Dubiln Packard

student loans

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Student Loan Forgiveness Programs – are you eligible?

Student Loan Forgiveness ProgramsEverybody wants to know about Student Loan Forgiveness.

In 2010, President Barak Obama signed into law a policy of Student Loan Forgiveness.  Formerly known as the Health Care and Education Reconciliation Act. The purpose of this law was to help certain indebted students recover from the burden of high education loans. Properly called the William D. Ford Direct Loan program, most people know it as Obama Student Loan Forgiveness. Who qualifies for the student loan forgiveness program and what are the eligibility requirements?

The Eligibility Requirements and Qualifications for Federal Student Loan Forgiveness.

To be clear, the Education Reconciliation Act provided a variety of relief processes for students overburdened by student debt.

One is the Public Service Loan Forgiveness program (PSLF). It was developed for students who enter public service and remain for a certain time. Because the program offered benefits retroactive to 2007, the first loans to be forgiven could start as early as 2017. Provided Congress does not scrap the program as suggested by the President in 2017, following are the eligibility requirements:

  • Employment with any federal, state, local, or tribal government organization
  • Ten years on the job
  • 120 qualified monthly payments to service the debt
  • Only direct federal loans made under the William D. Ford Federal Direct Loan Program qualify (private loans do not)
  • Be on a repayment plan

How Certain is Student Loan Forgiveness Under the Ford Direct Program?

As mentioned, Congress may nullify the program at the behest of President Trump. If that happens, there will be no forgiveness. Outside of that, the wise former student would have their employer check with the loan servicing company periodically to ensure their organization still qualifies. If not, it may be wise to seek employment immediately with an agency which does. Of course, remaining in the position could allow someone to advance such that the increased income would offset the loss of this benefit. Consider both options.

A student can make payments directly to the loan servicer, but in many cases the loan rates are substantial. The most important element of the program is the 120 consecutive qualified payments. These, however, do not have to be the full payment as required by the lender. Many students opt for a loan repayment program which can arrange payments based on income. For many entering government service, this will reduce the payments considerably.

For example. One student went to work for a state corrections agency upon graduation. On checking with a loan repayment organization, the student learned that his wages were such that he was not required to make full payments. In fact, his payments were reduced 95%. In addition, the program consolidated the 11 student loans which had been taken out over the course of his education into two loans. This had an immediate positive impact on his credit score. Most importantly, these reduced payments are qualified payments which are low enough he can manage them on the wages he receives from his qualified state employment. Assuming the program is not stopped, in ten years he will qualify to have the balance forgiven.

Beware of Student Loan Schemes.

The student loan crisis has spawned an enormous segment of businesses promising forgiveness and protection from collections. Do not be duped. There are five things to watch for if a student debt relief company comes calling:

  • Upfront payments required for services
  • Promise of immediate forgiveness
  • High-pressure sales tactics
  • Asked to provide Private information like Federal Student ID access
  • Your contact info came from an ad on search engines or social media

Companies which advertise must find a way to recoup their costs. They are in business to turn a profit. But the government does not charge to consolidate student loans or arrange payment plans, so a company seeking your business using advertising is looking for a way to profit from you, perhaps to your ruin. Just be aware of these and take the necessary steps to protect yourself. If you ever have a question about your student loans or have already signed up with a loan servicing company, you can visit studentloans.gov to find out if there are problems of which you should be aware.

Resources

https://www.studentdebtrelief.us/forgiveness/obama-student-loan-forgiveness/

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

https://www.nerdwallet.com/blog/loans/student-loans/how-to-spot-student-loan-scam/

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Borrower Based Academic Year and Scheduled Academic Year

student loanWhat is a Borrower Based Academic Year and How Does BBAY Differ from SAY?

Huh?  All of these letters.  How is anyone supposed to understand student loan applications?

Obtaining and maintaining student loans can be confusing. Students will often hear references to BBAY and SAY or, Borrower Based Academic Year and Scheduled Academic Year when loans are discussed. Because student loans comprise part of a student’s future economic standing, understanding these terms plays a role in loan disbursements. In this post, we provide a clearer understanding of the difference between BBAY and SAY. To best understand, let us start with loans based on the Scheduled Academic Year (SAY).

What is a Scheduled Academic Year (SAY)?    

The academic year calendar is published by each university or college, usually in the school catalogue or other materials. The calendar shows when classes begin for each standard academic year, traditionally in the fall.

A Scheduled Academic Year (SAY) is a fixed period that begins and ends at the same time each year; it is based on this school academic calendar and is used to measure annual loan limit progression. Annual student loan limits are based on a standard two-semester period marking one academic year. Because the school year runs as fall and spring semesters, student loans under SAY are provided for the fall and spring semester. The next loan period under SAY would begin the following fall.

However, students do not always want to attend school in tidy fall/spring schedules. Because of how loans are disbursed, this creates a lending problem. The solution is the Borrower Based Academic Year or BBAY.

What is a Borrower Based Academic Year (BBAY)?

The Borrower Based Academic Year (BBAY) is a standard that may be used to measure annual loan limit progression when a student does not attend school according to the traditional calendar. Rather than having to wait until the fall semester to qualify for loans, the borrower of a Title IV education loan becomes eligible for disbursement when the next semester begins, regardless of the traditional academic calendar.

Consider the following examples:

  • John wants to start attending college in the spring. Because the SAY provides loans only for Fall/Spring semesters, he would have to wait several months to begin classes. If he chooses instead to use BBAY to account for his student loans, he can begin in the spring.
  • Mary entered school in the fall, is nearing completion of spring classes, and wants to attend school in the summer. Because SAY funding ends with the spring semester and does not replenish until the following fall semester, she must apply instead to use the BBAY loan period.
  • Tom only wants to attend an online school which offers classes in five-week increments. Because of the non-traditional approach, his loans will be based on the BBAY.
  • Jerry wants to attend a vocational college. The next class starts in March. Using the BBAY, he can begin as soon as his loans are approved.
  • Steve is planning to get his Master’s in Education. Grad school classes often do not follow the traditional calendar.

As these examples show, the Borrower Based Academic Year is very different from the Scheduled Academic Year. The BBAY is a tool which the Department of Education uses to account for loans provided. Under U.S. law, limits are placed on the amounts which may be loaned for student aid each year (based on two semesters). To satisfy this requirement while allowing students the flexibility needed to attend as they see fit, the BBAY was developed. Understandably, students using the SAY will require more time to graduate while those using BBAY will graduate sooner. Too, those using BBAY will accumulate student debt quicker, but ideally, they will be able to pay on it sooner as well.

 

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Academic Attendance: How Does It Affect My Student Loans

Student loan form with dollars and books.

Academic attendance is just one of the the many things to keep in mind when applying for student loans and is one of the basic application requirements. While it may seem obvious, Academic Attendance is the first requirement to applying for a student loan.  In some cases, this is so but some universities and even colleges within the university may have different academic attendance requirements that can affect student loans. It is the responsibility of the student to know what the attendance requirements are and the best way to find out is to ask the university student loan office.

With the cost of college tuition steadily increasing each year, most university students seek loans. The most common student loans are handled through FAFSA (Free Application for Federal Student Aid). The information included here relates to such federally-backed student loans. To be clear, the United States government does not do the lending. Rather, the loans are backed by and administered by the U.S. Department of Education. As with any government backed program, there are requirements for approval and requirements which must be maintained throughout the term of the loans. One of these is academic attendance.

What Are the Academic Attendance Requirements for Federal Student Loans?

The basic requirements for Federal Student Aid is that the requester must be accepted for enrollment or currently be enrolled as a “regular student” in an approved degree program. This means that the loan enrollee must be at minimum a half-time student. However, each university may have its own academic requirements which must be met to maintain approval of the student loan. This can create some confusion, especially given the vague terms ‘regular’ and ‘half-time.’

For purposes of the student loan application, a regular student can be enrolled half-time but most universities distinguish between the two such that a regular student is one thing and a half-time student is another. Generally, most colleges consider a regular student to be a full-time student, one who is taking between 12 and 14 credit hours per semester. A half-time student is anything under 12 hours.

Under federal guidelines, a student taking less than 12 credit hours per month is eligible for student loans but only if the academic requirements of the attended university permits the reduced workload. Some do not.

For instance, one student took out loans for a semester at a University and enrolled in 14 hours of classes. After a few weeks, he decided that he needed to drop a class. The class he dropped comprised three credit hours. This lowered his academic attendance to 11 hours for the semester and he was removed from regular student status at the university. At that point, he became responsible for the loans. He contacted the lender and made payment arrangements so that he remained eligible for student aid. The following semester, he enrolled for 12 hours and the payments were deferred. This shows that although federal guidelines allow for less than full-time status to be considered a regular student, the university may have stricter guidelines.

This being the case, each university also has requirements related to the total days present in classes. Such attendance requirements vary from college to college so students should check with their student advisor or financial aid office to learn more. Failing to attend classes can also result in the loss of federal student aid.

University Academic Attendance Requirements Can Hinder or Halt Student Financial Aid

The bottom line is that most students enter college with the understanding that Federal Student Aid guidelines are the requirements which they must meet. In some cases, this is so but some universities and even colleges within the university may have different academic attendance requirements that can affect student loans. It is the responsibility of the student to know what the attendance requirements are and the best way to find out is to ask the university student loan office.

 

 

 

 

 

 

Sources

https://studentaid.ed.gov/sa/glossary

https://nces.ed.gov/pubs2009/attendancedata/chapter1a.asp

https://studentaid.ed.gov/sa/eligibility/staying-eligible

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Student Loans A to Z

Student Loans A to ZThis is the first in a series of articles about student loans. Since the financial crisis of 2008-09, there has been much debate about the student loan situation in the United States. In just the last decade, the cost of student loans has increased to nearly one and a half trillion dollars. In other words, this one form of debt alone comprises nearly eight percent of the GDP. Naturally, many are concerned.

How did student debt become such a major issue in America? To understand, a fast history of student loans is in order.

A Fast History of Student Loans

The history begins in 1040 when private lenders provided loans to students attending Harvard University. A prestigious school even then, costs were such that the loans would help the students with the cost of living while in attendance.

Twenty-seven years later, the United States Department of Education was created. The new bureaucracy had a mission of helping schools raise standards and increase enrollments. But, no formal student loan program was implemented.

In fact, the first formal program by the United States did not occur until after World War II. There were soldiers returning home from the war in large numbers. With all of those GIs returning to the workforce, it was a challenge. Much of the United States’ industrial output was consumed in war production, which was no longer as necessary as before. Recognizing the strain to the economy such a large home migration would cause, Congress passed the G.I. Bill to provide funds for military members to go to school.

Many economists have attributed the enormous economic increases in the following decade and a half to the G.I. Bill. The strain to the economy was mitigated and upon graduation, the U.S. economy had a well-educated workforce.

At the same time, the Cold War was on. To better compete globally, the National Defense Education Act was passed in 1958. It provided scholarships, grants, and loans for students who excelled in math, science, and languages. These were the first Federal student loans.

Not long after, the Civil Rights movement and President Lyndon Johnson’s Great Society produced the Higher Education Act to provide funds for needy students. The Federal Family Education Loan Program (FFELP) would become the first guaranteed student loan program in the nation. Banks and private lenders could provide the funds needed and the U.S. government would back them with subsidies and guarantees. By 1972, the Pell Grant was created.

It would be another twenty years before major changes occurred. In 1992, FAFSA was created to provide a simpler means of providing educational funds. The unsubsidized direct student loans have become the standard and ultimately, lead to the current situation.

A Fast History of the Current Student Loan Crisis

A year after establishing FAFSA (Free Application for Federal Student Aid), the Student Loan Reform Act provided students with direct access to funds. Instead of the loans going direct to the educational institution, students could request extra funds to cover living expenses up to a specified limit. In times of economic crisis more people enroll in school. The financial crisis of 2008 and 2009 nearly guaranteed massive increases in federal student loan guarantees.

One final element ensured that student spending and loans would rapidly increase: Online universities. Along with easy access to funds came easy access to classes. Little wonder that many American’s, desperate to better their standard of living, enrolled in the easy programs. Most of these online programs also offer training at hyper-inflated rates, further increasing the cost of education. Some of these online programs are just plain junk and impress no employer (more on that later).

Given the ease of lending combined with the ease of attendance, anything other than higher student debt would be surprising. But, the easier lending becomes, the less people tend to know about the terms and conditions. With many student loan debts coming due, many are now seeking to understand just what they got themselves into.

In this series of articles, Student Loans A-Z, we are going to cover most of the basics. We encourage you to bookmark our blog are return often or sign up for updates to receive each post as they are published.