5 Signs You’re Probably Going to Default on Your Student Loans

A newly released New York Federal Reserve analysis sheds some insight on factors that may determine if student loan borrowers are more or less likely to default on their loans.

According to Fed data, 28% of students who left college between 2010 and 2011 defaulted on their student loans within five years. That’s significantly higher than the students who left school five years earlier, between 2005 and 2006, of which only 19% defaulted within five years.

Defaulting on a student loan is big deal. Not only will someone who defaults on a student loan need to deal with collections calls, but a default can seriously harm a borrower’s credit rating, making it difficult to qualify for a personal loan or other large credit purchases like a new home.

The New York Fed’s analysis highlights factors that could determine default rates years after students leave school. They range from things a student can’t necessarily control —  family background and how selective the college they attended was — to things students may have a little more control over, like the degree and major they pursue.

The data show students in these categories are more likely to default on their student loans between ages 20-33:

  1. Dropped out before earning a degree.
  2. Enrolled in an associate’s degree program.
  3. Majored in arts and humanities.
  4. Attended a for-profit institution, community college or nonselective college.
  5. Came from a low-income family.

A few of the factors relate to things a student has some control over, like the kind of school chosen and the degree pursued. Another big factor, family background, depends more heavily on chance.

Here’s what the Fed found about how the factors influence default rates.

The school

For-profit, public, or nonprofit?

If a student attended a private for-profit two-year institution, their chances of default were highest of all — just above 3% were in default at age 22, shooting up to 42% by age 33. Students at private four-year for-profits weren’t far behind, with a default rate of

38.8% by age 33.

On the other hand, students were much less likely to struggle to repay their student loans at nonprofit institutions, both public and private. Private nonprofit four-year student had the lowest default rate at 17.2%. They were followed by students who attended public nonprofit four-year institutions.

Source: FBNY

Selective vs. nonselective

The Fed’s analysis found students who attended colleges that were more selective or competitive defaulted at lower rates that those who attended less-selective colleges. The analysis used Barron’s Profile of American Colleges to classify colleges into selective and nonselective based on competitiveness.

The degree

Graduate versus dropout

Whether or not a borrower graduated was the second-strongest predictor of default among borrowers, according to the Fed analysis. Overall, students who dropped out had higher rates of default versus borrowers who graduated no matter what kind of degree they attempted. The analysis notes that may be attributed to the fact graduates are more likely to find more gainful employment that would give them the ability to pay off their loans after earning a degree.

Source: FBNY

Associate versus bachelor’s degree

No matter what kind of college a graduate attended, students in a two-year degree programs had higher default rates than their peers who enrolled in a four-year college, according to the New York Fed analysis.

But the gap between default rates of two-year and four-year students was widest among students who attended public schools — 21.4% to 36.5%, respectively— a difference of more than 15 percentage points

STEM versus arts and humanities

Students who majored in arts and humanities defaulted on their loans at the highest rates — 26.3% at nonselective schools, 14.6% at selective schools— while STEM majors at selective schools (12%) and business students at selective schools (11.5%) defaulted at the lowest rates.  Overall, default rates among students who majored in business or a vocational programs were closer to STEM students than to arts and humanities majors.

Arts and humanities majors defaulted at higher rates regardless of the college’s selectivity, but if students majored in STEM, business or a vocational program, selectivity may have factored in more. By age 33, the default gap between students who chose a best-performing major and a worst-performing major was three percentage points at selective colleges, while at nonselective schools the gap was eight percentage points.

Source: FBNY

The student

Advantaged vs nonadvantaged

The Fed’s analysis took a look into defaulters’ income and family background, too. The analysis looked at the average income for the ZIP code area at a borrower’s youngest available age based on available loan data. The analysis defined students who came from households earning below the mean income based on ZIP code as nonadvantaged, and students from households earning above the mean income.

The analysis found borrowers who came from less-advantaged backgrounds based on income had higher default rates no matter what type of college they attended.

Taking both a borrower’s background and college into consideration, the widest gap in default rates observed in the analysis were among advantaged students who attended private nonprofit colleges (13% of whom defaulted by age 33) and nonadvantaged students who attended private for profit colleges (42.1% of whom defaulted by age 33).

Source: FBNY

The post 5 Signs You’re Probably Going to Default on Your Student Loans appeared first on MagnifyMoney.

What Is the NSLDS? A Tool to Keep Track of Student Loans

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Over the course of a college career, a student may take out multiple education loans of different amounts and term lengths. Loans are often granted on an annual basis, and by the time you graduate, it’s easy to lose track of your total borrowing.

What’s more, holders of federal loans get a short reprieve from repayment after graduation — up to six or nine months, depending on the loan time — making it can be easy to forget that you’ve got money due. It’s smart to use that grace period to begin planning for repayment, rather than viewing it as a vacation from thinking about your college loans.

One of the best ways to keep track of your federal student loans and payments is through the National Student Loan Data System, a centralized database for federal student loan and grant information managed by the U.S. Department of Education. By checking in regularly on the NSLDS, you can stay on top of how much you owe, the repayment terms of your loans and the monthly payment amounts.

For new graduates making a budget — sometimes for the first time — this student loan information can help them understand how much money they need to set aside for monthly payments, or if they need to look into alternative loan repayment programs.

“It’s a helpful tool, and so often as humans, we’re inclined to denial or procrastination,” says Melinda Opperman, executive vice president with Credit.org, a nonprofit organization focused on personal finance education. “By ignoring that tool, you could have a problem compounding. See what’s in there, and get yourself anchored and prepared.”

What’s the purpose of the National Student Loan Data System (NSLDS)?

The NSLDS was authorized as part of the 1986 Higher Education Act (HEA) Amendments and is administered by the Office of Federal Student Aid. It was formed with three purposes:

  • To better the quality of student aid data and its accessibility
  • To decrease the administrative work required for Title IV Aid
  • To decrease fraud and abuse of student aid programs

The NSLDS initially focused on federal loan compliance but eventually expanded to encompass detailed data from federal student loan and grant programs in which students are enrolled.

Where does the NSLDS get its information?

The NSLDS gets information from several government and loan processing services. Here are the sources for NSLDS data:

  • Guaranty agencies, which are state agencies or private, nonprofit organizations that provide information on the Federal Family Education Loan (FFEL) Program
  • Department of Education loan servicers
  • Department of Education debt collection services (information about defaults on loans held by the Department of Education)
  • Direct loan servicing (information on federal direct student loans)
  • Common origination disbursement (information on federal grant programs)
  • Conditional disability discharge tracking system (information on disability loans)
  • Central processing system (information on aid applicants)
  • Individual schools (information on federal Perkins loan program, student enrollment and aid overpayments)

When data from these sources are combined, you can get a comprehensive overview of your outstanding loans, repaid loans and repayment schedules.

The NSLDS is updated according to each organization’s loan reporting schedule. Some report monthly, and many report data more frequently.

What you’ll find on the NSLDS

After signing up for an FSA ID (Federal Student Aid ID), you can log into the NSLDS to see the updated status of your federal student loans and grants, as well as your college enrollment status and the effective date of your status.

Loans are listed from newest to oldest, and you can find more information about each, including the loan servicer’s name and contact information, by clicking on the loan number. You also will have access to an array of details about each of your federal loans and grants:

  • Name
  • Disbursed amount
  • Date of disbursement
  • Last-known balance
  • Outstanding interest
  • Status (e.g. repayment, in grace, paid in full)
  • Status effective date
  • Interest rate
  • Progress toward the 120 qualifying payments needed for Public Service Loan Forgiveness
  • Income-driven repayment plan anniversary date

“It gives a centralized, integrated view of the loans and grants under the student’s complete life cycle,” Opperman says. “Everything is there.”

You may see a lot of terms and abbreviations you don’t recognize, but there’s a glossary to help you understand them.

What you won’t find

The NSLDS only provides information about federal loan programs, so you will not see details about private loans. To get that information, you’ll need to contact your private loan’s servicer or your school’s financial aid department. You also can review your credit report (you are entitled to one free credit report annually) to find the information.

You also won’t find:

  • Real-time balance accounts. You should see the outstanding principal balance for each loan, but this number may not include the most recent data. Contact your loan servicer for the most up-to-date numbers.
  • Information about nursing and medical loans. While these are federal loan programs, they are not included in the NSLDS. Contact your school’s financial aid department for information about nursing or medical loans.
  • Loans you are not responsible for paying. Any federal loans your parents took out on your behalf, including federal PLUS loans, will not be listed on your NSLDS account. For information about federal student loans that they are responsible for paying, your parents will need to create their own FSA ID and password to access the NSLDS data.

Even with these gaps in information, the NSLDS is a great place to start when you’re not sure whom to contact with student loan questions or when you’re trying to get on top of your loan payments. It’s also helpful if you’re trying to figure out what type of loans you have, which is necessary when you’re applying for certain loan forgiveness programs.

How to sign up for the NSLDS

As mentioned previously, to use the NSLDS you must have an FSA ID username and password, which serve as your login information and allow you to access data about your federal loans and grants online. The ID and password also provide access to many other Department of Education websites.

To create an FSA username and password, visit this link. Opperman says the certified student loan counselors who work with Credit.org recommend you never give out your FSA number or password, even to credit counselors. This information carries the legal weight of a signature, and it can be used to commit identity theft. Credit counselors can get student loan information from you rather than by directly accessing your NSLDS account.

The FSA ID and password application requires your email address, mailing address, date of birth and Social Security number. A cellphone number can be provided if you’d like to bypass answering security questions to retrieve an FSA ID or password.

To look at your federal loan and grant information, click on “Financial Aid Review” after entering your FSA ID and password into the NSLDS website. You do not have to enter loan information, as agencies that issued your federal grants and loans will be responsible for reporting information to the NSLDS.

Is this site accurate?

While the information on the NSLDS generally is accurate because it is provided by loan servicers, it is usually not up to date. Organizations that provide loan information for the NSLDS report on different schedules..

What if the info is wrong?

The NSLDS is not infallible; it’s important to check your page regularly for errors and inaccuracies. Here are some common issues with the NSLDS and how to remedy them:

An error

Check the NSLDS record for this loan, and contact the data provider listed. You will need to give the data provider information that will help the organization look into the error and remedy it. If the data provider is uncooperative and will not fix the error, contact the NSLDS Customer Service Center at (800) 999-8219.

Missing data

If updated loan information is not available within 45 days of disbursement, contact a guaranty agency, the loan’s servicing center or your school’s financial aid office. Otherwise, allow for typical time lapses in reporting.

Frequently asked questions about NSLDS

Usually, no. Typically, only data providers can update information related to your loan when they make their reports to the NSLDS.

The site has an SSL certificate, which means all data passing between your web browser and the site server is encrypted (provided you’re using an SSL-compatible browser, like the latest versions of Chrome, Firefox, Safari or Internet Explorer).

The Department of Education does not charge a fee to use the site.

The site is designed to work best with Microsoft Internet Explorer. You can use other browsers, but keep in mind that the NSLDS pages may not function or display properly on other browsers. The NSLDS system requirements page provides help with browsers and a link to contact information for further assistance.

You are strongly advised not to share your FSA password — ever — as your FSA ID and password are for your use only. Anyone else who uses your FSA information is committing a security violation, and your user ID can be terminated. Organizations can lose access to the NSDLS if they share FSA IDs and passwords.

No. FSA ID passwords expire every 90 days. Fifteen days before the password expires, you will see a warning that it must be changed soon. Users can reset their passwords anytime during that 15-day window by clicking on the “change password” link on the FSA login page.

In this situation, call the NSLDS support number: (800) 999-8219.

You can call the Federal Student Aid Information Center at (800) 4FED-AID — 1-800-433-3243 — between 8 a.m. and 11 p.m. Eastern Time, Monday through Friday, and 11 a.m. to 5 p.m. on Saturday and Sunday. This helpline is not available on federal holidays. You can also contact the office by email or live chat through the website.

The post What Is the NSLDS? A Tool to Keep Track of Student Loans appeared first on MagnifyMoney.

Where the Wealthiest Millennials Stash Their Money

There’s been much talk about millennials being fearful of the stock market. They did, after all, live through the financial crisis, and many are shouldering record levels of student loan debt, while grappling with rising fixed costs.

The truth is that historically, young people have always shied away from investing. A whopping 89% of 25- to 35 year-old heads of household surveyed by the Federal Reserve in 2016 said their families were not invested in stocks. That’s only two percentage points higher than the average response since the Fed began the survey in 1989.

MagnifyMoney analyzed data from the 2016 Survey of Consumer Finances, conducted by the the Federal Reserve, to determine exactly how older millennials — those aged 25 to 35 — are allocating their assets.

In 2016, wealthy millennial households, on average, owned assets totaling more than $1.5 million. That is nearly nine times the assets of the average family in the same age group — $176,400. Included were financial assets (cash, retirement accounts, stocks, bonds, checking and savings deposits), as well as nonfinancial ones (real estate, businesses and cars).

While the wealth of each group was spread across just about every type of asset, the biggest difference was in the proportions for each category.

To add an extra layer of insight, we compared the savings habits of the average millennial household to millennial households in the top 25% of net worth. We also took a look at how the average young adult manages his or her assets to see how they differ in their approach.

Millennials and the stock market

Despite significant differences in income, we found that both sets of older millennial households today (average earners and the top 25% of earners) are investing roughly the same share of their financial assets in the market – about 60%.

Among the top 25% of millennial households, those with brokerage accounts hold more than 37% of their liquid assets, or about $224,000, in stocks and bonds and an additional 26%, or $154,000, in retirement accounts. Meanwhile, just over 14% of their assets are in liquid savings or checking accounts.

By comparison, the average millennial household with a brokerage account invests a little over $10,000 in stocks and bonds, or 22% of their total assets, and they reserve about 21% of their assets in checking or savings accounts.

Millennial households invest most heavily in their retirement accounts, accounting for around 38% of their financial assets, although they have only saved $18,800 on average.

Wealthy millennials carry much less of their wealth in checking and savings, compared with their peers. Although wealthier families carry eight times more in savings and checking than the average family — $84,000 vs. $10,300 — that’s just roughly 14% of their total assets in cash, while for the ordinary young family that figure is around 20%

The Fed data show that those on the top of the earnings pyramid are able to save far more for the future, even though they’re at a relatively early stage of their careers.

Across the board, older millennial families hold the greatest share of their financial assets in their retirement accounts. Although that share of retirement savings is smaller for wealthier millennial families (26% of their financial assets, versus 38% for the average older millennial family), they have saved far more.

When looking at the median amount of retirement savings versus the average, a more disturbing picture emerges, showing just how little the average older millennial family is saving for eventual retirement.

The median amount of money in higher earners’ retirement account is $90,000 (median being the middle point of a number set, with half the available figures above it and half below). But the median amount is $0 for the typical millennial family, meaning that at least half of millennial-run households don’t have any retirement savings at all.

Millennials and their nonfinancial assets

Most of millennial households’ wealth comes from physical assets, such as houses, cars and businesses.

While nearly 60% of young families don’t own houses today, the lowest homeownership rate since 1989, homes make up the largest share of the family’s nonfinancial assets, Fed data show.

For the average-earning older millennial family, housing represents more than two-thirds of the value of its nonfinancial assets — 66.4%. On average, this group’s homes are valued at $84,000.

The homes of rich millennial households are worth 4.6 times more, averaging $470,000 — though they represents a lower share of total nonfinancial assets — 50%.

Cars are the second-largest hard asset for the average young family to own, accounting for about 14% of nonfinancial assets.

While rich millennials drive fancier cars than their peers — prices are 2.4 times that of average millennials’ cars — their $42,000 car accounts for just 4.5% of their nonfinancial asset. In contrast, they stash as much as 31% of their asset in businesses, 20 percentage points higher than the ordinary millennial.

It’s worth noting that young adults in general are not into businesses. A scant 6.3% of young families have businesses, the lowest percentage since 1989, according to the Fed data. (Among those that do have them, the businesses represent just over 11% of their total nonfinancial assets.)

The student debt gap

Possibly the starkest example of how wealthy older millennials and their ordinary peers manage their finances can be seen in the realm of student loan debt.

A significant chunk of the average worker’s household debt comes in the form of student loans, making up close to 20% of total debt and averaging $16,000. In contrast, the wealthiest cohort carries about $2,000 less in student loan debt, on average, and this constitutes just about 4.6% of total debt.

With less student debt to worry about, it’s no surprise wealthier millennial families carry a larger share of mortgage debt. About 76% of their debt comes from their primary home, to the tune of $233,500, on average. This is 4.5 times the housing debt of a typical young homeowner.

In some cases, the top wealthy have another 11% or so of their total debt committed to a second house, something not many of their less-wealthy peers would have to worry about — affording even a first home is more of a struggle.

When is the right time to start investing?

For many millennials the answer isn’t whether or not it’s wise to save for retirement or invest for wealth but when to start. Generally, paying off high interest debts and building up a sufficient emergency fund should come first. Once those boxes are ticked, how much young workers invest depends on their tolerance for risk and their future financial goals.

“It’s never too much as long as you’ve got money for the emergency fund, and as long as they are funding their other goals not through debt,” says Krista Cavalieri, owner and senior advisor at Evolve Capital in Columbus, Ohio.

The biggest mistake that Cavalieri has seen among her young clients is that very few have been able to establish an emergency fund that will cover at least three to six months’ worth of living expenses.

Kelly Metzler, senior financial advisor at the New York-based Altfest Personal Wealth Management, said older millennials may not be able to save outside of retirement accounts yet, which can be a concern if they want to buy a house or have other large purchases or unexpected expenses ahead.

Cavalieri said that’s because young adults’ money is stretched thin by the varies needs in their lives and the lifestyle they keep.

“Their hands are kind of tied at where they are right now,” she said. “Everyone could clearly save more, but millennials are dealing with large amounts of debt. A lot of them are also dealing with the fact that the lack of financial education put that in that personal debt situation.”

The post Where the Wealthiest Millennials Stash Their Money appeared first on MagnifyMoney.

Applying for Public Service Student Loan Forgiveness: A Step-By-Step Guide

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Public Service Loan Forgiveness (PSLF) is a program designed to attract workers to jobs in the public sector by wiping clean remaining federal student loan debt after 120 qualifying payments.

Those payments represent 10 years’ worth of work with a qualifying public service employer, so because PSLF began in October 2007, the first applicants are just beginning to submit their forgiveness forms.

Qualifying for PSLF means meeting specific requirements for the employer, the loan type and the repayment plan — and the details can be overwhelming.

With that in mind, here’s a step-by-step guide to applying for PSLF.

Step 1: Figure out if you qualify.

First, it helps to understand why PSLF exists.

“It’s meant to be a light at the end of the tunnel for public service jobs, when people know they could make much more money going private,” says Betsy Mayotte, director of consumer outreach and compliance at the nonprofit American Student Assistance. “A lot of the careers — social workers, teachers, public defenders — require advanced degrees. The problem there is that people would accrue all this debt, then find they couldn’t stay in these public sector careers because they didn’t pay well.”

But the definition of public service is strictly defined, and “it’s not your job that matters, but your employer,” Mayotte adds. “It matters who signs your paycheck. You can be a groundskeeper at a state school and qualify. Conversely, you can feel as if your job is public service, but if your employer doesn’t meet the specific definitions, you don’t meet PSLF requirements.”

Employers that qualify for PSLF, per the U.S. Department of Education

  • A government organization (including a federal, state, local, or tribal organization, agency or entity; a public child or family service agency; or a tribal college or university)
  • A nonprofit, tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code
  • A private, nonprofit organization (though not a labor union or a partisan political organization) that provides one or more of the following public services:
    • Emergency management
    • Military service
    • Public safety
    • Law enforcement
    • Public interest law services
    • Early childhood education (including licensed or regulated health care, Head Start and state-funded pre-kindergarten)
    • Public service for individuals with disabilities and the elderly
    • Public health (including nurses, nurse practitioners, nurses in a clinical setting and full-time professionals engaged in health care practitioner and support occupations)
    • Public education
    • Public library services
    • School library or other school-based services

Employers that DO NOT qualify for PSLF

  • For-profit organizations (this includes for-profit government contractors)
  • Nonprofits that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code or that do not provide a qualifying public service as their primary function
  • Labor unions
  • Partisan political organizations

You must work full time (whatever your employer characterizes that to be — though it must be an average of at least 30 hours per week by the PSLF definition) for one of these qualifying employers, or part time for two or more as long as it adds up to 30 hours per week, while you make your 120 on-time payments. You’ll also need to be in qualifying employment when you apply for your loan forgiveness.

Because you won’t be able to apply for PSLF until you have completed qualifying payments, it helps to build up a paper trail over the years. You should fill out and send an employment certification form (ECF) to FedLoan Servicing, which handles PSLF, each year and whenever you change employers. You’ll fill out personal information and have your employer sign the form before sending it in. The form isn’t required, but you’ll receive a response detailing your progress toward your 120 payments and confirming your eligibility — great for peace of mind as well as record-keeping.

“While you’re not required to submit the ECF at any point, it’s always a great idea to keep records,” says Adam Minsky, a Boston attorney who specializes in student loan and consumer issues. “An employer could go out of business, or lose the records of your employment. Mistakes can be made with paperwork. So if you find yourself having to make a case for yourself later, it helps to have all of this on record.”

FedLoan Servicing says my employer isn’t eligible. Can I appeal?

If the response to your ECF comes back and someone says your employer does not qualify you for PSLF, that’s generally the final decision, says Mayotte. “You can theoretically appeal, but these employer types are all pretty straightforward,” she adds. “The overarching rule is that there’s no wiggle room: You work for the government, a 501(c)(3) nonprofit or another qualifying nonprofit. The exception might be if you work for one of these other qualifying nonprofits, but you’ll need to make a case.”

To appeal, you can resend your ECF to FedLoan Servicing and ask for another review, or contact the Department of Education’s ombudsman unit. In both cases you should include evidence to show why you think your employer should qualify, Mayotte says.

But barring a clerical mistake by FedLoan Servicing, a change in decision is exceedingly rare.

Ensure your loan type and repayment plan qualify

PSLF provides forgiveness only for federal Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans. Private loans, including bank loans that are “federally guaranteed,” do not qualify.

Loans made under other federal student loan programs, like Perkins Loans, aren’t eligible for PSLF on their own. They may become eligible, if they’re consolidated into a Direct Consolidation Loan — but it’s important to know that only payments toward that consolidated loan will count toward the 120-payment requirement.

Speaking of consolidation, here’s another thing you should know: If you consolidate qualifying loans, the clock resets to zero payments. A consolidation is considered a new loan, and again, only payments toward the consolidated loan will be counted toward your 120.

Don’t know which types of federal student loans you have? Check the Education Department site My Federal Student Aid. A pro tip from the Education Department: “Generally, if you see a loan type with ‘Direct’ in the name on My Federal Student Aid, then it is a Direct Loan; otherwise, it is a loan made under another federal student loan program.”

Additionally, you must be enrolled in the right type of repayment plan. Qualifying repayment plans include all four of the income-driven repayment plans, which base your monthly payment on your income and family size: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), income-based repayment (IBR); and income-contingent repayment (ICR).

Payments under the 10-year standard repayment plan qualify, but you’ll want to switch to an income-driven plan as soon as possible. If you stick with that 10-year repayment you’ll have paid off the loan, with nothing left to be forgiven under PSLF when you become eligible for it.

Make 120 qualifying payments

You’ll need to make all of those 120 payments during qualifying employment to apply for PSLF, but you don’t need to provide proof of those payments. Again, Minsky advises that it’s wise to keep your own records just in case there’s a clerical issue later — but generally, FedLoan Servicing will confirm the payments itself.

Note that the 120 payments do not have to be consecutive (nor, then, must be your employment with a qualifying public service employer). If you had periods of deferment or forbearance and stopped paying your loans, the count will pick up where you left off once you begin paying anew. Even defaulting on your loan payments doesn’t disqualify you, but you’ll need to rehabilitate the defaulted loan with your servicer before the payments can count toward your 120 again.

The payments do need to be on time, defined as “those received by your federal loan servicer no later than 15 days after the scheduled payment due date.” If your payment isn’t on time, or you pay less than what you’re required to that month, it won’t count toward your 120. You may make multiple smaller payments, but they must add up to at least the minimum payment amount for that month.

Step 2: Apply for loan forgiveness

After you’ve completed your 120 payments — phew, you did it! — go to the PSLF application here. The form is six pages long, but the actual application is only two. And you, the employee, must fill out only the first page: basic personal information like your date of birth, Social Security number and contact details. You’ll also need to certify under penalty of law that the information you’re submitting is truthful.

The second page is for detailing the employer’s information, and either you or your employer can fill out the top part. Here’s what it requires:

  • Employer’s name
  • Federal Employer Identification Number (FEIN, which can be found on your W-2 — or ask your HR department)
  • Your dates of employment
  • Whether you were a full- or part-time worker
  • Which category of public service your employer falls under

At the bottom of the page, there’s a section for your employer to sign, certifying that the information above is accurate.

You’ll need to repeat that process for every qualifying employer. (That’s why it’s smart to keep track of it all by submitting ECF forms annually and whenever you change employers.)

The remaining four pages of the application form reiterate the details of what it takes to qualify for PSLF. They also explain where to send the completed application form:

  • You can mail to

    U.S. Department of Education, FedLoan Servicing
    P.O. Box 69184
    Harrisburg, PA 17106-9184

  • Fax to 717-720-1628; or
  • Upload to MyFedLoan.org/FileUpload, if FedLoan Servicing is already your servicer.

In rare cases, you may not be able to obtain employers’ certification. There’s a checkbox on page 1: “Check this box if you cannot obtain certification from your employer because the organization is closed or because the organization has refused to certify your employment. The Department will follow up to assist you in getting documentation of your employment.”

“That’s another reason it’s prudent to send the ECF forms every year, because you’ll already have a signature on record,” Mayotte says. “I’ve heard of a few cases where employers were not comfortable filling out the form for privacy reasons, but usually if you show them the form and explain a bit, you can change their mind.”

Mayotte added that FedLoan Servicing will likely accept a tax return as proof of employment, but that solution is more of a “last-ditch effort” to satisfy the conditions.

FAQ and other things to know

It’s not yet clear, as the first qualifying borrowers are just now applying for PSLF. Mayotte says American Student Assistance is in touch with an early applicant, to see how the process goes, but no timetables for forgiveness have been confirmed. The Department of Education did not immediately respond to MagnifyMoney’s questions on the topic.

Yes. If you’ve made your 120 payments and are looking to switch to an employer who isn’t eligible, be sure to file your PSLF application first. You must also be employed full time at a qualifying employer or employers at the time the forgiveness is granted, according to the Department of Education.

“No concrete proposal seems imminent, but whenever something happens, there’s a general view among experts that a change to PSLF won’t be retroactive to existing borrowers,” Minsky says.

The payment count restarts, back at zero. The consolidated loan is considered a new loan, and only payments toward it will count.

Here are the employer certification form and the PSLF application.

While studentaid.ed.gov has all of the official information, it’s spread across different pages and can be unwieldy. American Student Assistance offers an excellent guide that breaks down the basics and also links to official webpages and forms.

Alternative loan forgiveness programs

Beyond PSLF, there are other federal programs to forgive or discharge federal student debt. These include:

Industry-specific forgiveness programs

  • Perkins Loan Cancellation and Discharge: This applies to people who perform certain types of public service or are employed in certain occupations. According to the Department of Education, for each complete year of service a percentage of the loan may be forgiven. That percentage varies by job/employer type, and the following workers qualify:
    • Volunteer in the Peace Corps or ACTION program (including VISTA)
    • Teacher
    • Member of the Armed Forces (serving in area of hostilities)
    • Nurse or medical technician
    • Law enforcement or corrections officer
    • Head Start worker
    • Child or family services worker
    • Professional provider of early intervention services
  • Teacher Loan Forgiveness: Teachers who work full time for five complete and consecutive academic years (in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications) may be eligible for forgiveness of up to a combined total of $17,500 on Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans. (Those who have only PLUS loans are not eligible.) Read more about loan forgiveness programs available to teachers, including TEACH Grants and state forgiveness programs.
  • Programs for lawyers: Lawyers with at least $10,000 in federal student loans may qualify for the Department of Justice Attorney Student Loan Repayment Program (ASLRP). Additionally, the John R. Justice Student Loan repayment program provides assistance for state and federal public defenders and state prosecutors for at least three years and is renewable after 3 years. Benefits cannot exceed $10,000 in a calendar year and cannot exceed $60,000 per attorney total. .) Read more about programs for lawyers, including forgiveness programs through specific law schools and certain states.
  • Programs for doctors and health professions: Several programs are available, including multiple military doctor loan forgiveness options through the Army, Navy and Air Force. Other options include state-specific forgiveness and the National Health Service Corps (NHSC), which can provide up to a $50,000 to repay a health profession student loan in exchange for a two-year commitment to a NHSC site in a high-need area.

Income-based repayment plans

  • This isn’t a traditional cancellation program like what’s above. These four federal income-driven repayment plans base your monthly payment on your income: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), income-based repayment (IBR) and income-contingent repayment (ICR).The payment terms vary, and your outstanding balance is forgiven after your repayment term of 20 to 25 years is complete. Because the monthly amount you owe will fluctuate based on your income, you could end up repaying your loans before your term is up, or you could have a balance that will be forgiven. However, if you receive student loan forgiveness this way, the canceled debt is taxable. (Only borrowers whose loan forgiveness stems from their employment are exempt from paying taxes on canceled student loan debt.)

Loan discharges for special circumstances

There are a few other times you may be able to get your student loans forgiven, but they’re relatively rare, and they’re generally because of bad circumstances. You can find out more about these discharges on the Department of Education’s website:

The post Applying for Public Service Student Loan Forgiveness: A Step-By-Step Guide appeared first on MagnifyMoney.

3 Reasons to File Your FAFSA Right Now

It’s October, and that means college-bound families can start applying for financial aid for the 2018-19 school year. the Free Application for Federal Student Aid, or FAFSA, opened Oct. 1.

Technically, families have until next summer — June 30, 2018 — to submit their FAFSA for 2018-19. But experts recommend filing as soon as possible in order to maximize the amount of aid students can receive. That’s because state, federal and school funding for various types of financial aid is often limited, and can run out.

Don’t leave money on the table. A recent study by social sciences researcher, Michael S. Kofoed at the United States West Point Military Academy found that each year, students who do not file miss out on as much as $9,741.05 in federal grant and student loan money, aggregating to some $24 billion annually.

“To get the most aid, you’re going to want to make sure you are doing it early,” says Jasmine Hicks, national field director with Young Invincibles, a nonprofit advocacy group for young adults.  Hicks has trained college-bound families on what they need to successfully fill out and submit the FAFSA.

Here are a few tips to help you file your FAFSA for the maximum amount of aid available to you.

1) Your state and college FAFSA deadlines might be even earlier than the federal cutoff.

Adding to your list of dates to remember, states and schools have their own FAFSA filing deadlines for grants and scholarships.

For example, for Delaware students to be eligible for state scholarships and grants for  2018-19, they must file their FAFSA by April 15, 2018. But the submission deadline for students who wish to be considered for Delaware State University scholarships and grants is even earlier, on March 15, 2018.

You can check here to see your state’s filing deadline. Be sure to enter your state of legal residence and the school year for which you’re applying for aid to view the cutoff date for your state. Be sure to double-check the deadline, as it could be earlier than the federal filing deadline and some states have different deadlines for different programs.

For example, Alaska’s Education Grant asks applicants to file the financial aid application as early as possible after the Oct 1 open date, since awards are made until the fund is depleted.

But the “official” FAFSA submission deadline for the scholarship is the same as the federal one.

Hicks says families should check a school’s website to check and see if there is a different filing deadline date than June 30, 2018. Some schools may require students to file earlier than June 30 to be considered for institutional scholarships and grants.

2)  The FAFSA is the key to unlocking more than just need-based aid.

If you don’t file the FAFSA, you might also remove yourself from the pool of eligible recipients for state and institutional aid, as well — even if they aren’t income-based. Many aid offerings require a FAFSA.

Here’s a list of all the federal aid for which you need to complete a FAFSA to be eligible:

  • Federal direct student loan
  • Federal work-study program
  • Federal PLUS loan (for parents)
  • Federal PELL grant
  • Federal Supplemental Educational Opportunity Grant (FSEOG)
  • Teacher Education Assistance for College and Higher Education (TEACH) Grant
  • Iraq and Afghanistan Service Grant

And that’s just federal aid. As we mentioned before, states and schools may use information from your FAFSA to determine if they will award you merit-based grants and scholarships. And they may have their own submission deadlines.

3) Financial aid money may run out.

Students may think they have tons of time to submit their application, but, if you wait to file, you may miss out on “free money” due to limited resources. Let’s put it another way: If the funds run out before you submit your FAFSA form, you could receive less money compared with what you would have gotten had you filed earlier — or you might get nothing at all.

If you know you will need scholarship or grant money to fund your education, you should make filing the FAFSA early your first priority. “There’s really no reason to wait,” says Hicks.

Fortunately, it’s become easier for families to tackle the FAFSA.  The Department of Education moved the application’s from January to October, beginning with the 2017 graduating high school class. Prior to the rule change, families could not submit their FAFSA until January for students attending college in the fall. The rule change allows families to submit the FAFSA form earlier, and use older tax information to fill out the form so they are able to meet early deadlines for financial aid.

Students can now use family tax information dating back as far as two years, so applicants no longer have to wait to file until their parents or guardians file their taxes for the current tax year.

On top of that, FAFSA forms now include a new  IRS data retrieval tool, which will automatically pull in your parent’s tax information from two years ago, so you don’t have to shuffle through a stack of papers looking for letters and numbers corresponding to the information you need to input.

Where to get help to finish up your FAFSA

The tax information may be easy to pull in electronically, but the FAFSA has more than 100 questions and isn’t the easiest form to decipher overall.

“Students often think of the FAFSA as a huge and daunting task,” says Hicks. “They don’t feel like they are able to do it or equipped to do it.”

Get help if you aren’t confident in filling out all the information on your own, so you don’t put off filing the FAFSA any longer. There may also be follow-up requests, like income verification, that, if overlooked or left incomplete, could delay your receiving all or part of your financial aid award.

Up to  40 percent of college-bound students who apply and are accepted to college fall prey to a phenomenon called ‘summer melt.’ They never make to campus their freshman year because of mistakes that trip them up in the process. Many of the mistakes have to do with the financial aid process and can be avoided if you get help early on.

Your high school guidance or college counselor may be able to assist you with your application.

If you feel you need more assistance than your counselor can provide, look to organizations or access programs that focus on helping students complete the forms required to give financial aid, like the College Goal Sunday Program hosted by the National College Action Network, or Reach4Success.

The post 3 Reasons to File Your FAFSA Right Now appeared first on MagnifyMoney.

More Than 40% of U.S. Adults Struggle to Make Ends Meet

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You may be struggling to pay bills every month, but so are plenty of other people.

The Consumer Financial Protection Bureau on Tuesday reported that 43 percent of American adults struggle to make ends meet, based on the results of a national survey conducted in 2016 on the financial well-being of U.S. consumers.

About 34 percent of all consumers surveyed reported experiencing material hardships —  these include running out of food, not being able to afford a place to live or lacking the money to seek medical treatment — in the past year, the bureau said.  

In the survey, the bureau asked more than 6,000 participants from all walks of life to answer 10 questions about current and future financial security and freedom of choice, and to give a score from 0 to 100 on each question. The average consumer score was 54 in the survey. Not surprisingly, consumers surveyed said that their financial conditions were closely tied to their level of education, income and employment status, according to the bureau. 

Young adults are especially susceptible to financial hardships, the agency found. 

Millennials — those age 34 and below — reported an average score of 51 for their financial well-being, 10 points lower than seniors ages 65 and up and three points lower than the national average. 

The report, what the bureau calls “the first of its kind,” not only provides a view of the the overall state of financial conditions in the U.S., it also sheds light on how individuals from different demographics are faring financially. 

Adults with scores of 50 or below have a high likelihood — more than 50 percent — of struggling to pay bills and of experiencing difficult financial situations, according to the report. 

In contrast, those who reported scores of 61 and above had a much lower probability — less than 10 percent — that they would have trouble paying for basic needs.  

 Savings = stability  

Of all the factors examined, the bureau found that the amount of savings and financial cushions is the most important when it comes to disparities in people’s financial situations. 

The average financial well-being for adults with savings of less than $250 — the lowest level — is 41. That compares with 68 for people with the highest level of savings — $75,000 or more, according to the report. 

Similar differences in scores were seen with the ability to absorb unexpected expenses.  

“These findings highlight the importance of savings and other safety nets in helping people to feel financially secure, one of the basic elements of financial well-being,” the report said. 

Having some sort of financial knowledge appears to benefit financial well-being. 

The survey found that individuals with higher levels of financial confidence, knowledge and day-to-day money management behaviors tend to report better financial conditions. 

Apart from the survey, the bureau initiated  an interactive online tool allowing consumers to measure their own financial well-being.  

 7 tips to improve your financial health: 

  1. Have “rainy day” cash available. Often, people who feel they are broke don’t have the means to absorb unexpected expenses. We’ve ranked the best options for when you need cash fast.  A good rule of thumb is to set aside at least three to six months’ worth of living expenses.   
  2. Save. Save. Save. It’s never too early to start saving for retirement. Financial planners often suggest you stash at least 10 percent of your income every month. 
  3. Focus on paying down high interest debts. Sometime it makes more sense to pay off debt than to save, especially if you have high-interest debt like credit cards.  Here are four fast ways to achieve that goal.
  4. Consider changing your lifestyle. Lifestyle inflation is the ultimate budget-killer — a widespread phenomenon that occurs when people spend more as their incomes increase.
  5. Learn to ignore the Joneses. Focusing on your needs and goals rather than aligning them with the people in your life or in your social media feed is critical to being happy with the state of your finances and your life.
  6. Come up with strategies to help break your negative spending habits. For example, we’ve written about a simple $20 rule that can help break your credit card addiction. Explore other ways to break bad money habits here.
  7. Educate yourself. The more you know about your finances, the better off you’ll be. It doesn’t have to be complicated. Simply using an app to track your spending or asking your HR department for a review of your retirement savings options are good places to start. The key is to engage in day-to-day money management and establish a habit of saving and budgeting. 

The post More Than 40% of U.S. Adults Struggle to Make Ends Meet appeared first on MagnifyMoney.

Is It OK to Spend Your Financial Aid Refund?

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Just a few weeks into their college education, many students receive funds totaling hundreds or possibly thousands of dollars — the “extra” money from the student’s financial aid package. Usually, the money comes with little to no information on how students should spend it, or how to return any funds they may not immediately need.What many students may not realize immediately is, the majority of the time, taking any extra money not truly needed to pay for educational expenses results in them owing even more student loan money and making payments over a longer period of time after graduation.

Simply learning about the money and creating a budget could prevent many students from adding to the average $34,144 student loan balance they are already expected to pay back.

What Is A Financial Aid Refund?

Your refund is the amount of money left over after all of your scholarships, grants, and federal and private student loans are applied toward tuition, fees and other direct educational expenses for the semester. The refund could come as a lump-sum direct deposit to your bank account, as cash or as a check.

The school legally has to disburse any leftover Federal Student Aid money you are awarded. “[Schools] cannot hold onto that credit balance unless the student gives written consent,” says Karen McCarthy, Director of Policy Analysis at National Association of Student Financial Aid Administrators (NASFAA). In the case of a PLUS loan, the parent must give consent for the school to hold the credit balance.

Most refunds most likely come from leftover federal student loans, but recipients of some grants may receive a refund for unused funds as well.

In fall 2009, Brooklyn, N.Y., resident Crystal Chery, was just beginning an associate’s degree program at Kingsborough Community College. She qualified for the Pell Grant, which covered $5,350 of her tuition and expenses for the school year. After tuition and fees totaling $1,550 were paid, Chery received a credit for about $1,125 to her bank account each semester.

While there is no official record of exactly how many college students end up with a positive balance on their account after all of their financial aid package is applied, each semester possibly thousands of U.S. college students in the United States find themselves in a similar position as Chery did her freshman year.

The total amount of financial aid that a student is able to receive is up to the institution’s calculated cost of attendance, which is a big part of the math that goes into calculating a student’s financial aid award. Sometimes colleges pad their total cost of attendance estimates to include things that aren’t directly paid to the school, like books, housing, transportation or child care. The idea is that the student will use any leftover funds for other things they need in order to go to school.

“Kids going to a $4,000 community college can walk away with about $5,000 of refunded money,” says college aid expert Joe Orsolini, especially if they find ways to save on expenses like housing. In Chery’s case, she lived at home, which meant she didn’t need any funds for housing.

If you received a refund from a mix of loans, scholarships and grants, carefully examine your refund to understand where it came from and if you’ll have to pay back that money.

Grant and Scholarship refunds

Grants and scholarships — truly “free money” — are usually applied to your institutional bills first. There may be restrictions on how you can use money from these sources, as rules vary widely by state, institution and scholarship program regarding how students are allowed to spend the funds they receive.

Usually the amount of “free money” a student gets is smaller compared to loans they receive and is depleted by direct institutional bills, so most students don’t get that money refunded to them. However, it’s possible for some students who received a large amount of scholarships to be refunded “free” money.

Chery isn’t required to repay the leftover Pell grant money she received for her education, as she doesn’t fall under any special circumstances like students who may have withdrawn early from their program, or dropped to part-time enrollment during the payment period. In addition, the school was legally required to issue her a refund credit for the excess federal funds.

Student loan refunds

If you receive a refund from unused federal student loan money, you’re free to keep it, but remember you’re still borrowing that money. You will need to pay any federal loan money refunded to you, with interest, starting six to nine months after you graduate.

Generally speaking, you should return any unused loan money that you don’t need right away to avoid taking out more in loans than you really need. But if you need to keep it, make sure you spend the money wisely.

Whatever you do, “don’t go buy a car or go on spring break with [your student loan refund],” says Orsolini. If you’re spending federal loan money, a $10 pizza today at 6.5% APR will cost close to $20 to pay off in 20 years.

Do that math for thousands of dollars in student loans. Make your best effort to limit any flexible, frivolous or impulsive spending to money you don’t have to pay back with interest.

How you handle your student loan refund may also depend on what kind of loan it is — unsubsidized or subsidized.

Subsidized student loans

Interest won’t begin to accrue on subsidized student loan money until six months after you have graduated. So, if you keep your refund, you don’t have to worry about racking up interest charges on the debt you owe while you’re in school.

For that reason Orsolini argues students shouldn’t give back any “extra” subsidized loan money until they are in their last semester of college.

“Until you know for sure that you’ve made it to the finish line, hang on to that money because you never know what is going to happen,” says Orsolini. He recommends placing excess financial aid funds into a 529 college savings account, where it can grow, and you can use the money if you plan to attend graduate school.

If students don’t want to open a 529 account, Orsolini recommends they stash unused subsidized loan money in an emergency savings fund, to help maintain as much flexibility as possible in paying for college.

Orsolini says this method provides a financial safety net for students, as you never know what can happen to your income. If you choose to do this, you should pay back any unused subsidized loan money the month before your graduation to avoid paying interest.

Warning: Orsolini’s method takes a lot of self-restraint.

Unsubsidized student loans

Students shouldn’t pocket any unsubsidized student loan money, as interest will begin to accrue immediately, and keeping the money won’t be worth it.

“Even if you put it in a savings account for a few months, it’s going to accrue more interest as a loan than it would in the savings account,” says Ashley Norwood, Consumer and Regulatory Adviser at American Student Assistance (ASA), a nonprofit student loan advocacy group that helps students finance and repay their student loans.

Avoid keeping unneeded unsubsidized loan money at all costs if you can.

If you find yourself keeping the loan because you need to live off of it, Betsy Mayotte, Director of Consumer Outreach and Compliance at ASA, suggests you do your best to reduce your cost of attendance.

You could make up some or all of the maximum $2,000 a student can receive in unsubsidized loans by getting a part-time job or a work-study job, for example. If cost of living is too high at the school you’re attending, look at a cheaper school or consider moving home if the school is close enough

Should You Spend Your Refund — or Return It?

Unless you have restrictions on how you can use it, what you decide to do with your refund money as a college student is really up to you.

“The assumption is that the student is using that credit balance to pay for those [indirectly billed] expenses,” says McCarthy.

But students don’t always do that.

“When I was in college, I remember all of my friends getting True Religions and all of this stuff [with their refund money] … I did not,” says Chery. “I was focused on other things.”

Chery used her fall semester “refund” to buy equipment to launch a DJ career, starting with a $1,350 MacBook, which she used to create her own mixes and to use at gigs she booked while in school. With the following semester’s refund, Chery purchased a Canon 60D DSLR camera for another $1,200 because she wanted to “dabble in photography and promote [her business].”

Chery says the investment paid off. After booking larger, professional gigs and gaining some experience, she was able to present work that helped her land an internship with Hollywood, Calif.-based media company, REVOLT TV, where she got to work with big-name music artists like Sean “Diddy” Combs and Damon Dash.

“When I started making these investments, I didn’t know that they were going to alter my career like that,” says Chery, who now hosts and books events with hundreds or thousands in attendance throughout the northeast United States.

After you’ve allocated funds to different areas of your budget, you need to figure out what to do with any extra funds. If the money is “free,” meaning you don’t have to pay it back later, you can keep it, but you may need to look into what you are allowed to spend it on, says McCarthy, as there may be restrictions on how you can use scholarship or grant money.

If you think you have enough money for your needs, the experts at ASA and NASFAA agree students should immediately send back any money they don’t think they need, since students can always ask for that disbursement again later on.

Giving money back or canceling a federal student loan won’t affect how much financial aid you are offered the following semester and if you need the money later on in the current semester, Mayotte tells Magnify Money.

“Let’s say you refused all of the loans. You can go back to the financial aid office and ask for part or all of that loan money up to 180 days after the last day of classes,” adds Mayotte.

As long as you were eligible to receive the student loan funds during that pay period, you can receive a federal loan for a prior or the current payment period without penalty if you ask for it within the 180-day period.

For example, you can technically still receive loan money you denied during the fall semester if you request a late disbursement for that money during your spring semester as long as it’s within 180 days after the end of the payment period.

Ask Yourself These 3 Questions Before Spending (Or Returning) Your Refund

Have you paid for all of your non-negotiable expenses for the semester?

Certain non-negotiable expenses (read: tuition and fees) are usually billed at the beginning of the semester, but the school won’t send you a bill for everything you can’t succeed without, like technology for classes, a working laptop, or sheets for your dorm bed. Here are a few possible spending categories you may or may not include in your budget:

  • Living expenses not billed by the institution
  • Books and other educational supplies you’re going to need over the course of the whole term
  • Transportation (gas, on- and off-campus parking)
  • Child care, if you need this so that you can attend school
  • Miscellaneous personal expenses

Do you need the money to cover other college-related expenses?

There are a host of hidden college costs college-bound families fail to consider for one reason or another, and they can dry an unsuspecting student’s checking account. They are all the little things families don’t think about during move-in, like organization membership fees and paying for food outside of a prepaid student meal plan. If you can’t cover those things with part-time income during the school year, tally up an estimate and keep what loan money you need.

Do you have an emergency fund?

You should have every reason to have savings, especially if you’re paying for school on your own. You won’t get many opportunities to stash away $1,000 in cash working for minimum wage as a barista in school. Pocketing some of the money now will help you steer clear of rainy days and expensive borrowing options in the future when those hidden costs creep up on you. Set one up ASAP.

How to return your refund to the Department of Education

The rule is simple: Return the loan within 120 days of disbursement, and it will be like you never took it out in the first place.

The rule is found in the text of the Master Promissory Note, which all FSA borrowers are required to sign promising to pay the loans back before they can receive any federal aid funds. The following information is found under “Canceling Your Loan”:

You may return all or part of your loan to us. Within 120 days of the date your school disbursed your loan money (by crediting the loan money to your account at the school, by paying it directly to you, or both), you may cancel all or part of your loan by returning all or part of the loan money to us. Contact your servicer for guidance on how and where to return your loan money.

You do not have to pay interest or the loan fee on the part of your loan that is cancelled or returned within the timeframes described above. We will adjust your loan amount to eliminate any interest and loan fee that applies to the amount of the loan that is cancelled or returned.

If you make the 120-day deadline, you’re in the clear. You won’t be required to pay loan fees or any interest already accrued on unsubsidized loans in that time. Sometimes, your university can send it back on your behalf, so your first point of contact should be the financial aid office at your institution. Check with them to see if they can send the unused federal student loan funds back on your behalf, or if you will need to send the money back to your loan servicer on your own.

After the deadline, you’ll need to simply make a loan payment back to your loan servicer. You can begin to pay your loans back while still in college. If you do, you won’t pay any interest on subsidized student loan money (it doesn’t begin to accrue until six months after you graduate), but you will pay any loan fees charged to your account.

When will I get my financial aid refund?

If you’re expecting a refund, you aren’t likely to see that money until after the add/drop period for classes — the grace period during which you can change your choices without penalty — ends. That can be about three to four weeks into the semester, although some schools may disburse funds earlier. According to the Department of Education, schools must pay a credit balance directly to a student or parent no more than 14 days after the first day of class or when the balance occurred if it occurred after the first day of class.

Until then, you’ll have to cover your costs out of pocket.

“Students who are expecting refunds are very anxious for them,” says Norwood.

Norwood adds the anxiety may be because many students who see a refund check are lower income — they may see the money because they qualified for more aid. They may depend on the funds from the refund to pay for important costs related to their education such as rent for off-campus housing or educational supplies for classes.

If you missed something on your financial checklist — like signing the Master Promissory Note or completing Loan Entrance Counseling — over the summer, you may see funds even later than four weeks. Overall, if you’re hoping to use refund money to cover your rent or other school expenses, you may need to come up with the cash by other means.

“If [students] don’t budget well for the whole year, it’ll be the same thing in January,” says Mayotte.

There is a silver lining for you if you received Federal Student Aid (FSA). As of July 1, 2016, Title IV schools are required to provide a way for FSA recipients to purchase books and supplies required for the semester by the seventh day of the semester if:

  • The school was able to disburse FSA funds 10 days before the semester began, or
  • The student would have a credit balance after all FSA funds are applied.

The school doesn’t have to write you a check outright for books. Institutions can award the funds in school credit or bookstore credit, too, but must grant you the amount you are expected to spend on educational supplies according to the institution’s calculated cost of attendance by the end of the first week of classes.

The post Is It OK to Spend Your Financial Aid Refund? appeared first on MagnifyMoney.

Not-So-Free College: Oregon Changes Requirements for Free Tuition

Some college-bound students in Oregon won’t receive money for college the state promised them for this upcoming school year. In 2016, Oregon became one of the first states to offer to cover students’ community college tuition, setting a $40 million budget for the Oregon Promise Program. However, state funding missed that mark by about $8 million this year.

The funding shortfall and a high turnout of applicants has forced Oregon state legislators to change the program’s eligibility requirements and disqualify students from the highest-earning households.

What’s changing

The Oregon legislature has given authority to the Higher Education Coordinating Commission (HECC) to establish cost controls for the Oregon Promise Program. HECC made a new rule that caps grant eligibility at students whose families are able to contribute $18,000 or more toward the student’s post-secondary education, according to the expected family contribution (EFC) calculation students receive after submitting the Free Application for Federal Student Aid (FAFSA) or Oregon Student Aid Application (ORSAA).

As a result, the state will only be able to award grants to about 80% of eligible new applicants for the fall 2017 semester. More than 15,000 students have applied for the grant for the upcoming 2017-18 school year, starting in September, HECC tells MagnifyMoney. So far, about 8,300 have been told they are eligible for Oregon Promise grants. However, notification of eligibility does not mean a student will receive an award — HECC won’t have an official number of recipients until students enroll in community colleges.

In its first year, the program awarded a total of $4.4 million to about 6,800 students, or 5.4% of fall 2016 community college students. Between November 2015 and March 2016, more than 19,000 people applied, and of that group, 10,459 met GPA, residency, and FAFSA requirements. Among them, 1,091 enrolled in public universities, therefore they didn’t receive a grant, and 6,745 enrolled in community college and received grants.

If you’re one of 6,745 students who enrolled in the program last year, you’re safe. Last year’s participants won’t be affected by the new income criteria and will continue to receive the grant, according to HECC.

The commission says the new limit could change again. Moving forward, the HECC will check the program’s funding annually and may adjust or eliminate the EFC limit, depending on how much funding is available.

What the Oregon Promise covers

The grant covers the gap between what a student receives in scholarships and grants, like the federal Pell grant, and what they need to cover tuition at Oregon community colleges. Legislators set a $1,000 annual award minimum, so even students who have tuition fully covered with federal grant money or scholarships still receive funds. Applicants must be a recent Oregon high school graduate or GED recipient, have high school cumulative GPA of 2.5 or higher, be an Oregon resident for at least a year before attending college, and not have attempted or completed more than 90 college credits.

Students left without the money they need for school may be forced to turn to other borrowing options like taking out a federal student loan or personal loan to attend school this year.

Other states with similar programs

Oregon isn’t the only state that offers free tuition to its community college students. The trend, started by the Obama Administration in 2015, gained even more popularity during the 2016 election season, prompting states like New York, Tennessee and Rhode Island and cities like San Francisco to test drive free college programs. Here’s a rundown of some of these programs:

New York

New York’s Excelsior Scholarship Program allows students to attend a State University of New York or City University of New York college tuition-free. Beginning in fall 2017, New York state residents from households earning $100,000 or less are eligible to receive up to $5,500 per school year for college.

Tennessee

In Tennessee, any state residents who have yet to earn their associate’s or bachelor’s degree can attend community or technical college for free. Starting in 2018, the Tennessee Promise Program will offer scholarships that cover the gap in of tuition and mandatory fees after what’s covered by a student’s Pell grant, the HOPE scholarship, or the Tennessee Student Assistance Award.

Rhode Island

Residents — regardless of income — can earn their associate degree for free at the Community College of Rhode Island beginning in fall 2017. The Rhode Island Promise program (seeing a trend here?) applies to 2017 high school graduates or those 19 years old or younger who received their GED in 2017.

Louisiana

Louisiana’s TOPS, or Taylor Opportunity Program for Students, is a collection of scholarships that pays tuition and some fees for Louisiana residents attending any of the state’s community colleges or public four-year colleges or universities, as long as the student graduated from high school with at least a 2.5 GPA.

San Francisco

San Francisco became the first U.S. city to offer a free college tuition program by introducing its Free City program in 2017. Beginning fall 2017, city residents who have lived in the state of California for a year or longer as of the first day of school are eligible to receive free tuition for the City College of San Francisco. Some lower-income residents are also eligible to receive stipends up to $250 per semester to help cover things like books and other college related expenses.

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Not-So-Free College: Oregon Changes Requirements for Free Tuition

Some college-bound students in Oregon won’t receive money for college the state promised them for this upcoming school year. In 2016, Oregon became one of the first states to offer to cover students’ community college tuition, setting a $40 million budget for the Oregon Promise Program. However, state funding missed that mark by about $8 million this year.

The funding shortfall and a high turnout of applicants has forced Oregon state legislators to change the program’s eligibility requirements and disqualify students from the highest-earning households.

What’s changing

The Oregon legislature has given authority to the Higher Education Coordinating Commission (HECC) to establish cost controls for the Oregon Promise Program. HECC made a new rule that caps grant eligibility at students whose families are able to contribute $18,000 or more toward the student’s post-secondary education, according to the expected family contribution (EFC) calculation students receive after submitting the Free Application for Federal Student Aid (FAFSA) or Oregon Student Aid Application (ORSAA).

As a result, the state will only be able to award grants to about 80% of eligible new applicants for the fall 2017 semester. More than 15,000 students have applied for the grant for the upcoming 2017-18 school year, starting in September, HECC tells MagnifyMoney. So far, about 8,300 have been told they are eligible for Oregon Promise grants. However, notification of eligibility does not mean a student will receive an award — HECC won’t have an official number of recipients until students enroll in community colleges.

In its first year, the program awarded a total of $4.4 million to about 6,800 students, or 5.4% of fall 2016 community college students. Between November 2015 and March 2016, more than 19,000 people applied, and of that group, 10,459 met GPA, residency, and FAFSA requirements. Among them, 1,091 enrolled in public universities, therefore they didn’t receive a grant, and 6,745 enrolled in community college and received grants.

If you’re one of 6,745 students who enrolled in the program last year, you’re safe. Last year’s participants won’t be affected by the new income criteria and will continue to receive the grant, according to HECC.

The commission says the new limit could change again. Moving forward, the HECC will check the program’s funding annually and may adjust or eliminate the EFC limit, depending on how much funding is available.

What the Oregon Promise covers

The grant covers the gap between what a student receives in scholarships and grants, like the federal Pell grant, and what they need to cover tuition at Oregon community colleges. Legislators set a $1,000 annual award minimum, so even students who have tuition fully covered with federal grant money or scholarships still receive funds. Applicants must be a recent Oregon high school graduate or GED recipient, have high school cumulative GPA of 2.5 or higher, be an Oregon resident for at least a year before attending college, and not have attempted or completed more than 90 college credits.

Students left without the money they need for school may be forced to turn to other borrowing options like taking out a federal student loan or personal loan to attend school this year.

Other states with similar programs

Oregon isn’t the only state that offers free tuition to its community college students. The trend, started by the Obama Administration in 2015, gained even more popularity during the 2016 election season, prompting states like New York, Tennessee and Rhode Island and cities like San Francisco to test drive free college programs. Here’s a rundown of some of these programs:

New York

New York’s Excelsior Scholarship Program allows students to attend a State University of New York or City University of New York college tuition-free. Beginning in fall 2017, New York state residents from households earning $100,000 or less are eligible to receive up to $5,500 per school year for college.

Tennessee

In Tennessee, any state residents who have yet to earn their associate’s or bachelor’s degree can attend community or technical college for free. Starting in 2018, the Tennessee Promise Program will offer scholarships that cover the gap in of tuition and mandatory fees after what’s covered by a student’s Pell grant, the HOPE scholarship, or the Tennessee Student Assistance Award.

Rhode Island

Residents — regardless of income — can earn their associate degree for free at the Community College of Rhode Island beginning in fall 2017. The Rhode Island Promise program (seeing a trend here?) applies to 2017 high school graduates or those 19 years old or younger who received their GED in 2017.

Louisiana

Louisiana’s TOPS, or Taylor Opportunity Program for Students, is a collection of scholarships that pays tuition and some fees for Louisiana residents attending any of the state’s community colleges or public four-year colleges or universities, as long as the student graduated from high school with at least a 2.5 GPA.

San Francisco

San Francisco became the first U.S. city to offer a free college tuition program by introducing its Free City program in 2017. Beginning fall 2017, city residents who have lived in the state of California for a year or longer as of the first day of school are eligible to receive free tuition for the City College of San Francisco. Some lower-income residents are also eligible to receive stipends up to $250 per semester to help cover things like books and other college related expenses.

The post Not-So-Free College: Oregon Changes Requirements for Free Tuition appeared first on MagnifyMoney.

With the Fate of Public Service Loan Forgiveness Uncertain, Here are Tips for Confused Borrowers

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More than half a million Americans are working toward Public Service Loan Forgiveness (PSLF), a program that eliminates federal student loan debt for people with jobs in the public sector. But the proposed 2018 White House budget reportedly calls for ending PSLF for future borrowers — and even current participants’ status could be in doubt, with a lawsuit claiming the government has reversed previous assurances given to certain borrowers that their employment qualifies.

Final decisions have not yet been made in either scenario. But even with this uncertainty, there are steps both current borrowers and interested potential future PSLF participants can take to make themselves as secure as possible.

First, a quick primer on PSLF: The program began in October 2007 under George W. Bush, and it wipes clean the remaining federal student debt for qualifying borrowers who have made 120 payments, or 10 years’ worth (more information is available at StudentAid.gov/publicservice). So the earliest any public service worker could receive loan forgiveness under PSLF is October 2017.

“The idea is to avoid making debt a disincentive to choosing public service,” explains Mark Kantrowitz, a student loan expert and publisher at college scholarship site Cappex.com. “Think about a public defender. They might make $40,000 a year, but they’ll incur $120,000 in debt for law school. That debt-to-income ratio is impossible, so PSLF makes that career path possible — and attracts people who might have otherwise taken high-paying private-sector jobs.”

Public Service Loan Forgiveness — on the chopping block?

At this time, the biggest threat to the future of PSLF is President Donald Trump’s 2018 White House education budget proposal. The budget proposal would eliminate PSLF — citing costs — and replace all current income-based repayment/forgiveness plans with a single income-driven system. While existing borrowers would be grandfathered into PSLF, any new students who take out their first federal loans on or after July 1, 2018, would not qualify. Still, all of this can happen only if Congress passes the budget — and it remains to be seen whether this section will pass as currently written in the proposal.

If you’re one of the more than 550,000 borrowers who is already working toward forgiveness — that is, you have already taken out at least one federal loan and/or you’ve completed school and are working in public service — the proposed cancellation of PSLF won’t affect you. Again, if the program is cut, it will impact only students who take out their first federal loans on or after July 1, 2018.

But even existing borrowers working toward PSLF can’t fully relax. As first reported by The New York Times, the Department of Education added a serious wrinkle by sending letters to people saying their employment was no longer eligible for PSLF, after the borrowers had confirmed with their loan servicer that they qualified. Four borrowers and the American Bar Association have filed a lawsuit against the department, and the case is currently in progress.

That may leave many workers questioning whether or not they will ultimately be eligible for loan forgiveness after all — even if they work in the nonprofit or public sector. MagnifyMoney has spoken to experts and reviewed the rules of the program to help.

How Can I Be Sure I Qualify for Public Service Loan Forgiveness?

Qualifying for PSLF depends on meeting several specific requirements, so the first step in determining your eligibility is to make sure your loans and employment check all the boxes.

1. Your student loan must qualify for forgiveness.

PSLF provides forgiveness only for federal Direct Loans:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans—for parents and graduate or professional students
  • Direct Consolidation Loans

Note that loans made under other federal student loan programs may become eligible for PSLF if they’re consolidated into a Direct Consolidation Loan, but only payments toward that consolidated loan will count toward the 120-payment requirement. And, according to ED, parents who borrowed a Direct PLUS Loan “may qualify for forgiveness of the PLUS loan, if the parent borrower—not the student on whose behalf the loan was obtained—is employed by a public service organization.”

2. You must be enrolled in the right type of repayment plan.

You must be enrolled in one of the Direct Loan repayment plans, some of which are income-based. The umbrella term for these plans is income-driven repayment plans, which include the Pay As You Earn and Income-Based Repayment plans. While payments under other types of Direct Loan plans, like the 10-year Standard Repayment Plan, do qualify and count toward your 120 payments, you’ll want to switch to an income-driven plan as soon as possible — because if you stick with a standard 10-year repayment, you’ll have paid off your loan in full after 10 years with nothing left to be forgiven under PSLF. Check the official PSLF site for more details. And note that private loans, including bank loans that are “federally guaranteed,” do not qualify.

3. You must make 120 on-time payments while employed full time by an eligible employer.

If you drop to part-time work, those payments won’t qualify. You must also be employed full time in public service at the time you apply for loan forgiveness and at the time the remaining balance on your eligible loans is forgiven. After you make your 120th payment you’ll need to submit the forgiveness application, which the Department of Education says will be available in September 2017.

4. Your employer must count as a public service organization.

This is the big one, and the most complicated step of the process for some borrowers to figure out. While the Education Department does address types of employers that fit under the PSLF program, there are some gray areas.  Broadly, the types of employers that qualify include governmental groups, not-for-profit tax-exempt organizations known as 501(c)(3)s, and private not-for-profits. That last category includes military; public safety, health, education, and library services; and more.

Pro tip: Certify that your employer is included in the program every year.

Each year and whenever you change employers, you should fill out and send an Employment Certification form to FedLoan Servicing. The form isn’t required to be submitted on an annual basis, but it’s highly recommended to fill it out annually so there are no unhappy surprises down the road.  It also helps you keep track of progress toward your 120 payments and gives you a chance to find out whether there is any change to your eligibility status.

What if you fear your job’s eligibility is unclear?

The validity of that FedLoan Servicing certification form is at the center of the lawsuit against the Department of Education. Although it’s important to have your employer’s eligibility certified by the department, the Education Department has said the form isn’t necessarily binding and the eligibility of employers can possibly change. As The New York Times put it, the department’s position implies “that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent … are not binding and can be rescinded at any time, the [DOE] said.”

That puts existing borrowers in a tough spot, says Joseph Orsolini, CFP and president of College Aid Planners: “[PSLF] is sort of an all-or-nothing in that you can’t apply for the forgiveness until you’ve already done your 120 payments. So to have someone choose this career path and work for years only to be told, ‘never mind, you no longer qualify even though we said you did,’ it would be hard for them not to see that as reneging on a deal.”

That possibility is “terrifying” for Frances Harrell, 35, a preservation specialist who works for a nonprofit that supports small and medium-size libraries in caring for their collections. She completed a library graduate school program in 2013 and emerged with a total of about $125,000 in debt, including her undergraduate loans.

“Everyone I know is in public service, and we all saw the Times article [about the PSLF lawsuit] and flipped out,” says Harrell, who currently lives in Gainesville, Fla. “I felt like I had been dropped in a bucket of ice. We’re making life decisions based on this understanding, and it feels so precarious not to have any true confirmation that we’ll get the forgiveness in the end.”

Christopher Razo, 22, who this month will begin classes at Chicago’s John Marshall Law School, plans to take advantage of PSLF while working toward his dream of becoming a state attorney. (Photo courtesy of Christopher Razo)

Harrell has also dealt with confusion from loan servicers and other experts — and based on incorrect advice, she nearly consolidated her loans in a way that would have reset the clock on her years of payments.

Christopher Razo, 22, who this month will begin classes at Chicago’s John Marshall Law School, is relieved that he is enrolling before the 2018 uncertainty begins. Razo is one of Orsolini’s clients, and he plans to take advantage of PSLF while working toward his dream of becoming a state attorney.

“[PSLF] is complex as it is, so my initial thought was, ‘Wow, great timing for me that I’m starting in 2017,’” Razo says. “But I understand the program affects way more than just me. [PSLF] gives you comfort to pursue public-service goals without having to make your employment about the money. I’m optimistic that [lawmakers] will see the good in the program so it can continue.”

When in doubt: Follow the ‘3 phone call rule’

While borrowers may think their loan servicer has all of the answers, Harrell’s situation isn’t uncommon, says Orsolini. He recommends “the three phone call rule”: Call three times and ask the same question, documenting whom you spoke to and when.

“These programs are complicated — which is one of the issues that critics [of PSLF] bring up — and you don’t always get the right information,” Orsolini says. “Before you plan your whole life around the [first] answer you get, you have to double- and triple-check that it’s right.”

If you’re taking out your first qualifying loan on or after July 1, 2018, Orsolini says “there’s not much to do besides hurry up and wait” to see what happens with the White House budget as it relates to PSLF.

“The important thing to remember is that a proposal is just a proposal, and these don’t always see the light of day,” Orsolini adds. “It doesn’t do any good to be overly worried, but you’ll want to keep a close eye on the news.”

Other types of loan forgiveness, cancellation, or discharge:

PSLF isn’t the only option. But not all types of federal student loans offer the same forgiveness, cancellation, or discharge options. See the chart below and check out StudentEd.gov pages here and here for more details.

Still, borrowers should know Trump’s desire to streamline federal programs into a single option means some of these loan types and forgiveness plans could be changed or canceled as well.

The post With the Fate of Public Service Loan Forgiveness Uncertain, Here are Tips for Confused Borrowers appeared first on MagnifyMoney.