Student Loan News, Updates and Blog Posts

SHHHHH

At some companies, the Holidays bring joy and days off from work….here at Edvisors…it brings bad moods and 14 hour days. JUST KIDDING! We are nearing the time when we draw names for our Secret Santa gift exchange…and the anticipation is killing me. Who will I get? Who will get me? Will I get Vodka? Here are some key questions to ask about the person you are shopping for and of course…my answers for the unfortunate person that gets me this year for Secret Santa:

1. What type of music does s/he like?
My Morning Jacket, My Morning Jacket, and My Morning Jacket
2. What is his/her favorite store?
http://mymorningjacket.shop.musictoday.com/
3. What is his/her favorite color?
Green
4. Is there anything that s/he is allergic to?
not that I know of
5. Does s/he drink?
look under my desk to find out
6. Is there anything s/he feels strongly against?
animal abuse (so… no fur products please)

A few things to consider, while you are trying to figure out what to get this person who you see more than your own family…but have no clue who this person actually is….

1. ask someone who knows them better for help without giving the secret away
2. don’t get them food if they are on a diet
3. don’t get them anything work related…like a three hole punch, or a stapler
4. most importantly….try and get something that person will truly enjoy…if you can’t handle this…dont play!

Happy Shopping

ps: does anyone actually drink Eggnog? If you do, post a comment….I want to make sure you exist.

I was speaking in the office break room with our director of student loan consolidation, Jon Rudy, about how we’re marketing our federal and private student loan consolidation products. We’re in agreement, as we frequently are, that student loan consolidation has a vital role in the education finance process.

Where I think a lot of student loan companies get hung up is on the idea of saving money for students. Student loan consolidation does not save you money over the long term if you only make the minimum payment, because at the bare minimum payment, you’ll be paying off your loan longer.

Think of it this way. If you rent an apartment, over a period of time, you’ll pay a certain amount for rent. If you rent that apartment longer, it costs you more money. If you rent a smaller apartment for longer, it will still probably cost you more money than a larger apartment for less time.

A loan is nothing more than a money rental. You’re renting money from a lender, and the interest you pay is the rent.

What student loan consolidation does is agree to reduce your rent, trading off with renting the money for a longer period of time, if you make the minimum payment.

Our perspective as a company is that students just out of school need to take a few years to get on their feet in their careers and personal finances. During that time period, a reduced monthly payment is just the thing they need. After a few years, when presumably they’re making good use of their education and degree, we strongly recommend that students step up and make more than the minimum payment, ideally making a payment that’s a little larger than the original, unconsolidated loan payment.

Because there are no early repayment penalties, they can effectively get on their feet financially and then be done with the loan in the same amount of time as if they hadn’t consolidated.

Does student loan consolidation save you money? Not necessarily. Does it reduce your monthly payment? Yes, absolutely. But more than anything else, student loan consolidation helps to buy you some time in the first years after school.

Source: FAFSA blog

A quick FAFSA update…for the first time ever, the only way to file a FAFSA, is online. I remember when I was a first time FAFSA applicant, back in 1998…my mom and I slaved over the FAFSA forms. We were so relieved when we finally sent them off. I waited for about 2 months for my SAR (Student Aid Report), and when it finally came, it was not that at all. It was one piece of paper that informed me that I had filled out one field incorrectly on the FAFSA form, and therefore I had not been processed at all for Federal Aid, until I fixed it. By the time I did fix it, the Pell Grant was no longer available to me for that school year. I am very surprised that it has taken until 2007 to switch the FAFSA to an online application only, but I can’t complain. Hopefully this will eliminate any prospective student from missing out on financial aid that otherwise would have been available to them. To end this blog, here are some common FAQs I hear about the FAFSA:

Q: My parents refuse to give me their information to fill out the FAFSA, what do I do?
a: If you are 100% certain that you cannot convince your folks that the information provided for the FAFSA form is used solely for educational aid purposes, then your next step would be to head into your FAO. They can hopefully put together an aid package for you through the school, so that you can still attend classes.

Q: I have been denied for the FAFSA because I make too much money, what do I do?
a: What this person really means is that they filled out the FAFSA and the government determined that they do not show enough “need” for them to get free money…otherwise known as grants from the government. This does not mean, that this student cannot borrow the Stafford Loan. If you are not eligible for grants, inquire about the Stafford Loan.

Happy Holidays!

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For prospective or current college students, it is important to know the 2 different types of the Stafford loan. It is not news that if you are going to take out a loan, you should be well educated about the loan, for obvious reasons….but equally as important is realizing what these loans mean for your financial future. Remember it’s your Education and your money…two things that have extreme importance in todays world. Ok so here goes: Subsidized Stafford loan means that no interest accrues on this loan while you are in school at least part time. Interest starts accrueing on it 6 months after you graduate, or withdraw from school…or 6 months after you drop below part time. The goverment puts limits on how much you can borrow, because they are the ones paying the interest for you to the lenders.

Unsubsidized Stafford loan are a bit different. They accrue interest from the moment it is disbursed. You, the borrower, have the option to pay the interest monthly, or let the interest accrue and be capitilized. For a 3500 Unsub Stafford loan, with a rate of 6.8% – this will accrue about $20 per month in interest. So $20 a month for four years will add about $1000 to your original loan balance by the time you graduate….and this will increase if you have the interest capitlized.

So here is the big picture….

Four years of school…you take out as much Sub as you can….you also take out some Unsub to help cover tuition costs….so you have $17125 in subsidized Stafford, and 10,500 in unsubsidized Stafford

Scenario # 1 (you paid the interest monthly for 4 years)

Total loan debt: $27,625

Monthly Payment: $ 318/ month for 10 years

Total Interest Paid: $10,535

Scenario # 2 (you did not pay your interest)

Total loan debt: $29,605

Monthly Payment: #341/ month for 10 years

Total Interest paid: $11,315

As you can see, it is wiser to pay the interest monthly, if you can afford it. If you cannot afford it, thats ok…you can make up for it later by paying not taking the full 10 years to pay the loan. Federal loans have no prepayment penalties. So the sooner you pay them off, the less you will end up paying in interest. Got Questions or Comments…..

Financial Aid Forum

If I could make two suggestions to anyone applying for financial aid, they would be:

• Complete the FAFSA Form EARLY, and
• Search for and Apply for scholarships as often as possible

Why?  The two biggest mis-perceptions are:

• The FAFSA Form is too complicated (so I will put it off until later)
• There are no scholarship I will qualify for

The FAFSA Form is not easy.  However, it can be done and most people will have to complete it anyway.  The Student Loan Network has created a guide to help you with this challenging task: www.FAFSAonline.com.   Use the guide to help you complete the FAFSA.

Get it done early to qualify for more aid.  Most federal and school financial aid programs will require that you have completed the FAFSA.  If you have it done early, there will be more financial aid available for you to qualify for.  The longer you wait, the less aid there will be left for you to apply for…

Finally, there are thousands of scholarships designed for all types of people – even you.  We have created a useful tool with an ebook on searching the internet and applying for scholarships.  Search our database and/or download your free ebook online at: Student Scholarship Search Guide.  Again, apply early as many awards won’t be there if you wait too long.

Source: FAFSA blog

As we approach the end of calendar year 2007, it’s a good idea to turn our eyes to the future and start thinking about our 2008 financial aid efforts. Here are 5 strategies to help you make the most of the waning days of 2007 with payoffs in the year to come.

1. See an expert. Most community banks and credit unions offer access to a certified financial planner for little or no charge, making them a great, hidden resource for figuring out your finances. Take the opportunity and an hour or two on a weeknight or weekend to see one and review your personal finances. Get a sense for where you are and how your finances are currently set up.

2. Start writing scholarship essays. Scholarship season really starts in earnest in January of each year, and the sooner you can get your applications in to a scholarship foundation, the sooner you can move onto the next application. Do your research for which scholarships would be appropriate to apply to, and download their applications. The most time consuming part of the scholarship search is the essay, so start writing now!

3. Do your budget. January is often thought of as the time to embark on resolutions, but now is the time to plan for those resolutions so you can hit the ground running after the champagne’s gone.

4. Set goals. Set measurable, achievable goals for yourself in 2008, like a scholarship application a weekend. Be sure to have a calendar set up so you don’t miss any deadlines.

5. Get ready to file your FAFSA. The FAFSA process kicks off on January 1, but having your IRS 1040 mostly done will speed up the process, as will doing the FAFSA worksheets. Run through our FAFSA tutorials here on FAFSAonline.com and make notes of where you have questions – then contact your financial aid officer or attend a College Goal Sunday event to get those questions answered!

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As we all know debt is a liability or obligation to pay or render something. Unfortunately many of us find ourselves biting off more than we can chew in this regard. In fact, some friends told me recently they are so far in debt with their student loans they have just stopped paying them all together, because in their words, “It was hopeless.” I can’t image feeling that level of despair, although I have my fair share of debt as well. I don’t want anyone to feel that way.

If you’re considering going to school, and I believe you should, than you should have an entrance and exit strategy so not to end up like my friends. And contrary to popular belief entrance and exit strategies do work, the key is actually having one to begin with.

Did you know the average cost of tuition, over a 4-year span, ranges from $12,500 in public schools to $27,000 for private institutions per year? That’s a lot or debt one can amass in a relatively short period of time. Can you handle a $100K student loan repayment? I know I couldn’t swing it, nor would I want to. So let’s come up with a creative solution to help you avoid an insurmountable mountain of student loan debt on graduation day. This article will focus on an entrance strategy.

Consider a Community College for the first couple of years. Why? It is far more economical. I am currently attending Massasoit Community College in Brockton, Massachusetts and the cost is $111.00 per credit. I am taking two three credit courses this semester which is costing me $666.00. Next year I will be transferring over to Bridgewater State College to finish my degree program and earn my Bachelors degree. The current cost at BSC is $333.00 per credit hour. Simple arithmetic shows I would have been spending $1,998.00 for the same amount of credit hours this semester if I took them at BSC. That is a 3:1 ratio and a savings of $1,332. You don’t need to be an economics major to appreciate that savings. In addition, many of the professors which teach at my college also teach at BSC. The only disclaimer is that you will want to make sure the classes you are taking are transferable; so check with your school’s Admissions office.

If you fore fill your core requirements at a Community college, like I did, you may save yourself thousands of dollars by graduation day.

Just remember each individual needs to chart his or her own course. What is right for you isn’t always right for someone else. But one thing we can all agree on is money.  We all need it.  They say money talks, and it’s true.  When it talks to me it says, “David, you are wise and practical.” What does your money say to you?

In a recent staff meeting, we discussed the issue of freedom of choice and the Stafford Federal Student Loan.

When you, as a first year student, signed the promissory note for the Stafford Federal Student Loan, you may have signed what’s called a Master Promissory Note, which is essentially a four year loan application. As you may know, recent events in the student loan world have highlighted the very important face that students, parents, and families have a right to choose when it comes to federal student loan providers.

Thus, if you would like to use StaffordLoan.com and the Student Loan Network as your provider of the Stafford Loan, you have the right to do so. Fill out and complete an application on StaffordLoan.com and then speak with your financial aid administrator. Let them know that you would like to switch loan providers for your Stafford Loan, and when your application from the Student Loan Network arrives in the office, to please certify it and cancel the old master promissory note.

Doesn’t it seem like we were just talking about this? I swear the years go by faster and faster now…

Anyway, for all you students and recent grads out there, the holiday season can be a wallet draining time. In the spirit of saving money, Student Loan Network has pulled together a crafty list of holiday money saving tips and ideas, designed to stretch your hard earned cash a little further this year.

Have any holiday shopping tips or ideas of your own? Feel free to comment back and I will post your ideas (with your permission of course) so others can gain from your knowledge.

If there’s one number that drives more financial aid information, it’s the adjusted gross income on your IRS 1040 form. This number is the effective income you make per year, and since the FAFSA is the government’s way of determining financial need, your adjusted gross income greatly affects how much financial aid you are eligible for.

What are the components of adjusted gross income? AGI is computed by adding your total income to offsets.

Wages, salaries, tips, etc.
Interest and dividends earned on investments.
Taxable refunds, credits, or offsets of state and local income taxes
Alimony received
Business income or (loss)
IRA distributions
Pensions and annuities
Rental real estate, royalties, partnerships, S corporations, trusts, etc.
Unemployment compensation
Social security benefits

That’s your total income. Here’s a list of the offsets:

Retirement plans and savings
One-half of self-employment tax
Self-employed health insurance deduction
Penalty on early withdrawal of savings
Alimony paid
Moving expenses
Student loan interest deduction
Tuition and fees deduction
Educator expenses
Certain business expenses of reservists, performing artists, and fee-basis government officials
Health savings account deduction
Domestic production activities deduction

Offsets are where you can reduce your adjusted gross income the most, and therefore impact your financial aid eligibility. Right off the bat, if you can max out your contributions to eligible retirement plans like 401ks, IRAs, and other retirement vehicles, you’ll lower your AGI and improve your eligibility for aid – not to mention help save for the future.

We’ll add more tips for reducing your AGI in future blog posts, but start by saving for retirement!

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