Today, we're talking about FA paperwork. Should you keep it or should you toss it? Once upon a time, I was told "If you're not sure if what you're about to do something right or wrong, then you should probably just assume it's wrong." The same thing applies to FA paperwork: if you're not sure if you should hang onto it or not, just hang onto it. Why? It's hard to get a copy of something you need if you got rid of it. Worst case scenario, you have papers you don't need or duplicates of papers you already have. But, it's better to have and not need, than to need and not have.
Second point on this is to remember to keep your FA paperwork in a safe and organized place. You don't want to just throw everything in a box and forget it until you have more paperwork. It's best to organize neatly your paperwork, such as keep loan, grant, scholarship, and other FA paperwork separate. Also be sure to arrange them by date, usually the newest in the front is a good idea. Also, don't forget that paperwork from your school and from your loan servicer should be separate also, that way they are easier to find if you need to talk to either.
Third point that should be made is if you are indeed positive that it's ok to get rid of something, then you shouldn't just throw it away. If you just throw something in the trash, you could run the risk of having your identity stolen. Remember, paperwork often has your name, date of birth, and social security number which is all someone needs to ruin your credit. Instead, paperwork should be shredded, and if you don't have access to a shredder, then at least tear the paperwork enough to make it difficult someone to piece together your personal information.
Don't forget that you will be getting a lot of paperwork over the course of your school term and repayment term. It will start off with confirmations (such as PIN and FAFSA confirmations) and end with your repayment statements. If you're expecting paperwork that doesn't arrive, make sure you contact someone to ask where it is. And as always, when in doubt, call your campus to ask what to do. The worst thing anyone can do is ignore the situation, because ignoring always makes things worse.
Monday, 24 June 2013
Monday, 17 June 2013
Are My Student Loans My Responsibility or My Parent's?
Sometimes this question will come up. Answer seems simple, right? You fill out a loan, then it's in your name. Since it's in your name, then it's your responsibility. But the question most often comes up because of type of loan as well as the age of the student.
First, the type of loan. If a student fills out a Master Promissory Note (MPN) and loan request for a Subsidized and/or Unsubsidized Direct Loan, then it is the responsibility of the student. If a PLUS Loan is completed, that is the responsibility of the parent. The easiest way to remember that is to remember who actually completed the MPN for each loan. The student completes the Direct Loan MPN, whereas the parent completes the PLUS Loan MPN. Remember that federal Direct Loans do not ask for cosigners, so only the student completes any part of it. Also remember that just because the loan is in the student's name, it doesn't mean that the parent can't help with payment or even pay the whole thing. It just means that the student will be held accountable if it isn't paid back.
Second, the age of the student. The Higher Education Act makes an exception for students under the age of 18 to take on a federal student loan without needing a cosigner even though it is a contract. Why is this relevant? Because of their age. It is legal for a business in most states to enter into a contract with a minor, but it's a dumb thing for the business to do so. Why? Because the minor has the right to back out of the contract and not be held liable. (The exception is if they committed some type of fraud, then most likely they will have to pay restitution.) If the minor had a cosigner, like a parent, then the contract is legally binding for that minor. But with the exception in the HEA, students are responsible for their student loans, even if they are not 18.
Students should always read and study as much as they can about their student loans, especially if they are private loans from a bank. They don't always work the same as the federal loans and usually have a lot more fine print. When in doubt, your best action is to ask questions, either to your loan servicer or your FA office.
First, the type of loan. If a student fills out a Master Promissory Note (MPN) and loan request for a Subsidized and/or Unsubsidized Direct Loan, then it is the responsibility of the student. If a PLUS Loan is completed, that is the responsibility of the parent. The easiest way to remember that is to remember who actually completed the MPN for each loan. The student completes the Direct Loan MPN, whereas the parent completes the PLUS Loan MPN. Remember that federal Direct Loans do not ask for cosigners, so only the student completes any part of it. Also remember that just because the loan is in the student's name, it doesn't mean that the parent can't help with payment or even pay the whole thing. It just means that the student will be held accountable if it isn't paid back.
Second, the age of the student. The Higher Education Act makes an exception for students under the age of 18 to take on a federal student loan without needing a cosigner even though it is a contract. Why is this relevant? Because of their age. It is legal for a business in most states to enter into a contract with a minor, but it's a dumb thing for the business to do so. Why? Because the minor has the right to back out of the contract and not be held liable. (The exception is if they committed some type of fraud, then most likely they will have to pay restitution.) If the minor had a cosigner, like a parent, then the contract is legally binding for that minor. But with the exception in the HEA, students are responsible for their student loans, even if they are not 18.
Students should always read and study as much as they can about their student loans, especially if they are private loans from a bank. They don't always work the same as the federal loans and usually have a lot more fine print. When in doubt, your best action is to ask questions, either to your loan servicer or your FA office.
Monday, 10 June 2013
Why Do I Have to Reapply for FA Each Year?
Many students come into the FA office and wonder why they can't just fill out the necessary paperwork once and have it done. But as with many things in FA, things aren't that simple.
The main reason you have to reapply is because the foundation of your FA (you FAFSA) is based on income, and income may change from year to year. The FAFSA has to be filed every award year (the period between July 1 and June 30). Your Direct Stafford loan eligibility is dependent on your FAFSA results, so without a FAFSA, there are no Direct Stafford loans.
As far as Direct Stafford loans are concerned, some schools are able to allow students to sign a two-year prom note and some only allow a one-year prom note. Master Promissory Notes (MPNs) are only good for a certain amount of time before they have to be completed again. Some schools are only allowed to use one-year prom note, which means you'd have to complete new loan paperwork each year.
Another reason you have to complete new paperwork each year is because of of your Satisfactory Academic Progress (SAP) calculation. Colleges have to monitor your SAP and make sure that you are successfully completing the courses in a manner that is leading you to completion of your program with good enough grades and in a timely fashion. Most often, you should finish with no less than a C average and finish in no more than 150% of the program's published length (so for a 2 year program, no more than 3 years). When this calculation is completed depends on the school, but before you can take out your next year's FA, your calculation will have to be completed. If you are not meeting SAP, that may affect your FA eligibility.
Even though many students would rather just fill out their FA once, it's actually a good thing to stop into the FA office to refill out your paperwork. This way, you will become more familiar with your own FA and terminology. It's a great time and place to ask questions, and a great time to understand your situation.
The main reason you have to reapply is because the foundation of your FA (you FAFSA) is based on income, and income may change from year to year. The FAFSA has to be filed every award year (the period between July 1 and June 30). Your Direct Stafford loan eligibility is dependent on your FAFSA results, so without a FAFSA, there are no Direct Stafford loans.
As far as Direct Stafford loans are concerned, some schools are able to allow students to sign a two-year prom note and some only allow a one-year prom note. Master Promissory Notes (MPNs) are only good for a certain amount of time before they have to be completed again. Some schools are only allowed to use one-year prom note, which means you'd have to complete new loan paperwork each year.
Another reason you have to complete new paperwork each year is because of of your Satisfactory Academic Progress (SAP) calculation. Colleges have to monitor your SAP and make sure that you are successfully completing the courses in a manner that is leading you to completion of your program with good enough grades and in a timely fashion. Most often, you should finish with no less than a C average and finish in no more than 150% of the program's published length (so for a 2 year program, no more than 3 years). When this calculation is completed depends on the school, but before you can take out your next year's FA, your calculation will have to be completed. If you are not meeting SAP, that may affect your FA eligibility.
Even though many students would rather just fill out their FA once, it's actually a good thing to stop into the FA office to refill out your paperwork. This way, you will become more familiar with your own FA and terminology. It's a great time and place to ask questions, and a great time to understand your situation.
Monday, 3 June 2013
Unusual Enrollment History (UEH) Flag
New for the 2013-14 FAFSA is the UEH error flag. Normally when a student completes a FAFSA, they receive a Student Aid Report (SAR) that contains their Expected Family Contribution (EFC) which helps the FA office determine their FA awards. This EFC can come back with an asterisk (*) by it which means their FAFSA information needs to be verified. Sometimes, there will be a "C" next to the EFC. A C code means that there is some problem that needs to be resolved before anything can be done. As long as the information gathered isn't conflicting, a verified SAR isn't a big deal. But a C code is much more serious and usually requires more care.
This is the case with the UEH. If a UEH flag comes up on your SAR, you will have a C code. The school receives a similar report called an ISIR, and on the ISIR, it will give either an error code of 359 or 360. Depending on your enrollment history, you will probably have to provide school records from previous schools and explain what your situation was in your previous enrollments. One example of what might cause a UEH flag is if you attended 3 or more schools in the past 2 years. The Dept of Ed doesn't understand why you are going to multiple schools in a short amount of time. They also don't understand if you went just long enough to get a refund check.
The goal of the UEH flag is to point out the students who have odd patterns of enrollment at schools and make that student be accountable as to why they feel they should have another chance. This is still new and there will be more information as we get closer to July 1 when the award year begins. But in the meantime, there may be some students who are fine this year who will lose eligibility for next year. Should be interesting how it turns out!
This is the case with the UEH. If a UEH flag comes up on your SAR, you will have a C code. The school receives a similar report called an ISIR, and on the ISIR, it will give either an error code of 359 or 360. Depending on your enrollment history, you will probably have to provide school records from previous schools and explain what your situation was in your previous enrollments. One example of what might cause a UEH flag is if you attended 3 or more schools in the past 2 years. The Dept of Ed doesn't understand why you are going to multiple schools in a short amount of time. They also don't understand if you went just long enough to get a refund check.
The goal of the UEH flag is to point out the students who have odd patterns of enrollment at schools and make that student be accountable as to why they feel they should have another chance. This is still new and there will be more information as we get closer to July 1 when the award year begins. But in the meantime, there may be some students who are fine this year who will lose eligibility for next year. Should be interesting how it turns out!
Monday, 27 May 2013
New Direct Subsidized Loan Limits for 2013
Beginning July 1, 2013, some changes are coming to the Direct Subsidized loans. A new law called Public Law 112-141 has established loan limits for the Direct Subsidized loans. This law affects new borrowers after July 1, 2013, and a new borrower is defined as a person who does not have any balance due on any outstanding loans on or after July 1, 2013.
The new new limitation puts a 150% cap for loans of a program. So, if you are in a 2 year program, then you are only allowed to receive Subsidized loans for 3 years. If you go over that, then you can only receive Unsubsidized loans. Since Satisfactory Academic Progress states you must complete in 150% of the program's length, it doesn't sound like that big of a deal, right? Think again.
The hardest part of this seems to be switching programs. If you are in a one year program, and switch to a two year program, then you are fine: you basically went from two years or eligibility to three years. But let's say you spend three years in a two year program, and you decide to go to a lesser program. This lesser program has few of the same classes, and will take you a year to complete. You've already used 3 years of eligibility even though you switched programs, and your new program has a max of two years of eligibility. You've already used it up, so you are not eligible for more Subsidized loans.
Confusing? Yes. The only way to get around this is if you start in a program and finish in that program, and you do it in the amount of time it's supposed to take you. And that is what the government is trying to get more students to do.
Keep in mind that as long as you have enough lifetime Unsubsidized loan eligibility, then any part of the Subsidized loans you don't qualify for, you can receive in Unsubsidized loans. However, also remember that Subsidized is better for you since interest doesn't build on the Subsidized loans while you're in school. The less Unsubsidized loans you have, the less interest you will owe, which will help your financial future.
The new new limitation puts a 150% cap for loans of a program. So, if you are in a 2 year program, then you are only allowed to receive Subsidized loans for 3 years. If you go over that, then you can only receive Unsubsidized loans. Since Satisfactory Academic Progress states you must complete in 150% of the program's length, it doesn't sound like that big of a deal, right? Think again.
The hardest part of this seems to be switching programs. If you are in a one year program, and switch to a two year program, then you are fine: you basically went from two years or eligibility to three years. But let's say you spend three years in a two year program, and you decide to go to a lesser program. This lesser program has few of the same classes, and will take you a year to complete. You've already used 3 years of eligibility even though you switched programs, and your new program has a max of two years of eligibility. You've already used it up, so you are not eligible for more Subsidized loans.
Confusing? Yes. The only way to get around this is if you start in a program and finish in that program, and you do it in the amount of time it's supposed to take you. And that is what the government is trying to get more students to do.
Keep in mind that as long as you have enough lifetime Unsubsidized loan eligibility, then any part of the Subsidized loans you don't qualify for, you can receive in Unsubsidized loans. However, also remember that Subsidized is better for you since interest doesn't build on the Subsidized loans while you're in school. The less Unsubsidized loans you have, the less interest you will owe, which will help your financial future.
Monday, 20 May 2013
New Loan Fees Announced, Starting July
As is common with a new award year, loan fees are changing for the Direct Subsidized, Direct Unsubsidized, and PLUS loans. Currently, there is a fee on these loans of 1.0% for the Subsidized and Unsubsidized loans, and 4.0% for PLUS loans.
The rates are going up to 1.051% for Subsidized and Unsubsidized loans, and 4.204% for PLUS loans. Just like with the fees currently, this is the amount of your federal loan that will not come in to the school.
The sequester took effect in March 2013, and the requirements it calls for were to take effect then. However, this fee is not included in the necessary items to take effect immediately. Dept of Ed announced that this fee would not be enforced until they had released more guidance. The announced in April that it would be enforced beginning on July 1.
The other thing you should know about this is that it affects new loans on or after July 1. If at least one disbursement was made before July 1, then your remaining disbursements on that loan will be at the lower rate. But if your loan's first disbursement is any day after July 1, then it will be at the higher rate.
The rates are going up to 1.051% for Subsidized and Unsubsidized loans, and 4.204% for PLUS loans. Just like with the fees currently, this is the amount of your federal loan that will not come in to the school.
The sequester took effect in March 2013, and the requirements it calls for were to take effect then. However, this fee is not included in the necessary items to take effect immediately. Dept of Ed announced that this fee would not be enforced until they had released more guidance. The announced in April that it would be enforced beginning on July 1.
The other thing you should know about this is that it affects new loans on or after July 1. If at least one disbursement was made before July 1, then your remaining disbursements on that loan will be at the lower rate. But if your loan's first disbursement is any day after July 1, then it will be at the higher rate.
Monday, 13 May 2013
What Is a Federal Direct Loan Servicer?
Back in 2010 as part of the Healthcare legislation, a small part of it actually dealt with federal student loans. At the time, there were two federal student loan programs that were very similar: Direct Loans and FFELP loans. FFELP loans were federal student loans that were serviced by a bank or a student loan company, both of which received federal subsidies to participate in the program. The Healthcare legislation ended the FFELP loans, which meant the only federal student loans of this type could be Direct Loans.
The way the Direct Loan program works is you complete a Master Promissory Note (MPN) that says 'Direct Loan' on it. But once you have your loan originated and disbursed, your correspondence probably won't have 'Direct Loan' on it. Instead, it will have other names on it. The Direct Loan program will transfer your loan to a student loan company that it selects to handle your loan needs. Your contact for information on your loan will become the company assigned to your loan. Who will it be? It's not up to the student or the school. The Direct Loan program picks it out for the student.
When the switch over in 2010 began, there were just a handful of servicers, but the number has grown to meet demand. The Dept of Ed picks who these servicers are, and these servicers must continue to meet the expectations of the Dept of Ed in order to continue to be a servicer.
So, who are these companies that you may be working with? Below is the list of servicers:
- Aspire Resources, Inc.
- Cornerstone
- COSTEP
- Direct Loan Servicing Center
- EDGEucation Loans
- EdManage
- Educational Services of America, Inc. (Edsouth Services)
- FedLoan Servicing (PHEAA)
- Granite State
- Great Lakes
- KSA Servicing
- Missouri Higher Education Loan Authority (MOHELA)
- National Education Loan Network (Nelnet)
- OSLA Servicing (OSLA)
- Student Loan Marketing Association (SLMA or Sallie Mae)
- VSAC Federal Loans
As I tell all students, when you receive mail or emails, make sure to check it out. Just because you don't recognize it, doesn't mean it isn't important. Also, the most important advice I can give is if you are not sure if it's important or not, be sure to ask your financial aid office about it. They will be able to tell you for sure if it's something you should worry about or not.
Subscribe to:
Posts (Atom)