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Financial Aid

That Free Financial Aid Seminar May be Just a Worthless Sales Pitch

Mark Kantrowitz

November 18, 2011

Error: The speaker included SLS loans in a list of financial aid from the federal government. The Supplemental Loan for Students (SLS) loan program ended in 1994, when it was replaced by the unsubsidized Stafford loan. Error: To get a Pell Grant, you must have an adjusted gross income under $25,000. Almost a third (29.6%) of Pell Grant recipients in 2007-08, the most recent year for which data is available, had an adjusted gross income of $25,000 or more. The data analysis system for the 2007-08 National Postsecondary Student Aid Study (NPSAS) also demonstrates that 95.9% of Pell Grant recipients in 2007-08 had an adjusted gross income less than $50,000. Error: As long as you file the FAFSA you are guaranteed to get the subsidized Stafford loan. The speaker confused the subsidized Stafford loan with the unsubsidized Stafford loan. Eligibility for the subsidized Stafford loan is based on financial need and is not guaranteed. The unsubsidized Stafford loan, on the other hand, does not depend on financial need and is available even to students from wealthy families. Error: The subsidized Stafford loan limit is $5,500/year in junior and senior year all the way into grad school. The speaker gave the correct annual loan limit for college juniors and seniors, but not for graduate students. The subsidized Stafford loan limit is $8,500/year for graduate and professional students. However, the Budget Control Act of 2011 eliminated the interest subsidy on subsidized Stafford loans for graduate and professional students starting July 1, 2012. The graduate and professional students will be able to borrow the same amounts as before, but the subsidized Stafford loans will effectively be unsubsidized Stafford loans. Error: You must demonstrate to the college that you deserve the unsubsidized Stafford loan. Perhaps the speaker again confused subsidized and unsubsidized Stafford loans? While colleges technically have the authority to reduce loan limits on a case-by-case basis, sub-regulatory guidance issued by the US Department of Education limits this authority. Colleges may not limit unsubsidized Stafford loans just to the college's own charges or reduce unsubsidized Stafford loan borrowing by independent students. There is also no requirement to prove that one "deserves" the Stafford loan other than by filing the Free Application for Federal Student Aid (FAFSA).

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