May 18, 2007
Student loan consolidations will bottle neck this summer because lendes have been locked out of the governement’s student loan database
Student loan consolidations will bottle neck this summer because lenders have been locked out of the governement’s student loan database.
Lenders need to verify the correct amount of a prospective borrower’s loans because if they’re off by too much on the initial application, the lenders need additional signed paperwork from the borrower, which extends the time to funding even further.
Student loan logjam
Thursday, May 17, 2007
Borrowers who are trying to consolidate their college loans before rates change July 1 might encounter some holdups because lenders have been temporarily banned from a government database of loan information.
Fortunately, the rates on variable-rate government guaranteed loans (those issued before July 1, 2006) won’t go up much, if at all, July 1. And even if the database snafu causes a processing delay, most lenders say they will give borrowers today’s rate if they get their applications in before July.
On April 17, the U.S. Education Department blocked all lenders and guarantee agencies from accessing the National Student Loan Data System after the Washington Post reported that some lenders might have been using the database improperly to gather information they could use to market loans. Access by authorized college financial aid officers and borrowers was not restricted.
The department had previously blocked almost 250 users from the student loan industry for inappropriate use of the system.
The database contains information on people who have obtained government-guaranteed Stafford, Plus and Perkins loans, and Pell grants.
By entering a borrower’s Social Security number, a user could get the borrower’s name, date of birth and loan data such as outstanding balance and payment status.
The database does not provide the borrower’s address, e-mail addresses or phone number. Nor does it include sensitive information students must enter on the federal financial aid applications, such as income or assets.
Lenders or others might have improperly gained borrower information by entering thousands of actual or random Social Security numbers into the database, then combined that with information from credit bureaus or other sources to target customers for consolidation loans, says Mark Kantrowitz of Finaid.com
On May 2, the department restored access to the system for 35 guaranty agencies, which are state agencies or nonprofits that act as middlemen for the federal government.
It also added beefed up security by requiring users to enter a series of numbers and letters in a text box and provide the borrower’s date of birth and first name, in addition to Social Security number.
The department has not said when it will restore access to lenders. In the meantime, that’s causing headaches for lenders who want to process consolidation loans.
After they leave school, borrowers can combine existing college loans into a single consolidation loan with an existing lender or a new one.
On the application, borrowers must list the existing loans they want to consolidate and their balances.
In the past, lenders could help borrowers fill out an application, or do it for them, by looking up that information in the database. They also could use the database to verify information borrowers provided.
With access restricted, borrowers must fill out the applications themselves.
“Most borrowers have no idea what their balance is and who the loan servicer is,” says Frank Ballman, executive vice president of Educational Direct, which makes consolidation loans.
“The borrower can go into the NSLDS themselves and get that information, but they need a PIN number. Even if they once had their PIN they’ve forgotten it. It creates a major barrier to consolidation that, unless the borrower understands how valuable consolidation is, many times they are not motivated to move forward.”
Ballman says his firm is still processing loan applications, but it’s taking longer than usual.
Christopher Chapman, president and chief executive of All Student Loan, says that if applicants have access to the database while they are on the phone, “We help them walk through it and figure out what parts they need to put on the application.” Alternatively, applicants “can print it out and we’ll talk to them later or they can mail us a copy.”
Chapman says his firm is not attempting to verify information on the loan application before sending a request for payoff to existing lenders. However, if there is an error on the application, the existing lender will kick it back, delaying the completion of the loan.
A Sallie Mae representative says that if current customers want to consolidate their loans with Sallie Mae, “we will automatically prefill their consolidation application for them with the relevant Sallie Mae loan information. Those who apply to consolidate loans from non-Sallie Mae lenders must now ‘self serve’ by looking up their loan information on NSLDS and entering that information on the consolidation loan application.”
Most lenders say they will give borrowers the rate that is in effect when their loan application is submitted. “As long as you have a substantially complete application with us, we will honor the rate,” says Tim Bornemeier, a managing director with Nelnet.
For a variety of reasons unrelated to the database, the rush to consolidate college loans before July 1 is expected to be much less frenzied than in recent years.
For starters, many students who have variable rate loans have already consolidated them.
Stafford and Plus loans issued before July 1, 2006, have variable rates that change once a year on July 1. The rate is tied to the yield on three-month Treasury bills at the last auction in May.
Consolidation loans, on the other hand, have fixed rates. The rate is a weighted average of the loans being consolidated, rounded up to the nearest one-eighth.
In years past, many students were eager to convert their variable rates loans into a fixed-rate loan by consolidating them.
On July 1, 2005, and again on July 1, 2006, rates on student loans shot up by almost two percentage points and the rush to consolidate before those deadlines was fierce.
Over the past year, however, short-term interest rates have been stable. Come July 1, the rates on variable-rate loans are likely to be no more than one-eighth of a percentage point higher than today.
What’s more, all Stafford and Plus loans disbursed since July 1, 2006, have fixed rates, which eliminates one of the big reasons to consolidate.
Another impediment: Before July 1, 2006, students could consolidate while they were still in school. Today, they must wait until they have left school.
That said, there are still some reasons to consolidate.
One, it’s easier to make one payment per month than several.
Two, six months after students graduate or stop attending school at least half time, the rate on their variable-rate Stafford loans goes up by 0.6 percent. If they consolidate before the end of that six-month grace period, they can lock in the lower in-school rate. (This does not apply to fixed-rate loans disbursed since July 1, 2006.)
Students who graduated in December are approaching the end of their grace period and should move quickly if they want to consolidate their variable-rate loans.
A final consideration: The standard repayment period for Stafford and Plus loans is 10 years. Consolidation loans generally allow repayment over 20 or 30 years, which is a blessing and a curse.
Moving from a 10-year to a 20-year repayment period “cuts your monthly payment by one-third, but more than doubles the total interest paid over the life of the loan,” says Kantrowitz.
If possible, it’s better to choose the shortest repayment period. However, if a borrower also has higher-rate private loans or credit card debt, it would be better to pay that off quickly and stretch out payments on lower-cost government loans by consolidating, says Kantrowitz.
May 17, 2007
It’s official – Higher Education is a hot-button issues for the 2008 campaign
We’d already seen the rumblings, but with the events of the last month or so, it’s official. Higher Education is one of the big issues of the 2008 campaign/election. Check out this interesting article from Inside Higher Ed.
Yay – just what we need – even more mudslinging!
Higher Ed and 2008
In the last week or so, higher education appears to have arrived as a 2008 campaign issue. Democratic candidates are vying to be the boldest defender of student loan borrowers and one in particular — John Edwards — has issued proposals that are unusually detailed for this early in a campaign. And in a sign that Edwards’s move was noticed, Barack Obama followed Tuesday with a plan of his own.
At the same time, several efforts have recently been announced to assure education generally and higher education in particular a prominent role in campaign discussions. To be sure, higher education has not overtaken the war in Iraq as the issue receiving the most attention. And it’s much easier to promise to do something on college costs, for example, than to actually do something. But experts said that the flurry of discussion is a positive sign for academe that its issues can capture public and political attention.
“I think higher education doesn’t win elections, but no candidate wants to be accused of ignoring the issue of college access,” said Robert Shireman, president of the Institute for College Access and Success. “It is important to have something in your list of policies that is relatively catchy, simple and credible,” said Shireman, who was an education policy adviser in the Clinton White House and is not working for any of the 2008 candidates.
If the last few days are any indication, the idea Democratic candidates believe will meet such criteria is overhauling the student loan system, which has been facing an unprecedented scandal in recent weeks over allegations that colleges were steering their students to lenders that favored the institutions or their employees with inducements of various kinds.
On Friday, Edwards — the former North Carolina senator and vice presidential nominee — formally proposed that the guaranteed student loan program be abolished and that all students borrow through direct lending — in which colleges, not banks, pass loan funds to students. Edwards said that by eliminating subsidies to lenders, $6 billion a year would be saved — funds he would direct to new grant programs for students. On Tuesday, Obama, the Illinois senator, held a conference call with student journalists to formally offer his pledge to eliminate all lender subsidies and convert borrowing to direct lending.
In the crowded Democratic field, Edwards and Obama are considered the top challengers to the front-runner, U.S. Sen. Hillary Rodham Clinton of New York. Direct lending was an educational priority of her husband’s administration and she has backed it as well, although thus far in the 2008 campaign, she has not focused on eliminating the guaranteed program but on urging the adoption of a “Student Borrower Bill of Rights,” which would assure students certain information about loan options, a choice of loan options, and income-based limits on their monthly repayment schedule.
Shireman said that the recent loan scandals have made lending a hot issue — and that major changes in the program are “much more likely than I would have thought six months ago. Even I am surprised at the level of the scandal.”
The Democratic coalescing around the issue of student loans is attracting attention from the lenders as well. Officials at Sallie Mae declined to comment on the proposals. But Henry Howard, CEO of U.S. Education Finance Group, issued a statement denouncing Obama within hours of his plan being released Tuesday. “As a lifelong Democrat, I am disappointed with Senator Obama’s proposal to take away Americans’ right to choose their own lender, abolish competition, and push everyone into a one-size-fits-all, inefficient, student loan monopoly. Such a proposal would result in increased borrower interest rates and mandate that the government serve as the only preferred lender.”
A spokeswoman for Howard elaborated that all of those criticisms applied to the Edwards plan, too.
Where Edwards and Obama differ in emphasis is what to do with the billions they would save by eliminating loan subsidies. Obama’s plan calls for using the funds for larger Pell Grants. Edwards wants to create a new “College for Everyone” program, which would provide 2 million students with scholarships to cover one year at a public college if they agree to work part-time in college and to take college preparatory courses in high school. The Edwards plan also calls for simplifying the process of applying for federal aid, new incentives for states to keep public tuitions low, and a new program to support the hiring of more guidance counselors at poor high schools.
The “College for Everyone” idea is being tested with a pilot project Edwards created with philanthropic funds at Greene Central High School, a high school that serves low-income students in a rural part of his home state where the textile and agriculture industries have suffered. Students at the high school receive the same offer Edwards wants to propose nationwide: a year at a public college paid for in return for meeting those basic requirements. Students at the high school are also receiving special counseling, trips to colleges, and detailed explanations of financial aid options (so they can receive aid after their first year).
Thus far, results have been impressive. Two years ago, before the program, about 40 percent of graduating high school seniors went on to college. This year, when high school seniors can see the first cohort already enrolled, 133 of 179 graduating seniors have been accepted for enrollment in the fall.
“The impact has been tremendous in helping our students to see that there are opportunities available for them, and that there are people willing to help them get to college,” said Randy Bledsoe, principal of the high school.
The Edwards higher ed platform has a strong populist theme — and he likes to talk about being the first in his family to attend college (North Carolina State University is his alma mater) and about having worked his way through. Four years ago, he called on colleges to eliminate admissions preferences for alumni children — calling them “a birthright out of 18th-century British aristocracy, not 21st century American democracy” — and early decision programs. A spokeswoman confirmed that he still maintains his opposition to those admissions policies.
Obama has been less detailed than Edwards on higher ed thus far, but numerous reports from campuses suggest high degrees of enthusiasm among students for his campaign. He’s also doing well with campaign contributions from professors. He is also receiving plenty of scrutiny because of his racial background. While Obama has been a strong supporter of affirmative action, in an interview Sunday with ABC’s “This Week,” he suggested that factors other than race and ethnicity need to go into college admissions policies that favor any groups. He said that white students who are from disadvantaged backgrounds deserve extra consideration. And asked if his daughters will deserve affirmative action when they apply to college, he said that they “should probably be treated by any admissions officer as folks who are pretty advantaged.”
Quieter on the GOP Side
To date, education has been more prominent in the Democratic than the Republican campaign. Rudy Giuliani’s education platform is brief and doesn’t mention higher education, but talks about his work reforming the New York City public schools and favoring “school choice.” Mitt Romney, the former Massachusetts governor, has a series of education statements calling for tougher standards and more accountability, and also calls for increased research support, but his emphasis has been on K-12. John McCain has said relatively little about higher education, but has called for fiscal restraint and the end of federal earmarks for special projects, many of which end up in higher education.
Several Republican policy experts on higher education said this week that they haven’t been consulted by campaigns yet, and expected that there would be more detailed proposals down the road, possibly when the Republican field is smaller.
William D. Hansen, who held senior posts in the Education Departments of the current and former President Bush and who has also headed a group for nonprofit lenders in the guaranteed loan program, has had some discussions with the Romney campaign. Hansen said Tuesday that he does not play any official role in the campaign and that it would be premature to say anything more. Herb Allison, chairman and CEO of TIAA-CREF, is close to McCain. Federal Election Commission records show that Allison gave Straight Talk America, McCain’s political action committee, $5,000 in October 2005 and another $5,000 in May 2006. (A spokesman for TIAA-CREF said that Allison’s duties there are full time and that he is not playing any formal role in the McCain campaign.)
While some college officials are trying to influence specific campaigns, others are trying to influence all of the campaigns — with the idea of making education a more central issue.
One such campaign is called “What’s Your Plan?” and is sponsored by a coalition of chapters of the Public Interest Research Group, the American Federation of Teachers, the Association for the Advancement of Sustainability in Higher Education, and other groups. While the groups are generally associated with a liberal take on education issues, the group is nonpartisan and aiming its activity — pressing candidates to answer a series of questions — on Democrats and Republicans alike. The idea is for students to attend as many campaign events as possible, identifying themselves as part of the “What’s Your Plan?” project, and then to ask for specific plans on four issues of concern to young voters: global warming, college affordability, financial security and health care.
“What we want is for all the candidates to talk directly to young people and outline their plans for how they are going to make the dream of a college education more affordable,” said Dave Rosenfeld, one of the organizers. “We want to ask the candidates over and over again, at every town hall meeting, pancake breakfast and event. We want the candidates to know that students care about these issues.”
Another campaign has deep pockets. Ed in 08 — sponsored in part by the Bill and Melinda Gates Foundation — is a new group that will aim to spend $60 million between now and the 2008 election to encourage all candidates to pay more attention to education issues. The group also plans to criticize candidates (as a group) when education is ignored. For example, it issued an analyis Tuesday night noting that education was ignored in the evening’s Republican presidential debate — and the previous debates of Republican and Democratic candidates.
Roy Romer, who has served as governor of Colorado and superintendent of schools in Los Angeles, is leading the effort and has already been meeting with campaign staffs. The emphasis is on elementary and secondary education, but he said that the issues of interest to the group — such as rigor of courses in schools and finding top teachers — relate directly to higher education as well.
Romer said that in talking with campaign officials in Republican and Democratic campaigns, he sees a link in their interests in K-12 issues and the costs of college. “Candidates for political office want to address people where they are in the real world. Many people are very concerned when they send their child to college and find them doing remedial work,” Romer said. “Now a family is paying a lot of money to send a child to college and they are going to be very concerned if the child is doing catch-up work — that’s the kind of work a candidate senses that people want to address.”
It’s not surprising to Romer that student loans are emerging as a top issue in the campaign. “It’s part of the issue of costs,” he said. “Parents and students are concerned about coming out of colleges with unmanageable debt, so there is substantial interest.”
May 9, 2007
House of Representatives Expected To Pass Amended Student Loan Sunshine Act Today
Here’s interesting news from NASFAA, the National Association of Financial Aid Administrators:
House Expected To Pass Amended Student Loan Sunshine Act
Today, the House of Representatives is expected to vote on, and pass, an amended version of the Student Loan Sunshine Act (HR 890) which is virtually identical to a bill (S. 486) introduced on Feb. 1 by Health, Education, Labor, and Pensions Chairman Edward Kennedy (D-MA). The amended version differs slightly from the original bill introduced by Education and Labor Chairman George Miller (D-CA) on Feb. 7 by incorporating Code of Conduct requirements contained in the Financial Aid Accountability & Transparency Act introduced by the Education and Labor Committee’s ranking Republican Howard “Buck” McKeon (R-CA) two weeks ago. A bipartisan agreement between Miller and McKeon on the contents of the bill paved the way for today’s floor consideration.
The revised Student Loan Sunshine Act is being considered using an expedited House floor procedure called the Suspension Calendar. The Suspension Calendar is used for non-controversial bills that are expected to pass overwhelmingly. Debate is limited to a maximum of 40 minutes and, in order to “suspend the rules” (where the term “Suspension Calendar” gets its name) and pass such a bill it must receive at least a 2/3rds vote. Most bills on the Suspension calendar are passed on a voice vote, but if there is a recorded vote, then historically very few such bills do not get the required super-majority vote. If there is a recorded vote on H.R. 890 it will be approved, if not unanimously, then with very few no votes.
According to a summary released by Miller’s office, the proposed amended legislation will “clean up the student loan industry and ensure that students and families will encounter a more trust-worthy student aid system.” A few of the actions specified by the Act to achieve this goal include:
- Requiring both institutions and lenders to adopt strict codes of conduct that adhere to specific guidelines
- Banning all gifts by lenders to schools
- Prohibiting school participation on lender advisory boards
- Prohibiting risk-sharing agreements between lenders and schools
- Only allowing preferred lender lists if certain criteria are met
- Banning staffing of school financial aid offices by lenders
- Setting specific requirements on private lenders, such as informing students of federal borrowing options before allowing them to borrow private funds, requiring exit counseling with the school’s involvement, providing detailed borrower information including clear Truth-in-Lending statements
- Setting strict marketing standards, including specific disclosure requirements for schools and lenders.
May 3, 2007
Some access restored to NSLDS
Well it’s a start at least- Guarantors have been given access to NSLDS, which is good news for students. We’ve had customers here who practically have to sign away their first born child to prove to a lender/guarantor that they’re in school still, or conversely, that they’re out of school. Because lenders still don’t have access, lenders are working with old data or no data whatsoever, and the onus is on the student to provide proof – and as any college student knows, getting official documentation from your college takes time. Time which is quite precious if you suddenly and incorrectly find yourself in repayment because your lender thinks you’re out of school!
Read the article from the NY Times here.
Some Access to Student Finance Data Is Restored
The federal Education Department announced yesterday that it was restoring some access to a database with personal information on millions of financial aid applicants.
The department restricted access last month to the database, the National Student Loan Data System, out of concern that student lenders or other marketers were improperly obtaining private information about potential borrowers. Loan companies, guarantors (the agencies that guarantee federal loans against default) and other entities were barred.
The department outlined a series of new security procedures yesterday in a letter sent to 35 guarantors. To get into the database, guarantors will have to provide the names of employees who will be given access, along with certification that the company will comply with access rules.
Other entities, like lenders and loan-service companies, will have to wait their turn to regain access.
Pam Eliadis, director of the department’s student loan database group, wrote that the database was “not to be used for the marketing of student loans or other products or services.” The database is meant to help determine eligibility for federal financial aid and to assist in loan collection.
Also yesterday, Representative George Miller, Democrat of California and chairman of the House education committee, asked the Federal Trade Commission to investigate marketing practices by student loan companies. Letters to students “are often intentionally designed to confuse or mislead,” Mr. Miller said, citing two examples: one from the College Debt Corporation and one from Education Loan Funding. He said the companies had used official-looking government logos.
Brian Cain, a lawyer for Education Loan Funding, said the company would cooperate. Calls to the College Debt Corporation were not returned.
May 1, 2007
One University rated lenders by perks
The Wall Street Journal is reporting that the University of Texas – Austin actually ranked lenders based on perks their office received! I’m not trying to defend all financial aid departments, but I really must point out that this case is an exception and not the rule. I’ve noticed that even the innocent financial aid departments are being attacked in the current climate, and that’s not fair to people who dedicate their lives to helping students.
But by all means – this particular group needs a major wake-up call and some strict guidelines (and perhaps a little shakeup at the top?).
“University Rated Lenders by Perks
The University of Texas at Austin’s Office of Student Financial Services rated student-loan firms based on “treats” and other meals provided to university officials, school documents show.
In internal reviews of their lists of lenders recommended to students, financial-aid officials rated the loan companies based on loan volume, customer service and whether they offered students reduced fees. But “visibility” was another factor the office cited, which it defined as “based on the number of lunches, breakfasts and extracurricular functions for entire OSFS staff.” Lenders on the list were graded on the quality of their culinary largesse by metrics ranging from ‘very good’ to ‘poor.’ ”
Please note a paid subscription is necessary to read the entire article.
April 30, 2007
Defaulters versus Taxpayers
Here is a very interesting opinion piece from the Washington Times. In particular, the author argues some very good points about default rates. As student loans are guaranteed by the government, any loan that is not paid back is shouldered by tax payers. What’s astonishing is that while around 11% of FFELP borrowers default on their loans, more than 16% of Direct loan borrowers go into default!! That’s 150% of FFELP loan borrowers – all of it being shouldered by tax payers.
Defaulters vs. taxpayers
By Leslie Carbone
April 29, 2007
New York State Attorney General Andrew Cuomo on March 22 announced a civil lawsuit against Education Finance Partners, a student loan company based in San Francisco, for offering colleges incentives to steer student borrowers toward the company’s loans.
American colleges accept a variety of financial incentives from some large student loan companies to steer students to borrow from them, according to Mr. Cuomo. Such goodies include substantial cash payments, free trips to resort destinations for campus financial aid officers, and company-manned call centers to answer students’ financial aid questions. Institutions that have accepted such incentives include Long Island, Boston, Clemson, Baylor and Drexel Universities.
“We believe these revenue-sharing agreements are really no different than kickbacks,” Mr. Cuomo charged at a news conference.
Senate Health, Education, Labor and Pensions Committee Chairman Edward Kennedy, Massachusetts Democrat, sent a letter to several other large student loan companies, including Sallie Mae, Citibank, Bank One and Bank of America, demanding information about their financial relationships with colleges.
These actions will no doubt energize politicians eager to take credit for clipping the wings of private lenders who earn profits from federally guaranteed student loans.
The Bush administration has proposed reducing the amount the government insures private companies against defaulted loans and increasing the fees companies must pay. But for an industry that operates on slim margins such measures would likely reduce competition and hurt students when companies simply pass these increased costs on to their customers.
Others propose more direct lending by the government. But such a shift could increase the taxpayers’ burden and drive up the overall costs of college.
As many taxpayers may not be aware, the U.S. Department of Education operates two competing loan programs, and the taxpayers bear the risks of both. Under the William D. Ford Direct Loan Program, the department makes and administers loans directly to borrowers. Under the Federal Family Education Loan (FFEL) program, private companies provide the capital and administer the loans, but the loans are largely federally subsidized and insured.
Some believe one way to rein in costs would be to scale back the FFEL program and expand the Ford Direct Loan program, thereby cutting out the middleman and potentially reducing costs.
But the devil is in the details — or, in this case, the defaults. The default rates under the Ford Direct Loan Program are higher than under the FFEL program, and the gap is widening. When a college grad defaults on a federally insured student loan, the taxpayer is on the hook for most of the balance.
The Office of Management and Budget says the 2007 projected weighted average default rate under the FFEL program is 11.7 percent; under the Ford program, it is a whopping 16.65 percent. Already 3.1 million Direct Loans are expected, and the increased burden to taxpayers would be significant if the program were expanded.
What accounts for the different default rates? Private companies have both the incentive and the ability to be innovative in keeping track of borrowers, enabling them to prevent and recover bad debts.
Students are a poor credit risk. They typically have limited credit histories, no secure jobs, and an immature sense of responsibility. That’s a main reason the federal government insures student loans.
But private companies are often better equipped than government agencies for keeping track of their customers. Government bureaucracy is inherently less efficient. Even the most diligent civil servants are hamstrung by the fact their public bureaucracy moves slowly and less able to take advantage of the best practices of the most successful private companies. Giving a federal agency more direct responsibility, in student lending or anything else, is likely to make its inherent inefficiencies costlier to taxpayers.
Federally insured student loans now provide 30 percent of all payments for college tuition costs. That loan market has more than doubled in the last 10 years, and economists have argued the result actually put upward pressure on college costs.
Four decades of experience have shown expanding the taxpayers’ burden while reducing students’ responsibility doesn’t make college more affordable.
The College Board says the cost of attending a public college or university has risen 86 percent, adjusted for inflation, since the 1991-92 academic year; private college costs have soared 52 percent in the same time. Tuition and fees for the current academic year at private, four-year institutions reached $22,218, up 5.9 percent from last year. Prices at public, four-year institutions rose 6.3 percent, to $5,836.
It’s time to take a hard look at the reasons college costs escalate, including rapidly rising federal student aid, and to pass policies that pressure colleges to decrease tuition — and not simply shift the taxpayers’ burden from one shoulder to another.
Who is Eligible for Federal Aid?
In order to be eligible for a Stafford Loan or any other Federal Financial Aid you must be one of the following…
- U.S. Citizen
- U.S. National (Includes Natives of American Samoa or Swain’s Island
- U.S. Permanent Resident who has an I-151, I-551, or I-551C (Permanent Resident Card)
If you are not in one of the above mentioned categories, you must have an Arrival-Departure Record (I-94) from the U.S. Citizenship and Immigration Services (USCIS) showing one of the following designations:
- Refugee
- Asylum Granted
- Cuban-Haitian Entrant, Status Pending
- Conditional Entrant (valid only if issued prior to April 1, 1980)
- Parolee (Must be paroled in the U.S. for at least one year and must be able to provide evidance from the USCIS that you in the U.S. for other than a temporary purpose and that you intend to become a U.S. Citizen or Permanent Resident)
You are not eligible for Federal Aid if you only have a Notice of Approval to Apply for Permanent Resident (I-171 or I-464).
If you are in the U.S. on F1 or F2 Student Visa, or J1 or a J2 exchange visitor visa then you are not eligible for Federal Financial Aid. Also, students with G Series Visa’s are not eligible.
The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans
April 26, 2007
Am I eligible for Loan Forgiveness?
See below for a detailed Stafford and Plus Loan Discharge and Cancellation Summary Chart….
|
Discharge/Forgiveness Condition |
Amount Discharged/Forgiven |
Notes |
|
Borrowers total and permanent disability or death* |
100 Percent |
Plus Loans may be discharged in the event of a death but not the disability of a student for whom the parents borrowed. |
|
Full time teacher for 5 consecutive years in a designated elementary or secondary school serving students from low-income families. |
Up to $5,000(up to $17,500 for teachers in certain specialties) of the total loan amount outstanding after the completion of the fifth year of teaching. Under the Direct and FFEL Consolidation Loan Programs, only the portion of the consolidation loans used to repay eligible Direct Loans or FFEL Loans qualifies for Loan Forgiveness. |
Plus Loans are not eligible for teacher loan forgiveness. At least one of your five consecutive years of teaching must occur after the 1997-1998 school year. |
|
Bankruptcy (Rare Cases) |
100 Percent |
Cancellation is possible only if the bankruptcy court rules that the repayment would cause undue hardship. |
|
Closed School (before the student could complete course of study) or False Loan Certification |
100 Percent |
For Loans received on or after January 1, 1986. |
|
Identity Theft |
100 Percent |
Effective July 1, 2006 |
|
School does not make requires return of loan funds to lender. |
Up to the amount that the school was required to return. |
For Loans received on or after Jan. 1, 1986. |
Questions….Contact the Department of Education at 800-433-3243. You may also find additional information on http://www.StaffordLoan.com.
The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans
April 25, 2007
How does your award letter rank?
Here’s an interesting article – ther’s a new website that helps decode and demystify financial aid award letters! There’s a glossary of what terms actually mean, and analysis of 5 actual award letters. Check out the article below and the site itself at FinancialAidLetter.com.
An A for Your Aid Award Letter (or an F?)
As if financial aid directors don’t have enough to worry about these days, now they need fear a failing grade on a new Web site, FinancialAidLetter.com, that dissects aid award letters for clarity and transparency.
“Over the years, people have been giving me letters and saying, ‘I don’t understand these,’” says Kim Clark, a senior writer at U.S. News & World Report who launched the Web site last week while on a six-month Kiplinger Program in Public Affairs Journalism fellowship at Ohio State University. “And I would look at them and say, ‘Wow, I don’t really understand them either.’”
“There’s so much jargon; there are so many buzzwords. The letters that students receive from colleges are often unintelligible to 17-year-olds or especially a parent who hasn’t been to college,” Clark says. “It makes it very difficult for families who are trying to compare offers.”
FinancialAidLetter.com offers a glossary defining the jargon and answers to frequently asked questions on student aid issues for high school students and parents. But on top of all that, it “decodes” aid letters from five institutions – Hendrix College, American and Monmouth Universities, and the Universities of Arizona and Pittsburgh – indicating in red any potentially misleading or unclear information. (Clark says that she asked high school counselors to recruit students to share their letters, and so the universities were chosen based on which students were willing).
A group of experts assigns each letter a grade based on clarity and completeness of information. Among the common transgressions cited by the evaluators: Unexplained acronyms and abbreviations, unsubsidized loans packaged as aid without any explanation (running the risk, evaluators say, of students, particularly first-generation students, thinking they’re “free money”), and incomplete information about cost of attendance.
For instance, the University of Pittsburgh, which receives a B-, is faulted for failing to include any explanation of what’s listed on the letter simply as the PHEEA (a grant from the Pennsylvania Higher Education Assistance Agency). The University of Arizona gets a B but also gets demerits for listing federal PLUS parent loans toward the total award (and since parents eligible for PLUS can borrow up to the balance of tuition after grant aid, institutions that do this can end up sending the message that the total aid award equals the total cost, Clark says).
Meanwhile, Monmouth University gets a D, in part for imposing tight deadlines on students and also for including “alternative financing” — described by graders as “a fancy name for a loan, which shouldn’t be counted as ‘aid’” — in its award letter.
“I was looking for something simple so that families can sit down and say, ‘Aha, this is how much it will cost to send Junior to college.’ None of these letters do so,” says David Hawkins, director of public policy at the National Association for College Admission Counseling and one of the site’s six volunteer graders.
“It wasn’t clear what the students and families were in for when it came to total cost, when it comes to how much aid they were getting versus loans.”
Yet, some of the financial aid directors whose letters were dissected describe a different philosophy about whether loans should be packaged as aid, and point out that while they were docked for including few details about various aid options in their letters, the explanatory information accompanying the letters was not considered or evaluated on the Web site.
“Needless to say, I’m not happy about the site,” says Claire Alasio, associate vice president for enrollment management at Monmouth. “The rating, I think, was very arbitrary, very unfair.”
“For example, one of the things that we were critiqued on was not offering the complete cost of attendance. When we publish our award letter, we very carefully specify that the costs we provide are for tuition and fees, in the case of a commuting student, or tuition, fees, room and board in the case of a resident student,” Alasio says. Additionally, administrators make the conscious decision to address the balance between gift aid and cost by including the “alternative financing” line in the award letter – and providing students in accompanying paperwork with various options for paying that balance via “alternative financing,” be it through taking out a PLUS or private loans, or enrolling in the university monthly payment plan. “From our point of view, by putting that on the award letter, we’re showing students and parents that there is a way to pay that gap,” says Alasio.
“There’s a difference in philosophy between our philosophy at the University of Arizona and the people who run that site,” adds John Nametz, the financial aid director there. “We believe in absolute full disclosure of all options on the award letter,” he says – adding that the university’s letter has a “back page” that wasn’t evaluated on the Web site.
The question of how to clarify award letters isn’t a new one within the financial aid world. In 2000, a National Association of Student Financial Aid Administrators committee on college access developed the Award Letter Evaluation Tool to offer colleges “a framework in which to provide ‘what families want to know’ in a language understood by all.”
Yet, the field has generally resisted standardization, Clark says.
“Simplicity and ease of comparability are really important,” she says, criticizing colleges that bury important information in “six inches” of material and underestimate the true costs students will face in their award letters by only including tuition, room and board, and fees (minus books, travel and other expenses).
“At a cost now of sometimes over $50,000, it’s not clear to me why consumers should not be given the same basic consumer rights that they receive in other, less important financial transactions. My God, when they buy a box of Jell-O for 69 cents, they’re given more consumer information than when they spend $50,000,” says Clark (who says that she’s unsure at this point how the site, which belongs to US News & World Report, will grow, and whether more critiques of letters will be added).
Don Hossler, a professor of educational leadership and policy studies at Indiana University and one of the evaluators for the site, says that as a former vice chancellor for enrollment services, he can understand the issue from both the student and administrative perspective.
“The first time I saw our letters [as vice chancellor], I thought, ‘Oh, my God,” he says, laughing (and quickly adding that the letters have since been updated). But, at the time, he and other administrators were unable to alter the award letters, he remembers, because the software they were using didn’t enable them to make the changes they desired.
“It can be complex on the back-end sometimes to write good letters,” Hossler says. “But I don’t think that absolves us of our responsibility.”
Stafford Loans for Foreign Enrolled Students
What a lot of students dont realize is that they may still be eligible for Stafford Loans even though they are attending a school overseas. The process for the loan is somewhat different than the process for schools in the U.S.. Your first step is always to complete your Fafsa. This must be done in order to receive any Federal Financial Aid. Once your Fafsa is completed, typically, you would receive an award letter from your schools financial aid office. In the case of a Foreign School this most likely won’t happen. You will need to contact the school and let them know that you are applying for the loan. They will need a copy of a signed Promissory Note and your SAR. The SAR will come from the Department of Education and the Promissory Note will come from your lender. To obtain a Promissory Note, visit www.StaffordLoan.com and click apply online. Make sure to sign and mail your Promissory Note to the address mentioned on the application. Mail a copy of the MPN and the SAR to your school. Your school will then certify the loan and the funds will be disbursed.
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