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Sallie Mae Financial Aid

Posted On: 2005-10-13
Length: 27:10

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Thanks for joining us. Your listening to the financial aid podcast with Chris Penn. Good morning. It is Thursday, October 13, 2005. Welcome to another episode of the Financial Aid Podcast. My name is Chris Penn and I'll be hosting today as I do every day. I got a late start today because of a ridiculous amount of traffic on Interstate 93 on the way to the office. It was for a good reason, there was a 9 car traffic accident. There were pieces of car everywhere. It looked like it was collision only. There didn't appear to be any vehicular injuries. There were no ambulances on scene. So, hopefully everyone walked out with nothing more than some whiplash and they'll get that cleaned up because....It normally doesn't take me more than 25 minutes or so because I leave so early in the morning but it took me an hour and a half today. It's just absolutely out of control. But, hopefully everyone was ok.

Let's get to the news because we've got a lot to talk about today. In technology news, which is something we rarely talk about on the podcast, but it's worth mentioning. Yesterday, Apple computer announced its first line of Video iPods. I've got to say, looking at the website, wow. These things are very nice. They're clearly positioning themselves as the much have gadget for the Christmas season. That and the Nano, their two iPod entries. The new iPods support video. They support video podcasts and they can hook into your television so there's some definite potential there for people who are interested in a video podcast or blog kind of thing. One thing that I think we're not going to be doing to many of those. I might try one or two just for fun. One thing about video production compared to audio production; they are very, very different animals. Video production requires very different set up then audio production does. Just in time alone, video production, for every one minute of video you've got between 10 and 15 minutes of production time - everything from camera equipment, pre-production, post-production, all that, whereas podcasting by audio podcasting, by comparison is about 1-4. It's a lot lower in demand. You don't need as much equipment you don't need as many different items to work with. You can produce it faster, more cheaply than video stuff. So, we'll probably try and do one or two of those but nothing major. We're certainly not going to be doing a daily show and I don't know anyone who owns a video recording studio who will be doing a podcast soon. So we shall see how that turns out.

Let's talk some student loan news. The Minnesota Daily, the Minneapolis St. Paul Newspaper has another article on the whole Higher Education and the whole drug provision stuff. In this case they're reporting that there is a change in the provision, at least in the House bill that hasn't gotten a lot of attention but it basically changes the provision from denying financial aid to anyone with a drug conviction to denying anyone federal financial aid if there is a drug conviction while they are enrolled in college. That's a positive for anybody who is going back to school who, between the time they graduated or the time they left school and the time they go back, if they had a run-in with the law they will then be able to qualify for financial aid. But the majority of students who are convicted of drug possession or drug distribution while in college will still be denied financial aid. Like we said in yesterday's podcast, it's one of those things that it's unfortunate but you're also breaking the law so that's just the way it is. You can petition the process, get involved with the political process to change which drugs consider legal or illegal. That is something only the government can do, so you need to petition your elected representatives to let them know that that is important and if it is important to you then you need to rally for it, lobby for it, get people together, get money together to influence congress. You need to buy a professional lobbyist to work on it for you.

Another piece of news, from the Tallahassee Democrat in Tallahassee, Florida, a pole by the Sallie Mae fund reveals that Hispanics and blacks are largely unaware of college financial aid options. The survey results showed that most Hispanics and blacks were not aware of financial aid opportunities available to them to get them to college. 66% of those that did not attend college said that lack of money influenced their decision. The Sallie Mae fund is trying to spend some money to raise awareness of people about what their financial aid options are but there's still a lot of work. So, the interview and article concluded with an interesting quote from one of the student's mothers who said in a phone interview that she thought that her child would probably work her way through college. She says, "We haven't researched financial aid. I don't even know where to begin. I prefer that she find a loan or something so that she can actually go to school and not work." That got me thinking about how do you explain federal financial aid? How do you do the elevator speech? If you've never been to a business school or a business program either in an undergraduate program or graduate level; the elevator speech. Can you sum up everything that is important about what it is that you're talking about in the time it takes for you to ride the elevator from the ground floor to the presumably the executive offices on the 50th floor. It's basically a 30 or 40 second speech about how to get the financial aid process started. I think I'm going to talk a little more about that in a little bit. But first I'm going to do a piece of podsafe music just to get things kicked-off a little bit.


New Podsafe music from Julian, aka Cookie Cutter Girl with her new song, Jenny. New from the Podsafe Music Network. I've been out of My Space the last couple of evenings trying to get artists to submit their stuff to the Podsafe Music Network so we can play it because I've got a couple of big music shows coming up this weekend. I wanted to see if I could get some new sounds out there on the Podsafe Music Network. So if you're in a band or you know a band let them know that the Podsafe Music Network is always accepting new submissions. It's free for any artist, musician or band to submit their stuff and they could potentially be played on any number of podcasts. If you have any questions about that you can email the podsafe music network directly at music@podshow.com. If you have questions about how to get your stuff onto my show or you have stuff and you'd like to get it played on my show, email me at financialaidpodcast@gmail.com.

Alright, let's talk about the federal financial aid process and the elevator speech. If I had to sum it up and not do it in some form bizarre poetry then I'd have to say that federal financial aid goes like this: scholarships, FAFSA, federal student loans, private loans, student loan consolidation. Really, that's the really short elevator speech. Let's start talking about scholarships. We've talked a ton about it in the past. Basically, scholarship hunting starts as early as middle school. It is in your parent's interest, it's in the student's interest to make sure that the student is excelling academically as much as possible and is involved in a number of activities that they enjoy obviously but that later can be leveraged later in scholarship activities. It can be things like getting involved in student government. I had fun in high school being class president because, well, we did some pretty outrageous things, but that's neither here nor there. Sports, if you are so inclined, artistic activities, music, pretty much anything that is an interest, doing a lot of different activities as opposed to sitting on the couch, coming home at 3:00 pm and turning on the television and vegging out until bedtime. That's not terribly helpful. It's also not healthy either. Scholarships are the first building block and you're trying to, basically, set up your life so that you qualify for as many scholarships as possible. So you think about the things you enjoy and you just get involved with them, have fun with them, get really passionate about them and that will kind of take care if itself.

Once you start seriously thinking about the college process, scholarships are the way to go. You start hunting, you start thinking about as many as possible. In the year that you're going to be entering school you're going to want to fill out your FAFSA, your Free Application for Federal Student Aid, and that is a form we can get online. You can fill it out for free online at our website at www.fafsaonline.com. You can also get it from your schools financial aid office, high school, the guidance counselor's office, the library, you name it you can find it there. The FAFSA is a fairly long questionnaire. It's very similar to the IRS 1040. It basically asks you about the family and how much; it's an instrument for the schools and the government to determine how much you can reasonably pay for college. Obviously, there is some disparity. There's some gap between your real financial situation is and what the government thinks and that's where loans come in later. But the FAFSA, you want to get that done as soon as possible in January of each year. The moment that second hand ticks over to 12:00 am and one second on New Year's day get your data in, get the FAFSA out the door.

Next after that, you'll get in the mail, depending on when you apply, the Student Aid Report, that is the result of your FAFSA that tells you how much federal financial aid you are qualified for. Federal financial aid comes in a number of forms. There's the Pell Grant, the Supplementary Education Opportunity Grant, there's the Perkins Loan, Federal Stafford Loans and Plus Loans and the FAFSA doesn't govern Plus Loans. So, you'll get this report that basically says that we think the health of your family's finances is X. So for the colleges you indicated on the FAFSA you might be interested in attending. Here's the cost of education. Here's what the government thinks it can contribute to its fares, and here's your expected family contribution, the EFC that magic number that says here's what we think you should be paying per year, essentially, for college. That is usually much higher than what people want it to be. It also tells you you are eligible for these loans, these grants, whatever. You will then go on to apply for those programs. You can also apply for Stafford Loans at www.staffordloans.com. Perkins loans are done through the university and the grants are administered through the university and those you don't have to repay.

Now you've got your scholarships lined up, you've got your grants applied for and received, you've gotten your FAFSA done and let's say you still have some money to make up. You still have a gap. You're next step can be one of two steps depending on how you want to tackle it. There's the Plus Loan, it's a parent loan for undergraduate students. This is the loan you take out on behalf of a student but basically let's your credit rating be leveraged for a relatively low interest rate loan for paying for college. If you're not an undergraduate student or have parents who don't want to take on a loan burden in their name but would rather have you take it out in your name, there's a private student loan avenue and that is the ACT Education Loan which you find at www.acteducationloans.com. Basically, the student take out (the parents can co-sign for it) but obligation is primarily in the student name so that's another different way of doing education financing. That one is a variable rate that is tied to what's called the London Interbank Offering Rate and it's a relatively stable index. Unlike the federal student loans, there's no cap on it so if the world's economy decides to tank, the interest rate on that loan could become very high. But in general it's relatively competitive with your education interest rate options.

Other options for financing, people talk about using home equity and thing like that, those are not necessarily the best options because they change the family's tax and financial structure overall and you can get yourself into a lot of trouble that way. Generally speaking, it's a bad idea to try and leverage the place you live in for college. There are usually other avenues. Throughout this entire process you are looking for scholarships. That should never stop. When you are done with the education process, when you're done with school or are a parent with Plus Loans that the interest rate for Plus Loans happen to be favorable that year, you can do a student loan consolidation and what that does is basically stretches out your payment term and locks in the rate as a fixed rate for whatever the rate is that year and helps you set up a repayment program that best suits your needs and that's important because the Stafford Loan rates can very from the low of 2.77% last year all the way up to 8.25%. Plus loans last year, the rate was 4.7% as the base and they can go all the way up to 9% so if it's below the limit, basically, it's in your best interest to consolidate and lock those in so that you are immune from rate changes and you can budget sensibly. So that's the tail end of the federal financial aid process. So, elevator speech? Simple, scholarships, FAFSA, federal student loans, private loans, student loan consolidation and that is the overview of the federal financial aid process. If you have any questions about the federal financial aid process, I'd be happy to answer them ton the air. You can email me at financialaidpodcast@gmail.com. I'd be more then happy to tackle them. There are interesting contortions to financial aid but it is well worth doing because the more people who go to college, the better off as a country we'll be.

Alright, let's hit another piece of Podsafe Music.


If you said Natalie Brown you would have guessed right. That was Natalie Brown with Love Has Finally Called My Name. So, another great piece of Podsafe Music there. Actually, I was going to do a scholarship update but I think I'm going to hold off until tomorrow. Look later on we might have a little surprise. We might try and crank out a video podcast. Maybe, we'll see how the day goes. So, as always, thank you for tuning in. Stay subscribed. If you're not subscribed, get subscribed. It's really easy. Just go to www.financialaidpodcast.com and right on the front page is instructions on how to subscribe to this podcast. I definitely think you should and not just because I have to say that but because we try and crank out a lot of good stuff. We try and bring you fresh new financial aid news all the time so if there is something out there that needs your attention we'll talk about it on the show. The only way you can really, really keep up to date is to get subscribed so you'll never miss an episode. You can get the show notes at www.financialaidpodcast.com so if you missed any of the shows check out the show notes. You'll links to the artist's websites. If you really like the artists do them a favor and buy their music. It's not really expensive. If you hear a song that you love pop the $.99 in iTunes for it; support independent artists. I was talking to Rob Coslow who is a guy we've played on the podcast a ton of times. He's a solo piano player, an excellent one. He said, in general, independent artists, of the $.99 you pay in iTunes Music Store, independent artists get between $.65 and $.70 so it's not a bad deal for them and they don't have to ship product or anything like that. You can of course buy the CDs of course. I'm a huge fan of There She Goes by Brother Love, $99 later and he gets $.65 or $.70 and that's not going to buy you a cup of coffee, well, maybe a really, really tiny one, but, times a 1000 people now you're starting to talk about rent money for inde artists so check out the website.

Also, we sent out a student loan consolidation bulletin in email so if you have not received that and you would like information about consolidation and your grace period ending, go to www.studentloanconsolidator.com. The bulletin will probably be on its way if it's not already. That's about it, until next time, take care.

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