Student Loan News, Updates and Blog Posts

Golf is a solitary game. One fleeting mental lapse and your round will blow up quicker than Kirstie Alley off Jenny Craig. It’s just you against the course. Sometimes that’s how it can feel in the student loan world as well. Many feel alone and unsure of the correct process. Some ask themselves, am I doing the right thing? Well, I’m here to serve as your student loan caddy and dissolve some of that stress and tame those insecurities. You’ll be swinging with confidence in no time. I’ll help you strategize your assault on the student loan course, and get your round under par. So put that karaoke microphone down and step back from your off pitch rendition of Neil Diamond’s “Solitary Man.” You are no longer alone.

I will start by telling you what I have told thousands of students, parents, guardians, and financial advisers over the past year, complete your FAFSA! It all starts with your Free Application for Federal Student Aid. Without this you have nothing. Would you walk up to the tee box with your sand wedge on a 500 yard par 5? I didn’t think so. So don’t start now. The FAFSA is the single most important document you can complete for federal financial aid. Below is an overview of how the process works from tee to green.

1. Complete your Free Application for Federal Student Aid FAFSA which gets sent to the Department of Education.

2. The DOE creates a Student Aid Report (SAR) on your behalf based off your FAFSA and sends this to the school(s) you designate. This process generally takes 7-10 business days.

3. The school will then send out an awards letter to you outlining the financial aid you are eligible for. That aid may include scholarships, grants, and federal loans.

4. You then complete a Stafford Loan application where you will sign a Master Promissory Note agreeing to pay back the loan after school. Please note, some schools are Direct Loan Schools or William D. Ford schools as they are also known. If you attend a Direct Loan School you will need to contact your school’s financial aid office for further instruction on how to complete your federal loan application.

5. The lender will send a certification letter to the school’s financial aid office within 48 hours of your successful completion of your Master Promissory Note. The school then certifies your enrollment and lists the amount of your federal loan (the amount is based on your Expected Family Contribution total from your SAR).

6. The funds get disbursed to the school.

7. Begin the repayment process 6 months after you graduate or take a leave of absence from school.

So there you have it. Never again will you be made the fool. Never again will you be referred to as “Tin Cup”. The tiger roar is now alive and well within. So go for the green. Go for the glory. Seize the moment. Wait, what’s that sound? I think I hear some chirping. Yes I do. Another birdie.

You filled out your applications on time. You have submitted and signed your documentation. You have dotted your i’s and crossed your t’s so what in the world is taking so long with your loan disbursement

There are a number of reasons student loan processing is going a bit slower than in previous years. Scandals in the student loan industry have made many students leery of their school’s preferred lender lists and have prompted them to seek their own lenders, mostly online. On the other hand, schools have had to scramble to get new processes in place, update website and financial aid collateral to reflect the changes in the industry and inform borrowers of their right to choose a lender. Schools, lenders and guarantors have had to certify those loans in various different ways. Historically, schools have had processes in place that while expediting the process, limited borrower choice. The result has been longer than expected processing times and later than usual disbursement dates.

If you are waiting for loan funds to come in, here are some tips to expediting the process:

1) The best way to get information on your loan is to speak with the lender you applied with. Your lender will be able to tell you if your loan is complete and if a certification request was sent to your school.
2) Be sure you have completed all of your loan documentation. Don’t just assume that you are done. Ensure that if you have signed and returned your Master Promissory Note and that it has been sent to your school for certification.
3) Double check with your school to verify they have received a certification request from your lender or guarantor.
4) If your school states that they have not received a certification request and your lender and or guarantor states that one was sent, verify the date and how the certification was requested. Then ask your school’s financial aid office to contact your lender to get the certification processed. If your lender states that the certification request was faxed, verify the fax number with the lender and the school. This will help speed up the process of getting your funds.
5) Lastly, double check your school’s preferred disbursement date. Your loan may be ready to be disbursed but your school ultimately decides when the funds are to be credited to your account. Knowing when your disbursement date is helpful especially if you are expecting a refund from your school.

It is a challenging year for everyone in the student loan industry but we are all committed to ensuring borrowers have choice and ease of process. For more information on the student loan process, please visit our website at www.GradLoans.com.

I recently read an article on Graduate student and the debt burden that they often carry – not only is undergraduate school debt often present, but graduates typically don’t have the parental/family contribution that they had while an undergrad student. As the article mentioned, graduates have about $8,000 in credit card debt – made up of charges from books, transportation and college or university fees. It also doesn’t help that most undergraduates graduate with about $3,500 in credit card debt, so it’s no surprise that the bills keep racking up.

The best option for graduate students is to consolidate all undergraduate debt. On a Federal loan consolidation, payments and interest rates are fixed for life, meaning no “surprise” monthly bills that creep up on you. The best part, is that payments can be fully deferred while you are enrolled in school.

Due to recent legislative changes, certain federal student loan consolidation borrower benefits will no longer be offered after October 1, 2007 for any new consolidation loans taken out. These benefits include offers such as interest rate reductions for on-time payments and automatic checking account withdrawal. The changes will not affect any federal consolidation loan that has been completed prior to October 1, 2007. The legislative changes are part of a bill titled “The College Cost Reduction and Access Act (H.R. 2669).”

H.R. 2669 contains provisions aimed to increase Pell grants through 2017, gradually cut federal student loan interest rates in half over the next 5 years, and institute several cuts to lenders and guarantors. Other provisions include Title IV loan forgiveness changes, increases for income protection allowances, and Title VIII Partnership Grants.

Borrower benefits will no longer be available due to the lender and guarantor cuts:

• Elimination of “Exceptional Performer” status which allowed lenders to receive higher insurance rates on defaulted loans
• A reduction in the insurance paid by the federal government for defaulted loans from 98% to 97%
• Reduced amount guarantors may keep when collecting on defaulted loans
• Reduced special allowance payments to lenders
• Increased loan fee lenders must pay to the Department of Education(DOE)
• Decreased account maintenance fees paid by the DOE to guarantors

A full summary of all the provisions contained on H.R. 2669 can be reviewed by visiting:
http://www.nasfaa.org/publications/2007/G2669Summary091007.html

In a nutshell, the above listed cuts will shrink lender profit margins for federal consolidation loans. With the decreased margins, lenders will no longer be able to afford offering borrower benefits. If lenders were to continue offering borrower benefits and discounts after the changes take effect, they would have to take a loss on each funded consolidation loan.

A lot more to come – stay tuned.

This afternoon I helped Debbie who attends Bentley College as a first year student. She just realized that with tuition, books and food, her federal student loan wouldn’t get her through her first school year. After much research she decided to take out an $8,000 Act Education Loan through the Student Loan Network. She was hesitant at first because it is a non-federal loan with higher interest rates. However she did some shopping around and the other loan companies that she looked at had the same rates. She realized that this loan is necessary for her to survive her first year and it’s just something that she is just going to have to deal with. She applied for the loan over the phone in under 5 minutes, was approved and the loan check will be arriving to her home in 5 days.

For many taking out a private loan is the only option. I don’t actually think this a bad option because this is the only way for a student to go to school. Lets face it, nobody likes loans but there’s no better thing than investing in yourself and your own education!

The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans, Education Loans/College Loans

Student Loan Network

There has been an increase in the amount of student loan borrowers asking this question over the past month or two – here is a little information that should help.

You cannot consolidate federal student loans while in school, however you should consolidate as soon as you graduate or drop below half time enrollment. This 6 month period prior to repayment beginning is called a “grace period.” During this time, you are not required to make any federal student loan payments. However, if you consolidate during your grace period, you can lock in your interest rate 0.6% lower and still not make any payments until your grace period ends. So, consolidation + grace period = bigger savings.

Already in repayment? No worries – it’s not too late to consolidate. You can still take full advantage of the benefits that consolidation offers even if you have been in repayment for years.

Now onto private student loans. A lot of you probably took out private student loans to help cover the cost of tuition. These loans cannot be combined with your federal consolidation – the rate calculation is completely different, and combining these two types of loans would eliminate all of your federal consolidation loan benefits. We normally recommend that students apply for a private consolidation loan after they have completed their federal consolidation loan process. Federal consolidation can help improve your credit score, and private consolidation is credit based. So, doing one will help the other.

Now that I have thoroughly confused everyone, allow me to summarize:

You can consolidate your federal student loans anytime after you graduate or drop below halftime enrollment. If possible, consolidate during your grace period to take advantage of a lower interest rate. Finally, consolidate your private student loans after you have completed your federal consolidation – it could help you get a lower interest rate.

Now that summer is officially behind us and we are headed into the fall, I thought I would pull together a few cash saving tips to help “bulk up” your savings for the long winter ahead. Over the next few weeks, I will periodically post a variety of money savings tips and ideas that anyone can do to help line their pockets with some extra green.

Most financial advisors will say you need at least 6 months worth of living expenses in a savings account in case the unexpected should happen. I agree with this whole heartedly, but being a realist, fully understand that this is not an easy task. Here are a few starter tips to help achieve that 6 month savings umbrella your parents have been nagging you about since you graduated.

• Sell what you don’t need. You have plenty of CD’s, DVD’s, and old play station games laying around that you haven’t touched in years. Extra MP3 player? Digital camera? Left over CRT monitor? Sell it all – someone will buy it. You started that ebay account for a reason – get to it. Also, instead of buying brand new furniture, buy used. All you need is a can of paint and you can turn that faded oak coffee table into a fresh nouveau masterpiece.
• Keep a spending journal. Write down your daily expenses – big or small.  At the end of the month categorize them -  You’ll be shocked at what you spend the majority of your cash on.
• Build a budget and stick with it. Probably one of the biggest ways to save money is the monthly budget – do it right and you can start saving for that trip to Costa Rica.
• Consolidate your student loans. You knew it was coming… Consolidation is the easiest way to cut your monthly expenses nearly in half.

Stay tuned for more tips in the weeks to come.