Stafford Student Loan News

Contrary to popular belief when you change school’s between semesters your Stafford loan funds do not simply transfer over to your new school with you.

The reason being is because the new school needs to receive a copy of your Student Aid Report (SAR). That is the report the FAO uses to determine your eligibility for the Stafford loan and how much it will be for. Just because you received $5,500 at one school does not necessarily mean you will receive the same amount at the new one.

As for your lender, who had already disbursed half of your Stafford loan funds to your old school in the Fall, you will need to contact them for three reasons. 1. You want to make sure they do NOT disburse the second installment to the old school, 2. they should be made aware of where you are currently enrolled so they can send a school certification form to your new school, and 3. you want to make sure they know you are still enrolled half-time or greater as defined by your school so they do not begin billing you.

If you need a Stafford loan (click here).

Many of you will be receiving your second Stafford loan disbursement, which will be applied toward your upcoming spring semester within the next few weeks. The sad thing is for many it won’t be enough to cover all your expenses.

If you are seeking alternative means to finance your second semester (click here).

Also, this is a good time to remind you to file your 2009/2010 FAFSA immediately after the new year hits! If you haven’t gotten it already, the new FAFSA eBook for the 2009-2010 FAFSA is out and available. It’s a comprehensive line by line guide to the new FAFSA that becomes available in just TWO DAYS, so make sure you grab a copy of the eBook.

Whether you are viewed as a dependent or independent student depends on several factors.  If one of the following applies you are an independent student for the 2009-10 academic year.

- You were born before Jan 1, 1986.

- You are or will be enrolled in a master’s or doctoral degree program (beyond a bachelor’s degree) at the beginning of the 2009-2010 academic year.

- You’re married on the day you apply (even if you are separated but not divorced).

- You have children who receive more than half their support from you at the time you apply and thru June 30, 2010.

- Both your parents are deceased, or you are (or were until age 18) a ward or dependent of the court.

- You are currently servicing on active duty in the U.S. Armed Forces for purposed other than training.

- You’re a veteran of the U.S. Armed Forces.

If none of these criteria apply you are a dependent student.

There is an article from the Boston Globe about a young soldier to be who died right before his tour in Iraq was set to begin. His name was Ian McVey. The article focused on his student loans that he left behind….he had both federal and private loans.

His federal loans were forgiven after his death…as all federal loans are, whether you are in the military or not. His private loans with Sallie Mae, will not be forgiven. Why? Because they are private loans, and it clearly states in the promissory note that the cosigner on the loan will be responsible for this loan if the primary borrower is not able to pay.  Ian McVey’s parents wrote a letter to Sallie Mae, hoping that they would forgive their son’s 53k debt, so that they would not be burdened with that debt. No surprise that Sallie said no…but it was in the way they said no that has me heated. (again, not surprised)…

Ian’s dad took the time to write a very personal and heartfelt letter to Sallie Mae. Stamped it, sent it off, and waited for a reply. Sallie Mae sent back a computer generated letter, with no name on it, stating that the loans would not be forgiven and he owed them 53k. You would think with all the bad press Sallie has gotten in the last year they would TRY to clean up their act??? Shouldn’t they have at least one person in their monstrous corporation that can write these letters, and be a contact for these families that are grieving….and burdened financially? I am not saying that Sallie should forgive those loans…because legally they do not have to…but why didn’t one person  take the time to answer this Dad? What do you think?

Read the article here.

Did you know in order to be eligible to receive federal student financial aid you must meet and maintain your school’s standards of satisfactory academic progress toward a degree or certificate offered by that institution? In most cases a minimum GPA of 2.0 is required.

To see if you qualify for a federal student loan be sure to complete your FAFSA.

If you have already completed your FAFSA and wish to apply for a Stafford loan (click here).  To apply for a Parent Plus loan (click here).

Five most recent Stafford loan help blog posts:

It took me forever and a day to find the answer to the question of when interest is capitalized on a federal student loan like the Stafford loan.

Capitalization occurs when:

• The loan enters repayment
• The loan exits deferment
• The loan exits forbearance
• The loan exits any status in which interest accrues

For the average student, interest will capitalize when the grace period ends on a subsidized Stafford loan. If you put a subsidized or unsubsidized Stafford loan into deferment or forbearance, once you return to repayment, accrued interest will capitalize.

If you’re not familiar with capitalization, read What is capitalized interest?

The answer is yes and no. It just depends on which federal loan you have been awarded.

For the Perkins loan, which are federal loans provided thru your school, the answer is no. There are no additional fees. If you are awarded $2,500 than the entire amount is yours.

If you have a Direct Subsidized or Unsubsidized Loan a 2% origination fee is attached which is taken right off the top of the amount you were approved for. For example if you are awarded $5,500 than $5,390 will be sent to the school when you deduct the 2% fee.

The Direct Plus loan has a 4% origination fee.

FFEL loans have fees as well, but they vary from lender to lender. They can range from 2% on the Stafford Subsidized and Unsubsidized loan to 4% on the Plus.

Here at Staffordloan.com we have zero fees for Stafford loans and 3% fees for Plus loans. For a Stafford loan (click here) and for a Grad Plus loan (click here) and for a Parent Plus loan (click here).

I can’t tell you how many students wind up with a defaulted student loan simply because they never got their monthly payment reminder in the mail. And by falling into default they end up having to pay back thousands more in late fees and interest. Don’t fall into this trap!

It is so easy in life to make excuses - to pass the buck - to blame someone else. It takes a person with character to stand up and take responsibility. Just because your lender or servicer has not sent your monthly invoice doesn’t mean you don’t have to pay your loan back. When you borrow stafford loans to finance your education you are also promising to pay them back. That is what your master promissory note is for. Billing statements are merely sent as a convenience. Sure, ignorance may be bliss for a while, but when they finally catch up with you it won’t be pretty.

Just remember your loan repayment begins six months after you either take a leave from school, fall below a half time status as defined by your school, or graduate. For most they graduate in May so by turkey time those graduates should be receiving a bill, but again, not all will.

We are defined by the choices we make in life. Don’t get off on the wrong foot by letting your loans fall into default and then blaming your lender. Be proactive instead of reactive and make it happen!

If you are unsure who your lender is you can contact the Department of Education at 800-433-3243 or log on to http://www.nslds.ed.gov/nslds_SA/.  Please note you will need your 4-digit FAFSA pin number to access your information online.

If you are in need of a stafford loan (click here).

As most everyone knows the FAFSA is the key that opens the financial aid door, but which parent gets listed on the FAFSA for a dependent student after a divorce is the million dollar question.   Is it the parent earning the most money?  How bout the one earing the least?  What about both?

The answer is…drum roll please…the parent you lived with for the greater amount of time during the 12 months preceding the date you file your FAFSA application.

If you didn’t live with either parent, or you lived with each parent an equal amount of time, then use information about the parent who provided the greater amount of financial support during the 12 months prior to the date you file your FAFSA application.

If you didn’t receive any financial support during that time than you must report information about the parent who most recently provided the greater amount of parental support.

To begin let’s first delineate the difference between a subsidized and unsubsidized loan.  If you received a subsidized loan for school NO interest will accrue while you are in school, sweet!  If however you have an unsubsidized loan than you are not so lucky.  Granted you could elect to make interest only payments if you so choose while in school, but if you don’t than that interest, which capitalizes quarterly, could spiral your student loan debt out of control.  Let’s take a look how.

So what is capitalized interest exactly?  When the interest is not paid, it is capitalized or added to the principle balance, which increases the outstanding principle amount on the loan.  Interest that is capitalized  and, therefore, has been added to the original amount of the loan subsequently accrues interest, adding an additional expense to the loan.

Here is a visual.

Loan amount: $1,000.

Interest per month: $10

Loan balance after 3 months: $1,030

Then that $1,030 loan balance is used as the new benchmark instead of  $1,000.  Now the monthly interest may go up to $10.10.

This was just a very basic visual used to demonstrate the capitalization concept.  Actual balances and interest rate calculations may vary.