan, home loans, jobs, loan agreement, loan repayment, obligation, priority, private loans, private student loans, student loan application, time of year, vacations

College Health Insurance: How the Affordable Care Act impacts students

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AppId is over the quota
July 19th, 2012 by Ken

Once again, it is summer billing season for college students and their parents. While the focus is mostly on tuition and other expenses, an attention getter on a billing statement is the cost of medical insurance. Colleges assess a charge for medical insurance up front to ensure all students are covered in some way. This is important as it provides a safety net for students when they arrive on campus, providing access to a range of available health care services. Getting sick or injured may be the last thing on a student’s mind, but when health treatment is required, the importance of insurance is obvious.

Does ACA affect prescription benefits for students? Yes!

However, having to pay extra money on top of the already high cost of college feels like an even greater squeeze for many families. The Affordable Care Act has specifically made some required changes to college health plans to provide additional services for college students if in the event they are needed. At least college students know they can receive certain guarantees of service if they are paying for college health insurance.

What do students get? The Affordable Care Act requires most student insurance plans to add prescription benefits, increase maximum coverage levels, and offer free preventative care.

Additional benefits that are commonly cited include free annual health exams and breast exams for women and free STD testing for all students. Prescription benefits and increased coverage are a major area as well. For example, Towson University has raised maximum prescription drug coverage from $750 per year to $100,000 per year and increased annual coverage limits to $200,000.

“All of the same standards that will apply to the rest of the health insurance plans will apply to the college health plan,” says Tobin Van Ostern, policy manager for the progressive advocacy group Campus Progress.

Will this drive up premiums? Increasing coverage limits and adding new requirements will drive up premiums for student plans, but it’s generally recognized that these student plans will remain less expensive than individual plans. However, some schools may have a marked increase in insurance premiums beginning this year to account for the additional service requirements, so take a look at that bill.

Can I stay on my parent’s plan? A provision in the Affordable Care Act allows young Americans under 26 to remain on their parents’ health insurance plan. To date, that’s resulted in 2.5 million previously uninsured young Americans gaining health insurance. As noted in last summer’s post about this topic, about 2/3's of college students remain eligible for health insurance through their parents pre-existing policy. If the student is covered under the parents, it probably makes sense to cancel the school coverage and save an additional $1,000 – $2,000. Just make sure the parent’s coverage can extend to the network of available health service providers at and near the school, especially when attending schools far from home.

Tags: advocacy group, affordable care, annual health, attention getter, billing statement, breast exams, care act, college health insurance, coverage levels, coverage limits, free std testing, health care services, health exams, health insurance plans, health treatment, maximum coverage, medical insurance, prescription benefits, prescription drug coverage, student insurance

New federal data on college costs released, but economic outcomes remain the prize of education

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AppId is over the quota
August 8th, 2012 by Ken

As originally posted on the Chronicle of Higher Education, the Education Department’s National Center for Education Statistics on Tuesday published new federal data on student financial aid, including the average price of attendance before aid and the net price of attendance for first-time undergraduate students. For those students attending public four-year institutions in the 2010-11 academic year, average price before aid was roughly $17,600 and the net price was approximately $11,000. For students attending private, nonprofit four-year colleges, average price before aid was about $34,000 and net price was roughly $19,800. At for-profit four-year institutions, the average price before aid was roughly $27,900, while the net price was slightly more than $22,500, the report said.

What this means for students: College continues to be expensive. This report will provide average numbers to help guide student’s and their families through the school selection process.

What needs to be scrutinized even more is outcomes: Pertinent economic value is necessary if money is borrowed to fund education. This is because loans need to be paid back. No one wants to be saddled with much more debt than what their degree is worth. Judging schools by price tag is only half the equation. If the value of the knowledge gained must be considered. Take a look at average salaries based on degrees earned on for some estimates.

Individual results will vary:
Remember, the numbers supplied by NCES and PayScale are averages based on past data. The economy has undergone massive structural changes over the years. While some traditionally lucrative occupations have seen downturns in employment and income, other occupations have been rising, like ship captains and make-up artists. Geographical location must be considered as well. North Dakota’s oil boom has drove unemployment to as low as 1% regionally, as there are not enough people to handle all the new work demands.

Some truckers make bank.......

Before committing to a particular school or degree, consider outcomes. If borrowing money for school is necessary, forecast your total required debt outlay before starting the education journey. Know what you owe long before committing to the years of study to acquire certain knowledge and skills, this way a rational outcome can be more easily achieved.

Tags: attendance, average salaries, chronicle of higher education, economic value, education department, four year colleges, geographical location, institutions, national center for education statistics, nces, occupations, oil boom, price tag, school selection, selection process, ship captains, student financial aid, undergraduate students, unemployment, what this means, work demands

Tuesday, October 30, 2012

Stafford Loan Update: Undergrads keep 3.4% but no more grace

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AppId is over the quota
July 14th, 2012 by Ken

Finally congress came to a conclusion on the fate of the interest rate on subsidized Stafford loans for undergraduates.

Both congress and the senate voted in favor of keeping the rate at 3.4% for undergraduate subsidized Stafford loans that was originally scheduled to double to 6.8% as of July 1, 2012.

However, in great political fashion and at the last minute, congress decided to continue this lower rate for at least another year. However, this one year extension will cost about $6 billion to subsidize, and will leave congress in the same position this time next year when they must decide if they will re-up the low rate. Many see this as political grand standing from both sides of the aisle, going into an election year with an unpredictable youth vote on the radar. No politician wants to be labeled “anti-student” or “anti-education” by voting against the extended subsidy, so it became more politically prudent to kick the can down the road.

Meanwhile, many undergraduate students will be happy to know that they can access this lower rate on the subsidized Stafford loan for another year, they just need to be on notice; Never before has capital hill wrangled so much over educational funding. Even the Pell Grant program was under fire just last year. The government has to make increasingly more convoluted political deals to maintain funding that was normally taken for granted. Consider that in order to get this loan subsidy extended, it had to be tied to a bill for lawmakers’ authority to spend money on federal transport initiatives. The clock is ticking on grant and subsides for higher education when there already exists such a high deficit as there is now.

However, what many do not realize is that the Grace period for subsidized Stafford loans has been extinguished. Traditionally, the subsidized Stafford loan grace period would be an extension of the interest subsidy up to six months after graduating or dropping out of school. This was a money saver for students just out of school, where any interest that accrued on the subsidized Stafford loan would be paid for by the government during the grace period. It’s gone now.

Instead, interest on subsidized Stafford loans will begin to accrue immediately when the student graduates or exits school. Grace period will now only mean that students are not responsible for any payments towards their loans, but interest will accrue normally. Thankfully, it will be at a reduced rate of 3.4%, for now. Next summer will be a new congressional session to decide the fate of student loan subsidies.

The subsidized Stafford loan for graduate level students has already been eliminated as of July 1, 2012, leaving only unsubsidized Stafford loans at 6.8% available for advanced degrees.

Tags: aisle, dropping out of school, educational funding, election year, federal transport, grace period, higher education, interest rate, interest subsidy, lawmakers, money saver, pell grant program, political deals, politician, subsidized stafford loan, subsidized stafford loans, transport initiatives, undergraduate students, undergraduates, youth vote