Tagged: graduate

Leading the Pack… YLS Loan Counseling

It’s nice to be ahead of curve, lead the pack, whatever euphemism you want to use. It’s also great to receive proof that what you are doing is the right approach.  And that’s what happened to us when TG (a nonprofit promoting education access) in cooperation with the National Association of Financial Aid Administrators released a report last month entitled INFORMED OR OVERWHELMED? A Legislative History of Student Loan Counseling with a Literature Review on the Efficacy of Loan Counseling

What that report validated for YLS was that our approach to loan counseling is on target.  Because the report concluded that in loan counseling “personalized information appears to contribute to a better understanding of information, and face-to-face counseling may be the best way to deliver this personalized information. Both students and financial aid administrators believe that some personalization, preferably face-to-face, is needed for comprehension”.

We began offering personalized loan counseling sessions to our 3Ls three years ago because we recognized that it had become increasingly challenging to navigate the “ever changing” student loan repayment landscape.   We also believed that, as an institution, we had an obligation to insure that our students made the best short term and long term decisions incorporating their loan debt into their larger financial planning.

The bottom line which underscores the need for individualized loan counseling is this… everyone’s total loan debt is different, everyone’s career path is different and, as such, everyone’s loan repayment is different.  (Let’s also add that based on all those factors everyone’s COAP eligibility is also different.)

There is no effective “one size fits all” loan counseling model. Yet so many schools simply default to having their students complete a generic “on line exit interview” required by federal regulations to get their loan repayment information.  We still have our students do the online exit (so that we are in federal compliance) but also take it one step further with our one on one sessions.

The sessions we offer are all about developing a personalized loan repayment plan for you.  In these one hour (or so) meetings we:

  • review your total loan portfolio and current balances,
  • identify who your loan servicer(s) is, their role in your repayment and how to work with them,
  • go over a calendar of when repayment will start and what you need to do to prepare for it
  • evaluate the myriad of repayment plan options offered by the Dept. of Education so that we can compare both monthly repayment costs and overall loan repayment costs (i.e. total principal vs. interest paid) and determine the most viable plan for you’
  • project what your support under our loan repayment assistance program COAP may look like over your ten years of eligibility, even accounting for various scenarios (job changes, marriage, children, etc.) along the way.

But we didn’t really need a report to validate that our personalized approach was the way to go. The proof for us is always our student themselves. We see that many of them walk into these sessions with a lot of trepidations and fear (let’s face it no one wants to really face their loan debt head on). But overwhelming when they finish the meeting they always say things like “that wasn’t as bad as I thought it would be” or “I really can manage this”.   And that’s our goal … to have you walk out feeling confident that you have plan of action to deal with the loan debt in the context of your overall financial planning.

“Survey Says”- What The Cost of Living Survey Told Us

It’s been a couple of years since I have written a blog post on the YLS Cost of Living survey and felt it was time to re-address what it is we actually do with this survey data and why it’s critical to the financial aid process. And along the way I will share some of the specific results of the recently completed 2014-2015 survey.

WE CAN’T DO IT WITHOUT YOU– the Cost of Living survey is only valuable when students take the time to respond and provide accurate data. So thank you to everyone who completed our 14-15 survey which yielded a 32% response rate of all YLS JD and Graduate students ( down from the 13-14 year response rate of 42% but still yields a good enough sample to draw conclusions.)

WHAT DOES ANY OF THIS HAVE TO DO WITH FINANCIAL AID? In order to award aid (by federal regulations) we must annually develop a “Cost of Attendance” (i.e. budget) which represents both the fixed (think tuition and fees) and estimated (i.e. books, housing, food) costs that a student attending YLS would incur. . That Cost of Attendance forms that basis of all aid awards since the need based aid formula is Cost of Attendance – Contribution (student, parent etc.) = Need. So to come up with those estimated costs of books, housing, food etc. we go (through the survey) to the people actually incurring these costs- our students- .

WHY FOCUS THE SURVEY ON ONLY CERTAIN EXPENSES? – The Department of Education regulations specify what are “allowable” expenses in the Cost of Attendance and it’s usually a pretty narrow definition. They also mandate that the same Cost of Attendance must be used for all students in the same degree program So we can’t create budgets based on each individual student’s spending pattern or needs… everyone is held to same overall Cost of Attendance accountability.

THE “BONUS”- beyond helping us build the Cost of Attendance, the survey gives us information to evaluate financial challenges among our students, which we can then address. . For example the increasing cost of professional clothing in last year’s survey led to our “Dress For Success For Less Workshop” this past year, as well as our increasing the COAP eligible suit loan from $350–$600.

SO… WHAT DID THE SURVEY SAY…? Some highlights (in a geeky “I love data” kind of way):
99% of our students live in New Haven – that figure is not much different than in prior years but this year we added a question asking in what area or neighborhood :

Where YLS Students live in New Haven
Downtown

61%
East Rock

26%
West River

0%
Westville

1%
Wooster Square

5%
Other

7%

 

So the pragmatist in me says it makes sense that people want to live in downtown as close to YLS as possible. But the Financial Aid Director in me looks at that same data and worries about the “price” of that convenience given that Downtown rents are notoriously higher priced.

blog 3

Living Situation data on the whole differed very little from the 13-14 year but when we drill down a little into this data and start segmenting it by class year … we find a very interesting development:

 

Class Year

1L

2L

3L

Graduate

I live alone

32%

36%

24%

57%

I live with my spouse

7%

6%

15%

21%

I live with my spouse/children

2%

4%

6%

0.00%

I live with one roommate

35%

25%

32%

14%

I live with two or more roommates

23%

28%

24%

7%

For the first time (in the 5 years that I have been conducting the survey) – the percentage of 1Ls living with roommates surpassed the number of 1Ls living alone. To me that’s a very positive trend because there are huge cost savings in living with roommates (and even more if you can do it for all three years). How much savings?

blog 2

Our survey answers that as well:

Let’s do the math – that cost difference between living with a roommate (let alone two or more roommates) is $3,978 for the 9 month academic year. If you lived alone for all three years that’s $11,394. Think that’s a lot? How about if you had to borrow that amount in extra Grad Plus loan funds and then pay it back on a 10 year repayment- total cost then for wanting to live alone for your three years of law school is now – $16,230?

The Average Monthly Living Cost decreased from 13-14 (primarily due to a drop in the average rent/housing cost) and given that data it’s awfully hard to justify an increase to the present $17,000 allotted for living in the student budget.

EXPENSE CATEGORY 2013-2104 2014-2015
Rent/mortgage* $921 $891
Basic Household utilities $92 $91
Telephone (cell or landline) $69 $67
Cable/Internet $51 $46
Food $443 $432
Local Transportation $142 $105
Average Monthly Total: $1,718 $1,631
Academic Year Total (9 months) $15,461 $14,679

In addition, the present estimate of $1,100 for books is fairly accurate given that the survey showed 2Ls and 3Ls spending an average of $954 last academic year.

THINGS THAT WORRIED ME:

  • A higher percentage (28%) of students indicate they primarily get their meals by “eating out-“ than last year (17%) with a corresponding decrease in students who make meals at home (77% to 56% ). As a wise, former YLS student so eloquently shared with me “buying meals out is one of the most efficient ways to deplete your budget”. ( A quote I should have carved over our office entrance)
  • There were some “ongoing” expenses cited for which we can make budget adjustments and allow additional COAP eligible loan borrowing- professional clothing, travel for Clerkship interviews and computer purchases. I worry from the responses that not everyone knew this option was available to them.
  • Many people cited out of pocket health costs as a challenge. Per federal regulations this is an area where on an individual case by case basis we can potentially make a budget adjustment for additional loan funds (however not COAP eligible) but in a cash flow situation that might help you deal with these costs. If this is your situation, come talk to us.
  • Of all the responses to “what are other ongoing expenses not captured elsewhere on the survey”- the most common was “gifts” for the holidays, for weddings, for birthdays etc. I know this is going to sound preachy but I need to say it.. the fact that you are here at Yale Law School has to make your family and friends very happy and proud. I think they would understand that for three very short years of your life you are going to be facing some financial constraints and restrictions that may hinder your ability to give pricey gifts. But you should never forget that the biggest/best gift for them will be your graduation from YLS. Seriously the only “wedding gift” that I received and still use on a daily basis is a very inexpensive hand crafted piece of pottery and I have never used one place setting of my Lenox china. I’m just saying… people will understand your situation

SOMETHING THAT MADE ME HAPPY:

blog1

57% of you indicated that you keep a budget!!! That’s the key to this whole Cost of Attendance challenge. And interestingly most of you are keeping it on a basic Excel spreadsheet and if using an app or software the majority are using mint.com If you are not keeping a budget you may want to check out the basic excel budget template we have available on the Inside Page.

THE BOTTOM LINE: As with all things financial- we have to end with the bottom line… we will retain the $17,000 allowance for “living” and $1,100 allowance for “books” in next year’s 2015-2016 Cost Of Attendance because based on the survey data (which is the only empirical evidence we have) an increase is not justified. That $17,000 allowance is still above the $14,679 average academic year living costs calculated by the survey and, as such ,we are still allowing a $2,321 “buffer” for higher cost choices or to cover some of the ancillary costs. (toiletries, household expenses, entertainment, technology maintenance, pet care, etc.) cited as ongoing expenses in the survey. We also need to point out that increasing the “living allowance and Cost of Attendance in general also increases the amount of unit loans offered to you and your overall borrowing/debt.

So my best advice is:
1) Start/continue to keep a budget so that you can live within that allowance, recognizing the reality that while here (again for three short years) you are going to need to make some challenging financial choices, decisions and sacrifices
2) Don’t hesitate to come to the Financial Aid Office to discuss any of the financial challenges that you face. There are circumstances under which we can make aid adjustment and, at the very least, we may be able to offer support and help you come up with some creative solutions.

New Year? Time For Your Annual Credit Report Checkup

Turning the calendar page to January (seriously does anyone even have a paper wall calendar anymore?)  is the perfect time to think about getting your credit report.  (Huh?)  Because you are entitled to a free credit report once a year and why not use January 1 as your own annual reminder.

credit reportThinking that you don’t really need to worry about your credit score until after you graduate? Think again… that federal Grad Plus loan that you may have opted to borrow is reviewed for credit eligibility each year.  So that means that a small credit slip (late bill etc. ) in your 1L year  could make you ineligible for the Grad Plus for your 2L  year.   Are you considering taking out a Bar Loan to help support your living expenses while studying for the bar?  Bar loans are only offered by private lenders and all are credit based -not just for their overall approval but also in determining what your interest rate will actually be.  (i.e. good credit = low interest rate and bad credit = high rate).  Want to take advantage of the new  refinancing options on your student loans that so many lenders are new offering- those interest rates are credit based as well.  Even potential employers will review and factor your credit into the hiring decision.

Here is how this works… there are three nationwide consumer credit reporting companies- Equifax, Experian and TransUnion.  You can get a  free annual report from each one of the credit reporting companies  once every 12 months.    So there are two possible strategies…

  1. Order the report from all three companies at the same time so that you can determine whether any of our files have errors across all three agencies.
  2. Request the reports separately for each credit reporting agency at various intervals so that you can monitor your credit files more often throughout the year.

No matter if you want the report from Equifax or TransUnion or Experion- you order it from one place- www.annualcreditreport.com.  That URL is the only one that will provide the report for free. (You may have seen ads for other sites with names that make you think the credit report is free but it is not).

What will your find on the credit report? Basically the report  contains information about your credit accounts including how much credit you have vs. how much credit is available to you vs. how much credit you are  actually using. There will also be information on your bill repayment history and whether a debt or bill collection is in place against you.

What won’t you find on the report?   Well surprisingly  you won’t find  an actual “credit score” You will need to purchase a credit score directly from the credit reporting companies. But since that score is based on all the information from the credit report it is still incredibly valuable to review the report and make sure there are no inaccuracies or errors which can hurt the calculation of the  credit score.

What do you do if you find something wrong on the report?  Fix it asap so that it doesn’t harm your credit in the long term.   To correct an error reach out directly to the credit reporting  company and fill out one of their dispute forms.  Know that the agency must investigate and respond to you within 30 days.

Does asking for the report itself “ding” your  credit? No, self-inquiries do not affect your score, as long as you order your credit report directly from the credit reporting agencies, or through an organization authorized to provide credit reports to consumers (like annualcreditreport.com)!

So start the New Year right – begin by  getting  a copy of your credit report  atwww.annualcreditreport.com.   You may need that good credit in the not so distant future!

Contact Info for the consumer credit reporting companies:

  • Equifax: 1-800-685-1111 or www.equifax.com
  • Experian: 1-888-397-3742 or www.experian.com
  • TransUnion: 1-800-916-8800 or www.transunion.com

Continue reading →

Eat Cheap- Wash, Rinse, Repeat

It seems like I am forever preaching the gospel of eating on the cheap at YLS . By now I am sure everyone knows that “food” is the one discretionary item in your budget that you can control (because you can’t really change how much you are going to pay each month for rent and utilities.) You probably also have heard me quote a very wise YLS student who once shared the prophecy- “ buying meals out is one of the most efficient ways to deplete your budget” .

Well there is a great new resource making its way through the graduate school world – “Good and Cheap: Eat Well On $4/Day” by Leanne Brown. Leanne actually wrote “Good and Cheap” as part of her master’s in food studies at New York University. The original premise of her study was focused on the critical question “how well can a person eat on the $4.00 per day given by SNAP (the U.S. Supplemental Nutritional Assistance Program – aka Food Stamps)? .

Leanne proved that based on maximizing every ingredient and using economical cooking methods there are numerous nutritious and affordable options. Her upcoming book (self-published as a result of a successful Kick Starter campaign where for every book funded a copy would be donated to a non-profit organization) not only includes a wealth of her nutritious budget conscious recipes but also includes tips on shopping, creating a basic pantry, and mastering some essential staples (i.e. pizza dough, flour tortillas, even croutons!). Now the book won’t officially “drop” until June 2015 but in advance of that you can visit Leanne’s website where she encourages downloading a PDF version so you can start cooking meals that are healthy for your body and budget.

Let’s Make A Deal- Refinancing Your Student Loans

Remember the basic premise of the vintage game show “Let’s Make A Deal” – you win a prize but then are asked if you want to keep what you have or trade it for another unknown prize that may or may not be better than what you originally had. That’s basically the scenario you are faced with when considering refinancing or consolidating your student loans.

Right now you know how much you borrowed on each loan, you know the interest rate on that loan and if you use the handy Department of Education Loan Estimator you can project (depending on what repayment plan you choose) what that means in terms of a monthly payment, as well as total interest and principal paid over the life of the loan. But what happens when you are facing the decision of refinancing or consolidating your student loans?

First a little background… historically the only vehicle to refinance or consolidate has been the federal Direct Consolidation Loan under which all your federal loans are basically bundled (not unlike a cable/internet/wireless phone package) to create one “mega” loan with a new interest rate based on the weighted average interest rate (from all your individual loans) rounded up to the nearest 1/8th of 1%. Since it is a weighted average rate in some cases (if your overall loan portfolio is made up of loans at high interest rates – like the Grad Plus) you may actually end up paying more over the life of the loan then if you kept the loans individual. You also lose the ability to triage your loans and pay down the highest interest loans first if they are now combined. But for some people the idea of managing multiple loans (1 or 2 for every year of Law School) makes a consolidation seem like a manageable benefit. In addition because it’s still a federal loan you still get the advantage of multiple repayment plan options, the ability to switch plans, can still participate in Public Service Loan Forgiveness, and have generous options for medical and economic forbearance.

But evolving on the student loan landscape over the last couple of years have been lending agencies that will refinance your federal student loans. Some of these agencies are traditional “bank” lenders and others are new ventures created just for the refinancing opportunities. Many of these new companies operate somewhat on a crowd sourcing model where company investors and borrowers are connected with one another for mutual benefit. Many offer borrowers the chance to build their own community for their personal and professional advancement through social and networking events. It’s a new and very different way of looking at student loan repayment and very well may be the wave of the future.

the balance

In refinancing the borrower upfront likely makes two critical decisions: 1) which loan term (i.e. 3 of years to repay the loans) and 2) the choice between a variable and fixed rate. These two decisions are actually interconnected in that the combination of choices drives the ultimate loan payoff amount. A fixed rate (more than likely higher than a variable) partnered with a long repayment term (say 15 years) is always going to yield a more expensive loan repayment than the variable rate at a short repayment (say 5 years). But what if you have a fixed rate on a short repayment vs. a variable rate on a long repayment- that combination may be much harder to analyze. Also with private refinancing your interest rate (whether fixed or variable) is going to be based on your credit (good credit = low rate and not so good credit = higher rate). So depending on what your interest rate turns out to be also drives which combination of the choices will be most advantageous to you.

Weighing the overall value of the fixed vs variable rate is also challenging. The fixed rate will be higher but will be stable throughout the life of loan making long term projections of repayment far more accurate. The variable rate may provide a financial gain over the life of the loan but given that the rate will change makes projections far more “guestimates”

The only way to really assess what to do with your loan among the choices of: 1) keep as is, 2) consolidate or 3) refinance is to try to do a side by side comparison of the following factors: your monthly payments, years in repayment, your total cumulative payments and your total interest paid over the life of the loan. Talk to present loan servicer, talk to the Department of Education’s Loan Consolidation Information Center and your potential private refinancing lender and make sure you understand fully the terms of each decision.

Finally… let’s talk about the elephant in the loan repayment room… COAP. Beginning in the January 2015 COAP cycle, federal loans refinanced through private lenders (that meet our definition of a “private refinanced student loan”) will be allowed into COAP. And while that sounds like a great development (i.e. if you get a significantly lower interest rate in refinancing you will pay less in your loan repayment) remember that that also means that we recalculate your COAP eligible loan balance at that new lower interest rate for a new (presumably lower) annual payout. . That lower annual payout minus your participant contribution based on income will equal a decreased annual COAP award. More significantly it may mean that you will reach the “income out” threshold (that point where the annual payout equals your assessed participant contribution) at a lower income level.

Lots of options, variables need to be analyzed and evaluating in this refinance/consolidate or not decision. Welcome to Let’s Make A Deal.

Want more information on federal consolidation and/or private refinancing of your student loans. See our FAQ on this topic, review the COAP Policy and Procedure Manual and join us for a webinar “ Frequently Asked Questions –Federal Loan Consolidation and Refinancing (and COAP!” ) on Friday, October 17th from 12:00-1:00 PM EDT (registration info) .

A Belated Federal Update, or, What I Should Have Been Writing About… But Didn’t

Ouch! Has it really been 6 months since I last wrote a blog post. Well just because I was inactive doesn’t mean that the great student loan debate didn’t rage on. Congress and the administration seemed to be in a particular frenzy these past few months in trying to come up with solutions to the “student loan crisis”. Much of the fury has been the result of the pending reauthorization of the Higher Education Affordability Act (up for renewal in 2014) and some of the proposal may really just be “marker bills” with more of an intention to “promote” the idea than to actually see any immediate action taken on it. So although nothing has been approved or adopted (yet) and some have already died… here is a sampling of some of the scenarios that are at least making the rounds on the Hill which could (significantly) impact your loan repayment future:

  • ExCEL Act (Earnings Contingent Education Loans Act) – originally proposed by Rep. Petri (R-WI) in the 112th and 113th Congress (and co-sponsored by Rep. Polis (D-CO)) – this bill creates a single student loan program (no more Unsub vs Grad Plus vs. Perkins) that is repaid on an income contingent basis (15% of income above 150% poverty) and would use employer withholdings to make payments. In addition interest would stop accruing on the loan when the total amount of interest accrued (paid and unpaid) equals 50% of the loan’s balance when it entered repayment.
  • Dynamic Student Loan Repayment Act – introduced by Senator Rubio (R-FL) and Senator Warner (D-VA) would replace current loans, subsidies, deferments, forbearances, and repayment options with a single loan called the Income Dependent Education Assistance (IDEA) Loan, and would be repaid through income-based repayment and employer withholding.
  • Financial Aid Simplication and Transparency (FAST ) Act – proposed by Senator Alexander (R-TN) and Senator Bennet (D-CO) – streamlines student loan repayments into two options- 10 year repayment or income-based repayment (eliminating the present Graduate Repayment and Extended (25 year) repayment options ). Also established a one loan (for undergrad and graduates) program.
  • Investing In Student Success Act – introduced by Rep. Petri (R-WI) and Sen Rubio (R-FL) establishes a regulatory framework for income share agreements. (What do income share agreements have to do with student loans you ask? It applies to those cases when individuals/organizations provide students with funds for their education in exchange for the student agreeing to make payments linked to their income after graduation) .

The other hot Beltway topic continues to be the future of Public Service Loan Forgiveness (PSLF). The President’s 2015 Budget Proposal called for capping the (currently uncapped) total amount of loan forgiveness under PSLF to $57,500. (Why $57,500? Because that’s the current aggregrate, undergraduate loan limit. ). The proposal would also limit qualifying payments for PSLF to only income drive repayment plans . More significantly it would calculate married borrower payments for income drive repayment (and therefore PSLF eligbility) on combined household Adjusted Gross Income. This would close a gap in the current regulation which allows a borrower if married to complete their taxes as “married filing separately” using only their AGI to calculate the income drive loan repayment amount. (A huge benefit if the borrower is working for relatively low income (i.e. public service) while the spouse may be making a significantly higher income). The Republicans countered with the GOP Tax Reform Act of 2014 under which the loan debt forgiven in year ten of Public Service Loan Forgiveness would now become a “taxable event”- i.e. you would need to declare the monetrary“value” of the amount forgiven as income on your tax return (and be taxed on income that technically you never received but had “in theory”). Keep in mind as well that we have yet to see the first group of borrowers step forward for their actual forgiveness (that won’t happen until 2017.

Want another example of how really far the politicizing of student loan debt has gone… Check out this recent ad from the College Republican National Committee parodying one of my favorite television shows- “Shark Tank” (Posted here only as example of the level to which this issue is now political fodder not for any political affiliation or endorsement ) But it does get you thinking .. with seemingly every one in Washington throwing out ideas on how to solve the student loan crisis… maybe it is time to turn to the “Sharks” to get this done.

I Have An Aid Award…. Now What?

Note- this posting was update since its initial publication in April 2014

You applied for aid and have viewed your aid award letter on the Yale Student Information System (sis) and now… (pause, silence, crickets etc.)

The letter you received is termed a “preliminary” award meaning there are a couple of things you need to do to turn the preliminary award into a final award:

1) Send the required tax documentation. We will actually compare your prior year 1040 tax return to the information you provided on Need Access upon which the preliminary award was made. If there is a substantial difference between the two an aid award adjustment (either increase or decrease ) may be made. Remember you need to file tax documentation for anyone whose data you reported on Need Access (including spouse or parent(s) if you are under age 29 by 12/31 of the year for which you are seeking aid). Weren’t required to file a tax return? Then you need to complete a “Non Filer” Statement on the Forms section of our website. Big requests … please only send the first two pages of the 1040 return . Our office printers and fax machines have died slow and painful deaths printing out tax returns that include multiple pages of Schedules. Save some trees, save our office machines… only send the first two pages. If we need any of those additional forms for further clarification.. .we will let you know at the appropriate time. Final step on the tax returns … by federal aid regulations they must be signed preferably on page 2 of the 1040 where it says “ Sign Here” (you would be surprised how many people miss that). Electronic or scanned signatures are totally acceptable. And if you e-filed your returns just sign anywhere on the copy you are sending us.

2) Send the Notification and Confirmation Form. The most important part of the 3 page form is Section A where we as are asking you to accept or decline your aid offer. This is also the part where you can indicate how much or how little of the loan funds offered you are actually accepting as well. A couple of notes on that topic:

  • If you have decided to borrow additional loan funds to cover the calculated parent contribution you would simply add that additional borrowing to your Grad Plus loan . You can never increase the Direct loan above the $20,500 federal limit. International students should just increase their Yale Graduate and Professional International loan for any parent contribution borrowing.
  • Think about how much you truly need to borrow- do you really need the full amount of loan funds offered? Can you budget for less than the $17,000 living allowance to decrease borrowing? Even a few dollars less in borrowing can save you considerable money in ultimate loan repayment. Also know that if you do decline any portion of your loans now… at any point during the academic year you can re-accept those funds .
  • The Notification and Confirmation form is flexible… you can change this form at any time between now and the beginning of the academic year. Not just in terms of accepting and declining funds .. but you can also change loan types as well. When the interest rates on federal student loans for next academic year come out (on or around June 1) and if you feel based on those loan rates that you want to look at private student loan options .. you can do that and submit a revised Notification and Confirmation form. The reason why we ask for this form now ( or by the May 3rd deadline) is because:
    • We have to know how much aid you are accepting so that those funds appear as “ anticipated aid” and will against the direct Yale charges of tuition and fees on your soon to be issued (July 1) Fall term bill.
    • Equally important… receipt of the Notification and Confirmation Form is our indicator that your file is ready for a final review. Submitting the taxes alone will not trigger that process .

Is there more to the financial aid process? Oh yes. Between now and the end of the summer, financial aid requirements including loan master promissory notes , online entrance counseling, asset verification forms, refund requests will all come into play. All to insure that when you do arrive on campus the bill is paid and you have funds in hand to support your living expenses. But that’s info for another blog at another time. For now just focus on finalizing the aid award.

For more information on the aid award process with links to the tax return and Notification and Confirmation Form requirements visit our website.

“Fixed- Variable” And Other Student Loan Oxymorons

The recent Bipartisan Student Loan Certainty Act of 2013 sped its way through Congress and the President’s desk on its way to significantly changing the federal student loan landscape. Let’s take a looks at it and see what are the upsides and what are the downsides….

First I need to say up front that anytime I see the words “bipartisan” anything I have to believe it’s a good thing. So let’s acknowledge that this really was a good faith effort on the part of Congress to address the student loan crisis. How effective their solution will be in providing real term debt relief may be difficult to assess in the immediate.

The major change of this act was to move the present federal loan system from one where Congress established interest rates to a system where interest rates are linked to the financial markets. Every academic year a new interest rate would be established for both Direct Unsubsidized Loans and Graduate Plus Loans. The rate would be based on the high yield of the 10 year Treasury Note (T-bills) prior to June 1 plus additional add-ons of 3.6% for the Direct Unsubsidized Loan and 4.6% for the Grad Plus Loan. So for academic year 13-14 we are looking at a 5.41% interest rate on the Direct Unsubsidized Loan (previously 6.8%) and a 6.41% interest rate on the Grad Plus loan (previously 7.9%).

The most common question asked of any loan regarding interest is … is this a fixed or variable rate? And the great answer regarding these new student loan is that it’s termed a “fixed-variable” rate. (Seriously that’s a better oxymoron than “jumbo shrimp”). What it means is that while the interest rates will change and be re-established every academic year depending on the T-bill and market, once that interest rate is established it will be locked in for the life of the loan through both your in-school enrollment and your full repayment. What that translates to is that you could end up finishing YLS with six different loans (a Direct Unsubsidized and Grad Plus per year for three years) all with different interest rates. That could make loan repayment just a little challenging but also may afford you a good opportunity to pay off your loans strategically using a “debt stacking” model (i.e. pay off the highest interest rate loans first).

It may also make accepting your aid award each year difficult, as you would not have confirmation of what your loan interest rates would be for the forthcoming academic year until after June 1 annually. It would put you on a very tight timeframe to decide if you would then take the loans at that rate or perhaps look at private loan alternatives and get it all sorted out by the time the August 1 bills are due.

Probably the biggest unknown out there is how high can the interest rates rise and ,depending again on the health of the market, how fast would it get there. As a safeguard, Congress did build “maximum” rates into the “fixed-variable” plan… for Direct Unsubsidized it’s a 9.5% rate and for the Grad PLUS it’s 10.5%. The reality is that if the economy improves these rates could increase quickly (some experts are even predicting that as earlier as 2015 we could already exceed the existing 6.8% on the Direct Unsubsidized loan.). Though the Congressional Budget Office predicts we would not reach the maximum interest rates within the next ten years. We all want fast economic recovery but we may be developing a culture of current students who need it to happen at a slightly slower pace until they graduate.

So why did Congress take this approach in addressing the student loan crisis? According to the bill’s proponents the measure was a “victory” for taxpayer who won’t be forced to subsidize student loan rates arbitrarily set by politicians. In addition the bill is estimated to reduce the deficit by $715 million over the next decade. Graduate and Professional students, the often ignored in the student loan debate, probably also want to applaud the fact that the bill actually addresses their loans.

Critics of the bill (including many student and consumer groups) are worried that the maximum caps are still far too high and should have been set lower to protect future borrowers – i.e. are we offering an immediate interest rate reduction to today’s current college student but on the backs of our current middle schoolers.

And the other question behind all this is… is how permanent is this solution? Would this all change (again) when Congress takes its rewrite of the Higher Education Act this Fall? Stay tuned.

Life Does Not Have To Involve Living Off Ramen- How YLS Students Save Money

Part of my ritual for another school year is a blog entry targeted to our new 1Ls basically focused on “living on the cheap” in New Haven. I could certainly give you my own ideas (like if you shop at IKEA check out their “As Is”… department first where not only can you save money but your furniture will already be put together for you – okay that’s equally a budget tip and equally “I am just lazy” tip). But this year I decided to change it up a little and go to the actual source… real YLS students who have learned (in some cases the hard way) how to save, sacrifice and manage on a student budget. I put out a call in early summer to our rising 2ls and 3Ls asking them to share with our incoming students their money management strategies and was amazed at their resourceful responses:

Most of the students agreed that the most challenging part of the student budget centered on housing/rent, transportation, food and books. That being said here are their creative solutions (with a disclaimer that the Financial Aid Office is not endorsing any strategies or vendors … we are simply stating that this is what students do…):

HOUSING/RENT
“Pay your rent for the entire semester ahead of time so that you don’t have to think about it. It really reduces the stress surrounding finances to have the biggest expense taken care of.”

“The hardest part of budgeting is paying your January rent, since the second semester doesn’t start until after winter break, you don’t get the second round of loans until late January. At the start of the semester, set aside all the cash you’ll need for rent into a savings account (or wherever) and then budget with the rest. A lot of us 1L year didn’t do this and had to scramble in January to make ends meet. “

“If you do not have a roommate, split utilities like internet with neighbors.”

“You can make small adjustments to your food budget, but let’s not ignore the elephant in the room: Don’t live in expensive downtown high-rise apartment buildings just because it’s easy or because everyone else seems to be doing it. You’ll have plenty of time to live in your own private mediocre high-rise apartment once you’re practicing law. Instead, find a room in a cute house in East Rock, Wooster Square, the Mansfield Street area, etc. You’ll save $400-600/month. If you do that, you’ll never have to worry about your food budget. Don’t be afraid to explore New Haven’s “outer” neighborhoods!”

“My advice is simple (for single people): live in East Rock with roommates. Rent is my biggest expense by far – by keeping my rent low, I’ve found living on the budget is really a piece of cake. “

TRANSPORTATION/TRAVEL:
“Get on a bike and go buy groceries. Homemade meals are the golden path to saving a ton of money. It can be hard to get around in New Haven, so a bike can be a great option to get exercise, bask in the sun, and buy the stuff you need. “

“Being in a long-distance relationship can really strain your budget, but planning ahead can help. If your significant other is an Amtrak ride away, buy a Student Advantage card to get discounted train travel. And book those tickets well in advance, even if you aren’t sure that you can actually travel on that day. Fares are much lower two months out and it’s easy to cancel or modify reservations – there’s no fee and you can use the credit towards a later trip.”
“Book your Amtrak or Mega Bus tickets in advance. Prices go way up closer to the date you’re traveling.”

“The key to saving money for me has been signing up for frequent flyer miles and credit cards that give me rewards so I can spend less on transportation to the west coast.”

“Sending my car back home was the best financial decision I could have made. With parking and upkeep expenses I was barely getting by, but without a car I’m able to live within my means. I just get my heavy groceries delivered through Peapod and buy fresh items from the co-op.”

SHOPPING:
“Shop at Savers!!!! Savers has furniture, home supplies & appliances and pretty awesome clothes. There are some real treasures there. “

“Connect with current or, ideally, recently graduated students to see if they can get some furniture. Alternatively, Craigslist is a great resource.”

“Carpool with a few other students every 3-4 weeks to Costco or Trader Joes in Milford and stock up on essentials.”

“If you shop online, use Ebates.com–you get cash back for most major retailers. It adds up!”

FOOD/MEALS
“Make food that freezes well and divide it into individual portions (and freeze it) so that you don’t have to resort to takeout when life gets hectic. “

“It’s surprising how much money you can waste on small expenses like study snacks during the day. To save money, stock your locker with snacks you’ve bought in bulk.”

“Attend events at YLS. Great way to get tasty free food and learn something new.”

“Make your own lunch or buy food from food carts… cook for yourself as much as you can. The dining hall has a microwave, plates, utensils, napkins, basic condiments. There’s even a fridge on the other side of the building. You can really cut costs by bringing your own lunch to school or attending almost-daily free lunch events.”

“I try to pack lunch at least three times a week. And I almost always cook dinner for myself. Buying meals out is one of the most efficient ways to deplete your funds. Plus cooking will impress potential dating partners. “

“I try to buy liquor at the big store next to Trader Joe’s. I get someone with a Costco card to take me shopping there. Don’t eat out! Save it for special occasions. Pack a lunch from home or go to an event with free lunch.”

BOOKS:
“Don’t buy books until you’ve had a couple weeks in your classes. There may be some classes for which it’s more sensible to use the copy the library has on reserve. This is particularly for professors who give a lot of reading outside of the textbook. If students are anything like me and can’t help highlighting, underlining, and taking notes in the text while reading, scanning and printing the pages you need really works. At the most, you’ll spend $60-$70 on printing per class over the entire semester. That probably amounts to a third of what you’d pay for buying the book.”

“If you HAVE to buy the book, make sure to check the Initiative’s book fair at the beginning of the semester, in addition to the ongoing Google doc that YLS students maintain to sell books (2012-13 version available here).”

“You might be tempted to pay more for your books and for shipping so that you can have them for the first day of class. But don’t do it, shop around and find less expensive options. “

“Books are a major expense and there are a lot of other ways to get the readings (friends, copies from the library). My year, someone from our small group got the books from the library and scanned all the readings for the first week and sent them to the group. That way, if the less expensive book didn’t ship for a week or two, we were still all covered.”

“You can also rent books from the book store for a lot less than buying them (though you can’t write/highlight in them). So keep that option in mind.”

BUDGETING IN GENERAL
“Do your best to estimate your utility bills and other bills related to living so that you can get a better idea of how much spending money you’ll have once ALL of your bills are paid for the semester. Divide the excess into weeks –this is the MAX that you can spend each week. Putting the money into a separate account will reduce confusion about how much money is available to go out with friends, shop, etc. “

“I think it’s helpful to make an actual budget in Excel at the beginning of every semester. Then at the end of each semester go back and see how well you stuck to your plan and revise for the next semester as necessary.”

“I set up a monthly budget in August and update it periodically to keep track of my expenses. I usually overestimate (within reason) all budget line items so I have a cushion at the end of the semester.

“I also use mint.com, a budgeting app. It lets you set monthly budgets and makes it super easy to keep track of spending.”

My thanks to all the 2Ls and 3Ls who contributed their suggestions and their first hand experiences living on a “fixed income”. Keep in mind that the Financial Aid Office has budgeting tools available to help you. In addition we will be kicking off our Financial Literacy Lunch Workshop series this year with a workshop on budgeting and credit on September 25 which includes one of those “valuable” free lunch opportunities.

“Delicious” Money Saving Tips And Tricks From One YLS Student

Inspiration for the blog comes in many forms. Take my change meeting with 2L Christina Coutu this past week who happened to see me with a container of my favorite Greek yogurt. Bonding over our mutual love of yogurt, Christina shared how in a purely cost savings measure she had taken to actually making her own yogurt. (Seriously you can make it? I thought it only came from the dairy case at Stop and Shop?). Christina said that when faced with the realization of how much she was spending buying those little individual yogurts she realized she could save some significant funds doing it herself. And she didn’t stop there.. .she also shared how she makes her own fast, affordable and healthy steel cut oats breakfast (in lieu of high cost cereals) and how she prepackages healthy snacks from home for munchies cravings while at YLS. Better than anything from Rachel Ray or Martha Stewart, here Christina shares her self-proclaimed “money saving tips and tricks in the kitchen” proving that budgeting can be done while here at YLS:

1. Make your own GREEK Yogurt.

What you’ll need:
* Crockpot
* Thermometer
* Milk (any fat content will work—higher fat = richer/smoother)
* Starter (1/2 cup per ½ gallon of milk of yogurt with live cultures)

Directions:

  1. Heat the milk in a saucepan on the stove or in a microwaveable safe container (in the microwave) until the milk reaches 180 to 200? F.
  2. Let the milk cool until it reaches 110-115? F.
  3. Once cool pour the milk into the crockpot.
  4. Remove one cup of the milk and whisk in the starter. Stir this mixture into the crockpot.
  5. Place thermometer inside the crockpot (you can simply crack the lid slightly). Cover the lid with a towel to keep the heat in.
  6. Check the yogurt after a few hours to see that the temperature hasn’t fallen below ~105-110? F. If it has simply turn on the crockpot (warm or low setting) until the thermometer reads 110-115.
  7. Leave the yogurt to sit for a total of ~8 hours, longer will yield tangier yogurt.

Notes:
* Once the yogurt has sat for ~8 hours you should have a layer of whey on the top. I like to pour this into a container and use it for banana bread (higher protein content than plain old water). This also makes the yogurt thicker.
* For extra thick yogurt strain it in a colander lined with cheesecloth, heavy duty paper towels, or coffee filters.

2. Make overnight steel cut oats for a fast, affordable, and healthy breakfast

What you’ll need:
* Add-ins of your choosing (suggestions to follow)
* Crock pot or regular pot
* 1-1/2 cups milk (any variety will do)
* 1-1/2 cups water
* 1 cup uncooked steel-cut oats
* 1/2 teaspoon cinnamon
* 1/4 teaspoon salt
* Optional garnishes:

Directions:

  1. Coat inside of slow cooker with cooking spray.
  2. Add all ingredients to slow cooker.
  3. Stir, cover, and cook on low for approx. 7 hours (slow cooker times can vary).
  4. Spoon oatmeal into Tupperware containers (1 cup portions are perfect) and store in the refrigerator for an easy grab and go breakfast.

*I like to pour ¼ cup milk on top, pop them in the microwave, and add additional toppings for a warm breakfast.

Mix-In Ideas
* Chopped apples, walnuts, and apple pie spice.
* Chopped bananas, cocoa powder, and slivered almonds.
* Flaxseeds, canned pumpkin, and pumpkin pie spice.
* Maple syrup and brown sugar.

3. Portion your own snacks into individual bags.

* Sounds easy enough but we’ve all spent way too much money on snacks because hunger strikes during a class break.
* Buy some Ziploc baggies and large sizes of foods you love—portion all of them at once and you’ll never have to worry about spending money frivolously on snacks.

A Few Great Snack Ideas:
1. Dry Cereal: Instead of paying $2 per serving for an individual cup of cereal in the dining hall do your own. A $4 box of cereal with 12 servings is just 33 cents a serving—saving you $1.67 every time you bring your own.
2. Nuts: Any variety will do but I love the flavored varieties.
3. Chips/Crackers: Just divide them up and pack some hummus for dipping.
4. Raw veggies and dip or hummus: Slice, portion, and bag them up. Grab a bag with a few tbsp. of hummus or dip if you prefer not to eat them plain. (mini Tupperware is great for this).
5. Raw fruit: bananas, apples, and oranges are great for packing.
6. Hardboiled eggs: boil a whole dozen at once.

There are great buys [Note: Christina cites Amazon] for stocking up on DIY snack essentials including: Food Storage Containers (less than $25 and great for your dips, oatmeal, and homemade yogurt), Thermometer (less than $5 and a must-have for yogurt) and the Crockpot (less than $25).

Any other YLS students have their own resourceful tips and tricks for living within the student budget? And yes .. I am talking to you… 3Ls… who have had three years of learning how to make a budget work for you. If so share them in the blog comments below or email them to our office (financialaid.law@yale.edu) as the topic of their own future blog posting…