Tagged: law

January 29, 2015

“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.

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?

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:

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.

October 21, 2014

Financial Aid Fashion Blogging

So this is my one (and most likely only) chance to join the myriad of “fashion bloggers” out there. Definitely a bucket list item I can now cross off.
So what’s the connection between my real life world of financial aid and the far more interesting world of fashion… budgeting of course (my favorite topic of conversation).

Our 2013-2014 Cost Of Living Survey indicated that on average, YLS students spent $642 on professional clothing last academic year (a significant jump of 18% over what was spent the prior year). That’s a big bite out of the already stretched student budget.

But the reality is that you can indeed “dress for success… for less” as our October 20th Financial Literacy Lunch Workshop proved. Fashion editor Shanelle Rein Olowokere (In Style, Entertainment Weekly, People Style Watch, PEOPLE.com and currently senior fashion editor at Goodhousekeeping.com) brought her fashion sense and sensibility to YLS.

Shanelle recognized that YLS students face two distinct challenges- dressing for the nonprofit/public service work environment and dressing for the far more conservative and formal law firm setting. With clothing generously provided by THE LOFT, Shanelle used real YLS models to demonstrate two looks for both the conservative (think firm or clerkship) to casual (nonprofits or new media) work places. Our special thanks to our two models Chelsea Lane-Miller’ 17 and Irina Anta’ 15 for agreeing to walk our makeshift runway (well, okay just the amphitheater stairs in Room 127) . In the photo on the left, Shanelle (right) highlights some of the features on Irina’s “casual work environment” LOFT look , while Chelsea (middle) waits to show a LOFT suit appropriate for “firm wear”. And Shanelle didn’t forget the men- she included in her presentations visuals for optimum casual and conservative looks for them as well.

So here are some of the key takeaways that Shanelle shared-

1) The absolute need to find the right fit- whether that means ignoring the sizing label, making friends with your local tailor or just knowing your body enough to realize what looks right on you!

2) Have a shopping strategy- know how much you can spend (i.e. the all-important budget), know what you need (make a list!), research on line first (saves lots of time browsing through stores) and shop smart (see something you like… wait for it to go on sale!)

3) Work those accessories- want to express your individual style while wearing a relatively conservative wardrobe? Let your accessories (tie, scarf etc.) do the talking for you. But don’t forget that you want quality in those accessories so that they fit well and will last … whether in good (aka comfortable) shoes or leather handbags .

Beyond her basic presentation, Shanelle fielded a lively Q&A session with students that touched on every fashion aspect imaginable from appropriate winter outerwear (answer- classic trench coat and wool coat), whether you can wear black shoes with navy pants (answer- absolutely), if black flat shoes are appropriate (answer- depending on the work environment and if the shoe was constructed well i.e. no ballet shoes), how to work with a tailor (answer- start with alterations to some of your less expensive clothing to see if you like their work before giving them any of your higher quality suits or dresses) to whether you can use a nice leather tote bag in lieu of a purse (answer- yes!) .

Above all Shanelle emphasized how important clothes are to not just looking professional but feeling good about yourself in the workplace, which ultimately help your performance. And she gave tips galore on inexpensive brands, sale strategies (shopstyle.com!) and continually proved that you can indeed dress well on a budget (provided you make a budget!).

And so ends this post from the self-proclaimed “Financial Aid Fashionista”!

October 10, 2014

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.

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) .

October 9, 2014

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) .

Bank on Students Emergency Loan Refinancing Act – by Senator Warren (D-MA) would allow more than 25 million people to refinance their student loans to today’s lower interest rates of less than 4 percent.

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.

April 7, 2014

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.

March 17, 2014

Rumor Has It.. Debunking COAP Myths For New Admits

Yale Law School’s COAP (Career Options Assistance Program) lends itself to a lot of questions at this time of the year when new admits are most likely comparing loan repayment assistance program (LRAPs) among schools. And since these LRAPs really function as a significant post enrollment scholarship for you they should be factored into any financial aid evaluation. But sometimes the complexities and details of these programs can lead to misinformation or misconceptions, so we wanted to “debunk” some of the common COAP myths:

Myth 1: Below the $50,000 income threshold COAP pays for my loans but above that I do not receive COAP support …
FALSE… it’s true that at an income level of $50,000 or below (for anyone admitted post 9/1/11) COAP will fully support your loan payments. But above $50,000 we use a tiered contribution schedule at which you are expected to put in a portion of your loan payment but where, depending on your debt, YLS is still providing significant support. COAP is not an “all or nothing” support program.

Myth 2: There is one income at which all COAP participants “income out” of the program…
FALSE … The income where your assessed participant contribution (Myth 1) is equal to or greater than the calculated annual payment (or at which point you income out) is dependent on your own loan debt, as well as any income exclusions specific to your own circumstances. There is no one income threshold that applies to all participants.

Myth 3: The 15/5 amortization schedule in calculating payments is not as generous as a straight 10 year repayment schedule
FALSE… The 15/5 works like this … for COAP years 1-5 your annual payment is calculated on a 15 year repayment schedule but then at COAP years 6-10 we recalculate your loan debt on a much more accelerated (i.e. increased) 5 year repayment schedule . The advantage of changing the amortization schedule in the middle of the program is that you can earn more income in the back five years of COAP and still have COAP eligibility. If that annual payment never changes (i.e. a straight 10 year repayment for all years of the program) but your income increases and your contribution goes up eventually you in will reach a point where you income out (see Myth 2). But if that annual payment changes to a higher number (as it does when we switch to a 5 year repayment schedule in Year 6) you have a higher ceiling for income growth and your contribution while still maintaining eligibility for support from us.

Myth 4 : if I leave COAP or don’t begin COAP as soon as I graduate I can never be eligible again…
FALSE… You have 10 years of eligibility in COAP at any time (provided you still have loan debt). So you can be in the program for a couple of years, leave and return to it whenever there is a point in your life where you need COAP assistance to make the loan payments. And you don’t need to start COAP immediately after graduation to start your eligibility. As long as you enter the program at some point within 10 years of graduating you will still have your flexible 10 years of program eligibility available to you.

Myth 5: COAP support is dependent on being in a public interest career….
FALSE… what makes COAP truly unique is that the program does not dictate what type of employment you must have to stay eligible. COAP is solely based on income no matter what career path you may choose. Granted many COAP participants are in public service or governmental work but we also have had participants ranging from concert pianists to record label producers to novelists. Your loan repayment assistance program should never restrict you from pursuing your dreams or taking a new direction in life.

Myth 6: COAP is the most generous, flexible and supportive loan repayment assistance program available…
Okay… based on everything above this myth is actually the TRUTH.

Want more information on COAP? Visit the COAP website or attend the COAP Workshop at Admitted Student Weekend. Interesting in having the Financial Aid Office work up a projection of what COAP support may look like for you based on your anticipated loan debt and career path… reach out to us at financialaid.law@yale.edu

March 7, 2014

“It’s A Beautiful Thing”- the New Loan Repayment Estimator

Yes I was a skeptic when I heard several months ago that the Department Of Education’s Office of Federal Student Aid was coming out with a new federal student loan repayment calculator to assist borrowers in estimating their repayment. Previous iterations of their calculators had been cumbersome (you had to individually enter all your loans by type and then by interest rate), manual (you had to subtotal all your estimated loan payments by each of the various federal repayment plans) and duplicative (separate calculators for Income Based repayment and Pay as You Earn projections).

But my immediate reaction to the new calculator (now called the “Repayment Estimator”) was simply that it was truly a “beautiful thing” (seriously I think I started to tear up a little also) . Because this time Federal Student Aid go it right. The Repayment Estimator is a huge tool in helping not just to educate borrowers on loan repayment but also in assisting them with making the right choices for them. And here is why it is indeed “so beautiful” :

1) It’s personalized… you log into the Estimator using your personal information and most importantly your FSA (or FAFSA) pin and when you do your loan balances automatically are pulled from the National Student Loan Database system right into the calculator. And it pulls the balances with the in school interest that has accrued to date so you are really getting the most accurate representation of your loan portfolio. No more manually entering each of your loans – POOF .. they are there like magic.

2) It literally tells you everything you ever wanted (or maybe didn’t want) to know about your loans– want your total debt, your weighted average interest rate, who your servicer is, what repayment plans each loan is eligible for… its all there for you!

3) It allows you to consider all your repayment option at once– Standard 10 year, Extended 25 year, Graduated Repayment, Income Based Repayment and Pay As You Earn are all projected automatically and visible simultaneously so that you can easily compare the cost of each option against one another. The Estimator even projects little “extras” like the payment increases (“step ups) that will happen as part of the Graduate Repayment Option and the loan balance that would be forgiven after 20 years of payment under Pay As You Earn or 25 years under Income Based Repayment.

4) There is a lovely parting gift… at the end of the Estimator you have the option to email the calculators results to yourself. This summary will include a detailed spreadsheet of the repayment plan results you saw on the calculator but also has some great comparative graphs documenting projected total amount paid and total interest paid over each plan.

Bottom line… the Repayment Estimator takes the ever complex world of federal student loan repayment and actually makes it (dare I say it?) understandable and clear. It’s a powerful resource for anyone in the quest to become a savvy and empowered loan borrower. Check out the new Student Loan Repayment Estimator today.

November 26, 2013

The Gift That Keeps on Giving- Sequestration and Loan Fees

You remember sequestration don’t you? That hot topic that everyone was talking about at the start of the year and now is very rarely mentioned. Well just because we’ve forgotten about it doesn’t mean it has forgotten you. And to make sure that it stays on our radar, it’s just given all of you a reminder… yet another increase in your loan origination fees.

Let’s back up a little with a few basics on origination fees in general. What are they? How do I pay them? Why do I pay them? Origination fees on student loans were initially imposed by Congress in the mid 1980’s as a “temporary solution” to budget issues and to reduce the cost of running the federal student loan program.

So fast forward thirty years and the temporary fees are still in place. According to the Department of Education Federal Student Aid website “the loan fee is an expense of borrowing one of these loans”. The fee, based on a percentage of the amount of each loan, is directly deducted from your actual loan disbursement. You may have noticed that the amount of loan funds initially awarded by the financial aid office differs from the amount that show up on your SIS account- that difference (the gross to the net) accounts for the origination fee that automatically comes out of the disbursement. But…. In terms of repayment, you are responsible for the full (“gross”) amount of the loan including the fee that never actually disburses to you.

This is why the issue of origination fees increasing might become a concern for you. Because as these fees increase, you will have less net funds to actually apply toward your costs while enrolled and higher debt afterwards.

So back to sequestration, resulting from the Budget Control Act of 2011, the automatic budget cuts under the “sequester” impacted federal student aid programs in a variety of ways one of which was an increase in the loan origination fees. Most students saw the first increase in these fees at the beginning of this academic year when the Direct Unsubsidized loan fees jumped from 1.0% to 1.051% and (more significantly) the Grad Plus jumped from 4.0% to 4.204 %. But those increases were only year one of the Sequester, applied during the middle of federal fiscal year 2013. Now they are quickly being followed by year 2 which further increases the fees from 1.051% to 1.072% on the Direct Unsubsidized loan and from 4.204% to 4.288% on the Grad Plus.

The new increase in fees will impact any “new” loans disbursed after December 1, 2013. So if you have an academic year loan awarded last summer for which a fall disbursement has already been made and a spring disbursement is pending – your fees will not change between the two disbursements- it’s still considered one pre-existing loan. BUT if you initially declined all your loans and are now deciding to accept them for Spring – those new loans would be subject to the increased fees. In addition, if you choose to increase an existing loan – that increase (because it’s recorded as a separate loan on your loan portfolio) would be subject to the new fees.

What is the increase actually costing you? For a $25,000 Grad Plus loan the total origination fee based on the new 4.288% means that $857.60 would come right out of your loan disbursement immediately. But you are still obligated to pay back that $857.60 as part of your total loan debt … which based on a 10 year repayment schedule at the current Grad Plus interest of 6.41% equates to a repayment of $1164.38 on those fees alone. Put yourself on the 25 year repayment plans and now those same fees cost you $1,723 over the life of your loan. Again, all for monies that you never have your disposal but for which you then pay back with interest.

So what happens next… when will the next hike in the origination fees happen given the fact that Sequestration is a 10 year process? Ah… for that question my trusty Magic 8 Ball shows a reply of “Cannot predict now”.

October 16, 2013

Get On Board the Public Service Loan Forgiveness Train

Any 3L who has already come in for a loan counseling session has probably heard my (overused) analogy of “ getting on the COAP train and riding it to the end of the station”, meaning determining a way to maximize your COAP benefits for a full ten years of eligibility. Well, there’s another train that you may also wish to ride either exclusive of or in tandem with COAP…. Public Service Loan Forgiveness.

Public Service Loan Forgiveness was initially established by Congress with the College Cost Reduction and Access Act of 2007. And despite the fact that its been around for 6 years, as a recent article in the New York Times reported, the program has been underused. The Consumer Financial Protection Bureau has even developed an “Employer’s Guide to Assisting Employees With Student Loan Repayment” to encourage public service employers to start actively promote PSLF among their workforces.

So why aren’t more people taking advantage of this “free” loan forgiveness? Two factors come to mind:

First, while the program was launched in 2007, the Department of Education had no system in place to actually track public service employment until 2012 (yes five years into the program!). But now that a system has been established with an annual ‘Employment Certification for Public Service Loan Forgiveness Form” and a loan servicer (Fed Loans) appointed as the sole servicer for borrowers in this program, these issues should be addressed going forward.

Second, as the article in the Times references, is the complexity of who gets PSLF for what loans under what conditions. Basically PSLF works this way… IF the borrower makes 120 separate, one time monthly payments IN certain loan repayment plans WHILE maintaining working in a public service organization(s) during that 120 month period THEN the borrower may have the remaining balances on the Direct Loans forgiven. For more information on what the IF, IN, WHILE AND THEN really means – see the federal PSLF website for the program’s specific eligibility requirements.

Because what I wanted to focus on in this post are the two questions I get asked most frequently by students considering PSLF :

Question 1: If I have COAP, why would I need Public Service Loan Forgiveness?

The general answer in most cases would be, if you have full COAP eligibility for all ten years of COAP (again the COAP train analogy), then most likely you would not even need to consider Public Service Loan Forgiveness as an option. But given changes in your own income, the addition of a spouse income, accumulated assets or even the amount of your total debt burden, there may be situations where based on the COAP formula you “income out” of COAP (i.e. your assessed COAP contribution surpasses the calculated COAP repayment amount based on either the 15 year repayment in COAP years 1-5 or the 5 year repayment in COAP years 6-10). In that situation if you were not eligible for COAP but still were employed in public service (and committed to it for the balance of the 120 loan payments) then PSLF might be a viable alternative for you. The issue would be that you would have to have a sense of that happening right from the outset of your loan repayment to insure you got on one of the eligible PSLF repayment plans from the get go and started banking those 120 payments as soon as possible. This is where one of our loan repayment counseling sessions can really assist you because part of that process is actually estimating your COAP eligibility (based on projected income and loan debt) for the full 10 years of COAP so that you can see how long you might receive support and if you should be making accommodations for PSLF as an option.

Question 2: How likely is it the Public Service Loan Forgiveness will be around when I actually need it?

We have no indications that PSLF is going anywhere yet this question continues to haunt us Financial Aid folks. Why? Do the math.. the program started in 2007 which means the first “graduating class” (i.e. the first group of borrowers to complete the 120 payments) won’t happen until 2017. That’s the magic moment when all these people (who up until last year when they required people in PSLF to identify themselves we had no idea existed) will step forward and ask the government to forgive the balance of their loans and write off their debt. Why is that significant? Because unlike other federal loan forgiveness programs where the forgiven debt is a taxable occurence (i.e. must be declared as income by the borrower in the tax year in which it is forgiven) in Public Service Loan Forgiveness the forgiven debt is not taxable . So while you could argue that the actual forgiveness of PSLF loans doesn’t have a direct cost to the government (these are all federal loans so the debt is “written off”) it could have a significant tax loss which may make it a target for review. On the optimistic future side for PSLF it should be noted that PSLF is not subject to appropriations or the budgetary process so literally it would take an act of Congress for it to go away. And if that were to happen (switch to pessimistic side) one would also hope that individuals currently clocking time in the program would be grandfathered to completion. The reality is that I don’t have a crystal ball capable of predicting the long term future of PSLF let alone any other federal aid program.

Want to learn more about if Public Service Loan Forgiveness is right for you or how it can work with COAP? Come to our COAP In Action workshop this spring where we dedicate a portion of the session to the specifics of PSLF. Want an individual loan counseling session to chart out your COAP eligibility? Contact the Financial Aid Office at financialaid.law@yale.edu.

October 16, 2013

Thanksgiving Comes Early to YLS

“I thank you for introducing me to the law, to my many friends, to my husband and I thank you for opening my eyes to the world around me in a way that I had never experienced.” Those words spoken by Secretary Hillary Rodham Clinton’73 while accepting the Award of Merit this month were nothing short of profound and spoke volumes about the YLS experience. Being grateful, expressing appreciation and, yes, simply giving thanks are such a central part of the fabric of the YLS community.

That’s why every year at this time we notify students that the need based institutional scholarship they received was supported through one of the endowed funds established by a YLS donor. And as such, we ask you to acknowledge the support you have received with a simple thank you letter or note (whatever you wish to call it) to that donor.

And each year we have the students who can write amazing opinions, memos and SAWs for class develop a severe case of writer’s block at the thought of composing a thank you note. “What do I say to this donor who I have never met” is a common refrain. Actually it’s very easy … because what the donor wants to know above all else is …. you! Our donors take great pleasure in seeing that their funds are actually supporting “real” YLS students. So talk about what you know best… yourself. Tell them why you came to YLS, what courses you have found the most rewarding or challenging, talk about clinic work, SPIF or summer employment experiences, tell them what you hope to do with your life going forward. Make them realize that their generosity supported a living, breathing law student with goals and aspirations. And, yes, somewhere along the way in telling your personal story, you should also utter the words “thank you” for their support of your scholarship.

Remember that what you and our donors have in common is that Yale Law School connection that Secretary Clinton articulated so well. Many of our endowed funds are established by alumni themselves or by the family members or professional colleagues of an alum as a memorial or honorarium. It is in essence a “pay it forward” movement that celebrates not only the donor’s or honorees’ Yale Law School experience but insures that the same experience is then passed forward to another generation of students through their scholarship support. (And with the hope that someday you too will reflect back on your YLS experience and find a way to “pay it forward” yourself).

Think of the whole process as Thanksgiving coming a little bit early… minus the turkey and stuffing… but with the same sentiment of gratitude and appreciation for what you have received.

A reminder for those of you with scholarships from our endowed funds…. What’s more fun than writing a thank you letter alone? A thank you letter writing party! This annual event which will be held November 4th,6th and 7th from 6:30-8:00 p.m. at Ashmun. Get inspiration and encouragement from your peers to write your thank you and share in some dinner, drinks and dessert.