10/30/2008 |
Questions about Your Student Loans Answered |
ASA’s—director of regulatory compliance and privacy, Betsy Mayotte, recently spent time answering student loan questions online via Boston.com. Betsy fielded questions from approximately 23 chat participants. Topics ranged from repayment to graduate loans to “how-to” tips.
Below you will find the full chat transcript, which could prove to be a useful tool in answering your own student loan questions. If you would like to read more from Betsy or communicate with her directly, visit www.amsa.com/bor and click on “Ask Betsy.”
Student loan chat with Betsy Mayotte
October 28, 2008 http://www.boston.com/business/personalfinance/articles/2008/10/28/mayottechat/
Betsy Mayotte, director of privacy and regulatory compliance at American Student Assistance, took readers’ questions about financing college and paying student loans. Here’s a transcript of the discussion.
Betsy_Mayotte: Good Afternoon everyone and welcome to our online chat on repaying your student loans. I’m Betsy Mayotte, a director at American Student Assistance here in Boston. ASA is a non-profit organization that focuses on helping people manage their student loan debt. Looks like we’ve already got some questions queued up so without further ado…
GLENDA__Guest_: WHO HAS THE CHEEPEST LOANS. I WANT TO REFINANCE MY LOANS TO A LESSER PERCENTAGE RATE.
Betsy_Mayotte: Well, it really depends what kind of student loans you have. Private student loans really vary by the lender and you’ll have to make some calls to see if any would be willing to refinance your current loans at a lower rate. Honestly, in my experience that does not happen very often—but it’s worth a shot. Federal student loans originated after the summer of 2006 have a fixed rate so the only way to get it lowered would be to see if your lender offers any type of incentive for on time or perhaps EFT payments. If your federal student loans are older than 2006, you may be able to consolidate to lock in your current rate, but it won’t lower it. Sorry—not the answer you were looking for but at least you know where to start.
cmc__Guest_: What kind of financial aid is available for an older worker who wants to change his profession?
Betsy_Mayotte: Actually, you are likely eligible for the same federal aid that everyone else is. If you attend a degree or certificate program at least half time at an eligible institution, you can apply for Pell (undergrad only), Stafford (all) and PLUS loans (graduate only)and whatever scholarships and institutional aid the school may offer. You can get started by filling out the FAFSA once you have been accepted into school. Good luck!!
Cindy__Guest_: With the financial crisis and freeze, will parents be able to get financing for next year’s tuition if their credit is less than perfect? My husband was unemployed for 9 months and we fell behind. He is working now and we are getting caught up but I am nervous that we won’t be able to fund our daughter’s education next year.
Betsy_Mayotte: Hi Cindy—boy—you are sure not alone in those fears! Most folks with less than perfect credit will still be able to get financing if they have a co-signer. The parent PLUS loan has a relatively mild credit requirement but will allow an endorser (co-signer) if needed. Private loans are stricter, and the interest rate tends to climb the lower the credit score is, but you should still be able to get them if needed. I’d really try to focus on those federal loans though
ac__Guest_: Hello
Betsy_Mayotte: Why hello!
JoeC__Guest_: Hi Betsy. How are savings in our kids’ UFund accounts considered by colleges when we apply for FinAid? Are they considered as part of income of parents, or kids?
Betsy_Mayotte: I’m fairly confident that it counts towards the parents assets but you may want to make extra sure by checking with your 529 provider.
mel__Guest_: How much is available through the federal loans? Is it even close to covering the cost of typical college costs?
Betsy_Mayotte: Well—it depends on how much your college costs!! ;-) Annual loan limits for undergrad students run from about $3500 (for dependants) to up to $13K for independant 4th year students. Graduate students can get up to $20,500 in Stafford funds and the parent and graduate plus loan can be taken for up to the cost of attendance minus any other aid. Keep in mind that some of these loans accrue no interest while you are in school while others do—so try to stick to the subsidized loans as much as possible.
mekmom__Guest_: If we aren’t likely to get any financial aid, with an income of $150K and four kids, the first starting college next fall are we better off getting student loans, parent loans or using home equity to finance college
Betsy_Mayotte: Ok—my lawyers would want me to tell you at this point that a certified financial planner I am not—and you should check with one for big decisions like that. With that out of the way, I’d say that in some ways the federal student loans might be your better bet. Their both tax deductible, but heaven forbid if something bad happens (death, disability, unemployment) there are things you can do to lower, temporarily postpone or even discharge federal student loans—while the home equity loan doesn’t have those options.
stacy__Guest_: hi Betsy… could you tell me how far back a college looks as far as the parents income tax returns… if I sell an asset junior year, will it be counted against me on the FAFSA when my child is a senior?
Betsy_Mayotte: Hi Stacy
Betsy_Mayotte: The FAFSA uses last years tax return to calculate this years financial aid. If there seems to be something strange however, the school may ask for more recent information. In the example you gave, yes, that would “count” in the senior year calculation.
babyface__Guest_: My child is an honors/AP-Level student who gets good-to-excellent grades. I know that Harvard(and I think Yale, as well) offer free tuition to families of modest to upper-modest means like ours. Are other schools following this model? Is there a comprehensive list of these schools? Thanks!
Betsy_Mayotte: Actually there is such a list. The following link is to a list of colleges and universitites that have modified their aid programs to eliminate or come close to eliminating loans for their students. http://projectonstudentdebt.org/pc_institution.php
Walshy__Guest_: I’m going back to business school. How do I go about getting a loan? My parents paid for ugrad but I am on my own for grad school and am new to the process.
Betsy_Mayotte: Hi Walshy
Betsy_Mayotte: If you fill out the Free Application for Federal Student Aid, you’ll be able to see which loans and grant programs you might be eligible for. You can do so online at www.fafsa.ed.gov
Betsy_Mayotte: The school you attend may also offer you some scholarships or other types of institutional aid.
joe__Guest_: If I skip filing FAFSA forms for my children’s first year of college can I pay cash and they fill them out for the next year
Betsy_Mayotte: Hi Joe
Betsy_Mayotte: You are never obligated to apply for student aid. You are also not obligated to take any aid you are offered. So, honestly, I would fill out the forms to see if you are eligible for any grant aid (you know—the good stuff you don’t have to pay back). The numbers from this year won’t really affect when you fill it out the following years (and don’t forget, as long as they are considered dependants for financial aid purposes,you’ll still have to fill out the FAFSA with your info).
payg__Guest_: Hi Betsy. in a divorce situation where one parent is responsible for college payments are both parents tax returns used for fafsma
Betsy_Mayotte: Hi there
Betsy_Mayotte: Usually it’s the household where the child lived most during the last 12 months. If it’s not the parent who is responsible for college payment, you may want to work something out before the process begins.
observer__Guest_: I am a single mother, share custody with my ex. He makes 2x—3x what I make. How does this affect my child? I make less than 60K
Betsy_Mayotte: Similar question to the previous—who has primary custody? That’s who should really be filling out the FAFSA.
tracy__Guest_: My son was fortunate to attend a good school through a tuition remission program. He does have to pay for housing which is about 12K a year. We, his parents feel that we got him the free tuition he should be on his own in terms of housing costs. Can he get a loan on his own or do we have to cosign for him?
Betsy_Mayotte: Hi there
Betsy_Mayotte: He is likely eligible for a federal loan, although it may be unsubsidized. Cost of attendance for a school includes cost of living so you should be able to apply for aid for that amount. Keep in mind that you will still have to fill out the FAFSA with your info if he is a dependant (under 24, not a veteran or have dependants of his own etc..)
joe_debt__Guest_: Hi Betsy I’m looking for some feedback on what to do if I dont really make enough money to currently start paying off school loans after the 6 month grace period. I am currently an intern at an agency and have been looking for jobs but havent had much luck
Betsy_Mayotte: Great question and I guarantee one that many others have. Federal student loans have lots of lower payment options including graduated, income sensitive and extended repayment. You can find out about them online at your lenders website. You can also possible defer (postpone) your loans if you are actively seeking fulltime work and currently working less than 30 hours per week. There are defermetns for economic hardship as well. I would start by reading about these at www.amsa.com and finding the one you think fits your situation best—then contact your lender to apply. Good for you thinking about this now!!
pete__Guest_: What if I can’t complete my tax returns in time to fill out the forms?
Betsy_Mayotte: Hi Pete
Betsy_Mayotte: You use last years tax info for this years FAFSA so that should not be an issue.
umass_grad__Guest_: I am applying to grad school for next fall. I live on my own and am not a dependent of my parents anymore. Should I optimistic about more aid because of that?
Betsy_Mayotte: Well the good news is that the annual loan limits for graduate students are higher than for undergrad. The bad news is that many of the federal grants available are for undergraduate students only. To end on a good news note—federal aid is based on your assets and income—so it sounds like your eligibility may have gone up due to your change in support.
observer__Guest_: I have primary custody in my case, divorce agreement says he has to pay accordant to his salary, but not sure how that affects aid.
Betsy_Mayotte: Well the aid will be based on your information by the sound of things. Doesn’t mean he can’t take out plus loans though.
gottime__Guest_: What do you think id the best plan for saving for a child who is still under 2? 529s the best options? I want to pay for 100% of college expenses, but by the time that rolls around I imagine the education will cost me $500K! At least. When will the prices level off? Is there a cycle to college costs as well?
Betsy_Mayotte: Boy—that’s a whole lot of speculating your looking for here! Remember my not a financial planner disclaimer from earlier? Ok then—I do think 529’s are a good start for investing for college. Saving in most any form is usually a pretty good idea. As far a college costs go—I suppose we could discuss supply and demand and what the market will bear over time etc…but truthfully, nobody knows when and if they will ever “level” off. I will tell you that Congress is starting a conversation on the cost of education, so by the time your little one is filling out applications, we may have had some helpful changes.
deweyst__Guest_: Hi, Betty—my son has been accepted to a sound engineering school in Arizona. We need to plan for travel and living expenses as well as tuition. The good and bad part is that he will go in MARCH! We are woefully unprepared for this and I do not know where to begin. We have some home equity that we can tap -- is that a good option or should we seek more traiditional student loans.?
Betsy_Mayotte: Congrats! You should absolutely start with the FAFSA and see how it goes from there. I woudln’t consider hitting up savings until you know exactly what the bill will be. Talk to his financial aid office after the FAFSA numbers come in. You might be surprised.
coops__Guest_: I’ve been reading that we should be putting $$ into accounts in student’s grandparent’s names, etc. in order to avoid having it show up as asset. Our child will go to college in 2 years—any tip for saving in the right places?
Betsy_Mayotte: Well it is true that the grandparents assets are not recorded as part of the financial aid calculation. Also the parents assets are considered “less” than the students assets in the calculation. Don’t forget there are other tax implications here so make sure you’ve vetted these investments before making them
dave__Guest_: Is there a way I can financial aid for preschool? My child has a ss# but can’t hold a pen. Can I sign the loan documents for him?
Betsy_Mayotte: While there is no infancy defense for federal student loans, there is also no federal student loans for pre-school. Besides, I don’t think he is old enough to get a job to pay said loans back.
babyface__Guest_: Thanks for directing me to the “project on student debt” link. One other question… A family member might be willing to pay(not loan) some of my child’s college education. It was suggested that I fill out the financial aid(FAFSA, I guess?) form first and then this family member would contribute based on what the award amount. Does this contribution ’post-FAFSA’ affect financial aid availability for that and/or subsequent years?
Betsy_Mayotte: No it should not assuming said really nice family member wasn’t a parent who had to contribute to the FAFSA info anyway, shoudln’t matter a bit. I think that is sound advice actually—always see what aid you qualify for first!!
jojo__Guest_: are there loan programs a student can take out by themselves
Betsy_Mayotte: There sure are! The Stafford and Perkins loan programs are not credit based and do not require a parent or other co-signer. Graduate students can also apply for the Federal PLUS loan and if credit-worthy, not need a co-signer.
deweyst__Guest_: Are the stafford and perkins loans through banks or schools?
Betsy_Mayotte: Great question. Perkins loans are through the school. Stafford loans will either be through a private lender if the school participates in the Federal Family Education Loan program (FFELP) or directly from the government if the school participates in the direct loan (DL) program. The terms and conditions of DL and FFELP loans are essentially the same.
Uomo__Guest_: I became an Italian citizen through my parents. My kids can now go to any EU university for little to no money. That was easy!
Betsy_Mayotte: Ahh—I’ve always wanted to be Australian—but I’d miss being a Red Sox fan just way too much..
fishman1234__Guest_: Hi Betsy. For purposes of Federal Loans (Stafford/Perkins/etc.) are Graduate School and Certificate program considered the same? What can the funds from these loans be used for, is it only education costs or can it be cost of living like for a person changing careers and going back to school (eg, the person way back in the very first question)? Thanks!
Betsy_Mayotte: Graduate, undergraduate, associate and certificate programs will all have different eligibilities based in part on cost and partly on the level of education. You can get financial aid for up to the cost of attendance which does include room and board but only to a certain degree. Every school has slightly different policies, but the easiest way to think of it is that the cost of attendance includes costs that you have only because you are in school. For example, you’d have a car regardless so it won’t cover car payments or insurance but it might cover some of the gas or a bus pass.
JoeC__Guest_: Hi again Betsy. What are the best websites for getting info on financial aid issues? thanks also for that url about colleges with maximum pricing. Very helpful!
Betsy_Mayotte: Hi
Betsy_Mayotte: The website I use the most is www.finaid.org as it’s the most comprehensive. You can also find good loan info on our site www.amsa.com
Betsy_Mayotte: Great questions everyone thanks! You can also e-mail me at askbetsy@amsa.com Have a great afternoon!!
