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.

After College: Were You Wrongly Denied Public Service Loan Forgiveness? There’s a Chance to Fix That!

Are you a Federal Direct Loan Program (FDLP) borrower who applied for Public Service Loan Forgiveness (PSLF) after completing a decade of public service employment? Did you do exactly what you were told to qualify for PSLF, then told you weren’t eligible because you used the wrong student loan repayment plan? If so, help is now available!

What is PSLF?

Normally, PSLF forgives your remaining FDLP debt after you use a qualifying repayment IMG_2908plan to make 120 qualifying monthly payments while performing qualifying employment.

What’s the Problem?

Congress recently found that student loan servicing personnel hired by the U.S. Education Department (ED) to administer FDLP steered untold numbers of public servants into FDLP repayment plans that didn’t qualify them for PSLF.

After faithfully making payments for 120 months under the repayment plans they were directed to use, FedLoans (the loan servicer administering PSLF) informed these public servants they didn’t qualify for PSLF because they used the wrong plans.

So Congress created a $350 million fund to help borrowers left in the lurch by this fiasco. Applications for this money are now being reviewed under a program ED calls Temporary Expanded Public Service Loan Forgiveness, or “TEPSLF.”

What Should You Do?

If you were denied PSLF because of this blunder, ask for loan forgiveness again by sending an email to TEPSLF@myfedloan.org. Here’s the model ED recommends for this email:

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Do You Qualify for TEPSLF?

TEPSLF will forgive what’s left of your FDLP debt only if:

  • You submitted a PSLF application that was denied solely because some or all of your 120 monthly payments were made under the Extended or Graduated repayment plans — which don’t qualify for PSLF; and
  • Your employer(s) certified that you completed a total of 120 months of qualifying employment; and
  • FedLoans Servicing accepted your employer certification(s); and
  • Your payment amount for the 12 months before you applied for TEPSLF, and the last payment you made before applying for TEPSLF, equaled or exceeded what you would have paid under one of the four income-driven repayment plans qualifying for PSLF. FedLoans Servicing will make this determination and, when it does, it’s supposed to notify you by email.

Hurry Up!

While $350 million sounds like a lot, it’ll be used to forgive debts on a first-come/ first-serve basis. So if your PSLF application was rejected over the type of repayment plan you used, don’t miss your chance — email FedLoans Servicing right away!

Looking for advice on managing the debts you took on for college? College Affordability Solutions has been 40 years experience with student loan repayment issues. Call (512) 366-5354 or email collegeafford@gmail.com to consult us at no charge.

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: 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!

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.

Special Bulletin: Your College-Related Tax Breaks Survived a Congressional Move to Eliminate Them

In November College Affordability Solutions urged you contact your members of the U.S. House and Senate in opposition to certain provisions within the House tax bill that was then working its way through Congress.

That bill was supposedly designed to cut taxes. But it would have done away with IMG_0428deductions and exemptions that reduce taxes for you and other students and parents by over $18 billion a year — money that helps pay college costs.

The original House bill was remarkably partisan. It was written by Republican House members without input from Democrats, and it got 227 Republican votes but no Democratic votes

Fortunately, the Senate also opposed eliminating college-related tax deductions, exclusions, and exemptions. It made sure they remained unchanged in the final bill, which is now law. So don’t ever think your voice doesn’t matter — constituent pressure clearly helped preserve these tax breaks!

Here are the college tax benefits that were preserved in the final bill:

  • If you’re a student, you still won’t be taxed on money you use from your College Savings Bonds to pay your educational expenses.
  • Parents, you may keep on making deposits into your Coverdell Education Saving Accounts to build up money for college.
  • The first $5,250 you use from your Employer-Provided Educational IMG_0429Assistance program to pay higher education costs will continue to be untaxed.
  • The Lifetime Learning Tax Credit remains unchanged. So you may keep reducing what you’ll pay in federal income taxes by up to $2,000 a year based on what you spend on tuition, required fees, books, and supplies for any student (including you) taking courses to get a degree or improve job skills.
  • The Scholarship and Fellowship Exclusion will continue to omit from federal taxation what your scholarships and fellowships pay toward your college costs.
  • Borrowers, you’ll still be able to claim your Student Loan Interest Deduction of up to $2,500 for student and/or parent loan interest you pay each year.
  • Your $4,000 per year Tuition and Fee Deduction remains unchanged.
  • Are you or will you be a graduate student? If so, any Tuition Reduction you receive in connection with a graduate assistantship or fellowship still won’t be subject to taxation.

Congratulations on keeping these benefits! But stay active and alert. More bills impacting college affordability will come before Congress soon.

Contact College Affordability Solutions by calling (512) 366-5354 or emailing collegeafford@gmail.com.