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Don't Borrow More Than You Need

Nov 21, 2007

by Administrator

Limiting the amount of money you borrow is a basic principle of good money management. College students who are able to finance their education through federal student loans, are fortunate to have access to low interest rate educational funding that puts earning a degree within their reach.

However, just because money is available to borrow does not necessarily mean that you should borrow it. If you are eligible for more student loan money than you really need, you may want to limit the amount you borrow. After all, even though the interest on a federal student loan tends to be lower than on other types of debt, it is still debt.

Additionally, you shouldn’t stop looking for scholarship resources just because you are able to access student loans. If you can get a scholarship to cover some of your expenses, you can reduce the amount of money you need to borrow and will ultimately have to repay. Many scholarship programs are available only to upper division students, so you should definitely keep your eyes open for funding opportunities even after you enroll in college.

And remember, there’s no need to rely on expensive student loan options to pay for your college education. For more information on finding free scholarship money for college, conduct a Scholarships.com free college scholarship search today, then apply and win! It’s that easy!

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Scholarships.com Financial Aid Calculators

Nov 9, 2007

by Kevin Ladd

Worrying about the application process is hard enough. When you add tuition costs, necessary savings, and loan interest rates into the equation, the numbers equal a headache. Don’t worry; we’ll give you a hand. Take advantage of the free financial aid calculators provided by Scholarships.com, and take things one day at a time—we’ll crunch the numbers for you.

College Cost Worksheet Calculator

Before accepting college offers, you should know how much an education at your school of choice will cost you. Not everyone has unlimited funds, and assuming that loan payments will take care of themselves after graduation is not the greatest policy. To help you estimate the costs of a college education, we have created a college cost worksheet. Just type in some estimates and find out what you should expect. To search for a college and find the cost estimates by school, you can also use our free college search.

Savings Planner Calculator

To secure a sound financial future, students should search for scholarships and set money aside for college. By using our savings planner calculator, you can find out where you will stand by the time freshman year rolls around. If you are still far behind, you may want to scrooge up, get a head start on scholarship applications and consider a part-time job.

Future College Cost & Savings Calculator

College is expensive, and even those who save are likely to encounter big school costs. Most students will need to make large contributions while attending school. With the help of our Future Cost Savings Calculator, you can estimate just how large your yearly contributions will have to be. We have already taken into account the estimated yearly increases in tuition.

Monthly Loan Payment Calculator

Sometimes loans are unavoidable. If you plan to borrow for an education, you should at least know what to expect when your bill arrives. Having to give up your career of choice in favor (or disfavor) of one that’s less desirable but higher paid can be disappointing. To avoid any problems, figure out how much you can afford to pay each month, and use our calculator to help you do it.

Going to college doesn't have to break the bank or saddle you with tens of thousands of dollars in student loan debt. Check out the Scholarships.com free college scholarship search where you’ll discover you qualify for hundreds of thousands of dollars in scholarships in just a few minutes, then apply and win! It’s that easy!

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Federal Student Loans

Nov 6, 2007

by Kevin Ladd

Loans don’t incite pleasant feelings in students, in anyone on the borrowing side. It doesn’t help that the media has made it a point to discuss, extensively, what appears to be the newest trend… mortgage loan defaulting. Student loans aren't as large as mortgages, but for a growing number, they are catching up.

Regardless of cost, there are a lot of dedicated students out there, and until the college-financing system undergoes a major overhaul (cross your fingers but don't hold your breath), loans may be inevitable. Before taking out loans, students should complete a FAFSA and conduct a free scholarship search. Those who still need money should apply for federal loans. Only after exhausting government loans should one consider private student loans

As a result of the recently passed College Cost Reduction and Access Act, there will be a decrease in interest rates on federal college student loans. That's great news for students with large financial aid needs, but loan rates have not yet been changed. Even before government rates become less expensive, it is in a student's best interest to see what the government has to offer before looking elsewhere. Below are the federal student loan options available to those in need.

Stafford Loans- Students who are interested in taking out a Stafford Loan (or other types of federal student loans) will need to fill out a FAFSA. The amount that a student can borrow will depend on a student’s year in school as well as on whether the Stafford Loan is subsidized or unsubsidized (only a portion of the amount may be subsidized). Stafford Loans disbursed after July 1, 2006 are fixed at a 6.8 % interest rate, but lower rates are in the works.

  • For the 2007-2008 school year, dependent undergraduate students attending college full time may borrow between $3,500 and $5,500 (borrowing limit increases after each completed year).
  • Independent undergraduates or dependents whose parents were denied a PLUS Loan may borrow between $7,500 and $10,500 (again, freshmen may take out less than seniors).
  • The maximum amount of a professional or graduate student loan is a bit larger—as is graduate tuition. This year, students may borrow up to $20,500, regardless of their year in graduate school.

PLUS Loans- The Parent Loan for Undergraduate Students or PLUS Loan is offered to, as the name suggests, parents of undergraduate students. Recently, the loan has also been made available to graduate school students. PLUS Loan amounts may not exceed the total cost of attendance minus any other financial aid received. If the student’s estimated cost of attendance (amount determined by each school) is $6,000 and the student receives $4,000 in aid, only $2,000 may be borrowed. To take advantage of this loan, students must max out their Stafford Loans, and doing so is in a student’s best interest anyway. PLUS Loans have higher interest rates than Stafford Loans; those disbursed on or after July 1, 2006 are fixed at 7.9% for Direct PLUS Loans and at 8.5% for FFEL PLUS Loans.

Perkins Loans- Although Perkins Loans are made with government money, they are normally classified as campus-based aid because they are administered by schools. Perkins Loans are offered to students with exceptional need, and only a limited amount is available. Once a school runs low on Perkins Loan funds, students will not receive as much (the same holds true for federal-work study opportunities). This is why students are generally advised to submit their FAFSA early. The earlier they apply, the greater their chance of receiving some forms of aid. The loan amount received through the Perkins Loan program depends on the amount a school has, on already-received aid and on the financial needs of the student. Students who qualify can borrow up to $4,000 each year and pay it off at a 5% student loan rate.

And don't forget, you should pay for your college education with as much free money as possible! Find as many scholarships and grants as you can before turning to student loans. Visit the Scholarships.com free college scholarship search today where you'll get matched with countless scholarships and grants for which you qualify, then apply and win! It’s that easy!

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New Lender Regulations Approved by Department of Education

Nov 2, 2007

by Scholarships.com Staff

After months of investigations into the legality of practices within the student loan industry, new regulations have been approved by the Department of Education. The guidelines came shortly after the passage of the College Cost Reduction and Access Act which increased financial aid and decreased lender subsidies. The new rules, however, are more targeted at the behavior of student lenders and financial aid officials.

Department regulations now state that colleges offering preferred-lender lists must suggest at least three different lenders. In the past, some schools mentioned only one lender, the one they had an exclusive contract with. The investigation also found that certain schools listed a number of lenders, but the choice was illusory. Because some lenders sold their loans to others on the list, the options were smaller than they appeared.

Approved mandates also cleared up some ambiguities between state and government laws regulating lender and school relationships. Lenders are generally pleased that the Department of Education has made clear their rules, when discrepancies arise, supersede rules laid down by the state. (Not that this wasn't already the legal rule of thumb.

Numerous schools and lenders have already agreed to abide by a new code of ethics and have donated millions to loan-education funds—even some who denied wrongdoing—after being accused of misdeeds by Andrew Cuomo, the Attorney General spearheading the investigation.  Citibank and Sallie Mae each agreed to pay $2 million while Education Finance Partners agreed to pay $2.5 million in settlements. New York University, Syracuse University and the University of Pennsylvania, among others, also settled and agreed to return some money to student borrowers. Knowing that Mr. Cuomo is not the loan king, although he sure has proven himself, will assuage some lender and college frustrations, but not by much.

And remember, there’s no need to rely on expensive student loan options to pay for your college education. For more information on finding free scholarship money for college, conduct a Scholarships.com free college scholarship search today, then apply and win! It’s that easy!

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NASFAA Questions Student Lender Auctions

Oct 26, 2007

by Scholarships.com Staff

A recent evaluation released by NASFAA, an organization representing the interests of financial aid professionals, brings into question the effectiveness of a new student lender auction system. The recently-passed College Cost Reduction and Access Act created, among other things, a new auction system wherein student lenders would bid on exclusive market rights in each state. While the law concentrated on cuts in student lender subsidies and increases in free student grants, the auction system aimed at lowering taxpayer burdens was also enacted.

When the system goes into effect in 2009, lenders interested in participating in the government's subsidized FFEL Plan would have to compete for the lowest subsidies. Those who won the bid would get exclusive state lender rights. Only lenders who would choose to take part in the government’s FFEL program would be effected, and only rights to PLUS loans would be auctioned.

However, the NASFAA report questions whether an auction would really be as effective as it initially seems.The statement suggested that the auction program was based on the rash assumption that lenders who bid for loan rights would be willing to greatly lower subsidy expectations, and that taxpayers would really benefit from lower subsidies. This assumption, based on the report, may prove to be faulty. State competition could be lower than expected, and some states could problematically benefit more than others. After a few years, the competition is likely to decrease altogether, and lenders may simply choose to opt out of the program.

Doubt was also cast upon the assumption that student borrowers would not be affected by the auction system. Based on the report, it is more likely that lenders will get rid of certain student benefits once they have exclusive rights to a state. Borrower services that could be affected include default prevention, financial literacy and electronic processing. The report disputes the claim that very few students are eligible for benefits. Instead, it suggests that most students qualify for at least some helpful services or benefits.

How an auction would in effect change the financial aid system and affect taxpayers remains to be seen. However, a "Bill Gates is about to take over the world" scenario is unlikely. First of all, a total overhaul is not going to occur; PLUS loans will be used to test out the system. Based on the results, a general idea of what could happen in such situations should be obtained. Secondly, the auction would repeat after two years, and it’s unlikely that lenders will get comfy enough to cause a ruckus. Because two lenders will be chosen per state, some competition is likely to keep them in line. Let us also remember that PLUS loans are not the only loans on the planet. If FFEL PLUS loans become too pricy, students could look to competing loans and lenders. FFEL program winners will still have a reputation to upkeep.

Ultimately, the government has the last word on this one. We'll see if that’s a good thing.

Going to college doesn't have to break the bank or saddle you with tens of thousands of dollars in student loan debt. Check out the Scholarships.com free college scholarship search where you’ll discover you qualify for hundreds of thousands of dollars in scholarships in just a few minutes, then apply and win! It’s that easy!

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Student Lenders Reap Millions in Excess Subsidies

Oct 22, 2007

by Scholarships.com Staff

In recently published (previously-known) financial aid news, student lenders were found to have made millions by accepting excess subsidies from the government. By finding loopholes in government regulations, the student lender Nelnet, one of the biggest offenders, was able to collect $278 million in excess payments between 2003 and 2005. Based on calculations released by the Washington Post, other lenders accepted an estimated $300 million in excess subsidies between 2003 and 2006—paid for by taxpayers.

Because students applying for government aid are restricted in how much they can borrow, the government offers subsidies to lenders who borrow to students. In exchange for the money, lenders offer students loans at rates that, although usually higher than those offered by the government, tend to be lower than those offered by unsubsidized lenders.

When average student loan interest rates were higher, the government guaranteed lenders a 9.5 percent interest rate for loans. Once average loan rates fell, many lenders continued to take in large subsidies.

And although the government lowered some subsidy sums after rates fell, they continued to guarantee a 9.5 percent rate on loans previously funded with tax-exempt bonds. To extend the pool of loans still eligible for larger subsidies, Nelnet divided tax-free bonds among various pools. They would then claim that pools of loans at least partially composed of tax-free bonds were eligible for 9.5 percent subsidies.

The government did little to stop them in the past, and it is doing little to punish them now. According to the Washington Post, the Department of Education Secretary Margaret Spellings did admit that the government shouldered some of the responsibility for the “confusion”. However, she indicated no intent to pursue full accounting, nor did she suggest that reimbursement from lenders would be sought.

And remember, there’s no need to rely on expensive student loan options to pay for your college education. For more information on finding free scholarship money for college, conduct a Scholarships.com free college scholarship search today, then apply and win! It’s that easy!

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Cuomo Subpeonas Lenders Over Marketing Tactics

Oct 12, 2007

by Scholarships.com Staff

The battle to offer students the best chance of getting out of college with both a diploma and a fighting chance at earning a living wage while paying off their student loans continues. Even those who have already reached an agreement with the New York attorney general are being subpeonad for what Cuomo terms "deceptive corporate marketing practices".

It is difficult to say whether students deserve special consideration with respect to corporate marketing practices, which, it seems to me, have been deceptive by definition for at least the last four or five decades without being placed under this kind of scrutiny. Shouldn't everyone be entitled to marketing that is not deceptive? Or should we all just continue to accept that marketers are not your friends and they tell you what they need to in order to get you to buy what they want to sell?

Of course, the initial scope of the investigation was and remains critical, as every student should be able to assume that their advisor, regardless of the institution they attend, is not a marketer. It is vital that those in the financial aid offices in all of our schools give only objective information to students that will get them through school with as little debt as possible.

Of course, there are those who claim Cuomo's crusade will ultimately harm students by causing them to distrust their advisors when the majority of them have been giving, and continue to give, good, objective advice. While I believe this to be true, I also believe it is never a bad idea to do independent research on something so important and that this statement is condescending, to say the least. Apparently students across the board, if forced to research loans for themselves, will fare poorly and pay more in loans than if they listened to those at their college or university financial aid office. In this argument it is never considered a possibility that, given the opportunity, a student and his parent might find the best possible solution to funding their education. If I were an aspiring college student or a parent of such a student, I would find this very insulting.

Going to college doesn't have to break the bank or saddle you with tens of thousands of dollars in student loan debt. Check out the Scholarships.com free college scholarship search where you’ll discover you qualify for hundreds of thousands of dollars in scholarships in just a few minutes, then apply and win! It’s that easy!

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Sallie Mae Files Lawsuit against Buyers

Oct 10, 2007

by Scholarships.com Staff

On October 8, 2007, Sallie Mae announced its intent to file a lawsuit against the company’s potential buyers, a group of investors led by J.C. Flowers & Company. In April, the student lender agreed to a buyout offer of $60 per share. Since then, the buyers retracted their initial proposal, citing recently passed student loan legislation as reason. 

By signing the College Cost Reduction and Access Act, President Bush agreed to cut student lender subsidies by about $21 billion. Numerous companies, including Sallie Mae, threatened that the cuts would force them to eliminate borrower benefits such as, among other things, on-time payment reductions.

Following the bill’s passage, buyers lowered their initial buyout price to $50 per share. Sallie Mae rejected the offer and filed a $900 million lawsuit for contract termination. Albert L. Lord, the Chairman of Sallie Mae’s Board of Directors stated, “We regret bringing this suit. Sallie Mae has honored its obligations under the merger agreement. We ask only that the buyer group do the same.”

And don't forget, you should pay for your college education with as much free money as possible! Find as many scholarships and grants as you can before turning to student loans. Visit the Scholarships.com free college scholarship search today where you'll get matched with countless scholarships and grants for which you qualify, then apply and win! It’s that easy!

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Sallie Mae Buyout in Abeyance

Oct 3, 2007

by Scholarships.com Staff

Buying Sallie Mae, the biggest lender in the business, may have seemed like a great idea at first, but doubts have been creeping up. A group of investors that includes J.C. Flowers & Company, Bank of America, JP Morgan Chase, and Friedman Fleischer & Lowe initially offered $25 billion for Sallie Mae, but has recently retracted the offer blaming new legislation for the decision. The College Cost Reduction and Access Act signed by President Bush last week entails, among other things, government cuts on subsidies given to student lenders. Over the next five years, about $21 billion would be cut from lender support and invested in student aid programs.

J.C. Flowers & Company stated that their decision abides by contract rules and that such legislation was considered when the contract was drawn up. A smaller purchase price was still proposed, and, if Sallie Mae performs well, the offer may increase.

The legislation will certainly not put the lender giant out of business, but Sallie Mae may feel some pressure. The lender has stated that the new law will force it to give up some student perks, and that won’t go over well with borrowers. Those who have financial needs will still be forced to borrow once government grants and loans are exhausted, but increased caps on both may decrease student needs.

Going to college doesn't have to break the bank or saddle you with tens of thousands of dollars in student loan debt. Check out the Scholarships.com free college scholarship search where you’ll discover you qualify for hundreds of thousands of dollars in scholarships in just a few minutes, then apply and win! It’s that easy!

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College Cost Reduction and Access Act Officially an Act

Sep 28, 2007

by Scholarships.com Staff

After an anxious wait on the part of students and lenders, President Bush finally signed the College Cost Reduction and Access Act into law. And you know this is big if MTV reported on the bill even though partying at club Les Deux wasn’t involved.

According to the new law, the maximum Pell Grant offered to students will increase while the subsidies the government offers student lenders will decrease. This is the biggest boost in student aid since the GI Bill for veterans---and a fresh change from the 2005 $12 billion financial aid cut.

Among those who will benefit are needy students eligible for government grants and those who borrow from the government. Currently, students are eligible to receive a maximum $4,310 Pell Grant each year. This number will increase gradually, reaching a high of $5,400 by 2012.

Under the act, new subsidized Stafford loan interest rates will also be cut. A low point of 3.4 percent will be available to students who borrow between July 1, 2011 and July 1, 2012. Unfortunately, students will have to wait until 2008 to take advantage of this change. Until then, they are stuck with the current fixed 6.8 percent loan interest rate.

Students who plan to teach in low-income neighborhoods after graduating may also benefit. Future teachers may receive a $4,000 TEACH Grant for each year they attend school (up to $16,000 for undergraduates and $8,000 for graduates), but a pretty detailed list of additional eligibility criteria must also be met.

The bill was largely a result of New York Attorney General Andrew Cuomo’s investigation into illegal actions within the $85 billion student loan industry. The investigation revealed that numerous financial aid administrators, including one from the Department of Education, received financial incentives from lenders who hoped to improve their standing with schools.

Some of the financial aid changes outlined in the act were previously considered, but Cuomo’s investigation provided much-needed impetus. Although Bush had initially threatened to veto the bill, he agreed to sign once recommended changes were made. In a White House photo, the president is shown signing the bill with four smiling college students, three smiling congressmen and a smiling Secretary of Education Margaret Spellings looking over his shoulder. A sign that read, “Making College More Affordable” hung from his desk.

And don't forget, you should pay for your college education with as much free money as possible! Find as many scholarships and grants as you can before turning to student loans. Visit the Scholarships.com free college scholarship search today where you'll get matched with countless scholarships and grants for which you qualify, then apply and win! It’s that easy!

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Student Loans: To Consolidate or not to Consolidate

Sep 26, 2007

by Scholarships.com Staff

President Bush is certainly keeping students waiting. Graduates debating loan consolidation and lenders pressuring them to go through with it are standing by to see if the Congress-approved College Cost Reduction Act will finally be signed by the president.

If the bill is passed, the government will cut lender subsidies by October 1st. The savings will then be used to increase Pell Grants to needy students. October is fast approaching, but the president has yet to make a move on the bill approved by Congress on September 7th. The potential law is not only important because of the grant factor; it is important because it may mean cuts in financial breaks offered by student lenders.

Lenders have warned that if the bill passes, students will not be granted many of the financial perks they were once eligible for. One of the perks in jeopardy is the Sallie Mae (the largest lender in the business) interest rate cut on consolidated loans to borrowers who pay on time for three years. Sallie Mae and other lenders are making the best of the situation by pressuring students to consolidate with them before things change.

Except that consolidating is not always in a student’s best interest. Students who have loans issued before July 2006, ones with interest rates that change each year, may lock in this year’s rates by consolidating. (loans borrowed after July 1, 2006 have fixed yearly rates.) If interest rates increase, students may be doing themselves a favor. They will be able to keep their discounts and maintain lower rates.

But there is a large chance that rates will go down. If students wait, they may be able to get lower rates that can offset lender discounts, ones that many students aren’t even eligible for. Students should also remember that by consolidating and increasing the lifespan of their loan, they will be paying more in the long run. They will be paying less each month, but additional payments mean more interest buildup.

Consolidation is a tough call. It’s hard to foretell the future. Numerous financial aid administrators suggest that students contact their lenders to find out exactly what discounts they can keep by consolidating. If they are big and the likelihood of eligibility is there, they can consider.

And remember, there’s no need to rely on expensive student loan options to pay for your college education. For more information on finding free scholarship money for college, conduct a Scholarships.com free college scholarship search today, then apply and win! It’s that easy!

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College News , Financial Aid , Student Loans

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