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.

Financial Aid News 162: Save $100 a year on fees

From NASFAA:

“The City Colleges must scrap its fee-laden debit card program for student loans because the fees are illegal, the U.S. Department of Education said in a recent letter to the district,” Chi Town Daily News reports. “In a July 7 letter, the agency wrote that students can’t be charged fees for using an ATM or visiting a teller to get their money … The letter comes two months after the agency first said the existing program was fine. Stephanie Babyak, a spokeswoman at the Education Department, said it reversed its own decision after asking the City Colleges some more questions about the debit card program. While the program was running, the first withdrawal from an ATM or a teller was free but future visits to an ATM cost $2 and talking to a teller cost $10. In May, the Department of Education told the City Colleges the program was acceptable since students had other ways of getting their refund money. They could wait for paper checks or get the funds direct-deposited into a bank account, the agency noted … Though the City Colleges does not face any sanctions for running the debit card program as it did, the Department of Education said it wants a response from the district about how it will fix the program.”

Commentary

With luck, the trend will spread of eliminating fees of any kind on debit cards for tuition rebates and student financial aid disbursements. These fees line the pockets of banks and schools with no measurable benefit to students other than not having to cash a physical check. Moreover, the disbursements themselves are usually the proceeds of a student loan, which means that students are paying additional fees on borrowed money, in effect paying twice for money that they’re already paying money on.

News You Can Use

One of the most insidious ways you can lose money, a little bit each day, is to do business with a major commercial bank that nickels and dimes you to death with fees. Everything ranging from fees for checking accounts to ATMs to Internet home banking to overdraft fees can add up to hundreds of dollars a month if you’re not careful.

Here’s an example – I recently went to withdraw money at a local ATM:

I walked away after seeing a $3 fee, knowing that the local convenience store ATM fee, just a few doors down, was $1.75.

There are three concrete steps you can take to protect your own wallet and deliver a strong message to commercial banks:

1. Don’t bank with a commercial bank. Look at community banks and especially credit unions for banking services that rival or exceed what commercial banks can deliver (often with much better service!) and no fees or very few fees. I’ve been a customer of a federal credit union for almost a decade and can happily say that my credit union (where the staff greets me by name) has no fees on 95% of its services. The SUM network of ATMs means no fees any time I use a SUM ATM, so I save money there. No fees for Internet home banking or Internet bill pay. I used to pay probably about $100/year in fees after all was said and done when I banked with a commercial bank long ago. Since then, banking with a credit union has saved me all those fees – over the span of a decade, $1,200. Who wouldn’t want $1,200 more free money?

2. Don’t patronize commercial bank ATMs. Every time you pay their inflated fees, you implicitly endorse their business practices and give them every reason to continue or increase their ATM fees. Go Google for ATM locators and find ATMs nearby that offer low fees or no fees. Join a credit union that’s a member of the SUM network and look for no-fee ATMs around you.

3. If you need to withdraw a small amount of cash – under $100 – and there no no-fee option around, go to any supermarket that offers cash back at the register and buy a pack of gum or some other consumable. You’ll pay about the same amount as an ATM fee but you’ll have something to show for it.

Finding a credit union is easy. Go to the National Credit Union Administration (NCUA) and use their search tool to locate a credit union near you. The NCUA is identical to the FDIC in terms of guarantees on your savings, so any money you have with an NCUA insured account has identical safety and coverage to FDIC insured bank accounts.

Additionally, many colleges have credit unions right on campus. Usually they’re set up primarily for employees of the college, but many allow students to bank with them as well. A commercial bank will almost always have an ATM on campus in a prominent place with high fees to sucker unaware students, but campuses with credit unions on campus almost always have a no-fee ATM as well. Save yourself some money and find it on your campus if you have one.

College Scholarship Application Process

The process for applying for college scholarship is virtually similar to applying for college. First, you have to learn as many scholarships grants as possible and create a shortlist of possible prospects that fit you and your need. Then, you create the most compelling application letters or essays that state your achievements together with interviews and other supporting letters such as recommendations. And finally, if you are lucky enough, you can go to college for less or for free.
Mentioned above is the ideal way of winning college scholarship, however, the task is still yours if you want to succeed winning your most wanted tool towards the degree. So to increase your chances of success, here are ways you can do:


Start your search early. Most scholarships are only open for a specific time period. After the application process closes, you have to wait for another year to file your application. Starting your search early would not only give you better chances of finding the best scholarship awards that suite you, it also gives you better chances of applying for several scholarships that in turn give you better chances of winning a scholarship.
Read the requirements carefully. It must be remembered that among all the scholarships available, there are only few that would suite you. To know this, read carefully the requirements including the eligibility standards of the scholarship you want to apply. If you find out that you do not fit, search for another one.
Do not apply if you do not qualify. Since it is assured that your application will be taken for granted, applying for a Scholarship that you don’t fit it is a complete waste of time.
In the events that there are things that should be clarified, never hesitate to contact the scholarship sponsor.
Complete your requirements. While you are searching for college scholarship, you must already be preparing the requirements. Never wait for the sponsor to ask before you prepare the requirements.
Write a compelling application essay. It does not mean that you dramatize your life story. It means that you convince your “would-be” sponsor that you need the scholarship more than anyone else. You should also fill up the application with honesty and sincerity. Never write false information just to pass the application process.
After all these, don’t forget to submit your application early and hope that the sponsor would consider you as one of their scholars. Good luck!
Low Jeremy
http://www.articlesbase.com/advertising-articles/college-scholarship-application-process-58595.html

foxyroxy Says:
September 17th, 2009 at 8:20 pm college application and scholarship process?
im not to sure of what i want to be when i grow up..im a sophomore in hs. right now but i feel like i should know and i feel as if i should like maybe be applying for scholarships already. so is it to early to start applying or how old where you when you started applying?

Lovelystar Says:
September 18th, 2009 at 1:22 am OMGosh lol. I feel the same way and im a sophmore too. But I know what I wanna be though. Well, I dont think its too early. Remember, HS years fly and by the time were juniours we’ll be ready to apply to colleges anyways so, its not bad to prepare ahead of time
References :
Same way

Miko Says:
September 18th, 2009 at 1:24 am careers.scienceontheweb.net – try this site. It has info about different US scholarships for college students and their grades requirements.
References :

Institutional Grants

There are other grants in addition to ours.  Colleges provide institutional grants to help make up the difference between college costs and what a family can be expected to contribute through income, savings, loans, and student earnings.
Other institutional grants, known as merit awards or merit scholarships, are awarded on the basis of academic achievement. Some merit awards are offered only to students whose families demonstrate financial need; others are awarded without regard to a family's finances.
Some grants come with special privileges or obligations. You'll want to find out about the types of grants awarded by each college you are considering.

Federal Supplemental Educational Opportunity Grant (FSEOG)

The Federal Supplemental Educational Opportunity Grant (FSEOG) program is for undergraduates with exceptional financial need. Pell Grant recipients with the lowest expected family contributions (EFCs) will be considered first for a FSEOG. Just like Pell Grants, the FSEOG does not have to be repaid.

How much can I get?

You can receive between $100 and $4,000 a year, depending on when you apply, your financial need, the funding at the school you're attending, and the policies of the financial aid office at your school.

If I am eligible, how will I get the FSEOG money?

If you're eligible, your school will credit your account, pay you directly (usually by check), or combine these methods. Your school must pay you at least once per term (semester, trimester, or quarter). Schools that do not use semesters, trimesters, or quarters must disburse funds at least twice per academic year.