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by Emily

Last week, we blogged about states and loan companies making cuts to student loan forgiveness programs.  The New York Times initially ran a piece on these budget cuts and has followed up this week with a chart of state loan forgiveness programs and their current financial status.  If you're planning on using one of these programs to cancel some of your student debt after college, you can head over to their website to see if your program is among those facing potential budget cuts.  If you don't see it listed, The New York Times is encouraging people to contact state and local loan forgiveness programs and report back with details.

While many state programs are facing cuts, federal loan forgiveness programs have expanded in recent years. New federal options include a public service loan forgiveness program and a repayment plan set to debut next month that will forgive students' remaining balances of federal student loans after 25 years of income-based payments. Congress has also approved more funding for Americorps, which can help volunteers pay for school. Cancellation programs for Perkins Loans may also become more popular if an expansion to the Perkins Loan program is approved in the 2010 federal budget.

Regardless of the state of your loan repayment and forgiveness options, keep in mind there is free money out there.  Grants and scholarships are available for virtually every student based on any number of characteristics and criteria.  For example, many groups offer nursing scholarships and education scholarships, among other major-specific awards.  To find out more, do a free college scholarship search.


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by Emily

With unemployment continuing to rise, college savings funds still performing poorly, and some states being forced to make cuts to grant and scholarship programs, many students are likely to be facing a very different financial situation when it comes to paying for college in 2009, as opposed to 2008.  Students who have experienced a significant change in their financial circumstances since completing the FAFSA, such as a loss of income and savings, can appeal to their college's financial aid office for a chance at more need-based college scholarships and grants.

Yesterday, U.S. News ran an excellent article by Kim Clark detailing the do's and don't's of appealing your student financial aid award, according to college financial aid administrators.  According to Clark, appeals are up this year and are more likely to be granted, as administrators take into account how drastically the financial landscape has changed.  If you are thinking of requesting a professional judgment appeal, here are some things you should do: 

     
  • Send a letter detailing changes in your circumstances and why you need more aid.
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  • Don't make demands for grants, but do explain how much help you need.
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  • Provide documentation, including pay stubs, medical bills, tax forms, or whatever helps show how things have changed since your 2008 tax return.
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  • Apply as early as possible.  While many colleges are increasing financial aid offerings, much aid is still first come, first serve.
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  • Write the letter yourself or have your parent write it if you are a dependent student and aren't comfortable doing it yourself.
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  • Tell the truth and don't lie or embellish--if caught, you could be fined or even jailed.
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 For more tips, you can read the entire article here.  If your circumstances have changed and you need more money for college, go beyond just requesting more aid from your school.  Update your Scholarships.com profile and do a scholarship search, paying attention to any new need-based scholarships and grants that may come up.  You could be eligible for more money than what is offered by your school, your state, and the federal government.


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by Emily

With President Obama's proposal to end the bank-based Federal Family Education Loan Program, there has been much speculation on what role would be left for banks in student loans, as well as which banks would be allowed to play that role.  An announcement made yesterday by the Department of Education indicates that at least four banks will remain involved in federal student loans for the forseeable future.

The Department of Education has selected four companies to service loans made through the federal Direct Loans program.  Sallie Mae, Nelnet, American Education Services/Pennsylvania Higher Education Assistance Agency, and Great Lakes Education Loan Services will all be awarded contracts of five to ten years to manage the increasing volume of student loans the federal government owns.

The servicers selected will be responsible for the student loans currently in the Direct Loans system, as well as loans the federal government has purchased as part of the federal rescue plan.  If all federal student loans are moved into Direct Loans, these agencies will also service them.  For now, what this means for student borrowers is that you may be dealing with different people if you have questions about your Stafford loans next year.  However, if Congress eliminates FFEL, this news could become more significant.


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by Emily

While it falls in the middle of summer on most academic calendars, July 1 marks an important date for financial aid each year.  On July 1, the Education Department switches from the 2008-2009 academic year to the 2009-2010 one, and new federal rules for financial aid go into effect. This means new loan consolidation and repayment options, lower interest rates on some federal student loans, among other changes for students receiving federal student financial aid.

One big change you likely already know about if you have applied for financial aid for fall is that Pell grants are going up from a maximum of $4,731 for 2008-2009 to a maximum of $5,350 for 2009-2010.  This change has already been widely publicized and is already reflected on your financial aid award letter.

Changes for current undergraduate students that you may not already know about include lower interest rates and lower loan fees on federal Stafford loans.  The interest rate on subsidized Stafford loans for undergraduate students will drop from 6.0 percent to 5.6 percent on July first.  Rates will not change for unsubsidized loans, graduate students, or federal PLUS loans.  The upfront loan fees on all Stafford loans will fall from 2 percent to 1.5 percent. Students who have older Stafford loans or PLUS loans with variable interest rates will also see lower interest rates as of July 1, provided they have not already consolidated their loans.

Those who are considering loan consolidation will see one of the biggest changes on July 1, with the unveiling of a new consolidation program through the federal Direct Loans program.  It will allow students to participate in an income-based repayment plan that will forgive any outstanding debt after 25 years.  Payments will be capped at 15 percent of whatever you earn above 150 percent of the federal poverty level and no payments will be required if your earnings fall below 150 percent of the federal poverty level.

Finally, since July 1 marks the start of the new academic year for financial aid, today is the last day to file a 2008-2009 FAFSA.  If you are planning to enroll in summer courses and have not yet applied for aid, you may want to check with your school to see whether summer is counted as part of 2008-2009 or 2009-2010 for financial aid purposes.  If your school counts summer as part of the previous academic year and you have not yet filed a FAFSA, you will want to do so right now.


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by Scholarships.com Staff

Congress has passed and President Obama has signed a bill that provides "technical corrections" to the Higher Education Act, which Congress renewed last year. In addition to offering clarification on several points and correcting minor errors, the Technical Corrections bill also makes some useful changes to federal student financial aid.

Minor clarifications include:

  • Updating the list of veteran's benefits not counted as financial aid to include benefits from the new GI Bill that goes into effect this year
  • Stating that lenders can provide both entrance and exit loan counseling to students
  • Setting 2010-2011 as the year in which the EZ FAFSA will need to be implemented
More substantial changes include:
  • Authorizing the Department of Education to buy up rehabilitated student loans (loans that have gone into default and since had consistent payments made on them) under the provisions outlined in ECASLA--previously students who had defaulted on loans and since resumed payments would find their loans stuck in default status due to the credit crunch.
  • Creating a new grant program for dependents of soldiers killed in Afghanistan or Iraq since September 11, 2001
  • Making Pell-eligible dependents of soldiers killed in Afghanistan or Iraq after September 11, 2001 eligible for an automatic 0 expected family contribution on the FAFSA
  • Changing the information schools must provide to lenders when students apply for private loans

The Chronicle of Higher Education has more information on the HEA Technical Corrections legislation here.


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by Scholarships.com Staff

We've previously blogged about the increase in student borrowing shown by the latest data from the National Center for Education Statistics. As more think tanks and other groups begin to analyze this information, additional reports are emerging to provide more details on who is borrowing the most. The latest report comes from Education Sector and bears the title, "Drowning in Debt: The Emerging Student Loan Crisis." While the report has been criticized by some as alarmist in tone, it does provide insight into students' growing reliance on student loans.

In broad terms, the study showed that over half of undergraduate students (53 percent) borrowed money to attend college in 2007-2008, up from just under 50 percent in 2003-2004. Students also took out larger loans in 2007-2008. Adding to the report published earlier by The Project on Student Debt, this report also looked at the percentage of students borrowing private loans, showing a sharp rise in recent years.

The report also breaks down borrowing by type of institution and type of loan, as well as along other lines. Education Sector found that student loan borrowing is most prevalent among students at private, for-profit colleges, with nearly 92 percent taking out student loans in 2007-2008. For-profit colleges also had one of the highest average loan amounts in 2007-2008, with students borrowing $9,611. Private not-for-profit colleges actually had higher average loan amounts at $9,766, but the percentage of students borrowing was significantly lower, though still higher than at public two-year and four-year colleges.

Students at for-profit and not-for-profit private colleges also relied the most heavily on private loans, with 43 percent of students at for-profit and 27 percent of students at non-profit private schools turning to alternate loans. These schools tend to have the highest tuition, so the greater loan amounts and rates of borrowing are not entirely surprising. Rising tuition and a lack of sufficient need-based financial aid (including a shift in focus from need-based to merit-based scholarships at four-year schools) are cited as two of the main causes for high rates of student borrowing.

A more detailed breakdown, complete with charts, is available on the Education Sector website.


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U.S. Bank Exits FFELP

July 10, 2009

by Scholarships.com Staff

Earlier this week, U.S. Bank announced that it would cease to act as a lender for Stafford Loans issued through the Federal Family Education Loan Program. U.S. Bank was the sixth largest participant in FFELP as of 2008, according to the Student Lending Analytics Blog, yet this news has caused barely a ripple.

This is partially due to the fact that the stream of lenders leaving FFELP has slowed considerably since last year and this particular student loan crisis seems largely to have passed. However, the news of another lender exiting FFELP seems less noteworthy or surprising in the face of increasing uncertainty about the future of FFELP as a whole. In what has been widely regarded as placing another nail in FFELP's coffin, the Department of Education has sent a letter to colleges currently participating in FFELP, detailing the steps being taken to ease their transition into issuing Stafford Loans through the federal Direct Loans program.

While Congress has not yet voted to move all federal student loans into the Direct Loan program, and while lenders and other organizations are still proposing alternatives to President Obama's suggestion of eliminating FFELP, many people seem to already regard the move as a done deal, regarding it as unlikely that any lenders will be around for much longer than the next academic year. Time will tell whether this proves to be the case, but for now students who were previously borrowing from U.S. Bank will still need to switch lenders at least one more time.


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by Scholarships.com Staff

Yesterday, the House of Representatives formally introduced legislation to reshape federal student loans, federal Pell Grants, and other aspects of student financial aid. The Student Aid and Fiscal Responsibility Act of 2009 builds on presidential budget recommendations and features several substantial changes to student aid.

A preliminary breakdown of the bill provided by the National Association of Student Financial Aid Administrators lays out the following proposed changes:

  • Dividing the Federal Pell Grant into mandatory and appropriated funding, then fixing the mandatory portion to the consumer price index plus 1 percent. Currently, the mandatory portion of the grant is $490 and the appropriated portion is $4860, so if these proportions remain the same, increases in the Pell Grant would still largely be at the whim of Congress each year.
  • Eliminating several questions on the FAFSA related to assets, but preventing anyone with assets of over $150,000 from qualifying for federal student aid.
  • Ending the Federal Family Education Loan Program and moving all federal Stafford Loans to Direct Loans.
  • Ending subsidized Stafford Loans for graduate and professional students in 2015.
  • Reverting to a variable interest rate that would be capped at 6.8 percent for subsidized Stafford Loans.
  • Expanding the Federal Perkins Loan program, with part of the new funding going specifically to schools that keep tuition low and graduate a high proportion of Pell-eligible students.
  • Changing the rules for drug offenses to make students ineligible for aid only if they've been arrested for selling a controlled substance.

The Democratic majority in the House has indicated a strong intention to pass this bill quickly, with the Committee on Education and Labor planning to vote on it as early as next week.


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by Scholarships.com Staff

After New York Attorney General Andrew Cuomo brought to light questionable practices some college financial aid offices engaged in when creating preferred lender lists for private loans, the fallout was felt nationwide. While colleges and lenders have reformed their practices in the face of new regulations, lawsuits against colleges and lenders are still being addressed.

Yesterday, Emerson College in Boston, one of the schools accused of receiving kickbacks in exchange for making it difficult for student borrowers to take out private loans from lenders not featured on their preferred lender list, settled with the attorneys general bringing the case, and agreed to pay a total of $780,000 to students who had been forced into student loans with less favorable rates. Payments will range from $25 to $833 and will cover the extra interest students are paying on their loans, compared to loans they could have obtained.

These cases serve as a reminder to weigh your options carefully before agreeing to borrow a student loan. Apply for federal financial aid and do a scholarship search first, then compare multiple lenders to be sure you are getting the best rate.  Even in the face of a lingering credit crisis and a weak economy, not to mention President Obama's plan to change the face of the student lending industry, it still pays to do your research before taking out a loan.


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by Scholarships.com Staff

We're nearly a week into August, and for many students, that means that back-to-school preparations have begun. Whether you're picking out notebooks and extra-long twin sheets, or trying to squeeze one last trip or a few more hours of work into your calendar, now is a good time to start looking ahead to the fall term if you're in college. This includes thinking about financial aid. One of the least pleasant aspects of the start of the semester is finding yourself in the line for the college financial aid office as it grows to epic proportions the first week of class.

Luckily, at most colleges the fall rush has not yet started, so if you have some extra time now, you can take steps to make sure you won't find yourself standing in a packed office and trying not to panic on the first day of class. From a financial aid office veteran, here are three things to check into now to avoid waiting in line later.

First, if you are applying for federal student financial aid, by now you should have filled out a 2009-2010 FAFSA and received a financial aid award notice from your college's financial aid office. If you're still waiting to complete a FAFSA or hear back from your school, now would be a good time to take care of these things. You may want to call your college's financial aid office, or check your account online if you have the option, to make sure that everything is in order for timely disbursement of your fall financial aid. Ask if you have any other paperwork you need to complete (such as verification or a master promissory note), especially if it is your first time receiving financial aid. Double check disbursement dates, as well, so you know when you are due to receive the money.

Second, if you've won any scholarship awards (and we hope you have!), now would be a good time to make sure you know when you will be receiving the funds, whether the checks will go to the school or to you, and whether you will need to sign anything or wait for the school to do any additional paperwork before you receive the money (the financial aid office may need to recalculate your aid based on the scholarships you've received). Many scholarship providers notify you of disbursement arrangements or include this information in their official rules, so review correspondence with them, as well as information they've published. If you have questions, you can check with your college and the scholarship provider.

Finally, make sure you will have sufficient funds to cover your bill and make arrangements if necessary to take care of whatever costs grants, scholarships, or federal student loans do not cover. Your parents may want to take out a PLUS loan, or you may want to take out a private loan to cover whatever gap is left. You will want to do paperwork for these as soon as possible, as processing times may take up to a few weeks, especially once things get busy. Many colleges also offer payment plans if you'd like to pay the rest of your bill without borrowing, but you cannot afford to do so all at once.


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