Student Loans : News, Updates and Blog Posts

With the Higher Education Opportunity Act going into effect on February 14, private lenders must now adhere to a new calendar in approving and disbursing a private student loan.

Staying up to speed on the various changes is very important, and so we provide this simple checklist to give you an overview of the new requirements.

1. Apply for a private student loan. Some lenders will offer the Application and Solicitation Disclosure electronically (click here to view a sample). This will give you a range of interest rates available and methods of repayment. If you are using a cosigner, he or she will receive this information as well.

2. Self-certification form. If your credit is approved (or if you are using a co-signer), you will e-sign your lender’s promissory note and fill out the self-certification form (click here for an example). For this form, you will need your cost of attendance, your estimated financial assistance for the period of enrollment covered by the loan, and the difference between the two. This information can be obtained from your financial aid office.

3. Loan Approval Disclosure. After your lender receives certification from the school you plan to attend, you will receive an approval disclosure form (click here for an example of this form), providing your specific interest rate, loan details and opportunities for repayment. The student and cosigner will have 30 calendar days to accept the offer. Many lenders will allow you to approve the loan online.

4. Final Disclosure. The student and (if applicable) the cosigner will receive a final disclosure form (click here for an example) covering all of the details of the loan. Now is your last chance if you decide to cancel the loan. You will have three business days to decide.

Please note: lenders and universities providing private student loans will likely use their own specific forms for these procedures. Contact your lender or financial aid office with any questions. To peruse some of the private student loan options available to you, check out our loan comparison tool on PrivateStudentLoans.com.

A question we receive often in our financial aid forum and through email is whether or not a student can consolidate their loans multiple times. The answer is rather simple: no if you are not taking out more, and yes if you are.
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If you’re reading this, that probably means you’re thinking about or have already decided you’re going to study abroad or do a global seminar. First of all, congratulations! You would be surprised how few students actually leave the country during their time in school; it truly is an enriching experience and gives you access to a more diverse portfolio of cultural perspectives.

• Airfare
• Tuition
• Apartment/Dorm/Flat Rent & Fees
• Food
• Supplies / Books
• Spending Money (an on-campus job is unlikely, and federal work study doesn’t apply abroad)

In most cases, you will still be eligible and receive whatever federal aid you qualified for after filing your FAFSA, but what about the extra expenses? In general, I personally would recommend having about $1,000 a month available to you in spending money while you are abroad. It sounds like a lot, but all sorts of stuff comes up that you don’t expect while you are away from home… and having the money if you need it is invaluable. There is *nothing* worse than being in a strange place and feeling helpless because you ran out of money without the ability to work and earn more.

A private student loan can be a good choice for this, because it allows you to borrow as much as you need to have a good safety cushion while you are away. When you return, you can simply apply the leftover funds back onto the loan so that you are not paying interest on the extra money.

In addition, some schools offer scholarships or loans of their own for their students studying abroad. Check with your college’s financial aid department to see if there are any special forms of financial aid you can apply for to cut down the cost of your SA program.

ScholarshipPoints Redemption Code: STUDYABROAD10

Image Credit to Jack Hess on Flickr

You might be one of the lucky few who found a job right after graduation, and can afford to pay back your student loans immediately. First of all, stop bragging. The rest of us don’t want to hear it. But you might be considering early repayment. Is it worth it? Here are two things you must consider.

There is NO penalty for early repayment. You won’t be charged a fee or anything of the sort. In fact, early loan repayment can actually benefit you in the long run as it cuts down on your overall cost and can mean you pay less interest.

Early repayment will end your grace period. You are entitled to a six month grace period following graduation, during which time most folks consolidate their student loans and look to find a job or other means to start payment. If you decide to pay back your loans right away, you will be waiving your grace period.

NOTE: If you decide to attend graduate school, and take out loans for that, you will be entitled to a new grace period following completion.

In my experience as a former college student, and seeing the individual cases of friends and peers going through the financial aid process, I saw that in some cases, the FAFSA doesn’t always tell a clear picture of a student’s financial situation. Often, parents’ income will dilute the amount of aid that a student would otherwise receive toward their education, regardless of the fact that the parents’ money may or may not be used to pay for their child’s schooling.

As a personal example, my parents owned a small business which technically makes a good amount of money on paper, but the reality is the net income is far less. Between paying salaries, benefits, building rent and fees, and other related costs, the profit was very slim compared to the revenue. Thus, when I would file my FAFSA each year, it would look like my family could afford a lot more than the reality of the situation.

Even if your family technically makes too much money, there are still two sources of federal financial aid that can be used toward your education: the unsubsidized Stafford loan and the Parent PLUS loan. If you have not read my blogs on federal Stafford loans or Parent PLUS loans, I recommend doing so because they contain a lot of useful information about the interest rates and other considerations.

In addition, I recommend pursuing scholarships and grants. StudentScholarshipSearch.com and ScholarshipPoints.com are excellent resources to find money for school that do not need to be paid back. Further, most of the scholarships are need-blind, meaning you don’t have to demonstrate financial need to qualify for them. After these methods, if you still have costs left over that need to be covered, you should consider a private student loan.

If you are in the situation of worrying about how to pay for school because of parental income throwing off your FAFSA, don’t stress yourself out too much. As listed above, there are a lot of different sources of funding for your education. I went through all four years of college working part-time and diligently planning out my financial aid to make sure I would be able to cover everything; it’s not easy, but getting financial aid “without need” is entirely doable.

ScholarshipPoints Redemption Code: NEEDAID2010

Image Credit to lovesteph83 on Flickr

Have you ever imagined yourself saving lives for a living? A career in medicine can do that for you. But medical school is not easy. It’s grueling and demanding, and certainly not cheap. According to the Association of American Medical Colleges, the average debt incurred by medical school graduates is $156,456. So how can you get the student loans you need for the white coat and stethoscope – without breaking the bank?

Here’s how:

Federal loans. Many of the same federal loan options available to you as an undergraduate are still an option for attending medical school. Just fill out a new FAFSA application as an independent student to determine your financial aid need.  You can borrow up to $20,500 ($8,500 of which can be subsidized) and the loan carries a 6.8 percent interest rate. You can also file for a Grad PLUS loan, which allows you to borrow up to the cost of education minus any other financial aid. The Grad PLUS loan carries an 8.5% interest rate.

Private Loans

Medical school loan: If federal aid is not enough, you can cover some of the cost with a private medical school loan, which allows you to borrow up to the cost of attendance. The annual maximum is $45,000. Click here to apply.

Medical residency loan: Those pursuing a career in a certain type of residency program might find themselves facing costs not usually covered in financial aid award packages. A medical residency loan will cover expenses related to medical board exam prep, and even relocation. This is a one-time loan in which you can borrow up to $20,000. Click here for more information.

There are also options for earning money while participation in internships or studying for your boards. Click here for a complete overview of your medical school loan options.

As with your undergrad loans, you have the option to consolidate once you graduate, spreading out your loan payments and possibly lowering your interest rate.

We’ll be back next week with information on paying for an MBA. Until then, the doctor is out.

ScholarshipPoints code: MED0310

As of last month,  federal changes have been implemented that require lenders to provide prospective students a self-certification form in order to receive their private student loan.

The Higher Education Opportunity Act (HEOA) went into effect on February 14 and applies to both private education lenders and schools that offer private loans to prospective students.

So what does this mean to you? Students and cosigners will receive an approval disclosure form from their lender once the self-certification form has been submitted. They have 30 days to accept the loan.

Your form should look similar to this. Lenders and institutions may have their own specific forms, however, they will not be much different than the standard federal form.

You will need the following information in order to fill out your self-certification form.

• Cost of attendance for the period of enrollment covered by the loan
• Estimated financial assistance for the period of enrollment covered by the loan
• The difference between the cost of attendance and the estimated financial assistance.

This information is available by contacting your school’s financial aid office.

NOTE: Individual private lenders may use their own procedures to abide by the new regulation, so you should contact your lender directly for specific questions about the form submission process.

The most common things we see in our Financial Aid Forum every day is, “what loans can I get without a cosigner?” or “My parents don’t want to cosign because they don’t want another loan over their head.” It’s a prevalent and enduring problem, made worse by the economy and anxiety about job security.

However, the reality of the situation is the fact that most students simply can not afford college without the help of student loans. In some cases, federal student loans can be enough to cover your tuition (mostly for in-state public schools or two-year institutions), but affording private college and out of state schools can be much more difficult.

As I mentioned earlier this week in a blog about saving money through loan repayment incentives, there are a lot of different rewards, benefits, and marketing techniques that private lenders use to try and prove their product is better than the competitor next door. However, one benefit that I didn’t mention that has become popular lately is cosigner release.

Cosigner release basically means that once you graduate from your degree program, you can request to have whomever cosigned on your loan released from their financial obligation. This is big. Cosigner release makes all of those “I don’t want to be ‘on the hook’ for your loan” arguments invalid, assuming you make sure to finish school of course.

If you’re interested in checking out who offers this, have a look at our private lender comparison tool. It lists some popular lenders and their various perks and quirks for student loan offerings. As always, I recommend going federal before going private, but cosigner release definitely makes the prospect of a private student loan less uneasy for whomever you ask to help pay for school.

ScholarshipPoints Code: COSIGNRELEASE

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If you’re an estranged parent or the child of divorce, you might be wondering which parent is responsible in certain student loan situations. Here is a brief overview.

Parent PLUS loans: Only one parent may apply for a Parent PLUS loan. The parent must (1) live with the child who will be using the loan; (2) claim the child as a dependent on taxes; and (3) support them more than 50%. This loan may not be transferred at any time and is the sole responsibility of the parent who applies.

Private Student loan cosigning: Either parent may elect to cosign for a student loan. The parent must have good credit and be responsible to pay in the event the student defaults following their post-graduation grace period.

Student loan consolidation: Only the parent who takes out the Parent PLUS loan may consolidate. If both parents co-signed for separate private loans for a child, an individual parent may only consolidate the loan(s) for which he or she co-signed.

We get a boatload of questions daily in our Financial Aid forums concerning private student loans. While such a loan can help you close the gap between your federal loan allowance and your total cost of education, there may be some concerns. Here are a sampling of questions found in our forums and some ways to answer them.

1. “My parents don’t want ANOTHER loan hanging over their heads.” – As you may have heard, the U.S. economy hasn’t exactly been great last couple of years. Virtually no outside lender will approve you for a private student loan without a cosigner. But Mom and Dad, already burdened by the cost of education, might feel queasy at the thought of borrowing even more and facing a potentially damaging interest rate. One way to solve this problem is to take out a Parent PLUS loan, which has a fixed interest rate of 8.5% and the payments can be deferred until after graduation.

2. “My parents have lousy credit.” – Again, you will almost definitely need a co-signer for a private student loan these days. One trick is to ask your parents to apply for the Parent PLUS loan. If they have bad credit, they will get denied. You, however, can become eligible for up to $6,000 more per year with an unsubsidized Stafford loan. You may also seek out another trusted adult as your guardian. (Read this checklist for finding a private student loan co-signer.)

3. “I don’t know which lender to trust.” -  Sad to say, there are a LOT of shady lenders out there who would love nothing more than to sucker you into a bad loan. Always (repeat: ALWAYS) shop around and perform your due diligence before providing personal information to a lender. One great place to start is right here, with the Private Student Loan comparison tool.

ScholarshipPoints code: PSLPROBLEMS