Student Loans : News, Updates and Blog Posts

On Tuesday, the Senate voted on the future of Stafford Loan interest rates. The rates for subsidized loans are currently at 3.4%, but without action from the government, will jump to 6.8% come July 1, 2012. A majority of 60 votes were needed to pass the bill which would lower these rates, unfortunately, the votes were split 52/45.

The issue between parties is not lower interest rates — most are in agreement that they should be lowered — it’s the how that’s keeping the bill from passing. The bill, written by the Democrats, attempts to close a tax loophole for high-salary workers in order to fund one more year of low-interest loans. However, the Republicans rather see this money come from elsewhere.

With both parties locked in a stalemate, it’s unclear how this issue will be resolved, but to learn more about the bill, check out this recent article from The New York Times.

It’s 7:30 on a monday morning and your alarm clock goes off. You turn it off and roll over for 5 more minutes of sleep. When you finally roll out of bed and look at the clock, it’s 11:30 and you’ve missed your class. Not a big deal, right? As it turns out, skipping class might cost you more than you think.

According to the recent infographic from StudentScholarshipSearch.com, skipping just one class is a waste of $20 if you attend a public college, or $50 if you’re at a private school. This may seem like it’s not a big deal, but wasted money can add up fast! If you’re paying for college with loans, you’ll be paying interest on that class’s cost too!

Still not convinced you shouldn’t skip class? What if i told you that “those who wasted time in college are 3x more likely to be unemployed”? That got your attention, didn’t it?

To find other ways skipping class can hurt you, check out the True Cost of Skipping Class infographic.

I’m pretty sure the title of this post just about says everything I need to say about the following video. Obama + Student loans + music + Jimmy Fallon = Magic. Pure magic. Oh, and what’s even better? It’s actually informative if you want to know more about what’s happening in the world of Stafford Loans right now.

Well done Sirs, well done.

When I was in college, the last thing I wanted to do was keep track of my expenses and create a budget. Booooooring. But now that I’m an adult (though it rarely feels that way) I’m finding it more and more important to keep track of money going in and out of my accounts. I wish this was something I paid attention to in college, because for someone with my level of disorganization, these skills could have been immensely beneficial.

While budgeting has not come as naturally to me as it does to others, here are a few helpful tips that have ensured I stay profitable over the years:

Needs vs. Wants

This one I learned at a young age. Growing up, my parents made sure I understood the difference between needs and wants (to the point where I now get anxiety if I splurge on a “want”). Without going this far, it’s important to realize what is considered a need vs. a want. Is it something that is absolutely necessary for school/living? This is probably a necessity if it will help you survive at college. While you may want the top-of-the-line technology, can you make do with something less expensive? Probably. Reign in the expenses by sticking to the lower-cost necessities.
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In last week’s blog “Know your student loans” I talked about some of the basic student loan terms you’ll need to know when choosing the best financial aid option. Included in the article were the basics of student loan interest rates. This week I want to break down interest rates even further to help you understand why banks charge what they do and how this is determined.

How interest rates are determined

The first thing you might notice during your financial aid process is that not all interest rates are created equal, even federal ones. Federal Stafford loans are currently at very low rates of 3.4%, while federal PLUS loans are at 7.9%. Even amongst private loans, the lowest available rates can vary significantly. But why is this?

For starters, the lowest advertised rates are not what most people get. You and everyone you know must have perfect credit to get these rates (not literally, but it might as well be). These low rates offered by lenders are based on external factors like PRIME or LIBOR indexes, and the stock market, as well as some internal factors such as how the bank invests its funds or even the business model the bank uses. The bottom line: banks determine their lowest interest rates based on what will keep them competitive in the market, while still being profitable.
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April is financial literacy month and this blog kicks off our financial literacy blog series! In keeping with this spirit, I wanted to break down some common student loan terms so that students and parents can be better informed about the student loan choices they make.

Basic Terms

The following are a few basic loan terms that are imperative to know when taking out a loan for the first time:

Principle – The total amount of the loan when you take it out. Interest accrues on this amount.

Origination fees – These are fees charged by the lender for the “creation” of the loan.

Interest – The amount charged for use of the loan money.

Capitalized interest – An amount of interest that is added to your principle. This means that if you have a loan of 10,000 with $100 in interest, once your interest is capitalized your loan principle becomes $10,100. It’s always best to avoid capitalizing interest because any interest that accrues after is going to be based on this new, higher principle balance, so you will end up paying more over time.

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Many FAFSA deadlines have come and gone. While there is still time to file (the federal deadline is not until June 30th) many state and college deadlines are quickly approaching.

For states like Connecticut, Indiana, Maryland and Michigan, the deadlines have passed. However, that doesn’t mean you can’t file, it’s just that you may be out of the running for any state and local grant/scholarship programs. For the full list of state deadlines, visit FAFSAOnline.com.

For those of you who haven’t filed, make sure you do and soon! The earlier you file, the better chance you have at receiving state, school, and local aid. If you’re waiting until taxes are filed, you don’t have to. File your FAFSA with estimated numbers based on last year, or select “will file”. This way, you can get your FAFSA filed on time, and simply file a FAFSA correction when you’re ready.

So find your FAFSA deadlines before it’s too late!

Student loans can be a crucial part of paying for college, but don’t forget there are other options that should be exhausted first- like scholarships. Many students know they should apply for scholarships, but either don’t have the time or get frustrated when they don’t win. We want to help, because let’s face it, free money for college is better than high-interest money for college.

StudentScholarshipSearch.com has developed an awesome infographic to help students win money: The Top 5 Scholarship Application Mistakes. Learn about some of the most common reasons why students are unable to snag a scholarship, and what you can do to turn your luck around.

While you may not win all of the scholarships you apply for, hopefully the tips from this infographic will get you on your way! And remember, apply apply apply!

We’re in the midst of FAFSA season, and while some of you early birds may have already filed and gotten your Student Aid Report, there’s still plenty of time to file before the federal FAFSA deadline of June 30th.

So if you procrastinate like I do, and have not filed your FAFSA yet, this tutorial may be a great asset for you. UC Santa Barbara developed this great video series to help students answer the FAFSA questions that might not be so straight forward. Take a look, and make sure to get your FAFSA filed before your state or school deadlines!

With all of the recent changes made by the Department of Education, the FAFSA has gotten easier for families to file. Having said that, there are still some questions that remain difficult to answer for many students.

One question I see a lot from dependent students is “whose information do I use for the FAFSA?” With all of the different family situations out there, it can be difficult to tell who the FAFSA considers a parent, and unfortunately, it’s not always who claims you as a dependent on taxes! If you’re not sure whose financial information to enter on your FAFSA, take a look at this flow chart to help you determine the answer!
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