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Student Debt Consolidation and Scholarships

Posted On: 2006-01-03
Length: 30:30

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Good Tuesday, it is January 3, 2006. This is the Financial Aid Podcast number 152. Welcoming everyone back, I know that a lot of people including us had yesterday off; we were out of the office, yesterday's podcast as a result was a little shorter than normal. We are back in the office, we are back in the New Year, welcome to 2006. We have so much to do this year, so many good things happening that I just can't wait to get started. Big shout out by the way to the gentleman at the B.J's Wholesale Club for throwing his shopping cart at my car while he was pulling out. You left you're case of Mountain Dew at the bottom of the cart as you drove off probably snickering that you didn't have to return you cart. Thanks for the free Mountain Dew, 36 cans worth and I'll be drinking that all week. Thank you very much. Let's get this New Year off to a good start, with the news. Hopefully your New Year's resolutions are off to a good start I and I hope that one of them in the packet is toss share credit cards in the shredder. We're going to be talking a little bit more about credit cards a little bit later on the show. But hopefully that is in the mix. Throw those things and the shredder, cut them up, burn them, whatever, but credit cards are clearly not going to be your friends this year.

In other news, and scholarships, I are scholarships the database the www.studentscholarshipsearch.com data base is up to $ 262,075,523.00 in awards. Now does it seem to you like these figures are pulled out of thin air? I particularly sense in only a few episodes to go that we're only at 60 something million. Who all guess what, this is virtually true for all scholarships sites. Ours are basically calculated based on the total value of the awards so if an institution offers ten scholarships worth $10,000, that's $100,000.00 in scholarships. You put together all these accumulative things and you eventually total up some really really absurd numbers. Today's scholarship by the way is for the entire state of New Mexico. It's a very large scholarship that, there's more than 35,000 of them so obviously that award number could be gigantic eye and of course it contributes to the total but, whenever you see somebody advertising and they have X billion of dollars in scholarship awards, well now you know at least how we calculate it. They probably do something very similar and suddenly it doesn't seem that impressive. If you've been listening to the Financial Aid Podcast for a while now, you know we've then putting together a few words every day. Making sure that they're good awards, they're high quality awards. A lot of full tuition scholarships; a lot of scholarships where the payout is very very high, but even still, the advertising number really is kind of meaningless, so just keep that in mind when you're hunting around for scholarships this year. The FAFSA, it is FAFSA season as day three of the FAFSA it season that means it is three days into the application process. If you total up the total amount of financial aid given by the government, $143 billion estimated, more or less and you divide that by the time of the FAFSA season, who which basically ends June 30, 2006; you're looking at $794 million a day.

What that means for you is this, every day that you wait is an additional day when that pool of aid gets smaller and smaller. Particularly a chunk of that aid is either subsidized or is free money. The Pell Grant for example, things like parts of the Stafford Loan Program are subsidized. It's important that you get your FAFSA in earlier rather than later so that you can get in line earlier for that free pool of money. You want to do that as soon as possible. One thing that we've talked about in the past is that you need to do your IRS 1040 in order to get an accurate picture, a reasonably accurate picture of your finances. If your financial situation is not changed a whole lot since 2004 tax return, you could actually use that as a basis for your FAFSA and then submit a correction if anything radically changes between then and now. If it's been the same job, if your parents had the same job or if you are a parent and your income picture has not changed a whole lot, then go ahead and use your 2004 tax return to complete your FAFSA and get it in the door, get it to the Department of Education and then if you need to file a correction later on you can certainly do that. It's easy to amend and unlike the IRS there are no jail time or perjury penalties for filing a FAFSA application that you then correct. That is something to do; you can file your FAFSA and walk through our nice FAFSA secrets at our FAFSA website, completely free at www. FAFSAonline.com and I'll put a link in the show notes today at www.financialaidpodcast.com for this and everything that talk about as well.

Two other reminders, if you are looking for second semester funding, now that the second semester is just around the corner, or may already be starting depending on your school, and you need a student loan to cover some unexpected expenses or to complete the ... it's federal aid, obviously not really increased in what 12 years, go to www.alternativestudentloan.com and you can find information there for K-12, college and graduate students and continuing education students as well. That's actually one thing that we will talk about in another show sometime. There are student loans if you are looking for continuing education for professional certification programs. If you an MCSE, or you are looking to get an MCSE, or a CNA, or a Sysco Certification or something like that, a professional certification from an accredited school that it isn't a full time degree its just a professional certification, you can still get student loans to pay for those and then make payments on those after you've got certification and presumably have got a better paying job. You can find more information about that at www.alternativestudentloans.com as well just look under the continuing education section. Finally of course graduate students can hit up www.gradloans.com, what the heck we've got all the sites out here today in one show-I know there's a lot of talk about advertising and podcasting, well the nice thing about the student loan networks podcast is that the entire thing is an advertisement. You don't have to worry about being annoyed by ad because it is an ad. www.gradloans.com, if you're looking for a loan specifically for graduate students with a higher total loan balance you can take out, up to $50,000 a year, so check out www.gradloans.com and finally, I would if I didn't mention our student loan consolidation site. We know what the interest rate is going to be next year of this year, that's 2006, we know what the interest rate is going to be starting July 1 of this year 6.8% for Stafford Loans, whether in school or in re-payment and 8.5% for PLUS Loans, Parent Loans for Undergraduate Students. That is a major bump from last year, it's a 2.4% respectively basis point increases. It is a huge huge increase. To avoid that lock in your rates now, by consolidating your student loans. You can consolidate them at www.studentloanconsolidator.com or give us a call at the office here at 877-328-1565. Incidentally if you are on the alternative student loans, if you want to call our private loan desk, you can call them at 866-229-8900. All right enough of the advertising and pimping and all that wonderful stuff. Had to get it done, had to get it out of the way for the New Year because it's the new year, new financial aid, new everything. Let's kick off this New Year with new piece of Podsafe music, let's do Lisa Surbone with "Ordinary Days."

(music)

That was Lisa Surbone with "Ordinary Days" from the Podsafe Music Network at www.music.podshow.com. All right like I mention earlier the scholarship today is the New Mexico Lottery Success Scholarship Program. Hey, what's the best kind of scholarship; it's a full tuition scholarship that you don't even have to apply for. This proves that even vices like gambling have their virtues. This scholarship program is available to New Mexico residents attending a New Mexico public college or university. I saw if you're looking into doing some future planning, you might want to move to New Mexico. More than 35,000 scholarships worth over $190 million; apparently the lotto's are very popular there. Here's the best part of this, all you have to do is meet the qualifications for the scholarship. You don't have to file an application, there is no deadline, there's no fees, no applications, no paperwork, no essays, no nothing. All that is required, is that you meet a few basic criteria. Basic criteria number one, you need to have a 2.5 GPA, a grade point average on a 4.0 scale, complete at least twelve credits each semester, the enrolled at a New Mexico public college or university immediately after graduating from a New Mexico high school or receiving a GED. Scholarships are also available to residents who began U.S. Military service within 120 days of graduating from a New Mexico high school or receiving GED, and then enroll at a New Mexico, college or university within 120 days receiving an honorable or medical discharge from the military. Clearly you could take some time off from school to go served in the country's armed forces; you are not out of the running which is nice. This scholarship-the scholarships which are worth up to 100% of their tuition at New Mexico public colleges and universities. You can receive scholarships for up to eight consecutive semesters, the scholarship does not actually begin until the second semester fulltime enrollment. So for the first semester you are on your own. The state of New Mexico actually dedicates 24% of its lottery revenues to the scholarship programs. So this is a very nice program for the residents of new Mexico financed by their lottery program. Like I said there's no application, there's no deadlines, there's none of that stuff, so all you have to do is be eligible based on the criteria that they've set down. And basically that means New Mexico resident enrolled in New Mexico public colleges and universities, $194 million in scholarships, 35,000 of them; and that is today's scholarship update. That by the way is one of the major contributors to why the database is worth $262 million, thank you to the state of New Mexico. All right let's move on to our next piece of Podsafe music, let's do something from-we haven't from Lovespiral in a while, let's do "Our Nights."

(music)

"Our Nights" by Lovespiral from the Podsafe Music Network of course. All right, I wanted to talk about a new thing for 2006. Hood and this is going to be from the news that you could use segment. I'm sure that you've heard in other forms of the new sites, and on the debt Podcast recently as well. Which is by the way a great Podcast, you should definitely check it out at www.debtpodcast.com Jay Fleischman's consumer finance and debt management podcast. Terrific one, I love listening to it. Credit cards have changed; specifically credit card minimum payments have changed. As of January 1, credit card companies previously basically were mandated to figure minimum payments on a credit card debt to around 2%. Some credit cards actually have a minimum lower than that at 1.5%. I know that on some of the MBNA cards have in the past like the L.L. Bean Visa card. Which means that it will take you forever and day to pay off the balance, any significant balance. There's a new law on the books that basically mandates credit card issuers have to specify a minimum payment of at least 4% up from the 2% previously.

What does that mean for you? Well, let's say you had a $12,000 credit card balance with an 18% interest rate. If you're making only minimum payments previously it would take you 60 years and $34,931 in interest to pay off that $12,000 balance. The new law basically cuts that in half. You're looking at about 30 years and five months and $17,683 in interest so you're still talking about a tremendous amount of money-with an extra 18% that's huge. That's a big chunk of money that really is a waste. If it will mean for people who are carrying balances right now on their credit cards you're going to see your monthly payments essentially double if you're paying the 2% rate, now you're paying a 4% rate. But the tradeoff of course is that the amount of total time that you're in debt and the amount of interest that you pay will be halved. However, if you can at all possible, make it extra payment towards the principle. Even if it's only $5.00 a month, even if you can only scrape up an extra five bucks a month, every little bit helps, every little bit will shave off more on your debt. And ideally what you want to do is take your credit cards and you want to make sure that you don't add to that problem by shredding them, put them in the shredder, the fireplace, you know whatever it takes to stop adding on to that debt snowball. 2006 is going to be an interesting year when it comes to consumer debt; we've talked about it in the past. The short version, if you're just joining us, is basically the adjustable rate mortgages are going up, credit card rates are probably going to go up, almost certainly are going to go up, because they are tied to the prime rate which is tied to the Federal funds rate. Which will be going up anywhere from 4.5% to 5% depending on who you talk to. All this basically means that anything that you pay interest on, if and like we talked earlier about in the Podcast, even student loan rates in July are going up as well, so everything that you pay interest on is going to get more expensive. Your payments will increase, the total amount of interest your going to pay is going to increase, and that means that any kind of consumer debt that your carrying around is going to be of a fairly large boat anchor around your neck.

So what you're going to want to do this year, if you still haven't firmly settled in on your new year's resolution make one of them that you're not going to add to the snowballing amounts of debt, particularly super high interest rate debt like subprime credit cards, subprime mortgages and things like that. Cash is going to be King this year if you can pay cash, that's the way to go. When it comes to student loans, if like I said the position of a responsible student loan like ours is this, student loans are the bridge between the tuition bill you get in the mail and the scholarships that you haven't been awarded yet but will be. They shouldn't be something that you carry around for 25 or 30 years. Ideally you can use student loans as a means of getting some money while you are looking for scholarships and then use the scholarships to pay down anything that you need to pay down after you found them. Like I said earlier, if they're not the be all end all financially, because really, they are still a loan, they are still a debt that you're going to carry around and you want to try and carry around as few of those as possible. I student loan consolidation equally true If helps you reduce your monthly payment in free's up cash to pay off higher interest debt that's wherein it fits into the picture. You are extending your payment term; you are extending that if you will pay more interest over the life of the loan totally. But you're trading that off with having more cash huge month to service higher interest debts. Once you have paid off your higher interest debts, you can then take that money and make prepayments or extra payments to your student loans and actually pay them off of course because there is no early payment or prepayment penalty before student loan consolidation. That's where that kind of fits in the student loan ecosystem as well. That is news that you could use and that is hopefully something that you can do in 2006 to reduce the amount of debt that you are carrying around. Let's finish off today show, well what do we have here let's do Sean Cole, "In the Middle of Nowhere."

(music)

"In the Middle of Nowhere" by Sean Cole from the Podsafe Music Network. And that is going to do it for our first business day Podcast a 2006. I thank you for joining us. Show notes are available at www.financialaidpodcast.com you'll find links there are two everything that we've talked about on today's show plus previous shows. You'll also find things like our [28:31] add your pen there. And don't forget since it is a new month, I might as well get it out there while we can, please vote for us at www.podcastalley.com we are podcast number 5459. There's actually a couple of Financial aid Podcast things in there so make sure that you are voting for the right one. And also on www.podcasts.yahoo.com let us know if you have any feedback regarding the Podcast, if you have any questions or comments or feedback, or things you want answered on the air, send me an e-mail at financialaidpodcast@gmail.com we'll be more than happy to tackle your questions about consumer finance, student loan finance, education finance, well you name it, and hopefully we can get all your questions answered on the air in public. Optionally, you can certainly asked things privately but just specify that in your e-mail so that I don't read it out on the air, that would be embarrassing for both of us. If you're not subscribed, get subscribed If you're listening to this safe from the my space bulletins that I post frequently, or right on the web site, get subscribe to the Podcast. It's very easy; basically you download the latest copy of iTunes it from Apple, it's free at www.iTunes.com and then click on the "add to my iTunes" button on our website, www.financailaidpodcast.com. And you'll be subscribed; you'll get a copy of Scholarships Search Secrets e-book. The free ten page PDF which shows you how to search for scholarships using search engines and free other free internet technologies and possibly any other e-books that we publish this year. Hopefully we'll at least crank out a couple more. I've been looking at few different options but I think we're going to do refresh of the Scholarship Search Secrets e-book, do a refresh of that, do a version two on that maybe so that incorporates the latest and greatest tips that we found out about scholarship hunting. Until next time folks, stay tuned, stay subscribed and we'll see you tomorrow. Take care.

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