During College: Strategies for Your College Finance Plan

Your College Finance Plan (CFP) needs strategies for you and you student toIMG_9592 implement before, during, and after college. Let’s look at the “During College” phase.

Research at a major university indicates that, looking back, almost 4 out of every 10 seniors conclude part or all of their student loans weren’t essential for their educations. Therefore, some of these strategies focus on personal money management so students can spend and borrow less of the interest-bearing educational debt that, over time, increases college costs. These include:

IMG_9555Also, the faster your student gets her degree, the less cost and debt she’ll incur. Still, the latest national data show that only 39.8% of undergraduates earn their bachelor’s degrees within 4 years. Here are some strategies that’ll help your student graduate on-time, if not before:

 

Look here for why you need a CFP. You can find summaries of strategies for your plan’s “Before College” phase here. And next Wednesday there’ll be samples of “After College” strategies for your CFP here.
Beginning October 16, check this website every Wednesday for a more detailed account of a strategy you may want to use in your CFP’s before, during, or after college phase.

Advertisements

Before and During College: A Car on Campus Can Create Colossally Causeless Costs

IMG_8107Most colleges and universities have vast student parking lots, sometimes unpaved areas on the outskirts of campus, generally poorly patrolled and supervised. Apartments near campus may also feature parking lots or nearby on-the-street parking.

The automobiles students bring to college quickly fill such parking places. And what could be more natural? Any young person anticipating the freedom of being on his own will also look forward to the convenience that comes with having a car.

But a vehicle at school also needlessly inflates college-related costs and educational debt. Consider:

  • Parking Fees: One large university near us charges its students as much as $796 per year to park on campus. Increased borrowing to pay this fee for four years at today’s federal college loan interest rates can inflate the total amount repaid by more than $4,000.
  • Maintenance and Upkeep: Gasoline, oil changes, and other auto-related expenses add up as the academic year goes along. Such costs can be deferred, if not skipped altogether, when your student’s car stays at home.
  • Damage and Vandalism: Cars sitting on the street and in remote, under-supervised lots are more prone to damage — from hailstorms, slashed tires, frozen batteries, collisions if others carelessly reverse or cut corners too closely, etc. Sometimes your student may need to pay for a tow job to the nearest repair shop just to get his car working again.

Most campuses are either small enough to cross on foot or have shuttle bus systems that are free to their students. And the municipal transit systems in many college towns also allow students to ride free or at reduced rates.

IMG_8108Your student may ask, how will I ever get home if I don’t have my car? This may be valid. But reasonably-priced bus services and trains often run between your state’s major colleges and large metropolitan areas. And if public transportation isn’t available, your student can probably get a ride straight to your door by offering to share gasoline expenses with a fellow student.

Now if a student commutes from home or to a job at an off-campus location not served by public transportation, a car may be necessary. Otherwise, a vehicle at college is an expensive and unnecessary luxury. So counsel your student to cut his college costs by leaving those wheels at home!

College Affordability Solutions offers guidance on a wide array of strategies to keep higher education costs, and higher education borrowing, as low as possible. Email collegeafford@gmail.com or call (512) 366-5354 for such guidance.

Before College: Make Sure Your Freshman’s Loans Are There When Needed

IMG_7991Soon you’ll be taking your new freshman to college. If you or she are borrowing Federal Direct Loans for the fall term, and if those loans’ proceeds are needed to help cover start-up costs that accompany the beginning of school, make sure they’re ready in time to do this.

How? Use your respective Federal Student Aid (FSA) IDs to make sure the following steps are complete on the government’s studentloans.gov website:

1. Your student should open “Complete Entrance Counseling” and get the 20-30 minute online briefing that’s full of information she needs about her rights and IMG_7990responsibilities as a borrower. If you’re a parent borrowing a PLUS loan, you need
to not do this.

2. Your student should then open the “Complete Loan Agreement for a Subsidized/Unsubsidized Loan (MPN)” link and fill out its online promissory note — the legal document through which she promises to repay all the federal subsidized and unsubsidized loans she borrows for 10 years. It’ll ask for her permanent and email addresses, her phone number, and for this information on two “references” — U.S. residents who’ve known her for at least 10 years.

3. If you’re borrowing your first parent PLUS loan for your freshman, open the “Parent Borrowers” page and provide the data requested under “Apply for a PLUS Loan.” Then open “Complete Loan Agreement for a PLUS Loan (MPN)” and execute its online promissory note, which’ll cover the PLUS loans you borrow for her for 10 years.

When everything described above is complete, each loan’s proceeds will arrive at the school within school 5-8 days. The school may apply them to tuition and other amounts owed 10 days before classes begin, then turn whatever’s left over to your student.

What if you or your student haven’t done everything and have enough funds to not need federal loan dollars until later this fall or even next term? Then delay the steps described above until about two weeks before the loan money is needed.

Why? Washington doesn’t charge interest on unsubsidized and PLUS loans until the school applies their proceeds. At today’s unsubsidized loan interest rate of 4.45% and PLUS loan interest rate of 7.00%, postponing this event from, say, mid-August until early January reduces the amount of interest to be paid on $1,000 of unsubsidized and PLUS loan by as much as $33 and $15, respectively. Small savings, but if you can do this every year, they’ll add up!

College Affordability Solutions is back for the 2017-18 academic year! Look here every Wednesday for a new post about strategies you and your student can use before, during, and after college to make higher education as affordable as possible! And check out what we can do for you by opening the “Services Offered” link on this website!

 

Special Bulletin: Does National Collegiate Student Loan Trusts Supposedly Own Your Loans? Make Them Prove It!

If you borrowed private student loans for your postsecondary education, and if an organization called National Collegiate Student Loan Trusts (National Collegiate) asserts you owe loan payments to it, double check everything it says about how much you owe and whether it actually owns your loans.

The New York Times reports that courts across the United States have dismissed IMG_7740many educational loan debts supposedly owed to National Collegiate because its was unable to prove that it had actually purchased those loans from lenders who originally made them. And in at least one case, a court dismissed part of a college graduate’s debt after finding that some loans for which National Collegiate was billing her were for enrollment at a school she never attended.

Note: National Collegiate is a “secondary market” that buys private student loans after they’re made, giving it the right to collect what borrowers owe in principal and interest on those loans. It has been particularly aggressive in going to court against private student loan borrowers unable to repay their debts.

National Collegiate contracts with American Education Services to provide its borrowers with services and do routine collections on its loans. The Times reports it uses a collection agency called Transworld Systems to collect debts when borrowers fall behind on their payments.

If any of your private student loans are being collected by either of these companies, determine whether National Collegiate Student Loan Trusts says it owns them. To do this, contact American Education Services and/or Transworld Systems to inquire. If they list National Collegiate as the owner of any of your loans, double check your records to confirm whether you actually borrowed them. If not, ask for documents proving you borrowed the loans and establishing what the courts call a “chain of title” to prove National Collegiate’s ownership.

Note: There are no reports of any federal or state student loans being dismissed by IMG_7739courts because of the irregularities described above.

Never stop making payments on and debt you really do owe. This can cost you big bucks and ruin your credit rating. And never, ever, use false or misleading information to try to get out of any of your debt obligations. That’s called a criminal offense called fraud!

But if there are questions about debts National Collegiate Student Loan Trusts says you owe it, retain a law firm or seek help from your local legal aid society if necessary. Don’t get ripped off!

We’re on summer vacation at College Affordability Solutions, but this issue was too important to ignore. Join us next month when we again begin publishing regular weekly blogs.

After College: If Your Student Loan Servicer Mistreats You . . .

The U.S. Education Department (ED) is the lender to which you owe what you borrowed under the Federal Direct Loan Program (FDLP). But ED doesn’t collect payments, answer questions, or provide help related to your FDLP debts. It’s contracted those jobs to one of nine private companies called a “loan servicer,” something many lenders do for their student and other consumer loans.

IMG_6914Loan servicers are usually very helpful. However, in one year alone there were over 30,000 documented complaints about them denying or discouraging the use of loan deferments, forgiveness, and repayment plans to which borrowers were entitled; inappropriately charging late-payment fees or increasing interest rates; losing or misapplying loan payments; and otherwise doing injustices to student loan borrowers.

If your servicer messes you over, here’s what you should do:

  1.  Go to ED’s Federal Student Aid website and review the applicable section under “How to Repay Your Loans” to make sure you understand your rights and responsibilities as a federal loan borrower.
  2. Call your servicer for help in resolving the problem. If necessary, speak with someone in management. Keep detailed notes — date, time, names, what you said, what they said, etc.
  3. Problem not resolved? Submit a complaint on the Consumer Finance Protection Bureau’s (CFPB) website. The CFPB is an independent agency under current IMG_6917federal law. It has the authority to investigate servicers, fine them, and require them to repay the money borrowers lost due to their errors. The CFPB also maintains a publicly accessible database about complaints regarding loan servicers and other financial companies — a database that can be used to determine which servicers ED hires in the future.

The U.S. House recently voted for HR 10. This bill that would end the CFPB’s independence and shut down public access to its complaint database. Also, Education Secretary Betsy DeVos has proposed taking servicer misconduct out of the criteria used to award future federal loan servicing contracts.

Nobody’s sure if the U.S. Senate will agree with HB 10 or the DeVos recommendation. So if you have federal student loans call, email or write letters to your Senators now. Tell them what you want them to do regarding these proposals.

And if you ever are mistreated by a federal student loan servicer, be aggressive in standing up for yourself and seeking relief. It’s your right, not just as a borrower, but as a citizen!

This is College Affordability Solutions’ last regularly scheduled blog for the 2016-17 academic year. But we’ll start up again in early August with more strategies to be used before, during, and after college for helping to optimize higher education affordability. Have a great summer. We’ll be back soon!

After College: What Will My Monthly Student Loan Payments Be?

Congratulations! You’ve finished your bachelor’s degree and are about to begin your career. If you borrowed for college, you’ll soon wonder how much you’ll need to spend each month to repay your student loans.

IMG_6700The answer is . . . it depends! It depends on how much you’ll owe when your grace period ends, the combined interest rates on your loans, the student loan repayment plan you select and, under some plans, your earnings and family size. Consider, for example, a new bachelor’s degree recipient who borrowed the annual maximum in Federal Direct Loans during each of his 4 years in college which, when his grace period ends, will amount to a $28,187 debt at a combined interest rate of 4.2%. He just accepted a new $40,000 per year job:

Repayment Plan         Monthly Payment       Number of Payments    Total Amount Paid

Standard                      $276                               120                                     $33,086

Graduated                   $155                               155                                     $34,696

Extended                     This Borrower Not Eligible for This Repayment Plan

Income-Based            $274                                121                                     $33,097

income-Contingent   $202                                165                                     $35,787

Pay As You Earn       $183                                142                                     $36,849

Revised Pay As You Earn     $183                   133                                     $34,193

Want a precise projections of your monthly payment amounts? Open the government’s Federal Student Loan Estimator with your Federal Student Aid ID to IMG_6699get them. Different federal repayment plans have different eligibility criteria, so this’ll also help you identify plans for which you do and don’t qualify.

Such research will help you evaluate the repayment plans for which you’re eligible in preparation for the day you tell your student loan servicer the plan under which you want to begin repaying your loans. It’ll also help you know how much you’ll need to budget for your monthly student loan payments — at least during your first year of repayment.

It’s important to remember two things about loan repayment. In general, the longer your repayment period, the lower your monthly payments will be. But also, the longer your repayment period and lower your monthly payments, the more you pay on your college debt in the long run. So it’s usually best to pick the plan requiring the highest monthly payments you can afford.

Also remember — for federal student loans, you may change your repayment plan as necessary. So if your situation changes and the plan you’re using no longer fits your needs, you may always research and pick another loan repayment plan. This makes federal student loans preferable to most, if not all, institutional, private, and state student loans.

Speaking of non-federal loans, to discover how much you owe and your repayment plan options for them, you’ll need to check your lender website(s) and, maybe, call your lender(s).

Forewarned is forearmed so, no matter what type of student loans you have, start now to research what you owe and your options for repaying it!

Want help considering your repayment plan options? Feel free to contact College Affordability Solutions at collegeafford@gmail.com or (512) 366-5354.

Special Bulletin: Proposed Federal Budget Would Reportedly Makes Big Cuts in Programs for College Students and Graduates

The Washington Post reports it has received what a U.S. Education Department staff member described as “near final” documents showing the administration will IMG_6510recommend a 13.6% reduction in federal education spending next week. The budget proposal would reportedly affect federal financial assistance for college students as follows:

  • Child Care for Enrolled Parents: End a $15 million program helping to make child care affordable for low-income parents attending college.
  • Federal Direct Subsidized Loans: Make as yet unannounced cuts that could end this program, which currently serves financially needy students. If this happens, all federal loans for such students would be unsubsidized and begin compiling interest the day they are made — significantly increasing student borrowing costs.
  • Federal Pell Grants: Hold Pell Grants for the nation’s neediest undergraduates at their current levels ($606 to $5,920 for fall and spring combined). Due to inflation, this would decrease Pell’s future “purchasing power.” Some good news is that the budget would fund an extension of 2017’s summer Pell Grants in future years.
  • Federal Work-Study (FWS): Cut FWS funding by $490 million (almost half), significantly reducing federally subsidized on and off-campus jobs that financially needy students use to pay for college.
  • Income-Driven Repayment: Close down all current income-driven repayment plans available to federal college loan borrowers. These plans offer loan forgiveness for balances remaining after borrowers pay 10% to 20% of their incomes over 20 to 25 year periods. They would be replaced with a new income-driven option requiring payments equal to 12.5% of income and limiting loan forgiveness to balances still outstanding after 30 years of such payments.
  • Public Service Loan Forgiveness (PSLF): Eliminate PSLF, which offers tax-free debt cancellation on federal student loan balances owed by ex-students in public service jobs after 10 years of on-time payment. Over 550,000 federal, state, local, and nonprofit employees are already registered for PSLF. It’s not yet clear whether they or public servants not yet registered would be cut off from It.IMG_6511

Presidents propose federal budgets, but Congress ultimately decides them. So if you support or oppose any of these proposed cuts, call or write your U.S. representative and senators to tell them how you feel.

College Affordability Solutions will post more bulletins on this website as additional information becomes available.