Stafford Student Loan News

Effective July 1, 2008…

Variable rate Stafford loan disbursed prior to July 1, 2006, that is IN GRACE (IG) = 3.6%

Variable rate Stafford loan disbursed prior to July 1, 2006, that is IN REPAYMENT (RP) = 4.21%

Variable rate Parent plus loan disbursed prior to July 1, 2006 = 5.01%

* note that any Stafford and PLUS loan that were taken out before July 1, 2006, and has never been consolidated, will have these new rates

* note that with consolidation, these rates are rounded to the nearest 1/8% which would make them:

3.625% Stafford in grace

4.25% Stafford in repayment

5.125% Parent Plus

For those who don’t know, if you have past drug convictions, for selling or possession while you were receiving Federal aid, then this can affect your aid eligibility. Your eligibility for Federal aid is revoked for a period of time (directly correlated to the type and number of convictions). I did some research on this, and it appears that as long as you have completed an “acceptable drug rehab program”, you can still receive federal aid. There are no time constraints on this…you could be convicted of selling/possessing drugs, enter a rehab program, complete it, and still get Federal aid right away. An acceptable drug rehab program consists of:

An acceptable drug rehabilitation program must include two random drug tests.

The program must also:

• Be qualified to receive funds from federal, state, or local governments

OR

• Be qualified to receive funds from a federal or state licensed insurance company

OR

• Be administered or recognized by a federal, state, or local government agency or court

OR

• Be administered or recognized by a federal or state licensed hospital, health clinic, or medical doctor

I also found that if this drug conviction (for selling or possessing) was 2 or more years ago, then a drug rehab program is NOT required, and you should still be able to get federal aid. If you have more than 1 drug conviction in the past 2 years, then your eligibility is suspended for longer. So basically, if you have more than 1 drug conviction in the past 2 years, you have to wait longer in order to be eligible for Federal aid. (it appears that each drug conviction you have = 1 year of lost eligibility). If you have 3 or more drug convictions in the past, then you are ineligible for Federal aid indefinitely.

For prospective or current college students, it is important to know the 2 different types of the Stafford loan. It is not news that if you are going to take out a loan, you should be well educated about the loan, for obvious reasons….but equally as important is realizing what these loans mean for your financial future. Remember it’s your Education and your money…two things that have extreme importance in todays world. Ok so here goes: Subsidized Stafford loan means that no interest accrues on this loan while you are in school at least part time. Interest starts accrueing on it 6 months after you graduate, or withdraw from school…or 6 months after you drop below part time. The goverment puts limits on how much you can borrow, because they are the ones paying the interest for you to the lenders.

Unsubsidized Stafford loan are a bit different. They accrue interest from the moment it is disbursed. You, the borrower, have the option to pay the interest monthly, or let the interest accrue and be capitilized. For a 3500 Unsub Stafford loan, with a rate of 6.8% - this will accrue about $20 per month in interest. So $20 a month for four years will add about $1000 to your original loan balance by the time you graduate….and this will increase if you have the interest capitlized.

So here is the big picture….

Four years of school…you take out as much Sub as you can….you also take out some Unsub to help cover tuition costs….so you have $17125 in subsidized Stafford, and 10,500 in unsubsidized Stafford

Scenario # 1 (you paid the interest monthly for 4 years)

Total loan debt: $27,625

Monthly Payment: $ 318/ month for 10 years

Total Interest Paid: $10,535

Scenario # 2 (you did not pay your interest)

Total loan debt: $29,605

Monthly Payment: #341/ month for 10 years

Total Interest paid: $11,315

As you can see, it is wiser to pay the interest monthly, if you can afford it. If you cannot afford it, thats ok…you can make up for it later by paying not taking the full 10 years to pay the loan. Federal loans have no prepayment penalties. So the sooner you pay them off, the less you will end up paying in interest. Got Questions or Comments…..

Financial Aid Forum

If you’re anything like me you’re mesmerized by shark specials. I just can’t get enough of them. I wait all year for “Shark Week” on the Discovery Channel with feverish anticipation. I grab my popcorn, pour a tall glass of pepsi-cola and settle in for some jaw crunching action. These predators of the sea are an awesome sight in action. I love all sharks including the tiger, reef, bull, and oceanic white tip, but it’s the great white that makes the headlines and is the token of my affection – from afar of course.

In the student loan world parents and students sometimes feel as though they have been thrown to the sharks, and are unsure who to trust or where to turn for help. Just imagine floating in the middle of the Pacific Ocean with no protection and no one around for miles. All those hours invested in front of your TV watching shark week probably wouldn’t make you feel too good at that particular moment. In fact, at that juncture you’d probably prefer not knowing the great white’s predatory instincts and savvy tactics. How they ambush their prey from underneath the calm waters while striking at a 45-90 degree angle. Well take a deep breath - I’m here to get you out of those dangerous waters and back onto shore. I want you watching shark specials while eating your lunch opposed to being lunch. Let’s take a bite out of the student loan world together!

1. First you need to determine if your school is a Direct Loan school or a FFELP (Federal Family Education Loan Program) school. Your school’s Financial Aid Office can inform you which umbrella your school falls under. The difference between the two is that Direct loan schools use the Federal Government as the bank to fund the loan while FFELP schools are allowed to use private institutions. It is important to note that both hold the same interest rate as they are both federally regulated loans. If you are a FFELP school read on. If you are attending a Direct Loan school please speak with your Financial Aid office regarding the process your school follows when processing federal loans.
2. The second step is to complete a Stafford loan master promissory note agreeing to pay back the loan after school (you have a 6 month grace period after you graduate before the repayment process begins). This form will have the lender details provided for you.
3. Third, the lender will send a certification letter to the school’s Financial Aid Office within 48 hours of your successful completion of your Master Promissory Note. The school then certifies your enrollment and lists the amount of your federal loan (the amount is based on your Expected Family Contribution total from your SAR which is generated from your FAFSA).
4. The funds are disbursed to your school on your behalf.

Now you are system educated. Now you can devise a game plan that’s right for you with your new found knowledge. Now YOU can be the shark and not the prey in that deep blue sea. To steal a line from the 1975 classic Jaws, “What we are dealing with here is a perfect engine, an eating machine. It’s really a miracle of evolution.” That’s you! Your engine is humming, your instincts are honed, and your unsuspecting prey is in sight. Enjoy your lunch – you know I’ll be watching.

Golf is a solitary game. One fleeting mental lapse and your round will blow up quicker than Kirstie Alley off Jenny Craig. It’s just you against the course. Sometimes that’s how it can feel in the student loan world as well. Many feel alone and unsure of the correct process. Some ask themselves, am I doing the right thing? Well, I’m here to serve as your student loan caddy and dissolve some of that stress and tame those insecurities. You’ll be swinging with confidence in no time. I’ll help you strategize your assault on the student loan course, and get your round under par. So put that karaoke microphone down and step back from your off pitch rendition of Neil Diamond’s “Solitary Man.” You are no longer alone.

I will start by telling you what I have told thousands of students, parents, guardians, and financial advisers over the past year, complete your FAFSA! It all starts with your Free Application for Federal Student Aid. Without this you have nothing. Would you walk up to the tee box with your sand wedge on a 500 yard par 5? I didn’t think so. So don’t start now. The FAFSA is the single most important document you can complete for federal financial aid. Below is an overview of how the process works from tee to green.

1. Complete your Free Application for Federal Student Aid FAFSA which gets sent to the Department of Education.

2. The DOE creates a Student Aid Report (SAR) on your behalf based off your FAFSA and sends this to the school(s) you designate. This process generally takes 7-10 business days.

3. The school will then send out an awards letter to you outlining the financial aid you are eligible for. That aid may include scholarships, grants, and federal loans.

4. You then complete a Stafford Loan application where you will sign a Master Promissory Note agreeing to pay back the loan after school. Please note, some schools are Direct Loan Schools or William D. Ford schools as they are also known. If you attend a Direct Loan School you will need to contact your school’s financial aid office for further instruction on how to complete your federal loan application.

5. The lender will send a certification letter to the school’s financial aid office within 48 hours of your successful completion of your Master Promissory Note. The school then certifies your enrollment and lists the amount of your federal loan (the amount is based on your Expected Family Contribution total from your SAR).

6. The funds get disbursed to the school.

7. Begin the repayment process 6 months after you graduate or take a leave of absence from school.

So there you have it. Never again will you be made the fool. Never again will you be referred to as “Tin Cup”. The tiger roar is now alive and well within. So go for the green. Go for the glory. Seize the moment. Wait, what’s that sound? I think I hear some chirping. Yes I do. Another birdie.

How many times have you uttered these nine words to yourself, “If I only knew then what I know now.” If you’re south of the legal drinking age, probably not often, but as father time marches on you gain new perspective.

I can tell you unequivocally that I wanted to hop into a Delorean, hit 88 mph, and go back in time to save me from myself on several occasions. I would have saved myself thousands on student loan repayments. Actually, who am I kidding, I would have placed a few choice wages on sporting events while I was back in time and became wealthy enough to pay my way thru school, but I digress on my fantasy adventures. My aim today is to have you eliminate those aforementioned nine words from your vocabulary as it pertains to student loans.

So let’s pump those 1.21 gigiwats of electricity thru the flux capacitor and get you where you need to go. Just follow my 6 easy steps below and you can’t go wrong.

1. Complete your Free Application for Federal Student Aid (FAFSA) (this application is sent to the Department of Education). Please note, if you do not have a pin number you will need to request one at www.pin.ed.gov
2. You will receive a Student Aid Report (SAR) which will be sent to both you and the school(s) you list on your FAFSA (up to six schools max) within 5-7 business days.
3. The school will send you an Awards letter outlining the financial aid you are qualified to receive. Financial aid which includes grants, scholarships, and federal loans.
4. If you qualify for a Stafford Loan you will need to find a lender to fund your loan. You can go to http://www.staffordloan.com/ and one will be assigned for you. We make it easy!
5. If you are a dependent student who needs additional funds for school you may have your parent apply for a parent plus loan. If they get accepted for the loan that would obviously be great, but if they get declined for any reason you will be qualified for additional Stafford loan funds. You can take that denial letter to your financial aid department.
6. If you do not qualify for a Stafford loan than you may wish to explore private student loan options. You can visit ActEducationLoans.com for more details regarding undergraduate private student loans.

So now that you’re back from the future, what is your game plan? Will you travel down the road of uncertainty like so many others before you? Will you navigate the course I have outlined? Regardless of choice one thing is certain, “Roads, where you’re going you don’t need roads.”

The mind set required when running a marathon is one of focus, mental fortitude, and toughness for the long hall.  As such, you naturally need to pace yourself and prepare yourself accordingly.  I have a friend Courtney from Austin Texas who runs each week and prepares herself proportionately for her mini-marathons.  She fastens her running sneakers snugly, gets her Ipod Nano set with her favorite tunes, puts on her running shorts and t-shirt, grabs a bottle of water, and equipped with her “can-do” attitude braves the scorching Texas heat.  She is mentally tough and prepared for the elements.  But Courtney is in the minority.  We as a nation are enamored with instant gratification.  Seldom do we take such steps to ensure success.  Well, I’m here to tell you when it comes to educational loans you want to breach this topic more like a marathon – not a sprint.  Take your time and get it right the first time.  To quote a commercial from the late 80’s, “It won’t happen over night, but it will happen.”

The fact is the process of obtaining a Stafford Loan holds several key phases before completion is reached which you should be aware of.  As they say, the best things in life are worth the wait, and this is one of those times.  Take a look at my lucky seven keys to success!

 1. Complete your FAFSA application (which gets sent to the Department of Education).

2. The DOE intern creates a Student Aid Report (SAR) on your behalf and sends this to the school(s) you designate.  This process generally takes 7-10 business days.

3. The school will then send out an Awards letter outlining if you are eligible for a Stafford Loan and for how much.

4. You then complete a Stafford loan application where you will sign a Master Promissory Note (some schools are set-up for e-signature while others require a hard copy to be sent).

5. The lender will send a certification letter to the school on your behalf for them to certify your enrollment and outline what you Stafford Loan eligibility amount totals.

6.  Your school sets the disbursement date of your Stafford Loan funds with the lender.

7. You begin the repayment process 6 months after you either graduate or take a leave of absence from school.

So it’s your choice.  You can run out that door totally unprepared into the fiery Texas heat, or you can take a page out of Courtney’s book and arm yourself accordingly.  I know which choice I would make.  The problem for me, however, is I just can’t keep up with her.  Court’s always been one step ahead of this writer, but someday I’ll catch her.  At least that’s what I keep telling myself.

Chess is a game of skill and strategy which has been around since 600AD. Simply speaking chess is a board game for two players, each beginning with 16 pieces of six kinds with the objective of checkmating the opposing king. It sounds easy in concept, but it can be overwhelming for some.

It took my mother years to master her craft and now beats my step-Dad on a regular basis. In fact, I don’t know if any word in the English language holds as much weight as the word “checkmate.” It is a liberating feeling for one and a humbling, crushing feeling for the other when checkmate is finally declared. The world of student loans, like a chess board, can be equally difficult to navigate for parents and students alike. You have a world of knowledge at your finger tips. You have several diverse directions you can travel. So how do you protect your King? How do you know if you are making the right moves? Well, the fact that you are reading this blog tells me you are one step ahead of most and on your way to checkmating the king. You are either researching Stafford Loans for yourself, your children, or someone you care about; a wise choice indeed.

Federal Loans are at the apex of the student loan universe with the most common of those loans being the Stafford Loan. Stafford loans simply put hold excellent rates and benefits for its borrower. That said, you do need to qualify for a Stafford loan. The process begins by completing your FAFSA. That report is then sent to the Department of Education where they arrive at an Expected Family Contribution (EFC) number. A Student Aid Report (SAR) is then generated and sent to the school or schools you designate. Finally, the school(s) will send you an Awards letter outlining what you are eligible for. It will state what grants, scholarships, and federal loans you are entitled to. If you are awarded a Stafford loan you may come back to this website and apply to have a lender assigned to your loan. The lender then disburses the funds directly to your school after they receive certification from the school that you have enrolled and that you have been awarded the funds. That is the final step in the equation. It’s that simple.

Now that you are armed with the knowledge you need, are you up for the challenge? Are you ready to take down the opposing king? I think you are. Say it with me, checkmate.

Why does it matter if I qualify for a Federal Loan? I can just take out a Private Loan and have the funds disbursed directly to me. What’s the difference between federal and private? I mean, I have to pay the money back anyway, right?

It’s true you do have to pay the money back regardless, but if I asked you a simple question like would you rather pay me back $20 or $50 for my services, which would you choose? If you value your hard earned dollar you would choose $20. That’s why you should take the time to complete your FAFSA and see if you qualify for federal loans, like a Stafford loan. Stafford loans are fixed at lower interest rates than private loans. That said, private loans have benefits too.

Let’s review some pros and cons for both and determine the best option for you.