Going to college is a noble choice. Navigating the financial aspect of that decision can be quite daunting. CheapScholar.org provides a number of resources to help our readers traverse the challenges associated with paying for college.

I have always been a big fan of infographics – especially those that are informative and esthetically pleasing to the eyes. The following infographic is chocked full of great information related to the financial aid process. Some of the topics covered are: FAFSA, Federal Loans, Comparing Financial Aid Packages, The Costs of College, Grants, Scholarships, and Work Study. Enjoy!

Brought to you by SNHU.EDU

The following guest article is provided by Dawn Lee.

Our method of providing student aid is focusing too much on what a person ‘was’ and ‘had’ done. It isn’t focusing enough on what a person ‘could’ do, and changing the way we dole out student aid to better suit this philosophy could very well change our country for the better.

This is at least according to Sandy Baum and Matthew Chingos in their report on strengthening state grant programs.

Baum is a Senior Fellow at the George Washington University Graduate School of Education and Human Development, while Chingos is a Fellow in Governance Studies as well as the research director of the Brookings Institution Brown Center on Education Policy.

Lengthy titles aside, these two folks are proposing some pretty significant changes to the way we distribute financial aid. They propose that:

1. States should target aid to students whose potential to succeed is restrained by their available resources.
2. Simplify aid programs so that prospective students and their families can more easily avail of them.
3. Reward concrete academic achievements like completing credit hours and on-time degree attainment.
4. Lower income limits and cut grants with priority placed on needier students during financial difficulties while still building up incentives for college completion.
5. Test, evaluate and promote innovative programs to replace programs found to be wasteful and inefficient.

These five points are the main components of their proposal, which aren’t really that bad on paper. I am even surprised at how basic they are. I mean, is our student aid system really that messed up that we need an entire research team to point out the basics of any aid-related program all over again?

What I’m really interested is the first point of the program, where aid should be given to students who have the potential to succeed.

I am particularly iffy about the ‘how’ of this process. How will we determine if a student has the potential for a better college if not by looking at his or her past performance? And another point I am concerned about is what about the other kids who don’t show a promising college career? Do we just leave them to fend for their own?

A solution to both issues is to stop focusing so much on where the aid goes and to start focusing on the education process itself.

We need a standardized system of education that molds students of all backgrounds into success stories. It’s not about rewarding the smart ones and disposing of the dumb ones – it’s about giving everybody a productive role to play in society. Establishing such a system will guarantee that student aid of any form will indeed return much more to society regardless of who receives that aid.

How we do that will, of course, need a lot of discussion. Have any ideas on how to make education universally rewarding for all? Just write it up on the comments section and let’s talk about it.

About The Author:

Dawn Lee is a single mother of one & a regular contributor at http://singlemothergrant.net.

If you’re considering going to college—undergraduate or graduate—you’ve probably heard a variety of educators, teachers, administrators, and fellow students discussing the FAFSA, or the Free Application for Federal Student Aid, as though it were the most important form in the world. For many students who have aspirations of climbing the ladder from higher education into lucrative careers in life sciences, financial consulting, or any number of highly specialized fields, the FAFSA may very well be one of the most important documents out there.

So, if you’ve found yourself asking ‘do I really need to fill this thing out,’ the short answer is: if you’re planning on receiving some kind of financial aid for school, then yes. Here is a breakdown of the more specific forms of financial aid the FAFSA makes you eligible for:

Pell Grant—Pell Grants, named after U.S. Senator Claiborne Pell, are sponsored by the Department of Education and covered by federal legislation dating back to the mid sixties. The Pell Grant allocates up to $5,500 for enrollment at over 5,400 educational institutions across the nation. This grant is specifically tailored for students with low EFCs (estimated family contribution).

Stafford Loans—Stafford loans are available to students enrolled in higher education institutions. Available as both subsidized and unsubsidized loans, interest rates for the Stafford awards are currently at 6.80%.

Perkins Loans—Perkins loans are similar to Stafford loans, but are given directly from schools that are Title IV eligible. There is a fixed interest rate of 5% that is sustained over the ten years the recipient has to repay the loan. Graduates can earn a lifetime amount of $60,000 from a Perkins.

Federal Work-Study Program—This is a federal program set up to help students pay for their educations while also earning an income. Students usually work at an on-campus facility, such as a library or dining hall,  and apply their earnings toward tuition costs or other miscellaneous living expenses. This is one of the most common forms of financial assistance in the American educational system and is open to all students in need.

All four of the preceding financial assistance programs require the proper filing of a FAFSA, underscoring the importance of the form. All in total, the FAFSA is your portal to applying for nine federal student-aid programs, over 600 state aid programs, and most other forms of grants, scholarships and institutional aid offered for education.

So in other words, yes, you definitely need to fill out a FAFSA.

Today’s guest article was provided by Amanda Green.

I receive a number of questions related to the financial aspect of the college experience. I respond to many of the emails directly but every now and again I like to share some of the questions on CheapScholar.org so that we can all learn from each other and maybe provide a little bit of a support group for our fellow readers.

The following story was brought to me by a young man named Adam. As you read through his situation, you may think that his scenario is unique, a little scary, and maybe even quite hard to stomach. However, I assure you that Adam is not alone and there are certainly others that are experiencing similar situations – just not maybe quite as severe as Adam.

Read Adam’s story and feel free to leave any advice, comments, or questions below. Tomorrow, I am going to introduce a new resource for Adam that I think may help his situation.

Dear CheapScholar,

This situation is going to sound very “cartoonish”, but I assure you it is no joke and a fact that I’ve just recently been slapped in the face with… I myself was brought up to highly value the dollar by my family so I still don’t quite understand people who abuse both money or “bad” debt (credit cards, auto loans, student loans & etc). By 27 years old I have saved very well on my own, pay my credit cards off in full every month, have an excellent credit score, hold a steady well paying job/career, have purchased and own multiple pieces of real estate, have a healthy 401K, have an active brokerage account I trade in frequently and other misc investments. Generally I am ALWAYS trying to learn how to invest and manage myself better financially; I have a spreadsheet for everything. I feel I need to give this brief background so that one can understand better, within a few sentences or so, the personal value that I place on managing one’s money.

The slap in the face came a few weeks ago when I made my girlfriend of 2+ years now, whom I love dearly and have planned to marry, start getting her college/student loans tallied up because she had just gotten a notice that one of them will be maturing soon and payment(s) due. I always knew she had student loans, and she always knew with 7 yrs of “private school” it’d probably be a larger but manageable number. Long story short, but it wasn’t long after going through her loans that my heart stopped and I went white as a ghost… but reality quickly snapped me out of the nightmare that  we just recreated on paper, and I realized how extraordinarily dreadful her and now our situation truly was. Her student loans are in excess of $340,000… That’s almost $50k/yr on average, an unfathomable amount…

The worst part about all this is that no she has not been training to become a Doctor or Lawyer. She got her undergrad, master’s and is now just finishing up an Advanced Education Specialist Degree, all in Psychology, and all of which will put her into a public school system paying her next to nothing. She is truly a sweetheart, is always wanting to learn/challenge herself educationally and has never (since I’ve known her) been careless spending with credit cards or the like. Her only real desire career-wise is to help everyday and work with mentally disabled K-12 students, she truly is a saint. In saying that, now her loans are plentiful, come from every conceivable lender, are comprised of every loan type and amount & most of which are unfortunately private rather than federal. I have plenty of moral and personal issues with this whole situation, but none of which I am willing to render an opinion on personally until I can help her figure out and start to climb out of this egregiously deep financial hole she has somehow gotten herself into. The story stems even deeper back to incredibly naive and irresponsible parents that created this loan nightmare for her; they “withdrew” or took out every loan disbursement amount and paid her tuition/expenses for her through the 7 years… My girlfriend, now only 25 years old, truly believed that a portion of her college had been being paid for by them and other family means, and that they certainly would have told her years ago if it was ever becoming a problem as terrible as this.

What boggles my mind, and I guess where my question(s) come in are how can the federal and private student loan entities possibly lend to one individual an amount of money this massive??? How has she racked up student loans of nearly $50k/yr??? To me these loan entities are borderline criminal, and seem completely vulturous in nature. Honestly this whole situation seems very similar to the Real Estate lending entities that have recently destroyed soo many lives/families/homes thru lending anyone and everyone home mortgages well outside of their financial wherewithal’s. I can only research soo much and have no idea which way to go from here. I don’t even know which way is up in all of this.

Any insight, direction or “miracle” would be wholly appreciated at this point… Please help!!! SOS!

Thanks,
Adam

Over the course of the past few weeks, CheapScholar.org has been covering the implementation of the new IRS Data Retrieval Tool that has been incorporated into the FAFSA filing process. The concept of making the information gathering process easier is a noble one but there has certainly been some challenges along the way.

Here are some of the informative DRT articles graciously provided by Mr. Randy Green, Financial Aid Director at Wittenberg University:

Digging up “DRT” on the New FAFSA IRS Linking Tool

Today’s guest article is provided by Mr. Randy Green, Director of Financial Aid at Wittenberg University.

Last week, I received this email from the mother of one of our college sophomores.

“This has been a very frustrating time with the new policy on obtaining IRS transcripts for financial institutions.  I have been calling for the past month to obtain this document for financial aid and as of today this document is still unavailable.

This creates such a discomfort in award distribution, not only for the institution, but the recipients.  My son, [name removed], felt very uneasy, as well as we as parents, about this as he is a presidential scholarship recipient.  He is working so hard at the university and finds this discouraging.

According to the IRS this document may not be available until late April early May 2012.  We had to pay taxes again this year and although the check was cashed by the IRS about 4 weeks ago the document is not available until the time indicated.  Please somehow assure students of their scholarships because this is discouraging.”

To be clear: tax filers who received a refund are having their returns processed first; tax filers who had to pay on their taxes had their checks cashed, but have returns that will not be processed until late April or May – a delay of twelve weeks or more.

I responded to the mother that the delay caused by the IRS Data Retrieval Process would not affect her son’s financial aid package here, but that the package would not be final until the verification process is completed; it appears likely that this will happen in May at the earliest.

We perform a quick review of every ISIR (the school side of the FAFSA results) we receive, but when I received her email I pulled her son’s record and looked it over closely.  There is nothing obviously wrong with the data (the taxes paid are in a “normal” range, the wages earned are close to the Adjusted Gross Income, and so on), but the most reassurance I could give them is that everything appeared to be in order.  The final aid package must wait for a completed verification.

March and April can be anxious, frustrating times for families even if everything goes smoothly.  Requiring that families use the Data Retrieval Tool or IRS tax transcripts to complete verification adds to that frustration.  The fact that they will not be available – due to IRS policy decisions on processing tax returns – until May takes that frustration to a whole new level.

The powers-that-be should note two items that may make this issue explode in the next four weeks:

1) In mid-April the Department of Education is going to send out a reminder to families that they should use the DRT process,  i.e. to people who have already tried to use it and were told they cannot use it until May;

2) May 1 is the national deposit deadline for most colleges – some families are going to be asked to commit before their financial aid packages are final.

We have always had those families who miss deadlines, who don’t file taxes properly, who don’t respond to instructions on verification.  And there have been those who have situations that require a delay due to tax filing extensions.

The difference this year is that families who do everything right – those who file their FAFSA and tax returns on time and accurately, who respond quickly to requests for information – are barred from getting their financial aid in a timely fashion solely because of federal policies.

With the economy making a slow trudge back from the brink, many are considering going back to school. Student loans are the only viable option for many potential college students, but that means incurring extra long-term debt at the worst possible time. A lot of language about reform has been batted around at all levels of government this past year. What has changed, what are politicians promising, and what policies are on the way?

Pay as You Earn

President Barack Obama announced in October 2011 that he would be making some major changes to the federal student loan program. Introducing the “Pay As You Earn” proposal, he promised smaller monthly payments for over 1.6 million students.

It won’t take effect until 2014, but you will then be able to ensure your student loan payments are no more than 10% of your income. If you make payments for 20 years, your balance may then be forgiven. The current Income-Based Repayment Plan (IBR) only allows your payments to be reduced to 15% of your income, with balance forgiveness after 25 years. Visit this link to find out if you are eligible.

President Obama announced recently that he intends to spur this to 2012 for students who are already struggling with payments. If you are employed in public services, such as nursing or teaching, you may get balance forgiveness in as soon as 10 years.

Bear in mind that none of this affects students who got loans for school from private lenders.

Loan Consolidation

Because of multiple payments for different loans, there has historically been a high default rate, as juggling multiple loans gets tricky. Beginning January 2012, 6 million more students were able to consolidate all their loans so that interest rates are more affordable.

It is not advised to do a loan consolidation with a credit card. If you can pay off a short term loan, check out financial tips from Plain Green Loans. Taking advantage of the consolidation earns you a 0.5% reduction of your interest rate.

Better Informed

As part of these reforms, the Consumer Financial Protection Bureau and the Department of Education have partnered up to offer the “Know Before You Owe” project. This is a form that endeavors to help potential students better understand what type of aid they qualify for, how much they may receive, and how to compare the different financial aid and work study options offered by various colleges. They believe that a lot of students sign for loans each year or each quarter without really understanding the repercussions for default or even how much they may end up owing, much less what other options exist.

If you are interested in seeing what a form looks like and helping the organizations with the project by providing feedback, please visit: http://www.consumerfinance.gov/students/knowbeforeyouowe/

Interest

One thing that isn’t very clear in any of President Obama’s speeches is that subsidized loans are slowly disappearing. The government (beginning July 1st, 2012) will no longer subsidize the interest for graduate student loans and interest will also start accruing for undergraduate subsidized loans during the 6 month grace period after graduation.

In addition, it is probably important to mention that the interest rate on subsidized student loans is doubling from 3.4% to 6.8% this coming academic year.

Startup Encouragement

The Small Business Administration (SBA) hopes to help young entrepreneurs by offering the Student Startup Plan. While the current administration says it wants to support and grow new startups, the SBA is backing it up by promoting the IBR as part of their startup planning for recent graduates. The ideology is that student loan payments should not stand in the way of anyone starting a business.

Graduate and Professional Students

Meanwhile, the Budget Control Act (BCA) became law in August 2011. This law makes it so that graduate and professional students can no longer get Stafford Loans. While the total annual loan amount allowed ($20,500) has not changed, the cap has traditionally been only for unsubsidized loans. Now that there are not subsidized loans, this means you may borrow the same amount, but now you pay much more in interest.

Other things that changed with the BCA include disallowing the Department of Education from offering repayment incentives such as interest reductions or rebates to encourage on-time payments, though they are still allowed to offer rate reductions if you are a Direct Loan borrower who has opted to have your payments automatically withdrawn from your bank account.

Private Borrowers

If you were a private borrower, Tennessee Rep. Steve Cohen and other Democrat Congress members are working for some relief for you, too. Since 2005, thanks to the Bankruptcy Reform Bill, you could not declare your privately held student loans in a bankruptcy. He is looking to reverse that, likening it to credit card debt. He is facing major opposition from his Republican counterparts, however.

Demand for Bigger Reform

Tuition will continue to climb as long as enrollment is up – and it is. The Occupy Wall Street movement has spawned Occupy Student Debt – asking for 0% interest on student loans, total and immediate debt forgiveness for prior students, and a future of free public college. While the solvency of these demands is debatable, politicians are listening. They have to. These future students are current voters.

Today’s guest article was provided by Christina Jones who is a Blogger Outreach Specialist with Blue Glass Interactive

Sources:

[1] http://www.whitehouse.gov/the-press-office/2011/10/25/we-cant-wait-obama-administration-lower-student-loan-payments-millions-b

[2] http://www.finaid.org/loans/forgiveness.phtml

[3] http://www.secureloanconsolidation.com/blog/changes-in-2012-for-holders-of-student-loan-debt/

[4] http://www.whitehouse.gov/economy/business/startup-america

[5] http://www.sba.gov/startupamerica/student-startup-plan

[6] http://www.loyno.edu/financialaid/federal-student-loan-changes-2012-2013

[7] http://www.cbsnews.com/8301-503544_162-20126172-503544/who-will-benefit-from-obamas-student-loan-plan/

[8] http://www.occupystudentdebtcampaign.org/our-principles/

Completing the FAFSA is the single most important step a family can take when trying to access funds to help cover educational expenses. Quite a bit of emphasis is put on families to complete the FAFSA as soon as possible. As a matter of fact, the FAFSA process allows for estimated tax information to be submitted if a family has not yet filed their taxes with the IRS.

Families that choose to submit estimated tax figures are required, utilizing information from their tax forms or via the IRS Data Retrieval Tool,  to go back into the FAFSA portal later and submit actual figures. The Department of Education sends reminders out to these families but for some odd reason they decided to send that notification out yesterday.

So, if you got that notification/email (see below), don’t worry, don’t despair, don’t call your financial aid office…you are fine. Just don’t forget to submit your actual figures after you file your taxes.

Email below has been graciously provided by one of our regular contributors, Mr. Randy Green.

************************************************

Subject: Important – Updates Needed for Your FAFSA

Dear JONATHAN,

When you completed your 2012-2013 Free Application for Federal Student Aid (FAFSA), you indicated that you were going to file your taxes and were providing estimated 2011 tax information.  Now that the federal tax filing deadline has passed and you have probably filed your 2011 tax returns, it is time for you to update your FAFSA.

You can update your FAFSA at www.fafsa.gov.  You should change your answer on the FAFSA (question 32) to reflect that you have “already completed” your tax return.  Once you’ve made this change, you will need to update the information you initially reported on the FAFSA to reflect the actual information from the 2011 tax return you filed.  If you filed a federal tax return with the IRS, when you access your FAFSA online, you may be eligible to use the IRS Data Retrieval Tool, which is the best and easiest way to provide accurate tax information.  With just a few simple steps, you can view information from your IRS tax return and transfer that information directly into your FAFSA.

If you are unable to use the IRS Data Retrieval Tool, you are still required to update the income information on your FAFSA so that it reflects the information on the 2011 tax return you filed.  The tax-related questions you should review on your FAFSA include adjusted gross income, income tax paid, number of exemptions, and income earned from work.  You should also ensure that your FAFSA correctly identifies the type of tax return that was filed (IRS 1040, 1040A, 1040EZ, foreign tax return, etc.) and that you have entered the correct amounts for Additional Financial Information (questions 43a-f) and Other Untaxed Income (questions 44a-j).

It is important that you make the necessary changes to the tax information so that your FAFSA includes the same information that was included on your tax return.  However, when making corrections based on your completed federal tax returns, do not update other information that was correct at the time you filed your FAFSA.  For example, do not change your answer for household size (question 93) or for number in college (question 94); unless your answer was incorrect as of the date your FAFSA was originally signed.

Your ability to receive federal student aid can be impacted if you do not make the necessary updates or corrections.

Thank you for your attention to this important matter.  If you have additional questions regarding the IRS Data Retrieval Tool, online help is available.  Visit www.fafsa.gov and click the “Browse Help” feature on the FAFSA home page for information on the tool and the FAFSA process.

U.S. Department of Education

Federal Student Aid