Tagged: loans

How 3Ls Can Achieve “Low Debt, High Gain” (Workshop Series)

Beginning in April, the Financial Aid Office will be offering the “Low Debt, High Gain” workshop series designed to give some practical, real world advice for our 3L students as they begin their transition from Yale Law School. And while each workshop is individual, the most benefit will come if you participate in all three because, as a series, they have been designed to build on one another.

The workshops will be held on consecutive Mondays beginning April 2 from 12:10:-1:00 p.m. in Room 128. We start off on April 2nd with Lori Moore, Director of Financial Literacy for the Access Group. Some of you may have loans held by the Access Group and many of you may know them as the people who brought you the Need Access financial aid application each year. Lori will kick off the series by providing an overview of loan repayment – the various plans you as the borrower can choose from, understanding who holds your loan and who is “servicing” it, as well as your rights and responsibilities as a borrower.

Once Lori has brought you up to speed on loan repayment and options, it’s time to see how COAP then coordinates with your repayment plan. On April 9th, Associate Dean Asha Rangappa and myself will present “Coping Through COAP” which will answer all the basic questions on how COAP awards are determined, what loans are covered, how and when to make application, as well as deal with the COAP intricacies of spouses, dependents, clerkships and assets.

Finally, now that Workshop 1 and 2 has sorted out all your loan repayment, it’s time to move onto larger fiscal issues you will face. That’s where financial planner John Caserta comes in with his workshop on April 16th entitled “Your Financial Future Starts Now”. John, a Yale college alum, has been offering this workshop to YLS students for a number of years and it has always been well received. John uses the analogy of “building your financial castle” to talk about personal spending plans, investment and insurance basics, understanding employee benefit packages and even focuses on the need to start thinking about your retirement (before you have even graduated !!!).

Even more incentive to attend- since the workshops are at lunchtime there will be food (probably pizza) – as well as some home baked dessert treats courtesy of the Financial Aid staffs’ kitchens.

As I mentioned the workshops are designed for 3Ls getting ready to leave YLS but are absolutely open for any 1L and 2L students who wish to attend. We also plan to record the sessions and make them available on the Financial Aid website afterward for those whose schedule might not permit participating.

A “Special” Offer On Loan Consolidation

The phrase “limited time offer” is taking on a whole new meaning for some student loan borrowers who are being contacted by the Department of Education’s student loan servicers and offered a “Special Direct Loan Consolidation”. This opportunity is part of President Obama’ “Pay As You Earn” initiative announced in October focused on increasing college affordability through better management of student loan debt.

The Special Direct Loan Consolidation is indeed being offered for a limited time (January 1-June 30, 2012) and only to a select group of borrowers deemed to have the greatest opportunity to benefit. In order to qualify for the Special Direct Loan Consolidation you must have:

  • at least one student loan held by the Department of Education (a Direct Loan or a Federal Family Education Loan [FFEL] owned by the Department and serviced by one of the Department’s servicers); and
  • at least one commercially-held FFEL loan (a FFEL loan that is owned by a FFEL lender and serviced either by that lender or by a servicer contracted by that lender).

The requirements were set up this way to offer borrowers with both Direct and commercially held FFEL loans the ability to better management their debt by ensuring all of their federal loans are serviced by the same entity, resulting in one bill and one payment .

Beyond the better loan management aspects, the Special Consolidation offers two other significant benefits not available in a traditional Direct Consolidation Loan. First, the terms of each commercially held FFEL loan brought into the Special Consolidation will remain intact such as the interest rates on the individual FFEL loans and the arranged repayment terms (i.e.10 year, 25 year, IBR). Normally when you consolidate in a traditional Direct Consolidation, all loans involved are factored into one single fixed interest rate based on weighted average of the interest rates of all the eligible loans (rounded up to the nearest one-eight of 1%, not to exceed 8.25%). More importantly in a traditionally Consolidation Loan, the repayment terms clock starts over again ultimately leading to more interest building on the loan. So the Special Consolidation does allow you to take advantage if you have good interest rates on your existing commercially held FFEL loans and providing you a shorter time period for repayment of those loans.

Second, the Special Consolidation Loan is offering a very tangible financial incentive- a .25% interest rate reduction on any of the commercially FFEL loans brought into the Special Consolidation. So on top of being allowed to retain your original interest rates on the individual loans, you also get the extra .25% reduction. And just like the traditional Consolidation Loan, the Special Consolidation still offers another .25% interest rate reduction if automatic debit is chosen for repayment.

So how do you apply for this “special” Special Consolidation Loan offer? Well you can’t apply on your own until one of the Department of Education’s loan servicers (FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae) contacts you to let you know that based on your borrowing history you meet the basic eligibility of holding both the DOE Direct loans and the commercially held FFEL loans. Notification began in late January and is expected to continue for several weeks.

If you are deemed eligible, do not hesitate to reach out to the Financial Aid Office for guidance or assistance in weighing your loan options and whether the Special Consolidation is ultimately going to be a true benefit for you. For more information on the “Special Consolidation Loan” see the Department of Education website.

All of this talk of DOE Direct loans vs. commercially held FFEL loans making your head spin? One of the best places to get a better understanding of your student loan history is the National Student Loan Database where you can log in and review each of your loans in depth including loan periods, amount borrowed, disbursed, balances, interest rates and most important who the lender and servicer on each loan is and how to contact them.

Public Service Loan Forgiveness Takes A Big Step Forward

On January 31, 2012, the Department of Education (DOE) made a long overdue announcement on the Public Service Loan Forgiveness (PSLF) Program which should significantly help borrowers qualify for this loan forgiveness option.

The PSLF Program was initially established by Congress with the passage of the College Cost Reduction and Access Act of 2007 toward the goal of encouraging student loan borrowers to pursue vitally important public service sector positions. It works this way.. IF the borrower makes 120 separate, one time monthly payments in certain loan repayment plans WHILE maintaining work in a public service organization(s) during the 120 month period THEN the borrower may have the remaining balances of their Direct Loans forgiven.

Beyond the basic 120 payments while in the public service field, PSLF comes with a couple of other important eligibility criteria. First, only borrowers with Direct Student Loans qualify. However, if the borrower had the older Federal Family Education loans (i.e. federal loans issued by commericial lenders) or Perkins loans, the borrower could consolidate those into a Direct Consolidation Loan to take advantage of PSLF. Second, the borrower must be using either the 10-year Standard Repayment Plan, Income Contingent Repayment (ICR) or Income Based Repayment (IBR) to pay back the loans. The reality is that only ICR or IBR works to the borrower’s advantage for PSLF in that the lower monthly loan payments (calculated on the actual ability to pay) leaves the borrower with a significant enough balance at the end of the 10 years to make forgiveness a true benefit.

The big step forward is that 5 years since PSLF’s inception, DOE has now developed a system for borrowers to track their public service employment for the required 10 years (120 months) of payments. Up until now, borrowers working toward PSLF completion were tasked with self-documenting their public service and maintaining records of their employment on their own with a layer of uncertainty as to what DOE would ultimately require as proof at the end of the 10 year period. All that changed in January, when DOE announced the availabiltiy of the “Employment Certification For Public Service Loan Forgiveness Form“. This form makes life easier for the borrower in terms of capturing consistent data from each qualifying employer in a standard template. More importantly, borrowers can submit the forms to DOE on an ongoing basis throughout their 10 years of repayment either annually or even as they change employment positions. DOE, in turn, will track and even confirm employment eligibiilty for PSLF based on each form submission. As such, borrowers will always be assured that they are making progress to have full loan forgiveness.

The Employment Certification Form is available for download at the PSLF website which also includes information on what type of public service position (a wide range!) qualify as well as other resources on this program.

The big question mark for PSLF is what happens in 2017, the year when the first group of borrowers participating in the program finally qualify for the loan forgivenss? Hopefully the new certification process will prepare both the borrowers and DOE for that moment.

“Twists and Turns”.. the loss of the Subsidized loan for Graduate students

Welcome to the “financial aid” blog. With all the captivating topics to write about why would I focus my first blog endeavor (ever!) on something as mundane as financial aid? Because far from being dull, the world of financial aid is filled with twists, turns and surprises. Don’t believe me? Then let’s talk about one of the biggest changes in the aid world for next academic year.

When you look at your financial aid award letter for 2012-2013, you will probably ask yourself the obvious question … “where did my Subsidized student loan go?”. Historically, Graduate level students have been offered a portion (presently $8,500 max) of their federal aid in the form a Subsidized loan with the benefit of no interest building on the loan while the student is both enrolled in school and during the six month post enrollment grace period.

However, in President Obama’s 2012-2013 budget proposal (March 2011) he recommended the elimination of the interest subsidy of the Subsidized Federal Direct Loans for Graduate and Professional students in an effort to utilize those savings to strengthen the undergraduate Pell Grant program. Congress initially countered with a proposal for the dissolution of the subsidy for all (Undergraduate and Graduate) students. Ultimately Section 502 of the Budget Control Act of 2011 (passed by Congress and signed by President Obama in August ) finalized the elimination of the Direct Subsidized loan for Graduate and Professional level students only.

The good news (in the short term) is that you will not lose loan funds. You were eligible for a maximum of $20,500 in Direct loans in 2011-2012 and you will be eligible for up to $20,500 in 2012-2013 as well. Only instead of $8,500 of the $20,500 eligible to be subsidized, the full amount is now unsubsidized. The bad news (in the long term) is that because interest will now be building on that formerly subsidized portion from the time of enrollment and during the grace period, you will ultimately be carrying a higher loan debt.

One other important aspect of Section 502 of the Budget Control Act of 2011 is that students will be losing the “origination fee rebate” which rewards on time payments on Direct (presently 1%) and Grad PLUS loans (presently 4%). The loss of the origination fee rebate will go into effect for any loan disbursed after July 1, 2012. The interest rate reduction for borrowers who agree to have payments automatically electronically debited from a bank account remain in effect (remember that when you enter into repayment!) and has not changed in the new law.

The reality is that the elimination of the subsidy loan for Graduate students has been seriously discussed and considered for several years as a budget savings measure and while it was a surprise for students (and financial aid administrators ) that it was ultimately passed , it was probably inevitable. Ultimately the Department of Education projects this measure will save an estimated $22 billion over the next ten years . Most significantly, $17 billion of those savings will address critical funding shortfalls for the Pell Grant program which remains the cornerstone federal aid vehicle to provide low income students access to post -secondary education.

So what are the most important things to remember/do about this change?

1) Understand that this change only affects those loans in place for academic year 2012-2013 (or for loans made for periods of enrollment beginning on/after July 1, 2012). The subsidized terms and conditions on any previous Direct Subsidized loans you received as an undergraduate or Graduate student to date remain as is and are secure.

2) If you declined any or the entire Direct Subsidized loan offered to you for this current 2011-2012 year , you may wish to rethink about borrowing it. Even if you do not need the funds immediately for this year, taking this loan now and banking the funds may serve you better than having to borrow the unsubsidized as your only option in a future academic year. If you do wish to reconsider your aid award and accept the previously award Subsidized loan, just contact our office.

3) Now more than ever you will want to take full advantage of COAP, particularly since your interest and aggregate loan balance will be higher without the benefits of the subsidy. Even in your 1L or 2L year , make an appointment to talk with the financial aid office about your loan balances, COAP eligibility and insure you are on track to apply for COAP to coincide with your loan repayment.

4) Finally, although it has been said many times, many ways, make a concerted effort to borrow only what you absolutely need to support yourself while at YLS. Sacrificing now in an effort to minimize your loan burden later will ultimately reap benefits for your future. Again, the Financial Aid Office can assist with helping you develop a viable spending plan to insure that you have enough funds to both live on and live well, while minimizing your loan borrowing.

So now that the FinAid blog is up and going , keep up with it as we report in upcoming posts other changes (beneficial changes!) in the works for the 2012-2013 academic year. Who knew financial aid could be so exciting!