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FAFSA Rate Increases

Posted On: 2006-01-04Length: 27:04

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Good Wednesday, January 4, 2006. The Financial Aid Podcast episode #153 welcoming you back. We got a lot to cover including some student loan stuff, some FAFSA stuff, a little bit on MySpace, a New England podcasting, some mailbag, a scholarship update about cooking, and of course Podsafe Music. So welcome to the show and let's get started with the news.

I'm in a very mellow mood this morning so I may not be as brash as I usually am on the podcast. First up, will rate increases slow down student loans. An article in the Mt. Vernon News asks will this be the case or not and the general consensus in the education finance community is no. Interest rates can go as high as they want to go really up to the cap on Federal student lows and even further beyond that on private student lows because for a lot of college students, looking at the long-term picture, the 10, 20, 30 year picture, it's inconceivable for a lot college students. This is not a slam on college students and your just trying to get through 4 years of college and never mind about what's going to happen in the 20 years after that. Federal student loans and private student loans with the exception of the Plus Loan, principal and interest payments are deferred until six months after graduation. This is at least true for the alternative student loan and for the Stafford and Perkins Loan. Perkins are actually deferred up to 9 months after college. So really the financial impact on whatever rates you've gotten your loan at will not become apparent until after you've graduated. If you're one of those students who really like to plan ahead, you like to look 5, 10, 15 years down the road, you'll see it now. You'll see what can happen with your interest rates. For the most part, education finance professionals generally regard student loans, the volume of them being taken out, not going to change a whole lot, particular when you compare them with other forms of credit. Private student loans of course are indexed either prime rate or LIBOR depending on which program you go through. Home equity loans are also indexed to things like the prime rate or the one year CMTs, Constant Maturity Treasuries. Credit cards, of course, are much more expensive than any form of student loans, particularly sub prime credit cards. With what's been going on in equity mortgage and markets, we just put out a press release on that on January 2nd actually, discussing what's happening in the mortgage equity markets, the short version is that it's becoming very expensive to borrow against your home and having to use you're home as collateral where as private student loans you don't have to do that. There is no collateral or requirements. So will student loans stop being taken out because interest rates are going up? No, especially since college tuition is, unfortunately, is continuing to increase at record paces. College has never been more expensive than it is today except for tomorrow when it will be more expensive than it is today.

Also, a couple of pieces of FAFSA stuff. One really, really important point that a couple of newspapers have not started picking up and reporting on, and it can't be repeated enough is that you have nothing to lose by filing a FAFSA. It's free form to file. You can of course get a professional consultant to help you with it the same way you'd get a professional to help you file your taxes. But give it a go first on your own. The FAFSA is a free form file. It does not cost you anything. It does not expose you to any additional risk or liability. The worst that can happen is that the government can tell you you do not qualify for federal financial aid. Well, that's not true, if you're an illegal alien, the government will tell you you do not qualify for federal financial aid and immigration will be at your doorstep within 30 days or so. I had to throw that in, it's one of my pet peeves. Anyway, you don't have anything to lose by filing a FAFSA. At the worst the government can tell you nothing at all but even in that case you can still get a subsidized Stafford Loan. The different between subsidized and unsubsidized Stafford Loans is that while you're in school, the government is picking up the tab on interest so interest is not accruing and with the unsubsidized interest does not accrue. The FAFSA is not needed for private student loans, so if you wanted to apply for private student loans for this semester you could certainly do so without having to file a FAFSA. It's a great way to get some short term loan proceeds to pay for school while you are looking for scholarships.

In other news, in podcasting news, if you are in the New England area and you are not a member of the New England podcasting community, definitely sign up. You can go to www.newenglandpodcasting.com and find all of us there. We've got some really interesting stuff right now in terms of development and marketing and using My Space as a means of getting more audience members for podcasts. Eric Skivo from GlitchCast just came up with an incredible tool for automating that so if you're a My Space user even and you want to play around with using My Space definitely visit the podcasting community. It's a great, great community to be a part of. That's it for the news. It's been a very quiet morning.

Let's kick off the morning with some Podsafe Music. I was looking at someone on My Space, speaking of which, Whitney Steele. We played her music a long while ago but we're going to revisit it. Let's start off with Whitney Steele and Crazy.

(music)

Whitney Steele, Crazy from the Podsafe Music Network at www.music.podshow.com. I forgot how much I liked her music. I'll have to play some more of it later on in the show. Alright, let's talk scholarships. Today's scholarship update is cooking. We're going to get cooking in Phoenix. The Art Institute in Phoenix Best Teen Chef Culinary Scholar Competition. This is a competition at the Art Institute of Phoenix and basically they're looking for the best teenage culinary masters. The entry requirements for the competition is you have to submit a notebook with the following: menu with a description of a 2-course meal including an appetizer, a salad, and a main course that includes sauce, garnish, vegetable and starch., the detailed recipes and directions for each course, you have to submit an essay on why you want to become a culinary professional and identify who inspired you and why. I imagine things like Bobby Flay or Emeril, and of course submit a current high school transcript. The way this will work is you would submit your application and the deadline I February 10, 2006, participants must be high school seniors. It doesn't appear that there is any citizenship eligibility so if you are an international student you may apply. Of course you'll have to travel there for the cook-off on your own dime. The competition will be judged by a panel of professional chefs and certified master chefs will judge the competition. All the judgments are of course final. The judges will judge each contestant's prepared food and select a winner at the competition where they'll go onto a national competition late in April. The benefit for this of course is scholarships. The 1st, 2nd, and 3rd place winner will be awarded a full tuition scholarship with the least $30,000 dollars. Fourth, fifth , and sixth place winners will get a half tuition scholarship for $15,000 and seventh, eighth and ninth will get a quarter tuition scholarship worth $7500 and anyone who's left gets $2000 scholarship. So clearly they are definitely giving out a lot of money here. They are looking for the best chef talent out there. So, check this out at our free website www.studentscholarshipsearch.com you'll find a link also on our show notes to today's Best Teen Chef Culinary Scholar Competition. I'd be really curious to see who has one previous awards and what recipes they came up with because I'm sure there are some pretty innovative ones out there. I wouldn't mind reviewing the winners.

Next piece of Whitney Steele music, let's doe Movie Star

(music)

Movie Star, by Whitney Steele from the Podsafe Music Network. Alright, let's tap into the mailbag. I've got a couple of questions. The first question is from Susanne and she asks, "Is there a or can you recommend a reputable lender for loan reconsolidation?" It just so happens that we know of a very good one, of course we're going to say The Student Loan Network. For loan reconsolidation there's a couple of different issues there. If you've already consolidated your federal student loans and you have it with a third party lender other than the Student Loan Network, what you need to do is a super two-step consolidation where you would reconsolidate with the Department of Education to take away the loan from the existing lender and then reconsolidate with the Student Loan Network afterward. It's a fairly lengthy process and one you want to get done sooner rather than later. If you've consolidated once but have new student loans after your consolidation you can apply directly with the Student Loan Network and you can do so at www.studentloanconsolidator.com or give us a call at 877-328-1565. You'll find that our borrower benefits are competitive with the rest of the industry and our customer service is much better on average because our customer service reps actually know what they're talking about and if they don't know the answer to your question they will certainly ask around. They will ask their manager, John, and Katie, and hopefully they will have the answers, if they don't have the answers we'll hit our partners and finally, as the option of last resort, we'll Google it. Google is our friend here at the office. Reputable lender? We certainly are. We've been around since 1988 and are listed with the Boston Better Business Bureau, bla, bla, bla. Everything that every other lender basically says, but I like to think that we are among the most reputable because we'll actually take the time to tell you things and we'll shoot straight with you and won't try and arm wrestle you into a loan that may not be the best choice for you. If student loan consolidation is not the best choice for you or your finances we'll tell you. We'll tell if you're better off where you are. For example, if you graduated in 1996 or 1997 and you had $20,000 in loans but now you're down to like last 2 or 3 years of your loan payments, it is not worth your time to consolidate. It really isn't unless you so desperately need the cash each month, it's not worth your time to consolidate. You're better off trying to pay off that loan as quickly as possible. That's a perfect example of where we'd say, hey, don't even bother with the consolidation. Just pay that off as fast as you can and you'll be done.

The second question here is from Nahani who asks, "How do I make it so that my parents don't have to pay off the loan they took out on my behalf immediately?" Well, Nahani, what Nahani has here is basically, her parents took out a Plus Loan, a parent loan for undergraduate students and one of the conditions of the loan is that payment begins within 60 days of disbursement. There is no deferment on principal or interest until after graduation like there is with the Stafford Loan and with Private Student Loans. The only way to get around the Plus Loan repayment thing is to take out an alternative student loan, a private student loan, and use the loan proceeds to pay off the Plus Loan. Then you can defer the loan's interest until six months after graduation. At least, with our alternative student loan which you can find at www.alternativestudentloan.com. The other nice thing about that, and this is something we talked about on one of our websites, the student is the primary borrower not the parent. So, that when the student graduates the student is the one that will be making the payments and for many parents this is appealing because they are not the principal borrower on the loan. Now if the parent does co-sign on the loan, then the parent is jointly liable on the loan which means if the student doesn't pay the parent has to. But, the primary obligation is the student's. I think there is, I'm not 100% sure on this, but I believe there is a difference in terms of credit when it comes to who is the primary borrower on the loan. So, Nahani, that is the answer to your question. Take out an alternative student loan to pay off the Plus Loan and then defer the loan until after graduation and you can get that at www.alternativestudentloan.com or give our private loan desk a call at 866-229-8900. Alright, that's going to tie up the mailbag for today.

Let's finish off with Storm Warning from Whitney Steele.

(music)

Storm Warning from Whitney Steele by the Podsafe Music Network and that is going to tie up today's show, episode #153 of the Financial Aid Podcast. Kind of a low key show for me. It's overcast, it's kind of dreary and we were supposed to get a lot of snow yesterday and instead we got absolutely nothing. That was a little disappointing because I wanted to go out sledding. Well, what can you do. You can find show notes for today's show and previous shows at www.financialaidpodcast.com and we'll have links to all the resources we talked about in the show as well as our Frapper Map, our geographical mapping, and a whole bunch of other things. If you haven't gone out and voted for us got to www.podcastalley.com and we're podcast 5459. Also, please vote for us at www.podcast.yahoo.com. We'd be more than happy to see some ratings and reviews. It would be terrific thing to do to help us out.

If you have feedback about anything in today's show send it to me at fiancialaidpodcast@gmail.com. I'd be more than happy to respond to what you have to say. Incidentally, anyone who was asking about international student loans and international scholarships, we've talked about this in the past and I don't really focus on it on the show because I have more of a domestic focus, but if you're looking for international student resources, three websites come to mind, www.internationalstudentloan.com, www.internationalscholarships.com, and www.internationalstudent.com will be great sources for you to find international related financial aid products and things like that. So take a look at those websites. I'll put links to that in the show notes as well.

If you're not subscribed, get subscribed. It's very easy, just go to iTunes and download the latest copy then go to www.financialaidpodcast.com and click on Add to My iTunes button and you'll get a copy of our Scholarship Searching Secrets guide, it's actually about 14 pages on how to use search engines to find scholarships for free on the internet and not have to pay any money or sign up for any services. I think that's going to do it for today's show. So, until tomorrow, folks, take care.

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