Student Loan News, Updates and Blog Posts

For many years a bachelor’s degree served as the key to a middle class life, but that was then. This isn’t your Daddy’s job market. Competition today is at an all-time high which is diluting the potency of a bachelor’s degree in today’s market.

To understand why a bachelor’s degree holds less weight today we can look inside the numbers and use some basic deductive reasoning.

First off the current U.S. population stands at 305 million. When my Dad entered the job market in 1959 the U.S. population was 177 million including Alaska and Hawaii which had just became the 49th and 50th U.S. States respectively that year.

In addition, skilled immigrants entering the U.S over the past fifty years, a number which grew very rapidly starting in the 1990’s at approximately 1.1 million migrants per year, has also added to the ever increasing population. Given these variables the supply of labor has outpaced marketplace demand. About the only parallel I can draw between 1959 and 2008 is the Boston Celtics defeated the Lakers to claim the championship that year too.

It is true that industry has expanded over the past 50 years but not nearly to the level of our increasing population. Also, we are losing many jobs overseas which compound’s the problem.

So what does all this mean? It basically means that today’s Master’s Degree is equivalent to yesterday’s bachelor’s degrees. A Masters provides your best chance at a middle class life in’08. By the time I’m looking at colleges with my son I’m sure a Ph.D will be the status quo.

My suggestion is to exercise that mind for as long as you can. It will literally pay off for you down the road.

To apply for a Federal Graduate Plus Loan (click here)

To apply for a private Graduate Loan (click here).

I became a father for the first time earlier this year which was the best moment of my life. Every decision I now make is with Barrett (featured to the right) in mind, which includes going back to school. I’m currently enrolled in classes with the aim of bettering myself, providing a better life for my family, and becoming a more well rounded person. I want to add to our countries GDP numbers. The only problem is my loan volume from school is now skyrocketing upward like a five star Sarah Palin wardrobe.

Did you know the average college graduate carries more than $20,000 in debt? That is a 6% increase year over year. When you combine that with starting salaries for recent grads, which only rose by 3% over that same time period according to the Project on Student Debt, it’s even harder for students to repay those sizeable loans. Of course many students have been unable to land jobs at all and have been forced to place their loans into forbearance where more interest will accrue inflating that total payback number.

It’s really an interesting dichotomy. Go to school and be in debt thousands vs. entering the work force right away with no debt at all. They both have pros and cons but the long term benefits and typical salaries for those with an education will far surpass those without – even when debiting the loan cost from the bottom-line.

To help make those monthly payments more affordable you may want to consider consolidation. Consolidation extends out your loan term and helps minimize your monthly student loan expense. There are also no prepayment penalties so if you have extra money to put toward your loan you can do so at any time.

I know consolidation is going to be in my near future when I graduate. That way I’ll be able to afford my loan payment each month and still buy that new bike for Barrett!

It is no secret that the current state of our economy is affecting the student loan industry. It is more difficult to obtain a loan, and you have fewer borrowing options. People ask me frequently why they should borrow federal loans before a private loan. The answer has always been because federal loans are less risk then private loans. Federal loans have fixed interest rates, and set deferment and forbearance options (making it easier for you to repay the loan, and harder to default on it). Currently, my answer to this question would be the same, except I would stress the interest rate factor. The majority of the private student loans have variable interest rates. They are either based of the LIBOR rate, or the PRIME rate. The LIBOR rate has gotten some recent press because it is set to increase in the current months. What this means for students who have private loans based off the LIBOR rate, is that their monthly payments will increase…making it harder and harder to repay that loan. USA Today has a recent article about the changing LIBOR rate. As stated above, federal loans have fixed rates…this means you will always have the same amount due every month for the life of the loan. This is very important, especially considering the current state of the economy, and the rising numbers of unemployment. But as so m of you know, federal loans are not typically enough to cover just tuition, never mind living expenses. Some students have no choice but to borrow private loans. But my advice would be don’t borrow blindly. Know the risk, know how much your monthly payment could balloon to…and make sure you will be able to pay that loan back, no matter what happens to the rate.

Friday Fun Fact!

Did you know there are tax incentives while paying back your federal student loans? Most can claim the interest on their taxes. This benefit applies to all loans used to pay for post-secondary education, including PLUS loans.

The IRS publication 970, Tax Benefits for Higher Education explains these benefits in greater detail. You can also contact the IRS at 800-829-1040 with additional questions.

Did you know under the federal work-study program you can work part-time to earn money for your education? So what are the primary benefits of the program? See below.

- Provides part-time employment while you are enrolled in school
- Helps pay your educational expenses
- Is available to undergraduate and graduate students
- Is available to full-time or part-time students
- Is administered by schools participating in the FWS Program
- Encourages community service work and work related to your course of study, whenever possible

So how do I know if I qualify?
Your school will inform you. It’s is all linked to your FAFSA and will be on your Awards letter. That said it’s important to get your FAFSA completed ASAP. The federal government provides only a certain amount of work-study funds to each qualified school and when those funds have been exhausted no additional work-study awards may be issued for the year.

SAR stands for Student Aid Report. After you complete your FAFSA a SAR report is then generated by the Department of Education on your behalf. So what is this SAR report anyway?

A SAR report, which is emailed to you 3-5 days after your FAFSA has been processed (if you provided an email address) or mailed to you 7-10 days thereafter is your key to the world of financial aid. Your school(s) also receives a copy of your SAR.

The school will then use the information on your SAR to determine your eligibility for grants, scholarships, federal loan options – and possibly nonfederal financial aid funds.

Finally, the school(s) listed on your FAFSA, which offered you admission, will send you an awards letter. The awards letter tells you the type of federal aid you are eligible to receive and how much you will receive. Be sure to review each award letter carefully and compare how much aid you can receive at each school. Every dime you save now will add up by the time you get out of school and begin repayment.

Don’t forget to sign up for a chance to win a $10,000 scholarship for school (Click here). Winner to be drawn on Halloween!

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Did you know the U.S. government requires each student applying for federal financial aid to complete a renewal FAFSA each year? And since the FAFSA is the key to determining your financial aid package it is of paramount importance to do so.

The reason a renewal is required is your financial situation or status could change (for better or worse) from year to year and that information must be captured. For example, perhaps one of your parents got a promotion and is able to pay for more or college or last summer’s internship paid very well, and allows you to contribute more to your education. All of this is crucial to determining your awards package.

So don’t forget to do your renewal FAFSA after the first of the new year!

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I get asked “where’s my stafford loan money” at least twice a day. I feel bad for these students too. It’s as if they’ve been thrown to the wolves to fend for themselves. I know at 18 I was a few fries short of a happy meal so I suspect some of them are too.

Basically, this is how it works. You’ll be paid through your school in at least two installments. No installment may exceed one-half of your total loan amount. Your loan money must first be applied to pay for tuition and fees, room and board, and other school charges. If loan money remains, you’ll receive the funds by check or in cash, unless you give the school written authorization to hold the funds until later in the enrollment period.

Generally, if you’re a first-year undergraduate student and a first-time borrower, your school cannot disburse your first payment until 30 days after the first day of your enrollment period. This practice ensures you won’t have a loan to repay if you don’t begin classes or if you withdraw during the first 30 days of classes.

To apply for a stafford loan (click here).

I was speaking with a few friends earlier this week who had asked me some general questions about the economy. After answering one question in particular about taxes I thought it might make for a nice blog topic. After all, it is my aim to educate and inform.

First off, the economy is a complicated mechanism as we all know. When we’re struggling thru tough economic time’s politicians can not simply institute tax cuts to remedy the problem. True, tax cuts may be part of the solution but not the sole answer. So why will tax cuts alone not work? I mean, that would help jumpstart the economy, right? More money being spent by consumers on goods and services is a good thing. But the reality is those tax cuts have a counterproductive aspect to them as well.

Conventional wisdom tells us if you have less money to spend than your consumption will decrease. If taxes get cut than the government has less money to spend which means something must get sacrificed. But if you delve a little deeper into the root of what happens when tax cuts are made you will have a better grasp of the mechanics behind this negative relationship.

For example, say McCain or Obama cut taxes. That will mean consumers will have more disposable income in their pockets, which is great. And because of that extra money the consumer can then purchase more goods and services with those extra dollars. That will then lead to a positive shift in the aggregate demand. With consumption on the rise that will then lead to higher interest rates which will then serve as a detriment to businesses that want to invest, since the cost to borrowing money would be increased by those higher interest rates.

So by doing a good thing, cutting taxes to stimulate growth, demand for investment falls. It is such a tangled web we weave. It’s like trying to juggle 10 things at once and hoping you don’t drop one. Unfortunately we’ve been dropping more than we’ve been catching lately. Let’s hope the next circus that comes to town can keep things a float.

Unless you’ve been wedged under a rock for the past several months you are well aware that the world economy has been in turmoil. And as a byproduct of the economic downturn many are taking refuge in the classroom.

New York University’s Stern School of Business reported a 30% increase in attendance in off-site informational sessions. Northwestern University’s Kellogg School of Management has had a 22% increase in applications so far in ‘08 according to the Personal Journal. In fact, since June the amount of registered applicants taking the Graduate Management Admission Test (GMAT) has gone up by nearly 50%.

The problem is with all these students flooding the grad school market it is making it more difficult to get a seat. Schools, for the most part, are NOT increasing the amount of students they are accepting into their graduate programs. That means you quite literally need to come with your “A-game” to get into most of these programs. However, it’s not strictly based on GPA. Recommendation letters from professors, job experience, and extracurricular activities all factor in as well.

My recommendation is to apply to as many schools as possible. Strength in numbers is the way to go. Don’t limit yourself to just one state either. You may need to make some sacrifices, but it is well worth it. According to the U.S. Census Bureau those who hold a master’s degree make on average 21% more per year than those with only a bachelor’s degree.

If you are considering graduate school and need a grad plus loan (click here). For a private graduate loan (click here).

Obtaining an MBA is an investment in you. It’s hard work, but can pay off in the long run.