April 30, 2009

Parent PLUS Loans 101

Posted in Parent PLUS Loans at 7:12 AM by Joe From Boston

Will your paycheck cover all the college expenses?

Will your paycheck cover all the
college expenses?

It’s that time of year again – parents are trying to figure out how to pay the difference between their child’s financial aid package and what next year will really cost.

So let’s do a review of what a PLUS loan is, and what the benefits are.
A PLUS loan is a loan for parents or guardians. You can borrow up to the full cost of education, minus any aid received (e.g. scholarships, Stafford loans).

  • You need the FAFSA to get a PLUS loan.
  • Only parents or guardians can take out this loan
  • The interest rate is set by Congress.  It is virtually guaranteed to be less than any private loan you could find.  Currently, the rate is fixed at 8.5% (July 2008 – June 2009)
  • There is a 3% origination fee, and there may be a 1% federal default fee that are deducted from the principal.
  • The PLUS loan cannot be transferred into the student’s name
  • PLUS Loans are credit-based, but the credit requirements are less that those of private loans or 2nd mortgages.
  • You have to apply for a new loan each year.
  • There are no penalties for paying the loan off early, and you will not be responsible for any future interest.
  • If you are denied a PLUS loan, you can submit the rejection letter to your child’s school to qualify him/her for more Stafford loan money.

April 28, 2009

Protecting students from credit…and themselves

Posted in Misc at 1:04 PM by Joe From Boston

According to APP.com,Congress is finally attempting to stop predatory lending practices towards the 18-22 year old target group, as they’re the most likely to get in waaaaaaay over their heads.

I definitely disagree with the author’s comment about requiring financial literacy classes being a bad idea.  I think they’re a great idea.  Most 18-year-olds can’t balance a checkbook and many see credit cards as “free” money.

Bring on the financial literacy classes!

Click here to read the whole article, or read the excerpt below.

“According to a survey by student lender Sallie Mae, undergraduates have an eye-popping average of $3,173 in credit card debt, and 92 percent of college students use the high-interest credit cards to buy textbooks and to pay for other education expenses.

In response, bills are working their way through Congress designed to save these young borrowers from predatory lenders — and from themselves. Some of the provisions in the proposed legislation are overkill, such as requiring those under 21 to complete a financial literacy course. But other requirements could provide important benefits for young people and adults alike.”

April 23, 2009

The best and worst of 529 plans

Posted in Saving for College tagged , , , at 11:56 AM by Joe From Boston

The Wall Street Journal has a great new article that evaluates 529 plans, taking into account the current economic meltdown in a study by Morningstar Inc.

Here’s an excerpt:

“The report… found that several plans were caught off-guard when their investments in some of OppenheimerFunds Inc.’s bond funds reported sharp losses. In other plans, the asset-allocation mix in the popular “age based” portfolios — which turn more conservative as the child nears college — turned out to be riskier than expected.

Such factors knocked several well-regarded 529s off the best list this year, such as Illinois’s Bright Start College Savings Program, which had offered the Oppenheimer funds that imploded and still has money in them.”

To see the best and worst, click here to view the entire article.

How Much Can I Borrow?

Posted in Parent PLUS Loans tagged at 8:33 AM by dbonvie

The yearly limit on a Parent PLUS Loan is equal to the cost of attendance minus any other financial aid received. If the students cost of attendance is $15,000, for example, and they receive $8,000 in other financial aid, you can borrow up to $7,000 to bridge the gap.

When Do I Begin Repaying My Parent Plus Loan?

Posted in Parent PLUS Loans tagged at 8:07 AM by dbonvie

For Plus loans made to parents on or after July 1, 2008, the borrower has the option of beginning the repayment period 60 days after the loan has been fully dispersed or waiting until six months after the student ceases to be enrolled on at least a half-time basis.

For parents who took out a loan prior to July 1, 2008 you do not have an option I’m afraid. The repayment period, as you already know, automatically kicked in 60 days after the loan was fully dispersed. Still, you may file for an economic hardship deferment or forbearance with your lender if needed as you do have three years worth of deferment benefits.

April 16, 2009

About to attend a public school in Georgia? Your tuition is going up

Posted in Saving for College, The Financial Aid Process tagged , , , at 10:19 AM by Joe From Boston

Remember back in 2006 when Georgia decided to freeze tuition at your freshman-year price for all 4 years?  Well, if you’re about to enter school, that’s no longer the case!

According to the Atlanta-Journal Constitution, the Board of Regents voted unanimously this past Tuesday to discontinue the policy.

The good news is, if you enrolled under the policy, it will continue for you, but will not apply to new students.

April 1, 2009

Still in school? Learn about repayment NOW!

Posted in Stafford Loans, The Financial Aid Process tagged , , , , at 10:10 AM by Joe From Boston

Trust me – take 15 minutes now, before you graduate and read a little on this convenient loan repayment portal set up by the Department of Education.

Learn NOW what will happen in the coming months BEFORE you graduate.  Remember, you’ve taken out loans and sworn on paper that you’ll repay, so it’s worth your time to learn about what’s ahead for you.

Also, check out this Stafford Loan exit counseling interview – if you have a Stafford loan, you’ll be required to go through exit counseling.  You’ll learn about your rights & responsibilities as a borrower in the federal student loan program.