My favorite song from a TV commercial has repeating lyrics that sing "Free Credit Report Dot Com." This catchy jiggle apparently works because I visited the website today. There are many reasons to check your credit report and it really is a good idea for anyone who is preparing to take out a student loan. Most banks and private organizations offer better loan rates to people that have a clean credit history.
As far as Free Credit Report dot com, the name is slightly misleading. The report is in fact, not free. It seems they spent so much on the theme song that to obtain a credit report you need to sign up for Triple Advantage Credit Monitoring, a $14.95 monthly fee. If you do not want the monthly fee they also have an option to purchase a report from the three major reporting companies, Experian, Equifax and TransUnion for around $40.
There is no reason to pay to see these reports however. The Fair Credit Reporting act requires the major reporting companies to provide a free copy of your credit report at least once a year. You can access this report simply by going to annualcreditreport.com which really is a free service. The only thing they will make you pay for is to find out what your actual "credit score" is. This number is a rating that the reporting companies derive after studying your borrowing and repayment history.
Friday, January 4, 2008
Monday, December 24, 2007
PLUS Loans
The Federal Government currently provides a fixed interest rate loan that your parents can take out to help pay for your education. This is a nice alternative if they can afford it as it will cut down on the amount of loans that you will have to pay off after you graduate. PLUS loans are currently offered through both the Federal Family Education Loan (FFEL) and the William D. Ford Federal Direct Loan (Direct Loan). Each of these providers lend your parents the money you need for school, however they will do so at different interest rates.
The better of the two options is the Direct Loan which carries an interest rate of 7.9% for the life of the loan. You can apply for this type of loan by filling out a Direct PLUS loan application which can be obtained from your schools financial aid office.
The less desirable option is the FFEL PLUS loan. The interest rate is also fixed, however it is higher than the Direct Loan, currently 8.5%. Like the Direct Loan, you can apply for the FFEL PLUS loan through your school, lender or state guaranty agency.
Unlike Stafford Loans, you will need to begin repayment on your PLUS loans within 60 days of initial disbursement. Also there will be no assistance with the interest like the subsidized Stafford loan. They are a nice option for anyone who has parents that would like to assist their children in college, but that do not have the savings to pay for tuition in full.
The better of the two options is the Direct Loan which carries an interest rate of 7.9% for the life of the loan. You can apply for this type of loan by filling out a Direct PLUS loan application which can be obtained from your schools financial aid office.
The less desirable option is the FFEL PLUS loan. The interest rate is also fixed, however it is higher than the Direct Loan, currently 8.5%. Like the Direct Loan, you can apply for the FFEL PLUS loan through your school, lender or state guaranty agency.
Unlike Stafford Loans, you will need to begin repayment on your PLUS loans within 60 days of initial disbursement. Also there will be no assistance with the interest like the subsidized Stafford loan. They are a nice option for anyone who has parents that would like to assist their children in college, but that do not have the savings to pay for tuition in full.
Tuesday, December 18, 2007
Federal Perkins Loan
Another choice that you currently have when deciding how you are going to pay for college is a type of need based loan provided by the Federal Government. The Federal Perkins Loan carries a low fixed rate (5.0% for duration of the repayment). It is available for families that generate low yearly revenue who must apply using the standard FAFSA application. (For more information click HERE.)
The best part of the Federal Perkins Loan is that it currently is eligible for the Federal Loan Cancellation program. This only is available for teachers working in critical shortage areas (math, science and special education) but can result in the forgiveness of large percentages of the student loan.
The bad news is that there are currently rumors that the Federal Perkins Loan will be discontinued under President Bush's current budget. Hopefully this will not be the case as the low interest rate and potential for loan forgiveness makes this an attractive option when paying for college.
The best part of the Federal Perkins Loan is that it currently is eligible for the Federal Loan Cancellation program. This only is available for teachers working in critical shortage areas (math, science and special education) but can result in the forgiveness of large percentages of the student loan.
The bad news is that there are currently rumors that the Federal Perkins Loan will be discontinued under President Bush's current budget. Hopefully this will not be the case as the low interest rate and potential for loan forgiveness makes this an attractive option when paying for college.
Saturday, December 15, 2007
What does unsubsidized mean?
The biggest and most important difference between a subsidized and an unsubsidized student loan is that the Federal Government does NOT pay for the interest that accrues on your unsubsidized loans. This type of loan is "non-need" based as calculated by the Free Application For Student Aid (FAFSA). Unsubsidized loans are often given to students who's parents make a moderate yearly income yet may have multiple children in college and therefore cannot pay the full price of tuition for their children.
The terms that have been negotiated with your provider will determine what will happen with the interest that will add up while you are in college. There are some cases where interest must be paid on a monthly basis beginning with the first disbursement of the loan. More commonly, the interest will be capitalized (added to the principle). This means that a 10,000 dollar loan at 6.8% interest over a 4 year period will actually cost the borrower $13,009.
Overall, the relatively low interest rate on these loans is far outweighed by the benefits of attaining a college diploma. The average yearly income of those with college degrees will more than cover the cost of these loan and the college experience is virtually priceless itself.
The terms that have been negotiated with your provider will determine what will happen with the interest that will add up while you are in college. There are some cases where interest must be paid on a monthly basis beginning with the first disbursement of the loan. More commonly, the interest will be capitalized (added to the principle). This means that a 10,000 dollar loan at 6.8% interest over a 4 year period will actually cost the borrower $13,009.
Overall, the relatively low interest rate on these loans is far outweighed by the benefits of attaining a college diploma. The average yearly income of those with college degrees will more than cover the cost of these loan and the college experience is virtually priceless itself.
Monday, December 10, 2007
Subsidized Stafford Loans
There are many types of student loans available based on personal need and current financial situation. When given the choice, one of the best available is a Subsidized Stafford Loan. Subsidized means that you will pay ZERO interest while you are in school. All Stafford loans are deferred until you graduate and your grace period is up (usually 6 months after graduation), however, the advantage of a subsidized loan is that the Federal Government will pay for the interest until that time is up.
The Stafford Loan was named after a now deceased former Senator from Vermont Robert Stafford. His hard work on higher education reform was honored by the renaming of the Federal Guaranteed Student Loan program to the Robert T. Stafford loan program. In the '06 school year there were over 7.7 million recipients of this loan who borrowed 28.8 billion dollars of interest free money.
In order to qualify for this loan you will need to apply through the Free Application For Student Aid (more info available HERE). The amount that you qualify for will be based on your EFC (Expected Family Contribution) and your year in school. The maximum for freshmen in 2007 is 3,500 dollars. This amount rises to $4,500 for sophomores and $5,500 for juniors and seniors. The good news for all recipients of Stafford Loans is that as of July 1st, 2006 interest rates are fixed for the life of the loan at 6.8% which is reasonable low. Again, this interest rate does not begin to accrue on your loans until after you graduate. This makes the Subsidized Stafford Loan an attractive option if you are in the market to finance a college education.
The Stafford Loan was named after a now deceased former Senator from Vermont Robert Stafford. His hard work on higher education reform was honored by the renaming of the Federal Guaranteed Student Loan program to the Robert T. Stafford loan program. In the '06 school year there were over 7.7 million recipients of this loan who borrowed 28.8 billion dollars of interest free money.
In order to qualify for this loan you will need to apply through the Free Application For Student Aid (more info available HERE). The amount that you qualify for will be based on your EFC (Expected Family Contribution) and your year in school. The maximum for freshmen in 2007 is 3,500 dollars. This amount rises to $4,500 for sophomores and $5,500 for juniors and seniors. The good news for all recipients of Stafford Loans is that as of July 1st, 2006 interest rates are fixed for the life of the loan at 6.8% which is reasonable low. Again, this interest rate does not begin to accrue on your loans until after you graduate. This makes the Subsidized Stafford Loan an attractive option if you are in the market to finance a college education.
Wednesday, December 5, 2007
Bankruptcy and Student Loans
One of the most important things that all potential lendees must understand is that students loans are NOT free money. They are loans that must be repaid in full, including all interest that has accrued. This is regardless of whether or not you earn your degree! If you fail out of college and end up working a menial job you will still need to pay back your loans. Payment must be completed regardless of quality of education, satisfaction with the university or ability to gain employment.
With some types of debt there are ways to default on loans, file for bankruptcy and be forgiven. This is absolutely not the case with student loans. According to Bankruptcy Code Section 523(a)(8), only under "undue hardship" would bankruptcy be granted. This of course varies per jurisdiction, however, you should know that student loans are next to impossible to be discharged. Changes to the bankruptcy code in 1998 and again in 2005 have further strengthened loan collectors abilities to collect their money. For the most part, Federal students loans can only be forgiven for total and permanent disability. Private loans, on the other hand, are rarely excused even for traumatic events.
With some types of debt there are ways to default on loans, file for bankruptcy and be forgiven. This is absolutely not the case with student loans. According to Bankruptcy Code Section 523(a)(8), only under "undue hardship" would bankruptcy be granted. This of course varies per jurisdiction, however, you should know that student loans are next to impossible to be discharged. Changes to the bankruptcy code in 1998 and again in 2005 have further strengthened loan collectors abilities to collect their money. For the most part, Federal students loans can only be forgiven for total and permanent disability. Private loans, on the other hand, are rarely excused even for traumatic events.
Tuesday, December 4, 2007
Should I fill out a FAFSA?
The best place to start for most students looking for ways to supplement their college tuition is the Free Application for Federal Student Aid. I need to highlight that this is a FREE service provided by our Federal government. There is currently an organization that will gladly help you fill out your free application for approximately 79.99 dollars. This organization uses the URL: www.fafsa.com. Do not waste your money with this group, as our government has done a very decent job with the application process and there is no need to pay anyone.
The FAFSA takes around an hour to fill out and will require you to input data concerning your family size, assets, number of children in college and income from the previous year. This data is plugged into a formula and the Expected Family Contribution or EFC is computed. This is the dollar amount that the Federal Government determines is manageable for your family to pay for your college tuition. Each year you attend college you will need to re-submit your FASFA with the corresponding year's tax records. This will help determine a new EFC which can be higher or lower as income and family situations change.
To begin a FAFSA application please visit the following website:
http://www.fafsa.ed.gov/
.
The FAFSA takes around an hour to fill out and will require you to input data concerning your family size, assets, number of children in college and income from the previous year. This data is plugged into a formula and the Expected Family Contribution or EFC is computed. This is the dollar amount that the Federal Government determines is manageable for your family to pay for your college tuition. Each year you attend college you will need to re-submit your FASFA with the corresponding year's tax records. This will help determine a new EFC which can be higher or lower as income and family situations change.
To begin a FAFSA application please visit the following website:
http://www.fafsa.ed.gov/
.
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