Meet FAFSA/Financial Aid deadlines

All colleges require the FAFSA (Free Application for Federal Student Aid) to be completed in order to award Federal Financial Aid awards as well as many colleges use the FAFSA to offer individual college aid awards.  Also, most if not all colleges require the FAFSA be submitted prior to the IRS Tax deadline which this year is April 17, 2012. Since most families do not file their taxes prior to the financial aid deadlines, they use “estimated federal tax” information in an effort to meet each of the respective colleges’ required FAFSA/ financial aid deadlines.

However, due to the fact that families use estimated federal tax information, many if not all of the colleges on their list require verification of the estimated federal tax information to finalize the family’s 2012-13 Financial Aid Awards. In 2012, there are not ONE but TWO options for families to “choose” from in order to verify federal tax information:

Option ONE

Go online, retrieve the already completed 2012-13 FAFSA and make corrections following the steps for the new IRS Retrieval Tool

Option TWO

Go online to order your 2011 tax return transcript

Adding to the confusion, each college typically recommends which Option works best for their respective financial aid process. In addition, there is a strong possibility that families will need to provide other information verifying different aspects of the household.

So, if a family’s federal taxes are completed at the IRS Tax deadline, there is very little time to verify tax information for the respective colleges and receive the final Financial Aid Awards package in time to meet the colleges’ “universal May 1^st deposit deadline !“ This scenario is playing out in many households across the country creating more difficulties for families making an important financial decision regarding which college(s) through the financial aid process they can reasonably afford.

To summarize, many families do not file their personal federal income taxes early, thus delaying the financial aid process, the process of verifying tax information is different from college to college, thus delaying the final Financial Aid awards package, which results in families having very little time to make an important, informed decision about the true costs of in most cases an expensive college education.

Financial Aid Tip #1

One thing all students can count on is a Federal Direct Student Loan on every award letter. The loan can be a Subsidized Loan (Federal  Govt  pays interest on the loan while student is attending at least half time), an Unsubsidized Loan (Student is responsible for the interest on the loan while attending at least half time) or a combination of both. The principal is deferred until student stops attending college or drops below half time status. However, no matter what type of Direct Student Loan, the maximum annual amount that a first year undergraduate student can borrow is $5,500.

Financial Aid Tip #2

Beginning July 1, 2012, all new Direct Student Subsidized and Unsubsidized loans will have a fixed interest rate of 6.8%. The President’s FY 2012-13 budget request has proposed maintaining the current subsidized interest rate, 3.4% for the 2012-13 academic year.

Financial Aid Tip #3

Many students will be offered Federal Work-Study awards but it is important to note that students are not able to deduct this award from the semester college bill. In order for the student to realize this type of award, first the student needs to secure a work-study position at the college, then “work” the designated hours for which they will be paid, typically students are paid every two weeks. Depending on the college and type of work-study position, the student is paid Minimum Wage and possibly more per hour.

Financial Aid Tip #4

          Grants and Scholarships are the best type of financial aid award so make sure you understand all criteria associated with the grants and scholarships. The criteria to receive these awards could include any of the following requirements such as enrollment status, full-time, part-time, a minimum GPA requirement each semester, course of study, etc.

Financial Aid Tip #5

          Students and families should be certain that the college of their choice has all of the documents needed for a complete financial aid package. More importantly, prior to making a deposit for their college choice contact the Admissions and Financial Aid office to ask if there is any additional aid available for the upcoming academic year. Remember, it costs you nothing to ask and could lead to additional grants and scholarships, perhaps saving you thousands of dollars$$$.

Teacher Eligibility

If you are a teacher, or other employee of a public service organization, under contract for at least eight out of 12 months, you meet the full-time standard if you work an average of at least 30 hours per week during the contractual period and receive credit by your employer for a full year’s worth of employment.

New Form Available to track eligibility

The Employment Certification for Public Service Loan Forgiveness form is now available and can be completed annually or whenever you change jobs.

How to Have Remaining Student Loan Balances Forgiven

1. Borrower must make 120 on time, full, scheduled monthly payments on Direct Loans. Only student loan payments made after October 1, 2007, qualify.

2. Borrower must make student loan payments under a qualifying repayment plan.

3. While making each student loan payment, borrower must be working full time at a qualifying public service organization.

Borrowers that have student loans under the Federal Family Education Loan (FFEL) Program and/or the Perkins Loan program can consolidate these loans into a Direct Consolidation Loan to take advantage of the PSLF. For borrowers that do not know what type of federal student loans they have, go to the National Student Loan Data System (NSLDS) website.

“When kids do graduate, the most daunting challenge can be the cost of college. At a time when Americans owe more in tuition debt than credit card debt, this Congress needs to stop the interest rates on student loans from doubling in July. Extend the tuition tax credit we started that saves middle-class families thousands of dollars. And give more young people the chance to earn their way through college by doubling the number of work-study jobs in the next five years.
Of course, it’s not enough for us to increase student aid. We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money. States also need to do their part, by making higher education a higher priority in their budgets. And colleges and universities have to do their part by working to keep costs down. Recently, I spoke with a group of college presidents who’ve done just that. Some schools re-design courses to help students finish more quickly. Some use better technology. The point is, it’s possible. So let me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down. Higher education can’t be a luxury – it’s an economic imperative that every family in America should be able to afford.”

What does this mean to those families with students heading to college for the 2012-13 academic year for the first time or those returning college students?

For Undergraduate students, the Federal Direct Subsidized Student Loan fixed interest rate is currently at 3.4% and the interest rate is scheduled to increase to 6.8% on July 1, 2012. Also, the current Federal Direct Unsubsidized Student Loan fixed interest rate is currently at 6.8% and it is scheduled to remain the same.

Increasing the number of college jobs in the Federal Work-Study program over the next five years is a step in the right direction. However, the work-study program has limited positions available per college, students have to be eligible and “hired” for the job. Also, typically students are paid every two weeks for hours worked throughout the academic year. More importantly, unlike grant/scholarship aid awards, being awarded a work-study job does not immediately impact the bottom line cost of the respective college.

Certainly tuition tax credits benefit those taxpayers that qualify but the most important piece of the discussion is the ever increasing tuition costs. College and Universities have significantly raised tuition and fees over the past twenty years, so families need to be more focused on the actual costs of college over the next four years. Focused discussions on the college major, career aspirations, borrowing loans to pay for college and the actual return on the investment are important to students and families striving to make college affordable.

All of your favorite eastern colleges and universities are included in the On Numbers analysis and for more details go to the recent Business Journals article by G. Scott Thomas.

FFELP – Federal Family Education Loan Program which allowed many banks and other private lending institutions to provide the Federal Student and Parent Loans.

FDLP-Federal Direct Loan Program allows the Federal Government to provide the Federal Student and Parent Loans.

ALL new borrowers after July 1, 2010, borrow directly from the Federal Government under the FDLP. Banks and other private lending institutions no longer provide the “guaranteed” Federal Student and Parent loans.

What this means to borrowers entering repayment of their student loans is at the very least, the borrower must know what type of loan(s) they have and under which program they borrowed.

Borrowers can find their Federal Loan information summary at www.nslds.ed.gov.

Once borrowers know their respective Federal Loan information, they should investigate possible deferment or forbearance options and most importantly must select a repayment option. There are a number of different federal student/parent loan repayment options available and the borrower should select the most cost-effective solution.

Within the repayment options are Loan Forgiveness programs which can be realized for certain select occupations, volunteer activities and military employment. These Loan Forgiveness programs have specific eligibility criteria and defined time lines that must be completed to receive some portions or in some cases all of the respective Federal Loans to be forgiven.

The complexity and flexibility of the Federal Student Loan Repayment programs is at a minimum confusing to borrowers and to many borrowers overwhelming when you factor in the current economic situation and the fact that student loan debt has now exceeded credit card debt in America! Let College Financing group’s team of experts guide you and devise the best repayment option for you and your budget.