Where ARE my Student Loans?

Before we see where those peaky loans have gone, let’s take a nostalgic look back: Once upon a time, not so very long ago, a student went to college and used Federal Financial Aid to help pay for their education. The student kept a copy of all of their loan paperwork, all of their loans were with one lender/servicer and, when their Repayment date arrived and the borrower was ready to make a payment, they had their payment coupon booklet in hand, with all of their payment coupons in place. The monthly payment amount was easy to locate, the mailing address was very clear – everything went smoothly. The borrower made regular monthly payments and received a Paid-in-Full statement after the 120th payment. Those were the days!

As many of you already know first-hand and many more of you will soon discover, the life of a student loan holder is not so simple anymore. The student loan industry has entered a brave new world! Over the past two years, many lenders have exited the student loan industry. Some will continue to service their FFELP loans until they are paid in full. However, many lenders choose to sell the FFELP loans and the next thing you know, you are getting letters and e-mail from lenders or servicers you never heard of. What’s a person to do?

It can become even more confusing for borrowers returning to school or who are still enrolled. If you are attending school and using federal student loan monies to fund your education, you have probably recently been contacted by your Financial Aid office asking you to stop in for an appointment. If you fall into this category, please make that appointment now! You will probably be asked to sign a new promissory note. This is necessary because, as of July 1, 2010, the U. S. Department of Education’s Direct Loans is the only source for federal student loans or consolidated federal student loans. For many borrowers, this will just add one more name to their ever growing list of loan servicers.

Now, more than ever, student loan borrowers must take control of their accounts and stay in contact with their lender/servicers. Do you know the answers to these 3 questions?

1. How many student loans do I have?
2. Who is servicing my student loan account(s)?
3. What is my approximate balance on my student loan account(s)?

You should know the answers to each question. Want to check your accuracy? Log onto http://www.nslds.ed.gov/ and see how you did. Were you correct? Any surprises? At this point, if you are still not completely comfortable with your student loan contact information, take a few moments to contact your lender or servicer and get everything straightened out. Even if you scored 100 on the 3 question quiz, follow these few simple guidelines to stay straight with your student loans. Notify your loan’s servicer if you:

· Change your mailing address
· Change E-mail address (Please note: if you no longer check an e-mail address, inactivate the account. If your lender/servicer has the address, they will send E-statements as opposed to “snail mail”. This will not help you if you never check or read mail in that mail box.)
· Change or disconnect your phone
· Change Employers or become unemployed (Remember there is an Unemployment Deferment available for anyone who is not working or is working less than 30 hours per week)

One final piece of advice; be sure to keep your school in the loop too. Lenders do not notify the borrower’s school when loans are bought or sold, so make sure you keep your alma mater updated on the latest changes to your accounts. Your alma mater is also a great source for answers to the latest, confusing correspondence you've received. Your school’s Default Management office still speaks and can translate that foreign language called Financial Aid!

Coming Next Month: The Rates are Falling, The Rates Are Falling …… July 1st means the annual adjustment in variable rate student loans – and they are falling. Is it time to finally consolidate your student loans?

Other Coming Attractions:
A Rose is a Rose is a Rose … Names can be confusing. You thought you paid that loan and now you are still getting late notices! What’s going on???

In-School Consolidation – What’s the Buzz? A look at the pros and cons of this 1 year window for in-school consolidation; it’s not for everyone.

A QUICK PRIMER ON EDUCATIONAL TAX CREDITS

There are four tax benefits for college education expenses:

· Tuition and fees tax deduction
· The American Opportunity Credit
· The Hope Credit
· The Lifetime Learning Credit

The Tuition and Fees deduction will reduce your taxable income. The Hope Credit, Lifetime Learning Credit and American Opportunity credit can reduce your tax bill. The American Opportunity credit replaces the Hope credit for 2009 and 2010, and provides a partially refundable credit. Taxpayers should investigate all of their options and choose the credit that will give them the lower tax; however, they cannot claim more than one credit or a credit and deduction for the same expenses. You cannot “double dip”. The education tax credits are calculated on IRS Form 8863 (PDF).

The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit can provide up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. Forty percent of the credit (up to $1,000 maximum) is refundable. This is unique to the American Opportunity Tax Credit. The tax credit is scheduled to have a limited life span and, unless Congress extends the credit to additional tax years, it will be available only for the 2009 and 2010 tax years.


The Hope Credit is a tax credit for college students in their first two years of college. It provides a tax credit of up to $1,800 on the first $2,400 of college tuition and fees. The Hope Credit can be claimed on your tax return if you, your spouse, or your dependent are a first-year or second-year college student, is enrolled at least half-time at an eligible education institution, and you were responsible for paying college expenses. If you missed this credit in the past, it might be possible to file an amended tax return for the year(s) in question.


The Lifetime Learning Credit is a tax credit for any person who takes college classes, even if you took only one class. It provides a tax credit of up to $2,000 on the first $10,000 of college tuition and fees. The total credit is limited to $ 2,000 per return, but you can claim the Lifetime Learning Credit if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses.

A QUICK REFERENCE GUIDE

American Opportunity Credit

1. $2,500 in tax credits on the first $4,000 of qualifying educational expenses. Up to $ 1,000 may be refunded.
2. Can be used for Education expenses paid with borrower funds (student loans)
3. Can be claimed for the first 4 years of post-secondary education expenses.
4. Available ONLY for 2009 & 2010
5. Applies to all four years of undergraduate college education
6. The American Opportunity credit also features an expanded definition of qualifying expenses.
   

Hope Credit

1. $1,800 of qualifying educational expenses paid for each eligible student. Can reduce taxes to $0. Excess funds cannot be refunded.
2. Can be used for Education expenses paid with borrower funds (student loans).
3. Available ONLY until the first 2 years of post-secondary education are completed.
4. Available ONLY for 2 years per eligible student.
5. Student must be pursuing an undergraduate degree or other recognized education credential.
6. Student must be enrolled at least half time for at least one academic period beginning during the year.
7. No felony drug conviction on student's record

Lifetime Learning Credit

1. Credit of up to $2,000 based on qualified tuition and related expenses paid for all eligible students. Can reduce taxes to $0. Excess funds cannot be refunded.
2. Can be used for Education expenses paid with borrower funds (student loans).
3. Available for all years of post secondary education and for courses to acquire or improve job skills.
4. Available for an unlimited number of years.
5. Student does not need to be pursuing a degree or other recognized education credential.
6. Available for one or more courses.
7. Felony drug conviction rule does not apply.

A final word of caution – Patience is a virtue that can pay BIG $s. Do not fall victim to so-called "instant" or "same-day" refunds. These are actually short term bank loans, and most have exorbitant fees. According to Brendan Conway (Contributor to The Christian Science Monitor / March 2, 2009), in some cases, that means a mind-boggling 1,300% when calculated like a credit-card’s annual percentage rate. Electronic refunds are generally processed within 15 days and a refund returned by mail will usually be received within 3 to 4 weeks.

This information is provided by SWFC to increase student awareness of possible Education Tax Credits and Deductions. We are not Tax Preparation experts. If you are interested in using any of these credits or deductions, please consult a Tax Expert or the IRS.

LOAN FORGIVENESS for PUBLIC SERVICE CAREERS

This program is open to those working in emergency management, government, military service, public safety and law enforcement, public health, public education, early childhood education, social work in a public child or family service agency, public services for individuals with disabilities or the elderly, public interest legal services or other school-based services, and employees of tax exempt 501(c)(3) organizations. If you work in one of the fields listed , you may qualify for the new Public Service Loan Forgiveness program, so Read On!

Public Service Loan Forgiveness Offered by the Direct Loan Program

Established by the College Cost Reduction and Access Act of 2007, this loan forgiveness program is only available through Direct Loans. The public service loan forgiveness program is targeted at students who pursue public service careers and who have high student loan debt and low income. Borrowers with low debt or high income will not benefit as much.

Eligible loans include Federal Direct Stafford Loans (Subsidized and Unsubsidized), Federal Direct PLUS Loans, and Federal Direct Consolidation. A FFELP borrower may consolidate their loans with Direct to qualify for the forgiveness program. Perkins Loans and FFELP PLUS loans may be included in a Federal Direct Consolidation Loan; the entire consolidation loan, including the Perkins or PLUS Loans, is eligible for public service loan forgiveness.

NOTE: Parent PLUS loans included in a Federal Direct Consolidation Loan are eligible for income-contingent repayment (but not income-based repayment), making it possible to obtain forgiveness. However, the income contingent repayment is not available for Federal Direct Consolidation Loans that include PLUS loans for borrowers who entered repayment before July 1, 2006, per 34 CFR 685.208(a)(1)(ii).

Eligible Repayment Plans include income-based repayment, income contingent repayment, standard repayment or a combination of these repayment plans. Payments made under other repayment plans do not count (e.g., extended repayment, including consolidated loans, and graduated repayment). To maximize the amount of forgiveness, borrowers should use income-based repayment.

Eligibility Requirements
PAYMENTS: The forgiveness occurs after ten years of repayment (120 monthly payments made on or after October 1, 2007 on an eligible Federal Direct Loan). Periods of deferment and forbearance are not counted toward the 120 payments. Payments made before October 1, 2007 do not count. This represents a huge savings compared to the 25 years of repayment required for forgiveness under the income-contingent and income-based repayment plans for borrowers who are not employed full time in public service jobs.

NOTE: If a borrower were to use only standard repayment for repaying their loans there would be no balance remaining after 10 years and so no debt to cancel. Standard repayment is only provided as an option to address situations where a borrower is unable to continue under income-based repayment because they no longer have a partial financial hardship or the payments under income-contingent repayment exceed standard repayment. In such a situation the borrower would use standard repayment for the remaining payments within the 10 year period and obtain some loan forgiveness at the end of the ten years of payments.

EMPLOYMENT: The borrower must be employed full-time in a public service job for the entire ten year repayment period. Public service jobs include, among other positions, emergency management, government (federal, state or local), military service, public safety and law enforcement (police and fire), public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations), public education, early childhood education (including licensed or regulated childcare, Head Start, and State-funded prekindergarten), social work in a public child or family service agency, public services for individuals with disabilities or the elderly, public interest legal services (including prosecutors, public defenders and legal advocacy on behalf of low-income communities at a nonprofit organization), public librarians, school librarians and other school-based services, and employees of tax exempt 501(c)(3) organizations

WHAT IS FORGIVEN: ALL remaining interest and principal are forgiven. The borrower must understand that this is an all-or-nothing benefit. If a borrower stops working full-time in a public service job, even with just a few of the 120 payments left, they get no forgiveness.

SOURCE: http://www.finaid.org/loans/publicservice.phtml

Back to School?

Public and private schools are back in session, fall is just around the corner, there's a hint of coolness in the air! This is the time of year that the ‘Back to School bug’ often bites us, and why not? It is a great time to either finish your degree or add additional credentials to your resume.

If you are thinking about heading back to college, be sure to get your student financial aid affairs in order. I am not talking about completing the FAFSA or being notified that your new loan has been processed. That’s the easy part. I am referring to those previous loans you used to pay for your education. Many students start a new program or enroll in a new school using federal student loan money. They are excited about their new educational path and everything is running smoothly when, suddenly, they are notified that their loan for the next term has been rejected. Why? They did not take care of their previous student loans and get their student financial aid affairs in order. One or more of their student loans defaulted and that results in a loss of Title IV funds. Over the years, I have worked with many students who had this unpleasant surprise. I have always found these situations very sad because they are preventable!

So, a few tips to follow before you hit the books again. If you are enrolling in college for a second (or third, fourth, fifth) time around, take a few moments to get your ducks in a row; you’ll be glad you did.

• Visit https://www.nslds.ed.gov/. The National Student Loan Data System (NSLDS) is the U.S. Department of Education's (ED's) central database for student aid. In one quick visit, you will find the financial institution that holds each of your loans, as well as the contact information for that bank or lender. The site should also show if the loans are in Repayment, Deferment or Forbearance. You may find a few surprises!
• Call each servicer or lender to make sure your loan payments are current or visit your account on their website. Remember, if you cannot make a payment to bring your loans current, you have other alternatives, including Deferment rights and Forbearance options. (For more information on your rights, visit http://www.cashcourse.org/swfc/SchoolPage.aspx.) However, be sure to get any delinquent issues resolved before you start classes. If your loans are in a delinquent status, many lenders will not process an In-School deferment and your loans will continue on the countdown to default.
• Make sure that your new school faxes a completed In-School Deferment to every lender holding one of your loans. Submitting the deferment form is a service that many schools offer, but it is your responsibility to make sure that the deferment form is received and processed.
• Finally, always open any mail that references student loans and is addressed to you. In today’s turbulent financial market, many student loans are being sold to other lenders or reassigned to other servicers. It takes 270 days of delinquency for a loan to default. You lender or servicer will be making numerous attempts to contact you before the default is processed.

FINALLY - A Student Loan Payment Perfect for ME!

July 1, 2009 brought a truly revolutionary change to the Direct and FFELP student loan programs. The new Income-Based Repayment (IBR) plan finally recognizes that "one size does not fit all". While there have always been payment plan options, they tended to generate monthly payments that were strictly related to your loan balance - in other words, the more you owed, the higher the monthly loan payment would be! For borrowers who have chosen careers in the public sector or had to accept entry level positions for their career path, these options were not enough. Frequently, while borrowers wanted to make payments, they were "forced" to use Forbearance because their only payment options were beyond their reach.

As you know, Forbearance will provide payment relief, but it also allows the loan's balance to grow, often at what seem to be astronomical rates. The interest can add up very quickly. For example, let’s say you have $15,500 in student loans and have a Standard Repayment plan with 120 payments @ 6.8% interest. Your monthly payments are $179 a month. However, if you use 36 months of Forbearance, your monthly payment will increase to $215 and you will pay back an additional $4,367 in interest or 20+% more over the loan’s repayment period. (Source: NCHELP Reference Library, Going Above & Beyond: Delinquency & Default Prevention - Slide 11, http://www.nchelp.org/elibrary/index.cfm?parent=1983) WOW – talk about a snowball effect!

With the new IBR plan, your monthly payment will be based on your specific financial situation, not a preset amount based on your loan balance. For borrowers experiencing partial financial hardship (and with today’s economic challenges many of us are), this plan can allow you to remain in a Repayment Status with manageable monthly payments. This can help create positive input to your credit reports.

So, you are probably wondering "How can I get on this plan?" In order to be approved for the IBR plan, a borrower must provide additional information but the payment will make it well worth the effort. To see if you might qualify for an IBR payment plan, use this simple calculator: http://www.aie.org/Calculators/IBR/index.cfm?cid=tgslcibrpage If this indicates you may qualify for the new IBR plan, hop on the phone and contact your servicer!

It’s Like Money in the Bank!

If you have variable rate student loans (loans issued between 7/1/1988 to 6/30/2006) & you will be entering Repayment between July 1, 2009 and June 30, 2010, this may be the year you want to consolidate those student loans.

Effective July 1, 2009, interest on variable rate Subsidized and Unsubsidized Stafford Loans issued between 7/1/1998 to 6/30/2006 will drop to 2.48%. This could allow you to save from $1,470 to over $5,100 over a 10 year loan period! *

There are a variety of lenders who are consolidating student loans. Just two pieces of advice:

• First, make sure that you are consolidating only your Federal Student Loans, and are consolidating under the Federal Student Loan program. This will allow you to maintain your borrower's rights, including deferment and forbearance rights!


• Next, shop around. Any loan is a consumer purchase and should be made after comparing all rights, benefits and terms or conditions. While most borrower rights, benefits and terms are defined by the Federal Loan program, there may be some discounts or costs that can vary by lender.

Be a wise consumer and check out all of your options before you "sign" or the dotted line (or the electronic "e-signature line")!

*Based on $15,000 balance, with 10 year repayment period, calculated at 2.50%, 4.25% and 8.25% interest rates.