October 31, 2006
Student loans from a student’s perspective
Here’s an interesting article from a student at the University of California at San Diego, in their paper The Guardian.
“ Fifty thousand dollars.
That’s the bill I’m looking at six months after graduation, when the deferment period for my student loans ends. And frankly, it’s a terrifying prospect. This is debt that has accumulated despite scholarships, despite working multiple jobs, despite having a tight budget. At the same time as degrees become more important in the job market, they also are becoming far less affordable.
In fact, college costs have increased rapidly across the country over in the last decade, with students paying 42 percent more for tuition in 2005 than they paid in 2000, a rate that far outpaces the rate of inflation. But as college costs have increased, financial aid has decreased. In 1975, the average Pell Grant covered nearly 84 percent of the cost of college; today, the average only covers 36 percent. This means that for many students, loans are quickly becoming necessary to pay for college. According to separate analyses by the American Council on Education and the College Board, close to two-thirds of loans students take out are for bachelor’s degrees, averaging a debt of more than $15,000 each. At UCSD, the rate is slightly lower, with 54 percent of UCSD undergraduates taking out federal or private loans.
Unfortunately, even these are becoming more costly, as the Deficit Reduction Act of 2005 recently increased the rates for the federal Stafford loan.”
You can read the full article here.
October 26, 2006
Can Parents use Refund Checks to Pay Off Private Loans…?
Comment:
I’m not positive about this – if a parent takes out the loan and is qualified, the school receives the funding, but if the money disbursed to the school is in excess of the student’s account, shouldn’t the school cut a check to the student?
Great Question! Although this can be tricky I will do my best to give some more detailed insight…
If there was an outstanding balance at the school then technically speaking, yes, a refund check from the school can be used at the parents discretion and in this could be used to pay off the students private loans. Although, in most cases a school will not certify a Parent Plus Loan for an amount that significantly exceeds the cost of attendance without prior notice that the loan will be used for school related expenses. Typically, an outstanding balance on a Private Student Loans would not be considered a school related expense. School Related Expenses would be such things as books, supplies, housing, and transportation.
If the student’s tuition was already paid and a parent was looking to borrow the Plus Loan just to pay off a Private Student Loan then the school would not certify the loan in the first place. Therefore, the answer to the question would be, NO, you can not borrow a Parent Plus Loan to pay off a Private Student Loan.
College graduates earn $23,000 more
If you need any more evidence than that as to why a college education is important, then this recent study is for you.
You can read the full article from the Associated Press here, on MSNBC.com.
How much is a bachelor’s degree worth? About $23,000 a year, the government said in a report released Thursday.
That is the average gap in earnings between adults with bachelor’s degrees and those with high school diplomas, according to data from the Census Bureau.
College graduates made an average of $51,554 in 2004, the most recent figures available, compared with $28,645 for adults with a high school diploma. High school dropouts earned an average of $19,169 and those with advanced college degrees made an average of $78,093.
Can I Borrower a Plus Loan to Pay Back My Daughters Private Loans?
This question was asked of me today from a borrower who has just recently heard of the Parent Plus Loan. She thought that borrowing the Parent Plus Loan would help her out of the huge interest rate she is paying on her private student lans. Unfortunately, the answer to this questions is No, you can not borrow a Parent Plus Loan in order to pay back any loans as the funds get disbursed directly to the school. Federal Loans such as the Parent PLus Loan are for upcoming cost of attendance only. The loans can not be consolidated with a private loan or turned into Federal Loans ever. In order to improve your interest rate on private student loans you may want to consider Private Loan Consolidation with one or more credit worthy co-borrowers. The better the combined credit score and history, the better interest rate you will receive.
The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans
October 25, 2006
Research is critical to pay for college
Gone are the days of low tuition or ubiquitous financial aid packages. College costs are rising much faster than inflation and families are left struggling to pay. Here is an interesting article from the Pittsburgh Post-Gazette that I think you should all read. I’m including sections of it here, but as it’s a longer article than I normally post, you can read the rest of the article online here.
“When it comes to paying for college, research is the key
Wednesday, October 25, 2006
By Eleanor Chute, Pittsburgh Post-Gazette
Learning how to pay for higher education is an education in itself.
It requires throwing away myths that only straight-A students get scholarships and money for needy students will suddenly appear.
It requires mastering a new vocabulary — such as FAFSA, the ubiquitous financial aid application, and PHEAA, the state agency that offers financial aid, and a host of federal loan and grant programs from Pell to Perkins to Stafford.
And it requires much detective work to find out just where the money is.
“I was just amazed at how complicated the process was and how different the game is played at every school,” said parent Connie Ruzich of Sewickley whose daughter, Emily, won a full scholarship to the University of Richmond.
Nationally, most college students receive some sort of financial aid.
Most institutions do not have enough financial aid — federal and state grants and loans, work-study jobs and grants provided by the school’s own money — to go around to all of those who need or want it.
They ration it by merit, need or a combination of that and other factors.
Unless they have large endowments, such as Harvard University does, many schools cannot afford to meet all of the financial needs of the average student. Some meet less than 75 percent of the financial need of students who do receive awards based on need.
Students and their families often are left to fill the gap themselves by finding outside scholarships, digging deeper into their savings, taking out private loans, getting help from grandparents or choosing cheaper schools.
Many high school counselors long have recommended students apply to a “safety school” they are sure to get into. With rising college costs, students now are advised to be sure to include a financial safety school.
The bottom financial line is the net cost of attending — not the sticker price. But that can be hard to determine before applying….
Many students miss out simply because they don’t meet the deadlines, said Patricia McCarthy, director of financial aid at Indiana University of Pennsylvania.
Schools with rolling admissions — ones that act on applications as they come in rather than waiting until a set date — often have rolling financial aid as well, and money can become scarce late in the cycle.
Deadlines for particular scholarships can be as early as the fall of the senior year of high school….
Some schools, including Carnegie Mellon University, practice “preferential packaging,” giving more grants to meet the needs of students they want most.”
October 24, 2006
Consolidation – why is it important?
There are a few critical reasons why it’s important to consolidate as soon as possible after graduation:
1) Lock in the lower interest rates.
Why? Congress can raise interest rates every July 1, if it so chooses. You should lock in before a year has passed to avoid getting higher rates.
2) Lock in during your grace period – even lower rates.
Why? A grace period is usually 6 months after your graduation date where your interest remains at the lower, in-school rate. After 6 months, the rate goes up and you begin to pay the loan back. If you consolidate while in your grace period, you lock in the grace period rate instead of the post-grace-period rate. What does this mean in plain English? You save money.
3)Lower your monthly payments
Why? You’re just out of college, paying for a new apartment, gas to get to your new job, paying your own health insurance, making a starting salary – face it, you’re probably not rich. Consolidation lengthens the amount of time you have to pay off your student loans. Most Federal loans give you only 10 years to pay it back. If you have thousands of dollars in loans, that may not be enough time. Consolidate to spread the payments out over time, and shrink what you pay each month.
Also, since we’re talking about Federal loan consolidation, there is no early payment penalty. You can consolidate and get the 15-30 year term period, and pay extra each month to get the loan paid off sooner – you won’t be charged a penalty for this!
October 23, 2006
Welcome Kristin!
Hi folks,
The times they are a-changin, as Dylan put it. I don’t have nearly as much time as I’d like to put into this blog, so my friend Kristin, who also works in the industry has agreed to help!
This is great for you guys, because now there will be two of us bringing you the latest information and updates you need to make smart decisions.
So give Kristin a warm welcome, she should be posting here shortly. 🙂
October 20, 2006
An amusing article for a change…
The articles I’ve posted recently have been very serious in nature, so I thought it might be time for something that would make you laugh – or at least shake your head in wonder/disbelief.
According to the Roanoke Times:
“An Indiana man pleaded guilty Wednesday to filing false income tax returns and student assistance applications in the names of fellow inmates at the Pulaski Correctional Unit.
Jason P. Justus, 32, who is no longer incarcerated in Pulaski, pleaded guilty to conspiring to submit false claims to the government. In return, a charge of lying to investigators will be dropped, prosecutors said.
Justus’ plea comes one week after his mother and sister, Karen Justus and Joy Justus, also of Indiana, were convicted of the same charge for their roles in the scam.
According to Assistant U.S. Attorney Patrick Hogeboom, the Pulaski Correctional Unit blew the whistle on the Justuses after noticing an inordinate number of checks coming from Indiana for various inmates at the jail.
Those checks, which ranged from $150 to $200, represented payment to the inmates for allowing the Justus family to use their names and Social Security numbers to apply for federal financial aid and to file false tax returns, records show.
In addition to at least 13 inmates’ names, the Justuses were also using their own names and the names of dead family members and acquaintances to file false claims, records show.”
The rest of the article is just as amusing. You can read it here.
October 19, 2006
Middle-class familes send message to Washington
Sometimes our federal government either doesn’t understand why people want something, or don’t understand that it’s a high priority on many people’s lists. It’s nice to see a grass-roots effot by average families trying to shoe Washington that financial aid is critically important to the future of this country. You can read the full article here.
“Contributed by: Dan Mahoney on 10/18/2006
Middle-class advocacy group and local residents remind Representative Bob Beauprez to expand access to higher education when he returns to D.C.
Lakewood, CO- On Monday, October 16, Communities United to Strengthen America presented a petition with several hundred signatures to Representative Bob Beauprez’s Wheat Ridge District Office urging him to vote against the 2007 federal budget proposal that would make it harder for students to pay for college by slashing billions in funding from Pell Grants, work-study and other tuition assistance programs.
Concerned students and family members have been walking door to door and calling JeffersonCounty residents on the phone in an effort to gather signatures and expand access to higher education by cutting interest rates on student loans and fully funding tuition assistance programs.
“I would not have a college education if not for affordable student loans. Now that I am an instructor at the University of Colorado-Denver it’s heartbreaking to see students who work hard in their classes and work full time and still struggle to afford books and classes,” said Harvey Bishop, a professor at the University of Colorado at Denver. “These are very talented and committed students who have a lot to give society and we should be making it easier not harder for them to make that contribution.”
Colorado public university students just faced a 17 percent increase in tuition costs during the last year-the largest percentage increase in the nation. Despite rising tuition costs in Colorado, Congressman Bob Beauprez voted in favor of a $12 billion cut to student loan programs and the Bush Administration’s proposed 2007 budget is set to under fund key tuition assistance initiatives like Work-Study and Pell Grants that would deny thousands of students the assistance they need to pay for college.
The benefits of going to college go beyond just the value of an education; it can be measured in a family’s pocketbook. Over their working lives, college graduates on average earn 73 percent more than high school graduates, are less likely to be unemployed. Yet while the benefits are high, so are the costs and debt. Tuition is rising across the nation while our government’s commitment to higher education is dropping.
“Most of the students I teach at University of Colorado at Denver work full time and find themselves at the age of 21 chained to credit card debt,” said James Walsh, a professor at the University of Colorado at Denver. “All of this compromises their education. Our students need help, and I’m concerned that if these trends continue, our universities will become a domain for the privileged only.”
So what are our elected officials doing about this?
Recently, President Bush proposed a 2007 federal budget that would deny thousands of Colorado student’s college assistance. Under this budget, an estimated 15,137 students in Colorado, including nearly 6,000 in the Denver Metro Area would be unable to obtain Perkins Loans or would not receive enough assistance to meet their needs to pay for college.”
October 18, 2006
Parents’ Misperceptions About Financial Aid, College Savings, and Debt
There was a very interesting article on the NAFSAA website that I found last night. I’m copying the whole article here as it’s an article EVERY parent should read:
“Most parents have misperceptions about the amount of financial aid their children will receive, but have a relatively good idea about the cost of college, according to a recent survey published by AllianceBernstein Investments. The survey, Failing Grades? American Families and Their College Saving Efforts, found that 95% of all parents intend to pay at least some of their children’s college expenses and feel that helping with those expenses would be the best investment they could make in their child’s future. However, when asked to rate themselves on being financially prepared to pay for their children’s college educations, 34% gave themselves a grade of “D” or worse.
Of the 1,358 parents surveyed, only 27% felt they were very likely to reach their college savings goal. The study suggests there is a lack of urgency partly because 84% of parents felt that there were lots of scholarships that will help them pay for some of their child’s higher education costs. Meanwhile, almost all of the 200 financial aid administrators (FAAs) surveyed thought that parents “have a false sense of security that colleges will help them cover education costs.”
“It’s important to remember that financial aid is meant to be a last resort, not a way for mitigate college costs,” said Dallas Martin, president of NASFAA.
The reality is much different than most parents’ perception, according to the survey. Two-thirds of aid administrators surveyed said the current system does not meet the needs of many students and their families. Nearly 75% said that less than half of those who apply for aid are financially able to meet their expected family contribution, and 61% said they thought it would be a major financial hardship for the average family applying for aid to meet their EFC.
“The discouraging reality is that college costs have skyrocketed and federal financial aid has eroded,” Martin said. “The result is that the doors of educational opportunity have closed for many of our nation’s youth because they cannot afford to attend college. It’s critical for parents to have more realistic expectations for financial aid and adjust their savings efforts accordingly.”
An overwhelming 97% of all FAAs surveyed felt that families have become more reliant on financial aid in recent years and 99% said that even wealthier families are looking for ways to reduce or avoid college costs.
“With college costs at an all-time high, parents are more likely to limit how much they are willing to spend on higher education expenses,” Martin said. “As a result, many young adults are picking up more of the tab for their undergraduate educations, and accumulating heavy debt burdens in the process.”
The survey found that parents’ believed that graduating without debt was an advantage, but 63% saw student debt as a “fact of life.” However, 57% of the administrators surveyed said they would not let their own children take out the average loan amounts borrowed by today’s college students.
Aid administrators also saw the amount of borrowing as a potential problem. Nearly 95% of administrators expressed concern about the amount students were borrowing and nearly all said that they expect borrowing to continue to increase in the next decade.”
The entire Alliance Bernstein report is available online.
By Justin Draeger
NASFAA Assistant Director for Communications
Student Loan Info for Parents 