SWFC Student Loan Debt Management

2012 Education Tax Credits and Deductions....

2012-01-09T11:25:00.000-08:00

WHOPPEE – its tax time again! As you start to gather your 2011 tax documents, don’t forget to include your education costs or the interest paid on federal student loans. There are also two tax credits this year, so more opportunities for savings. Of course, you cannot “double dip”, claiming more than one credit or deduction for the same expense, so do your homework and make sure you take advantage of the most advantageous choice for you!

The American Opportunity Tax Credit (AOTC) replaced the HOPE tax credit and provides additional benefits, extending coverage from the first two years to college to four years, covering text books and AOTC is partially refundable (40% or $1,000 maximum). This means that, even if you do not have a federal tax liability, you might still qualify for a refund. To claim your credit, you must use form 8863 and attaché to your 1040 or 1040A. At this time, this credit will expire at the end of 2012.

The Lifetime Learning Credit remains in place for 2011 and can create a tax credit of up to $2,000 for any level of college education (even graduate school). One unique feature of this credit is that it doesn't require a minimum level of enrollment. However, the Lifetime Learning Credit has a narrower income range compared to the tuition deduction, so you need to look at all options before deciding which tax credits or deductions to submit.

Here are some key facts the IRS wants you to know about these valuable education credits:

1. The American Opportunity Credit
• The credit can be up to $2,500 per eligible student.
• It is available for the first four years of post-secondary education.
• Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
• The student must be pursuing an undergraduate degree or other recognized educational credential.
• The student must be enrolled at least half time for at least one academic period.
• Qualified expenses include tuition and fees, coursed related books supplies and equipment.
• The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return.

2. Lifetime Learning Credit
• The credit can be up to $2,000 per eligible student.
• It is available for all years of postsecondary education and for courses to acquire or improve job skills.
• The maximum credited is limited to the amount of tax you must pay on your return.
• The student does not need to be pursuing a degree or other recognized education credential.
• Qualified expenses include tuition and fees, course related books, supplies and equipment.
• The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.

A Few Final Reminders: You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

For more information, visit: http://www.irs.gov/newsroom/article/0,,id=218389,00.html or
http://www.savingtoinvest.com/2011/02/american-opportunity-tax-credit-extension-for-2011-and-2012-eligiblity-income-and-phase-out-limits.html

Finally, watch for the 2011 edition of the IRS Publications, referencing Education Tax Credits. As of January 9, 2011, the link still gave 2010 information. (http://www.irs.gov/pub/irs-pdf/p970.pdf )

Special Direct Consolidation Loans

2011-12-22T13:03:00.000-08:00

As you may (or may not) have heard, the U.S. Department of Education will offer Special Direct Consolidation Loans to eligible borrowers, beginning in January 2012. As with traditional consolidation loans, this program is intended to assist borrowers with loans split among loan servicers by simplifying the repayment process, resulting in one monthly bill and payment. However, this program does not offer borrowers a traditional federal Consolidation loan and cannot be used to resolve defaulted loans.

The window for this special, short-term consolidation opportunity will close June 30, 2012. For borrowers to participate, they must meet two criteria:

o They must have at least one student loan held by the Department of Education (either a Direct Loan or a Federal Family Education Loan [FFEL] owned by the Department and serviced by one of the Department’s servicers).

o They must also have 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).

PROS of the Program: Borowers could receive a possible .5% interest rate reduction - which could mean huge savings!

o The U.S. Department of Education will give a 0.25% interest rate reduction from that rate as of the date of consolidation.
o They will also give an additional 0.25% interest rate deduction if the borrower chooses to repay his or her consolidation loan by auto-debit from the borrower's bank account.

Based on a 10 year repayment period, 6.8% interest rrate and 20,000 in debt, the savings could be as high as $ 611.00 (http://www.aie.org/paying-for-college/finance-tools/college-loan-calculator.cfm#).

Another positive feature: Borrowers could receive credit for previous Income-Based Repayment (IBR) payments. If a borrower made any payments on his or her lender-held FFELP loan(s) under an IBR plan prior to consolidation under this program, those payments will count toward the required number of payments for loan forgiveness if the borrower remains under the IBR plan. By consolidating into a Special Direct Consolidation Loan, any previously lender-held FFELP loan(s) will become a Direct loan and may be eligible for PSLF if the borrower meets the additional eligibility requirements - another HUGE potential savings.

BORROWERS IN GRACE: You should note that you may lose part of the grace period upon consolidation if you consolidate a lender-held FFELP loan that during the grace period,

Beginning in January 2012, the DOE servicers should begin contacting eligible borrowers. However, if you are interested and want to get started immediately, you may contact the DOE servicer currently servicing your ED-held loan(s) for assistance.

As with any consumer decision - investigate your options, do your research and make an informed decision. For more information, you can call 1-800-4-FED-AID (1-800-433-3243) or visit:
http://studentaid.ed.gov/PORTALSWebApp/students/english/specialconsolidation.jsp

One Final Note of Caution: Please let your school know if you consolidate your student loans. Many schools offer their students support while in repayment and consolidating may disconnect the school's linked access to their borrower's accounts.

Don’t Let the Season Carry You Away!

2011-11-22T11:17:00.000-08:00

TrueCredit.com Survey Reveals U.S. Consumers are Trimming Holiday Spending Credit Experts Share Shoppers’ Insights and Offer Easy Tips to Avoid Overspending: “While clipping coupons and bargain hunting are effective ways to pinch pennies, now more than ever, consumers need to plan for long-term savings,” said Lucy Duni, vice president of consumer education at TrueCredit.com by TransUnion. “During the holidays, it’s important for consumers to take a holistic approach to their spending, to ensure they don’t rack up debt that will impact their credit long after the holidays are over.”

The experts at TrueCredit.com compiled a list of helpful tips and insights to help consumers navigate the holiday shopping landscape:

Wallet Makeover: Surprisingly, the survey found 55 percent of people say they do *not* feel they’re more at risk of ID theft during the holiday shopping season. As more shoppers hit the stores, so do identity thieves, so it’s important for consumers to protect themselves. To reduce your risk, do not carry extra credit cards, your Social Security card, birth certificate or passport with you unless needed.

Check it Twice: Before you shop this holiday season, check your credit report to get an up-to-date view on your balances and to ensure everything is accurate. After the holidays, check your report again to make sure there isn’t any fraudulent activity on your report.
Trim the Tree: Talk to your friends and family about scaling back on extravagant gifts to ensure the holiday season is more economical for everyone. Try making a list of people you plan to buy gifts for and set a spending limit for each one.

Buyer Beware: According to the survey, more than half of Americans have between one-to-five retail credit cards, and 2 percent say they have seven or more! Avoid the temptation to sign up for every credit card you are offered while shopping. While the promotion may be enticing, it can also make it easier for you to rack up more debt.

Go Green: Go to the ATM and take out the amount of cash you plan to use for the day. Put it in your wallet. When your wallet is empty, stop shopping.

Eyes on the Prize: Maintain good spending habits and a healthy credit report during the holidays and throughout the year. Budgeting ahead for holiday and other spending extravaganzas can help limit financial stress while also keeping your debt accumulation to a minimum.

Final Tip: If you are lucky enough to get that lovely green stuff for a gift (otherwise known as cash), consider giving yourself a real gift and make an additional payment to your student loan principal. Remember, since interest is "fee simple" the faster you pay your principal down, the less your loan will cost!

To see the full results of TrueCredit.com’s survey and learn more about credit management, log onto www.gotruecredit.com and visit the learning center.

A Temporary Window of Opportunity is Closing Soon: Do You Need to Take Action Now?

2011-06-09T18:27:00.000-07:00

When President Obama signed the Health Care and Education Reconciliation Act of 2010 (HCERA), Public Law 111-152, on March 30, 2010, the bill included temporary changes to the conditions under which a borrower may consolidate loans into a Federal Direct Consolidation Loan. These changes apply only to a Direct Consolidation Loan that is made based on an application received by the U.S. Department of Education on or after July 1, 2010 and before July 1, 2011.

Borrower Eligibility Under the HCERA Temporary Consolidation Authority
If a borrower's Consolidation Loan Application and Promissory Note is received by the U. S. Department of Education before July 1, 2011, the borrower may consolidate a loan that has not yet entered repayment status, including a loan that is in an in-school status, if the borrower meets the following requirements:
1. The borrower has one or more loans from two or more of the following categories: (i) FFEL Program loans that are held by an eligible lender; (ii) FFEL Program loans that have been purchased by the Department ("PUT" Loans); and (iii) Direct Loan Program Loans.
2. The borrower has not yet entered repayment on one or more of the loans in any of the categories in #1.
3. The borrower is not consolidating any loans other than loans from the categories listed in #1.

Interest Rate Calculation for Loans made under the Temporary Consolidation Authority
For any Direct Consolidation Loan made to a borrower under the temporary consolidation authority, the interest rate will be calculated as follows:
1. Unless the borrower is consolidating certain loans that have a variable interest rate (see below), the interest rate on the Direct Consolidation Loan is the lesser of (a) the weighted average of the interest rates on the loans being consolidated, or (b) 8.25% (that is, the interest rate is calculated in the same manner as the interest rate for a regular consolidation loan, but without the rounding up to the nearest higher one-eighth of one percent).
2. If one or more of the loans a borrower consolidates is a Federal Stafford Loan (subsidized or unsubsidized), a Direct Subsidized Loan, or a Direct Unsubsidized Loan with a variable interest rate that is lower during the in-school, grace, and deferment periods, the interest rate on the Direct Consolidation Loan is the lesser of (a) the weighted average of the interest rates on the loans being consolidated, rounded to the nearest higher one-eighth of one percent, or (b) 8.25% (that is, the interest rate is calculated in the same manner as the interest rate for a regular consolidation loan).

Factors for Borrowers to Consider Before Consolidating
Because a Direct Consolidation Loan enters repayment on the date the loan is made, there are important factors a borrower needs to consider before deciding to consolidate loans into a Direct Consolidation Loan under this temporary authority.

Grace Period: There is no grace period on a Direct Consolidation Loan made under the temporary authority. The 6 month grace period is a unique feature of the Federal Student Loan Program, designed to allow borrowers to become established in their new careers before they begin repayment on their student loans. As with an in-school deferment, the interest is paid on the borrower’s subsidized loans while they are in grace. This can amount to a significant savings.

If a borrower consolidates while still in school on at least a half-time basis and before the loan has entered the grace period, the borrower will not receive a grace period on that loan after the borrower ceases to be enrolled on at least a half-time basis. However, the borrower will be eligible for an in-school deferment on the Direct Consolidation Loan while enrolled at least half-time at an eligible institution. (Note: If the borrower’s loans enter grace before June 30th, and wants to wait to consolidate until the end of the grace period by completing Item 17 in section C1 of the Direct Consolidation Loan Application and Promissory Note. Another word of caution, borrowers who delay applying until their loans enter the grace period and whose application is received by the Department before the July 1, 2011 deadline may receive the modified interest rate associated with the temporary authority, provided that they are not consolidating certain variable interest rate loans, as explained above.) Contact Direct Loans for information regarding the effects of consolidation on your student loans. Call 1-800-557-7392 or on-line @ http://loanconsolidation.ed.gov/ .

PLUS Loans: Borrowers with Federal PLUS Loans or Direct PLUS Loans that were first disbursed on or after July 1, 2008, are eligible to defer repayment of these loans for a 6-month period that begins on the date the borrower (or the dependent student on whose behalf the borrower obtained the loan) ceases to be enrolled at least half-time. Parent PLUS borrowers are also eligible to defer repayment while the dependent student is enrolled in school on at least a half-time basis.

If a PLUS borrower consolidates a PLUS loan while the borrower (or the dependent student) is still enrolled in school at least half-time, or during the 6-month post-enrollment deferment period, the borrower will lose eligibility for these deferments. Again, for detailed information on Consolidating and its effects on your personal loans, contact Direct Loans. Call 1-800-557-7392 or on-line @ http://loanconsolidation.ed.gov/ .

Personal Financial Decisions Require Research, Analysis and Thoughtful Decisions
You have probably already received mail concerning your student loans and the June 30th deadline for this one-time opportunity. There are many benefits to consolidating, including: lower payments, combining multiple servicers & payments into one location/payment, and the return of deferment or forbearance rights on older loans that may have exhausted these options. However, as we all know, there are no perfect solutions that will work for everyone. As with any personal financial decision, make sure that you evaluate and weigh all of the facts before you make a decision.

Finally, there is one disadvantage a SWFC student or former student will encounter if you decide to consolidate your loans. As you know, SWFC’s Financial Literacy staff monitors the accounts of our loan borrowers and help students if their loans become delinquent. We gather our documentation based on an ID that identifies your loans as originating with SWFC. Once the loans are consolidated, this ID link is removed, so we no longer automatically have access to monitor the status of the consolidated loans. In an effort to help our former students who want to take advantage of student loan consolidation, we have established a special process to assist SWFC borrowers with their consolidated student loans. If you have questions regarding consolidation and your student loans, please contact us @ helpwithloans@swfc.edu and we will be happy to help you gather the information you need to make an informed decision regarding consolidation and your student loans.

Tax Refund? Be Sure to “Pay” Yourself First!

2011-03-09T10:48:00.000-08:00

So you received a tax refund check – Lucky You! Getting a lump sum of money is fun. Sometimes I think that dreaming of all the ways you could spend it are the biggest part of the fun – a well deserved vacation, a shopping spree, down payment toward a car……you can spend days dreaming and planning. However, before you make your final decision, think about “paying” yourself first! Seriously, would you like to would you like to make 47% on an investment? Sounds like a ponzi scheme or something but the savings are real and you can turn part of your tax refund into some serious money for yourself.

If you follow this Blog, then you know that I am a huge proponent of making small additional payments to “chip” away you student loan debt. However, paying larger sums toward your student loan will also help, significantly – even if it is only a one-time payment! Let’s look at two scenarios, to see how making a lump sum payment can benefit you. Each of these will be based on a $20, 000 loan debt, at 6.8% interest, with standard 10 year repayment plan.

Scenario 1: Payment of $1,000
No Extra Payments -----------------------With Extra Payments
Monthly Payment $230.16 -----------------.-Monthly Payment $1,230.16

10 years Pay-off time ============ --==7 years 8 months Pay-off time

$7,619.28 Interest Paid Inte=====..===rest$6,149.15 Interest Paid

Advantages of Additional Payments:
2 years 4 months Time Saved

$1,470.13 Total Interest Savings

Balance Schedule for Scenario 1:
Year ---No Extra Pymt ---With Extra Pymt
2011 ---$18,553.54 --- ===$18,553.54
2012 =-$17,005.60 =====-$17,005.60
2013 -=$15,349.06 ==.== .$15,349.06
2014 --.$13,576.29 ===..=-$12,524.12
2015 =-$11,679.15 =====-$9,489.03
2016 =-$9,648.90 ======$6,240.99
2017 =-$7,476.21 =====-=$2,765.07
2018 = $5,151.09 ====== $0.00
2019 =.$2,662.83 =====.,,$0.00
2020 =.$0.00 ======.==$0.00

Scenario 2: Making $500 additional Payment
No Extra Payments ================With Extra Payments
$230.16 Monthly Payment ===========$730.16 Monthly Payment
Pay-off time 10 years ==============..Pay-off time 8 years 8 months

$7,619.28 Interest Paid =============-$6,733.53 Interest Paid

Advantages of Additional Payments:
1 year 4 months Time Saved

$885.75 Total Interest Savings

Balance Schedule for Scenario 2:
Year =-No Extra Pymnt =With Extra Payments
2011 =-$18,553.54 =====$18,553.54
2012 =-$17,005.60 ====-$17,005.60
2013 =-$15,349.06 ====-$15,349.06
2014 =-$13,576.29 ====-$13,050.21
2015 =-$11,679.15 =====$10,584.09
2016 =-$9,648.90 ====.=$7,944.95
2017 =-$7,476.21 =====.$5,120.64
2018 =-$5,151.09 ====.=$2,098.19
2019 =-$2,662.83 ====.=$0.00
2020 =-$0.00 =======-$0.00

If you would like to see how different amounts of “lump” sum payments can help you clear those loans faster, visit http://www.mortgagecalculatorsplus.com/calc-additionalpayment.php .

PAY YOURSELF FIRST – You Deserve It! It is tempting to splurge and spend your tax refund check on something fun or frivolous – I am not talking about using your whole refund to pay toward your student loans. I am a believer in having your cake and eating it too. However, if you will take just a small amount and pay toward your student loan debt, you can significantly shorten your repayment period. Think of all of the ways you could spend the money you currently have to pay on your student loan monthly payments once they are GONE! Now that’s something fun to dream about!

QUICK PRIMER ON EDUCATIONAL TAX CREDITS

2011-01-12T05:20:00.000-08:00

By popular demand, we are repeating an article from last January:
SWFC Financial Literacy Department's
QUICK PRIMER ON EDUCATIONAL TAX CREDITS

There are four tax benefits for college education expenses:
· Tuition and fees tax deduction
· The American Opportunity Credit
· The Hope Credit
· The Lifetime Learning Credit.

The Tuition and Fees deduction will reduce your taxable income. The Hope Credit, Lifetime Learning Credit and American Opportunity credit can reduce your tax bill. The American Opportunity credit replaces the Hope credit for 2009 and 2010, and provides a partially refundable credit. Taxpayers should investigate all of their options and choose the credit that will give them the lower tax responsibility; however, they cannot claim more than one credit or a credit and deduction for the same expenses. You cannot “double dip”. The education tax credits are calculated on IRS Form 8863 (PDF).

The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit can provide up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. Forty percent of the credit (up to $1,000 maximum) is refundable. This is unique to the American Opportunity Tax Credit. The tax credit is scheduled to have a limited life span and, unless Congress extends the credit to additional tax years, it will be available only for the 2009 and 2010 tax years.

The Hope Credit is a tax credit for college students in their first two years of college. It provides a tax credit of up to $1,800 on the first $2,400 of college tuition and fees. The Hope Credit can be claimed on your tax return if you, your spouse, or your dependent are a first-year or second-year college student, is enrolled at least half-time at an eligible education institution, and you were responsible for paying college expenses. If you missed this credit in the past, it might be possible to file an amended tax return for the year(s) in question.

The Lifetime Learning Credit is a tax credit for any person who takes college classes, even if you took only one class. It provides a tax credit of up to $2,000 on the first $10,000 of college tuition and fees. The total credit is limited to $ 2,000 per return, but you can claim the Lifetime Learning Credit if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses.

If you use the Income Based Repayment plan (IBR), you can also file IRS form 4506-T to allow the IRS to release your AGI information directly to your loan's http://www.irs.gov/pub/irs-pdf/f4506t.pdf

A final word of caution – Patience is a virtue that can pay BIG $. Do not fall victim to so-called "instant" or "same-day" refunds. These are actually short term bank loans, and most have exorbitant fees. According to Brendan Conway (Contributor to The Christian Science Monitor / March 2, 2009), in some cases, that means a mind-boggling 1,300% when calculated like a credit-card’s annual percentage rate. Electronic refunds are generally processed within 15 days and a refund returned by mail will usually be received within 3 to 4 weeks.

A QUICK REFERENCE GUIDE
American Opportunity Credit

$2,500 in tax credits on the first $4,000 of qualifying educational expenses.
Up to $ 1,000 may be refunded.
Can be used for Education expenses paid with borrower funds (student loans).
Can be claimed for the first 4 years of post-secondary education expenses.
Available ONLY for 2009 & 2010. Applies to all four years of undergraduate college education.
The American Opportunity credit also features an expanded definition of qualifying expenses.

Hope Credit

$1,800 of qualifying educational expenses paid for each eligible student.
Can reduce taxes to $0. Excess funds cannot be refunded.
Can be used for Education expenses paid with borrower funds (student loans).
Available ONLY until the first 2 years of post-secondary education are completed.
Available ONLY for 2 years per eligible student.
Student must be pursuing an undergraduate degree or other recognized education credential.
Student must be enrolled at least half time for at least one academic period beginning during the year.
No felony drug conviction on student's record.

Lifetime Learning Credit

Credit of up to $2,000 based on qualified tuition and related expenses paid for all eligible students. (This can reduce taxes to $0. Excess funds cannot be refunded).
Can be used for Education expenses paid with borrower funds (student loans).
Available for all years of post secondary education and for courses to acquire or improve job skills.
Available for an unlimited number of years.
Student does not need to be pursuing a degree or other recognized education credential.
Available for one or more courses.
Felony drug conviction rule does not apply.

This information is provided by SWFC to increase student awareness of possible Education Tax Credits and Deductions. We are not Tax Preparation experts. Students interested in using any of these credits or deductions should consult a Tax Expert or the IRS.

IRS Form 8863 Publication 970, Tax Benefits for Education

Names can be confusing – especially when it comes to student loans.

2010-12-21T10:43:00.000-08:00

A Rose is a Rose is a Rose … Names can be confusing – especially when it comes to student loans. You thought you paid that loan yet you are still getting late notices! What’s going on???

The student loan industry is still undergoing monumental changes that can be confusing for student loan borrowers. Even though Direct Loans became the single source for student loans as of July 1, 2010, life is not necessarily simpler. Direct Loans is now using several private companies to service their student loan portfolio. You may think of Direct Loans as your lender but they probably will not be the company servicing your loans. As of December 2010, in addition to the original Direct Loan Servicing, there are now four additional servicers who are handling student loan accounts for the Direct Loan Program. They are:
· DOE/Great Lakes
· DOE/NelNet
· DOE/Sallie Mae
· FedLoans (also known as PHEAA or AES)

It is important to understand that these DOE servicers are separate companies from their FFELP counterparts, with separate mailing addresses and phone numbers. They all also service loans under the FFEL loan program so you may have other student loans handled by Great Lakes, NelNet, Sallie Mae or PHEAA (AES). You may have the phone number for this servicer programmed into your speed dial. However, as separate companies, the DOE/servicer will have separate phone numbers and mailing addresses. Now that I have probably confused you, let’s review a few situations and see if we can help make your student loan life a little easier.

First Scenario – you thought you had a handle on who had your student loans; now, you called your servicer and they no longer have your loans. Yikes! Where are they? What’s going on? There was a large volume of FFELP loans that were sold to DOE in October 2010. This resulted in a lot of loan movement for borrowers. The good news is that this was the final loan sale authorized under the PUT program. However, as other loans were sold under the PUT program over the last few years, borrowers often went from one FFELP servicer to two or more DOE/servicers. Something simple became very bewildering. The DOE (Department of Education) has recognized the confusion created by this program and they are in the process of re-sorting their DOE/Servicer accounts to group all of a borrower’s DOE accounts to one DOE/Servicer. This may result in some additional, initial confusion as the loans are sorted and reassigned, but the DOE assures us that this process should be complete by mid-January and all borrowers with Direct or DOE held loans will have their loans serviced by one servicer. Happy New Year!

Second Scenario - you thought you were paying those loans and yet you keep getting a late notice or calls about delinquent loan payments. There are two possible answers to this scenario. The quickest and easiest explanation is that you have a loan or loans that were recently sold to another servicing company. Contact the company at the phone number referenced in the letter to see what is going on. You should be able to resolve this fairly quickly. The slightly trickier and more common problem occurs when you have loans serviced by both the FFELP servicer and the DOE servicer. For example, you have loans with Sallie Mae and you are making payments; however, you are getting letters from DOE/Sallie Mae saying you are delinquent. You must remember that, even though the names are similar, your loans are being serviced by two different companies. To resolve the current situation, call DOE/Sallie Mae and get a solution in place (payment, adjusted payment plan, deferment or forbearance). Our Tip for Future Contact: If you have the dual servicer situation, make it a habit to always contact the DOE/servicer first. This is based on a provision regarding federal payments, “lockboxes” etc. It can be confusing, but if you will simply get into the habit of contacting the DOE/servicer, you may still resolve your dual serviced student loans with one phone call. The customer service representatives from the DOE side are allowed to discuss both sets of accounts with you; however, the customer service representatives from the FFEL side are not allowed to discuss the DOE accounts with you. So… if you contact your FFELP servicer first, unless you ask to be transferred to the DOE/Servicer, you will have to call back to resolve those accounts.

Resources for Student Loan Management
A student loan borrower’s best source of student loan information remains NSLDS. The website, http://www.nslds.ed.gov/ will provide you with the most current information on all of your student loans and can be easily accessed 24/7 with your PIN. (Our Tip: If you have forgotten your PIN, visit http://www.pin.ed.gov/ and request a duplicate PIN). If you receive any mail from a student loan company, always open the mail and read the information. Trust me, in today’s economy, a company is not going to go to the expense of mailing letters or making phone calls (even “robo” phone calls) without a valid reason. As the borrower who can potentially be negatively impacted by adverse actions on student loans, you cannot afford to ignore any correspondence regarding your student loans. If you do not understand the information, either contact the customer service number listed on the letter or contact your school’s Financial Literacy department for assistance.

Each DOE/Servicer has a website where borrowers can download forms, review their accounts, make payments and request payment relief assistance. If you are a SWFC student or alumni, you can contact our financial literacy department and we will be happy to help locate your servicer’s website and set-up your account for easy management. Just e-mail me, mjoffe@swfc.edu and I will be happy to help.

Here is one final tidbit for your consideration. The Department of Education is reaching out to student loan borrowers and they have added two trendy contact resources for borrowers. Check these out:
www.facebook.com/college.gov
The page features weekly tips, info and links for future, current and former students.
www.youtube.com/collegedotgov This site features more than 60 videos, inspirational videos from peers and advice from current college students.

Could You Use an Additional $1,259?

2010-09-15T14:11:00.000-07:00

Let’s face it – that is a no brainer! Everyone would like to have an additional $1,259 and it is actually quite simple to get your hands on the money. For example, if you have student loan balance of $20,000 and pay an additional $30 per month towards your student loans, you will save $1,259 in interest charges and you will pay off your student loans 1.5 years sooner! Gosh – then you’ll just have to decide how to use the additional $4,680 you will have saved (that’s would be the amount you will pocket by not having to make 18 months worth of $260 student loan payments to the Department of Education!)

Ok you say – so I’m in, but just exactly where will I find an extra $30 a month? The answer is really surprisingly easy. You’ll just need to make a little a little sacrifice. Hey, I am not talking starvation here, just give up one vending machine or convenience store purchase a day! If you can forgo one snack a day with an average cost of a $1, you’ll have the $30 easy! So seriously, couldn’t you manage to skip the chips, or soda or coffee? Remember, just a dollar a day will end up saving you over $1259 in interest over the next 8.5 years.

OK! Hopefully, by now you are motivated! Now, let’s really think big. What if you gave up 3 fast food meals a week and browned it? Based on a $5 average cost per meal, you would be saving $15 a week – that would let you double your additional payment to $60. Now we are talking $ 2,149 in saved interest and cutting your loan’s term down to 7.2 years! Not having to make those $290 payments for 33 months will be putting another $9,570 at your disposal after your loans have been paid in full!

Gosh – skipping 3 fast food lunches a week? Forget the money – at 1,190 calories per meal (based on information from http://www.calorieking.com/), that’s 3,570 calories per week and, guess what? You need to reduce your calorie intake by 3500 calories to lose one pound. I like saving money but I’d love to lose the 52 pounds this year!

Bottom line, it only takes a little effort to add a lot of money to your wallet (and lose a lot from your hips). Take a few moments to visit SWFC's Cashcourse page and see how much you can save by making extra monthly payments to your student loan. Just click on the link and Do the Math! (http://www.cashcourse.org/swfc/Article.aspx?275)

GOOD NEWS: Student Loan Interest Rates Have Fallen - a little!

2010-07-29T14:57:00.000-07:00

If you have variable interest rate student loans, you are probably already used to looking forward to July 1st each year – the day you rate will either go up or, hopefully, down. However, even students who are signing up for a fixed rate loan can look forward to the date!

Let’s look at the older loans first. If your student loans were issued between July 1, 1998 and June 30, 2006, as of July 1, 2010, your student loan’s interest rate has fallen by .01%. Now that does not sound like a big deal, but the current year’s rate is 2.47% for loans in Repayment or Forbearance. If your loans are in Grace, In-school or in another Deferment status, your rate is even lower, down to 1.87%. While the 0.01% decrease may not sound like much, over a standard 10 year repayment term, it represents $ 63.15 for every $10,000 in student loans. If you have $25 K in student loans and consolidate to lock your interest rate in, you will save $157.88 over the next ten years. The true beauty of the 2.47% when compared to 2.48% comes with the practice of rounding of interest to the nearest 1/8th percent. The 2.48% will round to 2.50%, while 2.87% will round to 2.475%. (The same will hold true for the 1.87% grace rate when compared to the old grace rate of 1.88%)

There is also good news for most undergraduate students who are currently taking out student loans. Your subsidized undergraduate Stafford rates will also drop. In fact, if you have been receiving subsidized Stafford student loans since July 1st, 2008, you have been enjoying a rate decrease each year.

Subsidized Undergraduate Stafford Loans from 7/1/08–6/30/09 are 6.00%

Subsidized Undergraduate Stafford Loans from 7/1/09–6/30/10 are 5.60%

Subsidized Undergraduate Stafford Loans from 7/1/10–6/30/11 are 4.50%

Subsidized Undergraduate Stafford Loans from 7/1/11- 6/30/12 are 3.40%

Interest rates for unsubsidized undergraduate Stafford and Graduate Stafford loans (both subsidized and unsubsidized) have a fixed rate of 6.8%. I am sorry to close on a bit of bad new; however, as current legislature stands, the subsidized undergraduate Stafford rate will increase to 6.8% beginning 7/1/2012. That should be a bit of motivation to kick your studies in gear and graduate by June 2012!

2010-06-29T06:52:00.000-07:00

Where ARE my Student Loans?

Before we see where those peaky loans have gone, let’s take a nostalgic look back: Once upon a time, not so very long ago, a student went to college and used Federal Financial Aid to help pay for their education. The student kept a copy of all of their loan paperwork, all of their loans were with one lender/servicer and, when their Repayment date arrived and the borrower was ready to make a payment, they had their payment coupon booklet in hand, with all of their payment coupons in place. The monthly payment amount was easy to locate, the mailing address was very clear – everything went smoothly. The borrower made regular monthly payments and received a Paid-in-Full statement after the 120th payment. Those were the days!

As many of you already know first-hand and many more of you will soon discover, the life of a student loan holder is not so simple anymore. The student loan industry has entered a brave new world! Over the past two years, many lenders have exited the student loan industry. Some will continue to service their FFELP loans until they are paid in full. However, many lenders choose to sell the FFELP loans and the next thing you know, you are getting letters and e-mail from lenders or servicers you never heard of. What’s a person to do?

It can become even more confusing for borrowers returning to school or who are still enrolled. If you are attending school and using federal student loan monies to fund your education, you have probably recently been contacted by your Financial Aid office asking you to stop in for an appointment. If you fall into this category, please make that appointment now! You will probably be asked to sign a new promissory note. This is necessary because, as of July 1, 2010, the U. S. Department of Education’s Direct Loans is the only source for federal student loans or consolidated federal student loans. For many borrowers, this will just add one more name to their ever growing list of loan servicers.

Now, more than ever, student loan borrowers must take control of their accounts and stay in contact with their lender/servicers. Do you know the answers to these 3 questions?

1. How many student loans do I have?
2. Who is servicing my student loan account(s)?
3. What is my approximate balance on my student loan account(s)?

You should know the answers to each question. Want to check your accuracy? Log onto http://www.nslds.ed.gov/ and see how you did. Were you correct? Any surprises? At this point, if you are still not completely comfortable with your student loan contact information, take a few moments to contact your lender or servicer and get everything straightened out. Even if you scored 100 on the 3 question quiz, follow these few simple guidelines to stay straight with your student loans. Notify your loan’s servicer if you:

· Change your mailing address
· Change E-mail address (Please note: if you no longer check an e-mail address, inactivate the account. If your lender/servicer has the address, they will send E-statements as opposed to “snail mail”. This will not help you if you never check or read mail in that mail box.)
· Change or disconnect your phone
· Change Employers or become unemployed (Remember there is an Unemployment Deferment available for anyone who is not working or is working less than 30 hours per week)

One final piece of advice; be sure to keep your school in the loop too. Lenders do not notify the borrower’s school when loans are bought or sold, so make sure you keep your alma mater updated on the latest changes to your accounts. Your alma mater is also a great source for answers to the latest, confusing correspondence you've received. Your school’s Default Management office still speaks and can translate that foreign language called Financial Aid!

Coming Next Month: The Rates are Falling, The Rates Are Falling …… July 1st means the annual adjustment in variable rate student loans – and they are falling. Is it time to finally consolidate your student loans?

Other Coming Attractions:
A Rose is a Rose is a Rose … Names can be confusing. You thought you paid that loan and now you are still getting late notices! What’s going on???

In-School Consolidation – What’s the Buzz? A look at the pros and cons of this 1 year window for in-school consolidation; it’s not for everyone.

A QUICK PRIMER ON EDUCATIONAL TAX CREDITS

2010-01-26T14:58:00.000-08:00

There are four tax benefits for college education expenses:

· Tuition and fees tax deduction
· The American Opportunity Credit
· The Hope Credit
· The Lifetime Learning Credit

The Tuition and Fees deduction will reduce your taxable income. The Hope Credit, Lifetime Learning Credit and American Opportunity credit can reduce your tax bill. The American Opportunity credit replaces the Hope credit for 2009 and 2010, and provides a partially refundable credit. Taxpayers should investigate all of their options and choose the credit that will give them the lower tax; however, they cannot claim more than one credit or a credit and deduction for the same expenses. You cannot “double dip”. The education tax credits are calculated on IRS Form 8863 (PDF).

The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit can provide up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. Forty percent of the credit (up to $1,000 maximum) is refundable. This is unique to the American Opportunity Tax Credit. The tax credit is scheduled to have a limited life span and, unless Congress extends the credit to additional tax years, it will be available only for the 2009 and 2010 tax years.

The Hope Credit is a tax credit for college students in their first two years of college. It provides a tax credit of up to $1,800 on the first $2,400 of college tuition and fees. The Hope Credit can be claimed on your tax return if you, your spouse, or your dependent are a first-year or second-year college student, is enrolled at least half-time at an eligible education institution, and you were responsible for paying college expenses. If you missed this credit in the past, it might be possible to file an amended tax return for the year(s) in question.

The Lifetime Learning Credit is a tax credit for any person who takes college classes, even if you took only one class. It provides a tax credit of up to $2,000 on the first $10,000 of college tuition and fees. The total credit is limited to $ 2,000 per return, but you can claim the Lifetime Learning Credit if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses.

A QUICK REFERENCE GUIDE

American Opportunity Credit

$2,500 in tax credits on the first $4,000 of qualifying educational expenses. Up to $ 1,000 may be refunded.
Can be used for Education expenses paid with borrower funds (student loans)
Can be claimed for the first 4 years of post-secondary education expenses.
Available ONLY for 2009 & 2010
Applies to all four years of undergraduate college education
The American Opportunity credit also features an expanded definition of qualifying expenses.

Hope Credit

$1,800 of qualifying educational expenses paid for each eligible student. Can reduce taxes to $0. Excess funds cannot be refunded.
Can be used for Education expenses paid with borrower funds (student loans).
Available ONLY until the first 2 years of post-secondary education are completed.
Available ONLY for 2 years per eligible student.
Student must be pursuing an undergraduate degree or other recognized education credential.
Student must be enrolled at least half time for at least one academic period beginning during the year.
No felony drug conviction on student's record

Lifetime Learning Credit

Credit of up to $2,000 based on qualified tuition and related expenses paid for all eligible students. Can reduce taxes to $0. Excess funds cannot be refunded.
Can be used for Education expenses paid with borrower funds (student loans).
Available for all years of post secondary education and for courses to acquire or improve job skills.
Available for an unlimited number of years.
Student does not need to be pursuing a degree or other recognized education credential.
Available for one or more courses.
Felony drug conviction rule does not apply.

A final word of caution – Patience is a virtue that can pay BIG $s. Do not fall victim to so-called "instant" or "same-day" refunds. These are actually short term bank loans, and most have exorbitant fees. According to Brendan Conway (Contributor to The Christian Science Monitor / March 2, 2009), in some cases, that means a mind-boggling 1,300% when calculated like a credit-card’s annual percentage rate. Electronic refunds are generally processed within 15 days and a refund returned by mail will usually be received within 3 to 4 weeks.

This information is provided by SWFC to increase student awareness of possible Education Tax Credits and Deductions. We are not Tax Preparation experts. If you are interested in using any of these credits or deductions, please consult a Tax Expert or the IRS.

LOAN FORGIVENESS for PUBLIC SERVICE CAREERS

2009-09-30T11:39:00.000-07:00

This program is open to those working in emergency management, government, military service, public safety and law enforcement, public health, public education, early childhood education, social work in a public child or family service agency, public services for individuals with disabilities or the elderly, public interest legal services or other school-based services, and employees of tax exempt 501(c)(3) organizations. If you work in one of the fields listed , you may qualify for the new Public Service Loan Forgiveness program, so Read On!

Public Service Loan Forgiveness Offered by the Direct Loan Program

Established by the College Cost Reduction and Access Act of 2007, this loan forgiveness program is only available through Direct Loans. The public service loan forgiveness program is targeted at students who pursue public service careers and who have high student loan debt and low income. Borrowers with low debt or high income will not benefit as much.

Eligible loans include Federal Direct Stafford Loans (Subsidized and Unsubsidized), Federal Direct PLUS Loans, and Federal Direct Consolidation. A FFELP borrower may consolidate their loans with Direct to qualify for the forgiveness program. Perkins Loans and FFELP PLUS loans may be included in a Federal Direct Consolidation Loan; the entire consolidation loan, including the Perkins or PLUS Loans, is eligible for public service loan forgiveness.

NOTE: Parent PLUS loans included in a Federal Direct Consolidation Loan are eligible for income-contingent repayment (but not income-based repayment), making it possible to obtain forgiveness. However, the income contingent repayment is not available for Federal Direct Consolidation Loans that include PLUS loans for borrowers who entered repayment before July 1, 2006, per 34 CFR 685.208(a)(1)(ii).

Eligible Repayment Plans include income-based repayment, income contingent repayment, standard repayment or a combination of these repayment plans. Payments made under other repayment plans do not count (e.g., extended repayment, including consolidated loans, and graduated repayment). To maximize the amount of forgiveness, borrowers should use income-based repayment.

Eligibility Requirements
PAYMENTS: The forgiveness occurs after ten years of repayment (120 monthly payments made on or after October 1, 2007 on an eligible Federal Direct Loan). Periods of deferment and forbearance are not counted toward the 120 payments. Payments made before October 1, 2007 do not count. This represents a huge savings compared to the 25 years of repayment required for forgiveness under the income-contingent and income-based repayment plans for borrowers who are not employed full time in public service jobs.

NOTE: If a borrower were to use only standard repayment for repaying their loans there would be no balance remaining after 10 years and so no debt to cancel. Standard repayment is only provided as an option to address situations where a borrower is unable to continue under income-based repayment because they no longer have a partial financial hardship or the payments under income-contingent repayment exceed standard repayment. In such a situation the borrower would use standard repayment for the remaining payments within the 10 year period and obtain some loan forgiveness at the end of the ten years of payments.

EMPLOYMENT: The borrower must be employed full-time in a public service job for the entire ten year repayment period. Public service jobs include, among other positions, emergency management, government (federal, state or local), military service, public safety and law enforcement (police and fire), public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations), public education, early childhood education (including licensed or regulated childcare, Head Start, and State-funded prekindergarten), social work in a public child or family service agency, public services for individuals with disabilities or the elderly, public interest legal services (including prosecutors, public defenders and legal advocacy on behalf of low-income communities at a nonprofit organization), public librarians, school librarians and other school-based services, and employees of tax exempt 501(c)(3) organizations

WHAT IS FORGIVEN: ALL remaining interest and principal are forgiven. The borrower must understand that this is an all-or-nothing benefit. If a borrower stops working full-time in a public service job, even with just a few of the 120 payments left, they get no forgiveness.

SOURCE: http://www.finaid.org/loans/publicservice.phtml

Back to School?

2009-08-24T14:51:00.003-07:00

Public and private schools are back in session, fall is just around the corner, there's a hint of coolness in the air! This is the time of year that the ‘Back to School bug’ often bites us, and why not? It is a great time to either finish your degree or add additional credentials to your resume.

If you are thinking about heading back to college, be sure to get your student financial aid affairs in order. I am not talking about completing the FAFSA or being notified that your new loan has been processed. That’s the easy part. I am referring to those previous loans you used to pay for your education. Many students start a new program or enroll in a new school using federal student loan money. They are excited about their new educational path and everything is running smoothly when, suddenly, they are notified that their loan for the next term has been rejected. Why? They did not take care of their previous student loans and get their student financial aid affairs in order. One or more of their student loans defaulted and that results in a loss of Title IV funds. Over the years, I have worked with many students who had this unpleasant surprise. I have always found these situations very sad because they are preventable!

So, a few tips to follow before you hit the books again. If you are enrolling in college for a second (or third, fourth, fifth) time around, take a few moments to get your ducks in a row; you’ll be glad you did.

Visit https://www.nslds.ed.gov/. The National Student Loan Data System (NSLDS) is the U.S. Department of Education's (ED's) central database for student aid. In one quick visit, you will find the financial institution that holds each of your loans, as well as the contact information for that bank or lender. The site should also show if the loans are in Repayment, Deferment or Forbearance. You may find a few surprises!
Call each servicer or lender to make sure your loan payments are current or visit your account on their website. Remember, if you cannot make a payment to bring your loans current, you have other alternatives, including Deferment rights and Forbearance options. (For more information on your rights, visit http://www.cashcourse.org/swfc/SchoolPage.aspx.) However, be sure to get any delinquent issues resolved before you start classes. If your loans are in a delinquent status, many lenders will not process an In-School deferment and your loans will continue on the countdown to default.
Make sure that your new school faxes a completed In-School Deferment to every lender holding one of your loans. Submitting the deferment form is a service that many schools offer, but it is your responsibility to make sure that the deferment form is received and processed.
Finally, always open any mail that references student loans and is addressed to you. In today’s turbulent financial market, many student loans are being sold to other lenders or reassigned to other servicers. It takes 270 days of delinquency for a loan to default. You lender or servicer will be making numerous attempts to contact you before the default is processed.

FINALLY - A Student Loan Payment Perfect for ME!

2009-07-23T09:35:00.000-07:00

July 1, 2009 brought a truly revolutionary change to the Direct and FFELP student loan programs. The new Income-Based Repayment (IBR) plan finally recognizes that "one size does not fit all". While there have always been payment plan options, they tended to generate monthly payments that were strictly related to your loan balance - in other words, the more you owed, the higher the monthly loan payment would be! For borrowers who have chosen careers in the public sector or had to accept entry level positions for their career path, these options were not enough. Frequently, while borrowers wanted to make payments, they were "forced" to use Forbearance because their only payment options were beyond their reach.

As you know, Forbearance will provide payment relief, but it also allows the loan's balance to grow, often at what seem to be astronomical rates. The interest can add up very quickly. For example, let’s say you have $15,500 in student loans and have a Standard Repayment plan with 120 payments @ 6.8% interest. Your monthly payments are $179 a month. However, if you use 36 months of Forbearance, your monthly payment will increase to $215 and you will pay back an additional $4,367 in interest or 20+% more over the loan’s repayment period. (Source: NCHELP Reference Library, Going Above & Beyond: Delinquency & Default Prevention - Slide 11, http://www.nchelp.org/elibrary/index.cfm?parent=1983) WOW – talk about a snowball effect!

With the new IBR plan, your monthly payment will be based on your specific financial situation, not a preset amount based on your loan balance. For borrowers experiencing partial financial hardship (and with today’s economic challenges many of us are), this plan can allow you to remain in a Repayment Status with manageable monthly payments. This can help create positive input to your credit reports.

So, you are probably wondering "How can I get on this plan?" In order to be approved for the IBR plan, a borrower must provide additional information but the payment will make it well worth the effort. To see if you might qualify for an IBR payment plan, use this simple calculator: http://www.aie.org/Calculators/IBR/index.cfm?cid=tgslcibrpage If this indicates you may qualify for the new IBR plan, hop on the phone and contact your servicer!

It’s Like Money in the Bank!

2009-07-02T07:01:00.000-07:00

If you have variable rate student loans (loans issued between 7/1/1988 to 6/30/2006) & you will be entering Repayment between July 1, 2009 and June 30, 2010, this may be the year you want to consolidate those student loans.

Effective July 1, 2009, interest on variable rate Subsidized and Unsubsidized Stafford Loans issued between 7/1/1998 to 6/30/2006 will drop to 2.48%. This could allow you to save from $1,470 to over $5,100 over a 10 year loan period! *

There are a variety of lenders who are consolidating student loans. Just two pieces of advice:

First, make sure that you are consolidating only your Federal Student Loans, and are consolidating under the Federal Student Loan program. This will allow you to maintain your borrower's rights, including deferment and forbearance rights!

Next, shop around. Any loan is a consumer purchase and should be made after comparing all rights, benefits and terms or conditions. While most borrower rights, benefits and terms are defined by the Federal Loan program, there may be some discounts or costs that can vary by lender.

Be a wise consumer and check out all of your options before you "sign" or the dotted line (or the electronic "e-signature line")!

*Based on $15,000 balance, with 10 year repayment period, calculated at 2.50%, 4.25% and 8.25% interest rates.