During and After College: Despite What You May Have Heard, Public Service Loan Forgiveness is Still Available!

IMG_5373Hey current and future public servants! Are you hoping the Public Service Loan Forgiveness (PSLF) program will cancel part of your student debt? But do you keep hearing scary things about the program? Well, the PSLF news is both bad and good.

Bad News: Republicans want to kill PSLF. The president’s last two proposed budgets would have eliminated it. So would a Republican bill the House Education and Workforce Committee passed on a party line vote early this year.

Good News: Congress ignored all these proposals. Even if it accepts them in the future, PSLF’s end will probably apply only to those not borrowing qualifying loans (see below) before the following July 1st. If you borrow such loans before that date they’ll likely remain PSLF-eligible.

Keep tabs on PSLF with the U.S. Education Department’s easy to read and very informative PSLF web page.

Bad News: Most who’ve applied for PSLF so far have been disqualified. One problem seems to be that FedLoans, the company administering PSLF for the government, misled many borrowers about PSLF-qualifying repayment plans (again, see below).

Good News: Congress put up $700 million to fund the Temporary Expanded Public Loan Forgiveness program under which PSLF goes on a first-come/first-served basis to borrowers whose PSLF applications were rejected solely because they used the wrong repayment plans.

Bad News: PSLF’s low forgiveness rate is also due to borrower mistakes.

Good News: You can avoid such mistakes. Remember, you must meet four criteria for 120 months to get PSLF. These need not be consecutive months, but they count only if you have:

  1. Qualifying Loans: Only Federal Direct Loan Program (FDLP) loans qualify for IMG_5374PSLF. The National Student Loan Data System will show you other federal college loans you may have. Replacing them with an FDLP Consolidation Loan makes them PSLF-eligible.
  2. Qualifying Employment: Only months in which you work full-time in public service positions count and you must submit PSLF employment certification forms on which your employers confirm the months you had such jobs. It’s best to submit these forms to FedLoans by certified mail every year or when your qualifying employment with a government agency or nonprofit ends, whichever’s first, and to keep copies and your certified mail receipts.
  3. Qualifying Repayment Plan: As indicated above, a month counts only if you’re making payment under the standard repayment plan or one of the four income-driven repayment plans.
  4. Qualifying Payment: A month counts only if you pay the full required amount on-time.

IMG_5375Don’t qualify for PSLF? Don’t give up! The (Almost) Complete Guide to Student Loan Forgiveness from The Institute of Student Loan Advisors is a wonderful resource for information on over 200 other student loan forgiveness programs in the United States. Use it!

Contact College Affordability Solutions for a free consultation about your postsecondary debt if you want to take advantage of its 40 years of experience in the field of college borrowing.

Before College: A Last-Minute Affordability Checklist

Parents, you’ll soon be taking your freshman to college. Help him check off the following so he can begin keeping things affordable even before he arrives.

[ ] Apartment or Dorm Necessities
Make sure he has that blanket, mattress topper, printer, personal toiletries, pillow, IMG_4286sheets, and other basics not supplied by management. Space will be limited so don’t take too much extra stuff. And buy what’s needed before leaving. Merchants in college towns often charge high prices.

[ ] Coordination on Shared Items
Apartments and dorm rooms can only hold so many appliances, dishes, extra furnishings, posters, TVs, and such. These can be costly. If possible, he should contact his roommate(s) to decide who’ll bring what.

[ ] Key Money Management Knowledge
Today’s students face rapidly rising costs. They take on big debts to pay those costs. They get bombarded with credit card offers. But many don’t know about things like inflation, interest, debt, and financial record keeping. Make sure he’s not one of them.

IMG_4288[ ] Spending Plan
He needs to project what’ll remain after funds available for the academic term pay tuition and required fees. This’ll show what’s left to spend for the full term. Divide by the total weeks in the term to reduce his chances of running out of money before finals.

[ ] Do What’s Needed to Receive Loans
Loan funds don’t arrive until 5-10 days after new borrowers finish certain steps required to receive them. Unfinished steps can lead to missed payment deadlines or being cash-poor early in the term. So have him double check to make sure all these steps are complete. 

[ ] Return Unnecessary Loans Funds
Some spending plans show that extra money will be available. Their freshmen can return some of what they borrow before the term ends. This’ll cut the interest they pay. Later in the term, if it turns out they need what was returned, the financial aid office can usually help them re-borrow it.

[ ] Credit Card Management
A freshman who has or will get credit cards needs to know how to handle themIMG_4290that he’s borrowing each time he uses them, the date by which his monthly payment is required to avoid high interest charges, and that he shouldn’t use them use them to splurge or spend money he doesn’t have.

[ ] Key Deadlines
By what dates must tuition and fees, room and board or rent be paid? Missed deadlines can result in late fees, other extra charges, and even eviction. They can also hurt his credit rating.

[ ] Keep Looking for Scholarships
Some scholarships from inside and outside the college are reserved for upperclassmen. He needs to pursue these through his senior year.

[ ] Graduate On-Time
Not dropping classes helps achieve on-time graduation, which limits college costs and debt.

Want more information? Contact College Affordability Solutions for a no-charge consultation.

College Affordability Solutions Topical Index

This index links to almost 90 articles. Each describes an wat to make college more affordable. Use them to learn how to do this before, during, or after college

And don’t forget! On August 15, 2018, new articles will be posted here every Wednesday.

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

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

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:

IMG_2469

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.

Before College: Get Ready for What It’ll Cost . . . Now!

Parents and students are often shocked by college costs, especially late in high school, when there’s little time to generate significant amounts to help cover these costs.

It’s well known that postsecondary institutions charge tuition, and that there’ll be expenses for books and class supplies and room and board while students attend college. There are other charges, too. But it’s the total cost that seems to catch families by surprise.

So let’s look at the most recent data about the average cost of college attendance for an academic year (fall through spring). And for a sense of how these costs grow, look at what they were 10 years ago:

IMG_2078

Yes, over the last decade the average cost of a year at college rose 25% at public 2-year institutions, 38% at public 4-year universities, and 36% at private 4-year universities.

At this rate, if today’s 8-year old begins college in 10 years, her freshman year will cost approximately $22,000 at a public 2-year, $35,000 at a public 4-year, and $69,000 at a private 4-year institution.

She may be able to reduce expenses by, for example, living at home while taking classes. But she’ll still encounter 5-figure costs:

IMG_2116

Sallie Mae’s most recent How America Pays for College report indicates that nearly 90% of 2016-17 families know their children are college-bound in preschool. But in 2016-17 only 13% of college parents had 529 plans to help cover postsecondary expenses and just 8% could devote parental savings to these costs.

The result? Sallie Mae’s report indicates that, in 2016-17 alone, 33% of undergraduates borrowed an average of $8,835 in federal loans and almost one out of 10 of college parents took out Federal Direct Parent PLUS Loans, at an average of $10,226 per loan, to help pay postsecondary expenses.

Many of today’s postsecondary parents lost their jobs, income, and savings during the 2007-09 Great Recession. This really limited what they could save for college.

But in general, Americans are now better off. Unemployment in March was 4.1% — less than half the March 2010 rate of 9.9%. And U.S. Median Household Income has risen steadily to be almost 20% higher than in 2010.

If you’re enjoying job security and prosperity, now is the time to start saving all you can for college — even if it’s only a small amount.

Ah, you may ask, but won’t my savings reduce my child’s eligibility for federal student aid? Yes. But the reality is that 62% of that aid comes in the form of loans.

So every dollar you save today can help your student — and you — reduce college debt in the future!

Next Wednesday: Why 529 plans are the best way to save for college.
Until then, contact College Affordability Solutions at (512) 417-7660 or collegeafford@gmail.com for free consultations about issues related to financing your child’s college costs.