May 28, 2009
Sorry for disappearing so much this month. A bad bought of bronchitis led to a cracked rib, so I’ve had a lot of doctor-enforced downtime recently.
But I’m back in action, ready to bring you the student loan info and news you want to know. Stay tuned for more stories, news items and artilces to help you wend your way through the minefield that is financial aid.
May 21, 2009
In 2008 the rules of the game changed for the better for parents.
Prior to last summer, repayment on a Parent Plus loan began thirty days from the fully disbursed date, which was usually during the second semester. Meanwhile students were enjoying the benefit of an in school deferment on their federal Stafford loan for as long as they were in school half time or greater. This double standard was addressed and now Parents enjoy a similar deferral benefit.
Provided the student is enrolled half time or greater (usually 6 credits) as defined by the school, parents also enjoy the in school deferral benefit; though it’s worth noting that interest will still accrue during that time frame. But what happens when a dependent student (under 24) turns independent in the schools eye? Will the deferral period be terminated? The answer is NO.
Regardless of the students status, independent or dependent, the loan is still deferred whilst they are in school half time or greater. What the independent status does change, however, is the amount of Stafford loan funds which can be borrowed. It also disallows a parent to take out a Parent Plus loan on the student’s behalf.
May 19, 2009
While this won’t help parents as it doesn’t apply to PLUS Loans, this will help your students. Starting July 1, 2009 a new Income-Based-Repayment (IBR) plan will be offered to students for Stafford, GradPLUS and Consolidation loans that are not used to pay back Parent PLUS Loans.
According to the Team FFELP IBR Workgroup, “A borrower must have a partial financial hardship to qualify for an income-based repayment plan. A borrower who at one time had a partial financial hardship, but ceases to have a partial financial hardship may remain in the IBR plan.”
Partial Financial Hardship is calculated with the equation:
Standard Payment > 15%[AGI – (150% Poverty line applicable to family size)]
This means, partial financial hardship occurs when the standard repayment plan based on a 10-year repayment period at the time the borrower initially starts repayment is greater than 15 percent of the difference between the borrower’s adjusted gross income and 150% of the poverty line for the borrower’s family size.
Family size is defined as members of your household, such as spouse, children, grandparents who live in your residence with you and receive more than half their support from you. So a parent with Alzheimer’s that you take care of would count, but a roommate would not. It does include unborn children that will be born over the next year.
To qualify, you will need to authorize your loan company to receive the current year and past 3 years worth of tax returns from the IRS using IRS Form4506-T. Contact your lender to learn more!
May 15, 2009
Parent Plus loans are taken out on behalf of the student by the parent, meaning it is in the parents name. The student is also listed on the application, but that is for enrollment purposes. It is the parents FICO score they run to see if they qualify, and thus, it is the parents responsibility to see to it that the loan gets repaid.
A common misnomer that many students and parents share is when a student gets out of school they can consolidate all federal loans together under one umbrella in their name; which includes parent plus loans, Stafford loans, and Perkins loans. The fact is they cannot. They can consolidate Stafford and Perkins loans, but the Parent Plus loan must remain in a parents name.
May 6, 2009
So it’s May, you have your award letters. You don’t get enough financial aid from any school. What now?
How about delaying admission for a year and taking some online classes to get requirements out of the way? It’s certainly cheaper than tution at your first choice university.
Yes, I know this isn’t what you want to hear. There’s been a trend recently that people are entitled to a degree where and when they choose, but the reality in these tough economic times is that we have to make hard decisions. That may include either not attending the school of your choice, or delaying admission while you take classes online or at a community college.
Seriously, you should look at this problem from a completely different angle. You have options that you likely have not considered yet.
May 4, 2009
Parent Plus loans are not subsidized by the federal government like the Perkins loan and many Stafford loans, which are both in a students name. By subsidized of course we mean the government picks up the interest on the loan while the student is in school.
Parent Plus loans are unsubsidized meaning the borrower is responsible for the interest accruing during the life of the loan from the date of disbursement. Now since the Plus loan does not need to be repaid until after a student falls beneath a part time or greater status (in many cases this is after the student graduates) hundreds or in some cases thousands of dollars in interest may accrue.
Just keep in mind that you can make interest only payments while the student is in school if you so choose. This will help with the total principle and interest owed once the repayment period begins, as the interest is capitalized after each quarter.