I have a sophomore in college right now and will have another child
starting her freshman year in college next year. We were approved for
a Stafford Loan and a Parent PLUS loan for our son this year. We will
need to have student loans to finance the entire amount of both kids'
education. Will we be able to continue to be approved for enough loans
to get them both through college? We make too much money to qualify
for any free aid, but don't have anything saved for their education
and can't pay much monthly until I am able to get a full time job.
The unsubsidized Stafford loan and the Parent PLUS loan do not depend
on financial need. The Stafford loan has annual loan limits that
increase as the student progresses from one year in school to the
next. The annual limit on the Parent PLUS loan is up to the full cost
of attendance minus other aid received. The Stafford loan does not
depend on the borrower's credit history. The PLUS loan requires the
borrower to not have an adverse credit history, which is defined as
having had a foreclosure, repossession, tax lien, wage garnishment,
default determination or bankruptcy discharge in the last five years
or a current delinquency of 90 or more days. Assuming that you continue
to maintain a good credit history, you should continue to be approved
for enough loans to pay for your children's college education.
You should also continue to submit the Free Application for Federal Student
Aid (FAFSA). When the federal government calculates the expected
family contribution (EFC), it divides the parent contribution by the number
of children in college. So with two children in college next year,
your EFC should decrease significantly. This might make you eligible
for some need-based financial aid, such as the subsidized Stafford
loan or the Perkins loan or maybe even some grants. (The FAFSA is a
prerequisite for the Stafford loan, which has a lower interest rate
than the PLUS loan. So it is worthwhile to submit the FAFSA even if
you do not expect to qualify for need-based aid.)
Don't overlook the Hope Scholarship tax credit. When you pay for
college costs using education loans, it still qualifies for the tax
credit. Congress increased the maximum credit per child to $2,500 and
expanded eligibility from two years to four for 2009 and 2010. They
also increased the income phaseouts to $160,000 (fully phased out at
$180,000) for taxpayers who are married filing jointly, and half that
for single filers.
I am current enrolled in college. I was told that I am not qualified
for financial aid because I have an outstanding student loan that went
into default. How do I go about getting some money to pay for school
because the money I got from working isn't enough to provide for
school and my family.
— Derrick C.
Borrowers who have defaulted on a federal student loan are ineligible
for federal student aid. However, defaulted borrowers may regain
eligibility by making arrangements with the lender to repay the debt
and by making at least six consecutive monthly payments in compliance
with this agreement. If the borrower is subject to a court judgment
concerning the failure to repay the debt, the monthly payments must be
voluntary. Payments obtained by an offset of income tax refunds or
wage garnishment do not count as voluntary.
This is a one-time opportunity to regain opportunity for federal
student aid. Borrowers who default a second time are not eligible for
federal student aid unless they repay the debt in full.
In addition to regaining eligibility for federal student aid, a
defaulted borrower can rehabilitate the loan by making at least 9 of
10 consecutive voluntary monthly payments within 20 days of the due
date. Loan rehabilitation removes the default from the borrower's
credit record. It also ends wage garnishment and the offset of federal
income tax refunds.
If I have a student loan from my previous college will that hinder me getting another loan for a new school?
— Joey R.
Federal student loans are subject to annual and aggregate loan limits. If you
transfer mid-year from one college to another, your borrowing will be
limited to just the remaining eligibility.
Depending on the date of the transfer, a portion of your federal
student loan disbursements at the previous college may be returned to
the lender, in which case you'll be able to borrow the money that was
returned at your new college. If you transfer after completing less
than 60% of the semester it is likely that some of your student loan
funds will have been returned to the lender.
In general, financial aid does not transfer from one college to
another. You must reapply for financial aid at the new college. Your
expected family contribution might be the same, but the cost of
attendance will differ and the amount of student aid awarded by the
college from its own funds will differ. Many colleges have limited
student aid budgets for transfer students.