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.

http://fcir.org/2010/12/22/virtually-worthless/
"Virtually Worthless" - Florida Center for Investigative Reporting

http://www.bbb.org/us/article/alleged-diploma-mill-program-traced-to-pakistan-32568
"Alleged Diploma Mill Program Traced to Pakistan" - KHOU Houston, from BBB's website

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).

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 http://youcandealwithit.com/ . 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!

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!

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.

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.

"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.