Friday, December 21, 2012

Time for a Break

We find ourselves at the end of 2012, and once again it has been an interesting year. This marks the end of the first full calendar year for the Financial Aid Corner. Thanks to all the readers for your continued interest! Financial Aid isn't always the easiest information to explain, but I hope that you have learned as well as been encouraged to give thought to things that you may not have considered before.

The campuses are taking a break from classes for two weeks and our Arnold campus is gearing up for their January start. As we take this time to visit with family, to enjoy traditions, and to take some time off, our hope is that you have a fun, safe holiday season.

The Financial Aid Corner will return with new information, rules, news, and many other elements of the FA world next month. See you then!

Monday, December 17, 2012

New Student Loan Repayment Rules for 2013

There is news in the world of federal student loans. There are changes to the income-based repayment (IBR) plan and the income-contingent repayment (ICR) plan. Some of the information is broad for right now, but it looks that for the IBR, there will be new rules in documenting income. For the ICR, new rules will ease the documentation requirements as well as better clarifying parts of the plan. These are to begin July 1, 2013.

Another big change in repayment is a new IBR option: the Pay As You Earn repayment plan. This plan will limit the student's payments to 10% of the difference between their adjusted gross income and 1.5 times the poverty level for the area the student resides. This plan will also reduce from 25 years to 20 years the amount of time a student must make payments under the plan before the remaining loan balances are forgiven.

This Pay As You Earn repayment plan has some conditions. First, the borrower's loans must be held under the Federal Direct Loan Program; second, the borrower must be a new borrower as defined on or after October 1, 2007; third, the borrower must also have received loan disbursements on a direct loan on or after October 1, 2011; and fourthly, the borrower cannot repay under this plan any parents PLUS loans or any consolidation loans that include a parents PLUS loan.

As I understand it, if a borrower's payments while in this Pay As You Earn plan in the first three years do not satisfy the accruing interest and as long as the borrower is repaying a subsidized loan, then the Department of Education will not charge interest above the amount of the borrower's payment on that loan. Naturally, the borrower will have to submit income information for this plan, and like the regular IBR plan, the borrower will have to resubmit most recent income information.

There is no concrete date set yet for the Pay As You Earn repayment plan because as soon as the guidance is published, then the Department of Education will implement it.

Monday, December 10, 2012

Can a Student Discharge a Loan through Bankruptcy?

Can a student discharge a loan through bankruptcy?
The answer is (like everything in financial aid) somewhat complicated. In 9 out of 10 cases, the answer is no. But there is still that 1 case when it's possible. How? There are many ways, and it really depends on the state, the individual court, and the individual judge. However, what's stated here is the most often scenario.
Firstly, you have to look at the wording. In 2005, the exception to discharge was extended to include all education loans (private and federal). A debtor in Chapter 7 or Chapter 13 cannot discharge 1.) an educational loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or 2.) an obligation to repay funds received as an educational benefit (grants, scholarships); or 3.) any other educational loan that is a "qualified education loan" UNLESS excepting such debt from discharge under the above would impose an "undue hardship" on the debtor and the debtor's dependents.
That's the key: they have to prove "undue hardship", and that's rather difficult. So, what's the process?
1. The debtor files a bankruptcy petition (either Chapter 7 or 13).
2. The creditor then has to establish the existence of the debt and that it falls into one of the nondischargeable categories.
3. The debtor files an adversary proceeding and how to show an "undue hardship".
How does one prove "undue hardship"? The most often used test is called the Brunner Test. The Brunner Test is a 3-part test where the debtor has to prove all three of the following:
1.) That the debtor cannot maintain, based on current income and expenses, a minimal standard of living for himself and his dependents if forced to pay.
2.) That additional circumstances exist indicating that the current state is likely to persist for a significant portion of the repayment period of the student's loans.
3.) That the debtor has made good faith efforts to repay the loan.
The first part of that test is highly subjective and will change from court to court. In some cases the debtor will say "cigarettes are too expensive" and the court will tell him to quit smoking. On the other hand, some allowed expenses could be internet and phone. In some cases, cable is out of the question, but in other cases cable is fine because it isn't satellite. The second part of the test has to show that whatever the issues are, they are out of the debtor's control. Things such as a person having diabetes and resulting blindness was enough, as was asperger's syndrome with osteoperosis. Switching to a lower paying job by choice won't work because they will say you aren't maximizing your potential. The third part of the test has to show the debtor tried to repay the loan but couldn't because of the issues in the other parts. Trying alternative payment plans looks good, as does attempts at legitimate income maximizing and minimizing expenses.
Apparently 5 of 10 cases the debtor is denied discharge. 3-4 of 10 are close but don't quite have what it takes. And then there's maybe 1 legitimate case. It is very difficult to prove all three prongs of the Brunner Test, which is why they usually don't succeed. There have been attempts to change this setup, but it's unlikely it will change for awhile.

In the end, it's much easier and better for the student credit-wise to just work with their student loan servicer.

Monday, December 3, 2012

A Great Budget Calculator

One of the things that has been mentioned several times on this blog, and will continue to be mentioned is the need for students to use budgets to assist them in their daily lives. What better way to know how much one can spend and live within their means than a budget? But how do they look? And aren't they hard?

No they aren't. Here is a link to an interactive budget calculator tool. It is available from the Mapping Your Future website which is very good for helping students form an objective manner on everything from repayment to financial literacy. In this case, they are assisting with living within your means.

If you don't already have a budget or understand how it works, use this tool and do some reading into how it works. Faculty at your campus will also be willing to assist you with understanding budgets. In the meantime, use this tool to figure out your budget.

Remember: the main reason why a budget is especially necessary for a student is so that you know how you can afford your student loan payments.

Monday, November 26, 2012

What to Expect in FA for the Next Term

Now that the elections are over, what does the future hold for our sector of higher education? 

The results of the Presidential election are well-known, but what happened with the Senate and House? In the Senate, 6 Democrats, 3 Republicans, and 1 Independent retired. There were 7 Democrats and 3 Republicans elected, so that brings the total count to 53 Democrats, 45 Republicans, and 2 Independents (both of which will caucus with the Democrats). In the House, 14 Democrats retired and 11 Republicans retired. New members elected were 43 Democrats and 36 Republicans, which brings the count (as of last week) to 195 Democrats, 233 Republicans, and 7 undecided.

In the Senate Committee on Health, Education, Labor, and Pensions, Democrat Tom Harkin (who's a huge supporter of Gainful Employment and the destruction of our sector) remains the chairman of the committee. The ranking Republican member is Lamar Alexander, who's a big supporter of lessening regulations (such as Gainful Employment), so there may be some clashes in this committee in the next couple of years.

In the House Committee on Education and the Workforce, Republican John Kline remains chairman. Also on the committee is Republican Virginia Foxx. Both Kline and Foxx have voted repeatedly against anything relating to Gainful Employment, including a bill that was to de-fund the Department of Education from enforcing GE. Unfortunately, that bill died when it hit the Senate.

What's the President's agenda in education for the next four years? 1.) wants to cut the rate of tuition increases by half. This seems to be more of an issue for (believe it or not) public schools. 2.) pell grant support is going to continue. Some want to eliminate the pell or at least reduce it, but he wants to keep it at nearly all costs. 3.) continue to support community and public colleges as being the places for students to attend, so he's willing to dump more money in their systems to assist with that, as well as reward non-profit organizations for assisting in that goal.

What's the Department of Education's agenda for the next four years? 1.) Secretary Duncan wants to stay on. He does not support our sector and hasn't tried to hide his dislike of us (just like Sen. Harkin). 2.) continued pursuit of Gainful Employment. Just because they were shut down once doesn't mean they aren't going to try again. The stalling of the Department on the court ruling was to push it passed the election to see how to continue. Now that they know, they will continue it. 3.) continued enforcement actions with assistance from other agencies such as Department of Justice and Consumer Financial Protection Bureau. 3.) begin looking at the "value" of the education that the student is receiving. There is no word yet as to how that will be defined, but there will be pressure on all schools as to making sure the students receive a "valuable" education. 4.) more rules in the areas of fraud, teacher preparatory programs, academic progress, and accounting for federal funds. 

What education legislation is on the agenda? 1.) Elementary and Secondary Education Act due for reauthorization. 2.) Individuals with Disabilities Education Act due for reauthorization. 3.) Workforce Investment Act due for reauthorization. 4.) and most importantly the Higher Education Act due for reauthorization. 

What other hot topic items will we be dealing with? 1.) veterans education programs, 2.) FY 2014 pell grant shortfall, 3.) federal budget, 4.) students' levels of indebtedness, 5.) reasonable and affordable student loan payments, 6.) increased regulations and enforcement by new entities (such as the Consumer Financial Protection Bureau). 

So what should we expect? As SNL put it: "Four more years!... of gridlock!" The House is favorable to our sector, but the Senate, President, and Dep of Ed are not. The House will continue to try to assist, but will be vote down. The Senate will continue to hinder, but get vote down. The way around the Senate and House gridlock (which we've seen already, and should expect more of) are two ways: Presidential Executive Orders and Dep of Ed's regulations. Congress will continue to propose legislation, but they will be hindered by the lack of money. I've been told to expect the war between proposed legislation and the lack of funds to actually enable it, but that doesn't mean nothing will get through.

Only two more years until midterm elections! Who knows what'll change by then!

Monday, November 19, 2012

Return Pell Funds for 2012-13

Not too long ago, the Dept of Ed announced that students were able to return unnecessary portions of their Pell Grants for future use. The main reason for this is because of the Lifetime Eligibility reduction. The thought was because students can only use a certain amount of Pell in their lifetime (now 600% instead of the old 900%), they may want to return unused portions for future use. Of course, it's not as simple as it sounds.
  1. They can only return funds that have been disbursed in the current award year, so nothing from previous award years. If the disbursement hasn't been made, they can decline a disbursement to be made.
  2. They have to return it to the school, and then the school will refund the money.
  3. The students has to submit signed statements to the school, saying that they understand that the money they are refunding (or declining) is going back to the government, and also acknowledging that the Pell Grant funds may not be available after the award year is over. They may not be available if their Pell Grant awards change. Since the Lifetime Limit is according to percentage rather than amount, if your full pell is $5550 as opposed to a full pell of $3000, a quarter disbursement would be $1850 and $1000 respectively, but they are both 33%.
The Dept of Ed has said that they won't question students who choose to do this, as long as the necessary paperwork has been submitted. This is effective for the 2012-13 award year, but there is no word as to if the 2013-14 award year will also fall under this.

We'll see how many people actually do this. If you think/know that you're going to receive a higher Pell Grant in the following year, and you don't want to burn your eligibility on a small Pell Grant, then that could be a strategy if you have something else to supplement the Pell you are declining. On the other hand, I don't know many people who will turn down grant money from the government. Just remember that it's an option.

Monday, November 12, 2012

When Returning from a Leave of Absence

The Leave of Absence (LOA) is simply a break in a student's enrollment. The FSA Handbook and CFR are vague on some aspects of the LOA, but are quite specific on other aspects. But what happens when you come back from the LOA?

Well, you should know certain things. You can't get charged while on the LOA. If you took the LOA at the beginning of your semester/quarter, then when you return you will just get charged for your next enrollment period. If you were in the middle of your semester/quarter, then when you return, interesting things can happen. You will not get charged for your next enrollment period until you complete it (since you started one but didn't complete it). Any FA that has already come in before the LOA began will not come in again until you complete the enrollment period, and any FA that hasn't come in yet can come in then. This is why if you have money coming to you, and you received it before the LOA, then there's a good chance you won't get more until you complete the enrollment period that you return for. Each situation is a little different, so you need to check with the FA office to see how it affects your situation.

The other issue is your academics. For term-based schools, you must be allowed to complete the coursework that you began before the LOA. Most people interpret this as you should be in the same classes as when you took the LOA. For nonterm-based programs and clock hour programs, you don't have to complete the same coursework you began before taking the LOA. In those programs, you aren't necessarily (depending on the school) in regular enrollment periods, so you are eligible for funds near the beginning and at the halfway point. When you hit the halfway point, then you are eligible for the next disbursement. Because of this, you take your hours or do your coursework remaining until you hit the halfway point.

The Leave of Absence is a strange and sometimes complicated situation and some schools won't do them for that reason. They are hard to explain, and they affect not only your FA, but your academics, your graduation date, and the possibility of your having to be dropped in some cases. In the end, if your school does offer LOAs, you should only consider it as a last resort, and even then make sure you understand the consequences of taking an LOA.

Monday, November 5, 2012

10 Tips to Help You Avoid Defaulting

Originally found in the October issue of the Metro Business College at Arnold's October Newsletter.

Default happens when you make no payments on your student loan for at least 270 days. By defaulting, you are violating your loan agreement and subject to several consequences including immediate payment in full of your loan.

Here are 10 tips to help you avoid defaulting:

1. Borrow for college expenses only. Borrow only the amount you need and only what you can expect to repay.

2. Understand your rights and responsibilities regarding your repayment obligation as well as your repayment options.

3. Keep all records of anything regarding your loan.

4. Notify your loan servicer if anything changes: address, phone number, your name, or if you change schools.

5. Seek help as early as possible if you have any difficulty with your student loan repayments.

6. If you have any questions, talk to your loan servicer. Things will get worse if you ignore them.

7. Keep credit card debt to a minimum or avoid credit card debt completely.

8. Create and maintain a budget.

9. Consider making nominal student loan payments while in school. This will reduce the amount you owe after graduation.

10. Make loan payments on time.

What might not seem like a lot of money right now, can make a big difference in your payment later.

Monday, October 29, 2012

FA Shopping Sheet

If you've been following any Financial Aid information that involves the VA, then you're probably aware of the Financial Aid Shopping Sheet. But if you're not aware of it or aren't sure about it, the first thing you're probably wondering is what is it and where did it come from.

The FA Shopping Sheet can trace itself to Executive Order 13607. This Presidential Order urged schools that receive federal funds for veterans and military personnel to comply with a "principles of excellence". If you signed these principles, then for veterans and military personnel, you have to use a stadardized form "to help those prospective students understand the total cost of the educational program, including tuition and fees; the amount of that cost that will be covered by Federal educational benefits; the type and amount of financial aid they may qualify for; their estimated student loan debt upon graduation; information about student outcomes; and other information to facilitate comparison of aid packages offered by different educational institutions."

The one plus to this form is that you can use it for everyone and not only the military/veteran students. You can use it as an award letter for any student. Here is a link to the annotated Financial Aid Shopping Sheet as of August 30. This may change before it is implemented July 1, 2013.

Monday, October 22, 2012

Two-Factor Authentication Tokens

Welcome to the new era of the Dept of Ed's websites! Not a terribly long time ago (a year maybe?) the NSLDS, FAA Access, and other Dept of Ed websites went to a single login User ID and Password. This made things so much easier when trying to login without having to remember your five passwords and IDs, or even worse having to reset them and have to wait for that to go through. On the other hand, one can assume that a persnickety password and ID apparently weren't enough to make the government feel safe, so this year, the TFA has been introduced.

What's the TFA? By the time you read this, most states will already have had this dealt with, but if you haven't had the luxury of dealing with this, here's your intro.

TFA stands for Two-Factor Authentication, and it's basically another hoop that you'll have to jump through to access your Dept of Ed login sites. You will still use your UserID and Password, but then it will take you to another screen where you have to input a temporary password. All it has is a power button and that's it. Once you push the button, it will countdown using some dashes, then display a 6-digit temporary password. After 30 seconds, the screen goes blank. Type in this password and you will be able to access your site as normal.

TFA Token
For 2012, the Dept of Ed has been making these available in groups of states. Each month on the ifap website, there have been electronic announcements stating which states were coming out that month.

Monday, October 15, 2012

New Subsidized Loan Rules

On July 6, 2012, President Obama signed Public Law 112-141, which includes some new restrictions on Direct Subsidized loans. Specifically, this deals with the insterest subsidies on the Subsidized loans for new borrowers on or after July 1, 2013.

Any new borrower on or after this date will no longer be eligible for a new Direct Subsidized loan if they are past the 150% of their program length. Most Satisfactory Academic Progress policies state that you must complete the program within 150% of the program length (so if your program length is 2 years, then you must complete in 3 years). If you're fulltime, then the length will be different than if you're halftime all the way through. However, the 150% is typically the same. On the other hand, you may go beyond that 150% in some schools if you are on an academic plan from a Financial Aid Warning. Not every school does that the same, and some schools this new rule will not affect.

The new rule also has language that says that the borrower will no longer be eligible for interest subsidy benefits on all Subsidized loans first disbursed on or after July 1, 2013, who have reached that 150% threshhold.

If you want to read the Dept of Ed's electronic announcement, click here.

Monday, October 8, 2012

Clery Act Violations Increased

This is for all you FA, compliance, and administrators out there. There is big news on the Clery Act front as of October 2.

Before October 2, violations of the Clery Act carried a maximum fine of $27,500 per infraction. However, the Dept of Ed posted a change to that in the Federal Register declaring that the fine was going up to $35,000, which is a huge increase. The cited reason is to increase due to inflation.

The silver lining in this is that this will only affect violations that occurred after October 2. If the violations were before October 2, then they will be at the old $27,500 rate. If an investigation is ongoing currently and it started before October 2, then it will be at the old rate as well.

This is just another good reason (as if there aren't enough already) to make sure you are in compliance with Clery Act issues.

Monday, October 1, 2012

Selective Service and FA (Part 2)

Last week's post dealt with mostly exemptions from Selective Service and the few scenarios that could come up where registration isn't required. How do you prove that registration wasn't a requirement? If it's obvious that the student wasn't required to register, then the student doesn't need to obtain a letter from the Selective Service. Instead, all the students needs is some piece of documentation that would clear them from registration. The list below would exempt eligible noncitizens:
  • proof of birth date on passport, driver's license, birth certificate, etc.
  • proof of immigration date on I-94 form, passport, or a letter from USCIS stating the date
  • members in the US on a valid visa and between the ages of 18-25, then an I-20 form (student visa form), other valid U.S. passport visa stamp with expiration date (but the expiration date must be after the student turns 26)
If a student who hasn't registered yet and hasn't reached 26 yet fills out a FAFSA, then the student can be registered with Selective Service through the CPS. But if the student hasn't registered and is past 26, a C code will come back on the ISIR (SAR for the student). What do you do if the student hasn't registered yet?

Unfortunately, this is a very tricky situation. The student has to prove to the school that they did not "knowingly and willfully fail to register". The school is in a very tight predicament because it is really up to them as to if the student is eligible or not. Many schools have chosen to create policies on this subject, and some honestly find it less scary to just use the older, stricter rules of "you didn't register, then you get no aid". Some schools will have a process as to determine how to figure out if the student didn't register on purpose.

To start out with, if the student doesn't meet one of the criteria from above or from last week's post, then they have to write to the Selective Service and get a status information letter showing the failure to register. In writing to the Selective Service, the student should give as much detial as possible. If the status information letter comes back as a general exemption letter (which will have a code between E1-E8) or a "DOB before 1960" letter (which uses code NR), then the student was exempt. If there is any other code, then the school has to make the determination. Sometimes, information in the letter can be used to help with the decision. In the letter, it will say that "the final decision regarding the student’s eligibility rests with the agency awarding funds", which is the school on behalf of the Dept of Ed.

There are three things to consider when trying to make the determination if the students "knowingly and willfully failed to register". Those questions are where the student lived between the ages of 18-25, whether the student thought they'd already registered, and why the student claims they weren't aware of the requirement.

If the school makes their decision, then there is no appeal process. The only appeals a student can make is if they have provided the school with documentation the proves they are eligible and the school denies them, then the Dept of Ed will hear an appeal proceeding for that one reason. This regulation can be found in 34 CFR 668.37(f).

Monday, September 24, 2012

Selective Service and FA (Part 1)

Your Financial Aid may be complicated in relation to Selective Service. Males are required to register between the ages of 18-25. If you don't register before age 26, then you cannot register. The Selective Service registration is a very well-known procedure for men, and claiming "I didn't know" isn't a good reason anymore, especially in the information age we are currently in.

But you have to register with Selective Service to be eligible for Financial Aid. What if you didn't register? There are certain situations where a person is exempt from registration. These reasons are:
  • males currently in the armed services and on active duty (this exception does not apply to members of the Reserve and National Guard who are not on active duty)
  • males who are not yet 18 at the time that they complete their applications (an update is not required during the year, even if a student turns 18 after completing the application)
  • males born before 1960
  • citizens of the Republic of Palau, the Republic of the Marshall Islands, or the Federated States of Micronesia (unless being a citizen of the Republic of the Marshall Islands or the Federated States of Micronesia and you live in the US for more than a year for any reason other than being a student or employee of your homeland government, then you do have to register)
  • noncitizens who first entered the U.S. after they turned 26
  • noncitizens who entered the U.S. as lawful nonimmigrants on a valid visa and remained in the U.S. on the terms of that visa until after they turned 26
There are a few odd scenarios that can occur where registration isn't required. The problem with the following is that you have to have had these scenarios occur the entire time between your age of 18-25:
unable to register due to being hospitalized, incarcerated, or institutionalized
  • enrolled in any officer procurement program at The Citadel, North Georgia College and State University, Norwich University, Virginia Military Institute, Texas A&M University, or Virginia Polytechnic and State University
  • commissioned Public Health Service officers on active duty or members of the Reserve of the Public Health Service on specified active duty
  • Confused yet? That's understandable. The government has tried to come up with every possible scenario that could occur. Some of these change a little from year to year. The information above is from the 2012-13 FSA Handbook.

    Check back next week, as we dive a little more deeply into what happens if you don't register as well as some documentation.

    Monday, September 17, 2012

    IBR and Other Repayment Options (Video)

    Here is a recently made video from FedLoan Servicing (PHEAA) about IBR. IBR stands for Income-Based Repayment, which has become a great and helpful option for students in repayment to help avoid default. At first IBR might seem a bit complicated, but the simplest way to explain it is basing your repayment on your income. The video will explain much more detail about this, as well as a quick overview of the other payment plans available.

    Monday, September 10, 2012

    Plans for the 2013-14 Verification

    I've said many times that the FA rules from year to year are very much like a new car: each year a new model that comes out and sometimes resembles the previous model, but sometimes is very different. It seems there are plans in the works for the new Verification procedures for next year. Originally, the plan was for the 2012-13 year to be one that had a simplified Verification procedure in which if one item had to be verified, then you only had to verify that one item (and not all the items). That didn't exactly happen. But with the IRS Data Retrieval System, a sharp decrease of verifications have occurred, and if the IRS Data Retrieval System had been used correctly, then only a few things would have to be verified.

    So, progress has been made. The goal then was to make 2013-14 the year which would make individual items only be verified. However, it doesn't look quite like that will happen again. The Dept of Ed is transitioning into a new kind of Verification, and 2013-14 will be the hybrid year. As of right now, FAFSAs that come back to be verified will fit into one of five verification categories (V1-V5), with each one carrying a certain amount of items that would have to be verified. It could only be one item (V2 is Food Stamps, V3 is Child Support Paid), and it could be many items (V1 is Household Size, # in College, Child Support Paid, Food Stamps (SNAP), Income Earned from Work, AGI, Tax Paid, Untaxed Individual Retirement Account Distributions, Untaxed Pensions, Education Credits, IRA Deductions, and Tax-Exempt Interest). As of right now, it looks like the Verification requirements could be different in some cases for tax filers and non filers.

    On top of the changes in Verification, it appears as though the FAFSA could have new questions like High School Completion Status and Statement of Educational Purpose/Identity. We have a lot of time before the new FAFSA takes over next July, and even before it becomes available in early 2013. Hopefully there will be more available before then.

    Monday, September 3, 2012

    Free Financial Literacy on Repayment Webinar

    Nelnet is one of the federal student loan servicers handling the workload of the federal Direct Loan Program. They often have good and helpful information. In fact, in September there is a series of financial literacy webinars that Nelnet is offering.

    On Monday September 10 and Monday September 24, Nelnet is offering free webinars that are focusing on student loan repayment. They are being offered at 1:00 Central Time and at 3:30 Central Time on both of those days.

    Some of the information that will be provided include helpful tips to managing your loan repayment, developing a financial plans like a budget, helping you find your servicer, how to avoid delinquency or default, and learning about repayment plans.

    To find out more information about these free webinars, click here. There will be some great information presented, so I'm sure you'll learn a lot!

    Monday, August 27, 2012

    NSLDS and the PELL Lifetime Limit

    Back when Congress finally agreed on how much the 2012-13 Pell Grant would be, they had to cut some corners in other areas in order to maintain the amount. One of the corners that was cut was the Lifetime Limit of Pell a student could receive.

    The Lifetime Limit is exactly what it sounds like: the total amount of Pell Grant a person could receive in their lifetime. This limit isn't based on a dollar amount, but instead a percentage amount. Before July 1, the lifetime percentage was 900% (or 18 semesters/24 quarters). During the short time when more than 100% could be received (called a 'year-round pell'), that extra is figured into the lifetime eligibility also.

    The unusual thing about the lifetime eligibility is that since it's based on percentage, if you could only receive a $500 pell for the year, and the maximum that year was $4700, and if all $500 came in, then you were at 100%. This is the confusing part of this rule, but it tries to ensure that even though the amounts may not be the same for every student, the number of times you can receive pell is the same. If you applied for pell and weren't eligible, then your pell percentage would be 0% for that year. Keep in mind, they only count pell that actually was disbursed. Also keep in mind that unless 100% of your yearly pell came in for a year, then it's somewhat rare that your pell will be an even percentage; some who have withdrawn, were in shorter payment periods could, or were attending a clock hour program could have strange amounts like 37.061% of 67.776%.

    So now that we're passed the July 1 change of rules, the Lifetime Limit for pells has been reduced to 600% (or 12 semesters/18 quarters). The rule is also effective immediately and no one is grandfathered in. This is difficult to keep track of because NSLDS doesn't always calculate the total percentages. However, it's actually worse than that: NSLDS doesn't keep track of the entire Pell Grant history! It only goes back so far. So this means that there are students were are being denied Pell Grants or having Pell Grants reduced because of hitting this threshhold but the schools aren't knowing how close the students actually are.

    For the FA Administrators, to get a complete understanding of how much Pell Grant a student has had in their lifetime, you have to look on COD for the most accurate information.

    For the students, please let your FA people know if you went to school longer than what shows on NSLDS. This is help to avoid the FA office being left in the dark and help to give you the most accurate information.

    NSLDS is still a fabulous resource and a great tool, but when it comes to Pell Grants, it's not as effective as it is for loans.

    Monday, August 20, 2012

    What If? Scenario 4

    What if I am owed excess funds from my Financial Aid? Why can't I pick it up on a day I don't attend?

    This is a very simple answer. You must be in school and currently attending classes to receive your excess funds. If you normally pick up your check on Thursday, but you are absent Thursday, then you have to wait for your next day of attendance to pick it up. You are not in school and attending if you miss that day.

    The reason for this rule is because if your last day of attendance is Wednesday, and you pick up a check Thursday, and you drop out on Friday, then you weren't entitled to that money. Your account summary will show you received funds after your last day of attendance, and you will most likely owe most (if not all) of that money back (depending on how far through the payment period you are). The school is then in serious trouble with the Dept of Ed for giving you money you weren't entitled to. Like I said above, you have to be in school and attending, and just because you received the money before you dropped, you weren't actually attending.

    Schools aren't in business to give students money (after all, the money is more often than not a loan which the student has to repay), they are in business to give knowledge to students. The rules involving the money is taking into account the academic side. I've had students call and ask if they could pick up their check, and the student would be asked why they weren't at school that day. The most common answer is that they were sick. Because of the rules of the Dept of Ed, schools have to take the stance of "if you're too sick for class, then you're too sick for your check." You have to be able to be marked present for some time in the day when your check is available or else no one can prove that you were actually attending that day.

    Once again, rules are rules, and this isn't one that can really bend.

    Monday, August 13, 2012

    The Temporary Fate of Gainful Employment

    This posting is more for the FA administrators than anyone else. There has been a lot of talk lately as to what is and isn't still required, and there seems to be confusing answers that seem to contradict what's out there. So, what's really going on?

    There are four main points to discuss: disclosures, reporting, new programs, and the metrics.

    1. The Metrics. These were a series of figures that came out from the Dept this year for the first time. They were based partly on the massive report (explained below) from last October/November and partly on information from the Social Security Administration. This information translated to if a school was meeting expectations on three areas for programs: repayment rate and two debt-to-earnings ratios. If a school failed all three for three out of four years, then they would lose Title IV eligibility for that program (failures once and twice had varying degrees of severity and sanctions). The court ruling in June stated that the Dept had failed to accurately define where their rates came from. For example, the court didn't understand where the students' payments couldn't be above 30% of their discretionary income. In other words, the rates seemed to have been picked simply for the sake of knowing that roughly 25% of schools couldn't pass these rates chosen, as opposed to any actual evidence of why these rates were beneficial. So the Metrics were thrown out as being legal.

    2. The Report. Beginning last year, schools had to submit a massive report each October with information on the previous year's student's enrollments (last year's actually dated back five years). This massive report wanted to know things like name, SSN, enrollment dates, enrollment status at the end of the year, and information of what happened to the student after they left school. If schools didn't have any kind of a computerized database, this turned into a disaster to complete. The purpose of this report was to partially create the metrics, but since the metrics were thrown out, so was the report.

    3. New Programs. Another component of the rules was the new programs rule. The fear from the Dept was that schools would create a new program that was identical to a failing program, so to stop this, schools had to jump through all sorts of new hoops for programs to be approved. Part of this included having to submit the program information to the Dept at least 90 days before the first day of the new program (and this had to be after the program had obtained approval from the accrediting agency). Since there won't be failing programs, then there is no need for this part of the rule, so this was thrown out.

    4. The Disclosures. The judge ruled that the wording of 'gainful employment' in the original HEA of 1965 was vague enough that the Dept could make rules on the gainful employment of schools, so a requirement to disclose information about those programs was within the rights of the Dept. So the disclosures part of the rule was upheld, and schools still have to disclose information about the programs, such as on-time graduation rate, placement rate, median loan debt, SOC codes for potential jobs, etc.

    The future of the Gainful Employment rules are up in the air for the time being. The Dept has 60 days from the date of the ruling to appeal, which would be the end of August. However, it is expected that the Dept won't appeal and instead focus more on re-creating the rules for next year or the year after. It is generally agreed that a lot of the future of the rules depend a lot on who is elected President. We will see what the future holds!

    Monday, August 6, 2012

    Reminiscing of the FA Office

    The greatest thing about having a blog is the interaction that comes with it, and the greatest joy one can hear in life in general is to know that you've made a difference in someone's life.

    When I was in the FA office everyday, I saw that first hand. I would meet students who had been on their own since they were sixteen, who had several children, who made a life for themselves without any help from mom and dad, other family members, or anyone else. I'd met some remarkable people that made me take a look at myself and think "You know, life's not that bad." There were some amazing people that I had the great fortune of helping navigate through the murky waters of FA, and in return they helped me to appreciate everything that I'd taken for granted.

    Unfortunately, I don't get to see these students on a regular basis anymore, nor do I have the fortune of being able to directly help these remarkable people as I once did. They were stressful days, I won't lie. I remember being at graduations watching these same students (who I ended up looking up to as inspirations) completely ignore me and instead talk to their teachers and their admissions reps. And I was fine with it. After all, I was the FA person; I was the person who always needed something signed; I was the person who needed to send something in and had to inconvenience them to get the paperwork done; I was the one who more often than not had bad news. Well, at least that's the reputation that FA people have. But I was fine with it, like I said, because I knew that I was helping these students in ways they wouldn't realize yet, if they ever did.

    And as I'd stand off to the side at graduations and reminisce on the students that I'd never see again, I may only have one of them talk to me and thank me for helping them. It may have been the student that I'd stayed late for on a night that I didn't have to, putting aside my own personal life for the student who'd no-showed me a couple times before, or it may have been the student that always had their paperwork completed on-time and flawlessly. Either way, that one student would always make up for everything else. People would often ask why someone stays in the FA business since there always seems to be bad news, changing rules, and stress without end. My response is always "for that one student who realizes".

    No one seems to go into the FA industry on purpose: it always seems like an accident. After all, who ever hears of a child who says "I want to grow up to work in Financial Aid!" Everyone has their reason for getting into the industry, but I will say this: everyone that seems to get into it seems to last a long time in it. And that one student who says "thank you" is all it takes to continue for another year.

    Monday, July 30, 2012

    12 Ways to Make Sure Your Teen Doesn’t Boomerang Back

    12 Ways to Make Sure Your Teen Doesn’t Boomerang Back | Bachelor's Degree Online

    Here is a link that was sent to me from the people at Bachelors Degree Online. The article definitely has some good ideas about how to help children going off to college don't end up coming back so quickly. Although there is definitely a slant toward university life portrayed in the article, there are some good and common sense ideas that everyone can take and use in their lives.

    Sometimes we forget about the little things in life. I have two favorite points from this list: setting expectations early and providing the child with a strong financial education.

    No matter when you are thinking of college, it's never too early to start planning. The earlier you start thinking about it and getting things in order, the easier the change will be when you make the transition. I've heard Admissions reps talking to students at our school and they would try to make the prospective student think about daycare and transportation well in advance of starting. There will always been last minute things that go wrong, so there's no reason to figure out as much as you can in advance, so when something does go wrong, you can more easily take care of it.

    I can't speak enough about having a strong financial understanding, which ties is specifically with living within your means. I have friends who are in college or recently graduated college. They always tell me how difficult it is to afford things, but then I see them with the new iPhone, toting around a tablet, showing off a new tattoo, or smoking the expensive cigarettes. Sometimes in life, we have to make sacrifices. Other times we just need to cut back. Society tells us we need the newest toys and the higher-priced consumables. Sometimes, all it takes is just cutting back. In the first three months of this year, Starbucks' net income from the US alone was over $309 million. There's a reason why they make so much and why we feel so poor. Maybe one should get used to making their own coffee, which would save a few dollars every day. Maybe one should make their own lunch instead of buying fast food or even snack food. Maybe one should carpool sometimes. Wherever one can cut down on the spending (even if it's just a few cents here and there), one will be able to afford the things that they need to easier.

    It is a challenge to plan ahead and to live frugally, as well as do the other things listed, but the rewards are more than just an education at a school.

    Monday, July 23, 2012

    Graduation and Placement Rate Bias

    The world of higher education is an interesting one. It's a world filled with misinformation, half-truths, and outright lies. Sometimes there are truths, but one usually has to do some digging to actually find them. As with most industries, there are good players and bad players. It's just a way of life. However, with most attempts to weed out the bad players, the good players are the ones that suffer.

    The funny thing is how things aren't always how they seem. Take for example the rules of the Dept of Ed that for-profit schools disclose their on-time graduation rates, placement rates, costs, and other information. Any school that offers a Gainful Employment program, whether it's public, private, or for-profit, should release that information for that program. So why is it that all programs at a for-profit institution has to disclose that information? There are several reasons for that which we won't cover today.

    Some people are under the impression if a school has to disclose something, then the numbers have to be really good. But what's considered really good? I've met a few who compare graduation rates and placement rates to grades on tests: if it's over 90% then it's good, if it's in the 80's% then it's ok, if it's in the 70's% then it's not so good, and if it's under that, then it's failing. It's not quite that simple.

    Accrediting agencies have their own rules on these numbers. Graduation rates are figured on a time and a half basis, meaning if a program lasts two years, then the graduation rate is figured on people who completed in three years. Placement rates are figured on people who completed a program and obtained jobs in a related field; however, this figure doesn't take into account people who willingly chose not to get a job in a related field (yes, these people do exist - take for example an accountant who takes Medical Assisting to learn how to take care of her Great Aunt but has no intention of becoming a Medical Assistant). The rates themselves (like most statistics) don't tell the whole story, and usually ruling against the school. Most accrediting agencies look at around 60% as a good number for judging these rates.

    However, have you ever wondered what a public university's rates were? These schools don't have to disclose this information for non-Gainful Employment programs. So, just because they aren't required to disclose it, does that mean that their rates are exemplary?

    Here is an article about the 11 public universities with horrible graduation rates. These rates are based on time and a half for bachelor's degrees. The list of schools is found on a link in the page. I urge you to take a look. Some of the names will shock you.

    Monday, July 16, 2012

    Recent Updates

    Here we are after July 1, so that means new rules are now in effect. So what have been the newest changes?

    1. A new change which is nothing new but has had no publicity is that fees on federal Stafford loans. On the Subsidized, Unsubsidized, and PLUS loans, there were fees but some part of the fees had been part of a rebate. Well, the rebate is gone so the fee goes up now. Last year, the fee was .5% on Subsidized and Unsubsidized, but now it will be 1%. PLUS loans last year were 2.5%, but now they will be 4%.
    2. At seemingly the last minute Congress finally passed the extension of the Subsidized interest rate on June 29. It was signed into law the first week of July. This extension ensures that the Subsidized loan's interest rate will remain at 3.4% until June 30, 2013.
    3. The biggest news comes last. On June 30, a ruling was given from a federal district judge on the lawsuit between APSCU and the Dept of Education regarding the Gainful Employment rules. Although the Dept of Ed has 60 days from the ruling to appeal (and from the sound of it, it seems like they will), the career-focused sector of higher education treats this as a victory. Our of the four main parts, three were struck down and one was upheld. The one that was upheld was the Disclosures (cost, completion rate, placement rate, median loan debt, etc.). The one part of the rule that was struck down was the Metrics, which schools had to reach to remain eligible to continue receiving FA. The judge stated that the Dept of Ed hadn't fully explained how it had come up with its figures, so the judge struck down the rule. The other two (new program approval process and Reporting) were struck down since they were dependent on the Metrics.
    There have been some major changes. These are the largest ones. Those of us in the for-profit sector hail Rudolph Contreras's ruling in favor on 3/4 of the GE rules. Much of the industry isn't upset about the Disclosure rule not being struck down; in fact, we wish all schools would be held to that standard. It would surprise a lot of people to know the numbers on most of the large public schools.

    Monday, July 9, 2012

    Topic Requests?

    Financial Aid is difficult and challenging, and unfortunately it's a little different at each school. Because of this, there are always nuances that can only be explained by someone from that particular institution. On the other hand, there are always certain things that don't change and certain things that remain constant no matter how the institution interprets the rules.

    That being said, if you have topics that you would like covered, feel free to email suggestions. We try to keep updated on policies and rules that go into effect each year, as well as explaining issues with currently existing rules and regulations. If something hasn't been covered yet, let us know and we'll try to find some information.

    Monday, July 2, 2012

    A Moment to Breathe

    This week the campuses are on vacation, and to allow time to research new rules and regulations, the Financial Aid Corner is taking a moment to breathe. It's been a good year with some interest starting to show on this blog. I hope that the interest continues! For all the new rules and interpretations of the new rules, we always seem to stay quite busy.

    Thanks for checking out the blog! Let's take a moment to breathe as the new rules go into effect and as we make our way to the end of the year.

    Monday, June 25, 2012

    Policies & Procedures Manual

    What is a Policies & Procedures Manual?

    This is something that students aren't really aware of, but FA professionals know all about. A Policies & Procedures Manual is the ultimate rule book for a Financial Aid office. This is literally the collection of rules and policies for the FA office of a school. There are many places to find FA rules (FSA Handbook, Federal Reigster, etc.), but each school has differing rules which have to be kept somewhere.

    The P&P Manual is very important to the operation of the FA office. Most issues that come up in the day to day routine can be fixed using information from the manual. New hires are typically given a manual to read over and study in order to become familiar with the school's FA policies and procedures. When the Dept of Education comes into the school, a P&P Manual is the first thing they will ask for.

    So, you might wonder what's in one of these manuals. There is no one template or preferred style for the manual. Some schools have information in catalogs, on their website, in pamphlets, or in handbooks. The collection of these items is their manual. I always preferred to have all the information in one place so that if it's asked for by the Dept of Education, we can hand them a binder with the info included.

    Our P&P Manual has five sections and three appendixes. The sections are:
    1. Introduction - This section has addresses of the campuses, association memberships, code of conduct, charges and fees, and definitions of credit hours, academic years, and students statuses.
    2. Practices of FA Administration - This section has admissions practices, Satisfactory Academic Progress, Leave of Absence and withdrawal policies, crime awareness, and drug prevention.
    3. FA Programs - This section has information on student eligibility and information on the different FA programs that are offered at the campuses.
    4. General Administration - This section has information on the FA job description, packaging information, general FA appointment interviewing procedures, dependency override policy, professional judgment policy, verification procedures, default prevention, student status confirmation reporting, and student file documentation.
    5. Fiscal Management - This section has information on requesting funds, institutional refund policy, and Return of Title IV Funds.
    The three appedixes are:
    1. Common FA Acronyms and Terms
    2. Online Resources
    3. Supplementary Documents - This section includes citizenship information, default management plan, organizational chart, pell grant payment schedules, sample loan repayment chart, regional Dept of Education office information, and an Exit and an Entrance Counseling booklet.
    The manual itself should be updated annually since rules from the government update annually as well. Sometimes there won't be many changes, and sometimes there will be a lot of changes. In the last few years, there have been major changes, so it's difficult to make sure everything has been updated. However, it is a necessary element of the FA office.

    Monday, June 18, 2012

    Diploma Mills

    In the media recently, there has been some attention to diploma mills, and there have also been some people that call legitimate places diploma mills. But there are real diploma mills online, and people should be aware of what they are and what they do.

    To explain, a diploma mill is a place that takes money to give you a high school diploma. These are all online, which is the way they get around most laws. Even though there is a push to ban these companies, it's hard to ban something that is based outside of the US. What do I mean? Most of these websites that offer diplomas are actually from other countries, but pretend to be from here in the US.

    So what do you look for to determine if it's real or not? There are some obvious signs.
    1. If you pay a fee, take an evaluation, and receive your diploma in 2 weeks, then it's not legitimate.
    2. Look at the accrediting agencies. Sometimes these websites list what entities accredit them, but they aren't always real entities. A good way (not always true, but most of the time) to tell if the accrediting agency is bogus is to see if the US and/or state Dept of Education recognizes the agency. Some legitimate agencies aren't recognized, but that doesn't mean you shouldn't look with a critical eye.
    3. Look to see if they offer discounts. Schools aren't supposed to offer discounts because of the way tuition is handled. There are scholarships and grants that help pay for tuition, but since that's from an outside entity usually, it is different. Schools are the grocery store; if there are deals, you might want to think twice.
    4. If the site tells you what's in your graduation package before you complete, then there is a problem. One site says you will receive 1 high school diploma, 2 transcripts, 4 education verification letters, 1 certificate of membership, 1 certificate of distinction, and 1 award of excellence. See any problems there? How does anyone know you will qualify for a certificate of distinction or award of excellence before you've actually done anything?
    5. Look in the FAQ sections and look to see what they say in regards to a GED. Many times they will actually say that it's a good idea to get a GED in addition to their diploma. Why waste $400 on a fake diploma when a $50 GED will actually get you somewhere?
    6. If you get to choose the year in which you "graduated", then it is fake.
    7. If you are getting credit based on "life experience" and not actually taking a rigorous academic program, then it is a fake. You actually have to take tests to prove you know information and you have to actually earn credit.
    8. If you can't actually find a place where the school is "located" (meaning where the owner or parent company or any physical address of any kind), then it is fake. Most of these "schools" are actually run by people not in the US. One particular "school" is run from a man in Pakistan, and there are no faculty of any kind.
    9. A big red flag is if the school is self-accredited. It's one thing to fool students by saying you're accredited by bogus agencies, but telling them that they are accredited by nobody and being proud of it should be a major sign for you to stay away. How can they justify their curriculum if no one is checking it over?
    10. If the transcript has actual grades for classes and all you took was a life experience assessment, then there is something fishy.
    In the end, these sites try to make people think they can get a high school diploma without doing the work. It's much easier, safer, cheaper, and more beneficial to just go sit for the GED. The GED test is not offered online and you have to sit for it. It will definitely take you farther than a high school diploma that cost $200, $400, $700, or as much as $2500 but is really worthless.

    Here are two news stories you may be interested in. These tell you what you need to know.
    "Virtually Worthless" - Florida Center for Investigative Reporting
    "Alleged Diploma Mill Program Traced to Pakistan" - KHOU Houston, from BBB's website

    Monday, June 11, 2012

    IRS Data Retrieval Codes

    Another new element to the 2012-13 FAFSA is the way the IRS Data Retrieval informs the FA Administrator as to how the student used the IRS Data Retrieval system. Since the system was introduced in the 2009-10 award year, there have been codes printed on ISIRs that tell the FA Administrator how you used the system, but they have changed for the 2012-13 award year. Everytime there is a new transaction made on your FAFSA, a code is printed on it saying the status of your information that you entered. So, if you import your tax information and then you change it, the school will know. These codes (I believe) are printed only on the ISIR as opposed to the SAR.

    These codes are as follows:

    00 – Student/Parent was ineligible to use the IRS Data Retrieval Tool and was therefore not presented with the option to use it in FAFSA on the Web.

    01 – Student/Parent was presented with the option to use the IRS Data Retrieval Tool in FAFSA on the Web and elected to use it, but did not transfer IRS data into the FAFSA.

    02 – IRS data for the student/parent was transferred from the IRS and was not changed by the user prior to submission of an application or correction.

    03 – IRS data for the student/parent was transferred from the IRS and changed by the user prior to submission of an application or correction.

    04 – IRS data for the student/parent was transferred from the IRS and then changed by the user on a subsequent transaction.

    05 – Student/Parent was presented with the option to use the IRS Data Retrieval Tool in FAFSA on the Web, but did not elect to use it.

    06 – IRS data for the student/parent was transferred from the IRS, but a subsequent change made the student/parent ineligible to use the IRS Data Retrieval Tool.

    Blank – IRS Data Retrieval Tool not available in the application method utilized by the student/parent (such as paper FAFSA or FAA Access).

    Monday, June 4, 2012

    Financial Literacy

    Students often have problems in their lives that complicate things, whether that be daycare, work, family, or just not being able to afford the bills. Sometimes these problems aren't as complicated as one might think. Once in awhile, it's just a lifestyle choice. One way to know if your troubles are really what you think they are is to research through financial literacy.

    Financial literacy is a broad term for many subjects that concern both students and parents of students. Some of the subjects are just basic financial aid awareness, life choices, FA resources, money management, and other topics. I have seen students (and friends even) who complain they have no money and cry, saying they are about to have the electricity shut off or the water turned off or the gas turned off, but then they pull out the newest iphone. It's choices like that which will impact your future for years to come, and it's best to recognize and understand them as early as possible.

    One of the best sites for financial literacy that I've seen is located at . This is a website created by PHEAA, one of the servicer's currently handling federal Direct Loans. There is a section for borrowers and a section for parents. There is good information about financial aid in general to help you understand the terminology as well as the process itself. There is also information about repayment options, exit counseling, and money management.

    I highly recommend you check it out!

    Tuesday, May 29, 2012

    FA Alphabet Soup

    What is "FA Alphabet Soup" you ask? It's what some of us call all of the strange acronyms in the Financial Aid arena. Sometimes these are just simple things, such as FA standing for Financial Aid. Then there's DL for Direct Loans, FAFSA for Free Application for Federal Student Aid, and FSA for Federal Student Aid (if you didn't get that from FAFSA).

    The Alphabet Soup is nearly a language by itself.

    There are now defunct terms like GSL for Guaranteed Student Loan and FFELP for Federal Family Education Loan Program.

    There are organizations and agencies such as ED which is the Dept of Education (don't call them DE, since they will quickly correct you and say "we're not the Dept of Energy"), the CFPB which is the Consumer Financial Protection Bureau, and SAA which is Student Aid Administrators.

    Sometimes there are two acronyms that apply for the same person, such as FAA and FAO (Financial Aid Administrator and Financial Aid Office or Officer).

    Here are some of the other common acronyms:

    AY - Award Year

    COA - Cost of Attendance

    CPS - Central Processing System

    EFA - Estimated Financial Assistance

    EFC - Expected Family Contribution

    FSEOG - Federal Supplemental Educational Opportunity Grant

    MPN - Master Promissory Note

    NSLDS - National Student Loan Data System

    SAP - Satisfactory Academic Progress

    SAR - Student Aid Report

    And then there's the Gainful Employment (which is denoted as GE) acronyms:

    OOPB - Original Outstanding Principal Balance

    LPF - Loans Paid in Full

    PML - Payments-Made Loans

    So if you really want a chuckle at the FA Alphabet Soup, check out the Repayment Rate calculation for GE:

    OOPB of LPF plus OOPB of PML which is all over OOPB

    Fun stuff!

    Monday, May 21, 2012

    Media and Financial Aid

    It's no big secret that the media is always looking for the next big story. They were all over the "housing crisis", and since that was a huge success, they are looking for the next bubble. Most of them have gravitated toward student loans, calling it the next crisis or bubble that's about to burst. But is it really? Is it hype? You be the choice, but in the meantime here's some interesting notes.

    The most important thing to note is the massive size difference between the numbers of the housing bubble and the student loan industry. Currently, the student loan industry is around $867 billion. Sound like a lot? Well, compare it to the amount that the housing market comprised in 2006 when it burst: $22 trillion. That's about 25 times larger than the student loan industry. If every single student defaulted at the same time, it would have a fraction of the impact as the housing market since the housing market lost $8 trillion when it burst. $8 trillion, compared to (at worst) $867 billion? Big difference.

    Another important thing to note is that if FA is restricted or cut, it won't drive down tuition costs. There have been studies done on this, and each one seems to have its own result, which is usually what they were looking for. The simple fact is that schools that receive assistance from state and local governments have received less, which causes them to raise tuition to compensate. The cost of technology has been driving up tuition prices for years. It may make some things cheaper, but school isn't one of them. To compete on a technological avenue, the schools have to dump more and more money into the technological side, but this doesn't help tuition prices. If FA is restricted, more than likely, this will only result in less students attending school because they can't afford it.

    The other element that the media likes to latch onto is the fact that students are borrowing too much. They like to show these huge amounts that people have borrowed and defaulted on. Last Tuesday, the local news had a story about a doctor who earns 6 figures every year but has defaulted on his loans. These are common and take little into account for the causes. The most common stories include students who have borrowed over $200k. However, the truth is that only about 0.5% of borrowers have borrowed over $200k, 0.7% have borrowed between $150k-$200k, and 1.9% have borrowed between $100k-$150k. The other thing most don't realize is that these are graduate students, not undergraduates because loan limits restrict it. The truth is that over 43% of borrowers have between $1k-$10k of student loan debt, and another 30% have borrowed between $10k-$25k. But these don't make the news.

    Unfortunately, this "story" fits in the category of the car wreck analogy. People have to look at car wrecks when they pass because it's dark and sad and not normal. People tend to secretly enjoy what is out of their control and like to see bad things happens to others, then feel freaked out that it could happen to them. It's nothing new. So, you couple the idea that people feed on the negativity of the news and the notion of the media to look for the next story, and you are left with the wrong side of the stories being told to scare the masses. Sometimes, we just need to research the facts ourself.

    Monday, May 14, 2012

    IRS Data Retrieval Tool

    The FAFSA for the 2012-13 award year begins the new era of FA (once again). In this new era, the FAFSA is intended to be completed by the student, as opposed to the school submitting the FAFSA after the student fills it out. As part of this, the IRS Data Retrieval Tool is a main element.

    The IRS Data Retrieval Tool isn't new this year, but it is the first time that it's become mandatory. The good thing about the tool is that it will cut down on the number of FAFSAs that have to be verified, but the bad thing is that smaller schools have to change how they are processing FAFSAs.

    What the retrieval tool does is simply imports the student's tax information directly from the IRS to their FAFSA. Since it is genuine information from the IRS, then it has to be correct for Pell Grant purposes. As long as a student doesn't change the information that has been imported, then there is no need to verify the income information (even if the FAFSA is verified).

    But how would anyone know if the information has been changed after it was imported? When a FAFSA is processed, it will come back with a certain code on the ISIR. This code tells the FA Administrator what happened with the retrieval tool. There is a code for if the student used the tool, one for if the student didn't, and one for if the student changed in the information after it was imported. A subsequent posting will list the codes and possible troubleshooting.

    So far, the number of verifications is much lower than one would expect, so that part of it is true. However, it still has a few bugs as to whose information it can find. Some students who filed their taxes in January and February are still being told their information isn't found. Although this doesn't happen often, it does happen. Overall, it will be interesting to see what happens next.

    Monday, May 7, 2012

    "Why Does My FA Not Get Disbursed At Once?"

    This is a common question that students ask. The answer is actually really simple, but it's not always what a student wants to hear.

    If you're talking about Pell Grants, then your FA is based on Payment Period (or Period of Enrollment), such as a semester, quarter, trimester, etc. If you have two semesters in the Period of Enrollment, then your Pell will be split in half, with each disbursement coming once per semester. If you're in a quarter system, then (for a very confusing reason that will be discussed in another posting) the Pell is split into three disbursements. And so on. You only receive Pell for the amount of Payment Periods you actually attend, so if you attend one quarter in the award year, then you only receive one quarter's amount of Pell.

    If you're talking about loans, typically your loans have to have a minimum of two disbursements, although some schools are actually allowed to have one disbursement. There are many schools who could have one disbursement, but choose not to use it. Your loan is based on the amount of time in your loan period, which could be an academic year or a single Payment Period (depending on your situation). At a semester-based school, if your loan is for the academic year, then it would last for two semesters which means two disbursements. At a quarter-based school, typically your loan is for three quarters (one academic year), so the loan is split into thirds, one for each quarter.

    The good thing about Pell not coming at once is if you drop before the year is over, you still have Pell left to use at another school (if you switch) or at your current school (if you stay). The good thing about loans not coming at once is (once again) if you drop, you don't owe back the entire loan, just the part that came in and the school was entitled to keep. If you attend one semester and then drop, then you only owe back $4750 (combined Sub and Unsub for a first year Independent student), but if your entire loans had come in, then you'd owe $9500 (combined Sub and Unsub for a first year Independent student). That's a big difference. Just remember, your FA is based on the amount of time and number of credits you are attending from Payment Period to Payment Period.

    Monday, April 30, 2012

    Hope for the Subsidized Loans?

    On Friday, the House of Representatives passed a bill that included as part of it the ability to keep Subsidized Stafford loan interest rates at 3.4% for one more year. This would assist students for one more year in keeping their interest rates at a lower rate than the 6.8% (double what it currently is) that it is scheduled to go up to on July 1.

    We will see what happens with this bill as it goes up the pipeline. First it has to pass the Senate, and if it changes in the Senate, then it goes back to the House. Once the House and Senate approve, then it goes to the President to be signed into law. The fear is that he will veto the bill, and so far the news from the White House is that Obama will veto the bill.

    But have you been keeping track of this debate? Here's a small lesson in politics, which will be a great example of how FA laws seem to go through half the time.

    As stated above, there benefits to students who have a lower interest loan. And Obama was saying a week ago that he is going to stand by students and was willing to help them by keeping the Subsidized loan at 3.4%. His opponent didn't specifically say one way or the other what his plans were, but his comments haven't been viewed as being favorable toward it.

    So, why the sudden change in tone from he Administration? It's all politics, friends. You see, when a Republican led House passes a bill, and when that bill goes to a Democrat President, it suddenly is evil and must be killed. And even though he supported it a week ago, it is from the Republicans, so therefore it is bad.

    One must keep in mind, however, that the news is early, and there may be more to the bill that is unsavory for the Democrats, but it's also early in the sense that it still has to pass the Senate. And rest assured that changes will be made in the Senate! However, it became painfully obvious today that the simple act of ensuring a low interest rate for student loans (and only Subsidized loans) is nothing more than a political tool of being elected or re-elected rather than helping the constituents it is meant for.

    Now this isn't meant to cause anyone to get into an uproar one way or the other. It is more often than not typical politics. Nothing new. With FA, most rules are created as either political tools (as in this case), or they are created by people who don't know what the ramifications of their rules will do (such as the gainful employment rules). All we in the industry can say is: "it is what it is."

    Welcome to the fun of studying the political side of FA, friends!

    Monday, April 23, 2012

    "I have questions about servicers..."

    "...Where do I find out more?"

    That would depend on what information you are looking for. If you are looking for direct information about your individual servicer, then you'll need to research them on their website or give them a call. Your specific situation is unique to you and will be unlikely to be answered by someone other than them.

    However, if you have questions about servicers in general, then there are many places to find out some information. It's understandable that if your servicer changes, you may wonder why, and you may not really get an answer from your servicer.

    The one site that is a good resource for many things is called Mapping Your Future. They are a non-biased site that offers information in financial aid, careers, college, and money management. For the purpose of this posting, I'm going to share a specific link of theirs:  This has answers to questions about Direct Loan servicers that you may find useful.

    Monday, April 16, 2012

    Grace Period

    What is a grace period?

    A grace period deals with your student loans, and it's the time during which you don't have to make any payments on those loans. For federal Stafford loans, the grace period is six months. At Metro Business College, the Central Finance Loan is only three months. For the federal PLUS loan, the grace period is sixty days from the last date of disbursement. This is the short answer, and like with everything dealing with FA, there are no real short answers. There are different scenarios.

    One possible scenario is where you delay your grace period. If you complete a program then go directly into another program or another school, then you can fill out an in-school deferment. This will save your grace period for when you make it out your second time.

    Another possible scenario is where you've already used your grace period. This would happen if you go to school, then you are out for over six months, and then go back to school. You've essentially used your grace period. On your new loans, you will still have the grace period, but your old loans may not. In the past, once it's used, then you don't get it again.

    The only way to know exactly how your grace period will affect you is to contact your servicer. They will be able to give you an exact answer as to how it affects you personally, as opposed to how it works for most people.

    And remember: for any new federal Stafford loan you qualify for and take out, you have a right to a six month grace period.

    Monday, April 9, 2012

    2012-13 FAFSA Question

    Here's a good question that was asked recently: "If my FAFSA is verified and I am widowed, how do I verify just my income since 1040s are no longer acceptable?"

    This question deals with a few elements. Remember that if you are divorced, widowed, or separated, you don't have to use your spouse's income on the FAFSA (this goes for students and parents of students). You should also be aware that this means that you can't count them as a member of the household either. So, because you don't have to include the spouse's income and you are only counting your own, where do you get this information?

    The way the rules currently are is different than the way the rules are for July 1. Currently, if you are verified, you have to submit a copy of your 1040 tax return, and if you fall into the category of being separated, widowed, or divorced, then you could submit your W-2 or state 1040. In Missouri, income is separated into how much was earned by each member (filer and spouse). The Missouri return was perfect for this since most people keep their state and federal returns together. Unfortunately, in July the state return is no longer acceptable, and this is what the question deals with.

    The answer is the W-2. Copies of the W-2s are still acceptable, so you will need to present these to the FA office when you are widowed, divorced, or separated in order to more accurately report your income on the FAFSA. Also, remember that the FAFSA has the line "as of today", meaning that you are divorced, widowed, or separated as of the day you fill it out.

    Monday, April 2, 2012

    FSA Handbook

    What is the number one place Financial Aid personnel are told to look for more guidance regarding FA rules and regulations? The FSA Handbook. Published every year, the Federal Student Aid is a very complete answer guide to most of the rules and regulations concerning financial aid. It is a thick book containing a total of six volumes, and comes to the school hole punched for a binder. FA offices should have a copy of the handbook somewhere to refer to. The entire handbook is online on the IFAP website so it's easier to search for certain topics than it is in book form. The website is The language in the FSA Handbook isn't entirely in government jargon, so it's easier to understand than most government written publications. The website doesn't require a login so FA professionals as well as students can check it out. It covers rules and regulations for every possible higher educational institution, so semesters, quarters, trimesters, and modules are covered as well as standard and nonstandard terms and clock hours.

    Cover of the current FSA Handbook

    Monday, March 26, 2012

    ATB Test

    "I've heard about an ATB Test. What is it?"

    An ATB Test stands for Ability-to-Benefit Test. Not all colleges accept ATB Tests, but some do, and what it allows you to do is to attend college without a high school diploma or GED. Not only does it allow you entry into the school, it allows you to obtain FA.

    The tests themselves are made by publishers, and are administered by (according the the FSA Handbook) a certified official which may include "high school guidance counselors, test and measurement experts, human resource development professionals, qualified professional educators, or regional Armed Forces Command staff who are experts in education, training, and human resource development." The test itself must be administered properly for it to be used. For an administrator of the test to be certified, they must be certified by the state or by the publisher of the test used.

    If a school or its employee(s) affect the outcome of test scores in any way, or if the test wasn't administered independently of the school, then the school is responsible for returning any FA funds. So, basically, if anything is out of the ordinary, then the student isn't eligible for FA funds.

    However, a new change is on the horizon beginning July 1, 2012. The ATB Test can still be used as an entrance into college, but the student will not be eligible to receive any FA funds. In order to be eligible for FA funds, the student will have to have a high school diploma, a GED, or pass a state-recognized home school program.

    So, the short answer is go ahead and get your diploma, GED, or finish home schooling. You won't get FA without one of them!

    For more information about ATB Tests, check out the 2011-12 FSA Handbook (available online only at this point), Volume 1, Chapter 1, pages 8-11.

    Monday, March 19, 2012

    Claiborne Pell

    The Pell Grant has been called the foundation for a student's entire financial aid package, and rightfully so since all other higher education financial aid is dependent on the Pell Grant. You can still qualify for other grants and loans without a Pell Grant, but you have to apply for the Pell Grant to even have the option of qualifying for the other FA. But where did this come from? It certainly hasn't always been around. The Pell Grant is one of those things that seems to have been around as long as anyone can remember, but if they think about the 1950's, it's not there.

    So where did this come from? It came from a man named (oddly enough) Claiborne Pell. He was a senator from Rhode Island. He served six terms from 1961-97 and was most known for his work with education. He was largely responsible for creating the Basic Educational Opportunity Grant in 1973. This grant was created specifically for prison inmates to get an education. Pell and others believed that prisoners who received an education were less likely to return to jail and would ultimately create a safer public. The funding for this grant was never a problem in that there was always more money available than what was paid out. The odd thing was that people on the outside of prison weren't usually turned down for the grant. The Basic Educational Opportunity Grant was dubbed Pell Grant and soon the official name of the grant changed to it.

    Claiborne Pell died at the age of 90 in 2009, and without his support, there would be no Pell Grant serving the needs to students in higher education since 1973.

    Monday, March 12, 2012

    2012-13 FAFSA Update

    As it looks today, there is another change to the 2012-13 FAFSA, which takes effect beginning July 1. The FAFSA itself has remained relatively unscathed (the maximum amounts haven't changed, but the way it's figured has been). In a previous post, I mentioned that the new rules each year have an effect on FA similar to the way car designers have an effect on a car model. This year is no different.

    The biggest change is how the FAFSA is to be entered and verification. There is an IRS data retrieval function that was added a couple years ago, and what this does is it allows the student to import information from the IRS into their FAFSA, so the information is correct. However, if you want the FA person to enter the information for you, this most likely won't happen. The Dept of Ed wants students to take control of their paperwork, so they want to have the student do this by themself. We are still working on how to work this out at our school (some schools have been doing this for years).

    As far as verification, the Dept of Ed will no longer accept tax forms as proper verification materials. If a FAFSA is verified, then the student must request a tax transcript from the IRS, which takes a couple of weeks to come in. It was assumed that eventually the FAFSA would have to be done online, but the fact that a 1040 wouldn't be acceptable as a valid form of verification is a huge change.

    It is unclear if the number of FAFSAs that have to be verified will increase or decrease. Errors due to incorrect tax information should be down, but errors due to everything else should be way up. We'll just have to see how this whole thing works out. Currently, there are more questions than answers.

    Monday, March 5, 2012

    July 1, 2012 Interest Rates

    Back in 2006, Subsidized and Unsubsidized Stafford loans both had an interest rate of 6.8%. The only real difference between the two loans back then was how the interest accrued (Unsubsidized accrues while a student is in school, and a Subsidized does not).

    And then came the College Cost Reduction and Access Act of 2007. This act made it possible for students to get a break on their Subsidized loan interest rates. Each award year afterward, the interest rates were reducing. Even though the interest didn't accrue while the student was in school, the interest after a student left school would reduce, and any reduction in interest is very beneficial.

    This act created interest rates on a schedule as follows:
    • 6.0% in 2008-09
    • 5.6% in 2009-10
    • 4.5% in 2010-11
    • 3.4% in 2011-12
    So, what happens beginning July 1, 2012? The Subsidized interest rates will revert back to the level they were before the act took effect. So, beginning July 1, any Subsidized loan that is originated after that point will have a 6.8% interest rate. This means that the interest is essentially doubling from the 2011-12 award year to the 2012-13 award year.

    Although there has been talk that the government won't change the rate until next year (because this is an election year), this is something that is unlikely to change. The government is strapped for cash, so they will be looking for any place they can get a little extra money. So, be aware that this is a change coming up, and start now budgeting yourself for an increase of interest when you are finished with your program.