Student Loan News, Updates and Blog Posts

Generally speaking, a student cannot update information, such as income or assets, that was correct as of the date the application was signed. However, three items, household size, number in college, and dependency status—must be updated in certain circumstances.

Dependency status

A student must update their dependency status any time during the award year unless it changed because his or her marital status changed. This update is required whether or not the student was selected for verification.

Household size and number in college

Unlike dependency status, household size or number in college cannot be updated unless the student is selected for verification. If the student is selected, these items must be updated to be correct at the time of verification unless they changed due to a change in the student’s marital status, in which case updating is not permitted.

It turns out that doing good really does pay off.

When many college seniors graduate in May they will be facing a tough job market and student loan bills. Because of this, many soon-to-be college graduates are considering alternative post-graduate options. For students who decide to engage in post-graduate volunteer service there are a few student loan benefits.

The Peace Corps is the best example of this. Volunteers with the Peace Corps can apply for deferment of Stafford loans, Perkins loans and consolidation loans for up to 27 months.  Additionally, PeaceCorps volunteers qualify for a partial forgiveness of their Perkins loans (15% for each year of service).

AmeriCorps is another program with loan benefits. If you serve with AmeriCorps for 12 months you receive up $7,400 in stipends and $4,725 to be used towards student loans.

If you do decide to take advantage of one of these opportunities it is important to know that deferment and cancellation do not happen automatically. It is up to you to contact your lender and complete the paperwork needed in order to apply. The Peace Corps’ itself has very little to do with the deferment process. They basically only certify your dates and country of service. The Peace Corps does not grant or deny deferments of loans.

Try saying that five times fast!

Do you know what happens when you do not make your student loan payments? Ideally you should take repayment into consideration before you sign off on a loan, however most people do not really think about it until the bills start coming in. The worst thing you can do is miss payments. Missing payments kills your credit score. A bad credit score makes it impossible to obtain a mortgage, buy a car, and take out any other loans in the future. If you miss payments you will also end up getting slammed with interest in the long run. Paying at least the minimum amount every month is key to staying on top of your debt.

If you are in a position where you really cannot make your payments there are steps you can take to avoid being severely penalized. One option is to apply for income-based repayment. This is a new payment option for federal student loans. With this option your monthly payment is calculated based on your income and family size. The IBR loan payments will usually be less than 10% of your income.

Loan consolidation is another option that will help you minimize your monthly payments. When you consolidate your federal student loans your loan term is extended and you end up with one smaller monthly payment. The new interest rate is a weighted average of all of your previous loans. Before considering consolidation you should know that does not necessarily cut down your interest and you will be paying off your loans for a longer period of time.

Loan deferment options are also available in certain situations. Deferment does not excuse you from ever paying off your loans, rather it temporarily suspends payments. You may be eligible for deferment if you are in school at least half time, unemployed or have experienced an extreme economic hardship.

Finally, in rare situations a person might be eligible for student loan forgiveness. Forgiveness means that all or part of a person’s student loans are cancelled. You would qualify for loan forgiveness if you enter into public service, perform volunteer work, perform military service, or if you become permanently disabled.

If you are a parent of a prospective college student, or a prospective college student yourself, you should be starting to think about financial aid. You have probably heard people around you talking about FAFSA, Stafford loans, Pell Grants, scholarships, and alternative student loans. It might seem like you are the only one who does not know what is going on, but trust me you are not alone in your confusion. Applying for financial aid can be very stressful for families and filing the FAFSA is a task that most people dread.

In order to be eligible for any kind of Federal student loans or grants you must file the FAFSA. Many people play down the importance of the FAFSA, but it should not be taken lightly.  Mistakes on this form can end up costing you thousands of dollars in aid. Luckily there are people out there who know a lot about financial aid and might even be able to help you with the application process.

Many high schools and communities host financial aid and FAFSA workshops. These are usually free sessions run by the high school guidance department, a local college or outside consulting group. These workshops usually go over a general look at financial aid, applying for student aid, why you should file the FAFSA, determining financial need, and tips and techniques for filling out the FAFSA.

If you are perplexed by the financial aid process make sure you find out if your town is holding a workshop. If they are not planning one it may be beneficial to suggest it to the high school principal or guidance department. The U.S. department of education even provides resources and presentation materials that make hosting a financial aid night more manageable. After attending a financial aid or FAFSA session you will probably find out that you are not the only one who feels lost, but you will also probably feel more confident and ready to tackle the application process.

Yes, a third party with power of attorney for the borrower may sign a Stafford promissory note if the borrower is unable to sign.

Use of a power of attorney when signing an MPN limits the use of the MPN to
one loan. If the borrower submits his or her MPN through the school, the school must retain a copy of the original power of attorney and submit a copy with the MPN to the loan holder. A photocopy or a fax of the power of attorney is acceptable.

If the note is signed with a power of attorney, the student must authorize the
school in writing to credit the loan funds to his or her account at the school. In addition, the school must pay any remaining balance to the student for living expenses.

If you are like me you probably graduated from college with two things; a diploma and a pile of debt. It is completely normal for students to have federal student loans and private student loans to pay off after college, but on top of credit card payments, rent and insurance payments these loans can be a huge burden. There are ways to quickly pay down your debt without getting overwhelmed. Here is the method that I use:

1: Figure out your monthly income and expenses including any student loan and credit card bills.  This will allow you to see how much money you have left over after the bare minimum is paid.

2: Pay at least the minimum payment on all of your debts each month. Missing any payment can negatively affect your credit score. A poor credit score will makes it hard to rent an apartment, buy a car and take out any kind of loan in the future. Additionally, if you put off making payments you will end up getting slammed with interest in the long run.

3: Without neglecting any other living expenses and a modest savings plan, use any extra money to pay off whichever debt has the highest interest rate.  If you have a lot of credit card debt it is probably best to pay that down first. Once your credit card debt is paid off, try not to accumulate any additional debt. Once your first debt is paid you can move on to using your extra money to pay off whichever student loan has the highest interest rate and so on until you are debt free.

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Budgets; you can’t live with them and you can’t live without them. I hate budgets just as much as the next person, but I have realized that having one makes my life a lot easier.  By the time you make the decision to pursue grad school chances are you will be completely on your own financially. Whether you decide to go to school full time or part time while you work, paying for grad school will take a certain amount of financial discipline and budgeting. However, living within your means does not have to be a drag. You can successfully pay for grad school without being strapped for cash.

Here are some tips for creating a budget that works for your lifestyle:

1: Determine your monthly income and your monthly expenses. This is the most important step to creating a budget. The amount of money you bring home on a monthly basis is what you have to work with. Make sure your expenses do not exceed you income. If you are going to school part time and working full time this will probably be a little bit easier for you. If you are living off of savings, determine how much you have for each month. Be sure to factor in all expenses including rent, car payments, insurance, groceries etc.

2: Take out loans to pay your tuition and other school expenses. As a grad student you have plenty of loan options. The Graduate Stafford Loan has a low fixed interest rate and does not require a credit check. The Graduate PLUS Loan is a low, fixed interest rate student loan that is based on your credit. It allows you to borrow up to the total cost of your education minus any other aid you receive. Finally, there are other private loans that can help you cover any and all of your school expenses. Make sure you include all loan funds and tuition payments in your monthly income and expenses. GradLoans.com can help you apply for and secure all of the loans you need.

3: Defer undergraduate loans until your graduate degree is complete. Unless you have the money to start paying your loans back while you are in grad school you might as well wait. Do not kill yourself trying to pay off these loans until you are working full-time and have more flexibility.

4: Use a free online budgeting tool like Mint.com. The days of scratching numbers on a piece of paper are over. This tool allows you to see all of your accounts, including your student loans, aggregated together. It will allow you to see where you spend the most money and where you might be able to cut back.

5: Find a credit card with good rewards. Sometimes using a credit card to make all of your purchases can be beneficial if you pay it off every month and you get rewards points. I have a credit card that awards one point for every dollar spent. Usually I trade in my points for Target gift cards. Since I spend a lot of money there anyway it gives me a little extra wiggle room in my budget. StudentPlatinum.com can help you choose a credit card with a rewards program that will work for you.

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Would you lend someone money if you did not know they would pay it back?

The US government gives out $60 billion in federal student loans every year. This is a lot of money and the government needs to make sure that they will get it back. Any student who receives federal financial aid, including the Stafford loan and Perkins loan, must complete both entrance and exit counseling. These sessions ensure that borrowers know that they have an obligation to pay the money back after college. Students often begrudgingly complete the counseling requirement while paying very little attention to the content. However, these sessions are no waste of time. The can actually provide extremely useful information.

Entrance counseling is required before funds are disbursed to your school for the first time. This online session will probably take you about a half hour to complete, but that is a small price to pay for the loans you will be receiving. The goal of this session is to help you understand your loan responsibilities. It also provides tips and tools to help you develop a budget for managing your educational expenses.

Before graduation from college, borrowers must complete exit counseling. This session ensures that you know your debt obligations and that you know when you need to start paying back your loans. At the time when you are required to complete this session graduation will probably be the only thing on your mind. However, if you pay attention it may cut down the number of questions you have when it is time to consolidate or start re-paying.

One of the most common statements I hear from my college friends is that their parents never let them fill out a FAFSA. This is a frequent and sometimes costly mistake that students and their parents make when financially planning for college. The following are a few of the main reasons why people do not file the FAFSA and why you should not fall into the same trap.

Reason #1: I will not be eligible for financial aid.
According the Department of Education, approximately 1.5 million students who would be eligible for the Pell Grant do not complete the FAFSA. Could you be one of these people? The only way to even be considered for Pell Grants, Perkins Loans and Stafford loans is by filling out a FAFSA. Additionally, many colleges offer other kinds of financial aid that is not need based, but you still might need to submit a FAFSA to qualify. Some of these scholarships and grant programs are strictly designed for students who have been denied federal aid.

Reason #2: My parents do not want to disclose personal financial information.
This is probably the excuse I hear most often. The good news is that the information that you submit with your FAFSA is strictly confidential. Only a handful of people ever see the information. Try to be proactive in helping your parents understand the benefits.

Reason #3: The FAFSA is long and complicated. Filling it out will not be worth my time.
Although the FAFSA involves gathering a lot of information and can take a significant amount of time you should not dismiss it. College is going to be hard so the FAFSA will be good practice! In all seriousness, the FAFSA is free so why not take a couple of hours to talk to your parents, gather the necessary information, and fill out the form online. You could find out that you are eligible for a lot of financial aid. Also, changes are coming for FAFSA in 2010 so it will be shorter and more manageable than it was before.

If your GPA falls below a 2.0 you still may be eligible for federal aid. H0w the process works is that you are given a semester to raise your cumulative GPA to above 2.0 (the probationary period). If you are unable to do so you may be sanctioned to financial aid suspension or dismissal from the school.

If you get dismissed you will need to enter another school (most likely without the benefit of federal assistance), raise your academic standing, and then apply for reinstatement.

The other alternative, however, is to just enroll in a new school, file your FAFSA, and not have your transcripts sent over to the new one.  That assures you will still receive federal aid, assuming you demonstrated financial need of course.  The problem with this option, however, is that any previous credits you received would not be credited at the new institution. It would be like you were entering college for the first time in many ways.   You would also still be required to repay the loans you took out at your first school, and those amounts would be debited from your maximum allotment of funds as well.