Knowns versus Unknowns: In college there are usually two different roommate scenarios involving two different environments.

• Dorm on campus with a randomly selected roommate through residence life: This is the most common experience for incoming freshman, so relax. It’s like a lottery, but surprises are not necessarily a bad thing is this situation. Pros include getting to make a new friend, cons include rolling the dice and getting a roommate you would rather not have.
• Dorm on campus with a preselected friend:
  Many students fall back on old reliable friends or at least acquaintances if they happen to be attending the same school. Pros include predictability, but cons include the potential that you may no longer like your friend as much once you start living with them, and the opportunity cost of not having a new person in your circle of college friends.
• Living off-campus and privately search for a roommate:
  If you have the chance to live off campus, you will be connecting with potential roommates that may be attending different schools, or maybe are not even in college. Pros again include expanding your social circle, but cons are there is a bigger wild card for what roommate you will find.
• Living off-campus with a preselected friend:
  Living off campus with a friend is very common when the opportunity arises. Pros include a more reliable person to share rent and responsibilities with, but cons are like whats already mentioned; A smaller social circle and the chance that living with your friend ends up ruining the friendship.

While finding a reliable friend to live with in college may provide stability, finding and living with new people has unique rewards that can make the search very worth it. After all, a lot of the college experience is about meeting new and different people, and learning to live together happily. Remember, this is only a temporary living arrangement while attending school, not a lifetime commitment. If you cannot get over the nervousness or fears associated with the unknown, you may have difficulty dealing with college all together. Sometimes it’s better to just go with it and find out. Finding a college roommate is an adventure worth undertaking.

Getting trolled by the roommate? Only if it's in good fun....

In order to help mitigate risks and maximize the experience, many potential roommates are turning to social media to pre-screen roommates before even showing up on campus.

Facebook is of course the go to avenue for looking up roommates. As soon as a random roommate is assigned, soon to be freshman hit FB to locate their roommates profile to check them out. This approach can be good, but also very superficial. Judging a roommate solely on their social media profile can provide a distorted image of who the person really is, so avoid being too judgmental. At the same time, if you have asthma, and you find out they are a heavy smoker, this may be an opportunity to request a change with the school. Think of the Facebook profile as a birds eye general view. As long as most things are looking normal, you have a decent enough scouting report to make a decision.

Having a calm roommate might be the right choice for you

If you are looking for a room mate off-campus, there are new companies designed to connect potential space sharers through the internet. Company’s like Roomsurf, Easyroommate and Campusroommate all offer online services to connect you to the person you are looking for. They offer convenience online that can make the search much easier.

Important attributes you need to be a good roommate, and what you should expect from your fellow room mate:

• Reliable: Can you do what you say, and say what you do? Will you make sure to handle the rent payment first before spending on parties? Can chores like dishes and housecleaning be handled reliably, or is the place going to turn into a mess? Being reliable means coming though month in and month out on responsibilities associated with sharing space.


A lot of roommate issues begin with dishes

• Communication skills: This is a very under-rated category for college roommates simply because of lack of experience. Good communication between roommates is extremely important but very hard to deal with, especially for students that do not have experience living with brothers and sisters. Good communication should begin with addressing issues up front and early to establish expectations of behavior. Again, things like garbage removal, bathroom management and dirty laundry need to be resolved early so that they do not explode into bad situations later. Party etiquette, bringing over other friends, and private time for girlfriends/boyfriends needs to be discussed before hand to make a smoother living experience. It all starts with basic conversations early on.
• Trust: It should almost go without saying that the person you are living with must be able to be trusted. If you have to worry about personal items being stolen, it makes it impossible to live together. You must always respect other people’s belongings as well.
• Being friendly is not necessarily “BFF” status: Being able to share some common interests or hobbies is a good start, but even roommates with nothing in common can successfully co-habitate as long as they are cool, relaxed and considerate. Being agreeable without being a pushover is a good start. Good roommates are not always best friends, but they share a modicum of respect that makes it easy to live together.

The first step in determining eligibility for the Pell grant is to file the Free application for Federal Student Aid (FAFSA)

Key factors used to determine Pell grant eligibility include:

• Your Expected Family Contribution as determined by the FAFSA
• Your Cost of Attendance
• Whether you’re a full-time or part-time student
• Whether you attend school for a full academic year

Specific Eligibility Criteria includes:

• You are enrolled in a regular degree program.
• You are a U.S citizen or an eligible noncitizen.
• You are making Satisfactory Academic Progress.
• You are not in default on any federal student aid and do not owe a refund on a federal education grant.
• You show financial need as determined by the results of the FAFSA.
• You have NOT previously earned a bachelor’s degree.

Some changes for the 2012-2013 academic year:

• Maximum expected family contribution (EFC) eligibility has changed. During the 2011-12 academic year, students with EFCs between 0 and 5273 were eligible to receive a Pell Grant. For the 2012-13 academic year, only students with an EFC between 0 and 4995 will be Pell Grant eligible. Your EFC can be found on your Federal Student Aid Report (SAR).
• Beginning in Fall 2012, students are now limited to 12 semesters (or 600%) of Pell Grant eligibility during their lifetime. This change affects all students regardless of when or where they received their first Pell Grant. Students who are currently receiving the Pell Grant in the academic year 2011-2012 and have already used 600% of their Pell Grant eligibility will no longer be eligible to receive a Pell Grant starting Fall 2012.

Tracking Your Lifetime Eligibility used on NSLDS:

• You can find your Lifetime Eligibility Used for the Federal Pell Grant by going to the web site www.nslds.ed.gov and creating a student account.

The 2012-2013 Pell Chart

Reading an actual Pell chart can feel almost like an eye chart, but if you ever wondered exactly how an award is determined, look no further than here:

http://www.ifap.ed.gov/dpcletters/attachments/P1201Attach20122013PaymentSchedules.pdf

When looking at the chart, notice that there are different pages for different registration statuses.

• Full time students are typically registered for 12 credits or more for one semester.
• 3/4 time is typically 9 credits in a semester.
• Half time is typically 6 credits a semester.
• Less than half time is anything under 6 credits a semester in most cases.

1. Grants and Scholarships are free money, but awarded for different reasons: Everyone looks for the “free” money on the financial aid award letter first because it does not need to be paid back. But not all “free” money is the same. Scholarships are awarded to students considering some kind of merit like high grades and test scores, athletics, community service, leadership or other qualifying traits. Grants are awarded based on financial need considering information from the FAFSA, so the lower the income, the more likely one can qualify. Grants are typically offered by state, federal, and institutional sources.

No Federal Funding on your award letter?

2. Was any federal funding added to the financial aid award letter? Uh-oh, if you were not even awarded an unsubsidized Stafford loan, there could have been a problem filing your FAFSA form. As long as a FAFSA form is filed, virtually every student is eligible for a guaranteed federal loan of some kind. If none is listed on your award letter, make sure to contact the schools financial aid office to find out what is going on.

3. Be sensitive to the duration of grants and scholarships: Just because it takes a student five years to graduate doesn’t mean the scholarship awarded will continue that long. Many schools offer scholarships for eight semesters only, making the fifth “Super Senior” year of college very expensive. Good college planning considers the limits that scholarships have. This should impact class scheduling, as switching majors too far into a program can add more time until graduation. Be sensitive to the extent to which a scholarship can cover a student, and map out a path to graduation that does not exceed eligibility.

Additionally, some grant programs are reaching their limits as well. Many state backed grant programs for education are facing cuts that may limit grant duration, or total funding awarded. In December 2011, President Obama signed into law the Consolidated Appropriations Act, limiting the Federal Pell Grant to 12 semesters of eligibility during the student’s lifetime, beginning in Fall 2012. (Look up your Pell limit online NSLDS) Students will turn to their school to try and receive more grants, but it is inevitable that many will be left with a shortfall for funding. Knowing how long free funding can last is integral to planning out total costs for the years it takes to graduate.

4. College cost calculators can be helpful, but imperfect: The consumer finance protection bureau has released a new cost comparison tool that is available online. The “Paying for College cost comparison worksheet” is still in Beta, but it is a good start to help families with some ball park estimates to compare different schools. Georgetown Law School has a very comprehensive calculator for their program that is a big help for prospective students trying to decide on attendance, as Law School is very expensive. However, there are mixed reports about how convenient college cost calculators are, or if they are even easily accessible.

Lynn O’Shaughnessy at U.S. News and World Reports did a spot check on several college websites, and found that some schools have more to offer than others. Bottom line is that college cost calculators are a useful tool for those that understand how to use them, the same as a hammer in the hands of a carpenter. Without a basic grounding, these calculators cannot help people understand what the numbers mean anymore than any other calculator would.

Consider some advice from financial aid guru Mark Kantrowitz: Break down individual cost estimates for each school and compare tuition, room, board, books, transportation and miscellaneous expenses to come to more exact estimates. Then be ready to think outside the box for things like variations on transportation, mass transit vs owning a car, or the need for technology upgrades like a new computer while in school. Remember, this is not just one year of planning, this is multi-year. A single calculator cannot encapsulate all of your needs, but can help you get started. Once these costs are apparent, comparing different financial aid award letters becomes simplified.

5. Use common sense to deal with unknown variables: No one can predict the future. With that said, individuals have the power of refection and introspection to deal with questions that cannot be answered right now. In this way, an individual may predict their actions given particular circumstances that have yet to occur. So let’s say a scholarship is awarded to a student for $20,000 at an institution with $35,000 in tuition, and $11,000 for room and board. The scholarship requires that the student maintain a 3.75 GPA on a 4.0 scale. This is a steep requirement that will require a lot of study time and focus. Committing to this school and being able to pay for it successfully means committing to a much higher academic standard, and may mean a sacrifice of personal time/fun time while at school. Given the college environment today, some students are able to handle this challenge, while others just cannot.

Losing a large scholarship would be a heavy financial burden to deal with in two different ways. First, there is the option to continue with the current school, but this would require increased out of pocket payments or more student loans. Secondly, the student may transfer after losing a scholarship but this may mean lost credits towards graduation, leading to more total costs Getting a big scholarship offer is awesome, but a student needs to be able to commit to that scholarship for it’s entirety to make it worthwhile. Losing a scholarship while attending a very expensive school could suddenly and dramatically increase the cost of attending.

Soon to be freshman are closing in on their decision for college attendance for Fall 2012, and will be introduced to a college tuition statement along with their parents. Continuing students will be facing a new bill for next academic year as well.

One of the choices that families have for tuition payment is between the Parent Plus loan and a private student loan.

It’s nice to have a choice between borrowing options, and the following will help outline features of each.

Parent Plus loan

• The Parent Plus loan is offered through the Direct Loans program through the U.S. Department of Education. Applications can be accessed through their main page.
• It offers a fixed 7.9% rate to all approved applicants
• It has a 4% origination/guarantee fee taken out of the original loan amount. So if you apply for $10,000, $9,600 actually pays to the student account.
• It’s a credit based loan, but the criteria for approval is less strict, allowing for easier approvals. The Plus Loan credit review checks for adverse credit history. Adverse credit includes being delinquent 90 days or more on the repayment of any debt and if during the 5-year period before the date of the credit report there has been a default on debt, foreclosure, tax lien, repossession, wage garnishment, write-off of Title IV debt, or debt has been discharged in a bankruptcy. A lack of credit history or insufficient credit history is not considered adverse credit for the Plus loan program. Eligibility is not based on income and assets.
• If the parent is credit denied, they may reapply with an endorser. An endorser promises to repay the loan in the event that the parent is unable to do so, similar to a cosigner on other loan products. An endorser can be anyone including other family members or friends.
• If the parent is credit denied, the student is automatically eligible for an additional $4,000 in unsubsidized Stafford loans as a freshman or sophomore and $5,000 as a junior or senior.
• The parent Plus loan will require a school certification to determine eligibility before the funding can be disbursed to the school. A school certification is completed by the financial aid office to authorize the disbursement of funding by confirming registration status and eligibility considering cost of attendance minus all other financial aid / scholarships awarded. The student must be registered at least half time to allow the loan to disburse to the account. If less than half time, they are not eligible for Plus loan proceeds.
• Loan forgiveness is available in the event that the parent borrower becomes totally and permanently disabled, or if either the parent or student dies.
• The three repayment plans available include standard, extended, and graduated. The terms will differ between repayment programs, but generally borrowers will have 10 to 25 years to repay the plus loan. The ability to extend the loan term can reduce the monthly payment due, but will ultimately cost more to repay during that time.
• A federal loan will enter delinquency status immediately after a payment is missed, but only enters default after nine months without payment.

More on Parent Plus Loan repayment:

The Federal Parent Plus loan program has multiple repayment options available.

• Standard Repayment: Federal loans enter standard repayment automatically unless a different repayment plan is selected. This is a straightforward payment plan, with an established monthly payment due until the balance is paid. Maximum loan term is ten years and the minimum monthly payment will be $50, but may be higher depending on the balance. Of all repayment plans available, standard offers the highest monthly payments, but allows the loan to be paid off in the least amount of time.
• Extended:To be eligible for the extended plan, borrowers must have more than $30,000 in Direct Loan debt and must not have an outstanding balance on a Direct Loan as of October 7, 1998. Under the extended plan there is 25 years for repayment and two payment options: fixed or graduated. Fixed payments are the same amount each month, while graduated payments start low and increase every two years, (like the graduated plan listed below).
  This is a good plan if smaller monthly payments are needed. Because the repayment period will be 25 years, monthly payments may be substantially less than the standard plan. However, you may pay more in interest because you’re taking longer to repay the loans. Remember that the longer your loans are in repayment, the more interest you will pay.
• Graduated Repayment: With this plan, payments start out low and increase every two years. The length of the repayment period will be up to ten years. Monthly payments will never be less than the amount of interest that accrues between payments. Although the monthly payment will gradually increase, no single payment under this plan will be more than three times greater than any other payment. If income is expected to increase steadily over time, this plan may work well for a personal budget. With Parent Plus loans being specifically in the Parent’s name, many families work out an agreement where the student assists in the repayment of the loan to give their parents a hand. Recently graduated students looking forward to increased wages over time may be able to help their parents manage a plan like this more easily than standard repayment, as the payments are lower early on. However, under this plan more interest accrues over the life of the loan because the principal balance decreases at a slower rate.

Private student loan

• They are offered by financial institutions, rather than government sources. As a result, private student loans are not backed by any tax payer subsidy
• They may have fixed interest rates but more typically they carry variable interest rates. Variable rate loans are based on an underlying rate index like LIBOR or Prime. The loan rate will increase or decrease to reflect fluctuations of the rate index
• Private loans may or may not carry an origination fee. While most lenders no longer carry one, take note during the application process to confirm.
• Private loans follow more strict credit approval criteria than a parent Plus loan. A private loan will weigh the credit score along with income and assets versus total debts outstanding to determine eligibility.
• The primary borrower in a private loan is always the student. A cosigner could potentially be anyone, but typically parents are most likely to be the cosigner. During the application process the primary borrower’s credit is first considered before an approval or denial is issued, however, many young applicants do not have sufficient credit to be approved on a stand alone basis. In many instances, it is the cosigner’s credit that is utilized to approve the entire application. If the primary borrower and cosigner are denied for the loan, they are unable to gain access to the funding.
• Most private loans require a school certification. This is when the school authorizes the disbursement of funding by confirming registration status and eligibility considering cost of attendance minus all other financial aid / scholarships awarded. Private loans typically require school registration of half-time status or greater in order to be funded. (Usually 6 credits or more in a semester). A school certification will confirm the student meets registration requirements and also acts as consumer protection against over borrowing
• Private loans do not have the same repayment options as federal loans. Private loans follow a basic format, where payments are calculated considering the number of years in the term. Private loans cannot offer income based plans or loan forgiveness options like Federal student loans that are ultimately subsidized by taxpayers.
• Repayment options will vary from different providers. Some loans will require a minimum payment on the loan while the student is still in school, while some may be fully deferred as long as the student maintains at least half-time registration.

More on private student loan repayment:

While the student is in school, there may be three different private loan repayment options available.

• Minimum standard payment: The private loan may require a minimum monthly payment each month. A minimum monthly payment will probably be a fixed amount, like $25, no matter what interest rate or total loan amount outstanding is available.
• Interest payment: The borrower pays the amount of interest that accrues on the loan each month, thereby preventing the loan from growing beyond the principal amount originally borrowed. This is a preferred method for students looking to eliminate debt more quickly.
• Full deferment: Some private loans allow for the borrower to make no payments while in school. Instead, the loan is deferred and begins repayment after the student graduates or exits college. Deferment offers the convenience of more current cash flow, at the expense of increased interest costs during repayment.

Is one loan better than the other? Each loan offers different options that make them preferable to the individual’s needs. For some, having a fixed rate on a loan is a priority because they like predictability, however, the Parent Plus loan charges a high rate for that predictability at 7.9%. Throw in some high origination and guarantee fees, and Plus loan can be costly to repay. The private loan option may be a preferable option for borrowers looking for the lowest rate possible. A perfect scenario for private loan borrowing is when the applicant can qualify for lower rates, and proceeds to aggressively pay the loan back now to mitigate the risk of future rate variability. If a borrower decides to defer payments on a private loan for as along as possible and interest rates were to increase later, it may increase the cost of repayment.

Also some parents want to keep student loan debt only in their name, so they prefer the Plus loan. However, a student loan in the student’s name can create a credit building opportunity. The student can begin to repay loans in their name (Even with assistance from parents) and effectively build credit in their name as they pay the loan back. In conclusion, it’s better to have more options to pay for college, rather than less. By weighing the features of each, borrowers can find the option best for them.

Photo: Brendan Smialowski / AFP/Getty Images

Talking about student loan debt is a surefire way to get the attention of young voters, the same demographic that helped Obama get elected in 2008. Combining that with Jimmy Fallon and The Roots just makes the message that much more entertaining.

The video basically speaks for itself, and brings the message home for students; low subsidized Stafford loan rates should be maintained so that college can remain affordable.

While most conservative sentiment stands with allowing the rates to increase to 6.8% as scheduled, Obama has shifted the political game in his favor by aggressively bringing the topic to the attention of college attending voters. As a result, if you asked most politicians in DC today what their stance is on this topic, they will say that the low 3.4% interest rate should be maintained for subsidized Stafford loans. Even Presidential candidate Mitt Romney was quick to back the extension of low rates as well, demonstrating his concern for the youth vote.

However, a debate still remains about how this can be paid for considering budgetary constraints.

From Peter Baker and Jennifer Steinhauer at New York Times:

“…Mr. Obama pressed his attack on Republicans, depicting them as unsympathetic to college students in need. Republicans countered by accusing the president and his Democratic allies of playing politics with the issue and trying to raise taxes on small businesses to pay for the subsidized rate.”

“Senator Harry M. Reid of Nevada, the Democratic majority leader, introduced a bill to extend the cuts and pay for that extension by preventing some business owners from sheltering their income from Medicare and Social Security taxes.”

“Senator Lamar Alexander, Republican of Tennessee, responded with legislation introduced Wednesday to keep the low rate and pay for it by taking money from Mr. Obama’s health care program.”

So while on face, every politician will agree that students should keep access to this low rate loan, what they really do not know is how it will all be paid for. The controversy will continue as they look to make cuts from other programs to find extra funding.

The bigger questions still remain; How can the Federal Government continue to guarantee loans without a credit check to any college student that applies without considering more details of their ability to repay? Is it “predatory lending” to allow borrowers access to guaranteed federal funding that cannot be discharged in bankruptcy in the event it cannot be repaid? Should college loans be guaranteed to every student regardless of what field they are studying and what employment prospects result from those studies? And finally, does the guaranteed federal loan program itself allow colleges to continually increase costs without regard to the financial needs of students? Surely these are the most interesting times to be paying for college.

Wikimedia Commons / www.flickr.com/tracy_olson

Subsidized Stafford loans offer students a lower cost to borrow for college expenses. Students may qualify for this loan after filing the Free Application for Federal Student aid (FAFSA) to determine financial need. The subsidized Stafford loan offers an interest subsidy, where any interest that accrues on the loan while the student is in school is paid for by the government. After graduation, the rate can remain at a low fixed rate, currently at 3.4%.

A recent NYTimes article outlined some of the politics swirling around this issue during an election year. Obama does not go without some criticism, as continuing to offer student subsidies is seen as a way to generate more youth votes for 2012.

The low 3.4% on Subsidized Stafford loans was made available by the passing of the 2007 College Cost Reduction and Access Act, but is now on schedule to expire. There was a much higher interest rate environment during that time, with the Prime rate ranging from 7.25% to 8.25% during 2006-2007. This made the low locked in rate a financial life-saver, however it comes with a cost.

It’s estimated that this Stafford loan subsidy would cost another $6 Billion to extend into the next academic year. With limited resources available on capitol hill, politicians are treading carefully as they proceed. The White House is going after a media blitz to raise awareness about the issue with college students. Conservative opponents point out that continuing this subsidy will mean adding even greater tax burdens to citizens, and that they should allow the rates to increase accordingly.

With an estimated $860 Billion to $1 Trillion in student loans outstanding, one wonders how much more student loans can be subsidized by the government. With some 80% of all student loans outstanding being federally backed, taxpayers are ultimately on the hook for any of their defaults and delinquencies, along with interest payment subsidies. This is a high visibility issue on capitol hill during an election year, especially with younger Americans very concerned about how they can afford college. No doubt this issue will continue to build momentum until a decision is finally made.

As writer Derek Thompson puts it:

“In the last 30 years, the typical college tuition has tripled. But over the exact same period, the earnings gap between college-educated adults and high school graduates has also tripled. In 1979, the wage difference was 75%. In 2003, it was 230%.”

Read the full article here: http://m.theatlantic.com/business/archive/2012/04/the-paradox-of-college-the-rising-cost-of-going-and-not-going-to-school/256111/

This represents a technologically savvy and young demographic now becoming aware of the need to take control of their money through more effective loan repayment. It’s a big challenge, but fortunately this generation is gaining more access to technology to help manage debt repayment, which brings us to Binksty.

Binksty has been described by TechCrunch columnist Rip Empson as “…a comprehensive one-stop shop to manage loans, pay off debt, as well as educate (borrowers) on the best ways to save money.”

Sounds pretty good to me, but can they deliver?

All factors point to yes!

Just recently it was announced that Binksty “…has over $10 million in student loans under view, and has recently forged partnerships with Yodlee, which provides Binksty users with loan aggregation tools (the same engine that powers Mint.com and LearnVest)…”

Additionally, we here at Fynanz are adding our private student loan consolidation to the mix, making it even more simple for Binksty users to connect to a viable debt elimination program. Combining the user friendly interface found in Binksty with low cost loan consolidations offered through Fynanz is a winning combination for consumers.

Binksty provides a clean dashboard for user interface, customized advice tailored to the user’s debt scenario, and a decision analysis engine that can aggregate data effectively. This adds up to an improved user experience that can help former students knock out their debt repayment plan after graduation.

Some Binksty users have chimed in with positive reviews:

”I want to use (Binksty) as a tool to convince my fiance that we need to pay off our loans quickly!”

“The site looks great… a place to access all of my outstanding student loans and compare their basic attributes to each other. I’m excited and looking forward to see where your team takes this project… Thanks for the great service!”

Check out the Binksty Blog for more happenings: https://www.binksty.com/blog/

And the original article making waves on Tech Crunch: http://techcrunch.com/2012/03/19/binksty-redesign/

Between new regulations and changing economic conditions, many traditional private lenders have decided to stop providing their services.

Just recently, Chase Student lending has stopped originating new private loans for new borrowers.

But during this time of great change, we see new lenders entering the market. This is good news for consumers looking for lower rates. Credit Unions have stepped up big time to offer lower rates on private student loans, along with a gateway to credit union membership. Additionally, private student loan consolidation is now available to help the many borrowers that took private loans and need a better debt exit strategy now they have completed college.

Again, it’s credit unions helping students when they need it most.

A new article titled “Private college loans: 7 things you need to know” from Lynn O’Shaughnessy at CBS Money Watch highlights the advantages of Credit Union based student lending. Credit Unions carry lower rates, as noted in the article, and they also provide much more by way of additional products and services for students. Low rate student loans are just the beginning, when CU’s can offer low and no fee checking and savings, better rates on credit cards, auto and mortgage loans, and superior services with financial literacy to help provide common sense knowledge on how to handle money.

This promises to be another quality Credit Union conference, located at a beautiful venue, and dominated by critical topics presented by top speakers.

Some of the key areas covered in the conference include:

Credit Union Sustainability

The Digital Age and Financial Services

Identity Theft Prevention

Public Relations

Finally, a topic I am really looking forward to speaking on:“Youth and Money – and how credit unions can become their superheroes”

The Credit Unions are stepping up big time to meet the modern demands of our new economy. Financial services provided with friendly help right in your own neighborhood and beyond; it’s a beautiful thing.

Looking forward to meeting many wonderful people at the conference.

One of the questions covers the area of cash assets. Cash assets are typically hard to track or trace, so the FAFSA phrases the question as follows….

“As of today what is your parent’s total current balance of cash, savings and checking accounts?”

and

“As of today, what is your total current balance of cash, savings and checking accounts?”

The key part of these statements is “As of today”, leaving some flexibility for the student and/or parent to answer. If indeed there were no cash available in any of these accounts on the day the FAFSA were filed the correct answer would be zero.

So logically speaking, it would behoove the applicant to have as little cash available as possible on the day the FAFSA is filed to help maximize financial aid eligibility.

Here is a list of things that students and/or their parents and family can do with their cash instead of keeping it in the bank only to be listed as an asset on the FAFSA.

1. Pay off credit cards: If you have any credit card debt, and are carrying extra cash in your checking or savings, go ahead and make a bigger payment towards that debt just before filing the FAFSA. The FAFSA does not ask any questions about personal debt, they only care about what cash is on hand the day the FAFSA is filed. Instead of listing this cash as an available asset, it should be used to reduce personal debt. It does not make sense to be penalized by the FAFSA for having cash when one has outstanding debts to be re-payed with interest.

2. Maybe it’s time to upgrade the computer/laptop/smart phone: Let’s say personal debts are well managed, but your computer is worn out and behind on capabilities, kinda like the relic pictured above. It may be time to make an investment in technology. There are some good deals for college students looking to buy computer technology, especially online. Instead of claiming cash on the FAFSA, it may be time to get a new computer to help enhance your educational experience.

3. Use it for transportation or other miscellaneous expenses: Getting equipped for college may involve some new clothing, or exercise equipment, or a used car (It’s new to you!). Again, if cash is available and there are useful items you need for education, it’s better to spend the money than claim it on the FAFSA.

Easy on the cash flow, Uncle Money Bags

4. Relatives, please hold off on any large cash gifts: Uncle Bobby is a successful business man, and wants to help his nieces and nephews with their college costs. When he heard that his niece Stephanie was admitted and planning to attend an awesome college next year, he thought about sending her a check for $3,000 to help with expenses. However, when he realized that extra cash like that would end up getting claimed on the FAFSA, he held back on sending the money. Instead, he let Stephanie know to make a list of necessary supplies and items, and he would help her to buy those items as she needed them. It’s as simple as ordering online, and having deliveries sent to the dorm. This way Bobby can make sure the money is used for educational purposes, and Stephanie does not get penalized by the FAFSA for having extra cash.

5. If any cash must be claimed, it should be in the parent’s name: Be advised that the value of cash assets on the FAFSA is weighed more heavily under the student’s name than under the parent’s name. So if claiming cash is unavoidable, make sure it is claimed under the parent’s name only.

Read up more on FAFSA filing tips from my prior article. FAFSA: Understanding Parent and Student Assets

Go to www.fafsa.ed.gov

Filing the FAFSA is critical for students looking to start college in the Fall of 2012, as financial aid awarded is a major factor for students considering which college to attend.

It is equally critical for continuing students to complete their FAFSA renewals in a timely manner to retain financial aid eligibility for next academic year as well.

Quick FAFSA filing tips:

1. Know your deadline so you can file ahead of schedule: Each school and every state may have a different date as to when a FAFSA must be filed in order to qualify for maximum funding eligibility review. Common dates can range from March 1 into April, but some schools require the FAFSA to be filed as early as February 15. Make sure to file the FAFSA early so there is no question of timely delivery.

2. No tax return, no problem!: The FAFSA requires parent tax and asset information along with the student if they also file a tax return. However, this early in the year, many families have not yet completed their taxes. This does not jibe well with early deadlines for the FAFSA, however this is easily manageable. If your 2011 tax return is not yet ready, go ahead and file the new FAFSA using estimated numbers. If in 2011 your earnings are about the same as what they were in 2010, you may be able to use your old 2010 taxes to guide estimations. Once the actual tax returns are filed, you can log back onto the online FAFSA to make corrections and adjustments.

3. Remember your pin to renew your FAFSA every year: In order to electronically sign your FAFSA you must first authenticate your identity and get registered for a personal identification number, aka a PIN. You must register for this PIN by completing a 3 step process at www.pin.ed.gov. This PIN can be used to electronically sign each FAFSA every year, so make sure to remember your four digit number to easily renew the application.

If you see this mainpage, you are at the right place to register for the PIN

4. Master the fundamentals, data input them correctly: Make sure you personal information is completely accurate, and re-check it with a different set of eyes. (Parents and children need to work together to help each other) You would be shocked if you knew how many FAFSA’s were filed using incorrect birth dates and social security numbers. When this happens, it creates great confusion in the processing of your application, and will result in a verification request, adding more work for you and leading to my next point…

5. Be prepared for verification: Anywhere from a quarter to half of college students get selected for a process called verification. This is when the school must check the actual tax returns compared to the data originally submitted on the FAFSA, and to correct any discrepancies so that the information is accurate. Be advised that financial aid eligibility may change based on the results of verification review. If the information originally provided on the FAFSA is quite different from the information on the actual tax return, this may cause grants to be canceled. If the request to submit verification documents is ignored, all financial aid will be canceled. The best way to be prepared for this process is to keep copies of all the required forms in a neat folder next to your home computer, so in the event a verification request it can be responded to quickly and efficiently. Some schools will penalize a student for taking too long to submit verification documentation, even if it turns out all the data was accurate. Forms that may be requested in the verification process include but are not limited to:

• Social Security Card
• Driver’s License
• W-2
• Federal income tax returns: 1040, 1040A or 1040EZ
• Foreign tax returns
• Untaxed income records
• Current bank statements
• Current investment mortgage information (Rental property)
• Business and/or farm records
• Records of stocks, bonds and other investments
• Alien registration or permanent resident card (if not a U.S. citizen)

Forbearance is typically requested when a borrower is facing financial difficulty. Most commonly this is a result of lack of employment, a decrease in income, or illness or disability that prevents the borrower from working.

Important points about forbearance:

1. When a loan goes into forbearance, any accrued and unpaid interest is capitalized and added back into the total outstanding loan. A loan balance will continue to increase as long as the payments are suspended. In this way a forbearance does not make the loan “go away”, it’s just a temporary relief from having to make payments, but the loan will need to resume normal repayment at a future date. This can increase the total cost of loan repayment once normal payments resume.

2. Forbearance is provided as an alternative to regular monthly payments. A borrower may be able to make a partial payment on their loan each month that is lower than the minimum payment. For example, a borrower may be responsible for a $400 monthly payment, but can only afford $100 while they are searching for a new job. Making a $100 payment is better than making no payment at all, as some of the interest can be covered each month. The forbearance request will specify if you can make a partial payment or no payment on your loans.

3. Under forbearance, a lender agrees to halt required loan payments for a specific amount of time. Typically a single forbearance request can extend for 6 months, with an option to reapply and extend forbearance further. Most lenders can extend forbearance up to 18 months if continually approved for each 6 month segment. Confirm your forbearance time frame directly with your lender.

4. Can forbearance affect credit score? Forbearance is a better alternative to just missing payments. Because forbearance is not recorded as a missed payment due to an official arrangement made with your creditor, the information is not reported negatively on the credit score. However, a loan in forbearance will continue to grow by accumulating interest over time, and can have in impact on an individuals debt-to-income ratio.

5. What should I do to apply? Every lender/creditor may follow different application requirements to process a forbearance. The application may ask for detailed information about employment history, alternative income sources, and living expenses and must be fully completed before formal review. If incomplete, a forbearance can be rejected. Be advised that a request for forbearance may take several business days to process before being approved or denied.

6. Avoid the last minute, but late is better than never. If a payment is due within just a few days, there is no guarantee a forbearance request will be processed in time to avoid that payment. A forbearance request should be submitted well in advance of an upcoming payment due to give enough time to be approved, or if denied it can be determined what additional information is required to move to approval. A forbearance request may be activated retroactively, so if a borrower has already missed some payments, they should submit the request ASAP so the lender can update repayment status. A retroactive approval can help to avoid a negative impact on the borrowers credit report.

7. Forbearance is basically a short term cash flow solution for borrowers under financial distress. The temporary relief is only offered to help the borrower get back on their feet, and is not meant to be a permanent solution.

It’s easy to use a loan calculator online to quickly compare loan applications. Determining what your monthly payment would be is a good start. But when dealing with a private loan you will be faced with variable interest rates that can change year to year. This is why you need to zero in on debt elimination as part of your plan.

The three most important areas of consideration when comparing loans are:

The interest rate

The repayment term (10 years, 15 years etc)

The total cost of repayment

Rule of thumb is that the lower the rate, the less the loan costs. However this depends on how long it takes you to repay the loan. A lower rate loan that takes more years to repay could end up costing a lot. This is when a loan calculator comes in handy. The following will help illustrate some scenarios you can encounter. I used a loan calculator on Mapping Your Future for $10,000 loans with ten and fifteen year repayment schedules and 8% or 5% interest respectively.

Think of the big picture; what will this loan cost to repay in full?

As you can see, the loans with a 15 year repayment schedule had lower monthly payments but ended up costing the most to repay. A low monthly payment might be helpful to fit in your current budget but you unknowingly keep yourself in debt for too long and waste thousands of dollars on interest. Many borrowers are more concerned about the monthly payment than anything else, as they want to control their budget to have extra money available for other spending, but using this logic may lead to making only minimum payments each month and can increase the total cost of repayment. When comparing loan options, you need to know what the total cost of a loan will be after you finally pay it off. The loan that costs you the least amount to repay is probably the best one for you.

If you want to accelerate your debt freedom, look for a loan that does not have a pre-payment penalty. A prepayment is when you pay more than the standard monthly amount due towards the balance getting yourself out of debt faster.

Ken’s Tip – If you are taking out loans to go to college you need the right tools to make the right decision. Fortunately, loan calculators are readily available on the internet. Smart debt management starts with choosing the right loan. Trying to keep a low monthly payment will end up costing way more to repay. Focus on the total cost of repaying the loan and choose the one that costs you the least.

Why?

Well if you are having a hard time in college classes right now, it may be because you are not studying very much. You may need to increase your focus on your school work.

This is where things can get tricky. There are a lot of distractions in college life. There is always another party, another event, another video game or any number of things to do other than what appears to be very dull and boring curriculum. Doing nothing or just sleeping is more appealing than some subjects.

However, it is during November that many students are confronted with a dilemma. The prior months of September and October were spent mostly having fun, but during November projects are due and very often there are exams looming just before or just after Thanksgiving break. Students may find themselves unprepared to successfully handle the work now due.

Worst of all, there is a major issue with attitude. After getting used to two months of comfortable living, suddenly trying to study for an exam feels like a huge amount of work, even if in reality it requires minimal effort. Often times the perception of the challenge of school work is much more severe than the actual work required. It’s easy for a student to simply give up, and say “Hey this is too much for me” or “I will never be able to get this done” or “It’s not worth it, I will just go party more as usual.” These excuses are quickly produced, exams and papers are completed in a shoddy state, and another learning opportunity is extinguished. Don’t let this happen to you.

If studying or preparing a report feels overwhelming, and you are about to quit on trying any harder, try reading this excerpt from the book “Success Is Not an Accident: Change Your Choices; Change Your Life” by Tommy Newberry, and get back out there and give it the real college try!

1. In general taking early withdrawals from retirement accounts are liable for a 10% tax penalty in addition to any normal taxes due: It is financially prudent to allow retirement savings to grow on their own and preserve their tax deferred status. Pulling money out early does more harm than good.

2. You CAN borrow for college but you CAN’T borrow for retirement: When parents reach retirement age, time has run out to save more money. Once savings are used for other expenses they are gone forever and all the tax incentives for saving all these years go with it.

3. How many semesters can you cover with retirement savings?: Savings will run out faster than you think. If savings can only pay for a few semesters, how will the tuition get paid in the later semesters?

From a College Planning perspective, parents should not rely on retirement savings to pay for tuition. The right source for college savings would be in a 529 plan, with tax incentives for saving money for college.

However it takes several years of saving to build up any substantial 529 account. If a family has been unable to save money in a 529 plan, then they should look into student loan options to cover the rest of the bill.

One option is the Parent Plus loan offered by the Direct Loans Program. The Parent Plus loan offers a fixed rate and is a popular option with many families. The loan is only in the parents name and begins full repayment immediately while the student is in school.

A private student loan is another alternative. Using a private loan enables the student to pay for college now and handle repayment over time. Rather than depending on the parents to use retirement money, the student takes an active role in handling their own tuition. Parents can cosign with their children to help get them credit approved while in school. Many private lenders allow for the cosigner to be released from the loan if the primary borrower makes a certain number of payments on time.

Money Perspective: People take a different approach to making financial decisions based on who is actually paying the bill. When someone else pays for something on your behalf, the intrinsic value of that good or service is easily ignored. However when you personally pay for something you know first hand what value is exchanged. It is no different with college students. It is wonderful when someone else can pay for tuition, but when one pays for tuition using their own resources they tend to take that education much more seriously. Quite simply, you appreciate things/goods/services when you invest your own resources in them, and less so when someone else does the paying.

Students need to hold themselves accountable for their educational experience. Because students know first hand what goes on at school, they can truly weigh the value of their education versus the debt they incur. They can learn how to decide for themselves what is worth while. This means carefully evaluating colleges and majors, choosing what fits best. The point of going to college is to build a career and life for the future. If a student is able to do this as a result of a college education, then incurring and managing debts is a reasonable expense. It is vital that the student take ownership over their own education and determine what debts are appropriate and what debts are far too high to incur.

Parents should take heed. Save your retirement savings for retirement. Parents can best help their children during the college and major selection process by encouraging an objective comparison. Part of this comparison should include a calculation of debts. Then the student will know and value what opportunities they truly have for college.

While the plan offers some positives as mentioned in my post yesterday, not every borrower will benefit.

Financial aid expert Mark Kantrowitz wrote in the New York Times…

“Recent college graduates, for example, will not benefit. Instead, the new income-based repayment plan will be available to new borrowers since 2008 who have at least one loan that originated in 2012 or later. Borrowers with loans from 2007 and earlier will not be eligible. Likewise, borrowers who don’t have at least one loan from 2012 or later, like students who graduated in 2011 or earlier, also won’t be eligible. Borrowers who are already in repayment will not be eligible.”

Kantrowitz estimated that between 1.6 million and 5.8 million borrowers may benefit out of the 36 million borrowers in federal loan repayment now, still leaving many accounts unchanged.

So while it’s great to hear that some borrowers can get relief, there is only so much the federal student loan program can do given the sheer number of borrowers and volume of money.

Dear FOX news; please fact check:

In response to this announcement, FOX news released a new article criticizing the repayment program as being another government backed boondoggle, and the President for taking political credit for a measure that will impact student borrowers to help boost voter sentiment. Drudgereport.com really got into it by posting the story on their front page:

Problem is that the article uses the wrong numbers when explaining how this program may benefit students. From Chris Stirewalt;

“Take this example: If Suzy Creamcheese gets into George Washington University and borrows from the government the requisite $212,000 to obtain an undergraduate degree, her repayment schedule will be based on what she earns. If Suzy opts to heed the president’s call for public service, and takes a job as a city social worker earning $25,000, her payments would be limited to $1,411 a year after the $10,890 of poverty-level income is subtracted from her total exposure. Twenty years at that rate would have taxpayers recoup only $28,220 of their $212,000 loan to Suzy.”

The aptly named “Suzy Creamcheese” in this article is NOT eligible to borrow $212,000 from federal loans to pay for an undergraduate degree, plain and simple. A dependent undergraduate student is eligible for up to $31,000 in federal Stafford loans. An independent undergraduate can receive up to $57,500. It’s one thing to criticize a measure, it’s another thing to use completely false facts doing it.

Additionally, the article assumes that a borrower will keep flat income for the entire 20 years of the repayment schedule. This program is more or less designed to provide relief to student loan debtors facing limited job and income prospects today, but as their income (hopefully) increases they will be able to afford larger payments as a percentage of income. This is a much better alternative to ignoring the debt without intention of repayment. However, because the article uses incorrect numbers, readers would be confused. The article paints the picture of “Suzy Creamcheese” as being a deadbeat for borrowing money to go to college, and not paying it back at a higher rate, but the reality is that this program can offer some students a modicum of relief while they get on their feet during this recession.

Bigger political issues aside, when it comes to facts people need valid information.

In order to assist former students in the repayment of their federal loans, the following announcements are anticipated:

• A reduction in the maximum required payment on federal student loans from 15 percent of discretionary income annually to 10 percent. This is to be made available in 2012 instead of 2014.
• Under this plan, any remaining federal loan debt would be forgiven after 20 years of repayment, instead of the current 25 years.
• Borrowers with outstanding Stafford loans in the (now defunct) Federal Family Education Loan Program and the Federal direct loans program will be able to consolidate them together using the federal Direct Loans consolidation program. The consolidated loan would carry an interest rate of up to a half percentage point less than before.

Clarification of facts: This announcement will only affect Federal Loans, the majority of which are Stafford loans. If you are trying to get federal loans consolidated go to the Direct Loans web portal.

Private student loans are not part of the offered federal loan consolidation program, and would still require a separate private student loan consolidation.

Buying books online was a great way to save money in 2003. But at the end of the day, I still had to buy a book that would become obsolete after a new edition was published. Plus I’d have to lug around unnecessary weight and take up valuable desk space in the classroom. Not to mention all the resources used to create a book in the first place. But now there is a new alternative. Electronic Books are becoming a better option to traditional books. The New York Times featured a great article about the issue of college books and makes a great addition to the ongoing Revolution of Technology topic.

It’s the 21st century; knowledge delivery has expanded into the realm of the digital. Shouldn’t college textbooks catch up to this already? Flash forward to 2011 and a lot of things are still the same. Colleges reveal their inability to adapt and provide by not updating their method of delivery. Take a walk through a college bookstore and all those books are even more expensive. But some professors are moving to e-books.

The popularity of e-books is growing. E-books in the general market have seen a 200% increase in sales this year. The next big move should be in the classrooms where the cost of educational books could be radically reduced. Higher Ed charges too high a price not to innovate their teaching methods. Encouraging students to use digital based books in the classroom is the only logical step.

Colleges have no problem telling students to pay $700 -$1000 a semester for books, but an E-Book reader can go for $200 and last all the years of college. No longer do students need to be concerned with buying overly expensive books and then selling them back at the end of the semester. There would be no outdated books because the newest version can be easily downloaded. No more costs of carrying inventory at a book store. No more wasting time on a book store line only to find out it was the wrong edition. Plus a digital device can hold millions of pages in the palm of the hand. When all of these excessive costs are removed from the price of a book, the student can get the knowledge they need at a fraction of the cost with minimized waste. With the cost of college as high as it is, there is no excuse. It is a disservice not to innovate and provide superior value to students.

Until the time comes for colleges to adopt modern techniques, most college students will have to settle for old-fashioned text books. Here are some textbook tips:

1. Don’t buy books! Hold off on buying books for classes until you are absolutely sure of its need or use. This will vary from class to class. Some professors will list six or seven books on the syllabus as required for class but by the end of the semester only two were used. What a waste. Save your money and buy books only as necessary.

2. Maximize other resources: To avoid having to buy books you should use other alternatives. Utilize your library, or the internet for scholarly resources. Buying a whole book just to use one quote is a waste too. Chances are you can find whatever knowledge you need from a free source to complete whatever report or project is due.

3. Any books you buy should be put to use: Whether the book is on paper or electronic form, learning begins with your motivation. You should avoid waste and save money, but do not skimp on your learning experience.

4. If you have to buy a book, buy it online: The bookstore at school is ALWAYS more expensive.

5. Try renting a textbook for the semester: This can cut costs dramatically. There are a number of textbook rental websites available online now, so get out there and look for a deal!