Study Your Options!
Préstamos estudiantiles: ¡Estudia tus opciones!
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5 Key Steps: Choosing Schools and Loans
Shop carefully when you are preparing to go to college! The choices you make now can affect you for a lifetime. Students and families who take out student loans may find themselves in very serious debt trouble if they are not able to pay back the loans later on. Unlike other kinds of debt, student loans usually cannot be wiped out in a bankruptcy proceeding.
|1.||Compare colleges for better education deals.|
Be sure you are getting a high quality of education for your money: seek a school with a good academic reputation.
|2.||Fill out the FAFSA form. Go to fafsa.ed.gov|
|The Free Application for Federal Student Aid, also known as FAFSA, is used by schools to determine how much financial aid will be available to students. Filling out the FAFSA form is the first step when seeking college financial aid.|
|3.||Talk to the financial aid counselor.|
|Once you have been accepted to one or more colleges, talk to the financial aid counselor at the schools you are interested in attending. It is very important to know what financial aid options might be available to you at each one. Do not assume you will not be eligible for financial aid. Ask about it.
|4.||Start with government loans before seeking private student loan options.|
|If you need a loan to help pay the Expected Family Contribution, federal and state loans are generally lower-cost options with more generous repayment terms.
|5.||Check terms and repayment requirements, and be sure you can afford to repay the loan.|
|No matter what type of student loan you get, be sure you understand how all the terms of a loan can affect you and what will be required before you sign. Ask:
Your loan will probably cost more to pay off if you request a deferment or lower payment options. If you are allowed to stop repaying a student loan temporarily, you will be required to begin making payments again within a reasonable time period. Ask when payments must begin again. In very rare cases, with certain loan types, there may be loan cancellation options. This is unusual and anyone receiving such a cancellation of debt might still owe a large amount in income taxes due on the “forgiven” debt amount.
The U.S. Department of Education provides a College Navigator website to assist you in finding the right college: nces.ed.gov/collegenavigator. Search options on this website include type of degree, location, major, tuition, size, accreditation, financial aid options, graduation rates, student loan default rates and other factors. It also provides useful tools like college comparisons that can be exported into a spreadsheet.
Keep in mind that there are public and private colleges. Private for-profit colleges are often career-focused. It’s a good idea to check whether there are cheaper options through public or community colleges and to check a for-profit school’s record with the Better Business Bureau at BBB.org. According to federal data, most graduates of community colleges leave school without any loan debt. By contrast, graduates of two-year career programs at for-profit schools graduate with an average of $23,590 in loan debt.
If a career school has a low rate of placing students in jobs, or has high student loan default rate (also known as the cohort default rate), these are signs that you should proceed with caution. This information is often posted on the school’s website. A school’s student loan default rate should be under 30%.
Look for a school that has a high graduation rate. You want assurance that most students who incur debt at that particular school are getting a full education, instead of dropping out early with a big student loan debt but no degree and not enough earning power to be able to repay the loans.
Some colleges are simply better able to offer substantial financial aid packages to their students than others. Check the College Navigator website for some information and talk with a financial aid counselor at any school you are seriously interested in attending, to understand what they are able to offer you.
Attending college fairs is a great way to learn about schools. College representatives attend these fairs and can answer questions. The National Association for College Admissions Counseling provides a schedule of college fairs on its website in English at nacacnet.org.
Before choosing a college, visit the campus, if at all possible. Most colleges offer tours of the campus led by current students who can answer questions about daily campus life and school culture. Some schools also offer virtual tours on their website.
If you are considering a distance learning course or online degree, be aware that not all programs are accredited or eligible for federal student aid. To find out whether you can receive federal student aid for your program, check with your school’s financial aid office.
It is important to know whether a school is accredited, whether the program you are interested in is programmatically accredited, what type of accreditation it has, and whether the school is eligible for certain types of financial aid that you may wish to use (such as military education benefits).
The type of the school’s accreditation makes a difference in whether you will be able to transfer credits earned at that school to another school. Some schools are accredited by “national accreditors” and others by “regional accreditors.” In general, public schools and private non-profit schools are “regionally accredited”, and for-profit career schools are “nationally accredited.” Credits earned at nationally accredited schools are usually not transferable to regionally accredited schools.
Accreditation also matters for programs that lead to jobs which require licensing or certification. If you are enrolling in a program that leads to such a job, make sure that the program you are considering meets the necessary standards so that graduates are eligible to sit for exams or otherwise qualify for the license or certification. In some cases, a program must be programmatically accredited in order for graduates to be eligible to sit for licensing exams.
The U.S. Department of Education offers information about school accreditation in English at this website address: ope.ed.gov/accreditation. You can find information about Veterans Administration-approved schools on their website, located at benefits.va.gov/gibill.
It’s never too early to start planning for the cost of college, and there are many tools and information sources available to help families make an informed decision. (See the Resources section at the end of this article.)
After you decide on a college, make an appointment with the financial aid office of that college. Discuss estimated costs as well as applying for financial aid, grants and scholarships. The financial aid counselor can advise you on whether to borrow, how much to borrow, and provide information about possible lenders.
However, students and parents should always do their own loan research, too. Knowing what funding options are available for education will help you make better financial decisions based on your needs. Federal student loans offer borrowers many benefits not typically found in private loans. These include lower fixed interest rates, income-based repayment plans, loan forgiveness for certain types of employment after graduation, and payment postponement options. Always explore grants and scholarship possibilities, and exhaust all federal and state student loan options before considering a private loan.
Federal loan types include:
Check the prevailing interest rates, loan maximums, benefits and requirements for each loan type at the time you apply.
Your first step in applying for financial aid is to complete the Free Application for Federal Student Aid (FAFSA). Filling out the FAFSA is also essential because schools use information from the application to award financial aid. Apply at fafsa.ed.gov.
Scholarships are usually awarded based on academic, athletic or artistic merit; for relief of financial need; or for support of particular cultural groups. The scholarship grant may be made by the school, or by another party, such as an employer.
The following websites are listed by The New York State Higher Education Services Corporation as resources that can assist you in applying for scholarships:
Beware of Deceptive Tactics
Never pay for help to find money for college. You can do whatever is needed on your own and with the help of financial aid counselors, without paying anyone. These statements are a good indication that an offer is probably a scam:
The following are types of federal grants available to eligible students. Be sure you know your school’s deadlines for grant applications. They may be different at different colleges.
You can earn money to offset some of your education costs through a work-study program, if one is available at your school and you are eligible to receive this type of award. This can help reduce the amount you need to borrow. Check the college website and ask the financial aid office whether this opportunity is offered and available to you.
Before you commit to a loan, make an appointment with a financial aid advisor and be sure to ask the financial aid office or lender important questions before making a financial decision.
If you will need to borrow, make sure you understand all the benefits and requirements that come with every loan.
If you are offered a private loan, ask what the basis for the recommendation is. Sometimes a college may recommend a lender that provides good customer service, but that does not necessarily mean that lender is offering the lowest interest rate.
Check Loan Costs Versus Potential Earnings
Do Advertised Rates Apply to You?
Student loan debt is now the second highest form of consumer debt after mortgages. According to the Consumer Financial Protection Bureau, student loan debt has increased dramatically and is now about $1.2 trillion and growing. Average college debt at graduation is about $26,000. Consumers who graduate from school carrying large amounts of student loan debt may have to wait a long time before they can afford to buy a car or home, and may not even have much income to spend on things such as clothing or entertainment.
If you default on your student loan, you can damage your credit for many years. Your wages or tax returns may be garnished by the federal government or your lender – meaning a portion of a payment due to you can be withheld and paid to your lender instead. Also, your lender may file a lawsuit to recover the entire student loan debt.
Having tarnished credit can affect your ability to find a job or rent an apartment as some employers and landlords look at your credit score. It can make it nearly impossible to get financing for major investments such as a house or car.
Your loan’s co-signer may also face serious consequences if you default on your student loan, including garnishment of wages and long-term negative impact on the co-signer’s credit. If a home has been used as security for the student loan, and the loan is not repaid, that home might also be lost.
Don’t imagine that you can escape your student loan debt if you declare bankruptcy. Most borrowers are not eligible to have their student loans cancelled through a bankruptcy proceeding. And even if that does happen, the borrower may still owe a large sum of money in taxes on the “forgiven” loan amount, which can be treated as income by the IRS.
As soon as you realize you are having trouble making loan payments on time, contact your loan servicer at once. Do not ignore payment notices or wait to deal with the issue. Never ignore legal notices about past due loans. The problem will only get much worse if you do not cope with it right away.
Virtually all lenders will want to help you make a plan to repay your student loans in a way that will be possible for you. Don’t be afraid to contact your lender to strike a deal if you need help.
Talk to your lender about ways to make it easier for you to repay your student loan. Options may include making lower payments or suspending loan repayments for a while under “deferment” or “forbearance” plans. The type of student loan you have received and the lender type (government or private) will have an important impact on the kinds of options that may be available to you.
Be aware that loan delays or other changes to loan terms will probably result in your paying a higher total loan cost over a longer period of time.
For additional information about coping with student loan repayment problems, visit studentloanborrowerassistance.org, a helpful website resource in Spanish and English provided by the National Consumer Law Center.
Check the National Student Loan Database System at nslds.ed.gov in English and nslds.ed.gov/nslds_SA in Spanish to verify who your loan servicer is and how much you owe in Federal loans. To check the status of private loans, you can contact your school’s financial aid office, as they may have it on file. You can also request a copy of your credit report. You are allowed one free copy per year at annualcreditreport.com.
Once you have this information, you can decide what option below is appropriate for you and your repayment goals.
Loan Consolidation & Repayment Tips
The Health Care and Education Reconciliation Act gives student borrowers new choices in how they repay their federal student loans. The initiative will expand the existing income-based repayment plan for federal student loans. More than 1.2 million borrowers are projected to qualify and participate in this expanded program.
According to the White House website, under this new law, students enrolling in 2014 or later will have the following options:
Free Application for Student Federal Aid (FAFSA)
Complete and submit the FAFSA form to begin the student financial aid application process. The form is free. You do not need to pay anyone to submit it for you.
Federal Student Aid
U.S. Department of Education information about how to choose a college, qualifying and applying for financial aid, and managing student loans, including special loan forgiveness opportunities and requirements that are related to public service. The site is available in both English and Spanish.
National College Finance Center
Nationally relevant information in multiple languages from the New York State Higher Education Services Corporation (HESC) about paying for college and repaying student loans.
This search tool in English from the U.S. Department of Education allows you to compare college affordability and value.
Information from the U.S. Department of Education that can help you evaluate and select a high quality college.
The College Board
English: bigfuture.org and bigfuture.collegeboard.org/scholarship-search
Helpful information about colleges, careers, planning and paying for your education. The scholarship search link includes information in English about scholarships, research grants, other financial aid and internships.
Veteran Education and Student Loan Benefits
Information in English from the Veterans Administration about education and training benefits, as well as VA-approved schools.
National Association for College Admissions Counseling
Information about locating college fairs in your area. Check with your guidance counselor for information about additional college fairs.
Database of Accredited Postsecondary Institutions and Programs
U.S. Department of Education information about school and program accreditation. You can search the database by school name.
Consumer Financial Protection Bureau
This federal agency provides helpful tools and information about how to evaluate financial aid offers and student loans. Consumers may also submit complaints about student loan problems.
Matches members to relevant scholarship opportunities free of charge.
This is a no-cost website in English, offering information about scholarships, loans, college sasvings plans and military aid, as well as calculators that can help you estimate college costs.
Student Loan Borrower Assistance Project / National Consumer Law Center
This website offers helpful information about how to manage student loan repayment issues.
Free Annual Credit Report
You are entitled to check your credit report at no cost, once per year. This will help you understand your credit readiness before applying for loans.
National Student Loan Database System
Centralized database from the U.S. Department of Education where you can check on the status of your federal loan or grant. You will need to get a Personal Identification Number or PIN in order to get access to the information. Select “Financial Aid Review” to choose a PIN. Check to see which company is servicing your loan; it may not be the same as your original lender.
Better Business Bureau
bbb.org and newyork.bbb.org
BBB helps consumers find and recommend businesses, brands and charities they can trust. Contact BBB to report check business reviews, report unethical business conduct and ask about possible scams.
If you are not eligible for a federal loan, you may be eligible for a State grant or scholarship. The following are some resources where you can begin your search. Be sure to ask the financial aid counselor at your college about additional state-level possibilities.
© 2014 by the Education and Research Foundation of the Better Business of Metropolitan New York, Inc