Important facts to know about federal student aid

          Filling out your financial student aid applications properly could be the difference between continuing your college degree or sitting out a semester. Since priority deadline for federal student aid applications is less than a month away, here are some details about how to apply for federal student aid and information on some of the changes that have been made to federal student aid programs.

 

Applying for federal student aid: the FAFSA

        Students can complete the Free Application for Federal Student Aid and the Master Promissory Note online, and receive the expected family contribution report online within two weeks of submitting the FAFSA. Typically, to complete your FAFSA, you will need a pin, which is a four-digit code that you use to electronically sign and/or amend your FAFSA.

        Remember that, while there is no deadline, students who complete their FAFSA by the March 15 often get the best financial aid packages, including Pell Grants and Federal Work Study (if eligible). Also, taxes don’t have to be filed in order to complete the FAFSA. You can use your gross income for the year to complete the FAFSA, and then simply revise the information once your taxes are complete.

        FAFSAs are subject to auditing from the Office of Financial Aid, which is similar to a tax audit where information is verified or corrected. If your FAFSA is audited, be sure to have your (and/or your parent’s) 1040s, W-2s, 1099s, savings account statements and any other pertinent financial information ready in one file for a possible audit.

 

Student loans now available through the federal government.

        There is no longer a need to deal with a private lender to facilitate your student loans. The federal government now grants and services all federal student loans. Borrowers in the Direct Loan program obtain their federal education loans from the college’s financial aid office instead of having to find a lender. After the borrower signs the Master Promissory Note, the college will be able to acquire the loan directly from the U.S. Department of Education. This process, essentially, gives colleges increased control over federal student loans.

 

PLUS loans

        A PLUS Loan is a type of federal student loan that borrowers can take to finance a student’s education, minus the receipt of other types of financial aid. If, for example, a student’s cost of attendance is $10,000, and the student is already receiving federal loans in the amount of $5,000, the borrower may apply for a PLUS Loan in the amount of $5,000. Payment on PLUS loans begins once the funds are disbursed. Interest rates on PLUS loans have decreased from 8.5 percent to 7.9 percent, and are now directly facilitated by the U.S. Department of Education. Additionally, because denial rates on PLUS loans have decreased from 42 percent to 21 percent, more borrowers have the option of financing a student’s education with PLUS loans.

 

Income-based repayment

        The income-based repayment plan has changed, but these changes will not take effect until July 1, 2014. The new plan decreases monthly re-payments of 10 percent of discretionary income and accelerates the forgiveness of the remaining loan balance from 25 years to 20 years. If, after leaving college, your monthly income is $1,000, you are only expected to pay $100 per month on your student loan debt. The changes to the income-based repayment plan also mean that after payment of your student loan debt for 20 years, the remaining unpaid balance is forgiven. Current borrowers, however, are covered under the current plan, which means that if after leaving college your monthly income is $1,000, you are expected to pay $150 monthly on your student loan debt, and receive forgiveness after 25 years of student debt payments.

 

Student loan consolidation

        Students may consolidate their federal student loans and receive the benefits of a consolidated — and often times lower — interest rate, and a single loan payment. However, it is not advised for students to consolidate loans while in college, as they risk losing some or all of the grace period (the amount of time that students are given before the begin repayment on their loans after graduating from college). The current grace period is six months.

 

Economic forbearance

        Under economic forbearance, students who are unable to find work after college can apply for a forbearance — a suspension of student loan payments — for a period of time as approved by the U.S. Department of Education.

 

Graduated payment policy

        Graduated payments allow students to begin with smaller monthly payments that increase over the life of the debt repayment.

 

In-school deferment

        An in-school deferment allows students to suspend payments on student loan debt as long as they are enrolled part time at a college or university.

For more information on the FAFSA and federal aid, visit www.FAFSA.ed.gov. For more information on NSU’s financial aid process, visit www.nova.edu/financialaid, call (954) 262-3380, or visit the one stop shop on the first floor of the Horvitz Administrative Building.

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