Student Loans Amidst Dept. of Ed. Downsizing

 by Katherine O'Brien, MA, Certified College Planning Specialist, Founder and CEO of Celtic College Consultants, providing expert knowledge on the journey to college since 2004.

30-40% of college students take out student loans. Consequently, recent drastic personnel changes at the department of education have caused many people anxiety.

With half of the Department of Education (DOE) gone, questions about federal student loan programs abound. At this time, while President Trump said he wants to move the federal student loan system to the Small Business Administration (SBA), no executive order has been signed. However, such a move would likely require an act of Congress and could breach existing borrower contracts, leaving the plan vulnerable to lawsuits.

The Department of Education remains legally responsible for managing student loan programs under the Higher Education Act of 1965 (HEA). Until Congress acts, that legal authority cannot be transferred to another federal agency.

Even if enacted, any transfer from the DOE to the SBA would take months (or years) to happen and would not change current repayment terms or borrower obligations. At the same time, the SBA is also facing significant staff reductions of its own. Last week, it was announced that the SBA would cut its workforce by 40%. After those cuts, the agency may not have the capacity to absorb the complex and demanding responsibilities that comprise management of the federal student loan and collection programs.

Despite the headlines, student loan borrowers should know that nothing has changed for now. The Department of Education remains the legal administrator of federal student loans. The terms of existing loans remain in place. No loan transfers are happening, and no payments are due to the SBA.

Even if the administration wanted to shift the loans to the SBA, it may not be able to do so without Congress amending the HEA or passing a new law.

Be Careful!

In times of uncertainty, scams become more prevalent. Be sure to consult official sources of information and work with credentialed, seasoned professionals like myself.

 

 

 

Paying for College: Understanding Award Letters

by Katherine O'Brien, Senior College Planning Specialist

At some point after being accepted for admission by a college, your child will receive a letter from the financial aid office. This letter will include some or all of the information you need to determine who much the first year of study at that college will cost. Every college your child is accepted to will create one of these. They may come via US mail. Here are a few examples. You will notice that they are somewhat similar, yet somewhat different.

 

These letters sometimes come alongside the acceptance letter. Sometimes they come months later. If any of yours hasn’t arrived by the end of March, it’s time to contact those financial aid offices directly to ask about it.

 

The Top 3 Reasons Award Letters are Delayed

 

1.        The FAFSA or CSS PROFILE (if required) was not submitted.

2.        The FAFSA did not include that college as one of the colleges.

3.        The letter hasn’t been accessed by the student. S/he may have received an email notice that the letter was available. Many colleges post award letters in the college portal, to which students have been given login credentials. Often students forget to check for updates, or they don’t read or follow up on the email(s) telling them to login and receive their letter.

 

Pro Tip: Students should login to their student portals weekly and check for notices. Requests for additional information, invitations to join groups, apply for scholarships or special programs, as well as their financial aid award are often posted inside this platform.

 

If your student has checked email (including spam and junk folders) as well as the portal but finds nothing, it is prudent to reach out to the financial aid office. Check the website for their contact information.

 

Here’s a template for that email:

 

 

Hello,

 

My name is _____. My student ID is _____ (be sure to use the ID for the right college!). I was accepted for Fall 20XX admission. I’m writing/emailing to ask about the status of my financial aid award letter. I have not found it in my student portal nor have I received it via email or US mail.

 

Please let me know if you are missing anything from me. I haven’t seen any notices that you are missing something or that my award letter would be delayed. Let me know if I’ve missed something. The best way to contact me is by phone/text/email/letter.

 

If everything is in order, please let me know, when you can, when I can expect to receive my award letter.

 

Thank you very much for your time and attention. I look forward to making my decision once I have reviewed my financial aid package.

 

Sincerely,

 

Student name

 

 

Sample Financial Aid Award Letters:

 

 

 Here's another one:

 Sample #3 (This one shows both on campus and off campus housing costs:

And a fourth example:

 

Before I show you how to analyze them, allow me to explain some of the terms used.

 

Direct Costs: These are costs paid directly to the college. They include tuition, fees, and, if you are going to live on campus, room ,and board. You will also incur costs for books, supplies, insurance, transportation, personal items, and spending money.

 

Subsidized Loans: Every citizen who files the FAFSA, regardless of income, is eligible to take federal student loans. Subsidized loans are loans that the government pays the interest on while the student continues to be a student. Only students with financial need can take subsidized limits. There are annual limits as well as a total limit on how much can be borrowed. The federal government offers many programs to repay these loans once a student leaves college. Repayment is deferred until six months after the student stops attending college.

 

Unsubsidized Loans: Every citizen who files the FAFSA, regardless of income, is eligible to take federal student loans. All students can take unsubsidized loans. For these loans the interest accumulates from the time the money is borrow. There are annual limits as well as a total limit on how much can be borrowed. The federal government offers many programs to repay these loans once a student leaves college. Repayment is deferred until six months after the student stops attending college.

 

Year	Dependent Students	Independent Students
First Year Undergraduate	$3,500 subsidized/ $5,500 total	$3,500 subsidized/ $9,500 total
Second Year Undergrads	$4,500 subsidized/$6,500 total	$4,500 subsidized/ $10, 500 total
Third Year and beyond Undergrads	$5, 500 subsidized/ $7,500 total	$5,500 subsidized/ $12, 500 total
Graduate/Professional Students	N/A	$0 subsidized/ $20,500 total
TOTAL ALLOWED TO BORROW (Grad student totals include ALL federal student loans)	$23,000 subsidized/ $31,000 total	$23, 000 subsidized/ $57,500 total (undergrad) $65,500 subsidized/ $138,500 (grad)

 

Dependent Students: Undergraduate students who are financially supported by their parents and who have not been declared homeless, or who are not married, or who do not support a child are considered dependent students. Their parents’ financial information is considered on the FAFSA.

 

Independent Students: Graduate students, married students, students supporting children, and students who have been declared homeless are independent students. Their parents’ financial information is not included in the FAFSA. Dependent students whose parents are not able to take a PLUS loan can borrow up to this limit.

 

PLUS loan: Parent Loan for Undergraduate Studies – This federal loan program allows parents to borrow in order to pay for their child(ren)’s college. It must be repaid immediately and is not forgivable by bankruptcy. Parents cannot borrow more than the cost of attendance minus the other aid your child receives. Graduate and professional students can also take PLUS loans. The borrower’s credit history must meet the criteria to take this loan. There is not a total limit on the amount that can be borrowed.

 

How Can I Determine How Much We Will Have to Pay?

 

Use the spreadsheet I created for you! Copy this google sheet and enter in your information.

 

To schedule a college funding meeting, whether you are still in the planning stages, applying, or have already been accepted and are sorting through your options, email Katherine at KOB@CelticCollegeConsultants.com to schedule your private meeting today.

 

 

15 Huge Financial Aid & FAFSA Mistakes

by Katherine O'Brien (and Jeff Levy)

My colleague, Jeff Levy, shares some significant mistakes families make that can seriously affect their teen’s ability to maximize merit and financial aid.

 

Financial aid and FAFSA mistakes

1. Believing advice from people who aren’t qualified to give it.

I heard from a parent that an English teacher at his daughter’s school recommended “a little-known tip.” At their College Night, the teacher suggested that students select “not applying for financial aid” on their college application and wait until they’re admitted to submit the FAFSA.

This advice couldn’t be more incorrect, unethical, and potentially catastrophic to the family. If you expect to apply for financial aid, check “yes” on the college application and submit your forms well before the college deadlines.

[As a Certified College Planning Specialist, I have been trained in financial aid. I also regularly receive additional training.]

2. Deciding not to apply for financial aid because “we’ll never qualify.”

Most families have no idea whether they will qualify or not. Data consistently shows that many who are the most eligible for need-based aid never submit the FAFSA.

3. Not filing your income tax returns before applying for financial aid.

For current high school seniors enrolling in college in the fall of 2025, the FAFSA will not become available this year until December 1, 2024 because of widespread technical problems that began with last year’s release. Questions on the form will require accurate financial information from the 2023 tax year, and, in almost all cases, those tax returns will need to be provided. [They need to be submitted to the IRS AND processed before the FAFSA filing. During your FAFSA filing process, you will pull data both the parents' and the student's 2023 tax returns right into the FAFSA.]

4. Missing the college’s institutional deadline.

Some parents believe the best way to apply for financial aid is to wait until their student has been admitted. This is exactly what not to do. Be sure to submit your financial aid forms before each institution’s deadline. Keeping track of these can be annoying if your teen applies to many schools with Early Decision, Early Action, and Regular Decision deadlines. But it must be done. Going to each college’s website to gather and collate this information will take you or your child about 20 – 30 minutes.

5. Deciding not to apply for financial aid as a freshman and planning to ask for it later.

Many schools will give a full-pay applicant a bump in the admission process in exchange for the higher net revenue they bring to the institution. If such an applicant unexpectantly [sic] requests financial aid in later years, some schools will not consider that request for institutional aid; others might delay it by a full academic year. Do not make the mistake of “outsmarting” the admission office if there is even a [small] possibility you may require institutional aid in later years.

6. Not having a savings plan for college.

One of the most destructive myths about paying for college is that the financial aid formulas will wipe out your savings. People who advise this are either ill-informed or have a hidden agenda. In the needs calculation, the penalty for savings is five cents on the dollar! The best way to prepare for the cost of college is to save, and the best way to save is to use time to your advantage. Start early and save regularly, even a small amount each month.

7. Taking a work bonus in the FAFSA “base year.”

The most significant factor in determining what a family is expected to pay towards college is their Adjusted Gross Income on line 11 of Form 1040 of their federal tax returns.

Any income that can be postponed from the base year (2023 for students starting college in 2025, 2024 for students starting college in 2026, etc.) to the following year will decrease the applicant’s Student Aid Index (SAI) and increase their eligibility for financial aid.

8. Listing the 529 savings plan as a student asset instead of a parent asset.

Even though the student is the beneficiary of the 529 savings account and the parent the custodian, the Department of Education has stipulated that these savings plans should be listed as parent assets. This is an essential advantage because parent assets are “penalized” about one-quarter as much as student assets in the federal and institutional need methodologies.

9. Accumulating parent savings in a student-owned account.

While this can be a tax advantage, it is always a financial aid disadvantage. You must check with your tax advisor for the best approach. In the financial aid formulas, parent assets are penalized at about five cents on the dollar, while student assets are penalized about between 20 and 25 cents on the dollar. But check with your tax advisor about the best approach for you.

10. Allowing the grandparents to write the check directly to the college.

The FAFSA no longer asks the student if anyone other than their parents has given the student any money or paid any bills on the student’s behalf. So grandparent contributions to college costs is not a problem if the student plans to attend, or is already attending, an institution that only uses the FAFSA in the calculation of need-based aid.

However, any money paid on the student’s behalf from anyone other than parents is reportable on the CSS Profile, a second financial aid form used by about 170 undergraduate institutions. Such a payment or gift will be considered untaxed student income and could significantly reduce the student’s eligibility for need-based institutional aid.

11. When parents are separated or divorced, believing it’s the parent the student spends more time with who will complete the FAFSA.

Beginning with the 2024-2025 FAFSA [the FAFSA for the 24/25 school year], the divorced/separated biological parent who must complete the parent section of the FAFSA is the one who has provided more financial support to the student in the year to date.

12. Borrowing more than you can afford.

College is one of the most expensive purchases a family will make. Borrowing part of this cost to earn a college degree is not an unwise choice, just as borrowing part of the cost of a home can be an intelligent way to make home ownership possible. However, borrowing too much for college can be catastrophic.

Each family will need to decide for themselves how much debt is reasonable. A good rule of thumb is to keep total undergraduate loan debt below what the student expects to earn during their first year out of college. In other words, if students borrow the maximum lifetime limit of $31,000 in undergraduate federal student loans, they can successfully manage monthly repayments if their first job after college pays at least that amount annually before taxes.

13. Not taking advantage of low-interest federal student loans.

Federal student loans are generally packaged as part of the financial aid award. These are low-interest loans with many built-in repayment protections, usually far safer and less costly than private bank loans.

The federal cap on how much a student can borrow over four years of college is $27,000 (with annual caps from $5,500 to $7,500 per year) and the lifetime limit is $31,000. Repayments begin six months after graduation. I recommend taking advantage of this loan program if it helps your family meet the high cost of college.

14. “If she gets into _______, we’ll make it work!”

This thinking usually leads parents straight into the abyss of excessive borrowing. Parent loans (federal and private) have higher interest rates, fees, and stricter repayment terms than federal undergraduate student loans. Parents must think carefully about how many actual earning years they have left before going into substantial debt at an advanced age.

There are often less expensive options for college than high sticker price schools with little financial aid.

15. Not calling the financial aid office when you have a question.

These folks are not the IRS and not your enemy. They are usually happy to answer your questions and can be an excellent resource to help you navigate the complexities of the financial aid system. [Be careful. Sometimes a student worker is the one answering the phone. Be sure to speak with a trained financial aid officer when you call. Even so, remember that their primary job is to help the college meet its institutional financial goals.]

Financial and merit aid resources for students and parents

FAFSA (Free Application for Federal Student Aid)

CSSProfile

 

Link to original article:

https://grownandflown.com/fifteen-biggest-financial-aid-fafsa-mistakes/?

Financial Aid Awards - Evaluate, Consider, and, maybe, Appeal

Evaluate.

It is essential to understand the net cost at each school. Unfortunately, it is often the case that financial awards are incomplete so additional research is often needed. First, what is the COA, the total cost to attend for one year? This includes tuition, fees, room, board, books, personal expenses, and transportation to and from campus. Each college has an official COA. Your personal cost of attendance will vary. To normalize the COAs, adjust them so the same amount is included for books and personal expenses at every school.  For your own calculations, adjusting the transportation allocation will give your family a more accurate idea of your actual net costs. Keep in mind, however, the official COA is the one which come into play should you appeal the award offer.

COA – Grants – Scholarships – Tuition Reductions = Net Cost

COA – Grants -Scholarships - Tuition Reductions – Work Study – Student Loans = Current Out of Pocket Cost

Do not subtract parent loans.

Consider.

After having calculated the net cost, can you afford it? Remember that this is the cost for only one student for only one year. How many children do you have? What is the graduation rate at each school? (How likely is your child to graduate in four years?) CollegeData.com is one site where you can research 4-year graduation rates. Be aware that some programs, like architecture, are 5-year programs. Engineering or other schools which have many students participating in cooperative education or internship programs which delay graduation beyond four years may also have high graduation rates. If your student’s college  is of this type, take this into consideration as you consider award offers.

Note which scholarships are renewable. These will be renewed as long as the student takes enough credits each term and maintains a specified GPA. (These can be great motivators to keep your student using top study skills once on campus, too! For many, losing their scholarship means losing their ability to continue attending that college.) Once lost, these types of scholarships cannot be re-qualified for. Scholarship award letters and notices specify whether a scholarship is renewable and, if it is, for how many terms.

Appeal?

Circumstances that warrant an appeal letter:

1.     Change in family size. Should a family member die or move away, parents’ divorce, or a new child (or more!) arrive, it is important to notify the financial aid office immediately as you have likely grounds for an appeal. Such a change in circumstance may result in additional expenses, a loss of income, and other significant changes in the family.

2.     Loss of job or income.  One of the most powerful reason to appeal a financial aid award is that there has been a significant loss of income since the filing of the FAFSA or CSS PROFILE form. If this is due to a circumstance beyond the family’s control, this circumstance is one which enables financial aid officers to adjust the student’s aid package. The financial aid office will want to know the date of the change and the circumstances. They also will want to know the amount the earnings have been reduced and any reasonable estimate of how long it might be until a new position is procured or the income is restored. Whenever possible, provide documentation of your statements.

3.     Significant non-discretionary additional expenses.  A serious injury or illness in the family, or needing to move an elderly family member into your home, or a natural disaster that results in damage to your home, vehicle(s), or family members are all events which can be grounds for an appeal. Document your expenses as best you can.

4.     Better offer from a similar school. Some schools will adjust their offer in the event your student has received a more generous aid offer from a competing institution. It is important that the schools be similar to the one you will be appeal. Enclose a copy of the competitor school’s award letter with your appeal letter.  This sort of appeal can be even more effective the later in the season it is, as colleges scramble to fill their classes. At the same time, very popular schools tend to fill their class early so being prompt will be more beneficial in those cases.

Important Guidelines for Writing a Financial Aid Appeal Letter.

Should you determine that an appeal might be helpful, check each school’s financial aid page on the website to see if instructions about how to appeal are listed. Some schools have a form they required to be completed.  Most schools, however, do not have appeal instructions online. In those cases, give the office a call and ask how they would prefer you present your appeal.

1.     It is perfectly acceptable for parents, rather than the student to communicate directly with the financial aid office. This is not the case with the admissions office. However, it is fairly common for the financial aid office to require your student to sign a FERPA waiver giving them permission to speak with you.

2.     However, it is ideal, especially if this school is your child’s first choice school, for him or her to write a note to attach to your letter saying that this is his/her first choice school and that s/he has asked his/her parents to appeal for more financial aid to enable him or her to attend that school. Have the student include a statement that s/he will attend the school, if the finances can be worked out.

3.     In all communication, clearly identify the student by legal name, date of birth, high school, whether a first year or transfer applicant, and the application round (early decision, early action, regular decision). Clearly identify yourself and your relationship with the student.

4.     I encourage you to express some sort of happiness or gratitude that your child was accepted into the college and express gratitude for any grants and/or scholarships which have already been offered.

5.     Early in your letter, identify it as a letter of appeal.  Ask them to review their offer of financial aid in light of the information you are providing in your letter.

6.     State your information concisely.  Let your appeal be based on clearly stated numbers, dates, and events beyond your control.  Proofread your letter to ensure that the situation(s) you are describing are presented in a way that someone completely unfamiliar with them can understand them and that how they affect your ability to pay for college is evident.

7.     If possible, make it clear what you are asking for.  If you need the grant to be raised to $10,000 in order to make your child’s attendance at that school affordable, state this clearly.  If this amount makes the net cost at your child’s top choice school the same as a rival school, state that clearly as well. Reiterate your child’s comment and state that you’ll agree to their attending this school if your appeal is approved.

8.     If you can visit the aid office, mention in your letter that you would like to arrange a meeting as soon as possible after they have had a chance to review your appeal.  Otherwise, let them know that you will be following up in a few days by phone.  It is easiest to say no to someone in a letter, more challenging by phone, and even more difficult in person.  When you meet, be courteous and that them for their time.

9.     Finally, be sure to thank them for taking the time to review your case.  Explain that your family’s finances play a significant role in determining which college your child can attend. If this school is the first choice school, be sure to state that as well.  And express your hope that they can make it possible for him or her to attend.

For assistance with evaluating, negotiating, and appealing your financial aid award, please contact Katherine at kob@celticcollegeconsultants.com

8 Ways Parents Can Help Teens Avoid Student Loans

by Katherine O'Brien, MA CCPS
Founder, Celtic College Consultants

Teenagers typically see the world as nothing but possibility.  While this is true, those possibilities always have costs and trade-offs which are often overlooked by teens.  Being strategic about which colleges your student applies to can help him or her avoid taking out student loans.

1.     Start estimating your EFC and net prices during freshman year.  I regularly meet parents who are shocked and dismayed at their EFC (Expected Family Contribution) when the FAFSA is filed during their child’s senior year.  Never before had they any idea how much college was going to cost.  Yikes!  Spend some time net price calculators, then show your teen how to do the same.  This has the side benefit of incentivizing him or her when s/he can see the net cost shift based on improved GPA and/or test scores.

2.     Discuss money and the financial side of college early.  When you put off having that conversation, you are missing the opportunity you have to set expectations.  Your child needs to know that the choice of which college to attend will have the single biggest impact on his or her future financial state.  Explain to them that they need to make wise choices financially, and that brand name colleges, like everything else, aren’t necessarily the best choices.  Also take the time to help them understand that what is best for their best friend(s) may not be best for them.

3.     Do NOT procrastinate about filing the FAFSA (Free Application for Federal Student Aid)!  It opens October 1 and needs to be filed during your child’s senior year for his or her freshman year (and re-filed every year after that for each subsequent year of college).  Filing this form will make your child eligible for federal loans and grants, as well as (as determined by each state and college) a great deal of additional need (and sometimes merit) aid.  Much financial aid is awarded in a more or less first come, first served basis.  Put yourself at the front of the line!

4.     As a woman of faith, I can solemnly assure you that “Hope and Pray” is NOT a good college application strategy.  While it’s exciting to try to get accepted at highly selective or reach schools, this dream can become a financial nightmare, for both your child and yourself.  The temptation to stretch yourself too thin in order to make the “dream school” a reality (despite it being unaffordable for you!) is great.  It’s better to insist that the college list (list of schools s/he will apply to) ONLY include schools that you expect to be affordable, based on actual research and realistic expectations.

5.     Out of state costs for public universities can be as much as DOUBLE what they are for in state students.  This works well for the universities, especially in states like California and Illinois where budget cuts have been significant.  However, paying double for something similar to your in-state universities is ridiculous.  (Honors colleges are a completely different case.)

6.     Many assume that all scholarships are great and will make a significant difference when paying for college.  Many private scholarships are for $1,000 or less and last only one year.  They also are counted as resources and reduce need based financial aid eligibility dollar for dollar.  Selecting colleges with generous scholarship programs your student would be eligible for will make a much greater difference to the financial bottom line.

7.     Choosing colleges because they are highly ranked doesn’t guarantee that your student will have a good experience or the educational opportunities you hope for.  The criteria to be highly ranked often differs from a given family’s idea of what make a good college.

8.     Parents are the best educators for teens in matters of money.  Your regular interaction enables you to mentor how to comparison shop, save up for a special purchase, develop and use a budget, and borrow money.  Educating them about the realities of debt can significantly help teens avoid a nightmare of debt and set financial boundaries during the college search process.  If you ask a bank, which derives most of its income from lending money, to teach your child about how to manage their money, you can reasonably expect them to be taught how to be good consumer and borrower.

For more information on Katherine O'Brien's college consulting services and the program she uses to save students hundreds of thousands of dollars on college, see www.CelticCollegeConsultants.com