Tagged: financial aid

“Recalculating”…. Great Tools to “Navigate” Your Loan Repayment

Sad commentary on my professional life… I get excited (okay maybe even “giddy”)  every time I discover a new online calculator that helps make loan repayment more understandable and easy.   I collect calculators like other people collect  coins, stamps or sports memorabilia.  But the good news is that  I am now prepared to share the most price pieces of my  “loan repayment calculator” collection with you.

Here are some frequently asked questions or scenarios related to loan repayment and the links to online calculators that will help “estimate”  an  answer for you.  My one disclaimer … some of the sites are specific to individual companies or private enterprises . I am in no way endorsing these sites or companies above any other competing sites and companies.  I have just found the links below to be very useful in lifting the “veil of secrecy” from loan repayment.  Of course the most effective way to use these calculators is to also schedule an individual loan repayment counseling session with our office!

How much will I pay in loan repayment?
For Federal loans:
Federal Repayment Estimator Access Group Loan Calculator
Access Group Loan Manager
For Private loans:
Wells Fargo Private Student Loan Calculator

Will I pay less if I consolidate?
Direct Loans Consolidation Calculator
FinAid Comparative Consolidation Calculator

Will I pay less if I refinance?
Citizens Bank Refinancing Calculator-
Student Loan Hero Refinancing Calculator

How much interest will accrue if I take a deferment?
Nelnet “Cost of Postponing Your Payments” calculator 
Student Loan Hero Deferment Calculator- 

Will I earn enough to make my loan payments?
Paycheck City-Paycheck Calculator
Mapping Your Future Debt/Salary Wizard-
Studentloans.gov Financial Aid Counseling Tool
iGrad “Will I Be Able to Pay Back  My Student Loans” calculator

How much in addition to my monthly payment would I need to pay to pay off my loans in “X” years?
Student Loan Hero Prepayment Calculator-
Bankrate Loan Calculator and Amortization

What would my loan balance be after making “X” number of payments?
DinkyTown Amortizing Loan Calculator –

Should I pay off my student loans or invest?
Student Loan Hero- Payoff VS Invest Calculator
iGrad Pay Down Debt or Invest Calculator –

What Really “Mattress” And What You Should “Chair” About in Furnishing Your Apartment

So Class of 2018… here is the reality – your new permanent address here in New Haven is 127 Wall Street. That’s where you will be spending the majority of your days and nights. That apartment that you probably just dropped a hefty security deposit on is solely where you store your stuff and sleep.

Given that… there is no real reason to spend your already challenging student budget on furnished said apartment in any type of lavish style.  There are ways to get all the essential furniture you need and still save money

IKEA (located on Sargent Drive in the Long Wharf section) – is probably the go to New Haven “student friendly” destination for inexpensive and yet new furniture.   The biggest time constraint with IKEA is not winding your way through the labyrinths of their massive store  (following their mandated yellow line so that you have to walk through each and every department) but the time you will need in actually putting together the furniture which all comes unassembled  with no written instructions (just pictures) and you r only  tool is the 4 inch allen wrench supplied with each purchase.   There is a reason why IKEA sells a larger $7.99 tool kit close to the checkout counters- invest in that!   My favorite spot in IKEA is actually the “As Is” department which is tucked to the far left of the checkout area. Here you can find significantly reduced display models or slightly damaged furniture and the best part… it’s all pre- assembled!!    No room to fit that purchase in your car? – IKEA also allows you to rent trucks on a daily basis to bring the purchase home. Another budget item  related to IKEA- great inexpensive meals in their restaurant – the signature dish being their Swedish meatballs with  ligonberry sauce.

My other  favorite budget furniture place is Universal  Hotel Liquidators (UHL) located on Rt. 1 in West Haven. Consider the concept… who changes furniture the most often… hotels who are constantly updating  their rooms.  UHL  recognized that and the fact that this furniture for the most part is relatively gently used and as such very resellable. .  Think of it as a “green effort” to recycle furniture that still has a lot of life span left.  It’s an enormous warehouse where you can literally find any type of furniture here that you would find anywhere in a hotel. From the traditional bed sets,  desks, and armchairs to ice buckets, luggage racks and wet bars.  And usually it’s not just one of any given item but sometimes 30 that all came out of the same hotel (so you get to choose which one of the 30 is in the best condition).   Part of the adventure is looking for the identification found somewhere on the piece which tells what hotel  it came from – bonus points if you find anything from the Waldorf Astoria.  Hotel Liquidators will also deliver furniture for a small charge.

For those with a sense of adventure there is always the tag sale/estate sale circuit.  You can find a listing of area weekend sales in the classified of the New Haven register each week (paper version or online) .  If you have a car and can get out to the New Haven suburbs (Orange, Woodbridge, West Haven)  it’s usually some pretty good  pickings.

But why listen to me when he real source of interior design on a budget has to be our own  rising 2Ls and 3Ls who shared these tips:

  •  “I  strongly recommend furniture shopping at thrift stores, though you may want to reserve this for non-upholstered items like tables, desks, and dining chairs. My favorites in the area are Savers and Helping Hands Community Thrift Store (which, as a bonus, has a student discount!). “  [Note- you can find Savers, Helping Hands , the Goodwill Store as well as several private consignment shops all on the Route 1 Boston Post Road strip in Orange].
  • Look for furniture on Craigslist — many of the posts in New Haven are Yale students (sometimes even YLS students!) trying to get rid of their furniture before they move apartments or before new roommates move in, and you will often get furniture at a substantial discount.”
  •   “If you can wait to purchase some furniture (or if you are looking to purchase furniture before moving into another apartment before your 2L or 3L year), watch for posts by graduating and moving YLS students looking to get rid of furniture. Many of them will be giving away furniture (and much more — casebooks, dishware, coffeemakers and other appliances, etc. — the list goes on!) for free or very cheap at the end of the year and you can get a lot of what you need then if you are free to pick up the stuff then. “
  • “The Yale Free & For Sale Facebook group is a great place to get affordable furniture and household goods from other students”

So with these  suggestions, keep in mind  that your New Haven home is still a temporary address.  Really assess what critical furnishings you need to be relatively comfortable over what will be three short years and don’t let your budget fall  flat over the allure of that flat screen television.

“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.

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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?

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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.

Retirement…Numbers and Dollars…

25; 43,800; 93; 65; $117,000; 10; 75-85%; $263,000; 85; 67

During one of our most recent financial aid conferences, there were a variety of sessions and speakers who spoke on different topics and one session’s topic was the what, when and how about retirement. He stated this quote, “The 65 year old you will thank the 25 year old you”. It is NEVER too early to start to save for retirement, no matter how much is set aside. Now is the perfect time to start thinking about it. Look at what the FUTURE payoff would be 30-40 years from now (seems like forever but think about how fast your time here at Yale Law is moving).

What do you think when you hear “retirement”? Are you thinking it is way too far off in the future (regardless of how many years away)? Are you currently planning for it? If not, why? Or when you hear “retirement”, do you picture yourself lying on a beach and watching the waves? Traveling across the country or maybe the world? Buying a vacation home? Regardless of the cost of these things, your retirement funds must be 75-85% of your current salary (at the time of retirement) to continue the life style you were accustomed to.

Would you like to retire at a young age? What age is young to you? Age is really just a number but if one retires at the expected age of 65 and lives to the age of 85, during that twenty year retirement period, that one person will consume 43,800 meals which at today’s prices (2014) would cost $263,000. That is just for food! The average age people are living to is 93.

There are different types of retirement plans to choose from, Individual Retirement Arrangements (IRA) Roth IRAs, 401(k) plans, 403(b) plans, etc., too many list but if interested in the different types and want more clarification, description and rules on each, please go to: http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Types-of-Retirement-Plans-1

For those who were born after 1960 and later, 67 is retirement age and this when you can start the application process to receive social security benefits. Benefits can be applied for at an earlier age, but because you are not at “retirement age” a deduction would be calculated to the benefit. Why would you accept a reduced amount after all of the years of hard work you dedicated to your career? If curious, view the information on the Social Security Administration’s website: www.ssa.gov

The average loan debt of a student who graduated from Yale Law in 2014 was $117,000…hopefully with the help of COAP and your salary…the debt would have long been paid off at retirement, but what if, for whatever reason, it was not? This would be an additional debt taken out of your expected monthly retirement funds.

The Standard 10 Year Repayment Plan…you have heard of this term, correct? If not, at repayment time, this is the most aggressive, standard repayment plan all federal direct loans are automatically placed in (different for private loans). The federal loans have many repayment plans to choose from and it would be best to contact your servicer well in-advance of repayment to discuss the ideal plan that best suits your needs and budget.

It is so much information (and lots more that has not been inputted), so where do you start? Well…..this spring, the Financial Aid Office is holding five information sessions that cover loan repayment, COAP, Consolidating & Refinancing and new this spring, a session focused on financial protection strategies (aka “insurance”) for everyday living (cannot be missed). All very informative and if you learn one thing from each session or just one thing from all five sessions combined, then you will be that much more prepared for the future!

February 11th – Loan Repayment Strategies: Pick Your Plan
March 9th – Coping through COAP – Part I
March 11th – COAP in Action – Part II
March 25th – Let’s Make a Deal…Consolidating and Refinancing of Student Loans
April 1st – The Model for Financial Success with John Caserta

Reminders will be sent before each scheduled session…please stay tuned.

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

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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.

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 Points

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 .

Shanelle smilesBeyond 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”!

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.