Tuesday, April 15, 2014

New Interest Rate Projections for the 2014-15 AY

Yesterday, the Consumer Financial Protection Bureau (CFPB) updated their Paying for College tool. This tool gives students and prospective students the ability to get an idea of how to pay for college by understanding the different repayment options as well as other information that can help students make informed financial decisions regarding their education. 

What makes this of note is the CFPB has issued their projections for interest rates after July 1. These interest rates are based on the ten year note from the Treasury Dept. Next month, the Treasury Dept's bond auction will take place, setting the interest rates officially.

But in the meantime, here are the projections from the CFPB:

For Direct Sub and Unsub Loans (undergraduates), the current rate is 3.86%, and is projected to rise to 5.09%.
For Direct Sub and Unsub (grad), the current rate is 5.41%, and is projected to rise to 6.64%.
For Direct PLUS (parent/grad), the current rate is 6.41%, and is projected to rise to 7.64%.

This isn't the highest jump historically, but a jump nonetheless. Even though these are projections, the expectation is even if they are not quite accurate, the rates will be rising regardless. Be sure to stay informed on your student loans and keep track of them to understand your interest rate and how any change in them will change your payment. As far as this increase is concerned, if you had a $5000 loan, your interest would be just over $3 more a month in your monthly payment, and for an undergrad loan, the overall increase over ten years would be around $355 total.

When the actual numbers are released, we will post them. It'll be interesting to see how close the rates that have been projected actually come to the real numbers.

This has been another helpful post from your friends at Metro Business College.

Wednesday, February 19, 2014

New Tax Transcript Option from the IRS

If you have your FAFSA verified, and if you didn't use the IRS Data Retrieval Tool, then you probably know that you'll have to most likely obtain a tax return transcript to submit with your paperwork. If you live close enough to an IRS office, then you can go there to pick one up, but sometimes, this takes time. I've heard stories of people who could quickly walk in and walk out a short time later with their transcript, but I've also heard stories of people who had to wait and others who couldn't actually pick it up that day.

If you need to obtain a tax transcript, one easy way of obtaining it is to call 1-800-908-9946 and request it be sent to you. Another easy way is to request one from the IRS through their website. Click here to be taken to that page.

But the quickest way of obtaining a tax transcript is the new option to download a pdf of the transcript. If you click here, you will be taken to the IRS website where you immediately download your tax transcript pdf. This is helpful because if you call in or if you request online, it can take up to a couple of weeks to receive your transcript in the mail.

Remember, the best way of avoiding being verified is to use the IRS Data Retrieval Tool and making sure everything on the FAFSA is accurate. But if you are selected for verification anyway and need a tax transcript, be sure to check out the new transcript request option on the IRS website.

This has been another helpful posting from your friends at Metro Business College.

Monday, January 20, 2014

Documentation Is the Name of the Game

The one thing that a student and a financial aid officer has in common is the need to document your information. Without documentation, how can you prove things when asked?

As far as the student is concerned, you should document everything you receive from the school, from the government, and from your loan servicer (or bank if applicable). This is important so you can keep track of everything you may need for future reference. While you're in school, you may receive a 1098-T which you may be able to use when you figure your taxes, which could help you out. In addition to that, if you end up with discrepancies, you will have your information from before that you can use to help resolve the issue. It's also good to have items so you have contact information, account numbers/information, and a running balance total. 

As far as the financial aid officer is concerned, there are many reasons they need to document (everything from government regulations, accrediting agency requirements, campus policies, etc.), but one of the biggest reasons is justification. If the Dept of Ed or the accrediting agency walk in the door one day and ask to see a file, then it has to tell the story without any explanation from the financial aid officer. This means that all the paperwork has to be present and explain why that student deserved the financial aid they received.

An example of this is if a student has an unusual circumstance, then they have to provide documentation of that unusual circumstance. Let's say there is a student who is considered to be a dependent student who applies for financial aid, this means they need their parent's information. Unfortunately, this student had been living with friends and family their senior year of high school because of a domestic issue in that student's home. In order to help that student, the financial aid officer needs to document this situation so that if questioned, the questioning party would agree with the conclusion. All too often, the student will get family members and friend's parents to contribute letters of explanation and these letters are lacking in information. Many times, these letters will say things like "The student has been staying with us off and on", "She's a good person", "She deserves a chance", etc. The problem is usually, they don't contain any information to make a decision. They play on emotions and don't actually say the cause of why the school should do anything out of the ordinary.

On one hand, it's fortunate that schools are left on their own to decide what is good enough documentation. Unfortunately, sometimes what the school decides is enough might not actually be enough. Every one of these situations is different, and the Dept of Ed understands that, which is why they leave it open to the school. But if they check your file, and they do not agree that what you've provided is enough, then they will force the school to return your financial aid that you've received down to amount that you were eligible for to begin with. This means that you will most likely then owe the school a balance.

So, when in doubt, document everything. It's much better to have too much than not enough. And always, when in doubt, ask questions.


This has been another helpful posting from your friends at Metro Business College.

Monday, November 25, 2013

FSA's New Campaigns to Help Students

Beginning this month and running through mid-December, the Dept of Ed's Office of Financial Student Aid (FSA) is beginning a campaign to assist students with repayment information.

The campaign will be targeted emails to borrowers whose grace periods are ending, borrowers who have falling behind in their payments, borrowers with higher than average debts, and borrowers who are in deferment or forbearance because of financial hardship or unemployment.

These emails should also be including a link to FSA's repayment calculator and a link to FSA's Income-Based Repayment (IBR) calculator. The emails will encourage borrowers to get in touch with their loan servicer and update their account.

Along with the email campaign, a social media campaign for all recent grad borrowers will include Facebook, Twitter, and Youtube. These messages will include information about student loan repayment options, common mistakes, and general student loan advice.

For more information, click here to see the Dept of Ed's press release announcing the campaigns.

Another helpful post from your friends at Metro Business College!

Monday, November 4, 2013

HEA Reauthorization.. What Is It?

The Higher Education Act was originally signed into law in 1965 as part of President Johnson's Great Society agenda of domestic programs. The HEA is the law that governs how federal financial aid is appropriated to schools and students as well as many rules on how financial aid works. The one thing that the HEA does not do is finance the financial aid programs; that process is left to appropriations bills in Congress.

The HEA is up for reauthorization again, and that means that committees are being held in order to discuss what the new version of the HEA should be. Since 1965, the HEA has been reauthorized nine times, some times taking years for each reauthorization. With more disagreements over higher education now than ever before, why does it matter that people keep a watch on the process?

Many people like to think that the HEA reauthorization isn't as big of a deal as it used to be. This feeling mainly comes from the notion that nowadays, many rules in higher education are made outside of the act itself. Congress, Dept of Education, Consumer Financial Protection Bureau, IRS, Veteran Affairs, and even the President himself will create rules that schools have to follow, and these rules may come at any time. Since these rules usually have more of an effect than HEA would seem, then most people assume that HEA isn't a big deal.

However, you should keep in mind that there are all sorts of different people involved in the HEA process, from Congress members to members of schools and accreditation agencies. Many people involved have their own agendas that help their cause. A couple years ago, the Dept of Education enacted gainful employment rules that jeopardized the ability of colleges and universities to offer choice to students who didn't want to go to a public school. After some legal battles, it was ruled that most of the GE rules were not based on any concrete evidence and the Dept of Ed couldn't explain where they obtained their figures. The rules were struck down. There is a GE II in the discussions for the HEA reauthorization which has many schools on edge. In the little that's been explained so far, the GE II is expected to be more intense than the first attempt.

It is important that schools monitor the progress of the HEA reauthorization so if there are extensive changes, then they can adapt accordingly. It is expected that this reauthorization will go on for a long time, just as most of the others have. But in the political climate that has been going on for over seven years at this point, it's clear that several of the agendas behind most of the HEA reauthorization are geared for political agendas rather than helping the students. As more develops, we will share more results.

Monday, October 14, 2013

New Sequestration Changes Coming to Financial Aid

Announced on Friday, October 11, the Department of Education announced changes from the sequestration. There are some important things to note that have changed and some that haven't changed.

Firstly, Pell Grants are exempted from the sequestration changes for the remainder of the award year. No award amounts have been decided upon for the 2014-15 year yet, and they won't be until a bill providing an appropriation is enacted.

Secondly, campus-based programs (such as FSEOG) are not affected by the new changes either. As far as the 2014-15 award year's allocations are concerned, there is no information yet similar to the information regarding the Pell Grants.

Thirdly, there will be changes to the Iraq-Afghanistan Service Grant. According the letter from the Dept of Education, grant awards where the first disbursement is made on or after October 1, 2013, must be reduced by 7.2% from the original statutory amounts. Grant awards where the first disbursement was made after March 1, 2013, and before October 1, 2013, continue to be covered under the prior sequester and must be reduced by 10% from the original statutory award regardless of when any subsequent disbursement was made.

Fourthly, as of October 1, 2013, the sequester increases the origination fees for Direct Loans. Currently, the loan fees are set at 1.051% for Subsidized and Unsubsidized loans, and 4.204% for PLUS loans. The new loan fees will be 1.072% for Subsidized and Unsubsidized loans, and 4.288% for PLUS loans. These changes are more difficult to implement, so these changes will affect any new loans whose first disbursement is on or after December 1, 2013. Any new loans whose first disbursement was between July 1, 2013, and prior to December 1, 2013, will remain at 1.051% and 4.204%.

Another informative post from your friends at Metro Business College!

Monday, October 7, 2013

Why Should I Put my Email on My MPN?

On your Master Promissory Note (MPN), there is an optional line for you to enter your email address. Sometimes, students ask why they should enter it if it's optional. This is an option that is highly recommended you fill in.

Loan servicers are switching over to electronic services and messaging. You can pay your student loan bill online and manage your student loan account online. Email is just the next step in that. Loan servicers are trying to cut down on costs, and mailing out statements costs money in postage and paper, not to mention the ink to print them. Although they will mail you statements, they actually prefer to email statements which keeps their costs down.

Also, it's an attempt to meet the newest generation of student loan borrowers on their own terms. As technology continues to grow and the face to face conversations (and even voice to voice conversations) are going down, the student loan servicers are trying to converse with the borrowers in an impersonal manner such as email. So for those that have developed a phone phobia, the servicers are willing to accommodate for that, leaving no excuse not to get in touch with them. The servicers  want to hear from the borrowers, and email is just another way for that to happen.