A helpful article on College affordability – How are you going to pay for it all??? Please take some time to 1) read it and 2) Digg it:
Digg: Choosing a College and How to Pay for it
We will see what kind of visibility we can get with your help!
This is for all the parents out there who help their college bound teenager with the paperwork necessary to receive grants and loans from the gov’t. Once you submitted the FAFSA form…the gov’t processes it and then they send a SAR (student aid report) to the school(s) listed on the FAFSA form. Once the school receives this, they create a financial aid award letter for your child. Typically, you get this is the mail, and it’s at that point in time you start wondering where this money is going to come from. The Stafford loan will cover some of the tuition, but not usually all of it. From a lot of the parents I talk to, they are short an average of 7k-14k a year…after all Federal aid is utilized (Stafford loan, pell grant, scholarships). The question I get is…should I borrow a Parent plus loan, or should I co-sign an alternative loan for my child?
Well that depends on several things:
1. If you want loans that are all deferred until after graduation, then the parent plus is not for you…those payments begin when the loan is disbursed to the school
2. If you want the child to bear some responsibility for these loans in the future, the parent plus loan is not for you….this loan will ALWAYS remain under the parent’s name until it is paid in full. However, most parents borrow these loans, and then require their child to make the payments once they are out of school.
3. If you want to help the child get through school, but you want them to be on their own when they finish, then an alternative loan might work best. You will be the cosigner, but most alternative loans have co-signer release programs after a certain number of on time payments are made.
***something important to remember: federal loans are forgiven/cancelled if the borrower of the loan becomes deceased…for parent plus loans, this holds true for the parent and for the child it was borrowed for. The same cannot be said for alternative loans. It’s hard to think about, but it’s an important factor in making your decision about what type of loan to borrow.
The FAFSA blog is sponsored in part by:
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Does money really make the world go around, because I was under the belief it circled on its rotational axis at a 23.5 degree angle from vertical at 1000 miles per hour with no monetary influence, but that’s just me. Others have theorized that money actually makes the world go down like the Dow on black Tuesday. So which is it? Does it make the world go down or around? I guess it all depends on your vantage point and wallet size. The bigger your wallet, the greater your chance of motion sickness.
My goal is simple; find a way to beef up that wallet of yours devoid of any dizzy spells. The number one way to turn your paper thin wallet into a certified Jenny Craig candidate is to take someone else’s money! Scholarships provide the perfect gateway to which I speak.
You would be astounded at the number of scholarships you actually qualify for, and you don’t need to be Deans list to qualify either. I can not possibly stress enough that you need to take the time to look. I’ve even created a top 5 list to help streamline your search.
I get calls from desperate college graduates all the time who inform me they are in over their head with their student loan payments. And as sure as the sun rises in the east I’ll be fielding calls once again this May from despairing students who just graduated looking for advice, but at that point the damage is already done. The point of this blog is to put you in front of the 8-ball instead of behind it
Being proactive about the cost of your college education opposed to reactive can save you thousands of dollars and a whole lot of stress in the long run. And I promise it won’t be long before you’re spinning around the sun with your Ray-Ban sunglasses and calling Jenny Craig to let her know that big is beautiful. Student loan debt is the only thing you need to lose.
As far back as 2001, Congress, looking at incredibly high interest rates on federal student loans (8.25% statutory maximum on the Stafford loan, 8.5% on the PLUS loan) decided to legislate a mandatory fixed rate of 6.8% on Stafford loans beginning July 1, 2006. At the time, it seemed like a good idea to legislators to try “fixing” market prices. Prior to that legislation, Stafford and PLUS loans had variable rates of 2.3% and 3.1% + the 91-day Treasury Bill rate at the last auction in the month of May.
Fast forward to today – 2008. With the economic uncertainty, the 91-day Treasury Bill’s current rate is a shockingly low 0.21% (as of noon 3/20/08). If Stafford loan rates were still variable rate loans and rates were set today, the Stafford loan would have a variable rate of 2.51% – lower than student loan interest rates have ever been. For students now paying 6.8%, a rate of 2.51% would mean paying about $50 less per month on $20,000 in federal student loans. Had Congress also left student loan consolidation alone (not reducing subsidies to lenders, thereby reducing availability of consolidation loans to students) that same rate change would mean paying 56% less interest for the life of the loan.
This is a lesson for all of us – when government attempts to manage free markets, unintended consequences may result, and those consequences may be financially quite harmful in the long term.
Two things people do not always realize:
1) You must complete the Free Application for Federal Student Aid (FAFSA) in order to qualify for federal student aid, including the Stafford Loan. There is still time left so get it done online at www.fafsa.ed.gov.
2) You are not done once you complete the FAFSA. You then actually need to apply for a Stafford Loan – and any other aid you are interested in. Talk with your financial aid officer, seek other resources and apply as early as possible.
To find College Scholarships, visit www.StudentScholarshipSearch.com
Parent PLUS loans are Federal based loans taken out by a Parent on behalf of a child. Here are some quick facts about the loan before I touch on the consolidation of these loans:
1. These loans are taken out by the parents in their names, and can NEVER be transferred to the students name when they graduate
2. The student has no obligation to repay this loan
3. The payments on these loans start right away… they are not deferred because the child is in school (this is not the case with Stafford loans).
4. A parent plus loan is not a joint loan between 2 parents… even if the parents are married, only one parent applies for the loan and the loan will be under that parent’s name and associated Social Security number.
A typical college student is in school for four years. Let’s assume a parent will be borrowing 4 plus loans in total; one for each school year. The loan is typically applied for in the summer time… and half of it is disbursed for Fall semester, and the 2nd half will be disbursed at the start of spring semester. The loan payments will not begin until the loan is fully disbursed, so spring semester is when the parent will receive their first bill.
The following year, the parent repeats this process, and spring of their child’s Sophomore year they want to consolidate the 2 loans together. I say spring because you cannot consolidate a loan that is not fully disbursed. So to apply for a loan consolidation for your 2 loans..you simply fill out a Consolidation Promissory note with the company of your choice. Your loan payments will then be paid back to the company you chose, instead of your initial lenders for the loans.
Let’s add another child to the mix… many times parents have multiple children in college at the same time. Let’s say Dad and Mom have two children, Ben and Molly. Ben is a freshman at College X and Molly is a Junior at college Z. Dad has borrowed a plus loan for Molly for each year she has been in school. He wants to do the same for Ben. Dad CAN consolidate his PLUS loans together even though they are for 2 different children. However, if mom applied one year, with her Social Security Number, her PLUS loans cannot be combined with Dad’s PLUS loans. So keep that in mind when borrowing – it should be the same parent every year, unless you have no plans to consolidate.
One last fact about the PLUS loan is that its forgiven if: the parent that borrowed it becomes deceased OR the child that it was taken out for becomes deceased. Post any questions you may have about this loan.
From NASFAA, the National Association of Student Financial Aid Administrators:
After the paper version of the FAFSA was published by the Department of Education (ED) and the FAFSA on the Web site went live on January 1, 2008, IRS changed the Form 4136 line item for reporting the credit for tax on special fuels from line 17 to line 18.
IRS Form 4136, line 18, is the correct line item to use for reporting the credit for tax on special fuels on Worksheet B for the 2008-09 award year.
The FAFSA blog is sponsored in part by:
Five most recent FAFSA form help blog posts:
Some folks get confused by this question on your FAFSA – what is your state of legal residence?
The state of legal residence has nothing to do with immigration status or anything else – it’s the state in which you, the student, reside permanently. Many students have a school-based mailing address, but they are legally still living at home, at least for tax purposes.
Two easy ways to determine your state of legal residence – it’s whatever is on your driver’s license (if you have one) or whatever address you list on your IRS federal tax return (if you file one).
The FAFSA blog is sponsored in part by:
Five most recent FAFSA form help blog posts:
Do you struggle to save money? If so you are certainly not alone. Saving money is challenging. I equate it to dieting, exercising, or not seeing your friends for an extended period of time.
Exercising. Once you stop it’s hard to go back, isn’t it? I once committed to a regiment which included 200 sit-ups, 100 push-ups, and a 2 mile jog per day. Then I went on vacation to
“Now I look like a baby cow that hasn’t milked for six months.” David E. Bonvie
Not seeing your friends. The days, weeks, and months fly by so quickly without seeing your pals. That’s just the way it is these days. But just because you don’t see them doesn’t mean they’re not there. And just because you throw that credit card statement in your desk draw doesn’t mean it’s not there either. Don’t burry your finances in the Bermuda Triangle with your friends. Out of sight, out of mind doesn’t work in the world of finance. Tackle your issues head on as painful as it may be. Rip the band aid once and move on.
I want you all to be lean, mean, socialites with a few bucks in your pocket. I want you to dance like nobody is watching. Maybe then you can sit down and enjoy that brownie sundae without regret.
While some state priority deadlines have passed, it’s still not too late to file your FAFSA to qualify for the maximum amount of federal student aid available. The earlier you can file your FAFSA, the more likely it is you’ll receive scholarships and grants (if eligible) from a limited pool of money. In tough and declining economic conditions and times such as these, every dollar of aid counts that much more.
File today!
The FAFSA blog is sponsored in part by:
Five most recent FAFSA form help blog posts:
