For those of you who have struggled through the dreaded process of filling out the Free Application for Federal Student Aid, or FAFSA, in order to be eligible for financial aid or just to apply for unsubsidized Stafford loans, take heart. The Department of Education announced last week that it intends to substantially modify the process by making the FAFSA shorter, simpler and more user-friendly.
This streamlining will take place in 3 steps:
- Beginning this summer, enhanced skip-logic on the web-based FAFSA will allow applicants to bypass many more questions that are irrelevant to their situation. For example, students who are married or 24 and older, and therefore considered independent, will no longer have to answer questions about their parents’ finances.
- In the second phase, the Department of Education will ask Congress to pass legislation allowing the elimination of numerous questions that ask for financial data not found on tax returns. The department claims that since much of this information is not verifiable, especially that pertaining to assets, it adds little value to the process of awarding aid. So expect to see many of the asset questions discarded should Congress agree to the changes…no more reporting home equity which actually counted little towards the Expected Family Contribution anyway.
- The third step will be rolled out first as a pilot program to students applying for aid in the spring term of 2010. The program will allow students to populate 18 questions on the revised form with data retrieved from their most recently filed tax return. Why use this target group? Keep in mind that most of us have not yet filed our tax returns by the time we are required to submit the FAFSA to schools in early February in order to meet their financial aid deadlines. We complete the form as soon after January 1 as possible using estimates, to be updated with actual tax return data at a later date. Those applying for financial aid for the spring term start the process several months later, after the April 15 tax filing date. Again, this is only a pilot program. Questions still abound as to whether this will be a fair measure of need since using the last filed tax return in most cases for those filing for fall will mean relying on information that may be up to two years stale. One potential consequence is that colleges and state institutions cease to rely on the FAFSA and institute their own forms if they believe the information is too dated to be meaningful.
Will these changes be sufficient to generate greater accessibility to students or do they go to far? While that is being debated. some streamlining is already in the works, and that’s the good news for those who do not eagerly anticipate completing another FAFSA form come January 1, 2010.
Monday, June 29, 2009
Friday, June 19, 2009
Honors College Education at a Bargain Price
Don’t rule out state universities in the south if you are looking for honors college experiences at a far more reasonable price than you will find for comparable educations in the northeast. My recent trip down to Georgia and Alabama included four state universities (Georgia Tech, University of Georgia, University of Alabama-Birmingham and University of Alabama, Tuscaloosa), all with top quality honors colleges that are actively seeking to increase their geographic diversification and draw students from outside the southeast. These top-notch programs are well kept secrets just waiting to be discovered. The number of Fulbright, Goldwater, Marshall and Rhodes fellowship recipients is comparable to that at the Ivy League colleges. What’s more, for the student who is looking for a reasonably priced education, small classes, plenty of research opportunities, yet the campus spirit and excitement that come with attending an athletic powerhouse, these schools should not be overlooked. You can go to each university’s website to check out their honors programs and the types of scholarships they offer.
I also had the opportunity to visit several wonderful private colleges and learned that most offer meaningful tuition discounts, especially to candidates they are anxious to recruit (read: out-of-state!). Two of my favorite lesser known colleges were Birmingham-Southern College in Alabama (one of the Colleges That Change Lives), and Agnes-Scott College, a gem of an all-women’s college in the charming Atlanta suburb of Decatur. Its graduating senior class produced two Fulbright scholars this year and more fellowship recipients than the colleges in the Ivy League.
So think about expanding your horizons and looking beyond the colleges in the northeast and mid-Atlantic states. You may be pleasantly surprised by the quality of the education, beauty of the campuses, lifestyle, and cost!
I also had the opportunity to visit several wonderful private colleges and learned that most offer meaningful tuition discounts, especially to candidates they are anxious to recruit (read: out-of-state!). Two of my favorite lesser known colleges were Birmingham-Southern College in Alabama (one of the Colleges That Change Lives), and Agnes-Scott College, a gem of an all-women’s college in the charming Atlanta suburb of Decatur. Its graduating senior class produced two Fulbright scholars this year and more fellowship recipients than the colleges in the Ivy League.
So think about expanding your horizons and looking beyond the colleges in the northeast and mid-Atlantic states. You may be pleasantly surprised by the quality of the education, beauty of the campuses, lifestyle, and cost!
Sunday, June 7, 2009
Looking to Canada for Value
While Canadian colleges and universities have been increasing in popularity among American students over the past few years, the state of the economy has contributed to a recent surge in interest. Primary reason: Value! The cost of attending many private colleges in the U.S. has topped $50,000 a year. By contrast, the total annual bill for foreign students at a Canadian university is in the $30,000 range, a 40% savings!
But cost is not the only reason that Canadian schools have experienced an increase in applications and matriculation by American students. Canadian universities had been attracting more and more U.S. citizens well before the current economic crisis. Over the past 12 years the number of U.S. students studying in Canada has more than tripled to top 9,000. And as more American students head north, the benefits of attending a Canadian university are no longer such a well-kept secret. Those benefits include globally recognized academic programs, the opportunity to enjoy an international college experience without venturing far from home, state-of-the-art campus facilities in cities such as Montreal or Toronto, and a far less cumbersome and more straight-forward application process (no essay or letter of recommendation requirements).
American students attending schools in Canada can take their Stafford or PLUS loans with them across the border, though Pell Grants are not transportable. So if you are sensitive to cost (and who isn’t), want a top quality education with a vibrant student life experience, and are willing to explore beyond the U.S. border, then you might consider the Canadian university option. Check out the Association of Universities and Colleges of Canada’s website at http://www.aucc.ca/ to learn more.
But cost is not the only reason that Canadian schools have experienced an increase in applications and matriculation by American students. Canadian universities had been attracting more and more U.S. citizens well before the current economic crisis. Over the past 12 years the number of U.S. students studying in Canada has more than tripled to top 9,000. And as more American students head north, the benefits of attending a Canadian university are no longer such a well-kept secret. Those benefits include globally recognized academic programs, the opportunity to enjoy an international college experience without venturing far from home, state-of-the-art campus facilities in cities such as Montreal or Toronto, and a far less cumbersome and more straight-forward application process (no essay or letter of recommendation requirements).
American students attending schools in Canada can take their Stafford or PLUS loans with them across the border, though Pell Grants are not transportable. So if you are sensitive to cost (and who isn’t), want a top quality education with a vibrant student life experience, and are willing to explore beyond the U.S. border, then you might consider the Canadian university option. Check out the Association of Universities and Colleges of Canada’s website at http://www.aucc.ca/ to learn more.
Friday, June 5, 2009
New Option for Federal Student Loan Repayment
Borrowers graduating from college with student loans are about to get some relief from the federal government starting on July 1. Those in good standing on their student loan payments will be able to take advantage of a new program that will allow them to tie their monthly loan payments on federal loans to what they make, rather than to what they owe. Monthly loan payments will be capped at 15% of the amount by which gross income exceeds the federal poverty level (now $16,245 annually). Furthermore, if the loans are not fully paid off after 25 years, the unpaid balance will be forgiven. While this is generally great news for graduates starting out with modest post college incomes, there is some fine print of which borrowers should be aware.
As income rises, so will your monthly debt payments. That’s not a reason to turn down a raise, but don’t be surprised when the required loan payment suddenly increases.
Income used in the calculation is household income, not just the borrower’s; if a person is married, the spouse’s income will factor into the formula to determine the maximum payment amount, provided the couple files jointly. Filing separately will get around this issue. However, the taxpayers will forfeit other tax benefits such as student interest deductions which are only available to married couples who file jointly.
Payment reductions will slow down debt amortization. The not-so-desirable result is higher interest charges over the life of the loan.
Any debt that is forgiven after year 25 will be treated as income and therefore subject to taxes.
And as noted, borrowers must be in good standing to take advantage of the payment option.
This program applies to federal loans only. In other words, payments on high interest private student loans cannot be tied to income.
In an earlier post I discussed the advantages of the federal, or Stafford loan program, over other types of borrowing to finance one's education. The new income-based repayment program will provide another reason to exhaust this borrowing source before resorting to other types of loans.
As income rises, so will your monthly debt payments. That’s not a reason to turn down a raise, but don’t be surprised when the required loan payment suddenly increases.
Income used in the calculation is household income, not just the borrower’s; if a person is married, the spouse’s income will factor into the formula to determine the maximum payment amount, provided the couple files jointly. Filing separately will get around this issue. However, the taxpayers will forfeit other tax benefits such as student interest deductions which are only available to married couples who file jointly.
Payment reductions will slow down debt amortization. The not-so-desirable result is higher interest charges over the life of the loan.
Any debt that is forgiven after year 25 will be treated as income and therefore subject to taxes.
And as noted, borrowers must be in good standing to take advantage of the payment option.
This program applies to federal loans only. In other words, payments on high interest private student loans cannot be tied to income.
In an earlier post I discussed the advantages of the federal, or Stafford loan program, over other types of borrowing to finance one's education. The new income-based repayment program will provide another reason to exhaust this borrowing source before resorting to other types of loans.
Wednesday, May 27, 2009
Credit Card Reform...It's About Time
Financial institutions that prey on college students by offering gifts and other promises in order to entice them to sign up for credit cards has been a huge problem…one that fortunately is about to come to an end. Both the House and the Senate recently passed the Credit Card Accountability Responsibility and Disclosure Act of 2009, which President Obama is expected to sign into law. What is significant about this act? Aside from addressing what are considered unfair practices with respect to interest rates charged to cardholders, this act will do much to curb potential abuses targeted at college students. You may recall from one of my prior posts that students graduate from college with, on average, more than $4,000 outstanding in credit card debt, according to a recent Sallie Mae survey. This truly illustrates how serious a problem student leverage has become.
The most significant provisions of the act relating to college students can be summarized as follows:
- The issuance of credit cards to consumers under the age of 21 is prohibited unless
- a co-signer, 21 or older, agrees to be jointly responsible for the account, or
- the borrower can demonstrate independence and the means to repay debt incurred under the card.
- Credit card companies may no longer offer give-aways on or near college campuses to induce students to sign up for credit cards; The act will also encourage colleges to set policies that will limit credit card marketing locations and institute credit and debt counseling as part of their student orientation.
- Any contracts between colleges and credit card companies will require public disclosure.
This is a much needed first step to address a practice that is contributing to the potential financial irresponsibility of the Millennium generation. The changes that the act will institute are overdue, and we as parents should take this opportunity to also counsel our children on good and bad debt to help them establish sound money management habits as they move on to financial independence.
The most significant provisions of the act relating to college students can be summarized as follows:
- The issuance of credit cards to consumers under the age of 21 is prohibited unless
- a co-signer, 21 or older, agrees to be jointly responsible for the account, or
- the borrower can demonstrate independence and the means to repay debt incurred under the card.
- Credit card companies may no longer offer give-aways on or near college campuses to induce students to sign up for credit cards; The act will also encourage colleges to set policies that will limit credit card marketing locations and institute credit and debt counseling as part of their student orientation.
- Any contracts between colleges and credit card companies will require public disclosure.
This is a much needed first step to address a practice that is contributing to the potential financial irresponsibility of the Millennium generation. The changes that the act will institute are overdue, and we as parents should take this opportunity to also counsel our children on good and bad debt to help them establish sound money management habits as they move on to financial independence.
Tuesday, May 19, 2009
Finding the Colleges That Will Change Your Child's Life
Many of you are probably familiar with Loren Pope’s book, Colleges That Change Lives, in which he identified 40 schools that he believed offer unique college experiences and which have strong track records for producing graduates who go on to become successful scholars and scientists. Last night these 40 colleges drew a crowd of several hundred students and parents at the Colleges That Change Lives (CTCL) information session and college fair in New York City. Whether or not one of these schools is potentially the right fit for your son or daughter (go to the website to check out the list of these 40 colleges: http://www.CTCL.org), the approach has merit for all students beginning the college search process. The CTCL colleges travel across the country each year as a group to reach out to students and families and to share their philosophies on admission and on picking the right college match:
- Don’t let yourself be seduced by rankings such as those in U.S. News & World Report, which are based upon entering student statistics. These rankings say nothing about what goes on during the four years in college!
- Identify schools where serious and thoughtful scholarly work is performed. Pope picked his 40 schools by finding out where PhD students did their undergraduate studies. These colleges out pace many of the more selective schools in terms of the number of future PhDs they turn out each year.
- Look for colleges that are student centered and focused on undergraduate education.
- Find schools that produce creative and critical thinkers, encourage cooperative rather than competitive learning, and where students are engaged in intellectual pursuits both in and outside the classroom.
- Bottom line: Look at outcomes, rather than inputs. What do students accomplish while they are in school and what paths do they follow after graduation?
-
The principle message of the CTCL schools is that students are more likely to have meaningful and worthwhile college experiences if they jettison the criteria of name recognition, prestige and ranking, and focus on understanding their particular needs and how these will be met by the mission and identity of the college community they choose. Young people owe it to themselves to take ownership of the process. That means knowing themselves well and having the confidence about what they have to offer. Your son or daughter is more than just test scores, a GPA and his or her class rank. Fortunately most colleges are more interested in learning about who the student is as a person. They share your objective of helping your child find the right fit and have the best possible college experience!
- Don’t let yourself be seduced by rankings such as those in U.S. News & World Report, which are based upon entering student statistics. These rankings say nothing about what goes on during the four years in college!
- Identify schools where serious and thoughtful scholarly work is performed. Pope picked his 40 schools by finding out where PhD students did their undergraduate studies. These colleges out pace many of the more selective schools in terms of the number of future PhDs they turn out each year.
- Look for colleges that are student centered and focused on undergraduate education.
- Find schools that produce creative and critical thinkers, encourage cooperative rather than competitive learning, and where students are engaged in intellectual pursuits both in and outside the classroom.
- Bottom line: Look at outcomes, rather than inputs. What do students accomplish while they are in school and what paths do they follow after graduation?
-
The principle message of the CTCL schools is that students are more likely to have meaningful and worthwhile college experiences if they jettison the criteria of name recognition, prestige and ranking, and focus on understanding their particular needs and how these will be met by the mission and identity of the college community they choose. Young people owe it to themselves to take ownership of the process. That means knowing themselves well and having the confidence about what they have to offer. Your son or daughter is more than just test scores, a GPA and his or her class rank. Fortunately most colleges are more interested in learning about who the student is as a person. They share your objective of helping your child find the right fit and have the best possible college experience!
Thursday, May 14, 2009
Teaching Financial Responsibility - Talk to Your Kids About Money
This week I gave a presentation on Good Debt/Bad Debt to students at Chess-in-the-Schools, a not-for-profit after school program for New York City youth. I am hopeful that they left the session that much smarter about how to manage their personal finances. I am encouraged that I made some headway and was able to impress upon a group of high school kids that good financial habits will make or break their ability to lead financially secure lives.
Personal financial responsibility is a subject that needs to be taught to all young people, not just kids from lower socio-economic backgrounds who have no safety net. No one wants a child to graduate from college with excessive and unpaid credit card balances or to rack up large and unmanageable debts during any point in his or her life. Many of us had children in our thirties, and need to be thinking about our retirements too. Do we really want to be supporting our children’s bad spending habits after we’ve shelled out an obscene amount of money for a four year college education that we hoped would lead to their financial independence?
So what can we as parents do? Don’t wait until they go off to college to talk to them about good personal financial habits. Teach them the difference between good debt and bad debt. Using a credit card for impulsive purchases and paying the monthly minimum balance means that they are probably financing that purchase, at an 18% interest rate, over a period exceeding 20 years! At a double digit rate, the amount of interest they’ll end up paying will exceed the cost of the original purchase. If your son or daughter has a newly acquired credit card and is finding it difficult to pay off the balance each month, suggest using a debit card which takes the money directly from the checking account (but make sure that the checking account has sufficient cash so as not to overdraw the account). Help your child to see the need to cut back on impulsive spending.
Here are some staggering statistics. A recent survey conducted by student lender Sallie Mae, as reported on Bloomberg, revealed that 84% of students have at least one credit card, compared to 76% in 2004. Students with credit cards have an average of 4.6 cards and half of them have 4 or more. The average credit card debt among graduating college seniors was more than $4,100 last year, up from $2,900 in 2004. And only 17% of those who responded to the survey said they paid off their credit card balances each month!
You may be shocked to learn just how easy it is for an 18 year old college student to get a credit card. The banks prey on them on college campuses, send mailings about low initial rate offers, post inviting pitches in college bookstores and even entice students with free lunches. Make your child aware of these seductive offers and help him or her to understand how to be responsible about money and credit. There is no shame being one of the 17% who pays off credit card balances each month!
Personal financial responsibility is a subject that needs to be taught to all young people, not just kids from lower socio-economic backgrounds who have no safety net. No one wants a child to graduate from college with excessive and unpaid credit card balances or to rack up large and unmanageable debts during any point in his or her life. Many of us had children in our thirties, and need to be thinking about our retirements too. Do we really want to be supporting our children’s bad spending habits after we’ve shelled out an obscene amount of money for a four year college education that we hoped would lead to their financial independence?
So what can we as parents do? Don’t wait until they go off to college to talk to them about good personal financial habits. Teach them the difference between good debt and bad debt. Using a credit card for impulsive purchases and paying the monthly minimum balance means that they are probably financing that purchase, at an 18% interest rate, over a period exceeding 20 years! At a double digit rate, the amount of interest they’ll end up paying will exceed the cost of the original purchase. If your son or daughter has a newly acquired credit card and is finding it difficult to pay off the balance each month, suggest using a debit card which takes the money directly from the checking account (but make sure that the checking account has sufficient cash so as not to overdraw the account). Help your child to see the need to cut back on impulsive spending.
Here are some staggering statistics. A recent survey conducted by student lender Sallie Mae, as reported on Bloomberg, revealed that 84% of students have at least one credit card, compared to 76% in 2004. Students with credit cards have an average of 4.6 cards and half of them have 4 or more. The average credit card debt among graduating college seniors was more than $4,100 last year, up from $2,900 in 2004. And only 17% of those who responded to the survey said they paid off their credit card balances each month!
You may be shocked to learn just how easy it is for an 18 year old college student to get a credit card. The banks prey on them on college campuses, send mailings about low initial rate offers, post inviting pitches in college bookstores and even entice students with free lunches. Make your child aware of these seductive offers and help him or her to understand how to be responsible about money and credit. There is no shame being one of the 17% who pays off credit card balances each month!
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