After College: Look for Employers Offering Student Loan Repayment Assistance

You have or soon will complete your college commencement. Unless you’re about to begin graduate or professional study, you’re no doubt job hunting. If you have college debt, be sure to learn whether prospective employers offer student loan IMG_2287repayment assistance among their employee benefits.

Currently, only a few employers help employees pay down student loans. A recent survey found that just 4% of companies were doing this in 2017. But the number of companies offering this benefit is expected to grow in 2018, and some of America’s leading corporations — Aetna, Fidelity Investments, New York Life, Pricewaterhouse Coopers, Prudential, etc. — already provide it. So do some nonprofits and local governments such as the City of Memphis, Tennessee.

IMG_2288How does repayment assistance work on postsecondary debt? Your employer contributes a certain amount above and beyond the monthly payment you’re required to make. It’s contribution generally occurs on a monthly basis, although there may be annual and/or lifetime caps on its total contributions.

Employer-provided loan repayment assistance means your loans will be paid-in-full faster. Also, since the interest you pay is a product of how much you owe and for how long you owe it, it’ll also lower the amount of your lifetime earnings that you’ll devote to repaying your debt.

The Internal Revenue Service treats employer college debt payments as “taxable IMG_2289income” for the employees receiving this benefit, so put some money away to cover the increased federal income taxes you’ll pay on this amount. Nevertheless, any additional taxes you pay will be considerably less than what you’d spend if you paid 100% of your debt without employer assistance.

Why would an employer spend money to help repay its workers’ student loans? Think about it. Businesses in need of highly educated workforces gain a competitive advantage when recruiting the world’s most knowledgeable and skillful people — U.S. college graduates — 70% of whom borrowed while in school. Also, college educated employees are among the most mobile workers in today’s workforce but, being young and healthy, they often gain more from repayment assistance than medical, dental, or other types of benefits. So a company offering repayment assistance over a numbers of years also gives itself an advantage in retaining them.

You’ll likely earn less early in your career than at any other time. Employer-provided student loan repayment assistance can help resolve this while reducing your student debt, so carefully consider it as you evaluate prospective employers.

College Affordability Solutions brings 40 years of student loan experience to the table when consulting with ex-students about ways to manage their college debts. To arrange for a free consultation, email collegeafford@gmail.com.

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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 Now!

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: Parent Loans — Helpful Today, But a Potential Curse Tomorrow

IMG_1169Federal Direct Parent PLUS Loans. They’re often the way families fill the gap between their resources, financial aid, and costs their undergraduates incur at college. But parent PLUS loans have their pros and cons.

Parent PLUS loan advantages:

 

  • There’s no PLUS borrowing limit other than the cost of attendance for the student for whom you borrow (i.e. your “beneficiary”) minus her other financial aid.
  • The interest rate on each academic year’s PLUS loan is fixed so, unlike this rate on many private loans, it’ll never go up.
  • The only fee is a 1.069% federal loan fee.
  • Amounts you repay within 120 days of disbursement reduces principal and IMG_1150cancels interest and loan fee on that principal.
  • Your payments may be deferred while your beneficiary is enrolled at least half-time and during her 6-month post half-time grace period.
  • Payments may also be postponed under other federal deferment and forbearance programs.
  • Should you die or become totally and permanently disabled, or if your beneficiary dies, your PLUS debt will be discharged.

Parent PLUS loan downsides include:

  • The highest interest rate of all federal college loans. Currently 7.0%, this rate’s expected to rise on PLUS loans borrowed for the next few academic years. But with fixed rates, PLUS interest is still likely to be lower than variable rate private education loans.
  • To borrow a PLUS loan, you (or a cosigner) must have a sound credit history. IMG_1152Your credit history isn’t “sound” for PLUS if (1) when your credit report runs, you don’t owe over $2,085 that’s 90 or more days delinquent, or (2) for five years before your report runs, you’ve had no charge-offs, bankruptcies, defaults, foreclosures, repossessions, tax-liens, wage garnishments, or write-offs.
  • PLUS debt isn’t legally transferable to anyone else unless it’s privately refinanced.
  • Parent PLUS debt isn’t easily forgiven. Bankruptcy generally won’t discharge it, and it’s not eligible for the federal teacher loan forgiveness program. But, in addition to the discharges described above, it is eligible for Public Service Loan Forgiveness.

IMG_1151Borrow parent PLUS loans only as a resort, especially if you’re approaching retirement. Why? The Government Accountability Office recently found 17% of 65-74 year old parent borrowers had defaulted on such loans — subjecting themselves to expensive collection fees and the confiscation of their Social Security benefits and tax refunds. So while PLUS can be helpful today, it can be a curse tomorrow.

Note: College Affordability Solutions will be on “spring break” next week and so won’t be posting a blog. But look here again on Wednesday, March 21, for another post on issues related to keeping college affordable.

Contact College Affordability Solutions at (512) 366-5354 or collegeafford.gmail.com if you’re looking for a no-cost consultation on strategies for minimizing college costs.

After College: Help! I Can’t Make My Student Loan Payments!

You’re repaying loans you borrowed to pay for college. But you often find yourself IMG_1086choosing between paying for essentials and making monthly loan payments. What should you do?

You’re in luck if, like 90% of today’s college borrowers, you borrowed federal loans. Washington offers multiple ways to get relief from your predicament. The question — which is best for you?

IMG_1087If you’ve not already done so, consider replacing your federal loans with a Federal Direct Consolidation Loan. These offer longer repayment periods and lower monthly payments if you owe more than $7,500. But look into consolidation’s advantages and disadvantages before going this route.

You can also tell your loan servicer will change your repayment plan. To check out how this’ll affect your payments use the Federal Student Loan Repayment Estimator. IMG_1090It already knows your loan balances and can tell you the repayment plans for which you’re eligible plus monthly payment amounts in each available plan. It can also determine how consolidation would impact your loan repayment.

If the reason you can’t afford monthly payments is temporary, look into getting a deferment to postpone your payments for up to a year. You’re entitled to deferment if you’re:

No deferment? Another temporary solution is asking your servicer for a forbearance. You’re not entitled to forbearance. It depends on your situation. But you can totally postpone or partially reduce your payments while in forbearance.

But be careful about deferment and forbearance. During the former, interest continues to build on your unsubsidized and PLUS loans. During the latter, interest keeps building on all your loans. Unpaid interest from these periods then gets capitalized (added to principle) when your deferment or forbearance ends.

If your trouble making payments is because of your monthly due date, ask your servicer if you may change your payment due date to another day that works better for you.

Act fast, because missed and late payments have really bad consequences.

College Affordability Solutions offers 40-years of experience working with various educational loan repayment strategies. Call (512) 366-5354 or email College Affordability Solutions for a no-cost consultation.

Special Bulletin: Congress Considering Cuts to Student Aid Programs

On Monday the White House released its budget proposal for Fiscal Year 2019, which begins this coming October. The prospective budget is similar to HR 4508, the “Promoting Real Opportunity, Success, and Prosperity through Education Reform” IMG_0890(PROSPER) Act. This is a bill designed to revamp federal higher education programs. It will soon to be debated in the House.

If your student is now or likely will be a federal financial aid recipient, contact your  U.S. Representatives and Senators to let them know your thoughts on the proposed budget and HB 4508. Why? If Congress passes either as written, several federal student aid programs would be reduced or eliminated.

Subsidized Federal Direct Loans: Currently, no interest is charged on these loans until six months after their undergraduate borrowers leave college. But they would end for those first borrowing on or after July 1, 2019. Even at current interest rates, which are expected to rise, this would increase the cost of borrowing the $27,000 maximum allowed over 4 academic years by at least $2,800.

Income-Driven Repayment: Four repayment options would be replaced by one repayment plan requiring ex-students to pay 12.5%, instead of the current 10%, of their discretionary income toward their federal college debts. The repayment period would last 15 years instead of 20 to 30 years for undergraduates, and 30 years for graduate students. Discretionary income is the amount a borrower’s income exceeds 150% of poverty-level.

Public Service Loan Forgiveness (PSLF): Any student first borrowing a federal loan on/after July 1, 2019 would be ineligible for PSLF.

Federal College Work-Study (FCWS): The budget would reduce FCWS funding by 49.5%. FCWS currently helps over 630 thousand students earn more than $1 billion a IMG_0891year to pay college costs. Graduate students would become ineligible for FCWS.

Federal Pell Grants: College costs keep rising, but the budget proposes to limit Pell Grants to the same amount as in FY 2019 as this year.

Pell Grant eligibility would be extended to students in short-term programs providing certificates, licenses, or other credentials for “in-demand fields”. For-profit vocational schools usually offer such programs, but their certificate earners average 1.5% higher unemployment rates, 11% lower earnings, and $5,000 more in student debt than students earning similar certificates at community colleges.

Federal Supplemental Education Opportunity Grants (FSEOGs): The FSEOG program, which provides extra grant dollars to approximately one million of the nation’s neediest Pell Grant recipients, would be eliminated.

Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-cost consultation you have questions about how to pay for college.