Student Loan News, Updates and Blog Posts

As of July 1, 2008, the interest rate on all NEW subsidized Stafford loans will drop to 6.0%, a reduction of 0.8%. Bear this in mind next year when it’s time to consolidate your student loans!

If you’re a male over the age of 18, you are required by law to register with the Selective Service, also known as the draft. While America has not invoked the draft since the Vietnam War, federal still mandates it, and your FAFSA will be rejected if you meet the eligibility guidelines for the draft but are not registered.

To register for the Selective Service, visit www.SSS.gov.

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Just a reminder for folks who have waited a little longer before applying for federal financial aid – the FAFSA is a required form that must be completed and filed prior to receiving any federal financial aid, including the Stafford loan. If you haven’t filed your FAFSA, pretty much your only option is a private student loan, which typically has fewer advantages than federal student loans.

Filing your FAFSA takes a relatively short amount of time for the benefits it delivers – file today if you haven’t already done so.

One of the little known aspects of the FAFSA is that legally, you have to be truthful about your financial status at time of application. Let’s say you file on February 15 and you have $500 in your checking account for rent. On your filing, you have to declare that $500 in your checking account as a resource on the FAFSA, and it will count against your financial aid eligibility.

Let’s say that your rent for $450 is due on the 20th. Ask your landlord if you can make a payment on the 14th for the month instead of the 20th. If they agree, you can legally declare on the 15th that you only have $50 in your checking account, even if the check hasn’t cleared yet, because that money is no longer yours.

Got a pile of cash from a break or vacation of hard work? Take care of as many expenses as you can for the year ahead before you file your FAFSA. Make an extra payment or two on your rent, buy necessarily supplies, etc. Doing so will improve your eligibility for financial aid (and probably reduce some stress, too).

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This is my Bonds 101 blog designed to give you some basics on what a bond is.  I only feature three different types as not to confuse you (or me for that matter).  After you read this blog you’ll be able to walk into that cocktail party ready to flex some intellectual muscle.  Oh yes, you will be armed and dangerous!  Let’s get started and break a mental sweat before you put that mind back on holiday.

What is a bond?

A standard bond specifies the fixed amounts to be paid and the exact dates of the payments.  How much should you be willing to pay for a bond?  The answer deprends on the bond’s characteristics.  We will look at three basic types.

Zero-coupon bonds:  These are bonds which promise a single future payment, such as a U.S. Treasury bill.  These are very common.  Basically this is when you buy a bond for a set price, say $70 present value and the bond will pay the full note amount, say $100 in 5 years depending on the interest rate.

Coupon bonds: These are bonds which make periodic interest payments and repay the principle at maturity (a fixed time period is specified).  Coupon bonds do not have an individuals name on it (essentially they are unregistered).  Whoever is in physical possession of the coupon bond itself can collect the money.  Coupons are affixed to the bond itself.  The holder / owner of the bond will send in one of the coupons at a set time and receive an interest payment for the bond. U.S. Treasury bonds and most corporate bonds are coupon bonds.

Consols: These are bonds which make periodic interest payments forever; never repaying the principle that was borrowed.  Because governments are really the only borrowers that can credibly promise to make payments forever, there are no private consols.  So let’s say you by a consols bond for $500.  You will never get a direct payoff, but you will be ensured interest payments until the day you die.

So there you have it.  We’ve covered three different bond types to wet your pallet.  I tried to keep it pretty basic.  Converting the return on your investment by looking at yield to maturity is another blog for another time.  But for now I hope this helps. Now go rush out and get a “Fond for Bond” bumper sticker!

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I saw this post on Twitter:

if I dont get net access to complete my FAFSA I may not be going to school this year. #iaflood

You do NOT need Internet access to complete your FAFSA. If you’re stuck in the Iowa floods or some situation where Internet access just isn’t available, you can call the US Department of Education at 1-800-4-FED-AID (1-800-433-3243) to speak to someone about alternative options, and even filing by phone.

You can also still download and mail a printed copy, or pick up a paper copy of the FAFSA at a local college or university. Check to see if there’s a college, especially a community college, near you.

The online FAFSA remains the best choice for students, as it is the fastest and typically the most accurate, but in cases where natural disasters preclude that option, the US Department of Education does indeed still accept other options.

One cautionary note: do NOT call other companies for FAFSA by phone options – they WILL try to sell you their paid FAFSA services, which are unnecessary. Only call the US Department of Education.

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Last month I blogged about the 529 college savings plan and received some excellent questions that I felt would be beneficial to share with everyone (along with the answers of course). 

I pretty much just gave a snapshot overview of what a 529 plan was , but I’m going to get down to the nuts and bolts of it for you today.

Q: David, you are obviously very smart on financial matters and I would appreciate more details about the 529 plan if you get a chance.  I live in Vermont; do I have a good plan here?  If not, can I get into another state plan?

A: You’re right, I am a financial master, and semi-good looking too – ha-ha.  To answer your question Vermont is a Top 5 plan based on performance over the past 3 years.  They even offer a tax credit to the residents of the great state of Vermont.  Your state’s 529 plan is certainly solid, however, it is perfectly within your province to open a 529 plan in another state if you’d like.  Just because you live in Vermont doesn’t mean you can not open a 529 plan in Oregon.  Also, your child would not then be required to attend a school in Oregon either as many assume – this would simply mean your 529 account was located in that state.

Q: What are some of the main differences between state plans?

A:  One of the biggest differences between plans is who is running the plan.  For example in Massachusetts you have but one option, Fidelity.  In Nebraska it’s the Union Bank and Trust Company of Lincoln, Nebraska, and in Indiana it’s JP Morgan. 

Another thing to keep in mind is what types of fees are involved with each plan.  Are there monthly/yearly maintenance fees, program management fees, or start-up fees?  Obviously the higher the fees the less desirable the plan, unless of course that plan is performing at a very high level to overcome said fees.

Q: Is their a contribution minimum?  I can only afford to put $50 per month away?

A: These differ greatly from plan to plan and for residents vs. non-residents.  For example in Kansas the minimum contribution is $1,000, but only $250 for a Kansas residence.  Each subsequent contribution is $50 per month, but just $25 for Kansas residence.  In Louisiana it’s just $10 total to open an account while in Illinois, Nebraska, & Utah there are no minimum payments at all!  Keep in mind that some states also offer lower contribution minimums if you set up ACH.

Other things to keep in mind are state tax deductions.  For example, residents of Arkansas have a deductible in computing Arkansas taxable income up to $5,000 ($10,000 for married taxpayers) when they contribute to their state 529 plan. 

Also, about half of the state 529 plans offer rewards programs as well.  For example, Massachusetts has partnered up with American Express and offers rewards points that go directly into your child’s 529 plan.

I hope this information is helpful!  If you still have further questions or just want to tell me how fabulous I am, fire away!  I love to hear that I am a financial mastermind, look out Bernanke – I have some thoughts on this countries monetary policy too.  Happy Saving.

Before you decide to attend an international school to get your graduate degree, you may want to consider a few things. The biggest thing being, IT’S EXPENSIVE. If you choose to study in the states, most graduate students can get $20,500 a year in the Stafford loan…this is not always the case at schools overseas. If you have a particular school in mind, you want to check a few things. First, contact the school’s financial aid office to see what their policy is with accepting and handling US Federal loans. If they have no idea what you are talking about, you have a long road ahead of you.

When it comes to getting Federal aid for a school here, getting the actual loan certified is a relationship between the school’s FAO and the lender you chose. For school’s abroad, you need to be the middle man/woman. You need to find out exactly what the school needs from the lender, and then you relay that to the lender here. In most cases, you need to follow up on both ends to make sure paperwork has been received and is being processed. It can take a few months to actually get the loan.

In some of the more popular/larger schools abroad, there is already an established relationship between the school and a US lender. Consider yourself lucky if you go to a school like this. Most are not used to dealing with our Federal loan system. In some cases, schools abroad will not accept US federal loans…so you want to check with the school first, before you apply to go there…especially if you are relying on the $20,500 in the graduate Stafford loan. Check out Gradloans.com for more info about getting the Stafford loan for an international school.

To clear up some confusion…on July 1, 2008 interest rates are decreasing by approximately 3%…BUT only for Stafford loans that were disbursed prior to July 1, 2006…so if you have Stafford loans at 6.8% , these will not be affected by the rate drop. If you just recently graduated, your loan portfolio probably looks like this:

Stafford loan for $2625 from 2005 @ 6.62% variable

Stafford loan for $3500 from 2006 @ 6.62% variable

Stafford loan for $5500 from 2007 @ 6.8% fixed

Stafford loan for $5500 from 2008 @ 6.8% fixed

So on July 1, 2008, the loans at 6.62% will drop to 3.6%, but the loans at 6.8% will remain the same. If you consolidate the 4 together, the weighted average rate will be 5.75%…for the life of the loan. This model is only true for those in their grace period.

If all your Stafford loans are at 6.8%, you will not be affected by the rate drop whatsoever.

I’m a big fan of the life-blogging service Twitter, and thought I’d share some of the more recent comments about the FAFSA here, along with “director’s commentary” of sorts.

JanetIs: Glad the FAFSA isn’t due until the 30th.

@Janetis: Actually, the sooner you can file it, the better. There’s a limited amount of “free money” available each year, and once it’s gone, it’s gone. It’s allocated on a first come, first served basis.

andyduss: FAFSA can suck it!

dUbiAsIti: uuuuuuuuuuuuuuuuuuuuugh, i hate filling out the FAFSA! even when the gov’t has prefilled my answers and it’s easy as pie, i still HATE IT…

donkeypoof: importing music/FAFSA/nebraska driver’slicense?!

unsympathetic: finally filling out my FAFSA

bvaughn: Just finished my FAFSA for next semester… let’s see if the gov’t will give me any money to go to school!

@bvaughn: Don’t just wait on the government. Go find some money yourself – check out our free scholarship search book!

brandanger: wednesday got up cameto class had class til 11:35 work on FAFSA work on homework go out to eat with a friend

twistedmentat: Did my FAFSA. Sorry, Financial Institution, there ain’t no WAY yer squeezin’ eight large outta me.

mmemaledicta: Ok, so here’s what pisses me off about the FAFSA: They ask you for the totals of all accounts. What if rent hasn’t cleared? BS.

@mmemaledicta: They do ask you for the totals of all accounts, but that’s as of the day you file. If you know your rent will clear in a day or two, you can hold off filing the FAFSA until your rent has cleared and your checking account is back to normal.

craftyminx: FAFSA… Knew i forgot something

jeffmckown: Filling out the FAFSA sucks.

hyakurin: Watching CNN. Bored. Worried about FAFSA ******* me on my loans.

@hyakurin: There are a couple of loans, such as the PLUS loan, and private student loans, which do not require the FAFSA at all. If your award letter and student aid report come back with meager results, look into these loans, too.

merrickmonroe: @valor26: maybe not the school (yet), but FAFSA hq should watch out!

If you’ve got questions about the FAFSA, please ask! We’re here to help.

The FAFSA blog is sponsored in part by:

Five most recent FAFSA form help blog posts:

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