What's New in College Financial Aid?

The college financial aid system rivals only the IRS in its complexity. But change is on the way. This week, we've asked visiting blogger Sandy Baum, professor of economics at Skidmore College and special consultant to the College Board, to bring us up to speed on college financial aid. Here are the six most important developments:

1. More generous Pell grants. The Pell grant is the cornerstone of federal student aid: The government provides grants to dependent students with family incomes up to about $50,000 and to independent students with low incomes. The maximum grant is set every year by Congress and has not kept up with the price of college. In 2008-09, the maximum grant was $4,731; in 2009-10, it will be $5,350.

2. Income-based repayment for federal student loans. As of July 1, the federal government has a new system that will limit monthly payments on federal student loans to a reasonable percentage of the borrower's income. Those whose incomes are below 150 percent of the poverty line for their family size will not have any payments due; others will owe no more than 15 percent of the amount by which their incomes exceed this level.

This system is not perfect. The government will pay the interest for some borrowers whose payments don't cover it, but others will see their debts grow as interest accrues. After 25 years, remaining debt will be forgiven, but unless Congress makes a change, this will be a taxable event. And it's important to remember that only federal loans—not loans from private lenders that don't come with a federal guarantee—are covered by this important new program.

3. A simpler FAFSA form. In order to be eligible for federal financial aid—or for need-based financial aid from states, colleges, universities, or other sources—students must complete the Free Application for Federal Student Aid (FAFSA). The Department of Education has announced that this process will become simpler with increased reliance on "skip logic": Students will no longer have to sort through questions that do not pertain to their circumstances. The Obama administration is also requesting that Congress reduce the amount of information required to compute federal aid eligibility so that the form can become even shorter and easier to complete.

4. Transfer of income tax data. Students who apply for aid late enough in the calendar year for their previous year's income tax data to be available will be able to have data transferred directly to the FAFSA. Until and unless the program is expanded, it will not help students applying for aid for the fall semester. However, many people believe that if this experiment is successful, future students will not have to complete separate financial forms at all but will be able to rely on tax data to apply for financial aid.

5. Changing sources of college loans. Many students have to rely on loans to finance part of their college education. Borrowing for college is sensible, since education is an investment that usually pays off for a lifetime. Reasonable amounts of debt can be paid off out of future earnings.

In many cases, it makes sense for parents to take Parent Loans for Undergraduate Students (PLUS), diminishing the amount of debt students will have when they graduate. But when students themselves borrow, the most important thing to know is that federal Stafford loans are a much better bet than private loans. Private loans are widely marketed on the Internet, often with a boast that students can borrow as much as they need without completing the FAFSA, but the interest rates on these loans are likely to be much higher than those on federal loans. Also, the protections for economic hardship that come with federal loans are absent from private loans.

It's easy to get confused about what is actually a private loan. This is because, at least for now, the same private lenders (such as Sallie Mae and banks) provide both private loans and federally guaranteed Stafford loans. Congress is currently debating doing away with private sources of federal loans, but in the meantime, students should be clear about what they are getting.

6. Increasing financial aid (in some cases). Even as colleges and universities, both state and private, are struggling with financial realities, many are nevertheless increasing their financial aid budgets. The school with the highest price tag might actually be the least expensive to attend when financial aid is taken into consideration. And almost all states provide their own grant aid. Even in California, where pervasive stories about the state budget crisis include predictions of the demise of the generous and well-established Cal grant program, valuable state grants are quite likely to remain available to students. Students should be sure to get information about aid from all sources and to find out what they have to do to qualify.

The Obama Administration Gives Mothers Federal Funding For College

Who would have thought in a few short years the economy would have went from one of the most amazing spurt of economic growth and to the recession that we have now. No one could have predicted its occurrence, just like no one could have predicted that the stimulus package was going to help single mothers go back to college.
If you would like to avoid the backlash of this current recess of time, this time to consider making good choices that will lead you in a direction of financial security. Single mothers should make a decision to earn a college education that, despite our economy, will be paid for in full by the federal government.


You have heard the saying that we need to be thankful for what we have. This is also true in regard to what is available for college students today. The Pell Grant has been increased to over $5000 per student allowing most students, male or female, to go to college without any concern or need to pay back a long because this grant money is 100% free. Think about that. A complete two-year college education but you don’t have to pay for.
The Obama administration wants to send the public back to school. Without an education, the future may not be as bright. That is why all students, specifically single mothers, are part of the unified front by this administration to send these women into the university system to earn your college degree. Now more than ever, more funding is available than ever before.
Through using scholarships and grants, you don’t have to pay for tuition, books, or unit fees. To take advantage of this aspect of the economic stimulus package, applied for this free grant and Scholarship money as soon as possible. Without any question, this is one of the best times in history to be a college student. Apply for college funds, and once you have received the government money, you will be on your way to success.

Visit our sites for more information on finding federal funding for single mothers or obtaining scholarships for college students through the Obama administrations stimulus package.

Article Source: http://EzineArticles.com/?expert=Kelly_Thompsan

10 Tips for Getting More Financial Aid

Schools are approving a record number of appeals and giving more aid

By Kim Clark

Posted June 16, 2009

During the boom years, the nation's college financial aid officers used to swap tales about trivial, selfish appeals for more aid that students and parents occasionally filed, like the father who wanted more grants for his daughter because he'd just spent $25,000 on another daughter's wedding and the mother who demanded more scholarships for her child so the mother could spend her savings on a cruise.

Not this year. Colleges say they are being flooded with all-too-serious appeals for additional aid. And many colleges say they are scraping together extra grants or scholarships for the vast majority of appealers who can document a decline in income or an increase in expenses. But financial aid offices warn anyone with hidden income not to assume that appeals are risk-free: Appealers whose tax and other documents show that they falsified aid applications can lose all their aid and be fined or even sent to prison.


Mary Smith-Hammond, who retired from her job as a financial aid officer for the University of California-Berkeley in 2007, was called back this year to help with a big jump in appeals. She estimates that she has approved more aid for about 85 percent of the appeals she has processed so far, up from a historical average of about 50 percent. "The unemployment rate wasn't as high back then. And we had different standards," she says. Smith-Hammond, who long ago denied the appeal from the mother who wanted to save her money for a cruise, says she is even approving appeals for students whose parents last year reported incomes of about $400,000 but this year are collecting unemployment insurance. "Their stocks are gone, their 401(k) is gone. They may only keep their house for another year," she says. Some have seen their industries get wiped out, reducing the chances they'll find another high-paying job. "I have not seen an appeal that was frivolous" yet this year, Smith-Hammond says.
Normally, colleges award financial aid for each academic year based on a family's financial situation in the previous year, as reported by the family on the Free Application for Federal Student Aid. But the U.S. Department of Education this spring asked colleges to help those whose parents have lost their jobs or suffered a pay cut in 2009 by estimating a family's need for aid based on this year's lower income instead. Aid officers are also taking into account expenses that aren't reported on the FAFSA, such as medical bills.
Students or parents who feel they have a real need for extra aid will have more luck if they follow these Dos and Don't's suggested by Smith-Hammond and several other veteran aid officers.

Do:

• Make sure you've filed all the necessary aid applications. If you haven't done so already, fill out the FAFSA. If your college is one of the 300 or so that also requires the College Board's CSS/Financial Aid Profile, fill that out as well. If you have filed the aid applications, check them to make sure they accurately represent last year's finances.

• Check your college's financial aid Web page. Some have instructions or forms for filing an appeal. If you don't see any instructions, call the office and ask for help.

• Send a letter to your college's financial aid office asking for a "professional judgment" review of your award. Give specific reasons why you need more aid. "Give actual numbers. Don't just say, 'My medical expenses are high,' " explains Patricia Williams, director of financial aid at McDaniel College in Westminster, Md. "Detail what the medical costs are, how much insurance paid, and how much you paid. We work with formulas that require real numbers."

• Provide documentation for your claims, such as copies of W-2s, tax forms, hospital bills, and the like.

• Send the appeal and documentation as soon as possible. Some aid is first come, first served. "When the money has been committed, the school may not be able to offer (latecomers) any assistance," says Pat Watkins, director of financial aid for Eckerd College in St. Petersburg, Fla.

Don't:

• Lie or shade the truth. Most aid officers demand lots of corroborating evidence, and they scrutinize it. And the government can take back your aid, fine you, and even send you to prison for lying on the FAFSA.

• Let shame, embarrassment, or ego stop you from filing a legitimate appeal. You've got lots of company right now, notes Smith-Hammond. "It is your right. You are a taxpayer. You need help, and we are here to help you," she adds.

• Demand grants to replace student federally backed Stafford and Perkins loans or earnings from a work-study job. Although a handful of schools are promising enough grants to allow low-income students to graduate debt-free, the vast majority of schools can't afford to give out that much aid. "The basic premise of financial aid is that the student and family will do all they can first. Taking out loans is how the student does his or her part," McDaniel's Williams says.

• Expect a bankruptcy filing to guarantee you more aid. Since bankruptcy typically wipes out debts, colleges may conclude that you now have more money to spend on tuition, notes Eckerd's Watkins.

• Have your appeal filed by your accountant. Financial aid officers say the most persuasive appeals are filed by students themselves. Letters from parents also are often rewarded. If you can still afford to pay an accountant big bucks, aid officers may suspect you can afford more tuition, too.

Grads to Get a Break on Student Loan Payments

Mark Kantrowitz / Publisher of FinAid and FastWeb

May 26, 2009

If you’re struggling to make your monthly student loan payments on your measly first-job salary, you’re not alone. The good news is, the government is taking notice — and changing the game to make sure monthly payments don’t cripple college grads.

Even better, whatever you haven’t paid off after 25 years may be forgiven.

With this new option, instead of calculating monthly payments on the total amount a borrower owes, payments will be based on a percentage of the graduate’s discretionary income. It’s called Income-Based Repayment (IBR), it’s available for federally-guaranteed student loans and direct student loans, and it starts July 1, 2009.

If you’re looking for the lowest monthly payment for low and moderate-income borrowers, you’ve found it.

Payments Based on Income, Not Debt

Income-based repayment is similar to “income-contingent repayment” (ICR), but with some key differences.

• First and foremost, IBR is available to more grads. Income-contingent repayment is only available to borrowers in the direct loan program, while income-based repayment is available in both the federally-guaranteed student loan program and the direct loan program.
• IBR uses a smaller percentage of discretionary income and a smaller definition of discretionary income — that means they’re taking a smaller chunk out of the cash you have left over after your other bills are paid. In fact, IBR payments will be as much as 30% to 50% lower than ICRpayments.
• Borrowers do not have to consolidate their loans to get access to this plan.

With IBR, you won’t have to shell out any more than 15% of your discretionary income in loan payments.*

For example, if a borrower owed $40,000 in federal education loans and made $30,000 a year, they’d wind up making the following monthly payments under the different repayment plans:

• $171.94 a month with an IBR plan
• $277.63 a month under an extended 25-year repayment plan
• $319.50 a month under income-contingent repayment
• $460.32 a month under standard 10-year repayment plan

Under IBR plans, monthly payments are adjusted annually, based on the prior year’s federal income tax returns and any change in the family size. Borrowers can also request mid-year adjustments due to changes in financial circumstances, such as job loss. A borrower who is married to a spouse with high income can file as married filing separate in order to have the monthly payments based on only the borrower’s income instead of the combined income.

*Discretionary income is defined as the difference between adjusted gross income (AGI) and 150% of the poverty line for the family size. The example above is based on a single borrower who has $40,000 in federal education loans and an AGI of $30,000 a year, taking into account that the 2009 poverty line in the continental US is $10,830 (plus $3,740 for each additional family member), and 150% of that is $16,245.