SHOULD YOU GET A STUDENT LOAN OR A COLLEGE GRANT?

It's time to think about going back to school and figuring out how to pay for it. For most students, that means trying to get a college grant, a student loan, or both.

Student loans have changed now that new legislation has come into being. Lets call them Obama student loans as he is the one who put through the legislation and then Congress and the House passed it. Several things have changed but most notably student loans are now from controlled by the government instead of private banks and lending companies like it was before. Still, a college loan is still the same in that it has to be paid back.

College grants are usually given out in the form of Pell grants. People are busy trying to find back to school grants for moms and other types of school grants but it all really boils down to Pell grants. Unlike student loans, the good things about a grant is that it doesn't have to be repaid and that is a very important decision.

You can watch an interesting short video where Suze Orman outlines the dangers of student loans and her belief that they are going to be a big drag on the economy as more and more students start defaulting on them. Student loans are becoming too big with the price of college continuing to rise and students who have recently graduated are now finding it almost impossible to pay back.

With student loans you can't declare bankruptcy and in many cases the jobs graduates are getting are not paying enough to live and also repay the loans. And that is if you can even get a job in the first place!

She suggests going to a community college for the first two years (which is much cheaper) and then go to a state or private college for the last two.

So, if you can get a pell grant or college grant of any kind you should take that first as it doesn't have to be repaid. Unfortunately, most grants are just a small portion of the amount you need to attend college and so you will still need to get a loan for the rest and hopefully a good college job to help you start repaying that loan.

GOOD NEWS: Student Loan Interest Rates Have Fallen - a little!

If you have variable interest rate student loans, you are probably already used to looking forward to July 1st each year – the day you rate will either go up or, hopefully, down. However, even students who are signing up for a fixed rate loan can look forward to the date!

Let’s look at the older loans first. If your student loans were issued between July 1, 1998 and June 30, 2006, as of July 1, 2010, your student loan’s interest rate has fallen by .01%. Now that does not sound like a big deal, but the current year’s rate is 2.47% for loans in Repayment or Forbearance. If your loans are in Grace, In-school or in another Deferment status, your rate is even lower, down to 1.87%. While the 0.01% decrease may not sound like much, over a standard 10 year repayment term, it represents $ 63.15 for every $10,000 in student loans. If you have $25 K in student loans and consolidate to lock your interest rate in, you will save $157.88 over the next ten years. The true beauty of the 2.47% when compared to 2.48% comes with the practice of rounding of interest to the nearest 1/8th percent. The 2.48% will round to 2.50%, while 2.87% will round to 2.475%. (The same will hold true for the 1.87% grace rate when compared to the old grace rate of 1.88%)

There is also good news for most undergraduate students who are currently taking out student loans. Your subsidized undergraduate Stafford rates will also drop. In fact, if you have been receiving subsidized Stafford student loans since July 1st, 2008, you have been enjoying a rate decrease each year.

• Subsidized Undergraduate Stafford Loans from 7/1/08–6/30/09 are 6.00%


• Subsidized Undergraduate Stafford Loans from 7/1/09–6/30/10 are 5.60%


• Subsidized Undergraduate Stafford Loans from 7/1/10–6/30/11 are 4.50%


• Subsidized Undergraduate Stafford Loans from 7/1/11- 6/30/12 are 3.40%

Interest rates for unsubsidized undergraduate Stafford and Graduate Stafford loans (both subsidized and unsubsidized) have a fixed rate of 6.8%. I am sorry to close on a bit of bad new; however, as current legislature stands, the subsidized undergraduate Stafford rate will increase to 6.8% beginning 7/1/2012. That should be a bit of motivation to kick your studies in gear and graduate by June 2012!

Where ARE my Student Loans?

Before we see where those peaky loans have gone, let’s take a nostalgic look back: Once upon a time, not so very long ago, a student went to college and used Federal Financial Aid to help pay for their education. The student kept a copy of all of their loan paperwork, all of their loans were with one lender/servicer and, when their Repayment date arrived and the borrower was ready to make a payment, they had their payment coupon booklet in hand, with all of their payment coupons in place. The monthly payment amount was easy to locate, the mailing address was very clear – everything went smoothly. The borrower made regular monthly payments and received a Paid-in-Full statement after the 120th payment. Those were the days!

As many of you already know first-hand and many more of you will soon discover, the life of a student loan holder is not so simple anymore. The student loan industry has entered a brave new world! Over the past two years, many lenders have exited the student loan industry. Some will continue to service their FFELP loans until they are paid in full. However, many lenders choose to sell the FFELP loans and the next thing you know, you are getting letters and e-mail from lenders or servicers you never heard of. What’s a person to do?

It can become even more confusing for borrowers returning to school or who are still enrolled. If you are attending school and using federal student loan monies to fund your education, you have probably recently been contacted by your Financial Aid office asking you to stop in for an appointment. If you fall into this category, please make that appointment now! You will probably be asked to sign a new promissory note. This is necessary because, as of July 1, 2010, the U. S. Department of Education’s Direct Loans is the only source for federal student loans or consolidated federal student loans. For many borrowers, this will just add one more name to their ever growing list of loan servicers.

Now, more than ever, student loan borrowers must take control of their accounts and stay in contact with their lender/servicers. Do you know the answers to these 3 questions?

1. How many student loans do I have?
2. Who is servicing my student loan account(s)?
3. What is my approximate balance on my student loan account(s)?

You should know the answers to each question. Want to check your accuracy? Log onto http://www.nslds.ed.gov/ and see how you did. Were you correct? Any surprises? At this point, if you are still not completely comfortable with your student loan contact information, take a few moments to contact your lender or servicer and get everything straightened out. Even if you scored 100 on the 3 question quiz, follow these few simple guidelines to stay straight with your student loans. Notify your loan’s servicer if you:

· Change your mailing address
· Change E-mail address (Please note: if you no longer check an e-mail address, inactivate the account. If your lender/servicer has the address, they will send E-statements as opposed to “snail mail”. This will not help you if you never check or read mail in that mail box.)
· Change or disconnect your phone
· Change Employers or become unemployed (Remember there is an Unemployment Deferment available for anyone who is not working or is working less than 30 hours per week)

One final piece of advice; be sure to keep your school in the loop too. Lenders do not notify the borrower’s school when loans are bought or sold, so make sure you keep your alma mater updated on the latest changes to your accounts. Your alma mater is also a great source for answers to the latest, confusing correspondence you've received. Your school’s Default Management office still speaks and can translate that foreign language called Financial Aid!

Coming Next Month: The Rates are Falling, The Rates Are Falling …… July 1st means the annual adjustment in variable rate student loans – and they are falling. Is it time to finally consolidate your student loans?

Other Coming Attractions:
A Rose is a Rose is a Rose … Names can be confusing. You thought you paid that loan and now you are still getting late notices! What’s going on???

In-School Consolidation – What’s the Buzz? A look at the pros and cons of this 1 year window for in-school consolidation; it’s not for everyone.

A QUICK PRIMER ON EDUCATIONAL TAX CREDITS

There are four tax benefits for college education expenses:

· Tuition and fees tax deduction
· The American Opportunity Credit
· The Hope Credit
· The Lifetime Learning Credit

The Tuition and Fees deduction will reduce your taxable income. The Hope Credit, Lifetime Learning Credit and American Opportunity credit can reduce your tax bill. The American Opportunity credit replaces the Hope credit for 2009 and 2010, and provides a partially refundable credit. Taxpayers should investigate all of their options and choose the credit that will give them the lower tax; however, they cannot claim more than one credit or a credit and deduction for the same expenses. You cannot “double dip”. The education tax credits are calculated on IRS Form 8863 (PDF).

The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit can provide up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. Forty percent of the credit (up to $1,000 maximum) is refundable. This is unique to the American Opportunity Tax Credit. The tax credit is scheduled to have a limited life span and, unless Congress extends the credit to additional tax years, it will be available only for the 2009 and 2010 tax years.


The Hope Credit is a tax credit for college students in their first two years of college. It provides a tax credit of up to $1,800 on the first $2,400 of college tuition and fees. The Hope Credit can be claimed on your tax return if you, your spouse, or your dependent are a first-year or second-year college student, is enrolled at least half-time at an eligible education institution, and you were responsible for paying college expenses. If you missed this credit in the past, it might be possible to file an amended tax return for the year(s) in question.


The Lifetime Learning Credit is a tax credit for any person who takes college classes, even if you took only one class. It provides a tax credit of up to $2,000 on the first $10,000 of college tuition and fees. The total credit is limited to $ 2,000 per return, but you can claim the Lifetime Learning Credit if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses.

A QUICK REFERENCE GUIDE

American Opportunity Credit

1. $2,500 in tax credits on the first $4,000 of qualifying educational expenses. Up to $ 1,000 may be refunded.
2. Can be used for Education expenses paid with borrower funds (student loans)
3. Can be claimed for the first 4 years of post-secondary education expenses.
4. Available ONLY for 2009 & 2010
5. Applies to all four years of undergraduate college education
6. The American Opportunity credit also features an expanded definition of qualifying expenses.
   

Hope Credit

1. $1,800 of qualifying educational expenses paid for each eligible student. Can reduce taxes to $0. Excess funds cannot be refunded.
2. Can be used for Education expenses paid with borrower funds (student loans).
3. Available ONLY until the first 2 years of post-secondary education are completed.
4. Available ONLY for 2 years per eligible student.
5. Student must be pursuing an undergraduate degree or other recognized education credential.
6. Student must be enrolled at least half time for at least one academic period beginning during the year.
7. No felony drug conviction on student's record

Lifetime Learning Credit

1. Credit of up to $2,000 based on qualified tuition and related expenses paid for all eligible students. Can reduce taxes to $0. Excess funds cannot be refunded.
2. Can be used for Education expenses paid with borrower funds (student loans).
3. Available for all years of post secondary education and for courses to acquire or improve job skills.
4. Available for an unlimited number of years.
5. Student does not need to be pursuing a degree or other recognized education credential.
6. Available for one or more courses.
7. Felony drug conviction rule does not apply.

A final word of caution – Patience is a virtue that can pay BIG $s. Do not fall victim to so-called "instant" or "same-day" refunds. These are actually short term bank loans, and most have exorbitant fees. According to Brendan Conway (Contributor to The Christian Science Monitor / March 2, 2009), in some cases, that means a mind-boggling 1,300% when calculated like a credit-card’s annual percentage rate. Electronic refunds are generally processed within 15 days and a refund returned by mail will usually be received within 3 to 4 weeks.

This information is provided by SWFC to increase student awareness of possible Education Tax Credits and Deductions. We are not Tax Preparation experts. If you are interested in using any of these credits or deductions, please consult a Tax Expert or the IRS.

DO YOU CARE WHERE YOUR STUDENT LOAN COMES FROM?

If President Obama is successful next year, he will take private companies out of the business of loaning money to college students. The United States Government will make all the rules and determine everything including interest rates that are charged, how much each student will qualify for, and what students qualify for loans.

Knowing the US government and the politically correct mentality that runs through it, this means there might be quotas on who gets loans. If you are some Caucasian kid from Iowa, you might not qualify one year because not enough Mexican students or African students have gotten loans. The government may tell you or your child that you don't qualify for a loan at any time based on whatever criteria they have set up.

The Obama student loans proposal is just one more attempt at a government takeover of another part of our life. Do you care where your school loan comes from? Probably most don't but what I care about is whether I will be allowed to get one. If it is solely in the government's hands, I have ZERO confidence in the loan process. After all, the government screws up almost everything they touch.

I don't want the slimy politicians in Washington determining who gets to go to school via a loan and who doesn't. Am I the only one that feels this way?

WHERE TO GET OBAMA COLLEGE GRANTS

If you are looking for special Obama college grants to help you pay your tuition, you will be disappointed to know that there are none. President Obama did give a speech where he talked about the importance of moms return to school but he never laid out any grant specifically for that purpose.

Additionally, he talked about Obama moms return to school grants but again, there is no special grant that came about just because of him. This was a speech that has been used for advertising and people have latched onto it to make you believe there is some special funding for college grants that the Obama administration has put through.

The only thing they have done is to raise the tax credit you can take for Pell grants and, while this is helpful to some, it is hardly free Obama money for college. If you do want a shot at winning some free scholarship money to return to school, you can sign up at either of the two links below to be entered in a monthly drawing. Signing up is 100% free and carries no obligation:

Scholarships 4 Moms - (FREE) Both men and women over 18 can sign up for this free drawing.

Obama student loans continue to be on the back burner for now and it will not be until early next year at the soonest when the proposed changes will be voted on. For those who do not know, Obama wants all college and student loans to be given out and controlled by the government because he thinks they can do it cheaper than private companies. This is something that will be very bad for the country, in my opinion, because the government never runs anything efficiently and we don't want them meddling in our private business anyway.

THE BEST REASON THE OBAMA LOANS PROPOSAL SHOULD BE DEFEATED

Early next year, the Obama student loans proposal will be up for votes and our beloved (I say that sarcastically) bureaucrats will be deciding our children's future. Taking the college loans process away from private companies is a huge step toward socialism and it is just wrong.

Do you need proof why the government should keep their hands out of student loans? How about this story on MSN about the US postal service losing billions? It seems our government run post office has cut over 40,000 jobs and still lost $3.8 BILLION dollars for fiscal 2009! WOW! Now that is incompetance.

This is the single best reason why the government should stay out almost anything and everything. The Obama administration and any other administration does only one thing really well and that is losing and squandering our taxpayer dollars. They just don't understand how to run a business or program of any type and make it profitable. The military and the police force is the only thing we really need them to do.

The Obama student loans bill is something that most of us will regret forever if it is passed. We just don't want to give the government that much control over who gets loans and who doesn't. The politically correct government will put in quotas and all sorts of other things so that the racial groups that they want to go will get the loans and others will not. This is a recipe for disaster education wise and financial aid and student loans should never be any business of the people in Washington.