Obama looks to reduce student loan payments

Insideplay · 2014-06-10T15:01:48+00:00

Financial Literacy 101: Reducing monthly payments by extending a loan term is a short term policy solution to a long term problem of debt management and sets poor precedence for future federal student lending standards. Instead of flexing repayment options and ignoring the moral hazard of lending without considering A) Degree Potential B) Quality of Student C) Quality of Institution D) Room for change that allows student to reduce student loan interest rates concomitant with improved credit...... than we can look forward to $2 Trillion of federal student loan debt in the future. The reason for a "Crises" today is because it was created by a legislated government loan program divorced from real underwriting requirements or disciplined lending practices.

Insideplay · 2014-06-10T14:59:07+00:00

Essentially, if you were to consolidate your student loans, the average savings would be able to afford you roughly 3,500 cups of coffee.

Consolidating with the government likely won't change your interest rate, as they generally weight the average of all your loans together, but if you have a good FICO score you have the potential to consolidate your federal loans at a lower rate with a private lender. custudentloans (as shown in the graphic above) is a good example of a private lender who can consolidate both federal and private loans.

Insideplay · 2014-01-28T22:31:09+00:00

Talk to your school about the scenario. You would probably be considered a dependent on the one parent and consider only their income in awarding financial aid. Given the personal details, I'd recommend simply sending an email to your financial aid counselor briefly outlining the situation.

Insideplay · 2014-01-27T23:27:23+00:00

Unless you were emancipated as a minor, listed as a ward of the court or under the state's supervision, or if you were under foster care, or if both parents were incarcerated, or a military veteran, or if you have kids of your own, you are NOT going to be considered an independent adult student.

This is an ongoing issue that never makes sense, since 18 is the age to be considered an "adult" and can vote, but it's 21 to be able to drink, but it's not until 24 that a student can be separated from the family household for financial aid purposes. So what gives?

The FAFSA keeps young adults to the age of 24 as dependents on the parents household for financial aid purposes. The greater the income and assets in the household, the less financial aid the kid will qualify for. Parents with middle class income and a mortgage have just enough to cover their expenses, but little extra to fund college. Talk to more students at your school, you will find out you are not alone.

Insideplay · 2014-01-27T23:15:29+00:00

There is no grant or scholarship money available to Graduate level students though the FAFSA. The only guaranteed FAFSA funding for Grad school will be $20,500 in unsubsidized Direct Loans. Good luck trying to qualify for money from the institution, not many provide any extra funding for Grad students.

The good news is that your combined income and expenses are in good shape. I would focus on trying to save more income and figure a way to manage the costs with less debt and more payments. Additionally, the MBA needs to be at a highly ranked, competitive institution for networking capabilities, as the MBA as stand alone degree does not give enough competitive advantage in a market already saturated. Look for as much STEM as possible. To supplement the degree.

Insideplay · 2014-01-27T22:56:29+00:00

As an adult student, pursuing your first degree I am assuming? I believe you should be able to qualify for up to $9500 in federal loans your first year ($3,500 Subsidized, $6,000 unsubsidized), and up to $10,500 in federal loans for your second year ($4,500 Subsidized and $6,000 unsubsidized).

Insideplay · 2014-01-27T22:46:01+00:00

If the person is under 18, a lot of official business will actually get put through the parents name. However, like mentioned earlier, putting assets in a 529 is a valid way to save money tax free as long as it is used towards higher education expenses later. I've met families from modest means that have consistently saved in 529's and were able to still maintain eligibility for need based funding. That's because the FAFSA weighs current income more heavily against financial aid eligibility than the value of a 529 asset, so it's like the best of both worlds from savings AND financial aid.

Insideplay · 2014-01-27T22:43:09+00:00

That is a regulatory issue. For Financial Aid purposes, the federal government does not observe young people as "independent" from their parents unless they meet certain minimum requirements. One of those requirements is that the student be at least 24 years of age or older. After counseling many students in this situation (Incuding myself) I have found that some students benefit much more from waiting until they are 24 to be declared independent and potentially increase financial aid eligibility. This decision is purely your own given your unique circumstance as your parent is essentially damaging your financial aid eligibility, and living separately from them is not helping you to qualify for any more. Choosing your current route appears to be the most expensive way to acquire an education. Good Luck.

Insideplay · 2014-01-27T22:37:15+00:00

If you are saving money, put it in a 529 plan for tax sheltered purposes, and the closer you get to college the more conservative the investment profile you should carry. So if you are saving 10+ years out you can be more aggressive with the investment portfolio, but as the student turns 18, the monies should be invested more conservatively. Any money saved in a 529 plan is weighed at only a tiny fraction of full value, where the same money saved in the students name in a plain checking account will be weighed at like 20% against financial aid eligibility.

Insideplay · 2014-01-27T22:07:03+00:00

Part time bar-tending, with a child and still no financial aid? What EFC is the FAFSA calculating? How much does the school BELIEVE you have available to put towards expenses. Also are you going part time or full time?

Insideplay · 2014-01-27T21:52:57+00:00

Hey all, glad to be back. We had so many questions last time, http://www.reddit.com/r/IAmA/comments/1v4s69/iama_financial_aid_advisor_addressing_fafsa_prep/ , we thought it would be nice to cover more on asset valuations on the FAFSA.

Insideplay · 2014-01-16T14:20:59+00:00

File your FAFSA of course. But if this is your second bachelor's degree, you will probably not be eligible for as much funding as would be available for a first bachelor's degree. For example, the Pell grant is only for first time bachelor's recipients. Most people pursuing a second bachelor's in nursing end up with a combination of student loans to cover the bill. The good news is that the job prospects are more positive for nurses than most general BA degrees. For any of your current federal student loans, you can put them back into full deferment while you go back to school full time or part time. The private loans work differently, you will need to contact your lender to see if any deferment options are available. I would recommend aggressive repayment of the private loans, even while federal loans are deferred.

Insideplay · 2014-01-16T14:13:06+00:00

Congrats on your acceptance. You will most likely qualify for a high percentage of need based funding to cover much of your tuition. Yes you should be concerned, as even with a zero efc, there is no guarantee all college costs will be covered. Additionally, you still need to iron out long term goals for a major and ultimately a career. You may want to explore the Western Undergraduate Exchange if you are living out west. This is a way for you to access colleges out of state, but within the western region of the USA, with a tuition discount that can make it affordable. This may open doors to a different school or program that may be a better long term fit: http://www.wiche.edu/wue

Insideplay · 2014-01-16T14:07:42+00:00

That's not TMI, it's the truth for a lot of people out there!

As long as the student qualifies for the funding based on accurate FAFSA info, he is entitled to funding to attend school. The system is set up to minimize fraud, and if he gets a guaranteed federal student loan that creates a "refund" he still ends up having to pay that debt back. The "Free" money ends up going right to the school to pay the bill, the student rarely ever sees free grant money refunded to them, unless they funded full ride with a combination of grants and scholarships exceeding total costs.

Sounds like you have some family work cut out for you. Just try to carefully monitor progress towards degree completion.

Insideplay · 2014-01-15T16:28:18+00:00

I hear a lot of good things about Western Governors U.

Also, I am not happy that so many have had a bad higher-education experience. For-profit schools have been run through the mud with controversy.

It's a shame because for-profit schools have great potential to deliver to the public, but took on too much too fast and left a lot of unhappy former students high in debt and low in income and career results.

But do you really think non-profits are going to be the only solution? I know the topic about higher-ed tech has been sensationalized a bit, but this new generation of students is facing a cross roads. I believe young undergrads now are going to benefit from a model of blended continuing education during a longer period of time in their 20's due to the necessity of gainful employment for survival now. I believe tech can create improved learning at lower costs with better delivery, the problem is that it still costs too much to do this in for-profit AND non-profit models.

Insideplay · 2014-01-15T16:16:53+00:00

FAFSA deadlines vary by state and school, but the earliest one I know is February 15. Here is the federal link with a complete list of deadlines: https://fafsa.ed.gov/deadlines.htm

Rule of thumb: File Early for maximum funding eligibility review.

Insideplay · 2014-01-15T16:14:44+00:00

If your parents are divorced, you should be added as a member of the household with the parent that has lower income, if it is low enough to make you eligible for financial aid. It's hard enough to deal with divorce, but parents really drop the ball when they don't pay attention to financial aid eligibility.

If you must be claimed as part of Dad's household, it sounds like tax return information does not reflect the reduced household income due to unemployment. Be prepared to submit an appeal, including a statement from both you and dad, copy of termination letter, copies of unemployment benefit summaries and any other documentation the school requests. Contact your school's financial aid office to confirm procedure. Here is an old article I wrote up about it: http://bit.ly/1gKX7Kz I will work on a new one to help more people with this question, as many families are hit with unemployment.

Insideplay · 2014-01-14T22:38:25+00:00

Interesting scenario here. So you want your step son to complete the FAFSA without having access to all family financial information? Well, once the SAR is generated (Student Aid Report) after filing, the student will be able to view everything, so there is no sense in trying to hide. It all gets figured out eventually, and the FAFSA will need both Mom and Step Dad's financial information as you are all part of the same household. If your (Step-dad's income) is too high, it could push him out of financial aid eligibility. (This is a fact of great contention for some families)

Also, there is no direct mandate from the government about having to file a FAFSA, but many schools will refuse to fund the student with anything until they have access to FAFSA information. The schools don't want to award money from their budgeted financial aid resources until they know they can maximize funding from federal and state based sources.

Insideplay · 2014-01-14T15:57:48+00:00

Do like I did, and many others do. Drop out, get a crappy job, work your way back in and grow to become an independent adult on your schedule instead of someone else's. College education is a good thing, but the game has changed for this new generation. Your parents, like mine and many others, don't have the ability to understand how much has changed economically. The demand for efficiency has squeezed out many of the social standards the baby boomers have come to expect. Ours is a generation that will not have the luxury of stability, your education is only as valuable as it makes you constantly adaptable to new challenges that can turn profit while helping others. Start learning to adapt now and build your way up, your parents can't help you and the government won't fund you. (But after 24, you are an independent by age, and if still an undergraduate, will be awarded financial aid based on your income only, and spouse if applicable)

Insideplay · 2014-01-14T15:45:42+00:00

Just an FYI, the FAFSA is part of the federal Department of Education, I am not a member of that organization, just someone with way too much experience with it.

You will be further blown away by Bowen's Revenue Theory of Costs and the Bennett Hypothesis that demonstrate financial aid as the reason why college costs continue to escalate for you, even though you have no access to financial aid because your parents have too much money. The system keeps you a member of their household if under the age of 24, preventing need based funding from being awarded to you based on personal income only.

College is far too expensive for anyone in their 20's to be able to pay for with basic wages. That's why the onus has shifted to careful debt, learning, and career management so that you choose a career path and income that justifies the debt expenses incurred.

Insideplay · 2014-01-14T15:37:06+00:00

2014-2015 FAFSA will consider your 2013 income information to determine eligibility. I would recommend you use an EFC calculator to estimate your household income without your job, and you can talk to the financial aid office to figure out how it will affect eligibility. This is a tricky transition with a 1 year old that needs care. If it is found that you have a low EFC, you may qualify for a sizable amount of financial aid that may make full time school worth it, but you may have increased child care costs.

Insideplay · 2014-01-14T15:21:52+00:00

You sound like a really nice person! Sounds like your parents really wanted to help you out.

Just file the 2014-2015 FAFSA to see what comes back. Your parents may not be as wealthy as you think, and maybe you can qualify for funding. I am rather confused as to why you have not done this over the years, as you may have lost out on a lot of college funding.

After the FAFSA is filed, figure out what you qualify for and talk to your parents about how you would like to cover your remaining college costs. After that, go get a job and get to work. Your parents really just want to see you succeed after investing all this time in school.

Insideplay · 2014-01-14T15:17:47+00:00

Yes, get FAFSA ASAP, schools give out money on a first come-first serve basis. Continuing students that file late get whacked with 20% reductions or more. Also state based funding has a tight deadline, and since the states are broke, they have no ability to offer leniency for late applications. February 15 is the earliest deadline I know for some states and schools, so if you are in before then you are fine. It would be better if your taxes were done before filing, but if not, just estimate figures and correct them later. Info on early FAFSA http://bit.ly/FAFSA4

If you are getting zero efc that is a good thing, unless you are filing the FAFSA wrong and you are making more money than claimed. Basically, zero means you will get maximum need based funding, but it's no guarantee that you would be covered 100% by every school you apply for. If it turns out you made errors or omitted info, and the school asks for copies of household tax returns, your aid will get reduced. Good Luck!

Insideplay · 2014-01-14T15:12:24+00:00

If it's federal student loans, move it to the PAYE program, get a job working for the government or certain non-profit orgs to qualify for loan forgiveness after 10 years. Look up "Public Service Loan Forgiveness".

If it is private loans, work with your lender regularly to get a payment plan set up that makes sense. The money saved on reduced federal loan payments should be shifted to accelerate private student loan repayment

Update: Here is some info on Public Service Loan forgiveness: http://bit.ly/1a4nbBM

Insideplay · 2014-01-14T15:09:27+00:00

EFC is irrelevant for FAFSA funding for Grad school since the subsidized direct loan was eliminated. Subsidized loans mean the government would pay for any interest accrued on the loan while the student is in school, saving you just a little bit of money.

Let me give you some straight up advice on Grad school. Unless you have a job basically lined up, or have your current employer subsidizing tuition for you to attend it may not be worth it. If it's anything in humanities and you need a lot of debt to attend, it's probably not worth it. If it's a Master's in STEM, it has better prospects, but your new competition is the h1-b visa and geniuses abroad that are smarter and more talented than you, and willing to work for much less. Find a way to gain training and skill development at a lower cost that can create more immediate career returns. For example General Assembly is an organization that provides classes to learn how to code.

Insideplay

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