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Dissecting the Different Types of Federal Student Loans

Posted by Manuel Fabriquer on Tue, Feb 2, 2016 @ 9:59 PM
Student Loans

For most families of college-bound students, higher education presents a significant expense. In this competitive job market however, a college education is a huge, and often necessary asset, and so students and their parents work hard to make it happen. Fortunately, there is an abundance of opportunities when it comes to financing your studies.

Scholarships and grants are the first consideration for up and coming university freshmen. These are monetary gifts from schools, organizations, or the government (as in the case of the Pell Grant) that do not need to be repaid.

Yet after these resources have been exhausted, and your family financial contribution taken into account, you may be found eligible for some federal loans. While these are a useful option for funding your studies, it is important to understand the facts before you borrow. Let’s take a look at the different types of federal loans available.

Loan Basics

There are many benefits to taking out federal loans as opposed to loans from private lenders. Some of the advantages include:

  •  Flexible repayment options including income based or graduated repayment

  • Lower interest rates than private loans

  • In most cases, no cosigner or credit check required

  • Loan repayment does not begin until you’ve graduated or stopped attending at least half-time

You can borrow between $5500 and $12500 each undergraduate year with Direct Subsidized and Unsubsidized loans. How much you can borrow is dependent on specific circumstances such as your year of study. Additionally, you may be eligible for as much as $5500 per year in Perkins Loans.

After completing your FAFSA and submitting a financial aid application to your school, you’ll receive an award letter. This will let you know the total cost of attendance, what you’ve received in the form of gift aid, and what you are eligible to borrow. It’s good to remember that you only should borrow as much as you need. This is often less than the amount your school offers you.

Dissecting the Loans

Stafford Loans are the most well known type of federal student loan. These are split into two types: subsidized and unsubsidized. Subsidized loans depend on your family’s financial situation and are based on need. While you are enrolled in school at least part-time, interest does not build on subsidized loans. Unsubsidized loans come with a higher interest rate, and they start accruing interest from disbursement. Students do not need to demonstrate financial need to receive Unsubsidized loans.

Direct PLUS Loans are a third loan option. These fixed interest rate loans can be taken on by parents of dependent undergraduate students or graduate/professional students. If parents take out the PLUS loan, they will be responsible for its repayment. However, they do not need to make payments until you are finished with school.

Perkins Loans are a fourth type of loan, based on need, and include a 5% interest rate. Perkins Loans may be eligible for loan forgiveness following your graduation from college. Certain public service jobs can help you qualify as well as Peace Corps service and other opportunities. The criteria are fairly specific for loan forgiveness programs, but are worth looking into.

 

More questions about financing college? Get in touch with us now! 

Tags: strategies for college, college planning abc, college planning, college applications, cost of attending college, money for college, Manuel Fabriquer, College Admissions, attending college, cost of college

How Much Does College Really Cost?

Posted by Manuel Fabriquer on Thu, May 14, 2015 @ 10:15 PM
CollegeCostPHOTO

It’s not surprising that college these days can be fairly expensive. Educational costs are rising, particularly as universities strive to remain competitive. Fortunately, with scholarships, grants, and loan options, college is perhaps more affordable than ever. But what is the final cost of those four years? Though you may have a general idea of tuition amounts and the living expenses you’ll be responsible for, how much does college really cost?  

The Basics: Tuition, Fees,  Room & Board

In a recent College Board survey, reports showed that an average budget for an in-state public college was just over $23,000 per year. At a private college, a moderate budget amounted to approximately $46,000. These estimates include all of the basic, upfront items like tuition, fees, room & board, books, supplies, and other miscellaneous costs. Tuition and fees alone might be roughly ½ to ⅓ of that overall estimated budget and will vary greatly depending on your university and, at public colleges, your status as an in-state or out-of-state student. Fees are typically included within the tuition rate, and help offset the cost of student services such as library access, athletic facilities, and on-campus transportation. 

Room & board comprises your housing and dining options. This is a cost which can change dramatically based on many factors. Will you live in an on-campus dorm? An off-campus apartment? Will you have a meal plan and eat entirely at your school’s dining hall? Or will you cook the majority of your meals in your residence? These elements will determine whether you need to consider extra costs up front (such as signing up for a meal plan).

Books & Supplies

First-year students and their parents are often shocked by the cost of books and supplies when they begin their college education. If you’re in a science or mathematics major, you can expect to pay several hundred dollars each semester for your books. Other majors, such as fine arts, may have fewer books, but have hefty costs for supplies. It’s important to prepare yourself for these costs when heading to college for the first time. 

Other Costs

When estimating your cost of attendance, colleges typically include expenses that you won’t find on your bill, such as transportation, personal items, and clothing. Because these estimates will vary from student to student, it’s important to know your own budget for certain expenses. A student whose parents live far away from the university will probably incur larger transportation expenses when visiting home during breaks than a student whose parents live in the next town. Such miscellaneous expenses could amount to several thousand dollars per academic year.

Paying for College

Despite what may seem high costs, there are many ways of financing your college education. If you’re fortunate enough to receive scholarships or grants, this is money you do not have to repay. This will drop your costs significantly. Taking out federal or private loans is also an option, which a vast majority of parents and students choose to take advantage of. Remember, however, that all loans will need to be repaid, and these amounts gather interest. If you take out a substantial loan, you may end up paying a great deal more money than the original amount of the loan itself over the length of your repayment period.

No matter what, you should not let costs dissuade you from the incomparable benefit of receiving a university education. For more information on affording college, please contact us directly at College Planning ABC. 

Tags: strategies for college, college planning abc, college consulting, college planning, college applications, money for college, Manuel Fabriquer, College Admissions, attending college, Paying for college

Understanding Loans Before You Borrow

Posted by Manuel Fabriquer on Fri, Apr 17, 2015 @ 3:39 PM

Loan Photo WEB

While a college education can be expensive, it is an invaluable resource, helping you excel in your chosen career field and contributing to your all-around personal development. Fortunately, students these days have options for financing their higher education plans. Alongside scholarships, grants, and family contributions, students can choose to take out federal and private loans to help pay for their educational costs. Taking out a loan is a serious consideration, and it is important that you fully understand the facts and obligations associated with loans before borrowing.

Borrowing from the Government

If you plan to take out loans for your college education, federal loans are the way to go. Your university will determine your possible loans in line with information gathered from your FAFSA. With a fixed interest rate on federal loans, you’ll better know how much interest you’ll be paying over the life of the loan. Conversely, private loans have variable interest rates, which can present a financial challenge should the rates rise. As well, federal loans offer repayment options and programs for those who are experiencing financial hardship.

The most common type of federal loan is the Stafford Loan. These loans have yearly and overall borrowing limits, which differ based on what year you are in college, and whether or not you are financially dependent on your parents. Stafford Loans are divided into two types: subsidized and unsubsidized. Subsidized loans, contingent on financial need, do not accrue interest while you are still enrolled in school part-time or greater. Unsubsidized loans do accumulate interest, beginning when the loan is distributed. Unsubsidized loans also have a higher interest rate.

Other federal loans include Perkins Loans and PLUS Loans. Perkins Loans, with an interest rate of 5%, can assist students with up to $5,500 each year. If you’re a dependent student, your parents may qualify to take out a PLUS Loan. This loan is repaid by your parents and also has a fixed interest rate, making it a better alternative to a private loan. While you are enrolled in school, your parents do not need to make payments. A PLUS loan amount cannot exceed the total cost of educational expenses minus a student’s existing financial aid.

Things to Know

While private loans are an option, their variable interest rates and lack of structured repayment should make them your last resort. No matter the loan, it’s important to know that loans taken out in a student’s name are the responsibility of the student. Once you’ve graduated, you will be responsible for repaying your accumulated educational debt.

Fortunately, most federal loans have a grace period. Immediately following graduation, this grace period typically lasts 6 months. During this time, you won’t need to begin making repayments, but on unsubsidized Stafford loans, interest will still accrue. Many students take advantage of this grace period to commit to the job search in earnest. If you don’t find suitable employment or are experiencing financial hardship, there are options for repayment that can take into account your current income. This can temporarily lower your payments so that you can still continue to make them on time. In some circumstances, there are also options for forbearance and deferment, subject to the discretion of your loan servicer. Depending on your career interests, it may be worth investigating loan forgiveness programs, which can result in some reduction in your overall loan amounts.

 For further information on student loans, check out the following resources:

 https://studentloans.gov/myDirectLoan/index.action

 https://studentaid.ed.gov/types/loans

Tags: strategies for college, college planning abc, college planning, college applications, cost of attending college, money for college, Manuel Fabriquer, attending college, Paying for college, cost of college, student loans

Unique Scholarship Options You May Not Have Considered

Posted by Manuel Fabriquer on Fri, Mar 13, 2015 @ 9:25 AM
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Let’s face it: college can be expensive. But with the thousands of scholarship options out there, it doesn’t have to be. Although there are countless students just like you applying for these awards, if you work hard and choose the right scholarships for you, you can greatly increase your chances of winning.

There are many generic scholarships out there awarding big money prizes. Those are the ones that will see thousands of qualified applicants, and it may be more difficult to snag those. But what about specialized scholarships in your field of study? Local scholarships for students in your area? Prizes geared towards your specific talent? Scholarships that award students for an unusual trait? All of these unique and quirky scholarships exist. Why not consider applying for some of these scholarships? If you meet the criteria and can submit the right materials, you just might find yourself with more money for your college education in hand. 

The Writers of the Future Contest

Are you great in English class? Fancy yourself a writer? If you’ve got the linguistic chops, you may want to consider L. Ron Hubbard’s Writers of the Future Contest. Stories of up to 17,000 words in the science fiction or fantasy genre could win you prizes of up to $5,000. This is a great opportunity to flex your creative muscles and try for some serious cash. The current contest ends March 31st, so get writing!

Chick and Sophie Major Memorial Duck Calling Contest

If you can get yourself to Kansas (and have a serious talent for duck calls) the Chick and Sophie Major Memorial Duck Calling Contest could be the scholarship for you. This competition, held each Thanksgiving week, is open to high school seniors and awards prizes for 1st, 2nd, 3rd, and 4th places. This scholarship has been around for 38 years and has awarded more than $60,000 to students in that time. Better get practicing!

The Miss America Organization

Pageants may have lost popularity in recent years, but the Miss America Organization remains the leading provider of scholarship monies for young women, awarding millions of dollars each year to competitors on the national, state, and local levels. Competitions take place in each state and are open to young women ages 17-24. Participants are judged in several categories, with the greatest weight given to the Interview and Talent portions. If you have a love of performing, your dancing, singing, violin playing, and more could earn you big bucks for your education.

Stuck at Prom Scholarship Contest

Do you have an interest in fashion? Or do you simply fancy yourself creative with duct tape? The Duck Tape Stuck at Prom Scholarship Contest runs in 2015 from March 15th until June 1st, and offers two $10,000 scholarships to a high school couple who attends prom wearing inventive outfits made entirely of duct tape. This highly unusual scholarship offers major money, and also donates $5,000 to the winners’ high school. Check out the website to view last year’s winners and get some inspiration for your own incredible entries.

These are only a few of the incredible unique scholarship options out there. For more options, check out 45 of the Weirdest College Scholarships. With a little searching, you may find the perfect contest for you, and win yourself some much needed funds for your higher education. 

 

Tags: scholarships, strategies for college, financial aid award, college planning abc, college consulting, college planning, college applications, College Planning News, money for college, Manuel Fabriquer, College Admissions, attending college, college scholarships

What Do You Get the Graduating High School Senior?

Posted by Manuel Fabriquer on Thu, Jun 27, 2013 @ 6:00 AM

college technology

What do you get the graduating high school senior who has everything?  After all, high school seniors usually have all the latest clothing and gadgets, so it can be difficult to find something they don’t already own.  Yet, we all want to give that special student something that will make a difference in their lives.  This is especially true when it comes to close family and friends. 

The 529 Plan

Now it is possible to make a third party monetary contribution to some 529 plans.  Through a 529 plan, a student can save money in a tax favorable way to pay for college tuition and related costs.  In essence, you could contribute to a 529 plan whether the student just completed kindergarten or high school.

There are some new websites that have recently come online that allow third party contributions and even provide parents with a way to solicit gifts to their 529 plan.  However, parents should be aware that there are problems associated with these websites such as:

  • Problems with factual inaccuracies
  • Difficult to understand terms and conditions
  • High fees associated with the program
  • No help in selecting the right program

As with any financial instrument, it is recommended that you receive advice and direction on how to best maximize your investment. 

We are Here to Help

Should you be interested in learning about a 529 plan or perhaps other vehicles that can help your student pay for college, call our office today.  We have information that can be tailor fit match your needs and particular time frame.  We will navigate you to the best solution that will get you where you want to go.  Call today and don’t forget to also check out my next FREE workshop where I cover how to pay for college without going broke!

 

Tags: College Funding, cost of attending college, money for college, Saving for college, Manuel Fabriquer, College Admissions, attending college, Paying for college, cost of college

College Planning ABC shows what is behind rising college tuition

Posted by Manuel Fabriquer on Tue, Oct 2, 2012 @ 3:02 AM

Money falling resized 600
We have all heard how tuition costs are rising to all new levels.  In fact, The College Board has stated that since 1990 tuition and fees at four-year public schools have risen 150% to an average $8,244 per student this past academic year.

They also showed how during the same period federal grants and tax benefits rose 242%, to an average $4,292 per student.  Finally, The College Board and others have stated that student Federal loans have tripled during this same period.

Now, a new study published by the National Bureau of Economic Research has addressed one aspect of why tuitions may be rising.   This working paper is authored by Claudia Goldin of Harvard University and Stephanie Riegg Cellini of George Washington University.

In their research Goldin and Cellini have discovered an interesting relationship between increasing financial aid and the increase in tuition costs at for-profit schools. 

Their findings demonstrated how tuition at for-profit schools where students received federal aid was 75% higher than tuition at comparable for-profit schools whose students didn't receive any aid.

When they looked at the actual dollar amount the difference in the tuition increase between these two types of institutions averaged $3,390 more at institutions where students received federal aid.  It just happens to be that this increase is the same amount of federal aid that was available to these students.  In other words, the tuition increased to match what the students could borrow.

Economist Andrew Gillen of the Center for College Affordability and Productivity saw similar findings with regards to law-school tuition, which has climbed faster than undergraduate tuition.  Gillen believes a main factor was that law-school students can borrow much more from the federal government--as much as $138,500 over their lifetime.

These findings are not global and need to be taken into perspective.   For example, a spokesman for Education Secretary Arne Duncan said, the administration believes there is a link between federal aid and tuition increases at for-profit schools, but that it sees no such tie with public and nonprofit schools.

The fact remains that costs are increasing and there is no sign of them reducing in the near future.  Now more than ever it is critical for any family sending their student to college to fully understand how to finance that education.

At my College Planning Workshops, I review the most current information regarding the costs associated with the various universities.  What is more important, is the information I provide that shows you step-by-step how to reduce those costs so that you can send your children to college and still afford to retire.

Many families will not be aware of the many strategies that are available and end up sacrificing unnecessarily to educate their son or daughter. 

It just does not have to be that way.  Your first step is to sign up for my next College Planning ABC workshop.  Just click on the button below and I will see you there.

Click me

Tags: college planning abc, college planning, cost of attending college, money for college, cost of college

There are FREE Lunches – FREE College Education

Posted by Manuel Fabriquer on Mon, Jan 30, 2012 @ 5:35 AM

Yes, you read this right, Antioch College in Yellow Spring, Ohio, is waiving the tuition for all its students, who enroll in the next three years.

This private liberal arts college is willing to give you r student a full-ride tuition scholarship for four years?  The value of the free tuition for the current year is $26,500. The scholarship, based on that price, makes each scholarship worth at least $106,000.

It gets even better

Some students, who file financial aid applications, will capture an even greater price break.  Qualified financial need based students may get to skip the room and board charges or pay a reduced price.  This is very nice when you consider Antioch's room and board is currently $8,628.

Why is this university doing this?

Well, Antioch actually closed its doors in 2008.  Rather sad for a college which was originally founded by abolitionists in 1850.

This was a result of bad management decisions and other problems forced them to close their doors. However, now the alumni have stepped up with tremendous financial support allowing the school to reopen.

In 2011 Antioch welcomed 35 students into its inaugural freshmen and it hopes to welcome another 65 to 75 students in the fall. The school's goal is to have about 300 students attending the school by 2015.

What Can You Get at Antioch?

One of Antioch’s strengths in the past was its work cooperative program and it appears that this valuable program is back.  Through this program all students are provided with numerous work opportunities during their four years that include local, national and international experiences.

Currently the school offers 12 areas of concentration ranging from environmental and health sciences to languages and social sciences.

Here is a snap shot of the academic profile of the first class:

Students had an average unweighted high school GPA of 3.56 and an average ACT score of 27, which is roughly the equivalent of a 1250 on the SAT.

If you're a high school senior, there is still time to apply! Antioch's admission deadline is Feb. 15.

Tags: College Planning News, money for college, college scholarships

7 Common 529 PLAN Questions and Their Answers

Posted by Manuel Fabriquer on Mon, Nov 7, 2011 @ 9:25 AM

Many times at my workshops people will come up and ask me questions about 529 plans. I totally understand that there are many questions especially due to the amount of misunderstandings out there about this program.  So, below is a list of the most common questions I get and the answers. 

1. Do I have to use the money at a state school?
  Not necessarily. Your 529 Plan account assets can be applied at virtually all accredited
colleges and universities in the United States as well as to other eligible foreign institutions.

2. What expenses can I use the money for?
  You can use the funds for qualified higher education expenses like tuition, books, etc.

3. How and when can I take distributions from the account?
  Anytime you need it for your school related expenses. Now, please take note, distributions for non-qualified expenses may incur federal income tax and a 10% federal penalty tax. Qualified distributions include money for tuition, books, etc.

4. What about room and board?                                                                                             Good question. Here’s an answer that could help according to IRS Publication 970, it is written there that qualified education expenses are fees that are paid to the institution as a condition of enrollment or attendance.  So, a lot will depend on what the institution has noted as a condition of enrollment.

5. How do I withdraw funds from my 529 Account, and can I take loans against my 529 Account?                                                                 

 All you need to do is simply fill out the College Investing Plan Distribution in PDF form. Indicate the recipient or who is going to receive the money. You could be a parent who wants to send it to your child or you can be the student yourself requesting that you directly receive it. Now, please note, you cannot take a loan out against the 529 account.

TIP:

Always keep a record of your payments so you won’t have a hard time filing for your tax returns.

6. How about if my child earns a scholarship?
The amount of the scholarship award from your 529 Plan can always be withdrawn without worrying about the penalty; but remember that other taxes may still apply.

7. Will investing in 529 Plan affect eligibility for financial aid?
Based on the Expected Family Contribution calculator (EFC), 529 assets may have a relatively small affect on Federal financial aid eligibility as they are considered assets of the parent (Participant). Moreover, accounts can be considered assets of the child (Beneficiary), such as a UGMA/UTMA account, are most likely to have a greater effect on the Federal financial aid eligibility in the EFC calculation.  This is something that I always check and advise on for my clients.

This was just a brief overview and by no ways everything you need to know about a529 plans.  For more information on how you can use this tool, and other financial vehicles to pay for college, contact me, Manuel Fabriquer, at (408) 918 3068 and let me save you thousands on the cost of college!

 

Tags: scholarships, Blog, College Funding, money for college, College Admissions, college scholarships, secure financial aid

Updates on College Costs

Posted by Manuel Fabriquer on Tue, Nov 1, 2011 @ 7:24 PM

There is now a federal law that will increase the chance of getting college financial aid for families who will qualify upon application. This law will also help in offering grants to students who have plans of taking education as a course at the same time helping graduates to repay their student loans.

For Need-based Aid category also known as Pell grants, the news is that it will move up to a maximum of $ 5,400 annually for the next five years from its current maximum of $ 4,310. On the other hand, Stafford loans interest rates will drop by 3.4 % for the next for 4 years, which is half of the current rate.

For Loan Repayment category-

President Obama announced on Oct. 18 at the University of Colorado in Denver that college graduates would have an easier way to pay off student loans through the new “Pay as You Earn” plan.

The Pay as You Earn Plan, which was supposed to go into effect in 2014, will now go into effect in 2012 due to congress’s push by Obama. The plan will allow college graduates’ loans to not exceed 10 percent of the graduate’s discretionary income. After 20 years, any remaining debt will be forgiven, said Georgia Southern University’s Director of Financial Aid Division of Student Affairs- Connie Murphey

“Last year graduates (that) took out loans left college owing an average of $24,000. Student loan debt has now surpassed credit card dept. for the first time ever” said Obama in his speech addressing college students in Denver.

The old policy was that graduates had up to 10 years after they graduate, or leave school, to repay their student loans. College graduates also had to make payments of 15 percent, said Murphey.

The smaller payments will mean the payment time lasts longer, said GSU economics professor Anthony Barilla, Ph.D in economics.

“To the actual college graduate, if you kept their payments at 10 percent, that means they get to make smaller payments of their student loans and that also goes on for a longer duration, so there’s a plus and a minus to it,” said Barilla. “To the college graduate itself, it’s a longer duration of having to pay that loan.”

The college graduates that will not be affected are the students who received loans through private lenders such as banks and individuals, said Murphey.

“The ones that will not be affected is if students have a private loan through a lender, and a lot of students do. They go directly to a lender, they borrow money, it never comes through the school, it’s called a private loan,” said Murphey.

Moving on, the Public Service incentives category will help students in teacher-prep programs who are also committed to educate for four years after they graduate in the application for annual grants of $4,000 to cover the costs of going to college. Grants must be repaid in case they have decided to not pursue teaching.

Student borrowers can also have an incentive to go into a public position. This means that if they decide to work for a decade as a qualifying civil servant, the government shall then waive the loan balance of students to whose loan was provided directly by the government.

For more information on how your student can get money for college despite your income level, call me, Manuel Fabriquer, at (408) 918-3068.  College Planning Abc, is dedicated to helping students find and get into the best colleges in the nation while saving you the most amount of money.  Call today!

 

Tags: scholarships, college consulting, Blog, College Funding, College Planning News, money for college, college scholarships

Parents Are Not Saving for Kids College

Posted by Manuel Fabriquer on Wed, Aug 10, 2011 @ 7:25 AM

I wanted to share this article with you on research of what was discovered about parents saving for college.

http://www.accountingtoday.com/news/Parents-Not-Saving-Childrens-College-Education-59511-1.html&hl=en&geo=us

I understand that it’s tough to save for both retirement and college for the average American family. I have kids myself and it’s really a discipline of saving something every month. Things are tough right now with what is happening in the economy and the stock market.

The article mentions that parents plan to do the best they can to pay for college but are hoping that they are going to fund college on scholarships, academic, and sports scholarships.

In my opinion, I think that parents really need to get help with this process. I think that parents are naive about this whole process and how much parents can actually afford for college. I also believe that parents do not understand how much the cost of higher education is going to cost the family. In California, the cost for a UC College is roughly $30,000 per year and the average family will spend at least $120,000 per student. Most families that I see have 2- 3 children, some savings but only enough for one child. Most families have enough for the first child coming into college, but when the next child comes into college there is a massive problem. The problem lies with cash flow and being able to fund college on a monthly basis. Many families have a budget to pay for a portion of college, but the budget definitely is off when the next student enters college. The trick to college funding is how to keep funding retirement without sacrificing and minimizing education for their children.

What to do? Come to one of my upcoming Free College Planning Workshops or attend a conference call. Check out www.collegeplanningabc.com for events .

Tags: scholarships, Blog, College Funding, money for college, Saving for college