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!
Tuesday, 29 May 2012
Monday, 21 May 2012
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.
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.
Monday, 14 May 2012
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.
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.
Monday, 7 May 2012
"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.
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.
Monday, 30 April 2012
Hope for the Subsidized Loans?
On Friday, the House of Representatives passed a bill that included as part of it the ability to keep Subsidized Stafford loan interest rates at 3.4% for one more year. This would assist students for one more year in keeping their interest rates at a lower rate than the 6.8% (double what it currently is) that it is scheduled to go up to on July 1.
We will see what happens with this bill as it goes up the pipeline. First it has to pass the Senate, and if it changes in the Senate, then it goes back to the House. Once the House and Senate approve, then it goes to the President to be signed into law. The fear is that he will veto the bill, and so far the news from the White House is that Obama will veto the bill.
But have you been keeping track of this debate? Here's a small lesson in politics, which will be a great example of how FA laws seem to go through half the time.
As stated above, there benefits to students who have a lower interest loan. And Obama was saying a week ago that he is going to stand by students and was willing to help them by keeping the Subsidized loan at 3.4%. His opponent didn't specifically say one way or the other what his plans were, but his comments haven't been viewed as being favorable toward it.
So, why the sudden change in tone from he Administration? It's all politics, friends. You see, when a Republican led House passes a bill, and when that bill goes to a Democrat President, it suddenly is evil and must be killed. And even though he supported it a week ago, it is from the Republicans, so therefore it is bad.
One must keep in mind, however, that the news is early, and there may be more to the bill that is unsavory for the Democrats, but it's also early in the sense that it still has to pass the Senate. And rest assured that changes will be made in the Senate! However, it became painfully obvious today that the simple act of ensuring a low interest rate for student loans (and only Subsidized loans) is nothing more than a political tool of being elected or re-elected rather than helping the constituents it is meant for.
Now this isn't meant to cause anyone to get into an uproar one way or the other. It is more often than not typical politics. Nothing new. With FA, most rules are created as either political tools (as in this case), or they are created by people who don't know what the ramifications of their rules will do (such as the gainful employment rules). All we in the industry can say is: "it is what it is."
Welcome to the fun of studying the political side of FA, friends!
We will see what happens with this bill as it goes up the pipeline. First it has to pass the Senate, and if it changes in the Senate, then it goes back to the House. Once the House and Senate approve, then it goes to the President to be signed into law. The fear is that he will veto the bill, and so far the news from the White House is that Obama will veto the bill.
But have you been keeping track of this debate? Here's a small lesson in politics, which will be a great example of how FA laws seem to go through half the time.
As stated above, there benefits to students who have a lower interest loan. And Obama was saying a week ago that he is going to stand by students and was willing to help them by keeping the Subsidized loan at 3.4%. His opponent didn't specifically say one way or the other what his plans were, but his comments haven't been viewed as being favorable toward it.
So, why the sudden change in tone from he Administration? It's all politics, friends. You see, when a Republican led House passes a bill, and when that bill goes to a Democrat President, it suddenly is evil and must be killed. And even though he supported it a week ago, it is from the Republicans, so therefore it is bad.
One must keep in mind, however, that the news is early, and there may be more to the bill that is unsavory for the Democrats, but it's also early in the sense that it still has to pass the Senate. And rest assured that changes will be made in the Senate! However, it became painfully obvious today that the simple act of ensuring a low interest rate for student loans (and only Subsidized loans) is nothing more than a political tool of being elected or re-elected rather than helping the constituents it is meant for.
Now this isn't meant to cause anyone to get into an uproar one way or the other. It is more often than not typical politics. Nothing new. With FA, most rules are created as either political tools (as in this case), or they are created by people who don't know what the ramifications of their rules will do (such as the gainful employment rules). All we in the industry can say is: "it is what it is."
Welcome to the fun of studying the political side of FA, friends!
Monday, 23 April 2012
"I have questions about servicers..."
"...Where do I find out more?"
That would depend on what information you are looking for. If you are looking for direct information about your individual servicer, then you'll need to research them on their website or give them a call. Your specific situation is unique to you and will be unlikely to be answered by someone other than them.
However, if you have questions about servicers in general, then there are many places to find out some information. It's understandable that if your servicer changes, you may wonder why, and you may not really get an answer from your servicer.
The one site that is a good resource for many things is called Mapping Your Future. They are a non-biased site that offers information in financial aid, careers, college, and money management. For the purpose of this posting, I'm going to share a specific link of theirs: http://mappingyourfuture.org/paying/loanservicers.htm This has answers to questions about Direct Loan servicers that you may find useful.
That would depend on what information you are looking for. If you are looking for direct information about your individual servicer, then you'll need to research them on their website or give them a call. Your specific situation is unique to you and will be unlikely to be answered by someone other than them.
However, if you have questions about servicers in general, then there are many places to find out some information. It's understandable that if your servicer changes, you may wonder why, and you may not really get an answer from your servicer.
The one site that is a good resource for many things is called Mapping Your Future. They are a non-biased site that offers information in financial aid, careers, college, and money management. For the purpose of this posting, I'm going to share a specific link of theirs: http://mappingyourfuture.org/paying/loanservicers.htm This has answers to questions about Direct Loan servicers that you may find useful.
Monday, 16 April 2012
Grace Period
What is a grace period?
A grace period deals with your student loans, and it's the time during which you don't have to make any payments on those loans. For federal Stafford loans, the grace period is six months. At Metro Business College, the Central Finance Loan is only three months. For the federal PLUS loan, the grace period is sixty days from the last date of disbursement. This is the short answer, and like with everything dealing with FA, there are no real short answers. There are different scenarios.
One possible scenario is where you delay your grace period. If you complete a program then go directly into another program or another school, then you can fill out an in-school deferment. This will save your grace period for when you make it out your second time.
Another possible scenario is where you've already used your grace period. This would happen if you go to school, then you are out for over six months, and then go back to school. You've essentially used your grace period. On your new loans, you will still have the grace period, but your old loans may not. In the past, once it's used, then you don't get it again.
The only way to know exactly how your grace period will affect you is to contact your servicer. They will be able to give you an exact answer as to how it affects you personally, as opposed to how it works for most people.
And remember: for any new federal Stafford loan you qualify for and take out, you have a right to a six month grace period.
A grace period deals with your student loans, and it's the time during which you don't have to make any payments on those loans. For federal Stafford loans, the grace period is six months. At Metro Business College, the Central Finance Loan is only three months. For the federal PLUS loan, the grace period is sixty days from the last date of disbursement. This is the short answer, and like with everything dealing with FA, there are no real short answers. There are different scenarios.
One possible scenario is where you delay your grace period. If you complete a program then go directly into another program or another school, then you can fill out an in-school deferment. This will save your grace period for when you make it out your second time.
Another possible scenario is where you've already used your grace period. This would happen if you go to school, then you are out for over six months, and then go back to school. You've essentially used your grace period. On your new loans, you will still have the grace period, but your old loans may not. In the past, once it's used, then you don't get it again.
The only way to know exactly how your grace period will affect you is to contact your servicer. They will be able to give you an exact answer as to how it affects you personally, as opposed to how it works for most people.
And remember: for any new federal Stafford loan you qualify for and take out, you have a right to a six month grace period.
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