The future of federal aid!!

With the current budget process in flux, there are many soon-to-be college freshmen who may have received financial aid award notifications that may change. Most students will have to make a commitment to a college by May 1st, believing that they will receive the aid on the financial aid award notification. However, financial aid officers have been given guidance by the United States Department of Education that award notifications should contain disclaimers or statements which will alert students that their awards are subject to change based on potential federal funding legislation.....so what does a student and family do? They should pay very close attention to the nofications and the federal budget process. They should contact the schools to which they are applying to get the most up to date information on the adjustment of aid packages.

Amendment to this post: the federal budget for 2011 is settled with appropriations to September 2011. However, it has yet to be seen what this budget settlement will do for financial aid. Please keep an eye on posts for future developments!!

Be aware of federal aid cuts

If the federal government does not pass a new funding resolution by Friday, March 4th, the federal government will basically shut down. Part of the continuing resolution, which will lead into President Obama's budget proposal is the potential reduction in federal student aid. With the current state of both the federal and state budgets, there are few expenditures that won't be examined, perhaps evaluated and potentially cut. One of the most recent articles that discuss these cuts is located at:

http://www.usnews.com/education/best-colleges/paying-for-college/articles/2011/03/02/potential-cuts-to-pell-grant-could-affect-students-in-2011

Loan repayment

As a result of the CCRAA (College Cost Reduction Access Act) of 2007 and amendents built into the recent Health Care Reform Bill, there are now easier ways for students to repay their student loans. The IBR or Income Based Repayment Plan is for students who choose to work in careers with salaries are not high. Many of these careers could be in public service. Often students would shy away from careers in these public service fields because they don't pay well, even though they would have gained much personal satisfactionf from these jobs. This repayment plan evaluates students' ability to pay based on their salaries rather than on the amount borrowed.

Additionally, students who work in public service could be elgibile for the Public Loan Forgiveness Program. Students who work in public service and make 120 payments on their loan while working in public service could have the remaining principle of their loan forgiven after their 120th payment. For students who are on the standard repayment schedule, this might not be advantageous as the standard repayment plan is 10 years long. But for students in the payment plan above, may very well benefit from this program!!

7 months later

More than 7 months have passed since I last posted and it is not due to any lack of happenings in the financial aid world. In fact, so many major changes have made it difficult to keep up.

That being said, the role of financial aid has grown even more important as the economic conditions improve but still are not great. There will be federal aid cut backs as well as state budget cuts. However, it becomes increasingly important for people to have a college education to remain competitive in this world.

How does a student and family do this when the costs of college continue to rise and resources seem to be decreasing? Like anything else, such as, tax issues, estate or retirement concerns, there must be planning. Financing a college education these days requires the same amount of consideration and planning.

I hope to come back more often now to update all my readers on regulatory issues as well as "tips" that could assist in making the dream of a college education a reality!!!

Income protection allowance!!

I hear from many parents regarding their concern over the earned income of their children and how they are fearful about the impact that income may have on the anticipated financial aid eligibility for their children.

As has been previously mentioned, there are many non-monetary benefits for students having a job. Repsonsibility, time management and the building of professional skills are just some of these benefits. To discourage a young person from working, simply because it could impact a student's aid package would be a disservice to that student. It is apparent that the federal government feels the same way. As a part of the CCRAA legislation of 2007,increasing income protection allowances were built into the federal need analysis formula that considers income into the Expected Family Contribution only if the level of income exceeds what is protected. For example for the 2011-2012 academic year, using 2010 income, a student can earn up to $5250 during this year before any amount will be used towards the EFC. Only a percentage of the income above $5250 will count toward the EFC.

So if your dependent child wants to work, allow them to do so. I would recommend paying close attention to the year-to-date earnings just as a strategic planning mechanism. More than likely, most students working part time, (unless they are being paid a high hourly wage or are working a great deal of hours) will not exceed the protection allowance by much. But understanding the formulas and the impact of the various components upon it, helps build clearer understanding of the entrie financial aid picture!!!

Progress with Direct Lending

As was mentioned in previous entries, all schools in the U.S. must now administer their federal student loans through the federal government, as the federal government will now serve as the lender. This determination was made on 3/30/10 and all schools must be in compliance by July 1, 2010. This has presented many challenges for schools and these changes have come at the most difficult time of the year, when fall tuition bills are due and students and parents are in panic mode.

That being said, schools will figure this out and there will be loan funds available for students for the coming year and beyond. Some good news to share as well. Interest rates on the federal direct subsidized loans for periods beginning 7/1/10-6/30/11 will be at 4.5%. This is a decrease from the current interest rate of 5.6%.

Another positive is that with the Federal Direct Plus Loan the interest rate is 7.9%.In the previous FFELP Plus Loan the interest rate was 8.5%.

As more information becomes available, I'll be here to let you know.

No More FFELP program!!

It has truly been a long time, since a post...about 5 weeks, which is tough, but I now have very relevant important information for those students who plan on borrowing funds through the Federal Stafford Loan Program. As a piece of legislation tied to the health care reform bill (I know, where does education finance reform fit into that?), President Obama signed the bill that would eliminate the Federal Family Education Loan Program and all students will now have to borrow their student loans directly through the federal government from a program called the Federal Direct Student Loan Program.

President Obama and his administration felt that by eliminating lending through the various banks that participated in this program, approximately $87,000,000,000 would be saved over a 10 year period, because the banks would no longer receive interest subsidies from the federal government. It is proposed that these savings would go back into education funding by investing these funds into the federal Pell Grant, but that is yet to be seen.

So anyone who has borrowed a federal Stafford Loan through a bank, such as Chase, Citi Bank, or an agency like Sallie Mae, will no longer be able to do so. For any period of enrollment after July 1, 2010, students will now have to borrow through the Federal Direct Student Loan Program. This will cause students confusion when it comes to repayment, as students could perhaps be paying back several student loans to several different lenders....and this legislation was supposed to make things better for students? Time will tell!

Common FAFSA errors!!

My apologies for neglecting this blog...it is not intentional! This is the busy financial aid season with FAFSA deadlines and getting ready for 2010-2011. Yes, that's right. We're getting ready for the new academic year even before most are even thinking about ending this one. This time of year, there are many financial aid application deadlines, like February 1st, February 15th, March 1st and April 15th. Don't miss the deadlines nor wait until right before a common deadline to enter data on forms such as the FAFSA. It is during these deadline times that the servers become overloaded and data entry and processing can be slow and incomplete.

Check out the article below regarding some common FAFSA errors:

http://online.wsj.com/article/SB126611543466445911.html

Financial aid is now KEWL!!!!

Check out this video made to encourage young people to file for financial aid......

http://www.youtube.com/watch?v=Zw9B_QRWcjg&feature=player_embedded

If this helps young people to understand why it is important to complete their FAFSA and to do so early....more power to them!!!