FAFSA

As college graduates head out into the world, they will soon be faced with repaying their student loans. As high school graduates head off to college, they may be thinking about taking out student loans to help cover some of their costs. Before making any decisions, it is important to compare federal student loans and private student loans. While federal student loans have fixed interest rates, private student loans may have fixed or variable interest rates: • Fixed Interest Rates: These remain the same throughout the life of your student loan. This usually allows you to determine exactly how much you will be paying each month. An exception, however, is that the payment might change if you qualify for deferment, forbearance, or an interest rate reduction benefit. • Variable Interest Rates: These interest rates are usually tied to some type of index, such as the Prime Index or the London Interbank Offered Rate (LIBOR) Index, and go up or down as the chosen index changes. This means your monthly payment can change based on interest rate fluctuations, and also if you qualify for deferment, forbearance, or an interest rate reduction. When you compare federal and private student loans, look at the Annual Percentage Rate (APR) to make a fair comparison because it includes interest, fees, and other charges, and also takes into consideration whether payments have been deferred. The APR may actually be higher or lower than the stated interest rate. Understand when interest starts accruing, or adding up, on your student loans. In most cases, interest is deferred while you’re in school and doesn’t start building until graduation, but some loans may start accruing interest while you are still in school, even though you are not yet making payments. Recent graduates will likely be entitled to a grace period of six months before they need to make any payments; however, interest may still accrue during this time. If your budget allows, it might make sense to start repaying your student loans as soon as possible. If you have a number of student loans, you could consider consolidation. This helps you combine several existing federal loans into one or several private student loans into one. You won’t have to juggle a number of loans and you might be able to save money on interest rates. What About Student Loans for 2014-2015? The federal government usually sets the interest rate on federal student loans on July 1.  The National Association of Student Financial Aid Administrators (NASFAA) predicts the following interest rates on student loans for the upcoming academic year: • 4.66 percent – Federal Direct Stafford Loan (Subsidized and Unsubsidized) for undergraduate students • 6.21 percent – Federal Direct Unsubsidized Stafford Loan for graduate or professional students • 7.21 percent – Federal Direct PLUS Loan for parents and graduate or professional students. If you need help understanding your federal and private college student loans, or would like more information on the college financial aid process, contact College Financial Aid Advisors (CFAA).

Now that the May 1 deadline has passed and high school students have settled on their choice of college, it is time to begin the process of finalizing how to pay for it. Many financial aid packages include student loans, but it is important to understand that there is a difference between federal student loans and private student loans. Since the federal student loan process does not start until June, now is a good time to learn about the options available from some of the private student loan lenders. Some lenders can make it frustratingly complex to learn about all of their options, but Discover was recently recognized by The Wall Street Journal for embarking on the next generation of customer service. Discover Financial Services earned a spot on a list of the top business technology innovators in the U.S. by developing a new application that provides a fully comprehensive, customer-centric view. It also supplies account managers with better data and up-to-the-minute information, allowing them to provide superior customer service. Another example of Discover’s efforts to become more customer-centric is its newly-designed student loans website. They have included an easily-understandable chart to compare private student loan options right on the home page. The Discover site allows students and parents to easily compare options among its private student loans and those available from Sallie Mae and Wells Fargo. The three options do seem comparable on some points such as covering up to 100% of school-certified college and graduate school costs, offering competitive rates, getting an interest rate reduction when you sign up for automatic payments, not requiring payments while in school at least half-time, offering a free customized scholarship search, and applying in as little as fifteen minutes or less. But there are a few areas where Discover Student Loans stand out. The first is that they have a zero fees offer which includes no loan application fees, no origination fees, and no late fees. Secondly they have just instituted a Good Student Rewards Program, where students who get a 3.0 GPA or better are eligible for 1% cash reward on each new student loan. Finally they are the only lender on the list to offer 100% US-Based Student Loan Specialists who are available anytime, day or night. Knowledge is Power When it Comes to Student Loans When the federal loan process starts in June, Discover also has a chart which will help students and parents compare federal student loans to their private student loans. You can make wiser borrowing choices when you have a full understanding of all these differences. Talk to a professional college financial aid advisor who can help you sort through the entire financial aid process including grants, work-study programs, scholarships, and student loans to find the best combination that fits your unique financial situation. If you need help understanding your college financial aid opportunities, or would like more information on federal and private student loans, contact College Financial Aid Advisors (CFAA).

Whether you are a high school senior just deciding on which financial aid offer to accept or a high school junior who is planning summer trips to visit prospective colleges, the financial aid office is a great resource. The financial aid director is an incredible source of knowledge, but you have to be able to ask the right questions to get answers that can help your financial cause. Here are three intelligent questions to ask a financial aid director: 1. How much does it really cost to attend this college: It can be frustrating to try to come up with cost figures because students all have individual financial circumstances, but the financial aid director will probably have the best understanding of the closest dollar estimate. Start with a complete understanding of what it really costs to attend this college, not just tuition, room and board. You need to understand the typical costs for fees, books, living and travel expenses as well. Find out whether grants and scholarships are renewable, and what the anticipated increase is for next year’s tuition so you can plan ahead. From this amount you can subtract the amount of financial aid most students receive that does not have to be repaid, such as grants and scholarships. Even though it may look like all of your costs are covered, be sure you ask how much of the financial aid offer is student loans that have to be repaid after you graduate. 2. What are my chances of realistically being able to repay my student loans: You have to get a clear picture of whether this school is committed to helping you succeed. Find out how many students from the freshman class typically stay after the first semester, and ask how long it usually takes to graduate. Inquire about the percentage of graduating seniors who land jobs and what their average income is for various degrees. This will help you determine whether you will actually be able to earn enough money to repay any student loans you might need. 3. What else do you suggest for students in my particular situation: Most financial aid directors have years of experience and they have worked with students in just about any financial situation imaginable. Explain the specifics of your financial background, let the director know if anything is anticipated to change within the next year, and ask about what other students have done to achieve success. The financial aid director can be a wonderful source of information but if you are still not sure how to proceed, you can always work with a professional college financial aid advisor to make sure you understand all the implications of the financial decisions you make. Your advisor can help you put together a list of intelligent questions and will also help you decipher the answers. If you need help coming up with questions for the financial aid director, contact College Financial Aid Advisors (CFAA).

All of the financial aid packages are in from the various colleges to which you have applied, and now it is time to make a decision about which college to attend. Of course you want to think about the intangibles like how much you enjoyed the school and whether or not you think it will be a good fit for you, but the major factor in choosing usually comes down to the money. Here are some insights to help you compare financial packages to make sure you get the best deal: • How to Read the Financial Aid Offer: Although the format may vary among colleges, the financial aid offer usually contains the same basic information. It will have a cost of attendance (COA), which will detail tuition and room and board, with estimates for other expenses. It will then list out your financial aid package which may include federal and state financial aid, grants, scholarships and work-study programs. • Compare Schools: Consumer Financial Protection Bureau (CFPB) has a great tool to help you compare costs. They worked with the Department of Education to create a Financial Aid Shopping Sheet for colleges which includes the financial aid information along with graduation rates, loan default rates, and median borrowing. Their tool works off this shopping sheet and shows an average four-year public university next to schools you add. • Ask Questions: Don’t be afraid to politely ask questions if there is something you do not understand. Talk to the financial aid office at your college or a college financial aid advisor. Ask for their help in interpreting and comparing the financial aid offers you have received. Make Your Case for Additional Financial Aid If you have one preferred college you really want to attend that isn’t matching up to offers from the other schools, it’s time to make your case for additional aid. Form a thoughtful series of questions to determine what information the school used to make its offer. Ask whether you are allowed to submit any supporting documentation which might be able to bolster your case for additional financial aid. Strongly restate your interest in this particular college and reinforce the reasons why you think you will be a smart addition to their student body. Question them about strategies used by other students in situations similar to yours to be able to bridge the gap between the cost of attendance and available financial aid. Since making your case for additional financial aid is so important, contact College Financial Aid Advisors (CFAA) as soon as possible. We will help you talk to the school and put together your case for increasing the amount of financial aid you will receive. We can also help you search for scholarships that might be able to fill any financial aid gap. If you need professional insights on any other component of the financial aid process, contact CFAA now for a FREE financial aid strategy session.

It is possible that you may be selected for a process called verification after you have submitted your Free Application for Federal Student Aid (FAFSA). Verification is the process that schools sometimes use to confirm that data reported on the FAFSA is accurate. Your school or the Department of Education itself both have the authority to contact you to request additional documentation that supports income and other information that you reported. Being selected for verification doesn’t necessarily mean there is something wrong; some schools may choose to verify applications at random. Your FAFSA might be flagged for verification due to incomplete data, or the information you supplied might need additional clarification. If you provided estimated information on your FAFSA, this will need to be finalized so a financial aid determination can be made. You might be notified of the need for verification when you receive your Student Aid Report (SAR). If there is an asterisk (*) next to the Expected Family Contribution (EFC) amount the Department of Education is requesting further clarification. You might also see a message on the SAR which indicates that additional information is required. You might receive a “missing information” email or a Verification Worksheet from your school. You shouldn’t be afraid of the verification process, but be sure any additional information you provide is helpful in building your case for financial aid. Types of documentation that might prove useful include: • Taxes: You may be asked to complete an IRS Tax Return Transcript with additional information regarding your last tax statements. • Marriage: The school might want to see a marriage or divorce certificate, documentation regarding alimony and child support judgments, or a certificate of death. • Citizenship: This could include a request for alien registration information or a copy of a Social Security card. If you are selected for verification, you must update your FAFSA if there is a change in the number of family members or in the number of people who are in college in your household or your parents’ household. Once your information is reviewed again, you will be notified of any changes with a revised Student Aid Report.  Speed Is Important While you want to take sufficient time to make sure you are providing documentation that is helpful, there is some need to respond quickly. If certain documents are still missing, the school may again ask for further clarification, and you don’t want to miss out on any financial aid award deadlines. Verification can possibly increase or decrease the amount of financial aid which you have been offered. If this happens you will receive an amended Financial Aid Notification. Don’t stumble through the verification process on your own. Contact College Financial Aid Advisors (CFAA) as soon as possible and we will help you get back on the road to a financial aid decision. If you need professional insights on any other component of the financial aid process, contact CFAA now for a FREE financial aid strategy session.