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

Fill Out the FAFSA!

I'm back from California, where I spent seven weeks with my mom, who had major surgery. I was there at the beginning of the year, so I missed reminding you to FILL OUT YOUR FAFSA!

The FAFSA is the Free Application for Federal Student Aid. Most financial aid, even that which comes from the states and the colleges, start with the FAFSA. Many college deadlines are in February and March, so time’s a wastin’. Financial aid is given on a FIRST COME, FIRST SERVED basis, so the quicker you get your FAFSA done and submitted, the better off you are.
With the economy tanking, more people than ever will be applying for financial aid, so there's even more competition than usual. Some states are cutting back their financial aid and many colleges are raising their tuition. More reasons to get going on the FAFSA.

Even if you are fortunate enough to have a job and make a decent living, you want to fill out the FAFSA. Many colleges are so expensive that even people making good money can qualify for financial aid. Also, if you're going to have to take out a loan, government loans have better interest rates and terms than private loans. The government will pay the interest on some federal loans while the student is in college, and repayment of some federal loans don’t begin until after the student graduates or stops going to college. You can't get a government loan for college without filling out the FAFSA.

So get going! The official FAFSA site is www.fafsa.ed.gov. Note that it is not a .com site. If you go to a .com site you may be asked to pay to have the FAFSA submitted.

If You Need Help
If you need help in completing the FAFSA, check out the government publication “Completing the FAFSA, 2009-2010”. This has an explanation for each question asked in the FAFSA. You can also call toll-free 1-800-433-3243 or TTY users (for the hearing impaired) can call 1-800-730-8913.

COMING SOON: “The Secrets of Financial Aid” – an ebook with all the secrets I’ve discovered in my comprehensive research of the subject. Make sure you’re on my email list, so you can get a copy as soon as it is released. Click here to sign up. You’ll also get a free copy of the ebook “A Parent’s Survival Guide to College” by insider Neil P. O’Donnell, academic advisor and professor at a private college in NY.

Blessings,Bonnie

Increase Your College Financial Aid

Last time I told you I’d give you some ethical ways of increasing college financial aid and decreasing the EFC (Expected Family Contribution). I’ve been researching this and there are ways that I feel a Christian can do this without feeling that they are doing something unethical. This is somewhat like tax planning, which can also go both ways – some “tax planning” borders on illegal and can be definitely unethical. As Christians we want to steer clear of anything like that.

Since the FAFSA (Free Application for Federal Student Aid) is a snapshot of a certain day in terms of assets, you can control the assets somewhat. If you are planning on making a large purchase in the near future and you’ve been saving some cash for this, you might want to go ahead and buy that big purchase so the cash is gone. I wouldn’t say to go out and buy things just so you have less cash, but buying something a little earlier than you planned is another thing entirely.

If you’re going to owe the IRS, one of the things you could do is pay your taxes before you fill out the FAFSA. You need to do your taxes, or at least estimate them, before filling out the FAFSA, so you’ll know if you owe taxes. I know it’s normal to wait to pay until you absolutely have to, but in this instance, it might be better to go ahead and pay, if you have the cash. If you’re going to have to put your tax payment, or anything else, on a credit card or loan, then it won’t help with the EFC, because they don’t take debt into consideration.

While, it would be financially positive for the EFC to pay the taxes before you fill out the FAFSA, don't let that be a reason that you put off completing the FAFSA. You don't want to miss a deadline or miss college-funded financial aid because they've run out. (See last blog.)

If you’re looking at long-term savings, then consider that a larger percentage of your child's assets than your assets will be included in the EFC . If you’re wondering whether to put something in your name or your child’s, putting it in your name will save you money, as far as the EFC is concerned. Of course, if it’s already in your child’s name, I don’t think you can legally move it.

Which brings me to this important note: I’m not an accountant, a financial planner or a lawyer, so before you do anything that might impact you financially or legally, you should consult a professional.

I hope everyone is getting their FAFSA’s done without a lot of hair-tearing. If you have questions about federal financial aid or filling out the FAFSA, you can call toll-free 1-800-4-FED-AID (1-800-433-3243) or go to Completing the FAFSA, a 68-page ebook, prepared by the federal government, with lots of answers to your questions.

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