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Times Up On 6 Month Grace Period For Student Loans


If you graduated from college this last Spring, chances are you will be getting some loan repayment notifications in the mail if you have not already. Most student loan programs require students to start making payments 6 months after graduation. The hope is that you have put your new education to good use and are now gainfully employed and better prepared to start making payments on your college loans.

If you are one of these “fortunate” students/graduates, I would recommend the following advice for you as you start tackling this debt:

  • Know What You Owe: Are you the type that just pays a bill because someone sends it to you and you just assume they must know how much you owe?  If so, the first life altering change you want to adopt is NOT to be that person. Whether it is a medical bill or an education loan, you always need to know what you are paying.  In the instance of education loans, you can visit the National Student Loan Database Clearing House to see how much you have outstanding in federal student loans. Most guarantee agencies (manage private education loans) report to them as well, so you may even be able to see some private education loans reflected on this report as well. If all else fails and you can’t make sense of your loan situation, drop an email or a call to the financial aid office at the school you graduated from and see if they can provide you with a comprehensive snapshot of the loans you received. Another option is to contact the Bursar’s office (or Office of Student Accounts) and they can do a printout of your account reflecting all the activity (charges and credits) that you incurred while being a student.
  • File For In-School Deferment: If you are currently going to graduate school or taking classes at a college or university (at a half-time load or more), you are not required to start repayment on your education loans. Most of the time, the school that you are attending will file an in-school deferment for you via NSLDS (mentioned above) but not all schools do this. If they don’t, you are required to manually file your own deferment paperwork with your lenders. Each one will have its own type of deferment form but you can see an example of one here.
  • File for Economic Hardship Forbearance: If you don’t have a job or you find yourself to be underemployed, you can submit economic hardship paperwork to your lenders and based upon their criteria they can decide to approve or deny your petition. An approval means that you can delay your monthly payments for a time period established by your lender. At the end of that time period, your payments will start up again or you will need to resubmit forbearance paperwork for an additional extension.  Most lenders have limits on how many deferments and forbearances you can have, so be sure to educate yourself on any limits imposed by your lenders.
  • Set Your Payment Based Upon Your income: If you have a lot of federal student loan debt but very little income, the Department of Education has just the payment plan for you (actually they have six of them). They are Standard Repayment, Extended Repayment, Graduated Payments, Income Based Repayment,Income Contingent Repayment, and Income Sensitive Repayment. Seems like with all these options there would be no reason to not be making your monthly payments!
  • Consolidate Your Loans: If you can’t keep track of all your loans and you are making payments to multiple lenders, you may want to look into consolidating your loans with one lender. Typically you would bundle all your federal loans into one group and any non-federal loans into another. Just make sure you are aware of the interest rates and repayment terms before proceeding with consolidation. It may be in your best interest (no pun intended) to keep your loans housed with their current lenders. Also, keep in mind that you could lose some cancellation provisions if you consolidate (see next bullet item).
  • Some Federal Student Loan Debt Can be Forgiven: That’s right! If you are a teacher in a qualifying school district or working in the public services sector, you could qualify to have some or all of your federal loans cancelled/forgiven. There are some caveats to both of these programs but it is definitely worth looking into if you think you qualify.

I hope you found this article helpful. If you know of any other recent graduates that are going into loan repayment, please don’t hesitate to pass this information onto them using the “share Tab” below.

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Sallie Mae Sells Final Round of Student Loans (ECASLA)


In 2003 the Ensuring Continued Access to Student Loans Act (ECASLA) was put into place as a method to stabilize the student loan industry and insure lender participation from year to year. Basically, ECASLA was a piece of legislation that allowed education lenders the opportunity to sell off their loan portfolios each year to the Department of Education.  The money garnered from the transaction was then put back into the financial institution’s lending pool and doled out to students again in the form of education loans. This process kept lenders in business and students with access to federally backed education loans….until now.

Starting this year, banks and financial institutions are no longer part of the federal student loan process and all loans come directly from the Department of Education via StudentLoans.gov. Great debates and discussions have challenged the pros and cons of taking the “middle man” out of the federal student loan process but the end result is that they are now missing from the equation.

Based upon this, Sallie Mae recently announced that they will be selling off their final round of qualifying loans to the Department of Education on October 12th under the soon to expire ECASLA. This is certainly a monumental moment in the world of financial aid and student lending as this final transaction marks the end of an era in which banking institutions profited off of the federal student loan program.

The following is the eligibility criteria put into place by the Department of Education that depicts which loans they will purchase (and which ones they will not):

  • Were first disbursed between May 1, 2009, and June 30, 2010.
  • Have a loan period that includes or begins on or after July 1, 2009.
  • Are fully disbursed by September 30, 2010.
  • Have no borrower benefits other than a 0.25 percentage point interest rate reduction for auto-debit.

Sallie Mae will be contacting all affected borrowers prior to the sale and informing them of the change in where their loan will be housed. If borrowers don’t meet the loan criteria above, they will continue to make their payments directly to Sallie Mae.

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Mind The Gap – A College Financial Aid Perspective


Back in my younger days, I did a stint of travel over in Europe. It wasn’t anything fancy. My living arrangements consisted of a comfy (well-used) couch in a corner of a hostel that was being rented by a long time college friend of mine who was studying at BADA in London. I spent my days traveling across the countryside (mostly by train and foot) but I always came back to the hostel for a good night sleep and a hot shower.

I share this story with you because one of the things I saw during my travels was a “Mind The Gap” logo in just about every subway station in London.  Initially, I didn’t know what it stood for but I quickly figured it out as the first train/subway rolled into my platform area and I saw a huge “GAP” between the train and the platform. Like a light bulb had just turned on, I made a shrug of the shoulders and exclaimed “oh yea”… “Mind The Gap”. The three word phrase served as a warning to those that were not familiar with train/subway travel in London on the Underground and hopefully steered people safely clear of the gaping chasm following along the platform.

Gap In The World of Higher Education

Fast forward many years later… Now that I am employed in higher education and work in a campus setting, the term GAP has taken on a totally different meaning.  From a student financial aid perspective, gap references the difference between what the federal government says you can pay for college (via the FAFSA) and what the college or university you are planning on attending is providing you in the form of financial aid. Based upon that definition, I guess it could look like a gaping chasm as referenced above in the platform/subway analogy. 😉

For those that are numbers people, let me introduce gap to you in a different way. Let’s assume that the college you are attending is going to cost $50,000 dollars a year (that includes tuition, room, board, books, etc..). You do the proper thing and fill out the FAFSA to see what type of need-based aid you might qualify for and the results of your EFC (Estimated Family Contribution) shows that your family can afford to pay $10,000 toward your student’s education this year. Based upon that figure, you would automatically assume that the remaining $40,000 in college expense will be taken care of through financial aid resources. In some cases, it is. In other cases, not so much. If the college is able to offer the student $25,000 in the form of financial aid, that will leave an additional $15,000 in unmet need for the family…otherwise known as GAP. So the family will need to not only cover the $10,000 EFC but they will also need to manage a way to come up with the additional $15,000 (of gap) to cover all the costs for the year.

How Do You Bridge The Gap?

When paying for college, there are really only three solid methods that families resort to time and time again to cover their portion of the education expenses after all other forms of financial aid are maximized.

  • Discretionary Income is the first resource. Basically, this is the monies that are left over after a family has used their income to pay all other necessary household expenses.
  • College Savings (or any savings for that matter) can be utilized to help take care of college tuition and hopefully most families have some sort of college savings program in place, if only to cover textbook expenses…
  • Education Loans are becoming the more popular route for families when it comes to paying for college. If a family chooses the education loan route, they want to make sure that they maximize all federal loans available through the Direct Loan program. This would consist of student loans and also parent loans (PLUS). If their maximum potential of loan eligibility is met through these programs and they still need more funding, then they will need to look at private loan options.  Don’t forget your local credit unions as a resource as well. I recently chimed in on a query from NBC regarding the ever growing presence of credit unions in the education loan market. If you would like to see that clip, please feel free to check out the video below.



Mind The Gap

As families move through the college search process and start picking apart the financial aspect of what that experience will mean, they definitely want to be mindful of any gap in funding that may be encountered. Some colleges promise to cover all of the costs (up to the EFC dollar figure) but many colleges will probably fall short and rely upon the student to bring some additional outside scholarship dollars to the table to help bridge that gap. All-in-all, let’s hope your financial aid gap (if any) is more like that of a missing tooth and not so much like the grand canyon amongst the landscape. Even better yet, if it is like the gap on the platform at the London Underground, a properly placed footstep (planning ahead) will make sure you clear any financial challenge (or gap) presented to you.

I hope you find this article helpful.  If you know of anyone else that can benefit from this information, please don’t hesitate to use the “Share Tab” below to pass this along.

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Choosing The Best Private Education Loan For College


I need to preface this article by stating that I would never recommend a private education loan to cover your college expenses. That being said, if you have exhausted all of your other options available through the federal loan program (including Parent PLUS), maximized all your scholarship opportunities, and hit up your network of friends and family for financial support, then it is probably time for you to look at a private education loan.

Many of the banks that used to be in the private eduction loan market have long since dropped off of the charts and no longer actively participate in providing loans to students. Key Bank is one of the more recent ones that quickly comes to mind as leaving the educational loan sector. The following is a comprehensive list of all the private education lenders that I know to still be actively originating new loans. Surprisingly, your local credit unions are also a good source of private loans. If you know of others that are in the market, please feel free to share their information below in the comment section.

Sallie Mae Smart Option Loan: http://go.salliemae.com/

Discover Student Loans: http://www.discoverstudentloans.com/

Chase Student Loans: http://www.chasestudentloans.com/

PNC Student Loans: http://www.pnconcampus.com/

Sun Trust Student Loans: http://www.suntrusteducation.com/

EdAmerica Student Loans: http://www.edamerica.net/

Citizen’s Bank Student Loans: http://www.citizensbank.com/student-services/

Tips For Choosing The Right Private Education Loan

  • Check Interest Rates: What is the interest rate today?, Is the rate fixed or variable?, If it is variable, what is the maximum percentage that it can reach?
  • Repayment Benefits?: Does the loan carry repayment benefits for so many on time payments? Some loans used to give you a 1% capital reduction after 36 on time payments.
  • Do I need a co-signer?: Chances are yes! In the past a co-signer was not usually required but the education loan market has changed and you better count on having a co-signer in place before applying for a private education loan. Besides, they usually give you a better interest rate and reduced origination fees if you have a co-signer.
  • Read The Promissory Note: I know this is hard and your eyes are quickly going to glaze over as you look at the promissory note but this is a legally binding document and you want to make sure that you are not committing yourself to more than you thought.
  • Shop Around: Lenders of private education loans are required to hold their loan offers open for a period of at least 30 days. This gives you time to check out the competition and make sure you are getting the best benefit.
  • Don’t Pass on Federal Loans: I said this above but it is worth mentioning again. Don’t take a private student loan unless you have already exhausted all the loan monies available to you via federal programs. Statistics show that one in five students pass up less expensive federal loans for the private alternative just because they thought it was easier to apply for or they were not aware of all their loan options.
  • Check out the Repayment Terms: Meaning, how long do you have to pay back the loan? (10 years, 15, 20?) Is the loan able to be deferred if you go to graduate school? How often is the interest capitalized? (once a year is pretty typical) Are forbearance privileges available? (if you are unable to secure employment)

I hope you find this information helpful as you are looking over different loan options to cover your tuition expense for the coming year. If you think this article was useful, please feel free to share it with others using the “share tab” below.

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Sallie Mae & Direct Lending In The Headlines… again


salliemaeYesterday, I wrote a nice article about how Sallie Mae is doing great things to help educate families and students about the FAFSA and the Financial Aid process. For the most part it was a warm and fuzzy, all is roses, type of article.

In order to be fair to our reader base and keep you fully educated on the world of financial aid, I probably should devote a little attention to some of Sallie Mae’s other activities.

Right now, Congress has been working on legislation that will help to streamline the way federal loans are delivered to deserving students. Currently the loans are backed by the federal government but the private banking system takes care of funding and administering the loans to the schools who then apply to the tuition accounts of millions of students nationwide. I could go in greater detail on this whole process but you would probably stop reading after 2 sentences and reach for the Tylenol.

Anyway.. Congress is/was looking to take the banks out of the equation and go through a process called Direct Lending. Basically the federal government would provide the funding and administering of the loans directly to the schools and drop the banks out of the process.  Trust me.. there are pros and cons to each of these methods but my personal opinion is that Direct Lending is probably the way to go if we are to simplify and streamline the process in which students receive federal loans. However, my personal opinion holds very little weight and it is probably driven by the fact that I think Direct Lending is coming whether we want it to or not.

By leaving the banks out of the lending process, the Department of Education estimates that it will save approximately 80 Billion dollars (yes that is a “B” and not a “M”). The goal is to utilize this savings to help pump money into some other successful education programs like Pell and Perkins.

As you can imagine, Sallie Mae, being one of the largest education lenders and loan processors in the nation with 22 billion dollars in student loans under their belt, is not too keen about the new proposed legislation. They are so unhappy with the education bill that they have spent nearly 8 million dollars in 2009 to lobby against it. My guess is that they will spend even more in 2010.

Sallie Mae’s position on the legislation is not necessarily wrong, they just feel that the banks need to remain involved in the process because they play a vital role in educating students and families about the loan process. In addition, their top notch customer service is being marketed as being far superior to anything the government will be able to provide(and they may be right…). Also, the banks help to provide a competitive market for education loans and offer different borrower discounts to try and persuade a student from choosing one bank over the other. These discounts come in the form of reduced fees, interest rate and principle reductions, etc..

As I said, there are multiple sides to this story and each one carries their own conviction for why their position is best. Here is the latest article from the New York Times on the topic. If you are really interested, or having trouble falling to sleep, start researching Sallie Mae, Direct Lending, the Department of Education and all the related legislation and proposals. You will be sure to find out more than you ever wanted to know… In the meantime, if you just want to figure out how to make college affordable, keep checking back here at CheapScholar.org and we will do our best.

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