Tag: loan study

College Funding Changes In The Pandemic Relief Bill

There are several student financial aid provisions in the pandemic relief package that was included in the Consolidated Appropriations Act of 2021 that passed the House and Senate on Monday, December 21, 2020.

Student Loan Relief

Student loan borrowers are disappointed that the legislation did not include an extension to the student loan payment pause and interest waiver, nor did it provide any student loan forgiveness.

The payment pause and interest waiver is set to expire on January 31, 2021. President-elect Joe Biden will be able to extend it further after he takes office on January 20, 2021. Several possible extension dates have been floated, including April 1, April 30 and September 30, but Joe Biden has not yet said anything specific about the extension, just that it is needed.

Nevertheless, there are some changes in the legislation that affect student loan borrowers. In particular, the tax-free status of employer-paid student loan repayment assistance programs (LRAPs), which was set to expired on December 31, 2020, has been extended for five years through the end of 2025. Such LRAPs will be exempt from income and FICA taxes for both the employee and the employer.

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SULA, a complicated set of limits on subsidized Federal Direct Stafford loans, has been repealed. SULA mostly affected students who transferred from a 4-year college to a 2-year college.

In addition, there have been a few changes concerning the U.S. Department of Education’s Next Generation Processing and Servicing Environment (NextGen) for federal student loans.

  • New student loan borrower accounts must be allocated to loan servicers based on their past performance and servicing capacity.
  • Borrower accounts must be reallocated from servicers for “recurring non-compliance with FSA guidelines, contractual requirements, and applicable laws, including for failure to sufficiently inform borrowers of available repayment options.” Applicable laws include consumer protection laws.
  • NextGen must allow for multiple student loan servicers that contract directly with the U.S. Department of Education.
  • NextGen must incentivize more support to borrowers at risk of delinquency or default.
  • Borrowers must be allowed to choose their loan servicer when they consolidate their federal loans.
  • The U.S. Department of Education must improve transparency through expanded publication of aggregate data concerning student loan servicer performance.

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Changes in College Tuition Tax Breaks

The legislation changes the income phaseouts for the Lifetime Learning Tax Credit (LLTC) to be the same as the income phaseouts for the American Opportunity Tax Credit (AOTC), starting with tax years that begin after December 31, 2020.

The Lifetime Learning Tax Credit will start phasing out at $80,000 for single filers and $160,000 for taxpayers who file as married filing jointly. The tax credit is fully phased out at $90,000 (single) and $180,000 (married filing jointly). Married taxpayers who file separate returns are not eligible.

For comparison, the 2020 income phaseouts for the LLTC were $59,000 to $68,000 (single) and $118,000 to $136,000 (married filing jointly).

The new income phaseouts will not be adjusted for inflation.

In addition, the legislation repeals the Tuition and Fees Deduction, effective with tax years that begin in 2021. This is a permanent repeal, so the Tuition and Fees Deduction will not be resurrected by the next tax extenders bill.

New Funding for Higher Education Emergency Relief Fund

The $81.88 billion for the Education Stabilization Fund includes

  • $54.3 billion for the Elementary and Secondary School Emergency Relief Fund
  • $22.7 billion for the Higher Education Emergency Relief Fund (HEERF)
  • $4.05 billion for the Governor’s Emergency Education Relief Fund, of which $2.75 billion has been earmarked for Emergency Assistance to Non-Public Schools

The Higher Education Emergency Relief Fund previously received $16 billion as part of the CARES Act.

The allocation formula for the HEERF funding is more complicated than the one in the CARES Act, but the allowable uses are similar. Public and private non-profit colleges are required to use at least half of the money for financial aid grants to students. Private for-profit colleges are required to use all of the money for financial aid grants to students. Colleges must provide at least the same amount of emergency financial aid grants to students as they did under the CARES Act provisions, even if their total allocation is lower.

The emergency financial aid grants to students can be used for any element of the student’s cost of attendance or for emergency costs related to the pandemic, such as “tuition, food, housing, health care (including mental health care), or child care.”

The grants must be prioritized to students with exception financial need, such as Pell Grant recipients.

The emergency financial aid grants to students are tax-free.

Most College Students Remain Ineligible for Stimulus Checks

Most college students will remain ineligible for the recovery rebate checks, also known as the stimulus checks.

The legislation includes the same restriction that limits the $600 per qualifying child to children age 16 and younger. Only 0.1% of undergraduate students are age 16 or younger.

College students who are under age 24 are also ineligible, because they can be claimed as a dependent on someone else’s federal income tax return. The remain ineligible even if they are not claimed on someone else’s tax return.

A college student might qualify if they are married and file a joint return with their spouse or if they provide more than half of their own support. About 15% of undergraduate students are married. College students who are 24 years old or older may also qualify. More than 40% of undergraduate students are 24 years old or older.

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College students can still claim the $1,200 stimulus checks from the CARES Act in addition to the new $600 stimulus checks, if they are eligible.

Increase in the Maximum Pell Grant

The maximum Federal Pell Grant has been increased to $6,495 for the 2021-2022 academic year.

Eligibility criteria will be pegged to a multiple of the poverty line starting with the 2023-2024 academic year. Students will be eligible for the maximum Pell Grant if they and their parents/spouse, as applicable, are not required to file a federal income tax return or if their adjusted gross income (AGI) is less than 175% to 225% of the poverty line. The higher threshold is reserved for households involving a single parent.

FAFSA Simplification

The legislation simplifies the Free Application for Federal Student Aid (FAFSA) starting with the 2023-2024 academic year. The new FAFSA reduces the number of questions on the form by two-thirds, from 108 questions to about three dozen questions. Follow me on Twitter. Check out my website or some of my other work here. 

Mark Kantrowitz

Mark Kantrowitz

I am Publisher of PrivateStudentLoans.guru, a free web site about borrowing to pay for college. I am an expert on student financial aid, the FAFSA, scholarships, 529 plans, education tax benefits and student loans. I have been quoted in more than 10,000 newspaper and magazine articles about college admissions and financial aid. I am the author of five bestselling books about paying for college and have seven patents. I serve on the editorial board of the Journal of Student Financial Aid, the editorial advisory board of Bottom Line/Personal, and am a member of the board of trustees of the Center for Excellence in Education. I have previously served as publisher of Savingforcollege.com, Cappex, Edvisors, Fastweb and FinAid. I have two Bachelor’s degrees in mathematics and philosophy from the Massachusetts Institute of Technology (MIT) and a Master’s degree in computer science from Carnegie Mellon University (CMU)

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University of California Television (UCTV)

How to pay for college is a pressing question for all applicants from the class of 2020. COVID-19 has caused financial uncertainty and many are having to rethink their plans. Jodi Okun, an expert in financial aid, joins Steven Mercer to talk about how the pandemic is impacting financial aid awards, what to do if your family’s financial situation has changed, and how to plan for the future in uncertain times. [Show ID: 35963] More from: STEAM Channel (https://www.uctv.tv/steam) UCTV is the broadcast and online media platform of the University of California, featuring programming from its ten campuses, three national labs and affiliated research institutions. UCTV explores a broad spectrum of subjects for a general audience, including science, health and medicine, public affairs, humanities, arts and music, business, education, and agriculture. Launched in January 2000, UCTV embraces the core missions of the University of California — teaching, research, and public service – by providing quality, in-depth television far beyond the campus borders to inquisitive viewers around the world. (https://www.uctv.tv)

How to Determine Exactly How Much Money You Need to Push Your Business to the Next Level

Too often, entrepreneurs–especially inexperienced ones–take the “luxury” approach to funding, incorporating every bell and whistle into their expansion plan by trying to accomplish all goals at one time. That’s nice, but it’s usually not reality and often forces businesses to be cash strapped because of high debt repayments.

That’s why I suggest entrepreneurs take a three-pronged approach to their expansion planning. This exercise helps businesspeople ruthlessly prioritize their needs and determine what is a must and what is frivolous.

A, then B, then C

Let’s say an entrepreneur believes he or she needs $1 million to make their expansion plans a reality.

Now, write up a plan for that amount. What are you going to do with that million? What are the specific investments you will make? What will your cash flow look like afterward? What does your business, in general, look like?

Now do the same exercise with $500,000. Ask yourself the same questions, as well as anything else that’s pertinent. Can you primarily accomplish the same goals with half the cash?

Finally, do the exercise one more time, this time with a loan of only $250,000. What are the answers to the questions now? Might it be possible to do what you want to do with only a quarter of the original loan?

And the answer is…

No set answer will be correct.

Perhaps your initial inclination that you need $1 million was correct. And there’s a good chance that $250,000 simply won’t get the job done.

But there is a decent probability that the middle option might be feasible, especially if it makes you realize that some of the more frivolous “wish list” things you’d like to do are best set aside for now. Remember, you don’t have to accomplish everything at once, and a scaled-down plan might allow you to better focus on more important things, preventing you from overextending yourself.

Of course, don’t get too stuck on exact numbers. Maybe this exercise will have you realize your plan can go ahead effectively for $790,000. Or $615,000. Or $485,000. Or any other number.

The purpose is to gain some clarity and sharpen your focus–not to mention to allow you to decide what makes you most comfortable and enables you to sleep at night. Don’t underestimate the value of that.

Also, keep in mind the time factor. The larger the loan you seek, the longer it likely will take to receive approval from a lender. The saying “time is money” always rings true, especially in this scenario. You might miss opportunities waiting for lender approval.

Remember, business tends to be more of a marathon than a sprint. You need to pace yourself in all aspects, including financing, to better your odds of finishing the race. Hopefully, this exercise helps you accomplish that.

By Ami KassarCEO, MultiFunding.com @amikassar

 

Source: How to Determine Exactly How Much Money You Need to Push Your Business to the Next Level

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Student Loan Refinancing Just Got Crazy Cheaper

Student loan refinancing rates have dropped even lower.

Here’s why and what you need to know.

Student Loan Refinancing: Rates Drop Even Further

Student loan refinance rates now have dropped to as low as 2.01%.

Why? The Federal Reserve cut interest rates, and lenders have reduced student loan refinancing rates to a near-term low. That’s great news for student loan borrowers who want to refinance student loans, get a lower interest rate and save money.

Here’s how to refinance your student loans.

Student Loan Refinancing: Should I Refinance Student Loans?

Today In: Money

Many people ask: Should I refinance student loans?

If you want to save money and pay off student loans faster, student loan refinance is an effective tool. When you refinance student loans, you exchange your current student loans for a new, single student loan with a lower interest rate.

Student loan refinancing has several advantages, including:

  • lower interest rate
  • single monthly payment
  • fixed or variable interest rate
  • flexible 5-20 year loan repayment term
  • one student loan servicer
  • pay off your student loans faster
  • save money

Student Loan Refinancing: How To Apply

If you want to know how to refinance student loans, it’s important to understand how to apply. The good news: the process is simple.

Step 1: Find the best interest rate

There are multiple trusted, online lenders that can refinance student loans with low interest rates and easy, online applications. Compare the best interest rates and loan terms. Most borrowers will refinance student loans with the lender who gives them the lowest interest rate. Most lenders allow you to check your preliminary interest rate online for free within two to three minutes without any impact to your credit score.

Step 2: Use a student loan refinancing calculator 

This free student loan refinance calculator shows you how much money you can save when you refinance student loans.

For example, let’s assume you have a $100,000 student loan at an 8% interest rate and 10-year repayment term. If you refinance that student loan with a 3.0% interest rate and 10-year repayment term, you would lower your monthly payment by $248 and save $29,720 in total payments. If you are a doctor, dentist or pharmacist with a large student loan balance, your savings may be even higher.

Step 3: Apply online

You can apply online for student loan refinancing. Most applications take 10-15 minutes to complete. You can also upload any supporting documents, which may include a copy of your driver’s license, transcripts, recent paystubs or job offer letter.

Student Loan Refinance: Key Questions

1. Do I qualify for student loan refinance?

While each lender has its own underwriting criteria, the best candidates for student loan refinancing typically have the following:

  • A credit score of 65o or higher
  • Current employment or a written job offer
  • Stable, recurring monthly income
  • A low debt-to-income ratio
  • No defaults on their student loans

What if you don’t satisfy these requirements? You should apply with a co-signer with strong credit and income. Your co-signer can help you get approved for student loan refinancing and help you receive a lower interest rate. Your co-signer will be equally financially responsible for the student loan. However, some lenders allow the co-signer to be released from any financial obligations after meeting certain requirements.

You can maximize your chances of getting approved to refinance student loans by applying to multiple lenders. Each lender makes a separate decision, so getting rejected from one lender does not negatively impact your chances with another lender.

2. Can you refinance Parent PLUS Loans?

Yes. Parent PLUS Loans carry relatively high interest rates, so refinancing Parent PLUS Loans is a smart way to lower your interest rate and save money.

3. What are the fees to refinance student loans?

There are no fees to refinance your student loans. If any lender tries to charge you a fee to refinance student loans, find another lender. There are also no prepayment penalties, so you can pay off student loans anytime with no charge.

4. Should I refinance my federal student loans?

You should not refinance federal student loans if:

  • you plan to pursue public service loan forgiveness or an income-driven repayment plan
  • you want access to deferral or forbearance options

You can still refinance your private student loans and leave your federal student loans outstanding. Most lenders today offer employment protection if you lose your job and want to pause your monthly payments.

5. When should I refinance student loans? How often can I refinance student loans?

When should you refinance student loans? The answer: you should refinance student loans whenever you qualify for a lower interest rate. If you can get a lower interest rate and save more money, then it may be a smart financial move.

How often can you refinance student loans? There are no fees to apply, no fees to refinance, and no limit to how often you can refinance student loans.

Follow me on Twitter or LinkedIn. Check out my website.

Zack Friedman

Zack Friedman is the bestselling author of the highly-anticipated, blockbuster book, The Lemonade Life: How To Fuel Success, Create Happiness, and Conquer Anything. Zack is the founder and chief executive officer of Make Lemonade, a leading personal finance company that empowers you to live a better financial life. He is an in-demand speaker and has inspired millions through his powerful insights. Previously, he was chief financial officer of an international energy company, a hedge fund investor, and worked at Blackstone, Morgan Stanley, and the White House. Zack holds degrees from Harvard, Wharton, Columbia, and Johns Hopkins.

Source: Student Loan Refinancing Just Got Crazy Cheaper

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5.🔸Sofi ($100 Bonus): sofi.com/share/2345532 4.🔸Splash Financial ($300 Bonus for $30k refi or more): https://splash-financial.sjv.io/X5YXo 3.🔸Commonbond: http://bit.ly/CommonBondTF 2.🔸LendKey ($200 Bonus): https://mbsy.co/v9bGH 1.🔸Earnest: https://earnest.pxf.io/1KGY9 *Keep in mind that any bonus can change at any time* We go over the top 5 Student Loan Refinance Companies. As well as talk about a few important things to know before doing a student loan refinance. ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● 🔔SUBSCRIBE ➡ ​https://www.youtube.com/trufinancials…… ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● Disclaimer: I am not a CPA, attorney, or financial advisor and the information in these videos shall not be construed as tax, legal, or financial advice from a qualified perspective. If you need such advice, please contact a qualified CPA, attorney, or financial advisor. Some of the links are affiliate links. Which means if you click on some of the links I will make a small commission at no additional cost to you. This helps keep me making videos and providing value. Thank you for your support!

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Education

How To Calculate Your College Education Return On Investment

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With all the talk about changes to student loan repayment plans, popular student loan forgiveness programs potentially ending, and now limits on student loan borrowing, it’s essential that you fully understand what your college return on investment (ROI) is.

Going to college is an investment – just like buying stocks or investing in real estate. You are spending money (tuition, room, board, and more) with the goal of earning more money in the future – due to better paying jobs and opportunities.

And this has shown to be true for the last several decades according to the National Center for Education Statistics. Adults who complete a bachelors degree, on average, earn 57% more than those who are high school graduates. That’s a significant boost in earnings. But, if you spend too much to achieve it, it might not be worth it.

The Basic Math Of College Return On Investment

When you’re 17 or 18 years old, thinking about your lifetime return on investment of your college expenses is challenging. When you’re that age, it’s hard to even plan what classes to take, let alone your college major, future career, the implications of borrowing money to pay for school.

Luckily, we live in an era where there is more data than ever to help us make decisions.

To think about your return on investment, you want to look at what you spend – the cost of tuition, room, board, and more, and then compare it to what you have the potential to earn.

The Social Security Administration has some aggregate data on earnings that’s useful here. Controlling for various socio-demographic variables, men with bachelor’s degrees would earn $655,000 more in median lifetime earnings than high school graduates and women with a bachelor’s degrees would earn $450,000 more in median lifetime earnings than high school graduates.

Here’s the more interesting part – let’s take that lifetime earnings potential and discount it for the present day value. Applying a 4 percent annual real discount rate, the net present lifetime value at age 20 of a bachelor’s degree relative to a high school diploma is $260,000 for men and $180,000 for women. For those with a graduate degree, it is $400,000 for men and $310,000 for women.

So, adjusting for nothing else (such as career choice), men should never spend more than $260,000 for a bachelors degree, and women should never spend more than $180,000 for a bachelors degree.

The Advanced Math Of College ROI

Now that we have the basics, you can take some of that same math and apply it to your situation and see if you’re getting a potentially positive ROI or a negative ROI on your education costs.

You can look at your school’s cost of attendance (COA), which can typically be found on their financial aid webpage. Using that data, you can see the cost to attend four or five years.

Then, look at what you’d expect to earn over your lifetime. This can be a challenge, but tools like Glassdoor (which show salaries in various industries and jobs) or even government websites like Transparent California, where you can view ever Californian Public Worker’s salary. Using that data, you can see what you’d expect to make throughout your career, and add up your earning potential.

Once you do the math, you can see how the cost of your education stacks up for ROI.

Easy Rules Of Thumb To Remember

Doing the math can be challenging, but there are also some simple rules to remember when calculating your ROI.

First, while it may not seem like it, you can adjust your variables. You can attend a less expensive college (or do a path like community college first, then a state school). You can also earn more after graduation. Look at not just a career but adding in a side hustle as well. Maybe you are really passionate about a certain career, even though it doesn’t pay very well. You can still have a positive ROI, but you’ll earn that ROI with other jobs.

Second, borrowing to pay for school is expensive. It is a drag on your ROI due to the interest that will be accruing on your loans. And easy way to keep your ROI in balance with student loans is to never borrow more than you expect to earn in your first year after graduation. This is very career dependent, but it highlights how you can borrow more if you plan on going into a higher paying industry.

Finally, this math only includes high school versus bachelor degree. However, the same logic can apply to trade school or graduate school. You just need to get data around what you expect to make after graduation versus the cost of your education program.

There’s More Than Money When Going To College

Some will argue that there is more than a money ROI when it comes to higher education. And I’d be remiss to ignore that because it’s true. There is more to higher education than dollars in, dollars out.

Going to college has a variety of secondary benefits, such as a student moving out from home and learning how to handle communication, problem solving, and more. These real world skills are tough to put a monetary value on.

But, on the flip side, college is an expensive way to find yourself. While moving out of the house and having new experiences can be a very positive thing, it can easily become a future regret if the burden of student loans and poor financial choices weighs on you for a large portion of your life.

And my challenge would be, are there other ways to get these experiences while trying to build a positive ROI on education spending? My answer is yes.

Final Thoughts

Thinking about the ROI of your education spending can be a challenge. But it’s a must for every high schooler and parent.

Robert Farrington founded The College Investor, a personal finance website dedicated to helping people get out of student loan debt and start investing as early as possible.

Robert Farrington

Contributor

I’m a personal finance expert that focuses on helping millennials get out of student loan debt and start investing for their future. I also help parents make smart choi…

Source: How To Calculate Your College Education Return On Investment

Avoid These 10 Public Service Loan Forgiveness Mistakes – Zack Friedman

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It’s no secret that student loan forgiveness is a hot topic. When it comes to Public Service Loan Forgiveness, in particular, the requirements can be tricky.

That’s why it’s critical to ensure you know the details and are not headed down the wrong path.

Here are the 10 most common public service loan forgiveness mistakes to avoid at all costs.

1. Thinking Public Service Loan Forgiveness is automatic

Nope. Thinking that you work in “public service” and are performing a “public service” job won’t cut it.

The Public Service Loan Forgiveness Program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments.

Those “eligibility” requirements bring us to our second common mistake.

2. Not completing the Employment Certification Form

 The number one thing you can do to ensure you’re on track for public service loan forgiveness is to complete the Employment Certification Form.

The next question is: how often should I submit the employment certification form for public service loan forgiveness?

You should submit this form:

  • when you begin a job in public service
  • when you switch employers
  • annually

It’s important to submit this form annually to keep the U.S. Department of Education aware of your employment to ensure you’re on the right track.

3. Submitting an Employment Certification Form with errors

This sounds like a no-brainer, but your employment certification form could be rejected if there are errors.

Here are a few common mistakes:

  • information on one form that does not match previous forms
  • missing information such as an employer address
  • not completing all the required fields
  • correcting errors on the form, and then failing to place your initials next to the corrected errors

This all may sound bureaucratic, but better safe than sorry.

4. Not having your employment certification form signed by your employer

Your employment certification form must be signed by an authorized official at your employer.

Make sure it is that person who signs the form, not the person who sits next to you at work.

5. Not enrolling in an income-driven federal student loan repayment plan

To be eligible for public service loan forgiveness, you must be enrolled in an income-driven federal student loan repayment plan.

Remember, only federal student loans (not private student loans) are eligible for public service loan forgiveness). You also must make a majority of the 120 required payments while enrolled in a federal student loan repayment plan.

While the 10 Year Standard Repayment Plan qualifies for public service loan forgiveness, your federal student loans would be paid off after 10 years so there would be no more student loans to forgive.

How do you know which income-driven student loan repayment plan is best for you? Well, it depends on your specific financial situation.

This public service loan forgiveness calculator shows you which income-driven student loan repayment plan will maximize your student loan forgiveness.

6. Forgetting to consolidate your student loans, if necessary

Remember, only Direct student loans qualify for public service loan forgiveness.

So, if you have Perkins Loans, FFEL Loans or you borrowed student loans before 2011, you may need to consolidate these federal student loans into a Direct Consolidation Loan.

How do you know if you have Direct student loans?

You can check at Federal Student Aid. If you don’t see the word “Direct” next to your student loans, then you may need to consolidate those student loans.

How do you consolidate those student loans?

If you decide to consolidate those student loans, you can do so through StudentLoans.gov.

7. Not taking advantage of Temporary Expanded Public Service Loan Forgiveness

Were you denied public service loan forgiveness because you were enrolled in the wrong student loan repayment plan?

Congress has set aside an extra $350 million of public service loan forgiveness for this exact situation.

8. Failing to re-certify your income each year

As the name suggests, your income-driven student loan repayment plan is based on your income.

As your income may change each year, the federal government wants to ensure that you are still eligible for that income-driven student loan repayment plan.

Therefore, make sure to re-certify your income each year at studentloans.gov. At the same time, you can submit your annual Employer Certification Form.

9. Skipping student loan payments

While your 120 student loan payments under public service loan forgiveness do not have to be consecutive, you need to submit each payment within 15 days of the due date for that payment to count.

10. Thinking your job is what qualifies you for public service loan forgiveness, when it’s your employer that matters

Remember, it’s your employer that matters, not your role.

If you work with a non-profit, but are employed by a private company, this would not qualify for public service loan forgiveness.

Now that you’re in the know, hopefully the path toward public service loan forgiveness will be smoother.

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