Income Based Repayment for Federal Student Loans

There’s a new program for government college loans that gives students with big college debt some relief. It is based on your income and family size, so that if you have a large debt and a small salary, your payments are adjusted taking your family size into consideration as well. This new program, appropriately called Income Based Repayment (IBR), is available now for people who have any Stafford, Grad PLUS or Consolidation loan made under either the Direct Loan or program, unless the loan is in default, parent PLUS Loans, or consolidation loans that repaid a parent PLUS Loan. Although your lender will make the calculations to determine a new payment, you can find out if you are eligible and approximately how much difference this program would make on your monthly payment by going to the government’s IBR Calculator.

To use the IBR Calculator you will need to know your estimated adjusted gross income, the amount that you owed on your eligible federal student loans when you entered repayment, the estimated average interest rate on your eligible federal student loan, and your family size. You plug these figures into the IBR Calculator, and this gives you the payment amount your would pay on your government student aid through the Income Based Repayment plan. If that payment is lower than the monthly payment under a 10-year standard repayment plan, then you are eligible to repay your loans under IBR.

During this time of economic hardship and mounting student debt, this federal student loan program could be a lifesaver for many students and their families. Check it out at the Federal Student Aid website.

Blessings,
Bonnie

Student Loan Update + Wedding News

I looked at the date on my last blog entry, and can’t believe it’s been so long since I’ve written anything. So many things have been happening…

On a personal note, the most important thing that’s happened to me is that my son Chris got married. It was a beautiful wedding and my son and his new wife Nicole are very happy. Here’s a photo of the lovely couple.

Nicole and Chris

In addition to my son’s wedding, I’ve been writing two ebooks on financial aid for students, as well as working on some other projects for Christian College Parents. The writing is going well, but it hasn’t left much time for other things, like my blog!

Several things over the last few weeks have caught my attention, however, and I wanted to share them with you.

FIRST THE GOOD NEWS:

President Bush has signed legislation to help parents and college students with their student loans.

HIGHLIGHTS of the College Cost Reduction and Access Act:

· Monies received by institutions from selling their student loans must be used to provide more loans for students

· Temporarily removes medical bill payment delinquencies up to 180 days as a reason to reject parent applying for PLUS loans for their children’s tuition

· New subsidized Stafford loans interest rate dropped to 6%

And that’s just the beginning!

· The new maximum Pell Grant scholarship is now $4,731, up $490 from last year. This is the first in a series of increases to eventually raise the grant by $1090 by 2012.

· The interest rates for unconsolidated student loans taken out before July 1, 2006 has now dropped to 4.21 percent. You can get a fixed rate of 4.25 percent and combine all your student loans into one payment by getting a consolidation loan now. (Those loans taken out after July 1, 2006 won’t be eligible for this rate because they are at a fixed rate of 6.8 percent.)

· Even if your local bank has stopped issuing consolidation loans, you can still get one through the federal government’s Direct Loan program.

THE NOT-SO-GOOD NEWS:

Although government undergraduate student loans should be available to people who have filled out the FAFSA and qualify, private loans and loans through the Parent Loan for Undergraduate Students (PLUS), available to parents and graduate students are harder to come by.

Why is that?

· PLUS loans require a credit check, something the undergraduate student loans through government programs do not. Higher credit scores are required for these loans as a result of the subprime mortgage crisis.

· Credit score requirements for private loans will be even higher since they are not guaranteed by the federal government.

· Lenders make more money on loans for four or more years of college than they make on loans for two years of college.

This means that people with less than wonderful credit scores, low to moderate income, and/or plan to attend trade schools or community colleges will be the ones that have a harder time paying for college.

These are the very people who need the most help. If we want an educated citizenry with the knowledge and skills needed in today’s world, we need to make education easier to get, not harder.

If you are still trying to figure out how to finance this fall’s college education, here are some things to try:

· Contact your financial aid office. If you have not filled out the FAFSA, ask them if your child could still get government aid, if you did fill it out now.

· Ask the financial aid office if any scholarships or grants have become available that your child might qualify for.

· Ask if your child could get in the work/study program.

· Ask them if you could pay with an installment program over several months.

· PRAY

I don’t guarantee that any of those options will result in new funding, but it doesn’t hurt to ask. You just might be pleasantly surprised.

What about you?

Have you been affected by the student loan crunch? If so, please leave me feedback on how you’re coping with the situation.

Blessings,

Bonnie

Student loans-good and bad news

Recently I read two very different articles about student loans. The first one was all about the bad news concerning student loans and the second one was all about the good news. I sure was glad to read the second one!

BAD NEWS-

First I read a Newsday article by Carrie Mason-Draffen that appeared in The Houston Chronicle entitled Student loan market pinched. It said that the “subprime mortgage meltdown and the ensuing credit-market crunch have slowed lending and cooled investor interest in securities, including those backed by student loans.”

MORE BAD NEWS-

The article went on to say “In addition, the federal government has cut billions of dollars in subsidies to lenders who make federally guaranteed student loans.” According to the article, this makes lenders less likely to offer the federally guaranteed loans.

You wouldn’t think that there would be any good news after that, would you?

GOOD NEWS-

However, an article written by Stacy Teicher Khadaroo for The Christian Science Monitor, called Amid loan worries, a silver lining for students, states that the credit crunch in the private sector will push some students to apply for the federal loans with interest rates that can be half that of the private loans. The article also said that “Almost half of college students fail to collect all the federal loans – fixed at 6.8 percent – that they are eligible to receive.” In other words, because of the publicity that the credit crunch is receiving, students and their parents are finding out about the federal loans for which they qualify and saving themselves a lot of money in interest. WHOOPEE! That’s what I’ve been talking about!

So what about the problem regarding the federal loans?

MORE GOOD NEWS AND SOME BAD NEWS

The good news, according to the same article, is that, the federal loan system has “’impressive backstops…to make sure there’s loan availability,’” according to Robert Shireman, executive director of the Project on Student Debt in Berkeley, California.

However, it seems that these backstops are not completely ready to be used, if it becomes necessary. The story goes on to say that “Congressional education committees have urged Secretary of Education Margaret Spellings to make sure those ‘backstops’ are ready if needed. Under a lender-of-last-resort provision, 35 guaranty agencies would be obligated to serve as lenders if any problem arose. But that’s never been implemented before, and requires work to be made operational.”

EVEN MORE GOOD NEWS-

“Financial aid officers are eager to help students sort through the confusing news,” says the Christian Science Monitor article (emphasis mine). See that? “Financial aid officers are eager to help.” When approached the right way, most financial aid officers are eager to find a way that all accepted students can go to their colleges. Unfortunately, some parents start thinking that the financial aid officers are their opponents, especially if their students don’t get the financial aid packages that they wanted. I think this is a very harmful attitude, because, after all, financial aid officers are just people doing their jobs, limited by the resources they are given by their colleges.

As Christians, we always want to apply the Golden Rule when we interact with other people. You and I both know this isn’t always easy, especially when a big stressor, like money, is involved. However, I’ve found that using the Golden Rule will also yield better results, all other things being equal.

Not that I always manage to do this, but I do try. Right now I’ve got someone I need to apologize to because I didn’t treat her as I would want to be treated, because she didn’t treat me the way I wanted to be treated. And I was big time stressed at the time. I know that’s not a legitimate excuse, but I’m human.

God’s been working on me about this for a couple of days. First, my Beth Moore Bible Study homework included the verse: “Let your conversation be always full of grace, seasoned with salt, so that you know how to answer everyone.” (Colossians 4:6)

Then today at church the pastor talked about forgiving people, even if you think they were wrong and you were right. Boy, that struck home with me. So I decided that I not only had to forgive her, but that I also needed to apologize for being less than Christian in my reaction to her.

BACK TO STUDENT LOANS-

So there you have the good news and the bad news about the state of student loans today. I think the good news somewhat negates the bad news. However, with bad news being what sells papers, it’s often hard to find the good news of a situation. However, I’ll always give you the good news with the bad news, if I possibly can. In addition to the things I’ve learned through experience, and the eighteen months I spent doing research on the issues facing Christian high school and college students and their parents, I continue to monitor the news regarding these issues.

QUESTION FOR YOU-

Is anyone facing situations that have been affected by what’s going on with student loans? Please add a comment. Sharing could help others facing a similar situation, especially if you’ve found a good solution.

NEW EBOOK COMING-

I apologize for not blogging much lately. I’ve been working on an ebook, (tentatively-titled “The 10 Things You Absolutely Have to Know about Financial Aid) , and it’s taken up some of my blogging time. I’ll let you know when it’s ready (soon), and how you can get a copy.

Blessings,

Bonnie

GOOD NEWS in College Financial Aid

As I continue to research college financial aid for you, I've come across wonderful news!

Bowing to pressure from the American people and Congress, many colleges are using more of their endowments to limit or completely eliminate loans from their financial aid packages!

At Stanford, where this year the cost of attendance is $49,500/yr, they recognize that many people will not be able to afford that. Students whose families’ total income is lower than $45,000/yr get a free ride, with the exception of some self-help, which Stanford requires of all their students receiving financial aid. The standard amount of self-help required is $4,000/yr, which the student is expected to provide through working or taking out loans. Stanford has also set aside an additional $5 million for financial aid for families with incomes from $60,000 to $135,000.

This year Emory University, where the cost of attendance is $47,000/yr, eliminated loans for undergraduates whose families earn under $50,000/yr. For families that earn up to $100,000/yr Emory is capping the students total loan amount at $15,000 for four years. Considering that borrowing $80,000 --$100,000 for college is not unheard of, a cap of $15,000 is great. Private loan companies advertise that you can get up to $40,000 a year!

Brown University recently announced that it is eliminating tuition for students whose parents earn less than $60,000. Their cost of attendance for the 2007-2008 school year is $48,660. Not only are they helping families that earn under $60K, Brown will also substitute grants for student loans in the financial aid packages of students whose families earn less than $100,000 a year.

And this is just the tip of the iceberg!

Reports of universities cutting or limiting the loans from their financial aid packages are coming fast and furious! Every week another college announces that they are using more of their endowment to lessen the burden on their students. I don't know about you, but I consider this a great victory for parents and students! Maybe now students can get an education without graduating with the millstones of massive debt hanging around their necks.

Nice to have a bit of good news for a change. I hope all your news is good news when it comes to financial aid!

Blessings,
Bonnie

Financial Aid – Fill Out FAFSA Now

Well, the holidays are over, and it’s time to start thinking about the FAFSA (Free Application for Federal Student Aid). I do hope you had a wonderful Christmas, but it's time to get to work!

EVERYONE should fill out the FAFSA, even if they don’t think they qualify for financial aid.

The reasons are simple. Believe it or not, colleges with high endowments and universities that are expensive offer financial aid to families with high incomes. You might be surprised by how much financial aid you qualify for. Many colleges have stopped including loans as part of their financial aid packages and are using more of their endowments than they have in the past.

Even if all you qualify for are loans, you may be eligible for federally-subsidized loans, which have lower interest than private loans. Private loans should only be used as a last resort!

If you don’t fill out the FAFSA, you may miss out on all sorts of financial aid.

Although the federal deadline for submitting the FAFSA is June 30, 2008, many states and schools have earlier deadlines. Two of the colleges I checked had deadlines of Feb. 15, 2008 and one said to submit it as soon after January 1^st as possible.

Besides the state and university deadlines, there is another good reason for getting it in as soon as possible. Part of the financial aid given students is provided by the individual colleges. When it is gone, it’s gone, so the sooner you apply the better.

So go to the FAFSA website and start getting organized. There are papers to be collected, taxes to estimate or complete, PINs to apply for. The sooner you get started, the better!

Next blog I’ll talk about ethical ways to minimize the EFC (Expected Family Contribution).

Blessings,
Bonnie