Monday, January 28, 2013

How Do I Know What Lender to Use?

This is a common question in the Financial Aid Office. When a student has exhausted all resources that don't typically require repayment (scholarships, grants, etc.), then the loan questions come out. And one of the most common makes sense. After all, there are how many lenders out there?

The answer to this question depends on what type of loan you are referring to. If you are able to take out a Federal loan, specifically a Direct Loan, then you don't have to choose a lender. What happens is you take out your loan from the Federal government. Then your loan is sent to and serviced by a government-approved loan servicer. Sallie Mae, Great Lakes, and Nelnet are a few of these. So, in a sense, your lender is chosen for you with these loans. The only bad part about the servicers is the possibility that your loan could change to a different servicer. It doesn't happen often anymore, but it's always possible. There are some borrowers who ended up with more than one servicer in the last couple years, and the servicers are trying to get all the borrowers' loans together. What better way than trade a couple loans?

If you are looking at a private loan, then your question on which lender to use becomes a valid one. Most schools that use private loans (which should only be considered after you've exhausted the Federal loan options) will have a preferred lending list. These lenders are the ones that the school uses the most, so your FA administrator should know a little something about each one. The best advice anyone can give when considering these types of loans is to ask questions. Ask about length of repayment, interest rates, credit checks, and so on. Do your research on these lenders' websites, and even call them yourself. One of the best  things you can do is ask someone who's had loans before with the lenders or people who've had a lot of private loan experience. Typically, parents are a great resource since they've had home loans, car loans, etc., and this loan will be similar.

As a reminder, you should only look at private student loans after you've received as much scholarships, grants, other free money, and federal loans as you can get. If you don't need a private loan, then don't get it. There are strict limits on federal loans, but private loans work differently. The horror stories you will read on the internet about student loan repayments being out of control are mostly from the private loan debt. But in the end, someone once said "There's no such thing as a stupid question," and if you ask questions about your lenders, then you'll find out who to use.

Monday, January 21, 2013

Beware of Scholarship Scams

“Billions of dollars worth of scholarships went unclaimed last year. Send us $79.95, and we’ll send you a scholarship of at least $1000 or we’ll send your money back!”

Does this sound familiar? Have you seen emails, online ads, or even postcards with phrases like this? You’re not alone. Thousands of statements like this are posted all over the internet. Today, families are struggling to pay for education and sometimes they turn to outside sources for help without researching them out. Are statements like this one legit?

The old saying “if it sounds too good to be true, it probably is” definitely applies to scholarships. There are few things to keep in mind with scholarships.

  1. If you are guaranteed a scholarship before filling anything out, then don’t trust it.
  2. Scholarships are free, so if you have to pay for information, help, or the scholarship itself, then it’s a scam. Application fees are also included. You shouldn't pay for any fees either.
  3. If you “won” a scholarship you didn’t enter, it’s a scam.
  4. Scholarship organizations don’t contact you unless you’ve contacted them first.
  5. If they use phrases like “everyone’s eligible” or “60% of all applicants win”, it’s a scam because usually few people win scholarships. Also, most scholarships are open for a select group of people. For example, a scholarship for left-handed people won't work for people who are right-handed.
  6. There's no contact information for the organization giving the scholarship. Phone numbers and addresses should be somewhere.
  7. Be wary of P.O. Boxes. Some legitimate places use P.O. Boxes, but most won't. Most organizations giving out scholarships will use an actual business address.
  8. Be wary of California and Florida addresses. There are some legitimate scholarship organizations from California and Florida, but it seems many of the scams have addresses from those two states.
  9. Be wary of organizations that notify you by phone. Legitimate places use snail mail almost exclusively with their notifications.
  10. If you contact the organization and they treat you badly when you ask questions, then it's probably a scam. Real organizations want to help students, but scammers just want your money.
  11. Beware of endorsements. Government entities such as the US Dept of Ed or the US Chamber of Commerce don't sponsor or endorse any private businesses. Also if a college or the Better Business Bureau supposedly sponsors or endorses these organizations, then call the Better Business Bureau and the college and see if that's true.
  12. Look out for phrases like "guaranteed to win!" With these claims, they are either a scam or there is a lot of fine print. You may be guaranteed to win if you jump through an obscene amount of hoops.
  13. Beware of the places asking for your personal information. If they get information like your name, date of birth, social security number, bank accounts, or credit card numbers, they will be easily able to commit identity theft.
  14. Make sure the federal agencies mentioned are real agencies. Just because it sounds official and has a Washington DC address doesn't mean it's legitimate.
  15. Don't let any organization apply for you. Scams like to use this method as well as have you pay for that service to get you twice.
  16. This may be strange, but make sure the scholarship information has good spelling and grammar.
  17. If they use a phrase about how much money went unearned or uncollected in a year, then it's a good idea to steer clear. 
  18. Just because the organization uses the term "fund" or "foundation" doesn't necessarily mean it's a non-profit scholarship group.
In the end, your best bet is to do your research, and when in doubt, consult with the Financial Aid administrator at your school.

If you want to learn more about scholarships, go to Education Planner. If you want a legitimate scholarship search website, check out FastWeb or College Board.

Wednesday, January 16, 2013

Sympathy for Greg at SIBA

Yesterday around 2 pm, a financial aid colleague, Greg Elsenrath, was shot in his office by a disgruntled student. I was following the events yesterday as best as I could, and I didn't want to post anything until I knew more.

The student was known at the school, and he made his way up to the 4th floor where Greg's office is. The student then shot Greg once. The student soon shot himself. Apparently, the student was upset that his financial aid was cut off, which sounds to me that he'd reached his lifetime eligibility limit, which is nothing in Greg's control. But the student snapped and took it out on Greg.

Last report was that Greg was rushed to surgery and made it through doing well. He is expected to make a recovery. SIBA, Stevens Institute for Business and the Arts, will be closed until next Tuesday.

As part of the financial aid community, you don't expect such things to happen. Greg is a colleague of mine. We go to conferences twice a year and meet up in the peer group session as well as other conference activities. When I told someone last night about it they asked when was the last time you talked to him. I remembered to November at the last conference. There was a peer group session, but he and I were the only two in the session. So we talked for about a half hour. One of the topics was campus safety/security. Irony has a strange way of playing with one's mind sometimes.

So, as we move forward from random school shootings of students and faculty, to targeted shootings of students and faculty, to now targeted shootings of specific administrators, we should remember to be ever-watching of the students that we serve. Our jobs are to help students afford and pay for their education, but we should not forget that sometimes students may not understand FA situations and may take out their frustrations.

I hope that Greg makes a fast recovery. Keep him and your family in your thoughts!

Monday, January 14, 2013

Paying Interest While in School

Often, a student will ask "Should I pay interest on my student loans while I'm in school?" And without hesitation, I always say "If you can afford it, you definitely should at least pay the interest." Why? First you have to look at where the interest is building.

The Subsidized and Unsubsidized loans are similar in many aspects, but the biggest difference is the way interest accrues while you're in school. The interest on the Subsidized loan is subsidized by the government during your enrollment (hence the name of the loan). The Unsubsidized loan is not subsidized by the government, so as soon as your loan is disbursed, interest will begin accruing on it. These loans usually have a 6-month grace period before you are required to make payments; however, interest will be accruing on both the Subsidized loan and the Unsubsidized loan during this time. Once you graduate, your Subsidized loan will begin accruing interest.

Next, let's look at a specific example. Let's say you are enrolled for a 12-month period of time while payments are not required, and you have a total of $15,000 of Unsubsidized loans. This means your interest rate will be 6.8%. If you pay your interest along the way, then you will pay a total of $1,020 in interest for that 12 months. When you finish your 12-month period, then you will owe just $15,000. Sound like a lot? Compare to if you pay nothing. That same $1,020 will be added to your existing $15,000, so you will owe $16,020 when you finish. You may say that you're still paying the same amount so it doesn't matter. Where it does matter is in repayment. There's a big difference in going into repayment owing only $15,000 as compared to $16,020. How big?

You have 10 years to pay off these student loans, which comes out to 120 monthly payments. If you'd been paying your interest, then your monthly payment on a standard repayment plan would be $173; whereas, if you hadn't been paying, then your monthly payment will be $184. Also, the total amount repaid over the entire repayment period (without anything changing such as payment plan or deferments/forbearances/delinquencies) if you've been repaying your interest would be a total of $21,734. But if you hadn't been paying your interest, then that total would be $22,123.

So in this example, you could be saving $11 a month, or $389 over the life of the loan. There are other benefits to paying interest while in school such as becoming familiar with the process early and becoming comfortable with it. Another great thing is it will help to give you good habits.

Don't forget: pre-payment on your loan itself is allowed also. You don't have to stay at just paying the interest; the more you pay early, the more you'll save in the end!

Thursday, January 10, 2013

Congratulations to Nathan!

Congratulations to Nathan Chirban, Massage Therapy instructor at our Rolla campus, who was Voted #1 Best Massage Therapist in Rolla, Mo, for the Rolla Daily News Reader's Annual Choice Award for 2012!

Monday, January 7, 2013

New Total and Permanent Disability Discharge Rules

This rule applies to any student loan borrower in the Title IV branch of financial aid, which means Direct Loans, FFELP loans, and Perkins loans.

The first change is that starting July 2013, all borrowers will apply for Total and Permanent Disability (TPD) directly to the Department of Education, rather than to the school or the lender/guarantor.

Borrowers may also apply using certain types of disability determinations from the Social Security Administration (SSA). Borrowers wholse disability status is confirmed by SSA and who are subject to a status review in five to seven years may submit that documentation rather than undergoing the usual TPD loan discharge application under the Title IV loan programs.

There are three aspects that are not changing though. 1. Borrowers will still be subject to a three-year post discharge monitoring period. 2. And increase in income or receipt of Title IV loan funds or a Teacher Education Assistance for College and Higher Education Grant may result in the reinstatement of the previously discharged loans. 3. The Department of Education may request documentation from the borrower and the borrower has to comply.

So this should make things a little easier for the borrowers to go through the TPD, but on the other hand, they are still keeping the rules tough for those who don't deserve a TPD loan discharge.