Before College: Will Your Student Lose Financial Aid If You Save for College?

A young father recently said, “I’m not saving for college. Everybody knows that anything I save will just make my kids ineligible for government grants!”

There’s some truth to this. The Expected Family Contribution (EFC) is what Washington believes the student and his family can afford to spend on a year at college. It also determines the student’s eligibility for need-based grants. And assets such as savings and investment accounts can enlarge the EFC.

This year, the government’s only large-scale grant program, Federal Pell Grants, is reserved for students with EFCs of $6,094 or less so, if savings or other assets would push an EFC above this amount, the student would become ineligible for federal grants.

Still, there are excellent reasons to save for college:

1. Savings and investments don’t add that much to the EFC. For every $100 a parent owns in assets, just $5.60 count toward the EFC, and the EFC includes only $20 out of every $100 in student-owned assets.

2. Even children with small-dollar savings accounts designated for college are three times more likely attend college and 4.5 time more likely to graduate. These ratios rise as the amounts in college savings accounts grow.

3. Federal grants are already inadequate for financially needy students. The maximum Pell Grant covers just 23.5% of 2018-19 costs at the average state college or university, so even with that maximum Pell award, your student will still need another $19,800 to make ends meet.

4. This problem will only get worse. Student costs are expected to rise sharply over the next several years — partly because inflation has reemerged and partly because legislatures keep forcing tuition increases by downsizing college appropriations. At the same time, Washington’s massive tax cuts for corporations and the wealthy are increasing the pressure cut spending on domestic programs such as Pell Grants.

What does all this mean? Don’t save for college and, if your student does qualify for federal grants, they’ll cover a smaller and smaller share of his college costs. As a result, he (and you) may have to borrow more and more in the student loans that make up 61% of all federal student aid. And since interest rates on these loans are rising, it’s increasingly costly to borrow for college.

There are many ways to amass the money your child will need for postsecondary education. But no matter how you do it, even just a little bit of saving and investing for college is a winning strategy, and a way to reduce your child’s dependence on educational debt.

Contact College Affordability Solutions for a free consultation if you’re looking for ways to make college more affordable for you or your student.

Before, During, and After College: Resources To Help You Understand Your Federal Student Loans

Few students and parents are familiar with their rights and responsibilities as student loan borrowers. Even fewer know of the resources available to help them obtain such information.

The Federal Direct Loan Program makes 90% of all student loans so, today, we’re discussing FDLP information resources for those loans.

Before and During College

To receive your first FDLP loan, you must complete an online Master Promissory Notes (MPN) — your loan contract with the government. It spells out your rights and responsibilities as a borrower. Review it carefully. Ask questions about it if necessary. Make a paper copy and store that copy in a safe place. You can never can tell when you’ll need it.

You must also complete online entrance counseling before you get your first FDLP loan. Pay close attention to its content. You’ll find it really helpful.

The Federal Student Aid (FSA) website is informative and easy to read. Under “Types of Aid,” open its Loans webpage for what you need to know about different FDLP loans, how to get them, their borrowing limits, and how they differ from private student loans. Back on the Loans webpage you’ll also find information on FDLP interest rates and fees.

Finally, your financial aid office should be able to advise you on FDLP loan issues that arise before and during college.

After College

The government provides online exit counseling when you leave school and repayment begins to draw near. Be sure to complete this counseling, and pay close attention to the facts it offers.

There’s also a How to Repay Your Loans webpage on the FSA website. It’ll connect you to guidance about making payments, finding the right repayment plan, and what to do if you’re having trouble making payments. It also links to information about loan forgiveness, cancellation, and discharge, and there’s a repayment calculator for estimating your payments under each repayment plan available to you.

The National Student Loan Data System (NSLDS), which is accessible with your FSA ID, shows you what owe on your FDLP loans, each loan’s status, and the federal loan servicer collecting them.

If you need advice about situations affecting your FDLP debt, call your federal loan servicer or the government’s Student Loan Support Center at (800) 557-7394. You can also call or email the Federal Student Aid Information Center. It’s phone number is (800) 433-3243.

No matter which federal loans you have, bookmark and use these resources. Only by being well-informed will you be able to manage your federal college debt well.

Contact College Affordability Solutions for free consultations if you have difficulty understanding anything about any of your student loans.

Before, During, and After College: Watch Out For Student Aid Scams!

Halloween! The traditional date for trick or treating. But you should beware every day that tricksters out there want to rip you off before, during, and after college.

Students get $253 billion a year in financial aid, and scammers go where the money is, so rest assured they’re after your aid and other money.

Here’s a common scam. The promise to “find’ sources from which you can apply for aid in return for fees of hundreds or thousands of dollars. What’s delivered is information on federal, state, or private aid programs.

You can get this information for free from your high school counselor or reputable scholarship search engines like Big Future and Fastweb.

Another example — the U.S. Education Department (ED) reports phishing emails are targeting student accounts that use single factor authentications of student identity. Scammers then redirect deposits from student bank accounts into their bank accounts. This includes deposits of student aid remaining after tuition and fee payments — i.e. your spending money for the academic term.

Schools notify students upon sending aid to their bank accounts. If such deposits aren’t in your account within 3-4 working days, contact your school and, if need be, notify ED.

Those struggling to repay college debts are also fraud targets. Last year, the Federal Trade Commission (FTC) and 11 state attorneys general found scammers that used false promises of debt relief to steal more than $95 million in illegal fees from federal borrowers.

This year, New York sued several so-called debt relief companies that allegedly talked borrowers into making student loan payments to them for $1,000 in fees. And Betsy Mayotte of TISLA tells of a crooked company pretending to do federal student loan debt relief. It tells borrowers that repayment plans tying monthly payments to income are ending, then charges them fees to keep using such plans.

You can always repay your lender — including ED for Federal Direct Loans — at no charge. And income-sensitive repayment plans aren’t ending. It costs nothing to get or keep them. Just call your federal student loan servicer.

It’s not always easy to recognize student aid/loan scammers, so here are some warning signs. They:

  • Request up-front fees. No legitimate student aid or loan provider charges up front for its services.
  • Seek personal information. Some scammers hope to steal your identity to open fake credit cards in your name.
  • Make promises that sound too good to be true, because they are too good to be true!

If you’ve been scammed, file a consumer complaint with the FTC. It may be able to get your money back, or at least warn others of what to watch for.

Suspicious of some offer related to your student aid and loans? Contact College Affordability Solutions for a free consultation.

After College: If You’re Older and Paying on College Loans, You’re Not Alone. And You Have Options!

The nation’s $1.5 trillion in outstanding student loan debt is increasingly affecting older Americans, and not for the better.

The Consumer Finance Protection Bureau (CFPB) recently found that the numbers of people aged 60 and over owing on college loans quadrupled in a decade. Their average educational debt rose from $12,100 to $23,500 during that period.

A $23,500 debt generates monthly payments that can reach $490. This significantly reduces what aging Americans have to spend on basic necessities, including healthcare. It also cuts into what they can save for retirement.

These problems are compounded by the automobile, credit card, mortgage, and other debts many older borrowers are repaying. Bankruptcy courts, however, hardly ever discharge student loan debts.

Fifty and 60 year olds amass these debts by helping children and grandchildren pay for school or by cosigning — pledging to repay if their students don’t — private loans. Only 27% borrow for themselves.

Not surprisingly, many older borrowers struggle to repay educational loans. The CFPB found that 12% were behind on such payments, negatively affecting their credit scores.

Among federal student loan borrowers aged 65 and over, 37% were in default. The government has the legal right to garnish (confiscate) their social security benefits to repay their defaults. Social security is the only regular source of retirement income for 69% of Americans aged 65 and over, so this is particularly alarming.

Delinquent and defaulted borrowers are also subject to aggressive, hostile, even threatening collection calls and letters. As one expert put it, “A student loan can be a debt that’s kind of like a ball and chain that you . . . drag to the grave.”

How to avoid these problems? If you’re a precollege parent, implement a College Finance Plan. This’ll help your children cut the cost of a quality postsecondary education by, for example, completing college level classes in high school, getting grants, and winning scholarships. It’ll also help you maximize savings and financial resources other than debt to pay that price.

If you and your student must borrow for college, use the Federal Direct Loan Program’s (FDLP’s) student and/or parent PLUS loans. If either of you ever considers private student loans, research and compare them (see here and here) beforehand.

Carefully select your loan repayment plan. Different plans require different monthly payment amounts. In the FDLP, some also lead to loan forgiveness. You can also reduce monthly payments temporarily through forbearance or permanently through consolidation, which is generally better for federal loans than refinancing them.

Finally, FDLP loans offer three pathways for getting out of default. Explore them here.

Owing on college loans late in life need not be a crisis. Check your options. Then pursue what works best for you!

Contact College Affordability Solutions if you’re looking for strategies to better manage your college loan debts. There is no charge for consulting with it on this or other issues related to paying for postsecondary education.

During College: Using Campus Services to Boost Academic Performance Pays Off

Performing well academically makes postsecondary learning more affordable. Completing your classes with good grades does this by helping you:

  • Improve your chances of winning scholarships and paid on-campus IMG_5329assistantships or internships
  • Avoid flunking out or dropping classes to avoid flunking out, both of which require you to pay tuition and fees at least twice to finish the same credit hours; an
  • Maintain Satisfactory Academic Progress (SAP) toward your degree. The government and other providers set SAP standards for the aid programs they fund, so SAP rules may differ from award to award. But whatever they are, you must comply with them to remain eligible for the financial aid you’re currently receiving.

So take advantage of available academic support services even if you’re not at risk of dropping below SAP or flunking out. Given the financial benefits of a good academic record, it just makes sense to use these services as much help as possible as early as possible.

IMG_5332Where to go? That depends on the issue. Of course, if you have trouble understanding or applying anything that comes up in class, see that class’s teacher or teaching assistant right away.

Your institution probably has numerous other services to help resolve situations that make for academic problems. They’re typically free and always confidential. Examples include centers and offices for:

  • Academic Advising: Consult these professionals about classes and course schedules. They can also guide you to other campus resources;
  • Campus Safety or Police: Contact them whenever your security may be in jeopardy;
  • Career and Job Placement: This is for help exploring changes of major and IMG_5335related employment pathways;
  • Counseling: Go here for help with anxiety, grief and loss, stress, and other emotional or mental wellness issues;
  • Disabled Students: This office will help you arrange accommodations and services to overcome functional limitations;
  • Emergency Services: These provide support to help overcome crises, emergencies, food shortages, or homelessness;
  • Learning or Student Success: Go here for tutoring and for coaching, study groups, and workshops to help improve your academic skills — note-taking, public speaking, studying, test-taking, etc.;
  • Legal Services: This’ll help you understand your rights under civil, consumer, criminal, tenant, and traffic laws;
  • Multicultural Students: You can find programs and events to help you understand students from other cultures, deal with prejudice, etc.;
  • Student Health: Get treatment here for physical illnesses or injuries; and
  • Student Housing: Your resident assistant can help you navigate roommate and other living environment issues. He can also guide you to other services.

In summary, there are many forms of academic assistance on campus. Use them early and often to do your best in every class and keep college as affordable as possible!

Contact College Affordability Solutions for a free-consultation if you want strategies to implement before, during and after college to make it more affordable.

Before, During, After College: Vote as if Your Student Aid and Loan Repayment Depend on It . . . They Do!

Do you think your family will one day need financial aid for college? Are you or your student now relying on state or federal aid? Are you struggling to pay off your college debt?

If any of these circumstances apply to you, you have until November 6 to take IMG_5103personal actions to make government programs work for you. How? Vote! You’re not registered to vote? Get registered right away!

There are 6,070 state legislative seats, 435 U.S. House seats, 36 governorships, and 33 U.S. Senate seats up for election on November 6, and you can vote for and against candidates at least in part based on what they’ll do about college affordability.

Make sure you educate yourself about candidate records and positions on grants, loans, scholarships, and work-study. To do this:

  • Review their campaign websites for statements about college affordability and student aid;
  • Write and ask what they plan to do about college costs and student aid; andIMG_5105
  • Confront them at campaign events with direct, specific questions — and don’t let them off the hook until they give real answers.

For example, did you know that, over the last decade:

  • Congress increased funding to provide up to $1,160 (37%) more in Federal Pell Grants. But the average cost of one year at a public college or university increased $7,924 (146%), so the nation’s largest college grant program now covers $6,314 less of those costs.
  • State legislatures allocated only 33% more for grants and scholarships even though there’s been a 12% increase in college students who are paying almost 150% more to attend college.

Did you know the U.S. House Committee on Education and the Workforce recently passed HR 4508 on a party-line vote. If this bill becomes law it would:

  • Eliminate Federal Direct Subsidized Loans, the least expensive form of college IMG_5106debt, which, even if interest rates don’t climb, will raise the typical undergraduate’s cost of borrowing by at least $2,710 (8%).
  • Kill Public Service Loan Forgiveness, leaving tens of thousands of first responders, teachers and others who provide low-paying but essential community services without a way get some of their college debt cancelled in exchange for 10 years of full-time government or nonprofit employment.
  • End the Federal Supplemental Opportunity Grant program that currently provides $840 million a year to our neediest college students.

And did you also know that more candidates than ever are pledging to work for free college tuition if they get elected or reelected?

So there’s no shortage of financial aid issues on which you need to pin down the candidates, then use what you learn in voting decisions. Get busy. November 6 is just 35 days away!

Use College Affordability Solutions’ Topical Index or contact College Affordability Solutions to learn about strategies that’ll help you control your postsecondary education costs before, during, and after college.

Before and During College: Tried and True Ways to Reduce Textbook Costs

IMG_4449Textbooks. They’re vital for postsecondary learning, but expensive. This past June the University of Northwestern — St. Paul’s Dr. Tanya Grosz observed

Textbook prices have risen up to 6 times the rate of inflation. . . . And according to a 2016 study conducted with . . . 40 public colleges in Florida, the high cost of textbooks caused 66.5% of students not to take a certain course, 47.6% to take fewer courses, 37.6% to earn a poor grade, 26.1% to drop a course, and 19.8% to fail a course.

But textbook costs can be shrunk. Most colleges provide lists of required textbook titles and ISBN numbers at or before registration so you have time to save by:

Ÿ•   Shopping Around: A booklist for each class is usually available on-line. Get it, and then compare prices for electronic and physical books — new, used, rental — at various retailers. College bookstores often charge more than you’ll pay elsewhere.

Ÿ•   Going to the Library: Campus and local libraries often have textbooks you can check out. If not, contact your instructor and ask to have books required for you class placed in the campus library.

Ÿ•   Using E-Books: Textbooks may be available electronically — sometimes, but not IMG_4450always, for less than physical books — from online retailers like Amazon, Barnes & Noble, Textbooks.com, etc. You can download them onto Kindles, laptops, mobile phones, or tablets and can do searches, highlight and copy text, insert bookmarks, and make your own notes in them. But remember – rented e-books eventually go away, so buy it if you need to keep it.

Ÿ•   Accessing Open Textbooks: These are digitally accessible texts written by experts, then edited by instructors if needed. Open textbooks are particularly useful for fields of study that require few updates (e.g. mathematics). Ask at your school’s library or maybe check out OpenStax College, a nonprofit based at Rice University, which publishes open textbooks that are free online and low cost in print.

Ÿ•   Getting Used Texts: You can buy or rent used physical books for less than new books. But check their condition. Watch out for broken spines, missing pages, and pages falling out, or books with too much that’s been marked up by others.

Ÿ•   Book-Sharing: Split textbook costs with classmates, and then share. But set clear sharing-schedules, and make sure classmates can be trusted to abide by them so IMG_4453you’ll get the books when planned.

Ÿ•   Book-Trading: Another cost-cutter trading books that are no longer needed for books need in a new term’s classes. Just double check to be sure you have the edition required by your instructor.

These strategies can help cut your expenses, which can help you borrow less for postsecondary education.

Contact College Affordability Solutions for a free consultation on other ways to cut college-related expenses.