10:48 - Student Lending Analytics Blog
10:48 |freep: Welcome, Freepsters!
| |
|10:49 |freep: We're getting situated, so please feel free to send on your financial aid question and we'll get read to answer |
| |them. |
|10:49 |freep: Our expert today is Mark Kantrowitz, publisher of and a nationally recognized expert on financial |
| |aid. |
|10:49 |freep: He'll start answering your questions at 11 a.m. |
|10:51 |freep: You can get started by checking out Susan Tompor's column from today on the subject |
|10:51 |freep: Susan Tompor: Families look harder to cover college costs |
|10:53 |freep: And just FYI, questions are moderated so you won't seen your question right away |
|10:59 |Jewel: |
| |This is Jewel Gopwani, a business writer with the Detroit Free Press. I’ll help moderate the chat today. Here is a |
| |question sent to money@. |
| |Amy asks: |
| |I was wondering what the usual income limit was for a Pell Grant, or does it differ from school to school, year to |
| |year? I have two children in college and an unemployed husband. Last year, one of my daughters received a Pell Grant |
| |but not the other daughter. This year, although our income dropped a little, neither of them received a Pell Grant. |
| | |
| | |
|11:00 |Mark Kantrowitz: |
| |Excellent question. |
| | |
| |While there is no firm income cutoff on eligibility, 98% of Pell Grant recipients have family AGI of $50,000 or less. So|
| |an increase in family income could explain why both children did not qualify this year even though one did last year. |
| |But that does not explain why one qualified for a Pell Grant and the other didn't. |
| | |
| |There are a variety of factors that could have affected Pell Grant eligibility for one child but not the other. Pell |
| |Grant eligibility is based on the Expected Family Contribution (EFC), which is based on the sum of the parent |
| |contribution and the student contribution. A difference in EFC for the two children due to a difference in the student |
| |contribution could cause one to have an EFC above the eligibility threshold and the other below it. The student |
| |contribution is based on 20% of the student's assets and 50% of student income above the income protection allowance |
| |(IPA). The IPA was $3,080 last year and will be $3,750 this year. So a difference in their income or assets could be |
| |responsible and would be my best guess given the circumstances as described. |
| | |
| |Also, two years ago the Pell Grant was subjected to tuition sensitivity. A difference in the tuition charged by each |
| |child's school could be responsible. This was repealed by the College Cost Reduction and Access Act of 2007. |
| | |
| |Another common cause, though clearly not the case for this family, is when the number of children in college changes. |
| |Usually (but not always) an increase in the number of children in college will cause an increase in Pell Grant |
| |eligibility. Most often this is noticed when one child graduates, causing the sibling's EFC to increase. |
| | |
| |Finally, it is possible that there was an error on one child's FAFSA that did not appear on the other child's FAFSA, or |
| |one school may have granted a professional judgment adjustment for an unusual family financial circumstance and the |
| |other college did not. I'd suggest comparing the EFCs as reported on the Student Aid Reports and then comparing the |
| |FAFSAs as submitted. Any difference between the two could be responsible. Especially look for digit transpositions in |
| |income figures. |
|11:01 |Jewel: Thanks, Mark. Here is a question from Laurie: |
| |Both my husband and I are fortunate to still have our jobs, however, what happens if one or both of us find ourselves |
| |unemployed after we submitted the FAFSA for this year? Our son is in his first year at MSU. |
| |Also, are there any options for middle class families whose buying power has greatly diminished but still find ourselves|
| |as not qualifying for financial aid? |
| | |
| | |
| | |
|11:01 |Mark Kantrowitz: The Expected Family Contribution is based on the prior tax year. For example, if you are submitting a |
| |FAFSA for the 2009-10 academic year, it will be based on 2008 tax year data. If there is a change in family financial |
| |circumstances from last year to this year, regardless of whether it occurs before or after you submit the FAFSA, you |
| |should contact the college to ask for a "professional judgment review". Sometimes this is called a "special |
| |circumstances review". This includes unemployment of a primary wage earner for the family or even a decrease in income. |
| |It helps if you provide a copy of any third party documentation relating to the unusual circumstance, such as a copy of |
| |the layoff notice. The college has the authority to make adjustments to the inputs to the need analysis formula to |
| |compensate for unusual circumstances. The amount of the change will be based on the financial impact of the unusual |
| |circumstance. For example, if one parent has been laid off the school will not only want to adjust for the loss of |
| |income, but will also take into consideration any severance pay and unemployment benefits expected to occur during the |
| |academic year. That being said, they will also consider changes in the other parent's income. So if one parent is laid |
| |off but the other parent gets a big raise, both changes will be considered. Also tell the school about any unusual |
| |expenses, such as high unreimbursed medical bills. If an expense is not discretionary in nature the school is more |
| |likely to make an adjustment for it. The bottom line is you should always contact the school's financial aid office if |
| |there is anything unusual about your family's financial circumstances, whether an unusual expense or a change in income.|
| | |
| |As a middle income family you should look into the education tax benefits, such as the Tuition and Fees Deduction |
| |(recently extended through the end of 2009), the Hope Scholarship and the Lifetime Learning Tax Credit. You will most |
| |likely find the Hope Scholarship to be the most beneficial of the three, but you should examine each of them to see |
| |which is best for your specific financial circumstances. |
| | |
| |Also, everybody, regardless of income or financial need, qualifies for the unsubsidized Stafford loan and for the Parent|
| |PLUS loan. |
|11:02 |Jewel: |
| |Here’s another question sent to the freep: |
| | |
| |What type of colleges (public or private) would be more likely to provide the most financial aid based on merit? My |
| |granddaughter is a junior in high school, does very well in standardized tests and is taking all advanced level college |
| |prep courses and has about a 3.95 GPA. |
|11:03 |Mark Kantrowitz: The colleges that aren't as well known are more likely to provide academic scholarships in order to |
| |attract talented students like your granddaughter. We list several at |
| |scholarships/academicscholarships.phtml |
|11:03 |[Comment From Frank C] |
| |I recently filed a FAFSA for my graduating senior. What's the best way to follow up with the schools he is interested in|
| |to see what funds may be available to him? |
|11:06 |Mark Kantrowitz: The colleges that admit him will send you a "financial aid award letter" sometime in late March or |
| |early April. This will list a package of various awards available to him, including federal, state and institutional |
| |grants, need-based loans and work-study. |
| | |
| |If there are any unusual family financial circumstances, such as a change in finances from last year to this year, or |
| |any unusual non-discretionary expenses (e.g., unreimbursed medical bills, private secondary school tuition) bring them |
| |to the attention of the college by sending them a separate letter. Do not include the letter with your FAFSA. |
| | |
|11:06 |[Comment From Guest] |
| |My daughter does not qualify for financial aid because of my income. That does not mean we can afford the tuition |
| |because of other financial obligations. What should we do? |
|11:09 |Mark Kantrowitz: First, write a letter to the college asking for a "professional judgment review" and provide |
| |information about the financial obligations to the school. It's entirely up to the discretion of the school, but if they|
| |school decides that the circumstances merit an adjustment, it might lead to increased aid eligibility. |
| | |
| |Other suggestions include: |
| |1. Search for scholarships on free web sites like . |
| |2. Use the education tax benefits, such as the Hope Scholarship, Lifetime Learning Tax Credit, and Tuition and Fees |
| |Deduction. |
| |3. The unsubsidized Stafford loan and the PLUS loan are available to all families, even those who do not have financial |
| |need. |
|11:09 |[Comment From Chris] |
| |If you have to take a student loan is it a requirement for the parent to co-sign? |
|11:12 |Mark Kantrowitz: Federal student loans, like the Perkins and Stafford loan, do not have cosigners. There is no need for|
| |the parent to cosign these loans, nor can they. |
| | |
| |The Parent PLUS, a federal loan for parents of undergraduate students, is borrowed by the parents, not the student. |
| | |
| |Private student loans, on the other hand, allow and encourage cosigners. It is a good idea for the parents to cosign |
| |such loans even if the student can qualify on his or her own. The lenders use the higher of the two credit scores not |
| |only to determine not only eligibility, but also the interest rates and fees. So if the parents have a better credit |
| |score than the student, as is usually the case, cosigning the loan can reduce the cost of the loan. |
| | |
| |Because of the credit crisis many lenders that offer private student loans have tightened their credit underwriting |
| |criteria, requiring a higher FICO score to qualify. They are also requiring more borrowers to have cosigners. For |
| |example, in 2007 Sallie Mae had a cosigner rate of about 50%, while in 2008 this increased to more than 2/3. |
|11:13 |[Comment From Guy] |
| |I inherited some money from a parent's estate last year, and used most of it to pay off debts. This is a one-time thing |
| |and does not reflect my typical annual income. People have said I should contact each school my child is applying to |
| |individually to let them know of my situation. Do you agree with that advice? |
|11:15 |Mark Kantrowitz: I agree. This is a good example of an unusual circumstance that justifies a professional judgment |
| |review. An inheritance is a one-time event that is not reflective of ability to pay during the award year. Many colleges|
| |will make an adjustment to disregard it as income but will still count it as an asset so that you aren't |
| |double-penalized for the one-time event. Of course, if you've already spent the inheritance to pay down debt before |
| |filing the FAFSA, it won't show up as an asset on the FAFSA. |
|11:16 |[Comment From Frank C] |
| |Is there a threshold of total family savings, college savings plans, other investments, etc. that a student should not |
| |realistically expect any assistance? |
|11:22 |Mark Kantrowitz: Not really. The need analysis formula is complicated and there are a lot of aspects that can cause a |
| |family that has high income to nevertheless qualify for some aid. For example, the number of children in college has a |
| |major impact on aid eligibility. The more children in college, the lower the EFC. This is because the parent |
| |contribution is divided by the number of children in college. The EFC is heavily weighted toward income, and so ability |
| |to pay is split among all the children. |
| | |
| |It's a little known fact that only 4% of dependent students have any contribution from parent assets. Many parent assets|
| |are sheltered by the formula, including money in qualified retirement plans, the net worth of the family's principal |
| |place of residence, small businesses owned and controlled by the family, and an asset protection allowance based on the |
| |age of the older parent (typically $50,000 for most parents of college-age children). Even if you're among the 4%, the |
| |worst-case impact on aid eligibility is 5.64% of unsheltered parent assets above the asset protection allowance. |
| | |
| |Also, filing a FAFSA is a prerequisite for the Stafford loan. Everybody qualifies for an unsubsidized Stafford loan, but|
| |the federal government requires you to submit the FAFSA in order to make sure you don't also qualify for other forms of |
| |aid. |
| | |
| |So even if you're earning $250,000 a year and have a lot of assets, it is still worthwhile to file the FAFSA. |
|11:22 |Jewel: |
| |Here’s a question sent to the money@: |
| | What are the key factors for divorced parents that can influence the ability to receive financial assistance through |
| |FAFSA and similar formulas? |
|11:23 |Mark Kantrowitz: In the case of a student with divorced parents, only one parent's financial information is reported on|
| |the FAFSA. This parent, called the custodial parent (not necessarily the parent who has custody), is the parent with |
| |which the student lived the most during the twelve months ending on the date the FAFSA is submitted. If the student |
| |lived with neither parent more, then it is based on whichever parent provided more support to the student, which is |
| |usually the parent with the greater income. (A student might have lived with neither parent more in a joint custody |
| |situation where there is an even number of days in the year (e.g., a leap year), or when the divorce was recent, or when|
| |the parents are living together after the divorce.) |
| | |
| |Colleges will verify custody arrangements by asking for a copy of the divorce decree. |
| | |
| |A separation will be treated the same as a divorce. However, an informal separation (as opposed to a legal separation) |
| |requires that the parents do not live together, so the college may ask for proof that the parents maintained separate |
| |residences, such as copies of leases or mortgage statements. Living with friends or in a hotel room (or if one parent |
| |travels frequently on business) doesn't count. |
| | |
| |By excluding one parent's income usually the student will qualify for more aid. |
| | |
| |Often the colleges will ask the non-custodial parent to complete a supplemental form for awarding the college's own aid.|
| | |
|11:23 |[Comment From John] |
| |With two kids in college next year, will I see an increase in the amount of aid available to them next year? |
|11:28 |Mark Kantrowitz: When the number of children in college increases from one to two (or more), usually the family sees an|
| |increase in the amount of aid available. There are some esoteric situations in which a family with very low income might|
| |see a slight decrease, but in most situations the family will see an increase. |
| | |
| |Here's a hypothetical example to illustrate. Suppose the parent contribution for one child in college is $20,000 and the|
| |student contribution is $5,000. That child has an EFC of $25,000 ($20,000 + $5,000). When the number of children |
| |increases to two, they roughly split the parent contribution in half. So each child will have a family contribution of |
| |$15,000 ($20,000/2 + $5,000). Financial aid is based on financial need, which is the difference between the cost of |
| |attendance and the EFC. Let's assume that the cost of attendance (COA) is $30,000. So when one child was in college, |
| |that child would have financial need of $30,000 - $25,000 = $5,000. When there are two children in college, each has |
| |financial need of $30,000 - $15,000 = $15,000. That's a big jump in aid eligibility. |
| | |
| |This is why it is better to have twins than children who are separated in age by 4 years. Twins get more aid, all else |
| |being equal. Likewise siblings who are very close in age get more aid. It's an artefact of the formula. |
|11:28 |[Comment From Brian] |
| |Is there a maximun income for the parents to qualify for student loans |
|11:31 |Mark Kantrowitz: Eligibility for the Parent PLUS loan does not depend on income. It does, however, require that the |
| |parents not have an "adverse credit history". This includes having had a foreclosure, repossession, tax lien, wage |
| |garnishment, bankruptcy or certain other derogatory events on the credit history for the past five years, or having a |
| |current delinquency on any debt of 90 or more days. It does NOT depend on their credit score. |
| | |
| |Private student loans may have minimum income thresholds for cosigners and borrowers and may have maximum debt-to-income|
| |ratios for cosigners. They do not, however, have a maximum income limit. In fact, if the parents have high income they |
| |are more likely to qualify for a private student loan. |
|11:31 |Jewel: |
| |Here’s a question sent to he freep about the Michigan Education Trust, which allows for tuition to be pre-purchased for |
| |a Michigan resident to any Michigan Public university, college or community college. |
| | |
| |Our daughter is finishing up her first year at Michigan State. Luckily, we have a MET to cover her tuition, but we are |
| |paying for room and board, books, fees, etc. |
| | |
| |Is she eligible to apply for scholarships and grants even though she is not a freshman? Do you have any websites or |
| |contacts to pass along regarding this? |
| | |
| |Also, I filled out the FAFSA last year and she was told she wasn't eligible for any funds, and with her father being |
| |retired, we thought she would be. Exactly what good is the FAFSA? What does the household income need to be? Are the |
| |FAFSA funds like a scholarship/grant or do they have to be paid back? |
| | |
| |Any insight you could pass along would be greatly appreciated. |
| | |
|11:34 |Mark Kantrowitz: Many private scholarships are available to students who are already enrolled in college. So search |
| |free scholarship databases like . |
| | |
| |Also, don't forget to apply for federal student aid every year. Financial circumstances can change each year, and |
| |Congress enacts changes to the need analysis formula frequently. For example, the amount of money a student can earn |
| |before it affects their aid eligibility will be increasing by $750 a year for the next few years. Federal student aid |
| |includes grants, loans and work-study. |
| | |
| |Also look into education tax benefits which give you some money back on your income tax return for college costs. |
| | |
| |Note that many scholarships may have a cost of attendance limit and some may be limited to tuition. Since the MET pays |
| |for tuition, you may find that some awards are not available to you. For example, the Tuition and Fees deduction is |
| |limited to tuition and fees, as the name suggests, so that education tax benefit may not be available to you. On the |
| |other hand, distributions from 529 college savings plans can be used to pay room and board expenses since such plans |
| |have a broad definition of qualified higher education expenses. |
|11:34 |[Comment From Steve] |
| |Unfortunately I lost my job two weeks before I completed my MBA. I took student loan to pay my tuition expenses. Now |
| |that I don't have a job and the job outlook is soo grim and my repayemnt starts in May of this year. What should I do? |
|11:39 |Mark Kantrowitz: The first thing you should do is call the lender(s) to tell them about your situation and ask about |
| |your options. You should always talk to them before you default, since you lose options if you default. |
| | |
| |There are a variety of options on federal education loans. You can use an alternate repayment plan, such as extended |
| |repayment to reduce the size of the monthly payments. Extended repayment reduces the size of the monthly payments by |
| |increasing the loan term. (This will, however, increase the total interest paid over the lifetime of the loan. For |
| |example, going from a 10 year term to a 20 year term on a 6.8% Stafford loan cuts the monthly payment by about a third, |
| |but increases the total interest paid over the life of the loan by a factor of 2.18.) |
| | |
| |Another option is an economic hardship deferment or forbearance. These are periods of time of up to three years during |
| |which your monthly payments are suspended or significantly reduced. Interest continues to accrue, but is added to the |
| |loan balance. It is not a good idea to use a deferment or forbearance for an extended period of time because the loan |
| |will just keep on getting bigger and bigger. But if you're actively looking for work and can't afford to make the |
| |monthly payments, a short deferment or forbearance will not do much harm. |
| | |
| |Private student loans also offer forbearances, but usually limited to up to a year. |
|11:40 |[Comment From Tahnee] |
| |Is full financial aid still available for students with a low income level? For example, if the total bill is $20,000, |
| |can a student get aid for that amount? |
|11:43 |Mark Kantrowitz: Low income students often qualify for significant amounts of aid. For example, a dependent student |
| |with family income of under $30,000 will usually qualify for an automatic zero EFC. This yields the maximum amount of |
| |financial aid. |
| | |
| |At most colleges students receiving financial aid are first subjected to a "self-help level" which is met through |
| |work-study and need-based loans. Then any remaining need is often met mostly through grants. (Of course, if the student |
| |qualifies for the Pell Grant and other federal/state grants they get them, as those are first-dollar awards.) |
| | |
| |There are more than five dozen colleges, mostly elite colleges, that have adopted generous financial aid policies that |
| |eliminate loans from the financial aid package, replacing them with grants. At such a college a student with a 0 EFC |
| |would graduate with no debt. |
|11:43 |[Comment From Marcia] |
| |Are books deductible on income tax returns? |
|11:46 |Mark Kantrowitz: Textbooks are not currently deductible on federal income tax returns. However, the US House of |
| |Representatives just passed legislation (still pending in the Senate) which would amend the definition of a qualified |
| |higher education expense for the Hope Scholarship tax credit to include "course materials" in addition to tuition and |
| |fees. By "course materials" they mean textbooks and other college-required expenses for class supplies. |
|11:46 |[Comment From Jessica] |
| |I am currently applying for graduate schools and I am wondering what recommendations you have about the best places to |
| |look for scholarships, loans, grants, etc for potential graduate students? |
|11:47 |Mark Kantrowitz: The web site not only includes undergraduate scholarships, but also graduate fellowships, |
| |teaching assistantships and research assistantships. You should also submit the FAFSA at fafsa.. |
|11:47 |[Comment From Guest] |
| |With the skyrocketing cost of a higher education, is it even worth getting a 4 year degree if you are going to paying |
| |off that financial aid for the next 10 years? What is going to be done about those costs? |
|11:47 |Jewel: Thanks for your questions, everyone. We have received lots, so if you haven't seen your question posted, don't|
| |worry, Mark will get to it. |
|11:48 |freep: And FYI, this page will transition to a replay of the live blog as soon as it ends. So you can come back at any |
| |time and recap all the questions and answers. |
|11:54 |Mark Kantrowitz: It is still worthwhile to obtain a bachelor's degree. For most students the increase in lifetime |
| |income exceeds, on a net present value basis, the net cost of their education and the opportunity cost of not working |
| |during the college years. |
| | |
| |You may have heard of the Census Bureau figure that lifetime earnings for a bachelor's degree are $1 million more than |
| |for someone with just a high school diploma. I updated this figure to $1.2 million using the same methodology in July |
| |2007. While some may argue about the value on a net present value basis, all agree that it is still financially |
| |worthwhile to obtain a college education. There are also other benefits of obtaining a college education. See |
| |educators/higheredbenefits.phtml for additional details. |
| | |
| |That being said, the cost-benefit tradeoffs can depend on the amount of debt, the field of study and the college you are|
| |attending. If you are spending $100,000 to get a degree for a job that will pay only $40,000, you should think seriously|
| |about switching to a less expensive college. Degrees in business and engineering and computer science (or other |
| |scientific fields) pay better than degrees in art or humanities. |
|11:54 |[Comment From Marcia] |
| |Can I report on my taxes the losses incurred on my 529 plan? |
|11:56 |Mark Kantrowitz: Yes and no. In order to report the losses on your 529 plan you must completely liquidate the plan and |
| |offset those losses with any gains from distributions on other 529 plans you may own. Then the losses are deducted as a |
| |miscellaneous deduction, subjected to the 2% of AGI threshold. |
| | |
| |On the other hand, if your 529 plan is in the red and you take a nonqualified distribution, you will not only not owe |
| |the 10% tax penalty but also owe no income tax on the distribution. The income tax and tax penalty are assessed only on |
| |the plan's net earnings, which are attributed to distributions pro-rata. If there are no earnings, there is no income |
| |tax on the distribution. |
|11:56 |[Comment From Barney] |
| |Is is better to submit FASFA now (since our 2008 taxes have not been submitted) and go back and correct the FASFA, or |
| |wait until we have completed our 2008 Tax Return? |
|12:00 |freep: Thanks for your questions, everyone! We won't be able to take any more, but will do our best to work through |
| |those already submitted. |
|12:00 |Mark Kantrowitz: Don't wait until you've completed your 2008 federal income tax return. There are many states with very|
| |early deadlines, and some colleges have priority student aid deadlines, so it is best to submit the FAFSA as soon as |
| |possible after January 1. You should try to get the figures in the right ballpark, but will have an opportunity to |
| |correct any errors (and will be required to do so) later. |
| | |
| |To get the figures in the right ballpark, start with your W2 and 1099 statements. Also look at the last paystub of the |
| |year and the last bank account and brokerage account statements. Also take a look at your 2007 income tax return to make|
| |sure you aren't overlooking any particular type of income, such as capital gains, interest and dividend income, etc., |
| |and to make sure your figures are not too far off. |
| | |
| |Of course, you could always complete your income tax returns early. |
| | |
| |This year companies have until mid-February (February 17) to mail W2 statements and 1099s. In previous years the |
| |deadline was end of January. So you may receive your W2 statements and 1099 forms two weeks later than usual. |
|12:00 |[Comment From Guest] |
| |We were thinking of starting a 529 for young child; given the market does this make sense? Or should we wait to see what|
| |happens? |
|12:05 |Mark Kantrowitz: You should start saving for college as soon as possible. While there may be further losses this year, |
| |it is difficult to predict the market bottom (called "timing the market") except in hindsight. If you set up the plan to|
| |make regular automatic monthly contributions you will get the benefit of dollar cost averaging. This means that when the|
| |market is down, like it is now, your investment will buy more shares which will ultimately be worth more. |
| | |
| |I have two very young children and both had losses of 25% in their 529 plans. I have not, however, changed their asset |
| |allocation (both are using age-based asset allocations) and I am continuing to contribute to their plans every month. |
| |Pulling out now would just lock in the losses. Moreover, in any ten year period the stock market is pretty much |
| |guaranteed to drop significantly, so it is not unexpected to have some losses for a few years. But my children have a |
| |long time to recover from these losses before they enroll in college, and the dollar amount of their losses is |
| |relatively low, given that the savings early on are not as big as the savings they will have when college is imminent. |
|12:05 |[Comment From Julianne STroud] |
| |I have about $40,000 of equity in my home, is it wise to use that for my daughter's college education. My daughter does |
| |not qualify as well for finnacial aid due to our income. But we have other financial obligations that make me think this|
| |is the only place to get the money. And is it true that no student can get a student college loan anymnore? |
|12:13 |Mark Kantrowitz: Although mortgage companies like to spin home equity loans and lines of credit as though you are |
| |"tapping into the equity in your home", the reality is that these are loans. So you need to consider several issues |
| |before deciding whether to rely on a home equity loan or HELOC. |
| | |
| |1. What is the interest rate on the home equity financing? How does it compare with the federal Stafford and PLUS loans?|
| |Note that up to $2,500 in interest paid on education loans is deductible on your income tax returns as an above the line|
| |exclusion from income, so you can take that deduction even if you don't itemize. |
| | |
| |2. What are the consequences of default on the loans? If you default on a home equity loan you could lose your home. If |
| |you default on a PLUS loan, your home is safe. The federal government may have strong tools for collecting defaulted |
| |federal education debt (e.g., garnisheeing up to 15% of wages, attaching income tax refunds, etc.) but they can't |
| |repossess or foreclose on your child's education. |
| | |
| |Please note that federal education loans are still available. These include the Stafford and PLUS loan. You can get them|
| |even if you don't qualify for aid. Congress enacted the Ensuring Continued Access to Student Loans Act of 2008 to help |
| |avert a crisis in the federal student loan system. You should always borrow federal first, as federal education loans |
| |are cheaper, more available, and have better repayment terms than private student loans. |
| | |
| |Private student loans, on the other hand, have become much less available. 39 of the 60 lenders offering such loans have|
| |suspended their loan programs and those that remain have tightened their credit underwriting criteria and increased the |
| |interest rates by 2% to 4%. But most families should be able to obtain sufficient Stafford and PLUS loans to pay for the|
| |full cost of education, so private student loans are usually not necessary. (The main circumstances in which families |
| |borrow private loans instead of federal are when they are unaware of federal borrowing options, when the student is not |
| |making satisfactory academic progress and so has lost aid eligibility, when the school has opted out of the federal loan|
| |program because of a high default rate, and international students who are ineligible for federal education loans.) |
|12:13 |[Comment From John] |
| |With two students in college next year, should I expect an increase in aide available, even if my income was too high |
| |for aid with the first student? |
|12:15 |Mark Kantrowitz: This is similar to a previous question. Even if you did not qualify for financial aid with one child |
| |in college, it is possible that having two children in college will cause both of them to qualify. A lot depends on the |
| |specific financial circumstances. I suggest using an EFC calculator such as the ones on to play "What If" |
| |games, such as increasing the number of children in college to see the impact on aid eligibility. |
| | |
| |But you should always apply for financial aid each year, since the formula is complicated enough and details change each|
| |year, so failing to qualify one year doesn't give any indication as to whether or not you will qualify the next year. |
|12:15 |[Comment From douglas] |
| |im 27, a waiter, and according to my w2 made more than 34,000 last year. i fear i may not qualify for enough grants, if |
| |any, to allow me to finish college. what do you suggest i do in filing my returns and fafsa to maximize the amount of |
| |money i receive. |
|12:20 |Mark Kantrowitz: If you will be quitting the job while you are in college, tell the college and ask for a professional |
| |judgment review. Even though this is a voluntary reduction in income, colleges understand that students may need to |
| |reduce income to focus on schoolwork. (After all, while working 15 or fewer hours a week will improve academics by |
| |forcing you to learn time management skills, working more than 15 hours a week will hurt your academic performance by |
| |taking away time from studying.) |
| | |
| |The FAFSA is heavily weighted toward income. Assuming you were not required to file a 1040, with an income of less than |
| |$50,000 yoiu will qualify for the simplified needs test, which causes assets to be disregarded. If your income were less|
| |than $30,000, you would have qualified for an automatic zero EFC. There's not much you can do about your income from |
| |last year, but look into the Tuition and Fees Deduction. This reduces your AGI and depending on exactly how much you |
| |earned, you might be able to use it and other exclusions from income to reduce your AGI below the $30,000 threshold. |
|12:20 |[Comment From D. Schmidt] |
| |My son is currently a sophomore in a private school and the only way that we can afford it is via the financial aid |
| |package he has enjoyed. My current position has just been elimated so I will be unemployed shortly. Are there any |
| |significant reductions for next year that could jeperdize his current package (Pell Grant, Perkens Loan, Stafford)? |
|12:24 |Mark Kantrowitz: First, you need to talk to the college to ask for a professional judgment review to compensate for |
| |your reduced income due to your impending layoff. (The British have a much more elegant way of putting it: "made |
| |redundant".) |
| | |
| |The good news is the House just passed a stimulus bill that includes significant increases in student aid, including a |
| |$500 increase in the Pell Grant, a $2,000 increase in the unsubsidized Stafford loan, and a $700 increase in the Hope |
| |Scholarship. This legislation is still pending in the Senate, and the current Senate version is not as generous. But the|
| |Senate is expected to vote on their version next week, and the final legislation will likely still include some |
| |improvements in student aid. I wish they would increase the Pell Grant more, but something is better than nothing. |
| | |
|12:24 |[Comment From Guest] |
| |If I apply for financial aid now, how long will it take before I find out if I am approved? |
|12:26 |Mark Kantrowitz: If you submit the FAFSA online at fafsa., you will likely get your Student Aid Report (SAR) from|
| |the government in 2-3 weeks. The colleges you list on the FAFSA then use this information to assemble a financial aid |
| |package. How long this takes varies from college to college, but in most cases newly admitted students will receive a |
| |financial aid award letter in late March or early April. |
|12:26 |[Comment From Guest] |
| |I am losing my job a 2 weeks. My daughter is a graduating senior. Will I be able to qualify for a parent student loan |
| |while unemployed? What if my credit rating is impacted during my unemployment? |
|12:29 |Mark Kantrowitz: You will be able to qualify for a Parent PLUS loan even if you are unemployed. Thanks to the Ensuring |
| |Continued Access to Student Loans Act of 2008, you can defer repayment on the Parent PLUS loan while your daughter is in|
| |school and for six months after graduation. Then you will need to start making payments on the loan. |
| | |
| |Private student loans, on the other hand, do require the borrower or cosigner to have current employment. So loss of |
| |your job may affect your eligibility for private student loans. |
| | |
| |Loss of a job will not affect your credit score so much as failing to pay your bills and debts on time as per the |
| |agreement. Try to avoid being late on any debt. It is very hard to get a good credit score, but very easy to turn a good|
| |credit score into a bad one just by missing or being late on a few payments. |
|12:29 |[Comment From David] |
| |My son is 21 but is on his own because he flunked out of college and burned through the college fund we had saved. Can |
| |he qualify for aid, or does my income have to be factored in? |
|12:31 |Mark Kantrowitz: A student is considered to be a dependent student until age 24. (Students who are married, in graduate|
| |school, have a dependent other than a spouse, in the military or a veteran, or certain other circumstances will qualify |
| |for independent student status.) So unless he qualifies as an independent student, your income will still need to be |
| |reported on the FAFSA until he's age 24. (The age 24 threshold is as of December 31 of the award year. So someone |
| |submitting the FAFSA now for the 2009-10 academic year who will be 24 before the end of the year is independent.) |
|12:31 |[Comment From Tim] |
| |Can you explain the differences between the Hope Scholarship, Lifetime Learning Tax Credit and Tuition and Fees |
| |Deduction? |
|12:37 |Mark Kantrowitz: The Hope Scholarship provides a tax credit of up to $1,800 for the first two years (both tax and |
| |academic) of postsecondary education. It is 100% of the first $1,200 in tuition and related expenses and 50% of the |
| |second $1,200. It is a per-student tax credit. The Lifetime Learning tax credit is a per-taypayer tax credit that is up |
| |to $2,000, and is 20% of the first $10,000 in tuition expenses paid by the taxpayer. There are coordination restrictions|
| |that prevent double-dipping. In most cases the Hope Scholarship is better if the family qualifies for both, since few |
| |families have enough tuition expenses to qualify for the full amount of the Lifetime Learning tax credit. (Any expenses |
| |paid by scholarships don't count for the deduction.) |
| | |
| |The Tuition and Fees Deduction is an above-the-line exclusion from income for up to $4,000 in tuition expenses. It |
| |reduces your AGI and can be taken even if you don't itemize. The value of the deduction in reducing taxes depends on |
| |your tax bracket. If you are in the 25% tax bracket, for example, it can be worth up to $1,000. Some families will |
| |prefer this deduction because it reduces the AGI and so may trigger other benefits that depend on AGI. It also has |
| |higher income phaseouts than the Hope Scholarship and Lifetime Learning Tax Credits. (This may change, as may the amount|
| |of the Hope Scholarship.) The Tuition and Fees deduction will expire at the end of the 2009 tax year unless extended by |
| |Congress. |
|12:37 |[Comment From Liz] |
| |We have 4 kids, one in college, a senior , all 4 have 529's that have lost significant value. We are filling out a FAFSA|
| |for our senior, am I correct in my understanding that the other 529's have to be listed as investments for this child |
| |even though they "belong" to the siblings? Is there a place on the form to explain that these are designated for the |
| |other kids and are unavailable? And, will there be a transcript available for this chat? |
|12:38 |Jewel: Just a reminder, this page will transition to a replay of the live blog as soon as the chat ends. So you can |
| |come back at any time and recap all the questions and answers. |
|12:40 |Mark Kantrowitz: 529 plans where the parent is the account owner and custodial 529 plans (where the student is the |
| |account owner) must be reported as parent assets on the FAFSA if the student is a dependent student. If the student is |
| |an independent student only 529 plans owned by the student are reported. 529 plans owned by grandparents are not |
| |reported on the FAFSA. |
| | |
| |The CSS Financial Aid PROFILE, which is used by about 300 private colleges, has a different treatment, requiring 529 |
| |plans that name the student as a beneficiary to be reported. |
| | |
| |There is no place to explain that the 529 plans belong to siblings. This is a federal requirement and colleges do not |
| |have the authority to exclude 529 plans that belong to siblings. |
|12:40 |[Comment From Guest] |
| |Is it typically true to assume that although private university's tuition can be considerably more than a public |
| |university, if one maxes out their financial aid (EFC = 0 for instance), that the private university will cover a larger|
| |% of the tuition in grants and other forms of aid? |
|12:45 |Mark Kantrowitz: It is correct that more expensive colleges often provide more financial aid than less expensive |
| |colleges, so the net cost (cost minus all need-based aid) is often the same. However, whether that aid is mostly grants |
| |or mostly loans depends on the college. Some of the more elite colleges have adopted policies that substitute grants for|
| |loans in the financial aid package, making their out-of-pocket cost (cost minus need-based aid excluding loans) less |
| |than even some public colleges. |
| | |
| |When evaluating financial aid offers you should focus on the out of pocket cost, since this is the amount you will have |
| |to pay from income, savings and also future income in the form of loans. A college with a lower out-of-pocket cost will |
| |cost you less than a college with a higher out-of-pocket cost even if the net cost is the same. |
| | |
| |See FinAid's section on Financial Aid Award Letters and also the Award Letter Comparison Tool for more information on |
| |out-of-pocket cost and net cost. |
|12:45 |[Comment From Linda] |
| |I have two questions. My husband and I make a good income. However, our daughter goes to school in Atlanta at about |
| |$30,000 per year. We currently owe $50,000 in financial aid loans. She does not qualify for need-based scholarships or |
| |merit-based scholarships. At the rate that we are currently going, we will owe $100,000 when she graduates. What advice |
| |do you have for us? |
|12:47 |Mark Kantrowitz: A few suggestions: |
| | |
| |1. Take advantage of the education tax benefits, such as the Hope Scholarship, Lifetime Learning Tax Credit, and Tuition|
| |and Fees Deduction. |
| | |
| |2. Is your daughter borrowing from the Stafford loan program? If not, she should borrow to the limit before you borrow |
| |from the PLUS loan program, since the Stafford loan has a lower interest rate and fees. |
| | |
| |3. Consider having her transfer to a less expensive college. There are many good colleges that don't cost as much. |
|12:47 |[Comment From Linda] |
| |My niece lost both of her parents. Will she automatically qualify for financial aid? |
|12:49 |Mark Kantrowitz: Orphans are automatically considered independent students. As such her financial aid will be based |
| |only on her own income and assets. Often in such situations the student has little income and so will qualify for an |
| |automatic zero EFC, which will mean qualifying for a significant amount of financial aid. |
|12:49 |[Comment From Marcia] |
| |My daughter will be applying to graduate school for the 2010 winter term at U of M. Does she still fill out the |
| |2009/2010 Fasfa and send it in now, even though she will not be attending in the fall, but in the following semester |
| |(winter term)? |
|12:51 |Mark Kantrowitz: I am not sufficiently familiar with Michigan state aid for graduate students to know whether the March|
| |1 deadline for Michigan state aid involves any aid for graduate students. I don't think it does, but I'm not 100% |
| |certain. If it did, then you would want to submit the FAFSA now. If it doesn't, she can wait until she applies for |
| |admission to submit the FAFSA. It doesn't hurt to submit the FAFSA now. As a graduate student she will be independent |
| |and should complete the FAFSA to indicate this. |
|12:52 |[Comment From Fran Costos] |
| |I have a sophomore and a senior in high school and have been saving for their college tuition since they were born. I |
| |saw their accounts drop 33% recently. I don't think they'll qualify for financial aid. What can we do now to make sure |
| |that we can afford they can go to a great 4-year university? Are there scholarships that they can apply for now? |
|12:55 |Mark Kantrowitz: There are many scholarships available for high school students. Search free web sites like |
| |to find the awards that match your children's profile. Or better yet, get them to search. (There are even scholarships |
| |for elementary school children. But no scholarship matching service list scholarships for children under age 13 because |
| |of the Children's Online Privacy Protection Act. However, you can find a list of all such awards on .) |
| | |
| |You should continue saving for their college education. Hopefully the stock market will start improving in the second |
| |half of 2009, so maybe you'll be able to make back some of the losses. |
| | |
|12:55 |[Comment From Jon] |
| |My question is in regard to the MET. I recently purchased MET contracts for 2 of my 3 children. Have held off on the |
| |third because I am nervous about the stability of the fund that is used to pay for the fees when they enter college. I |
| |have examined the fund and seems to be secure and stable but I am not knowledgeable enough to determine if this is a |
| |safe investment. Interested in your thoughts on the security of the MET contracts. Thanks, Jon |
|1:01 |Mark Kantrowitz: Most state prepaid tuition plans, like MET, are not backed by the "full faith and credit of the state". |
| |So the guarantee is only as good as the fund. However, I doubt that any state will allow a state plan to fail since the |
| |public outcry would be bad politics. |
| | |
| |Most prepaid tuition plans use a fairly stable balanced investment strategy to avoid placing the investments at risk. They|
| |use actuaries to ensure that the returns are sufficient to fulfill the guarantee and adjust the contribution rates |
| |accordingly. Some state plans suffered the same 25% to 35% losses that individual investors faced in the stock market. So |
| |there is reason for concern. But I think it is ok to continue investing. (Please note that I am not able to give you |
| |individual investment advice and must speak in generalities.) |
|1:01 |[Comment From Neil Currie] |
| |This is more at the end of the rainbow, but my son finishes college in April. I have utilized the FALSA site and have had |
| |loans the past four years. What do you suggest I do in terms of consolidating loans to make a single payment as time goes |
| |on. Is there a better interest rate available by doing the paperwork a particular way? |
|1:07 |Mark Kantrowitz: Federal loans originated before July 1, 2006 have variable rates. Consolidating them locks in the |
| |current rate on the loans. I believe that the new rates that go into effect on July 1, 2009 will be among the lowest in |
| |the history of the loan program, so wait until the end of May to see what the rates will be (there should be news stories |
| |about this topic), then compare them with the current rates. If the new rates are better, wait until July 1, 2009 to |
| |consolidate. You can consolidate with the federal government at loanconsolidation.. |
| | |
| |Consolidation gets you a single payment. It also gets you access to alternate repayment plans that decrease the size of |
| |the monthly payment by increasing the loan term (and consequently, increasing the total interest paid over the life of the|
| |loan). |
| | |
| |But consolidation doesn't get you a better interest rate, other than by locking in the interest rates on variable rate |
| |loans at the current rate. If that happens to be a very low rate, it will save money over the life of the loan. If you |
| |have only fixed rate loans, consolidation does not save you any money. |
| | |
| |There are also options for reducing monthly payments that don't require consolidation. You can get up to 25 year extended |
| |repayment without consolidating if you have more than $30,000 in debt with a single lender. Most lenders will also offer |
| |unified billing if all your loans are with the same lender. Starting July 1, 2009, there's a new repayment plan called |
| |income-based repayment (best for borrowers with high debt and low income) that is available even if you don't consolidate |
| |your loans. |
| | |
| |Private student loans cannot be consolidated with federal loans. There are four lenders that currently offer private |
| |consolidation loans, but these all have variable rates. So there is not any financial benefit to consolidating private |
| |loans. |
|1:08 |[Comment From Steve] |
| |I currently have a wife and daughter in college, full and part time. i am on Layoff and want to go back myself in the |
| |spring. Should I apply for financial aid immediately? |
|1:11 |Mark Kantrowitz: Yes, you should apply for financial aid. Since you will be attending in the spring you should submit the|
| |2008-09 FAFSA in addition to the 2009-10 FAFSA for yourself. These will require 2007 and 2008 tax data, respectively. The |
| |2008-09 FAFSA will be for the spring 2008 semester. The 2009-10 FAFSA will be for fall 2009 and spring 2010. |
| | |
| |Also, ask all of the colleges for a professional judgment review and provide them with documentation of your wife's |
| |enrollment and your enrollment in college. While children in college is automatically reported on the FAFSA, parent |
| |enrollment is a professional judgment item subject to the discretion of the school. The school will want to see proof that|
| |you really are enrolled. |
|1:11 |[Comment From Phil] |
| |My son has been accepted to UM Ann Arbor. Pating forcollege wasnt going to be too hard because we had $61,000 in a 529 |
| |plan and my wife and i were making $110,000 collectivelly. But.....Now his 529 is worth $32000 and my income is the same |
| |right now but there is a high probability I will either be losing my job (I make $90000) or taking a 20% pay cut. Will my |
| |son qualify for any grants or will it be all loans that he will have to pay back? Thanks |
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related searches
- windows 10 student discount
- student loan forgiveness after 10 years
- windows 10 student download
- top 10 student loan companies
- free student windows 10 upgrade
- windows 10 pro student discount
- download windows 10 student edition
- windows 10 pro student download
- top 10 student loan lenders
- windows 10 upgrade student discount
- windows 10 download student free
- 10 year student loan forgiveness