An analogy for college students and Monopoly lovers

I was never a fan of handing over those yellow paper dollars to my opponent because I landed on his piece of property on Illinois Ave. Just like handing over those fake paper dollars in Monopoly, paying off student loans will feel the same way. But in the game of Monopoly, it does feel better when I make an investment by buying a piece of property. And paying off student loans should feel like making an investment in Monopoly. Though at first all you see is money being taken from your bank account, later you will see the results when people start paying you for landing on your square… Or rather when your student loans diminish. There are positives to making those monthly payments. The burden is being relieved.

Photo by Mikael Miettinen

Payment Options for Student Loans

There are 4 options that can all be negotiated with your lender, whether it was a private lender before the law on private student loans changed, or whether your sole lenders are companies backed by the government. After graduation there will be a 6-9 month grace period where graduates will not have to pay off student loans, so they have time to look for a job (so they can afford the payments). Unless the graduate is in forbearance with their lender, which allows more of a grace period, he or she will start paying off loans with an amount that is negotiated with the lender. The minimum is usually about $50. Graduates are able to switch their payments to larger payments monthly. The most important thing is to stay on the same page with the lender.

Payment Option 1: Standard Payment

Graduates who have found a well-paying job soon after graduation will start paying off loans in the form of standard payment. This is the best option because loans will be paid off after 10 years, and it has the best interest rate. While this is the quickest payment option, it is also requires the highest monthly payments.

Payment Option 2: Graduated Payment

Writing a check

This option is for graduates who have found a job that starts off with a decent wage that will steadily increase over time. The loan payments will start off by mirroring the small wage and over the next couple of years for the next 10-30 years the payments will increase like the graduate’s wage.

Payment Option 3: Income-Based Payment

This payment option is set up so that monthly payments will be based off of what the graduate is making in their current income. This is for those who have seasonal jobs, or jobs that fluctuate with seasons. With this option, graduates will have 15 years to pay off their loans.

Payment Option 4: Long-Term Payment

This payment plan has the worst interest rate, because the payer has chosen to pay the least amount per month. This means that by the end of the 30 years it takes to pay off the loan, the loan payer will have paid almost double than they initially borrowed.

If you have questions about any of these options, contact your lender. Or ask your mother, she usually knows.

The changes you should know about

Starting on July 1, 2010 all federal education loans will be made through the new Direct Loan Program. This piece of legislation was the final budget reconciliation bill that carried over into the Democrats’ Health Care Overhaul, when President Obama signed it into place on Tuesday. What does this mean? It means no more mediators between paying for higher education loans and the government. The middle men of private banks and loan companies will be eliminated in dealing with federal student loans. This is being done to expand Pell grants and make it easier for students to pay off loans after graduation, instead of worrying about extra fees to the private loaners. It will save an estimated $60 billion of subsidies that would have otherwise gone to private loaners. Furthermore, there will no longer be private student loans facilitating federal funds, so many more loans will be coming directly from the government.

Where do we fit into all of this?

How does this affect me? The decision has been made to get rid of private student lenders so that more investment can be made towards Pell Grants, which are specifically for low-income families determined by the FAFSA. By 2017 the maximum Pell Grant should go from $5,550 to $5,975, while also dispersing 820,000 more grants by 2020.  The new law also invests $2 billion into education and career programs at community colleges for trade adjustment aid, providing training to employees who have been laid off because of foreign competitors. This investment will be made over the next four years.

So what now? Don’t worry. The access to loans is still available, they are just coming from a different place. While the government can partially choose who we lend money from, they cannot (or haven’t yet) implemented a law saying everyone must wear a bow in their hair on Thursdays. That would just be ridiculous. At that point we might need to start worrying, when government control is so deep that it is visible in our appearance. But this, this is an opportunity for underprivileged families to send their kids to college and a way to invest in the future. It’s a way to save more and in turn give more to those in need.

Getting inside the mind of a scholarship winner

I’ve been researching the qualities and attributes of scholarship recipients from scholarship search services such as Fast Web and College Board, and I’ve noticed that there is something different about these students. It’s not that they are home schooled individuals who went to bed dreaming about The Golden Ratio, or didn’t have any friends growing up because they were overly dedicated to their schoolwork. No, that’s a stereotype. What I am talking about are scholarship recipients, who are creative, innovative, out-of-the-box thinkers. These kinds of people will thrive in our culture, because everyone is looking for new ideas so that their business can become bigger, better and more established.

You are a creative, innovative, out-of-the-box thinker

Don’t look over your shoulder, I’m talking to you. Education is one of the ways that shapes us as individuals, shaping an extent of our identity. Be it Math, English, Web Design, Linguistics, or Biology, the ways in which we learn as well as the content we learn expands our mind and teaches us to think differently. A math major will look at the world differently than an English major and a student majoring in Web Design will look at the world differently than a student majoring in Biology. And beyond our education, there is experience which is dense and inevitable. Are you getting my point? We are all unique individuals, just like Mr. Rogers probably said, and we each bring something different to the table. When applying for a scholarship, being set apart is the key. Whether the set-apart-ness is big or small. But we don’t have any excuses if we think we are inept to fulfill this duty. Here’s how to get that free money:

• Answer the question and follow the instructions.
• Be real, and add your own experience to what you decide to write on.
• Be original.
• Be grammatically correct.
• Know that you have a chance.
• Think before you write. Brainstorm some good ideas and create an outline to help you get going.
• Show what you are trying to say through stories and examples, individualizing your essay while demonstrating the point you want to make.
• Know your audience.
• Develop a theme. Don’t simply list all your achievements. Decide on a theme you want to convey that sums up the impression you want to make. Write about experiences that develop that theme.

What the scholarship givers look for:

• A positive and confident attitude
• A clear definition of who you are and who you want to be
• An assessment of your top skills

And here is what NOT to do. And here’s some more of what not to do.

Did tedious just become easier?

That’s what three members of the Department of Education in September 2009 explained to hundreds of high school counselors who gathered in Baltimore to hear the changes being made to the Free Application for Financial Student Aid. Hey, that applies to us! The Obama Administration announced the changes in June and they have been in effect since the beginning of this month.

Some Facts on the 2010 FAFSA

• The online application, which previously asked for more than 150 questions, now asks 22 fewer questions
• The applicant will be led to 17 less web screens than they would have in 2009
• Applications online for the FAFSA must be submitted by midnight Central Daylight time, June 30, 2010
• Corrections made to the application must be submitted online by midnight Central Daylight Time, September 21, 2010
• The online form is now more organized into categories such as, “student demographics,” “parent demographics,” “basic eligibility” and “dependency status”
• Once an applicant has filled out the application online, it will give an estimate of the student’s Pell Grant, giving them a figure of their eligibility for student loans
• Students who are married or are over 23 can skip over a section of parent finance questions that no longer apply to them
• Low income students no longer have to go through questions of assets that are irrelevant to their situation
• Students who are applying for aid in the spring 2010 quarter are able to upload their IRS tax data directly into the online FAFSA forms
• Full summary of changes on the FAFSA

There are several different ways to pay for college…

Deb: Um, hello. Would you like to look like this?
[holds out a photo]
Napoleon Dynamite: [Napoleon takes the photo and looks at it] This is a girl.
Deb: [Deb continues nervously] Because for a limited time only, Glamour Shots by Deb are 75% off.
Napoleon Dynamite: I already get my hair cut at the Cuttin’ Corral.
Deb: Well, maybe you’d be interested in some home-woven handicrafts?
[Scene continues after Rex Kwon Do TV ad Kip's watching]
Deb: … And here we have some boondoggle key chains. A must-have for this season’s fashion.
Napoleon Dynamite: I already made like infinity of those at scout camp.                                   Deb: I’m trying to earn money for college.

Though making home-woven handicrafts would be quite fun, you don’t have to earn money for college the way Deb chose to. There are other options.

1. Join an on campus group that offers free room & board. A great option for anyone with great leadership abilities who wants to be involved. For example, a Residential Advisor. Look into the benefits of positions on campus that are related to residential life and food services.
2. Attend your campus wide Job Fair: Bring a resume, dress well, and pay for college by working it off through an on or off campus job .
3. The Summer Melt is an opportunity few know about. It’s the time right before fall term when students resign their spots in a university, thus resigning their scholarship money. Writing a letter to your financial aid office asking for more money doesn’t hurt, and usually helps.
4. Write a killer scholarship essay, and use it for multiple scholarship entries. Kill multiple birds with just one sweet stone.
5. Join a free scholarship search service such as Fast web, College Board’s Scholarship Search or Sallie Mae and let them find scholarships for you to apply for.
6. Using Advanced Placement credits towards college means super cheap college credit.
7. Have the government cancel all or part of your educational loans by qualifying for loan forgiveness. To qualify for loan forgiveness you must match the criteria specified by the forgiveness program which can include community service, joining the armed services, and teaching or practicing medicine in certain types of communities.
8. Seek out jobs that pay your college tuition. Three national companies that assist employees towards their education are UPS, FedEx and Home Depot.
9. If you’ve got a knack for writing, or just have things to say that would be useful in any way to others, create a blog and make money through advertisement placed on your website.
10. Host an event (more likely if you are living in a house) and organize a house show with the musicians on campus, or host a Scrabble tournament with incentives. The suggested donation for attending should be posted as anywhere from $1 to $1,000,000.

Save Save Save

1. Accelerate your degree by getting yourself into an accelerated degree program, which cram a semester’s worth of content into a shorter amount of time. In an accelerated degree program, tuition is about half the price of a traditional degree program, while encompassing a greater intensity of work.
2. Bulk up on transfer credits! During the summer, enroll in classes at a community college that will transfer to your university and save you a whole lot of money.
3. Consider transferring into your preferred university after two years, if it is more expensive, while going somewhere else at first. Doing this will allow you to still gain the benefits of your chosen university while also taking away a diploma from the college of preference.
4. Create a budget to calculate the money you spend on coffee, late night fast food runs and other things that are unnecessary. Being able to track your money will help you save and spend responsibly.
5. Keep coupons of local grocery stores and follow weekly sales, avoiding expensive grocers.

Private Student Loans – Alternatives

The private student loan market has all but died in the past few years. There are however a number of alternatives that are popping up.

#1. Lending Club – Borrow up to $25,000, however good credit is a must and the loan has a 3-5 year term that begins repayment right away.

#2. SimpleTuition – Search dozens of lenders to find the perfect student loan to match your needs. Easy, quick, simple.

Student Jobs

Getting a job as a student is a great way to pay for at least some of your college tuition expenses.

College is expensive. College is DARN expensive. Beyond scholarships, and grants, and government loans, what if you are still short? Check out these 15 creative way of paying for college.

I’d be curious to see the numbers on how the online colleges and universities are doing since the recession began.

I’d bet their numbers are up.

Why? Why not. Taking a MBA program for example online could save you $50,000 easily vs. a traditional brick and mortar program.

Take a look at a 2 year chart of Capella Education, which operates the accredited Capella University.

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As you can see, they are holding up very well during the downturn. As I dig more into the financials, I’ll see if enrollment is up this year.

I am a student at Seattle Pacific University. I have both federal loans and private student loans. I did my FAFSA every year and 2 out of the 4 years I didn’t get enough federal financial aid (loans), so I had to apply for private student loans. I did it through Sallie Mae. Now the time has come for me to consolidate all these loans together. Unfortunately, private student loans cant be consolidated with federal student loans. The interest rates on federal’s are too low to consolidate with private’s. Here is my dilemma. Its ok though you have a lot of options I’ve looked into for refinancing those private loans.

Consolidate my private loan by paying more?

This is probably the route I am going to take. Most private loans don’t compete on price so a private consolidation loan is simply replacing the private loans with one another and combining their total value. Your main goal and its main benefit is to pay a single monthly payment. Additionally, consolidating your private loan resets the term of the loan. So your monthly payment will be lower. You do end up paying more on interest over the lifetime of the loan, then you would have if you did not consolidate, but that is the least of our worries when we have to eat and find a job right? Plus this interest is fixed.

If Brett Favre consolidated

Interest rates on Private loans are based primarily off your credit score. What this means is your score may have improved since graduation. If this is the case then you may be able to get a lower interest rate on your consolidated loan, by talking to the current holder of your loan or a consolidated lender. Here is where Brett Favre comes in. Even if your credit score has not improved, you can talk to your current holder and see if they will lower your interest rates, rather than lose you to another lender. If they do not oblige, go to the Jets and live in NYC. Kapeesh?

Who will consolidate my Private Loan?

Now you have to make a decision. Which lender will consolidate my private student loans? I have made a list that might help your decision. These are private programs that consolidate your loans so the interest rate is not set by the government, it is dictated by the lender. So ask questions like is the rate fixed or variable? and whether there are any fees or prepayment penalties.

Really Important: Don’t consolidate your federal loans with your private loans. The interest rates, and superior benefits of federal loans far outweigh that of a private loan.

They are not listed in any particular order. I found them on FinAid.org

Educated Borrower Private Consolidation Loan
$7,500 minimum. $300,000 maximum. Up to 30-year term. Introductory rate of LIBOR + 1% to LIBOR + 1.75% during the first year. After the first year the rate increases to LIBOR + 5% to LIBOR + 5.75%. Origination fee of 0% to 5%. No prepayment penalty.

MELA Private Consolidation Loan
$10,000 minimum. No aggregate loan limit for MELA loans. $125,000 aggregate loan limit for non-MELA loans. Variable interest rate updated annually based on the MELA tax-exempt bond auction rate plus a spread of 3.5%. The 2007-08 MELA auction rate was 3.85%, yielding a consolidation interest rate of 7.35%. The same interest rate is provided to all borrowers, regardless of credit. The fees vary based on credit score, with 1% for excellent credit, 3% for good credit, and 6% for fair credit. The repayment term is 15-30 years, depending on the amount owed (15 years for up to $20,000, 20 years for up to $40,000, 25 years for up to $60,000 and 30 years for more than $60,000). 0.25% interest rate reduction for auto debit. Borrowers must be a Maine resident, existing MELA borrower or a student who attended a Maine college. There must be a Maine affiliation to apply for this loan.

NextStudent Private Consolidation Loan
$7,500 minimum. $300,000 maximum. Up to 30-year term. No prepayment penalties. Variable rate loan. Interest rates of 3-month LIBOR + 1.00% to 3-month LIBOR + 1.75% during the first year and 3-month LIBOR + 5.00% to 3-month LIBOR + 5.75% after the first year. Interest rates vary quarterly. Origination fees of 0% to 5%. No prepayment penalties.

SC Student Loan – PAL Consolidation Loan
$5,000 minimum. $150,000 maximum. Loans must be in grace period or repayment. Borrowers under age 24 must have a creditworthy cosigner. Borrowers age 24 or older must either be creditworthy or have a creditworthy cosigner. Repayment term of 10 to 30 years depending on the loan balance. No prepayment penalties. Variable rate loan. Interest rates of 3-month LIBOR + 4.50%. Interest rates vary quarterly. No fees. No prepayment penalties.

Student Loan Network Private Loan Consolidation
$10,000 minimum. $300,000 maximum. 20-year term for loans less than $40,000. Up to 30-year loan term for higher amounts. Variable rate loan. Interest rates of 3-month LIBOR + 5.00% to 3-month LIBOR + 8.5%. Origination fees of 1% to 5%. No prepayment penalties. Cosigner release after 48 on-time payments, contingent upon primary borrower credit.

StudentLoans.com Private Consolidation Loan
(A Brazos company.)
There is only minimal information about the loans on the web site. This loan appears to be a private label of the Education Finance Partners Private Consolidation Loan.

Wells Fargo Private Consolidation Loan
$5,000 minimum. $40,000 to $100,000 maximum, depending on credit. Aggregate loan limit of $100,000 (including other education debt). Up to 15-year term. Variable rate loan. Interest ranges from Prime + 0.0% to Prime + 6.75%. No origination fees. Up to 0.50% interest rate reduction for auto-debit. 0.5% interest rate reduction after making 48 initial on-time monthly payments.

It is safe to say that the economy has scared anyone trying to get a loan for school. How will you pay it back if the economy gets worse? How will you get a job once school is over? These are all great questions to ask yourself in the process of college. One great way to make sure your education gets funded is to stick to government programs and lending. have you heard about Stafford Loans and PLUS loans? They are government funded loans for your education. (Stafford for you, and PLUS for parents). The federal direct loan program or FDLP is another great way to get loans that is less common. The FDLP is more often called “direct loans”.

Thank the Department of Education

Direct Loans are the same as Stafford and PLUS loans except they are funded by the department of education or offered through the Federal Family Education Loan Program. (mouthful, so FFELP for short). Your school will choose which program best fits the needs of their students, The FDSLP or the FFELP. Confused yet? All you should know is that there was $509 million dollars budgeted for 2008 and that amount is expected to be higher with Barack Obama as president.

How to get these Student Direct Loans

In the FFELP, Private organizations market and service federally guaranteed loans. These institutions include non-profits and some commercial organizations. Why do they do this? To make money off the interest. In order to qualify for these loans you need to fill out the FAFSA. I have said this in most of my articles, but filling out the FAFSA and filling it out early can make all the difference when it comes to getting the money you need for college. There will be a section on the FAFSA where you can request FFELP or FDSLP. You will only be able to choose one depending on your college and the Student Direct loan they offer.

Consolidating you Direct Loan

Once you graduate you can consolidate Stafford Loans, PLUS loans and Perkins loans into one single debt. This is the definition of consolidation and its smart to do this once you graduate because it reduces monthly repayments and lengthens the term of your loan. Consolidated loans have a fixed interest rate for the entire life of the loan. So your payment won’t change. When I graduate I am definitely signing up for this option. Multiple bills from separate loans can cause headaches. This makes it easy to lower your payment and pay it off gradually.

Where to Consolidate your Direct Loan

There are some great companies out there to consolidate your loan. First place is where you received your direct loan, and that is the FDSLP. The department of education will consolidate your loan with a fixed interest rate and one monthly payment. Other companies that are leaders in consolidation are Sallie Mae, CitiBank and NextStudent. Make sure you do your research when deciding which to consolidate with. Options may very with each company or program.

There you have it. All the Direct Loan information you need. When you decide to get a student direct loan, make sure you know what you are getting into and read the fine print. My education is really important to me, but after college I want to make sure I am not paying huge monthly payments and getting myself into even bigger holes.

Many of us rely on government student loans to fund our education. They usually have low interest rates, are easily available with often no credit checks, and Universities will usually help you find them. When we fill out the FAFSA in search for Federal Aid, government student loans and grants is exactly what we are looking for. They provide great deferment options and long repayment periods that can usually be extended. I want to give you a background and some of the research I’ve found on government student loans and what to expect.

Who funds the Government student loans?

It is actually not the government that provides the finances for these student loans. Private organizations provide the necessary means for your education in accordance with the Department of Education through 2 programs which I have stated in previous articles, the FFELP and the FDLP. There are many different student loan programs. Check with your college or potential college to make sure you are applying for the right ones. Each college is different in the programs they participate in.

The faithful Stafford Loan

Stafford loans are probably the most common government student loans. They are federal loans made directly available to college and university students and supplement resources such as grants, scholarships, and work study. I have done work study all 4 years of college. The experience I gained, while helping to pay for my tuition was one of the best aids I received. The Stafford loan can come subsidized or unsubsidized. Subsidized means the government pays the loans interest while you’re in school, obviously being a better way to go. Unsubsidized student loans requires you to pay all the interest, however you can have these payments deferred after graduation.

In order to receive a subsidized Stafford loan you have to show some sort of financial need. This includes your family. I was able to receive a subsidized student loan last year by claiming myself as an independent on my taxes and FAFSA. This helped the amount I received because I was not under my parents income. If your family makes over $100K then there is only a 10% chance you will receive a subsidized Stafford loan. If it is less than that you have a pretty good shot.

Stafford Loans have limits. It depends on your status in school. If you are a freshman you can receive up to $3500, a sophomore $4500, and $5500 for Juniors and Seniors. Some majors have higher limits like medical school etc…

The other Government student loans

There are other government loans worth looking into and doing your research on. They are not as prevalent as the Stafford loan but can significantly help fund your education. Last year there was $31 billion in unmet financial need. That is a lot of money that was not given out. Don’t be the student that doesn’t get the financial aid they need. Other loans which I have mentioned in other articles is the Parent PLUS loan, which your parents can apply for. This loan differs from the Stafford or Perkins loan. The other loan that is popular among undergraduate students is the Perkins loan. It is a low interest loan (about 5%) for both undergrads and graduate students. With a Perkins loan the school is your lender. The loan is made with federal funds and your school contributes a piece of the pie. You pay back the loan to your school. It is a great loan because it is set at a low interest rate and you conveniently deal directly with your school as opposed to some outside company.

Now go get a Government student loan.

From one student to another, I strongly recommend a government student loan to help fund your education. The interest rates are fixed and the school will urge you toward this. I have subsidized and unsubsidized its OK to have both and you can consolidate them when you graduate. I love going to school and can only imagine if I was unable to pay for it. If you need help there is help out there and lots of money to be had.