Daily Aid 95: Student loans and graduation, dwindling scholarships

Student Financial Aid News

From NASFAA:

“The Coon Rapids Community Scholarship Association began its annual hunt for donations last week and while the group still has months to gather money for the graduating senior class, expectations are being tempered by the harsh reality of an economy that is anything but donation friendly,” the Minneapolis Star Tribune reports. “The association would be content with a 10 percent to 20 percent decrease in donations, but there’s no way to tell how large the drop-off is going to be, longtime association member Bruce Frank said. Last year the association, which has about 15 members, raised $156,000 and was able to provide 196 seniors with scholarships ranging from $500 to a few thousand dollars.”

Commentary

Don’t you feel prescient? We predicted this last year, discussed this early in the year, and it’s coming to pass. As the broader economy tightens, scholarship dollars are receding, and you knew well in advance about these troubling days ahead for scholarships. If you’ve been taking aggressive advantage of our Scholarship Search Secrets eBook, then I congratulate you. You’re ahead of the curve and hopefully ahead of the pack in terms of scholarship dollars raised. If you’ve not started an all-out campaign for scholarships, the clock is ticking.

Of course, I remind you about our $10,000 scholarship drawing at the end of this month. Get going!

From NASFAA:

“State-run trust funds for parents who want to pay off college tuition before their children enroll are running short on cash, and program officials worry they won’t be able to pay for students who are counting on the money,” the Associated Press reports. “The rising cost of college and plunging stock market have combined to create a disparity between what some of the 18 states’ prepaid tuition plans have on the books and what they’re supposed to pay. The worst case is in Alabama, where the sour economy has sliced off nearly half of the fund’s assets, and state officials are telling parents the full cost of college isn’t a sure thing.”

Commentary

Check carefully the terms and conditions of any 529 prepaid tuition plan you participate in to see what happens if the state can’t meet its financial obligations, and see what remedies are available to you, if any. You may find, as in the case of Alabama and reading the contract carefully that the state may have advertised full tuition, but the law itself governing it may not guarantee payment of full tuition. Check now so that you’re prepared for future contingencies.

Scholarship Update

M.Sc. Program: KSOP Scholarship Program Facts: – Scholarship of 800 Euro/month for international students – Scholarship of 400 Euro/month for German students – Mandatory Research – Application deadline: July 15 each year The program is divided into four stages, providing you as a student with the necessary prerequisites (Stage I: Introduction), to give you a solid background on the most important topics within the wide and diverse field of Optics & Photonics

Details at our free college scholarship search site.

Focus on Financial Aid

A very popular question lately has been what to do with your student loans if you’re graduating, if you’re going to be graduating soon. There are three basic options for students on graduating, at least for federal student loans like the Stafford loan.

+ Deferment is an entitlement that postpones payments. If you qualify, you must be granted a deferment.
+ Forbearance is a discretionary plan that postpones payments. Forbearance is optionally granted by the lender based on many factors, including your payment history and loan status.
+ Consolidation is a loan type. Consolidation does not postpone payments, but does reduce them, making them more affordable.

When it comes to payments and interest, here are some more key differences:

+ In deferment, no interest accrues on subsidized loans. Unsubsidized loans accrue interest. At the end of the deferment, any accumulated interest is added to your loan.
+ In forbearance, interest accrues on all loans regardless of type. At the end of the forbearance, accumulated interest is added to your loan. Forbearance may also require a small interest-only monthly payment.
+ In consolidation, interest is paid as part of each monthly payment.

Additionally:

+ In deferment and forbearance, your interest rates remain variable and can substantially increase or decrease based on market conditions. It is in your best interest to consolidate before filing for either.
+ In consolidation, your interest rates are locked in at the time of consolidation and cannot decrease or increase.

Finally, when it comes to time periods:

+ Deferments usually are granted for a period of 36 months and are non-renewable unless you consolidate.
+ Forbearances are granted for periods based on the lender’s discretion, usually 24 or 36 months and are non-renewable unless you consolidate.
+ Consolidation loans renew your deferment and forbearance eligibility by closing out your old loans and opening a new consolidation loan.

Deferment, forbearance, and consolidation are not automatic processes. You must apply for each program.

What about private student loans? Unlike federal student loans, private student loans have no deferment entitlement available. A private student lender may have forbearance or other hardship programs available, but you’ll need to contact your lender to get specific details, as they vary from lender to lender.

Which is the right choice for you? It really depends on your circumstances – investigate each, run the numbers, and figure out which option makes the most financial sense for you now and long term.