FAFSA, Federal Loans, Grants, Merit Aid, Money, Private Loans, Scholarships, State Loans

Understanding Your Financial Aid Letter

Comments Off on Understanding Your Financial Aid Letter 20 February 2017

When you’re accepted to a college, you’ll receive a letter explaining the financial aid package you are awarded.

These letters are sometimes filled with terms you might not be familiar with. You need to make sure you understand what your financial aid letter offers before you accept any part of it.

Here’s what you need to know:

  • You will be told about grants, scholarships, work-study programs and federal student loans. Grants and scholarships are funds that you never have to repay. Work-study is government funding that you earn by working a qualifying job on or off campus. Federal-student loans are borrowed money that’s taken out through the government that you will repay.
  • The cost of attendance (COA), which is what you can expect to pay for tuition, fees and room and board, also will be included. Additional expenses, such as textbooks, transportation and basic necessities, are not included in this cost. Tip: You cannot rely on this estimate beyond your freshman year. The cost of attendance is not fixed and does not take potential tuition increases into account.
  • An important aspect of your financial aid is the expected family contribution (EFC). This number, based on information from your FAFSA, estimates how much you and your family can afford to pay for college out of pocket.
  • It’s important to note that you don’t have to accept all the terms of your financial aid letter. You can decline things such as work-study and loans. Make sure to ask the right questions before you accept your letter and find the average student loan debt for each school you are accepted to. Ask how many graduates find a job in their field within six months because that is when the grace period for student loans typically ends.
  • Check to see if you can expect the same scholarships every year as well. Keep your College Greenlight profile up to date so you can find scholarships to help with college expenses.

African American Students, Diversity, Federal Loans

Student Loan Debts at Historically Black Colleges and Universities

Comments Off on Student Loan Debts at Historically Black Colleges and Universities 20 January 2017

People who attend historically black colleges and universities (HBCUs) typically have larger amounts of student loan debt than those at traditional universities. Debt loads at HBCU’s tend to be larger because many students are low-income and/or first-generation.

According to the United Negro College Fund’s report, FEWER RESOURCES, MORE DEBT: Loan Debt Burdens Students at Historically Black Colleges and Universities, HBCU students typically graduate with higher debt loads because they borrow at a higher rate than their non-HBCU peers. According to a 2013 study, HBCU students borrow an average of $26,266 in federal loans. Non-HBCU students borrow an average of $14,881.

HBCU students also have lower loan repayment rates than their non-HBCU counterparts. According to the report: “Seven years after leaving college, the average cohort repayment rate for HBCU students is considerably lower than that for students at non-HBCUs (59 percent vs. 85 percent).” This rate, however, does not include factors that impact repayment rates such as student economic status, labor market conditions and choice of educational program.

Another issue facing HBCU students is that more come from families with lower incomes than their non-HBCU peers. In 2005, the median family income of students at HBCUs was $28,400. That is about half the median family income ($51,400) for students who attend non-HBCUs. The discrepancy in income limits the ability of an HBCU student to pay for college. Thus, HBCU students have large amounts of unmet need that require them to take out student loans.

HBCU institutions have limited resources, which hinders their ability to provide grants to students. In 2015, the top 10 HBCU endowments to provide grants to students ranged from $34 million to $660 million. The endowments for non-HBCU institutions that year ranged from $10 billion to $36 billion.

Suggestions to reduce the HBCU student debt loan

  • Policymakers should reduce the complicated nature of the federal student aid eligibility process and provide more aid to those in need
  • Grant aid and work-study opportunities should be increased
  • Federal loans should be less costly for students and their families
  • The federal student loan servicing system repayment process should be more manageable, effective and efficient

Federal Loans, Money, Private Loans, State Loans

How to Help Borrowers with Unpaid College Debts and Defaulted Student Loans

Comments Off on How to Help Borrowers with Unpaid College Debts and Defaulted Student Loans 17 November 2016

Students sometimes encounter roadblocks because they owe money to a college or have defaulted on their student loans. Low-income students are more likely to be affected by these problems. These tips will help counselors help them overcome these obstacles.

Problem: Colleges may legally refuse to provide official transcripts to students who owe a debt to the college. This can prevent the student from transferring to another college to continue their education. But, the student can’t afford to repay the debt until they graduate and get a good job. Or, the student may need financial aid to pay off the debt.

Solution: A counselor can help the student by advocating on their behalf with the college. Maybe the student can finish their degree at the original college, with just a little more financial support. Maybe the college can accept a payment plan instead of payment in full, and release the transcripts after the student has made a few consecutive monthly payments. Maybe the counselor can convince the new college to conditionally accept unofficial transcripts and let the student enroll with a promise to deliver official transcripts later. Colleges may be more willing to compromise when a counselor intercedes on behalf of the student. (Counselors should get the student to sign a FERPA waiver so that the college can discuss the situation with the counselor.)

Problem: The student wants to repay his or her student loans, but circumstances have overtaken them. By the time the student loan bill is due, they’ve already spent their paycheck.

Solution: Sometimes, students just have trouble managing their money. Ask them to track their spending for a month using a program like Quicken or Mint.com. Increasing awareness of how they spend their money is the first step in exercising restraint. It will also help them plan for their bills. Encourage them to enroll in auto-debit, where the monthly student loan payment is automatically transferred from their bank account to the lender. Not only will this help ensure that they make the payments on time, but many lenders offer a slight interest rate reduction as an incentive. Asking the lender to change the due date to a few days after they receive their pay check may also help. These problems can also be prevented by providing students with access to financial literacy mini-courses while they are still in school.

Problem: The student is getting harassed by collection agencies. They are afraid to open their mail or answer the phone. They need someone to help them figure out a way out of this mess.

Solution: Avoiding the problem will only make it worse. The simplest solution is to talk to the lender and ask about their options. If they are actively engaging with the lender, the flood of letters and calls will stop. They can also exercise their rights under the Fair Debt Collection Practices Act (FDCPA) to tell the lender to stop contacting them, which will end most of the calls and letters, except for notices about specific actions the lender is taking, such as filing a lawsuit. But, this will not address the underlying problem, which is the difficulty dealing with the debt. There are options for dealing with financial difficulty, such as suspending or reducing the monthly loan payments, and for rehabilitating defaulted student loans.

Problem: The student doesn’t know the status of his or her student loans, just that it is bad.

Solution: The problem might not be as bad as the student thinks. If the student is just a few months delinquent, as opposed to being in default, making a few payments might be all that is necessary to bring the account current. Start by compiling a list of the loans and the lenders. If the student doesn’t remember any of these details, have them login to the National Student Loan Data Systems (NSLDS) to check on the status of the federal loans. Information about private student loans, as well as federal loans, may be found in the student’s credit reports, which may be obtained for free at www.annualcreditreport.com. Then, have the student call the lenders to learn about their options.

Problem: The student wants to continue their education, but has learned that they are ineligible for further federal student aid because they are in default on a previous federal student loan.

Solution: Borrowers can regain eligibility for federal student aid by rehabilitating the defaulted student loans. There are two main methods. One is to make 6 consecutive, full, voluntary, on-time payments on the defaulted student loan. The other is to consolidate the loans into a Federal Direct Consolidation Loan and agree to repay the consolidation loan with an income-driven repayment plan. This is a one-time opportunity, so if they redefault, they will have no choice other than to pay off the debt in full.

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