College Affordability Solutions Topical Index

This index links to almost 90 different posts from the last two years, each describing one or more approaches that’ll postsecondary education more affordable. Feel free to review them for steps you can take to do this before, during, or after college

Visit this index whenever you want. And mark August 15, 2018, on your calendar. That’s when College Affordability Solutions will begin publishing fresh posts again every Wednesday to help students and families devise strategies for making a quality postsecondary learning less costly to you.

Before College

College Finance Plan

Cost Reduction Strategies

College Costs

College Search and Selection

Credit Cards

Deadlines

Dependent and Independent Students

FAFSA (Free Application for Federal Student Aid)

Financial Aid Application Processes

Financial Aid Offers

Grants

Money Management

Parent Borrowing

Private Student Loans

Saving and Investing for College

Scams and Rip-Offs

Scholarships

Seeking Financial Assistance

Student Loans

Tuition and Fees

Value of Postsecondary Education

Verification

During College

College Finance Plan

Cost Reduction Strategies

Credit Cards

FAFSA (Free Application for Federal Student Aid)

Financial Aid Offers

Grants

Money Management

Off-Campus Housing

Parent Borrowing

  • Parent Loans — Helpful Today, But A Potential Curse Tomorrow (Published March 7, 2018)

Private Student Loans

Scams and Rip-Offs

Scholarships

Seeking Financial Assistance

Student Loans

Tax Benefits for Higher Education

Working While in College

After College

College Finance Plan

Consolidation and Refinancing

Debt Forgiveness and Cancellation

Grace Period

Missed Payment

Repayment of College Loans

Repayment Assistance

Repayment Problems

Tax Benefits for College Loan Repayment

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Before and During College: Get Answers to These Questions Before Borrowing Private Student Loans (Part 2)

In Part 1 of this series we identified answers to get on “up-front” issues when IMG_2699comparing a private versus federal student loan. Today we recommend questions to ask about things that happen after you get your money, but which are nevertheless essential to determining which loan is better for you.

Repayment Begin

  • When must you begin repaying your debt?

Payments aren’t required on federal student loans while you’re enrolled at least half-time and during a “grace period” lasting six months for Federal Direct Loan Program (FDLP) loans and nine months for Federal Perkins loans. Private student loan repayment start dates vary by loan.

Deferment and Forbearance

  • Under what conditions may payments be temporarily postponed or reduced?
  • What happens to interest that accrues (builds up) during these postponement and reductions?
  • Must you pay a fee to get your payments postponed or reduced?

You may temporarily postpone or reduce your monthly loan payments through various deferments and forbearances. Interest doesn’t accrue on FDLP Subsidized and Federal Perkins loans during deferment, but keeps accruing on other federal loans during deferment and all federal loans during forbearance.

The government charges no fees for deferment or forbearance, but some private lenders do — if they offer deferments or forbearances at all.

Loan Consolidation

  • May my federal and private college loans be consolidated?
  • Does my interest rate change if I consolidate? How much?
  • Does consolidating change my repayment period or other terms and conditions?

An FDLP Consolidation loan pays off whatever federal student loans you choose, but not your non-federal debts.

FDLP fixes your consolidation loan interest rate at the weighted average of all the loans it pays off, plus .125%.

You can usually get lower monthly payments on an FDLP Consolidation loan, which get extended repayment periods based on their size:

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Repayment Plans

  • How long will you have to fully repay your debt?
  • Do you have different repayment options. If so, what are their terms and conditions (monthly payment amounts, etc.)?

The FDLP allows you to choose from seven different repayment plans. The standard plan requires a monthly payment amount sufficient to pay off your debt within 10 years. Four others help ensure you’ll not be overwhelmed by monthly payment amounts by making such amounts a percentage of your Adjusted Gross Income, even if this requires a repayment period longer than 10 years.

Loan Discharge and Forgiveness

  • May any portion of your debt be cancelled? If so, under what circumstances?

Most private student loans offer no opportunities for discharge or forgiveness. Federal student loan debts may be discharged or forgiven under various reasons, including Public Service and Teacher Loan Forgiveness.

College Affordability Solutions offers free advice and counsel on college borrowing based on 40 years experience in student financial aid and student loans. Call (512) 366-5354 or email collegeafford@gmail.com for such assistance.

Before and During College: Get Answers to These Questions Before Borrowing Private Student Loans (Part 1)

Private credit providers want to increase their share of the student loan market. So if you’ll be in college — including graduate or professional school — during 2018-19, you may be targeted by private student loan marketing campaigns. If you are, remember that old saying, “Let the buyer beware!”

Private lenders want to convince you to borrow loans that’ll maximize their profits. You want to borrow loans that are as inexpensive as possible and, since you can’t predict the future, that give you flexible repayment terms. To do this, you’ll need answers to questions about your private and Federal Direct Loan Program (FDLP) borrowing options.

Here are some questions to ask:

Interest

  • What’s the initial interest rate?
  • Is the interest rate ever subject to change? If so, when and on what basis? If the changed interest rate was place today, what would it be?
  • Am I responsible for interest that accrues (builds up) during all phases of the loan’s life? What happens to this interest when I’m not required to pay it?

Many private college loans offer “introductory” interest rates that are lower than FDLP interest rates. But these rates generally rise later. Conversely, every FDLP loan has a fixed interest rate that’ll never change:

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FDLP interest payments aren’t required while you’re enrolled at least half-time and for six months after you leave school. But interest accrues on all but FDLP Subsidized loans during these times and, if you don’t pay it, it’ll be capitalized (added to loan principal) when your grace period ends. Many private loans handle interest in a similar manner.

Credit Record

  • What creditworthiness standards must you meet to get the loan?

Applicants get rejected, or charged higher interest rates, if they don’t have lender-required credit scores. But Washington limits access only to FDLP Graduate and Parent PLUS loans for applicants with “adverse credit histories.”

Loan Fees

  • How much will I be charged to obtain my loan(s)?

Washington currently charges a 1.066% fee on FDLP Subsidized and Unsubsidized loans, and a 4.264% fee on FDLP Graduate and Parent PLUS loans. Private lenders may require larger or smaller fees. These fees are deducted from the loan money you receive.

Private loan marketing campaigns usually concentrate on a few positive highlights about what they advertise so, to get all the answers you need, you’ll have to dig through lender websites and maybe even make calls or send emails to lenders. In-depth information on FDLP loans is available in the government’s Federal Student Loans: Basics for Students booklet.

Next Wednesday
Look right here for even more questions to get answered before you
borrow private student loans.

Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for free consultations about how to compare your college borrowing options.

Before and During College: Prepare for Rising Student Loan Interest Rates

The Federal Direct Loan Program (FDLP) provides 89% of all postsecondary educational loans. Unfortunately, FDLP loans will soon become more expensive to borrow.

FDLP interest rates are set every May for loans made from July 1 through June 30. The 2018-19 rates will be 0.6% higher than in 2017-18, making this the third year in aIMG_2154 row during which they have risen.

Note: FDLP loans are “made” from July 1 through June 30 if, during this period, any portion of their initial installments go directly to students or are applied applied to what they owe their institutions.

Higher rates increase borrowing costs. For example, what if the lower 2017-18 interest rates versus the higher 2018-19 interest rates were to remain in place for the next four years? Depending on the borrower’s choice of repayment plan, the total amount repaid to the FDLP under the higher rates would jump by up to:

  • $2,755 for undergraduates borrowing the maximum amount each year for four years;
  • $7,144 for parents borrowing the national average of $10,226 per year to help their undergraduates earn four-year degrees; and
  • $7,338 for two-year master’s degree students borrowing $25,000 per year.

Why are rates rising? Federal law ties the interest charged on each FDLP loan to the rate at which the government auctions off 10-year Treasury notes every May. The rates at which such Treasury notes are auctioned rises as the economy improves, which it’s been doing since late 2015, so FDLP interest rates have been rising, too.

And assuming there’s no economic recession for the next few years, future FDLP interest rates will climb even higher.

Good news? Federal law fixes FDLP interest rate until loans are totally repaid, so their interest rates never rise. This helps make FDLP loans better than the “variable rate” educational loans offered by many private lending institutions.

Still, rising FDLP rates make college less affordable unless borrowing is reduced. Fortunately, there are ways to do this and still get a quality education, including, but not limited to:

So make plans now, because it’s going to be more important than ever to minimize college debt for 2018-19!

College Affordability Solutions brings 40 years of personal college finance and student loan experience to it’s no-cost consultations with customers. Contact it at (512) 366-5354 or collegeafford@gmail.com for such a consultation.

During College: Advise Your Student to Avoid Dropping Courses, Especially Late In The Term!

The end of another academic term is approaching, and students struggling with courses are no doubt assessing their options. Should they drop these courses? IMG_1947Probably not.

Dropping now is a bad idea for several reasons:

  • Students who drop courses late in a term usually receive little or no refund of tuition and fees paid for the courses. So they get no return on the money they invested, and repeated drops can force them to enroll for one or more additional terms, costing them thousands in extra tuition, fees, and other costs of attendance.
  • If dropped courses are necessary to satisfy academic requirements — either in the “core” curriculum or to fulfill the demands of a student’s major — the student will eventually have to retake them or similar courses. Result? The student pays twice to complete requirements once.
  • Dropping courses can also jeopardize financial aid eligibility. To get federal aid, Washington requires a student to meet institutional standards for Satisfactory Academic Progress (SAP) toward graduation. These standards — usually postedIMG_1948 on financial aid office websites — obligate the student to successfully complete a certain percentage of the courses in which she enrolls. Many scholarship providers, schools, and states apply similar requirements for their aid programs. But if dropping would put a student below these percentages, she could lose future financial aid.

Because of all this, students should avoid the temptation to drop in order to avert grades that are good but, for whatever reasons, aren’t considered good enough. Some students, for example, can’t tolerate anything less than an A for reasons of personal pride. Others may worry that Bs or Cs will ruin their graduate or professional school applications.

Is there ever a time when a student should consider dropping a course? Yes. SAP also requires at least a 2.0 undergraduate Grade Point Average (GPA), and most institutions have minimum GPAs that students must remain at or above in order to remain enrolled. If a student is certain her final grade in a course will put her below these minimums, dropping may be her best option.

Students may appeal lost aid if they fail to maintain SAP. These appeal processes are usually described on aid office websites. Successful appeals generally (a) document extraordinary circumstances (e.g. illness or family emergency) that undermined academic performance and (b) describe steps the student has taken to overcome these circumstances.

IMG_1949Instead of dropping, it’s usually better to seek academic assistance — and to do so ASAP. Visit with the instructor, get a tutor, join a study group, consult an academic advisor or campus counselor, etc. These actions can go a long way toward avoiding all the costly negatives stemming from a dropped course!

 

Got questions about how to avoid making college attendance more expensive than it needs to be? Contact College Affordability Solutions for a free consultation at (512) 366-5354 or https://collegeafford.com.

During College: You Should Be Protesting If Your Student’s Not Detesting Cryptocurrency Investing!

It’s bad enough that 75% of college students gamble. But now another perilous student behavior has emerged. A recent survey by The Student Loan Report indicates that 21% of student borrowers invest in cryptocurrencies such as Bitcoin.IMG_1834

As a responsible parent you of course advise your student not to gamble. But also urge him to stay away from cryptocurrency investments!

Unfortunately, these investments are easy to make. After loan and other aid money pays tuition and fees for an academic term, your student gets the remainder to cover that term’s books and other necessary expenses. Now he could have up to a few thousand dollars in hand.

He can invest these funds — hopefully in a safe and secure bank account, but also in high-risk opportunities such as cryptocurrencies. Wherever he invests, he’ll still need to pay for necessities like books, housing, and food as the term progresses.

IMG_1779What makes cryptocurrencies so dicey for college students? It’s what investment professionals call “volatility.” Cryptocurrencies can become really volatile really fast!

For example, Bitcoin’s value on January 10 was $14,890.72. But by February 5 it’s value dropped to $6,914.26 — a 54% loss! So if your student bought a $2,000 share in Bitcoin on January 10 and sold this share just 25 days later, he lost $1,080 of his investment! Meanwhile, thousands in costs for the term remain to be paid.

Some call Bitcoin the potentially biggest “bubble” in history. A $1,080 loss from his IMG_1782limited pool of funds could easily place your child among the 52% of college students facing high levels of food insecurity, or the 12% college students who are homeless.

Difficulty paying for basic needs undermines academic performance, and money shortages have long been among the most common reasons why students leave college without degrees, so cryptocurrency financial losses could also end up placing your student among the 25% who drop out every year.

Far better for your student to spend as conservatively as possible and, toward the end of the term, if he has money he doesn’t need, return it to the government. For every $100 of his spring Federal Direct Unsubsidized Loan he returns within 120 days of its disbursement, Washington will immediately cancel all fees and interest applicable to that $100. The result is that for every $100 he returns, the total amount he’ll ultimately repay on this loan will be cut by up to $191!

There’s an old saying, “Never gamble unless you can afford to lose the money.” If your student needs loans and/or other financial aid to help pay for college, he certainly cannot afford to lose money on erratic investments such as cryptocurrencies!

College Affordability Solutions has 40 years of experience in counseling students and parents on ways to manage their dollars for college. Call (512) 366-5354 or email collegeafford@gmail.com for a no-cost consultation.

Before and During College: Games the Government Plays — Federal TEACH Grants

Maybe your high school senior is planning to be a teacher, or your college student’s already an education major. Her 2018-19 financial aid offer may include a Federal TEACH Grant. If so, she needs to be extremely careful about that grant!

IMG_1648TEACH Grants aren’t grants at all. Financial aid pros call them “groans” — grants that all-too easily turns into loans.

TEACH Grant Basics

TEACH Grants provide up to $4,000 per academic year. Their eligibility requirements include financial need and:

Teachers must submit forms for each year they plan to fulfill TEACH Grant service requirements in low-income schools, then submit proof they completed those requirements — all to FedLoans, a private company hired to administer TEACH Grants.

The Risk

If your student fails to timely document four years of required service within eight years of leaving the major for which she got a TEACH Grant, her grant will turn into a Federal Direct Unsubsidized Loan. Interest then gets charged going back to the dates her TEACH Grant was disbursed. For example, if a $4,000 TEACH Grant received eight years ago converted to an unsubsidized loan today, your student could end up repaying $9,360 in principal and interest.

So it’ll be quite costly if your student receives a TEACH Grant but then moves to IMG_1651another major (80% of all students change majors), doesn’t teach, or teaches in a school or subject that doesn’t fulfill TEACH Grant service requirements. Small wonder a recent U.S. Department of Education study shows that 63% of TEACH Grants have been converted to unsubsidized loans.

Compounding the Risk

Some teachers also allege their TEACH Grants were falsely turned into loans due to minor paperwork errors or FedLoans losing their documents.

IMG_1658The situation’s so bad that at least one state’s Attorney General is trying to sue FedLoans for “callous disregard” of ex-students’ needs. But the current Secretary of Education is protecting FedLoans by asserting that it’s immune from state consumer protection lawsuits as a federal contractor. Ultimately, the courts will have to resolve this matter.

A Bad Deal!

If your student’s awarded a TEACH Grant, suggest she request other grants instead. If she must take the TEACH Grant, stress the importance of completing its service requirements and carefully documenting everything she does to provide FedLoans with proof that she fulfilled them. Even then, that TEACH Grant may still be a bad deal!

Need help deciphering financial aid offers? Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-cost consultation!