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Posted On: 2005-12-01
Length: 28:08

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Good Thursday December 1, 2005. Welcome to episode 128 of the Financial Aid Podcast my name is Chris Penn and it's a big day here at Financial Aid Podcast for many of you who have subscribed in recent days its because you want to find out who won the Ipod Nano with Lanier Headphones give away or the one time student loan payment of $300 depending on which prize you choose. The winners will be coming up in a little while, we have picked them and will be giving that away towards the end of the show. Today we are going to talk a little bit about the new FAFSA, some home equity stuff, a $50,000 year scholarship for six years, some audio feedback from the mailbag and of course the Ipod give away and Podsafe music. Let's kick things right off with the news.

The new FAFSA has arrived, topping the news today, the FAFSA 2006-2007 the school year coming up has come out. We got a whole bunch of them at the office here yesterday, this is the paper version, there is of course the online version which you can find along with a tutorial at our website at www.fafsaonline.com it's a very nice publication. We've got the usual worksheet and things, everything that was in the draft FAFSA that we published not too long ago; nice thing about this version here is that its color coded. Sections of the FAFSA which apply to the student are color coded in blue, for parents and family members the rest is in purple, there are also a list of deadline published right on the front page for when state aid due. For example in Massachusetts you must have everything done and submitted by May 1, some other states here like Alaska, April 15, Maine May 1; basically you are looking at the second quarter of the year, with the exception of Indianan which is in March 1, very early and North Carolina and North Dakota, and Montana, Michigan, Maryland March dates there. Kentucky and a few others Oregon, Rhode Island and West Virginia all those states require that you have all of your financial aid paperwork into at least at the state level by those dates in order for you qualify for State Financial Aid. Remember that when it comes to the FAFSA and any kind of financial aid, earlier is better. Get it done as soon as possible. If you can on January 2, 2006, when the doors open the first Department of Education Administer peeks out the door, foom your FAFSA should be right there ready for them to process because the sooner you get it in the more the access you will have to the fixed pool of grant and subsidized financial aid. The later you wait the more people who are line ahead of you; they will get that more valuable aid first.

Other things when we did the draft FAFSA not too long ago, one thing we talked about was that there were a number of inaccuracies to which they line on the IRS returns to look at when it comes to filing the FAFSA. I did a quick check on the 2005 1040 along with this FAFSA, those references have been fixed. If you are filling out the FAFSA and you spot any additional inaccuracies please let me know so that I can let everyone else know as well. But for the moment the references for the 2005 IRS 1040 are in good order which is nice to see. Also in the news according to the Consumer Bankers Association, 5% of all education finance is fueled by home equity. That is a lot of money. If you look at the total amount at financial aid that is known it's about $129 billion and 5% of that education finance is fueled by home equity you are talking about almost $6.5 billion every single year. That is a ton of money that is financed usually in variable rates because home equity loans are usually financed with a short term variable rate, their 15 year loans are usually, they are usually pegged to either prime or LIBOR or the one year constant maturity treasury rate depending on which bank you went through. That is a lot of money and that means that on that $6.45 billion if we did the calculation and amortization based solely on the rates that most people were taking out loans over this past year which is about 5% give or take. The total of amount interest paid on that loan is going to be $2.73 billion paid over 15 years. That is a heck of a lot of money. Certainly more than people were paying for the Stafford loans if they consolidated them before July 1 of this past year. The HELOC rate like I said is around 5% for most of this past year it's now to about 6% at least for HELOC home equity loans in general that means in interest paid, you are talking about 3.35 almost $3 1/3 billion now instead of $2 3/4 of a billion, that's all large numbers no matter how you slice it but that's still enormous amounts of money that is fluctuating at these rates as home equity and mortgage rates go up. This is not taken into account by the way the mortgage rate which there is a whole lot of variable, ones for those that are out there as well.

The message that we get out of this especially for parents and for families that are looking to finance the cost of higher education with home equity or with mortgage re-financing or whatever, if you have a variable rate loan of any kind; home equity loan, re-financed, home equity line of credit, try to get that fixed rate as soon as you can because every indication right now is that the rates are to continue to go up. A lot of the bank rank rates are set by the Federal Funds rate which of course is set by the Federal Reserve and we've gone through I think 14 consecutive rate hikes, a quarter point rate hikes in the last 18 months and every indication shows that we are on 4% for the Federal Funds rate. Every indication shows that the next three Federal Reserve meetings are going to have a quarter point bumps up in the interest rate as well, so you are adding another 3/4 of a point interest rate by March which means that if you are a mortgager or home equity loan is based at least partially on this Federal Funds rate you are looking at instead of 6% you now are looking at almost 7% as an interest rate and then you are talking some really serious money. If you did that same amount of money the $6.45 billion and we run that now at 7%, we are talking about almost $4 billion in interest over the 15 year time period. No one person is going to have that interest payment, but it goes to show you that you are talking about an extra billion and a quarter dollars if those rates go up from where people got them, 5% to 7%, that's a ton of money. If you have variable rate loans, home equity, mortgage what ever fixed rate is the way to go. Try to refinance, now you can refinance through really just about any bank or credit union or whatever if you want to use Student Loan Network Services we would more than happy to help you go to www.studentloannetwork.com/mortgage and you can get a quote without having to pay anything for that. That is the news for this morning; let's move onto our first piece of Podsafe music,Sean Cole with "Stand."


"Stand," by Sean Cole from the Podsafe Music Network at www.podsafemusicnetwork.com. Let's do a quick scholarship update. Jack Kent Cook Graduate Students Scholarship, $50,000 per year for up to six years this is a scholarship for graduate students. Seniors and Alumni from the University of Texas at Tyler may compete for graduate scholarships to the Jack Kent Cook Foundation. The scholarships will be awarded in early summer of 2006 for the use during the 2006-2007 academic years and maybe renewed in the following years paid, based on performance. Students and Alumni may win up to $50,000 a year for six years through the foundation. The fund was established by estate of Jack Kent Cook in 2000 to help young people reach their full potential through education. You can apply by either calling the Office of Academic Affairs or visiting the University of Texas, Tyler website. You can find this link along with more information and the Office of Academic Affairs phone number at our website at www.studentscholarshipsearch.com, there will be a link in the show notes today as well where you can find a link to the scholarship and many others that we've been talking about recently. You can visit www.studentscholarshipsearch.com and the Jack Kent Cook scholarship is today's scholarship update. Next piece of Podsafe music, Matthew Ebel with "Wasting my Time.


"Wasting my Time," by Matthew Ebel from the Podsafe Music Network at www.podsafemusicnetwork.com you can also find Matthew's stuff at www.matthewebel.com and there will be a link in the show notes for that as well. Let's move onto the mailbag, we have some audio feedback from Brian Parson from the Around Town Sports Podcast. Let's see what he has to say.

BRIAN: Hey there Chris, it's Brian Person checking in here from www.aroundtownsports.com and the Around Town Sports Podcast. I really do love the Financial Aid Podcast, I tune in every day and certainly enjoy your content; a couple of questions for you which I hope that you can answer for me.

No.1 You mentioned weeks ago, and I think it was the News You Can Use segment about how we can lower our monthly finance charges on credit cards that compute the charges based on an average daily balance and we can do that by, I know you said making smaller weekly payments instead of paying a big payment at the end of the month. My question is, can we do that same kind of thing for student loans and will it help us in same way or are there particular kinds of loans that that might help us with?

Secondly Chris I fortunately consolidated my student my student loans when I graduated graduate school in Australia a couple of years ago, so my monthly payments are a nice a manageable number. My sister on the other hand did not consolidate during the grace period, although her principle balance is only 60% of my total, her actual monthly payment at the moment is $30 more per month and again she's subjected to the change in interest rate each year and as it's going up she can expect her payments to go up. My question is does she have any recourse? Can she lock in the current rates now by consolidating it at this point some two to three years after she finished her undergraduate studies? Appreciate your answers to these questions Chris, keep up the great work and very much enjoy the Financial Aid Podcast, thanks a lot.

CHRIS PENN: Thank you Brian for that audio feedback. All right let's tackle those questions.

First question when it comes interest rates on student loans and how to save more. Interest rates on credit cards are what are done on average daily balance, where student loans are simple amortization. It's exactly the same formula that you use to compute mortgage payment and things like that. It's your standard fixed rate. Now with student loans that are not consolidated those are variable rate loans so every year you would have to re-compute your payments based on what the new interest rate was that was set at on July 1. However if you consolidate your student loans, then you have a fixed rate for the life of the loan and really is just a very straight forward mortgage computation. You can use our calculator at www.studentloanconsolidator.com look for the gigantic picture of a calculator on the page and run a scenario's and things like that. The best way to save more money each month by lowering your payment is consolidating your student loans, you can really cut your loans anywhere from 10% to 50%, your monthly payment you can cut those by 10% to 50%. Sometimes even more depending on how much you owe. Regarding your sister and her question about consolidating her loans even after being out of school for a few years as long as you have student loans that are in excess of $10,000 and you are no longer in school, you are more or less eligible to consolidate your student loans.

The other condition is that your loans have to be held by more than one third party lender or by the Department of Education. So if your sister went to school and she has only Federal Student loans from Sallie Mae she theoretically could consolidate her loans but would probably unless the math worked out a certain way; not necessarily be in her best interests. Department of Education loans always good always welcomed, or loans from more than one lender. So if she had some Sallie Mae loans and maybe a Wells Fargo loan that she is good shape and she can consolidate. There is no time limit per se when it comes to when you can consolidate; it's just that the loan balance has to be-most lenders say $10,000 or above and to be perfectly honest the reason for that is because once you start getting into the $5,000 or $6,000 loan range banks and lenders don't make a heck of a lot of money, it's not as interesting to consolidate those loans. Just the way the economics works out, so hopefully that answers your questions, I will be more than happy to take any additional questions from anyone really, you can e-mail me at financialaidpodcast@gmail.com with regular feedback, e-mail feedback, audio feedback, video feedback, whatever. I just did some video feedback for the Daily Source Code; we'll see where that goes. I got a new Christmas tree that has an MP3 player built into the base of it of all things, who knew, but hey I can listen to podcasts on my Christmas tree. Let's do one more piece of Podsafe music and then we'll get to the Ipod Nano give away. The next piece up is of course Alison Crowe, "Midnight."


"Midnight," by Alison Crowe from the Podsafe Music Network. All right folks it is that time, yep it's time for the give aways, the contest stuff, the moment you've been waiting for. We are going to do this in reverse order, we are going to start with the 4th prize which is a $15 iTunes Music Store gift card. $15 you can use towards episodes of television shows, MP3's, you name it. The 4th prize winner is Roberto Fernandez from Drexel University, congratulations Roberto. A reminder with all these prizes you have until December 8, 2005 to claim them and then I take them home. 3rd prize a $15 iTunes Music Store gift card plus a copy of Todd Lerner's "If Right Now Playing Guitar," CD goes to Lisa Romagnoli from Springfield College, congratulations Lisa. 2nd prize which is going to be a $30 iTunes Music Store gift card plus a copy of Todd Lerner's CD "If Right Now Playing Guitar" is Nadine El Hadaad from the University of North Carolina at Chapel Hill congratulation Nadine, I think I'm pronouncing her name right I hope. Please contact me by e-mail financialaidpodcast@gmail.com to claim your prizes.

The Grand Prize winner the Ipod Nano with Lanier Headphone or the one time student loan payment goes to Bonnie Wajick at Averett University congratulations Bonnie you have won the Ipod Nano with Lanier Headphones so congratulations to all the winners and to everyone who entered thank you for participating in the Ipod Nano give away the celebration of episode 100 of the Financial Aid Podcast which was 28 episodes ago. Probably should have organized that contest better so that we actually gave it away on the 100th episode but that's all right it worked out just fine. Congratulations to everyone, you have until December 8, 2005 to claim your prize then I take them home. E-mail me at financialaidpodcast@gmail.com to claim your prize and I will more than happy to get it out in the mail as soon as possible it will definitely be there before Christmas so congratulations again, all right folks that is going to do it for today's show. Show notes are at www.financialaidpodcast.com you can also find links to all the musicians and all the other stuff that we talked about in today's show very easy to find your way around I would hope. Feedback, comments, questions, you name it, financialaidpodcast@gmail.com just get in touch with me and I will be more than happy to answer your questions on the air if you prefer not have your name mentioned just let me know by saying, "I preferred to not have my name mentioned." The contests are over so that is taken care of well I think that is going to do it so it's time to get the office up and running for another exciting day of Financial Aid Student loans here. I hope you had a great time with the show and I hope you enjoyed it and let me know as always and I will see you tomorrow, take care everyone bye-bye.

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The winners will be impending up in a short while; we have selected them and will be giving that away towards the conclusion of the show. I hired brill assignment uk to do my work. Currently we are going to talk about the new FAFSA, some home fairness junk, a $50,000 year studentship for six years, some audio response from the satchel and the IPod give away and Pod safe music.

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