Wednesday, February 27, 2008

Student Loan Forgiveness Program

The Congressional Research Service has a nice reference document called Student Loan Forgiveness Program. This is a handy little document to read through during these troubled economic times.

Wednesday, February 20, 2008

Loan Rehabilitation

You may want to consider rehabilitating your defaulted loan(s). Advantages of rehabilitation include:

* Your loan(s) will no longer be considered to be in a default status.

* The default status reported by your loan holder to the national credit bureaus will be deleted.

* You will be eligible for the same benefits that were available on the loans before the loans defaulted. This may include deferment, forbearance, and Title IV eligibility.

* Wage garnishment ends and the Internal Revenue Service no longer withholds your income tax refund.

If you are a Direct Loan Borrower:

To rehabilitate a Direct Loan, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the U.S. Department of Education (Department). Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will be returned to the Direct Loan Servicing Center.

If you are a FFEL loan borrower:

To rehabilitate a FFEL, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) may be purchased by an eligible lending institution.

If you are a college loan Perkins borrower:

To rehabilitate a Perkins Loan, you must make twelve (12) on-time, monthly payments of an agreed amount to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your twelve (12) payments. Once you have made the required payments, your loan(s) will continue to be serviced by the Department until the balance owed is paid in full.

Tuesday, February 19, 2008

Can my Stafford Loan ever be discharged (canceled)?

Yes, but only under a few circumstances. Your loan can’t be canceled because you didn’t complete the program of study at the school (unless you couldn’t complete the program for a valid reason—the school closed, for example), or because you didn’t like the school or the program of study, or you didn’t obtain employment after completing the program of study.

Monday, February 18, 2008

What if I have trouble repaying the Stafford Loan?

Under certain circumstances, you can receive a deferment or forbearance on your loan, as long as it’s not in default. During a deferment, no payments are required. You won’t be charged interest for a subsidized FFEL or Direct Stafford loan. If you have an unsubsidized Stafford Loan, you are responsible for the interest during deferment.

If you’re temporarily unable to meet your repayment schedule (for example due to poor health or other unforeseen personal problems), but you’re not eligible for a deferment, your lender might grant you forbearance for a limited and specified period.

(Source: Studentaid.ed.gov)

Friday, February 15, 2008

How do I pay back my Stafford Loan?

You’ll repay your FFEL Stafford Loan to a private lender or loan servicer. You’ll repay your Direct Loan to the U.S. Department of Education’s Direct Loan Servicing Center. Both the Direct Loan and FFEL programs offer four repayment plans you can choose from, but the terms differ slightly. You will receive more detailed information on your repayment options during entrance and exit counseling sessions your school will provide.

Thursday, February 14, 2008

When do I pay back my Stafford Loans?

After you graduate, leave school, or drop below half-time enrollment, you will have a six-month "grace period" before you begin repayment. During this period, you'll receive repayment information, and you'll be notified of your first payment due date. You're responsible for beginning repayment on time, even if you don't receive this information. Payments are usually due monthly.

During the grace period on a subsidized loan, you don’t have to pay any principal, and you won’t be charged interest. During the grace period on an unsubsidized loan, you don’t have to pay any principal, but you will be charged interest. You can either pay the interest or it will be capitalized (added to your principal loan balance, thus increasing the amount you’ll repay).

Other than interest, is there a charge for this loan?

You'll pay a fee of up to 4 percent of the loan, deducted proportionately from each loan disbursement. For a FFEL Stafford Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the FFEL Program in your state) to help reduce the cost of the loans. For a Direct Stafford Loan, the entire fee goes to the government to help reduce the cost of the loans. Also, if you don't make your loan payments when scheduled, you may be charged collection costs and late fees.

Wednesday, February 13, 2008

What's the interest rate on a Stafford Loan?

For all Stafford loans first disbursed on or after July 1, 2006, the interest rate is fixed at 6.8 percent.

This change from a variable to a fixed interest rate does not affect a borrower's variable interest rate on loans made before July 1, 2006.

For Stafford Loans first disbursed between July 1, 1998 and June 30, 2006, the interest rate is variable (adjusted annually on July 1st) but will not exceed 8.25 percent. (You'll be notified any time the variable rate changes.) The interest rate for these loans in 2007-08 is 7.22 percent. (This rate applies to loans in repayment status; the rate may be lower during grace and deferment periods.)

How will I get the Stafford Loan money?

For both the Direct Loan and FFEL programs, you'll be paid through your school in at least two installments. No installment may exceed one-half of your loan amount. Your loan money must first be applied to pay for tuition and fees, room and board, and other school charges. If loan money remains, you'll receive the funds by check or in cash, unless you give the school written authorization to hold the funds until later in the enrollment period.

Generally, if you're a first-year undergraduate student and a first-time borrower, your school cannot disburse your first payment until 30 days after the first day of your enrollment period. This practice ensures you won't have a loan to repay if you don't begin classes or if you withdraw during the first 30 days of classes.

A school with a cohort default rate of less than 10 percent for each of the three most recent fiscal years for which data are available are not required to delay the delivery or disbursement of the first disbursement of a loan for 30 days for first-time, first year undergraduate borrowers.

Tuesday, February 12, 2008

How much can I borrow for a Stafford Loan?

It depends on your year in school and whether you have a subsidized or unsubsidized Direct or FFEL Stafford Loan. A subsidized loan is awarded on the basis of financial need. If you're eligible for a subsidized loan, the government will pay (subsidize) the interest on your loan while you're in school, for the first six months after you leave school, and if you qualify to have your payments deferred. Depending on your financial need, you may borrow subsidized money for an amount up to the annual loan borrowing limit for your level of study (see below).

You might be able to borrow loan funds beyond your subsidized loan amount even if you don't have demonstrated financial need. In that case, you'd receive an unsubsidized loan. Your school will subtract the total amount of your other financial aid from your cost of attendance to determine whether you're eligible for an unsubsidized loan. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it's paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (that is, added to the principal amount of your loan). Capitalizing the interest will increase the amount you have to repay.

You can receive a subsidized loan and an unsubsidized loan for the same enrollment period as long as you don't exceed the annual loan limits.

If you're a dependent undergraduate student, each year you can borrow up to:

* $3,500 (for the 2007-08 academic year) if you're a first-year student enrolled in a program of study that is at least a full academic year.

* $4,500 (for the 2007-08 academic year) if you've completed your first year of study and the remainder of your program is at least a full academic year.

* $5,500 if you've completed two years of study and the remainder of your program is at least a full academic year.

If you're an independent undergraduate student or a dependent student whose parents have applied for but were unable to get a PLUS Loan (a parent loan), each year you can borrow up to:

* $7,500 (for the 2007-08 academic year) if you're a first-year student enrolled in a program of study that is at least a full academic year. No more than $3,500 of this amount may be in subsidized loans.

* $8,500 (for the 2007-08 academic year) if you've completed your first year of study and the remainder of your program is at least a full academic year. No more than $4,500 of this amount may be in subsidized loans.

* $10,500 (for the 2007-08 academic year) if you've completed two years of study and the remainder of your program is at least a full academic year. No more than $5,500 of this amount may be in subsidized loans.

If you're a graduate or professional degree student, each year you can borrow up to

* $20,500 for the 2007-08 academic year. No more than $8,500 of this amount may be in subsidized loans.


When you graduate with a graduate or professional degree, the maximum total debt allowed from Stafford Loans is $138,500. No more than $65,500 of this amount may be in subsidized loans. This maximum total graduate debt limit includes Stafford Loans received for undergraduate study.

These amounts are the maximum yearly amounts you can borrow in both subsidized and unsubsidized FFELs or Direct Loans, individually or in combination. Because you can't borrow more than your cost of attendance minus the amount of any Federal Pell Grant you're eligible for and minus any other financial aid you'll get, you may receive less than the annual maximum amounts.

(Source: Studentaid.ed.gov)

How to Choose and Evaluate Lenders for Stafford Loan

You'll need to choose a lender if you obtain a FFEL Stafford Loan. (If you have a Direct Stafford Loan, the federal government—through the U.S. Department of Education—is your lender.) Schools that participate in the FFEL Program will usually have a list of preferred lenders. Student loan borrowers may choose a lender from that list, or choose a different lender they prefer (for example, a credit union). Here are a few things to think about when selecting a FFEL lender.

(Source: Studentaid.ed.gov)

Monday, February 11, 2008

Stafford Loans

In addition to Perkins Loans, the U.S. Department of Education administers the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Both the FFEL and Direct Loan programs consist of what are generally known as Stafford Loans (for students) and PLUS Loans (for parents).

Schools generally participate in either the FFEL or Direct Loan program but sometimes participate in both. Under the Direct Loan Program, the funds for your loan come directly from the federal government. Funds for your FFEL will come from a bank, credit union, or other lender that participates in the program. Eligibility rules and loan amounts are identical under both programs, but repayment plans differ somewhat.

How can I get a FFEL or Direct Loan?
For either type of loan, you must fill out a FAFSA. After your FAFSA is processed, your school will review the results and will inform you about your loan eligibility. You also will have to sign a promissory note, a binding legal document that lists the conditions under which you're borrowing and the terms under which you agree to repay your loan.

(Source: Studentaid.ed.gov)

Wednesday, February 06, 2008

The Today Show - College Loan Scandals

This was filmed last summer but is still relevant for today:

Student Bank Loans

Suppose you need a student loan and you don't want to be hindered by the restrictions and timeline of federal loans. Look into student bank loans.

Some of the advantages of student bank loans:
* It's usually a faster approval time.
* You don't have to fill out a FAFSA (Free Application For Federal Student Aid).
* You can borrow a good bit more money. (This is especially good if you're shooting for an expensive private institution.)

Student bank loan approval is based on your personal credit score and history as well as your ability to pay it off ... the better your rating, the better interest rate you get. Don't get scared, the loan rate will be comparable to a federal student loan and not like a credit card rate.

So, if your responsible and are considered a low risk, getting a student bank loan can save you the red tape surrounding federal loans.

Here's a couple of links for student bank loans:
Wachovia
Bank of America

Tuesday, February 05, 2008

Addressing Your Defaulted Student Loan

If this applies to you then listen up. Here's what the Federal Student Aid office says:

Make a payment now by credit or debit card
(We accept American Express, Discover, Master Card and Visa as repayment options. Please contact the Default Resolution Group at 1-800-621-3115 to process your credit card payment).

Student loan borrowers in default now have more options than ever before to repay their student loans. The U.S. Department of Education's (Department) Default Resolution Group is committed to assisting individuals in default by making debt repayment a simple process.

This site will provide you with information on the following loan programs:

Federal Family Education Loans (FFEL), which include Federal Stafford, Federal Consolidation and Federal PLUS loans. When placed in default, these loans are first assigned to a guaranty agency (an organization that administers the FFEL Program for your state) for collection. Periodically, guaranty agencies assign loans to the Department for collection.

Direct Loans, which includes Federal Stafford Consolidation and PLUS loans that are offered through the William D. Ford Direct Loan Program. When placed in default, these loans are assigned to the Department's Default Resolution Group.

Federal Perkins Loans. When placed in default, Perkins Loans may remain with the school or be assigned to the Department for collection.

Federal Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), Academic Competitiveness Grants and National SMART Grants. In certain instances, you may have to repay part of a Federal grant that was awarded to you.

If you are not sure what type of loan you have, check your promissory note or use our National Student Loan Data System. If your loan is not one of the loans listed above, the information on this site does not apply to you.

Student Loan Calculator

Here's a handy little calculator from CNN Money to help you determine how quickly you'll pay off your student loans. I figure your loan amount and interest rate are set. Play around with the monthly payment amount. Figure out the maximum monthly payment you can afford and see how short your loan will last.

Monday, February 04, 2008

Chase cuts rates and fees

Here's something to consider if you're currently shopping around for a student loan. According to Reuters:

Chase Education Finance said it will waive the origination fee on Stafford loans and the 1 percent default fee on Stafford, Parent PLUS and Grad PLUS loans.

It said it will also reduce the interest rate on all three loans by one-tenth of a percentage point if it makes, services and retains the loans.

Friday, February 01, 2008

Sponsor my Loan

There's a Mr. Luke Livingston that has come up with a clever way to help pay off his student loans. Check out sponsormyloans.com and see what he's done.

For $200, you can be the sole sponsor of his site for 1 month with your ads on the header, footer, and sidebar. It reminds me of the "million dollar home page" some time ago but this site is a good bit more reasonable.