UPDATED: Got questions about paying fall college tuition bills, student loans or the first-time homebuyer's credit? Check out Eileen's live chat about personal finance at 12 p.m. Tuesday, July 21 and pose your questions to the expert herself!

Sun business columnist Eileen Ambrose has some excellent ideas for families struggling to pay college costs after their financial situations changed due to job loss, declining investment value, home foreclosures or other problems.

The first step is important: call the college's financial aid office right away and tell them you're having a problem. Several local schools have extended aid adjustment deadlines or even raised money specifically to assist students who are struggling, according to Eileen.

Check her column for more ideas of financial aid sources. 

Continue reading "Help with college tuition costs" »

Posted by Liz Kay at 8:40 AM | Permalink | Comments (0)
Categories: College/Financial aid, Student loans
        

Income-based student loan repayment plans are on the way to help some recent graduates make it through this tough employment season, according to Eileen Ambrose's column this week.

This will be good news for those who are "upside-down" in their student loan debt --- a term which usually refers to people who owe more on their home than the property is worth. I'm arbitrarily going to assign that term to folks who owe more in student loans than they earn in a year, unless we get some better suggestions in the comments below.

But an estimated 1 million people with federal loans whose debts exceed their annual pay could be eligible, particularly people with low-paid public service jobs.

Here's how it works: 

Continue reading "Income-based repayment for student loans: Consumer Sundays" »

Posted by Liz Kay at 8:54 AM | Permalink | Comments (2)
Categories: Student loans, Watchdog
        

Eileen's got an excellent column this week with savings tips for recent college graduates, helping them set financial priorities due to poor employment outlook and dismal economic climate.

One important piece of advice when weighing potential jobs: consider positions that might a. help you develop marketable skills that can aid your next employment search and b. benefits. A job that offers lower pay but adds health insurance can be a valuable bonus. 

Also, when talking about health insurance, did you know that in Maryland, uninsured, unmarried dependents up to age 25 ...

Continue reading "Financial advice for the Class of 2009: Consumer Sundays" »

Posted by Liz Kay at 9:07 AM | Permalink | Comments (0)
Categories: Budgeting, Cheap/Frugal, College/Financial aid, Insurance, Student loans, Wages
        

Student loan guru Mark Kantrowitz says he got a sneak preview of Sallie Mae’s new private student loan that will become available next week.

Kantrowitz says in an he likes some of the features of the “Smart Option Student Loan” and encourages other lenders to adopt them:

For one, the Sallie Mae loan requires borrowers to pay at least the interest while they are in school, so that interest doesn’t snowball while students are in school. If you can’t pay the interest while attending classes, you don’t get the loan unless you have a co-signer.

Secondly, the loan term is 5 to 15 years, not the usually 20 to 25 years of other private loans.

This new loan will replace Sallie Mae’s Signature Student Loan, says Kantrowitz, who publishes FinAid, an online provide of financial aid information.

Requiring interest payments while in school will keep the loan costs down for students, but it also helps Sallie Mae’s cash flow and will keep the borrower in touch with the lender through monthly statements, Katrowitz says.

Katrowitz crunched some numbers and found that the new loan could cut the interest paid over the life of the loan by about two-thirds compared the standard private loan.

 The major drawback, he says, is that borrowers usually want to defer interest payments while in school, even if it costs them more over time.

Posted by Eileen Ambrose at 12:05 PM | Permalink | Comments (0)
Categories: Student loans
        

What do more than one-third of college grads expect to be doing more than 10 years from now?

Occupy the corner office at a corporation? Start their own company? Run for political office?

Unfortunately, their plans are a bit more mundane. They expect to be paying off student loans still.

Thirty-seven percent said it will take them more than a decade to pay off their debt, according to an online survey of 4,000 respondents by CollegeGrad.com, a site for entry level jobs.

Ten years is the standard repayment schedule for federal student loans. The federal program has some options, which I wrote about yesterday, to stretch out payments beyond and even to have some debt forgiven. But the longer you take to repay, the more you will pay in interest.

Some positive news from the survey: Twenty-eight percent didn’t have any loans, and 14 percent expect to pay off their debt in less than five years. About one in five expect to pay on the standard schedule.

Posted by Eileen Ambrose at 4:05 PM | Permalink | Comments (1)
Categories: Student loans
        

The college a student chooses to attend often depends on the financial aid award letters. Families compare the aid packages and go with the more generous college.

The problem, according to a new survey, is that many families don’t understand the difference between grants, scholarships, loans and work-study.

And what you don’t understand can cost you. You can end up turning down an aid package comprised of grants that don’t have to be repaid in favor of a package made up of loans.

Siegel + Gale, a branding company, surveyed more than 200 parents of college-age children. The group’s findings:

- A quarter of parents didn’t know grants generally don’t have to be repaid.

- More than two-thirds didn’t realize that student’s work-study paycheck is subject to income tax.

- Less than half knew that some student loans don’t require a credit check.

- Seventy-seven percent didn’t know the difference between a subsidized and unsubsidized loan. (Subsidized means Uncle Sam pays the interest on the loan while the student is in school.)

- Forty percent didn’t realize Pell Grants are not loans, but federal grants that don’t have to be repaid.

“All of America’s colleges and universities ought to adopt a simplified, standard financial aid award letter so parents can make comparisons across schools,” says Peter S. Cohl, Siegel + Gale’s Higher Education practice leader in statement.

Cohl also suggests schools rank the awards in order of value to the student, from grants and scholarships high on the list and pricey private loans on the bottom.

Good idea. But families can’t wait for schools to act. Parents and students need to educate themselves about financial aid terms. FinAid is a good resource. Also SimpleTuition allows you to search for and compare loans.

Posted by Eileen Ambrose at 7:02 AM | Permalink | Comments (2)
Categories: Student loans
        

It’s July 1, and that means several changes for student borrowers.

The Project on Student Debt has posted details of the changes online. Here are some of the highlights:

The interest rate on new subsidized – meaning the government pays the interest on the loan while you’re in school – drops from 6.8 percent to 6 percent for undergraduates. Unsubsidized Stafford loans remain at 6.8 percent interest.

Undergrads can also borrow an extra $2,000 a year in unsubsidized loans. That means the new annual limit for dependent students is $5,500 for freshmen, $6,500 for sophomores, and $7,500 for juniors and seniors. Independent students or those whose parents don’t qualify for a government PLUS loan will be able to borrow up to $6,000 in each of the first and second years, and $7,000 in the third and fourth years.

The maximum you can borrow under the Stafford loan program during your college years also is going up. Undergraduate dependent students will be able to borrow a maximum of $31,000, up from $23,000. The new limit for independent students will be $57,500, up from $46,000.

Also, the new variable rate for Stafford loans taken out before July 2006 is going down to 4.21 percent. But new graduates who consolidate a variable-rate loan can lock in a lower rate of 3.61 percent.

Posted by Eileen Ambrose at 2:07 PM | Permalink | Comments (0)
Categories: Student loans
        

Every year, the variable rates on federal student and parent loans are adjusted based on the last Treasury bill auction in May.

That auction was today. And the results mean that beginning in July, the new rates on variable-rate loans will be about 3 percentage points lower for the next year.

“This is the biggest drop ever in the interest rates on variable-rate loans,” says Mark Kantrowitz, publisher of FinAid, in an e-mail. “The new rates themselves are the fourth lowest rates in the history of the student loan program.”

If you have a federal Stafford loan or a parent PLUS loan issued before July 2006, then you have a variable rate loan. (Loans made after that date have a fixed rate of 6.8 percent for student loans and 8.5 percent for a PLUS loan.)

And if you have variable rate loans, consider consolidating those loans after July 1, when these new low rates kick in. Your variable-rate loans will be combined into a new single loan at a fixed rate based on these new low rates.

According to Kantrowitz, if you consolidate a Stafford loan while in school or during the grace period the new rate will be 3.625 percent. The rate on a Stafford loan now in repayment will be 4.25 percent. And the rate for a consolidated PLUS loan will be 5.125 percent.

A new grad, for instance, with $20,000 in Stafford loans would save $3,521 in interest over the 10-year life of the loan by consolidating while in the grace period.

Kantrowitz says there is little benefit to consolidating fixed-rate loans.

Also, you may find it difficult to find a lender willing to consolidate your loans. Many have been bailing out of the business during the credit crunch. Kantrowitz says borrowers will likely have to go the Federal Direct Consolidation Loan program.

Posted by Eileen Ambrose at 4:48 PM | Permalink | Comments (2)
Categories: Student loans
        

A Bankrate.com article today revealed a coding glitch by Sallie Mae that caused borrowers' credit scores to plummet overnight. (Read earlier post.)

Sallie Mae spokesman Tom Joyce says:

“It’s fixed. We just got confirmation from Equifax. It was taken care of overnight so consumers’ credit scores should be back to what they should be.”

The problem was a coding error at Sallie Mae. It caused borrowers making graduated payments – meaning the payments start out low and go higher – to be listed as delinquent. About 10 percent of Sallie Mae borrowers, or around 1 million people, make graduated payments.

Sallie Mae last Friday sent the four major credit bureaus the payment information of its borrowers. Only Equifax had loaded the information before the problem was discovered. So, only credit scores using Equifax information was affected.

Bankrate.com said scores fell by 100 points or more.

Joyce says it’s unknown how many borrowers might have been hurt by a suddenly lower credit score. Sallie Mae says it will supply credit reference letters to those who need to show a potential lender that they are not delinquent on student loans. Borrowers can call 888-272-5543.

Have you had this problem?

Posted by Eileen Ambrose at 12:15 PM | Permalink | Comments (0)
Categories: Student loans
        

Attention borrowers:

The credit scores of about 10 percent of Sallie Mae borrowers have been negatively affected by a glitch in the company’s computer system, according to a report by Bankrate.com.

Overnight, borrowers have seen their Equifax credit scores plummet by as much as 100 points.

The problem affects borrowers in graduated or extended repayment plans. These lower payments allow people to repay loans over 12 to 30 years, instead of the usual 10. But under Sallie Mae’s coding, Equifax read these payments as partial payments, meaning students were delinquent.

The student loan giant told Bankrate it is working to fix the problem and will supply a credit reference for people who need one.

A Sallie Mae spokeswoman confirmed the glitch. We’ll update the situation later when we hear more from the company.

Posted by Eileen Ambrose at 10:51 AM | Permalink | Comments (0)
Categories: Student loans
        

Should you wait until after July to consolidate old student loans?

Yes, according to student loan guru Mark Kantrowitz.

Variable rates on Stafford loans made before July 2006 appear to be headed down and borrowers will be better off waiting until July this summer before consolidating loans and locking in a rate.

Interest rates on student loans made as of July 2006 are now fixed. Older loans still carry a variable rate that adjusts each year.

But given the recent direction of rates, Kantrowitz predicts: “Rates will be dropping by about 3.5%, the biggest drop in the history of the student loan program.”

Under the student loan formula, here are the rates Kantrowitz predicts for those consolidating:

Stafford Loans consolidated while in school or the grace period: 3.25%

Stafford Loans consolidated while in repayment: 3.75%

PLUS Loans: 4.625%

If you jumped the gun and consolidated before July, these are the rates Kantrowitz says you’d likely receive:

Stafford Loans in-school rate: 6.62% - 6.625%

Stafford Loan in repayment: 7.22% - 7.25% PLUS Loans: 8.02% - 8.125%

The rates after July will be low, but not the lowest ever That occurred in 2004-2005, Kantrowitz says.

Posted by Eileen Ambrose at 2:32 PM | Permalink | Comments (0)
Categories: Student loans
        

Did you receive a thank-you letter recently for your testimonial along with a $300 Visa gift card?

What gives, you might wonder. That was my colleague’s reaction. She received two such letters within days of each other. Both included a faux gift card for $300.

One of the letters came from the American Educational Loan Processing in St. Petersburg, Fla. A call to the company quickly solved the mystery.

The company is searching for people wanting to consolidate student loans. Use the company’s services and provide a testimonial, and American Educational will send you a real $300 gift card, says general manager Kathleen Moore.

So far, the response has been great, she says. And competitors now are using similar promotions.

I didn’t stay on the phone long enough with Moore to get the details of consolidating with her company. But with interest rates likely headed lower, college loan experts suggest borrowers wait to consolidate.

Posted by Eileen Ambrose at 2:10 PM | Permalink | Comments (1)
Categories: Student loans
        

The subprime mortgage crisis has taken its toll on the real estate and financial industries. But can it also affect your student loan?

Maybe.

Financial aid guru Mark Kantrowitz says it depends on the loan.

Federal student loans shouldn’t be affected, he says. Uncle Sam still has plenty of money.

But students taking out new private loans might see a slight increase in the interest rate or a tightening of underwriting criteria used by lenders.

Kantrowitz says parents who usually tap the equity in their home for tuition may find that harder to do. They may resort to federal PLUS loans. PLUS loans require a good credit history, though. If parents fall far behind on their mortgage payments or other bills, they may not qualify for a PLUS loan.

If that were to happen, Kantrowitz says, students could still qualify for an unsubsidized federal Stafford loan. The limit is $4,000 a year for freshmen and sophomores; $5,000 for juniors and seniors.

He figures Congress could always raise these limits for students if the credit crunch was hurting parents’ chances of getting a PLUS loan.

Posted by Eileen Ambrose at 8:00 AM | Permalink | Comments (0)
Categories: Student loans