Tag Archives: student loan deferments

Money for College Project Weekly Roundup: Scholarship of the Day

Yesterday I decided to finally roll out a new segment of the Money for College Project: The Scholarship of the Day!

One main focus of this blog is helping you find money for college, and traditionally one of the best sources of college money is scholarships. Scholarships are amazing, but their one big problem is that people don’t know about them. Getting the word out about a scholarship is the hardest task for a scholarship committee, and finding scholarships is the hardest task for college students.

This new segment is intended to bring these two groups together. To match prospective college students with real scholarships they can apply for. You may not qualify for every scholarship that you see posted here, but I promise you that there will be many that you can apply for.

If you are a scholarship committee and have a scholarship you would like to promote, please let me know, and I will be happy to get it posted for you!

Enjoy the selections for this week!

Money for College Project

[button link=”http://www.moneyforcollegeproject.com/2012/02/06/the-reason-pro-athletes-have-money-problems/” color=”red”] Pro Athlete Money Problems[/button]

[button link=”http://www.moneyforcollegeproject.com/2012/02/07/the-facebook-ipo-what-it-means-for-you/” color=”red”] Facebook IPO[/button]

[button link=”http://www.moneyforcollegeproject.com/2012/02/08/can-the-game-second-life-teach-our-children-personal-finance/” color=”red”] Second life and Personal Finance[/button]

[button link=”http://www.moneyforcollegeproject.com/2012/02/09/how-to-use-your-1098-t-to-claim-an-education-credit/” color=”red”] Use Your 1098-T[/button]

[button link=”http://www.moneyforcollegeproject.com/2012/02/09/scholarship-of-the-day-dont-be-trashy-competition/” color=”red”] Scholarship of the Day[/button]

Yakezie Friends

[button link=”http://sustainablelifeblog.com/2012/02/08/the-meat-challenge/” color=”green”] Sustainable Life – The Meat Challenge[/button]

[button link=”http://www.stocktrendinvesting.com/blog/suggested-reading-investing-and-personal-finance” color=”green”] Stock Trend Investing – Suggested Reading[/button]

[button link=”http://www.pennypinchingprofessional.com/2012/02/can-small-business-owners-ignore.html” color=”green”] Penny Pinching Pro – Business Etiquette[/button]

[button link=”http://www.fiscalphoenix.com/the-ins-and-outs-of-mutual-funds/” color=”green”]Fiscal Phoenix – Mutual Funds[/button]

[button link=”http://www.mightybargainhunter.com/2012/02/10/mortgage-interest-tax-deduction-low-rates/” color=”green”] Mighty Bargain Hunter – Tax Deductions[/button]

[button link=”http://moneycactus.com/what-motivates-you/” color=”green”] Money Cactus – Motivation[/button]

[button link=”http://www.roshawnwatson.com/2012/02/4-ways-to-reshape-your-views-regarding.html” color=”green”] Roshawn Watson – Views on Money[/button]

[button link=”http://brokeprofessionals.com/2012/02/08/understanding-company-stock-awards/” color=”green”] Broke Professionals – Company Stock Awards[/button]

[button link=”http://erinshanendoah.com/dogatemywallet/?p=399″ color=”green”] Dog Ate my Wallet – Coffee Talk[/button]

[button link=”http://www.mypersonalfinancejourney.com/2012/01/spread-betting-how-it-works-and-risks.html” color=”green”] My PF Journey – Spread Betting[/button]

Money For College Project Weekly Roundup: Productivity Tools Edition

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Last week on Money for College Project I wrote a weekly roundup post about how much I have going on in my life right now. Over the weekend I realized that I needed to streamline some things or my life and productivity would spiral out of control. One of my biggest problems is being able to focus when I write. I typically have 1 hour in the morning where I complete my focused writing for blog articles and what not. That works for me.

However, now that I will have blog posts on top of papers for my grad school classes, I know I will need to write much more than 1 hour ever morning. To combat my ADD and actually try to get something done, I wanted to find a full screen text editor, that would allow me to write and focus without any interruptions.

Scrivener is what I ended up with. I did the free trial to see how I like it, but so far it is incredible. It is easy to use, cool to work with, and even aesthetically pleasing to look at. It does cost $45 though, which is why I am seriously evaluating it to see if it will be worth it through the free trial. I’ll keep you posted…

Enjoy the selections for this week!

Money for College Project

[button link=”http://www.moneyforcollegeproject.com/2012/01/23/2011-forbes-15-richest-fictional-characters/” color=”red”] Forbes 15 Richest Fictional Characters [/button]

[button link=”http://www.moneyforcollegeproject.com/2012/01/24/how-to-sell-old-coins-for-cash-i-made-102/” color=”red”] How to Sell Old Coins for Cash – I Made $102[/button]

[button link=”http://www.moneyforcollegeproject.com/2012/01/25/surviving-the-college-dining-hall-infographic/” color=”red”] Surviving the College Dining Hall – Infographic[/button]

[button link=”http://www.moneyforcollegeproject.com/2012/01/26/college-students-face-stiff-competition-for-financial-aid/” color=”red”] Stiff Competition for Financial Aid[/button]

Awesome Articles You Need to Read

[button link=”http://gearpatrol.com/blog/2012/01/26/stay-camp-wandewaga-elkhorn-wisconsin/”] Camp Wandawega – Escape![/button] If you are looking for a quiet retreat to the woods and would love to escape the hustle and bustle of your daily routine, or even escape the 21st century, then travel back in time to Camp Wandawega. At $200 a night it is pricey, but how many other times in your life can you stay in a 3 story treehouse?

[button link=”http://www.budgetinginthefunstuff.com/husband-working-home/”] BiFS – Husband Working from Home[/button] Crystal from Budgeting in the Fun Stuff recently announced that her husband has decided to quit his job and work full-time with her advertising business. Her client list and advertisers have expanded so much she cannot keep it a one woman show any more. Hats off to her. I work with Crystl, and I have been more than pleased with the results. If this new employee addition truly means more advertisers for all of her clients, then this is indeed an exciting move!

[button link=”http://thecollegeinvestor.com/2246/i-launched-my-free-ebook/”] Student Loan Debt – Ebook[/button] The College Investor launched a new ebook this week called Student Loan Debt. It’s a quick read, and it walks you through your options regarding student loan debt and how to pay it off. If you are struggling with student loan debt, then I would highly recommend this free resource!

Yakezie Friends

[button link=”http://sustainablelifeblog.com/2012/01/25/will-your-csa-save-money/” color=”green”] Sustainable Life – CSA Save Money?[/button]

[button link=”http://blog.themillionairenurse.com/2012/01/25/you-wanna-be-work-happy-or-work-sad/” color=”green”] The Millionaire Nurse – Workplace Stress[/button]

[button link=”http://dailymoneyshot.net/guest-post-6-tips-to-keep-your-dream-job-from-becoming-your-nightmare/” color=”green”] Daily Money Shot – Dream Job Security[/button]

[button link=”http://www.moneybeagle.com/2012/01/i-should-have-known-we-wouldnt-get-any-snow.html” color=”green”]Money Beagle – Less Snow[/button]

[button link=”http://knsfinancial.com/cheap-textbook-rental-reviews-ecampus/” color=”green”] KNS Financial – Textbook Rentals[/button]

[button link=”http://www.bucksomeboomer.com/recession-romance-frugal-recipe-to-show-your-love/” color=”green”] Bucksome Boomer – Recession Romance[/button]

[button link=”http://www.investinthemarkets.com/risk-management/steps-to-diversify-a-small-stock-portfolio/” color=”green”] Invest in the Markets – Small Portfolio[/button]

[button link=”http://erinshanendoah.com/dogatemywallet/?p=356″ color=”green”] Dog Ate my Wallet – Brother’s New Venture[/button]

Federal Student Aid Unlocked: Pell Grant

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This post was originally published back in 2009 on the first variation of the Money for College Project. I would selfishly like to think that my writing has improved from these humble beginnings, but it’s probably not true. Regardless of the writing, the information is still gold. The Pell grant is the premiere need based grant funded by our tax dollars and administered by the Department of Education. Complete your FAFSA to qualify for this award and all other federal grants and Stafford student loans.

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Every year Federal Student Aid (FSA) provides more than $83 billion in financial aid across their various programs. This money assists about 14 million students attending college. With those staggering numbers I can promise you that if you complete the proper steps I outline here on this blog, you can get a piece of that money!

Over the next few days I would like to explore the different types of Federal Student Aid. With 10 different programs that offer assistance to students, it is easy to get lost in a cloud of numbers and unfamiliar terms. Hopefully, after we have gone through this journey of exploring every program in detail, you will have a better understanding of how you fit into the big picture, and most importantly, where you can go for your money!

Before we get into the individual programs, it is important to note HOW one would go about applying for this aid. GOOD NEWS! It’s simple: The Free Application for Federal Student Aid (FAFSA). With one application you will be evaluated for all 10 FSA programs. Simply go to www.fafsa.gov and follow the steps to submit your application (Intimidated by the FAFSA?? More to come on that later so stay tuned!).

Now that you know how to apply for all these programs, let’s look a little closer at each one.

First: Federal Pell Grant

This is the most important Federal grant as it is the largest grant. Since it is a grant, it does not have to be repaid. The Pell Grant is available exclusively to undergraduate students and your eligibility is determined by your financial need. Your financial need is used to determine how much of the Pell grant you will receive, if any.

For the 2009-2010 award year (which runs July 1st 2009- June 30th 2010), the maximum amount you can receive in Pell is $5350 (**For 20120-2013 the maximum Pell award is stuck at $5500). Depending on which college you attend this could be enough to pay your entire tuition (eg. the school where I (formerly) worked is only $1746 for a full time student, per semester!) Or if it will not pay your entire tuition, the Pell grant will almost certainly make a significant dent in your college tuition bill.

Also, for part-time students, the Pell grant can be applied to your tuition through a scaling award system. Here is an example: If you receive the maximum Pell award of $5350, that breaks down to $2675 in Fall and $2675 in Spring (if you come full time). If you come half time, the Pell amount would be cut in half or $1338 each semester. Now keep in mind, your tuition should also be less, so Pell should cover roughly the same percentage of your tuition bill whether you take full or part-time classes.

Coming up next: Federal Supplemental Educational Opportunity grant (FSEOG)

The College Bucket List Top 10

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What are the 10 quintessential things every college student should experience?

What makes a college experience more than just a series of grades and a piece of paper?

What are you most looking forward to during your college years, or what do you wish you could go back and do that you never got to?

This will all be answered here today, as Money for College Project is proud to present:

The College Bucket List Top 10

No. 1 – Take a Cross Country Road Trip

Nothing screams the freedom of college more than a cross country road trip with close friends. This can be done during spring break, over the summer, or even on a long weekend. More points are obviously due if you can pull this off spontaneously. No planning, no destination, just get in the car and drive. Oh, and don’t forget to bring the TP.

No. 2 – Study Abroad

One of the joys of being in college is the opportunity to travel with no strings attached. Most likely the closest relationship you are leaving behind would be a girlfriend/boyfriend. No spouse, no kids, no job, no major responsibilities. At what other point in your future life will you be able to transplant yourself into a foreign country for a few months? I submit…most likely never! So take advantage of a study abroad program while you can. This can also greatly impact your ability to get a job and give you a worldview that looks beyond the coasts of your home country.

No. 3 – Join an Intramural Team

The vast majority of college students do not have college athletic scholarships. This does not mean however, that you lose your athletic ability. In fact, many top tier high school athletes simply decide not to pursue college athletics and focus on their academics. Smart move. Intramural sports gives you an outlet for your athletic prowess without the pressure and time commitment of practice, coaches, and a grueling game schedule. Intramurals are also excellent times to spend with close friends, and create some great memories for the years to come. Many colleges have everything from flag football, soccer, basketball, hockey (field or ice), and ultimate frisbee.

No. 4 – Earn a B, or even a C

So this might sound like strange advice. After all, you go to college to get the best grades you can, and to be successful right? I agree, but I also strongly believe there are more important things in your college life than grades. If we were all good college students with a 4.0 GPA, the world would be a sad place. A college degree is as much about the experience, and learning to become an adult as it is about earning your degree. If you have the option of studying a few more hours for an exam to make an A, or volunteering to help build the Habitat for Humanity House your college sponsors every year, I would pick the Habitat house ever year. When you look back, the experiences you have in college will be what stick with you the most.

With that said, you need to shoot to keep a B average. Some employers still look at those things, and virtually every Grad School sets a 3.0 GPA as it’s minimum entrance requirements.

No. 5 – Go Fanatical for a Sports Game

Even if sports are not really your thing, being a fanatical fan at your college’s biggest sporting event can be all kinds of fun. You could paint up for your home football game against the in-state rivals, you could camp out all night to get tickets to the conference championship basketball game, you could bring a megaphone to the big soccer game, you and all of your friends could make signs for the women’s volleyball team at their big game, or you could even work your way into the President’s box at a home football game. I highly recommend anything short of streaking…..definitely not recommended.

No. 6 – Cultivate a Caffeine Addiction

This can be incredibly useful while highly enjoyable. Late nights in the library can be dreary and dull but with a fresh dose of caffeine in your system your night can be instantly turned into a frenzied race to the finish. Caffeine will always be the one friend you can count on when you need it the most, especially for those 8am exams which leads us to…

No. 7 – Pull an All Nighter

This may be the standard by which all other college activities are measured. You are assured of at least one all night study session with a 8am exam the next morning. As referenced above, your only true friend may be caffeine, but with your newly cultivated caffeine addiction you should have no problem keeping your spirits up and your focus where it needs to be. Ace the exam, then enjoy the sweet crash of sleep for the rest of the day.

No. 8 – Start a Business with College Friends

Does The Social Network mean anything to anybody? You may never have another opportunity in your life where so many intelligent people are all gathered in one central location. Colleges are a cornucopia of brilliant ideas and young minds with the energy to bring these ideas to life. Starting a business with your college friends can be the most rewarding decision of your life. Even if your business does not take off and earn you millions, you still will have begun down the path of entrepreneurship, which hopefully will stay with you for the rest of your life.

No. 9 – Join a Protest, Rally, or Demonstration

Not everyone is political, and not all rallies are for a fanatical cause. College is a time to figure out what you believe, and learn how to make a difference. A protest, rally, demonstration or march is a great way to link yourself to a good cause and make a difference. Who knows, it might even lead to a new career prospect!

No. 10 – Graduate

I know, this might seem dumb, but the best goal you can set for yourself in college is to graduate. Your college experience might be amazing, but you really limit your options without your diploma. There certainly are exceptions who have done alright without a degree (Bill Gates, Mark Zuckerberg) but they are just that, exceptions. Your college legacy will be firmly sealed in the alumni status as you walk across the stage and receive your diploma.

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Understanding Your Financial Aid Package, plus a sweet video!

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There is a lot of information floating around the internet about how a school constructs your financial aid package. In fact, this might be one of the most misunderstood parts of the financial aid process and something we have talked a lot about here at Money for College Project. There seems to be a large disconnect between submitting a FAFSA and receiving your financial aid package back in the mail.

By working in a financial aid office for many years, I have become a little jaded to the fact that these letters are difficult to understand. However, every time I meet with a student who is lost about the entire process, it become clear to me all over again, that this is really confusing!

I am always trying to find better ways to explain this process to students and parents, and I ran across a video recently that I think does an excellent job of explaining how the process works. The video is created by Brown University, so there are a few Brown specific statements made, but overall 98% of the information presented will work at all colleges across the U.S. The information is so universal because virtually all colleges accept federal financial aid, and the U.S. Government regulates how their funds are awarded.

A few notes on the video:

Not all schools meet 100% of demonstrated need when creating their financial aid packages (most Ivy League and top tier schools do).
Often times loans are included in your financial aid package
If your parents are divorced or separated, you will use the parent income for the parent you live with (Brown’s non-custodial parent application is not required at most schools)
The FAFSA can be submitted on January 1st, in preparation for the upcoming Fall semester in August.

Do you have any questions about how a financial aid award package is created? Please discuss in the comments!

Money for College Project Roundup: Leaving for a Cruise Edition

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Well, starting tomorrow its anchors away for my wife and I. We are heading out on our first ever cruise! We’ll be heading for 7 days around the Western Caribbean, and stopping in 4 different countries and territories. This Fall has been so busy that I have barely had a moment to sit back and breathe, so this vacation is much needed.

Since neither one of us have ever been on a cruise, so any advice all of your pro cruisers have would be welcome.

I do have some posts planned for next week, and as I will be gone for Thanksgiving, I want to wish you all a Happy Thanksgiving as well!

As always, here are the best articles from the Money for College Project, around the web, and my fellow Yakezie friends. Enjoy!

Money for College Project

[button link=”http://www.moneyforcollegeproject.com/2011/11/14/ditch-your-college-meal-plan-to-save-money/” color=”red”] Ditch your College Meal Plan[/button] There are many different ways to get healthy meals as a college student. You can be much smarter than eating sodium laced Ramen noodles every night, and also avoid the high price of the college meal plans.

[button link=”http://www.moneyforcollegeproject.com/2011/11/15/the-student-debt-project-first-look/” color=”red”] Student Debt Project[/button] The Student Debt Project is a fascinating study into the nature of student debt in America. It looks behind the scenes and addresses the root of the problem, and provides some fascinating insights along the way.

Awesome Articles You Need to Read

[button link=”http://www.thehobbitblog.com/?p=3933″] The Hobbit Blog: 3D production Video[/button] Not sure if I have revealed this here at Money for COllege project or not, but I am a huge Lord of the Rings fan. So it goes without saying that I am pretty stoked about the upcoming Hobbit film. Here is the latest installment in their series of production videos, and this one focuses in on the 3D aspect of the film. Fascinating stuff!

[button link=”http://www.smartpassiveincome.com/how-to-be-everywhere/”] SPI: How to be Everywhere[/button] Pat Flynn talks about how bloggers can take their content off of the internet and off of their blogs, and reach an entirely new segment and audience.

[button link=”http://www.commonsensemarketing.net/amazon-affiliate-product-reviews/”] How to Write Killer Amazon Affiliate Reviews[/button] Sarah walks you through how to write killer amazon product reviews that will actually generate leads and produce sales for you. This can be a very profitable niche if you approach it correctly.

[button link=”http://artofmanliness.com/2011/11/16/from-idea-to-reality-a-one-year-case-study-on-launching-a-successful-business/”] How to Launch a Business: Case Study[/button] Art of Manliness follows the boys from Moonshine, as they dish about the last year as they have taken their business idea from just that, an idea, and turned it into a sustainable business. Very inspirational!

Yakezie Friends

[button link=”http://sustainablelifeblog.com/2011/11/16/how-i-saved-over-3500-on-my-honeymoon/” color=”green”] Sustainable Life – How to Save on a Honeymoon[/button]

[button link=”http://blog.themillionairenurse.com/2011/11/15/management-are-you-afraid-to-take-that-step/” color=”green”] The Millionaire Nurse – Afraid of Management?[/button]

[button link=”http://dailymoneyshot.net/sometimes-other-peoples-words-are-better-than-mine/” color=”green”] Daily Money Shot – Quotable Quote[/button]

[button link=”http://www.moneybeagle.com/2011/11/make-sure-your-groupon-doesnt-expire.html” color=”green”]Money Beagle – Expiring Groupons[/button]

[button link=”http://knsfinancial.com/macys-black-friday-2011-ad-deals/” color=”green”] KNS FInancial – Black Friday Ads[/button]

[button link=”http://www.bucksomeboomer.com/do-you-have-a-plan-for-charitable-giving/” color=”green”] Bucksome Boomer – Charitable Giving Plan[/button]

[button link=”http://www.investinthemarkets.com/learn-to-invest/how-to-choose-a-discount-broker/” color=”green”] Invest in the Markets – Discount Brokers[/button]

[button link=”http://erinshanendoah.com/dogatemywallet/?p=135″ color=”green”] Dog Ate my Wallet – Working from Home[/button]

[button link=”http://www.20sfinances.com/2011/11/15/does-cheap-perfume-exist/” color=”green”] 20’s Finance – Cheap Perfume[/button]

The Student Debt Project — First Look

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This is relatively breaking news, so I wanted to share it with you here first. The Project on Student Debt, which is funded by the Institute for College Access and Success, just released it’s annual report on Student Debt in 2010.

The Project on Student Debt helps American families understand how the student loan borrowing process works, and also what the implications are during repayment and even further down the road. This project is a non-profit, dedicated to spreading the word about the negative impact that student loan debt can have on your future. They are also committed to teaching students and parents about how to be responsible with their student loans and how to properly manage their money for college. Basically, these folks are after my own heart!

Please go ahead and check out the Student Debt report for 2010. There is some fascinating data collected in this report.

I have just recently received the report, and I want to put some research into the report before I respond here on Money for College Project. So in the mean time, please feel free to check it out, and let me know what questions you would like to see answered in my breakdown of the Student Debt in 2010 Report.

Can You Invest Student Loans? Follow Up

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invest student loan refund

Back on September 12th, I posted an article titled Can You Invest Student Loan Refunds?. This has become one of my most popular articles, and I wanted to write a follow-up post to give another perspective that arose out of your comments.

I did my best to make a convincing argument against taking your student loans and investing them. I still believe that this is simply a moral barrier that should not be crossed, but it is also a Federal law.

The main question that was raised in the comments, and which is quite valid, is how will the government ever track these student loan refunds if they are invested?

Government Black Hole?

Moral high ground aside, I think it is very interesting to see exactly how someone can take the student loan refund that they receive and invest it for a profit (or a potential loss). The fact that this is possible brings to light a large need in our government for more student loan oversight and tighter restrictions on who, and how much, students can borrow. If it were publicized that investing student loans is a great way to make money (which ok, I am doing here on this blog, but please forgive that for a moment) then I could forsee this practice becoming much more common.

Many commenters asked the question in the original article of how the government enforces their rule that student loan refund can only be used for “educational expenses”. From all of my work in higher education, the only answer I could come up with is that unfortunately, they do not. I see their reasoning behind this. Can you imagine how difficult it would be to track the refunds of millions of student loans across the country? You would need to hire hundreds of auditors to work full-time on enforcing this rule.

So as it stands, the government really does not have an adequate way of enforcing their rule that you cannot invest student loan refunds.

The Gray Area…

As with many federal regulations, there is a large gray area that is left open to interpretation. If you receive a student loan refund, and you want to do something proactive with that money, what are your options?

Strictly investing that money in the stock market is out. That would mean that you are using the funds to directly incur a profit (or a loss). What about investing the student loan refunds in a Roth IRA? This is still based on the whims of the stock market, but arguably more safe

What about stuffing your student loan refund into a high yield savings account? You are incurring no risk, and it is also gaining a small amount of income as time passes.

I would say that this decision is left up to you.

There are positives and negatives to every financial decision that you make regarding your student loan refunds. If you invest in a ROTH IRA, then you have to pay a penalty if you withdraw the funds to pay off your student loan before you reach retirement age.

If you invest your loan refund in the stock market, then you run the risk of losing all of that money, and having no funds to repay your student loan.

Parking your student loan refund in a high yield savings account seems like a very safe option, but the yield is so small these days, is it really worth it?

All questions that you will need to think through.

I know there are some strong arguments on both sides of this topic, and I know you all would love to share them. So please let me have it in the comments.

Would you invest your student loan refund? How would you do it?

President Obama’s Student Loan Debt Plan is Worthless

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Last week, President Obama unveiled a new plan to help combat the rapidly growing amounts of student loan debt in our country. He made his speech in front of a group of 4,000 protesters, mainly students, who had gathered as part of the “occupy” protests springing up around the country.

I won’t get into a political debate here at all, but I do want to point out what I believe are significant flaws in the President’s proposed student loan debt plan. If you are a student, or anyone else who is repaying student loans, then this is important information that could directly affect your financial future.

Student Loan Proposal #1

Last year Congress passed a law that would allow a borrower on the Income Based Repayment Plan to cap their maximum student loan payment at 10% of their discretionary income, rather than the 15% it had been previously. This law had been scheduled to take effect in 2014, and the President’s new proposal will simply speed that process up. My problem with this proposal is that it is not actually helping students pay off their loans any faster. Lowering the maximum required payment? All that does is drag out the length of repayment, and increase the amount of interest that is being paid on a student loan.

Student Loan Proposal #2

Under the Income Based Repayment Plan the Department of Education will allow the remaining debt to be forgiven after 20 years instead of 25 years. This sounds like a great benefit, but does anyone really want to pay on their student loan for 20 years? Or even 15 years? I think that we need to stop treating student loan debt like mortgages (although I will concede that some people have as much student loan debt as the average mortgage amount, or more…). We should look to cap the maximum repayment period at 10 years. This will force students to deal with their student loan problems quickly, rather than stringing it out until their kids are ready to go off to college, and they are still paying on their own student loans!

Student Loan Proposal #3

The President’s new student loan debt plan will also allow borrowers who have a student loan under the Federal Family Education Loan Program (which was disbanded in 2010) and a loan under the currently mandatory Federal Direct Loan program, to be able to consolidate these loans for up to one half percentage point less in interest rate.

I actually think that this is a good proposal because it will go a long ways towards preventing default and confusion among student borrowers. It is much more difficult to manage 2, 3, or 4 different student loan payments than it is to manage one payment. This proposal allows you to streamline your monthly payments, and even get a small reduction in your student loan interest rate.

However, the problem lies in the fact that when you consolidate these loans, you almost always lose your student loan deferment and forbearance privileges. That is how the policy currently works, and I have not read anywhere where this is proposed to change. This means that if you consolidate these loans into one Direct Loan, then you will not be eligible to apply for a medical deferment, or a forbearance due to a financial hardship or loss of employment.

Consolidating your loans may sound like the smart move to make, but be sure you read all of the red tape before signing the loan consolidation papers. You may be signing some very important rights away.

What Needs to Happen

I don’t have to answer for fixing the student loan program. Unfortunately, I don’t know the one trick that will help borrowers repay their loans easier (except for 0% interest on student loans of course).

What needs to happen is a more focused effort by the Federal Government and all colleges around the nation in helping students avoid taking out student loans in the first place! Students will always have a difficulty repaying a debt. We cannot change that, but what we can change is the amount of debt they have to repay in the first place.

We need to implement financial literacy programs that teach students basic money management principles and teach them how to budget their money while in college, and once they graduate. Colleges need to put more emphasis on the entrance loan counseling that is required before loan disbursement. This is the perfect time to explain to your student borrowers exactly what they can expect when they repay their loans. There is a large chunk of time between entrance counseling when a student is a freshman, and exit counseling when they have already racked up over $100,000 in student loans. We need to be proactive in this middle period. I would advocate annual required loan counseling sessions.

I would also strongly advocate for more conscious effort on promoting scholarships and grants. We need to help our students find the “free money” that is available to them, rather than relying so heavily on student loans. If we don’t, then we may begin to lose students in the future who simply decide not to take out so much in student loans.

Do you have any ideas on what can be done to combat the rising student loan debt problem?

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