Appealing a Financial Aid Offer – Can it be Done?

For most families, the act of opening the financial aid offer letter is a harrowing one. In just a few short sentences they will see how much a college or university is willing to offer in the way of student loans and scholarships. But what happens when that figure is too low?

Believe it or not, a student aid package that offered less than expected does not necessarily mean the end of the road. In some cases, a borrower can appeal to the school for more money. So how can this be done?

For starters, strike the word “negotiate” from your vocabulary. If you call a financial aid office and tell them you want to negotiate your student loan package, it will be a very short phone call.  You are not negotiating. You are “appealing.” There is a difference. The first step is to call the financial aid office and inquire about the process of submitting an appeal. Most likely, you will be asked to write a letter explaining, in detail, why you feel the aid package should be reconsidered.

Your appeal letter will explain, in brief, the grounds on which you are appealing the financial aid offer. You should decide early on whether this an appeal for need or for merit, or for both. If it is an appeal for need, you must demonstrate to the school that your federal aid package simply isn’t enough for you to afford attending the school. More than likely, a successful appeal based on need will cover a recent change in your financial situation, such as a series of expensive medical bills or a parent losing his or her job. You will need evidence to back up your claim, including copies of bills and pay stubs.

You may also appeal on the grounds of merit. An exceptional student may be eligible for various scholarships or grants. Look into the criteria for these awards. The best evidence to appeal on these grounds is a stronger scholarship offer from a similar school.

So, now that you know when you can appeal, another critical aspect is how. Writing your appeal letter can (in some cases) make or break your appeal. It’s important to remember that whoever reads your letter is a real person, and you should write for them, respectfully. So here are some tips to help you craft an excellent appeal letter.

Address it to the right person- Starting a letter “To whom it may concern” may be practical (as you might not always know who’s reading your letter), however, when possible, find a name to address it to. Typically, A financial aid officer will sign a student’s award letter, so this would be the name to use. If you can’t find a name here, check the school’s website. Adding a personal greeting might seem small, but personal touches go a long way.Get your facts straight- Before asking for more aid, it’s important to understand why you received the amount you did. Familiarize yourself with the school’s financial aid policy so that you do not seem uninformed, or worse, accusatory. For example, federal award standards are often different from an individual school’s. Before accusing the office of awarding an incorrect amount of money, make sure your calculations are based on the same information.Don’t be rude- This falls in line with what I said in tip one, but it’s important nonetheless. So let’s jump back to high school English class for a second and talk about tone. The tone in which you write your letter is very important, as it conveys the message you are trying to send. Do not write as if the school owes you something- because they don’t. Instead, respectfully ask that your case be reviewed based on reasons x,y, and z. Having someone else read over the letter before you send it can also really help if you are unsure of how it comes across to others. And remember, you are not negotiating- be polite!

If you keep these tips in mind while drafting your letter, then hopefully your appeal process will go off without a hitch. Just remember, a school cannot grant appeals in every case, and there is a limit to how much an institution can help. If after going through the process you still come up short, you should consider taking out a private student loan.

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When do I Receive my Stafford Loan?

I become very, very impatient when someone owes me money. I don’t even like the 10 seconds it takes for an ATM to spit out my cash- feels like an eternity. And I am extra diligent about much larger sums of money, like my student loans. If you’re like me, you might be on pins and needles wondering when you actually receive your Stafford loan.

Your lender (in the case of federal loans, this would be the Department of Education) will disburse your Stafford Loan funds directly to your college or university. The disbursement will occur in two installments – typically in the fall and winter/spring semesters. Your school will take the money and apply it toward what you owe in tuition and fees. If there is any money leftover, the excess funds will either be used to credit your account or paid to you directly. Keep in mind that loans are not free money. They collect interest and need to be repaid, so it’s usually best that if you don’t need them, don’t use them! Contact your financial aid office for information on your school’s specific policy.

If summer classes are a regular part of your course-load, chances are your school divided your Stafford funds up to cover you. If you are taking extra summer classes, your Stafford Loans may not cover them. Be sure to contact your financial aid office for more information.

If your school disburses your funds in October, but you need money for September (to pay for off-campus housing, for example), consider a private student loan to cover any expenses you may have in the meantime. You can even compare private loans to find the best deal for you!

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The Lowdown on Co-Signing

There are a lot of things to consider when you take out a private student loan. Of these, whether or not to apply with a co-signer tends to be a popular question among students and young professionals.

A co-signer is an individual that agrees to be your backup in the event that you cannot make payments on your loan or credit account. They are especially important if you do not have an established credit history or have negative credit report / low credit score. For most students, the first case is quite normal; you’re likely young, so credit products have not been available to you long enough to build up any substantial amount of credit history.

If you’re worried about being approved for a loan, who you choose as your co-signer can have a huge impact. That being said, there are a few solid rules to follow in selecting a co-signer that will greatly increase your chance of being approved with a low interest rate:

They need to have a long credit history. You want at least 5-8 years of positive, non-delinquent records.The higher their credit score, the better.The lower their debt to income ratio, the better.

#3 can actually consist of a lot of different things. For credit cards, they should carry less than 50% of their credit limit at any given time on each of their accounts. More than 50% indicates a lack of ability to repay their debt and weakens their ability to be a creditworthy co-signer. For long term debt, they need to be in a position where they aren’t stretching every dollar to pay their mortgage every month. That doesn’t mean rich, it just means living within their means.

Lastly, you should make sure that the person you select is trustworthy, and trusts you in return. This is a big decision and going into it without full confidence in the other is never a good idea.

If you use those criteria, you should be in a much better place to be approved for a loan. Also, keep in mind that a co-signer does not have to be an immediate family member; if you have a generous friend that is willing to help out, they could certainly be a co-signer on most types of loans.

Finding a co-signer may not always be easy because they might be worried about the “what ifs” such as “what if the holder can no longer pay due to injury or death?” While these situations are rare, they do happen. Currently, there is no private loan co-signer discharge in the event of the holder’s death or permanent disability. Federal loans offer a complete loan discharge for the co-signer, but private loans have yet to jump on board. So what can you do? Many lenders now offer co-signer releases. If the primary loan holder completes school and makes a certain amount of on-time payments, then they can apply to have their co-signer released from all responsibility.

Last but not least, some useful reading: Reluctant Cosigner? There’s a solution for that.

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Perkins Loans 411

Perkins loans are great options for those students who are eligible. They have low interest rates and can be used for both undergraduate and graduate studies. But before you accept the loan, make sure you get all of the facts.

So, here’s what you can expect from a Perkins Loan. These loans are federally funded and only available to the students in highest need. They differ from other federal government loans in that they are dispersed through different lenders. While other federal loans are dispersed through the government, Perkins Loans are the only ones to come directly from your college.

For each year of school, students are allowed to take out up to $4,000 ($8,000 for graduate students). Typically, the loans are dispersed to you in two installments, one for each semester. The funds either get sent directly to you via check or applied directly to your school account.

Learn more about Perkins loans borrowing limits, interest rates and repayment at the StudentLoanNetwork.com.

Unfortunately, not all students will qualify for Perkins loans. So for these students, here are some other options.

One such option is searching for scholarships. While the the payout for scholarships is usually minimal when compared to the time spent applying, any little bit can help. Plus, unlike loans, scholarships never need to be repaid. To make it easy to keep track of scholarships and their deadlines, try keeping a spreadsheet so that you know which you’ve applied to and when to apply next. StudentScholarshipSearch.com is a great resource and makes it easy to help you find relevant scholarships; plus, there are new ones posted daily, because let’s face it, you’re busy enough being students.

If scholarships don’t pan out, then consider getting private student loans. While we typically tell students to exhaust all of their federal loan options first, getting a private loan can be a great option to cover the remainder of your expenses. Just like any other big financial decisions, it’s best to shop around before making your final choice, so make sure to compare your loan options as this can be incredibly beneficial.

So if your Perkins loans did not cover enough of your school expenses, then no worries, these other options can really help bridge the gap in your financial aid.

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In the News: Pell Grant Funding

It may have come to your attention that because of the federal defecit, legislation was in the works to cut funding for federal Pell Grants. When the Department of Defense and Full-Year Continuing Appropriations Act was signed by President Obama, Pell Grants were among the programs to receive cuts, but luckily, not to the extent of other departments.

Overall, the Department of Education saw a cut of $1.3 billion, not substantial compared to the $38 billion in cuts the bill passed overall. Still, Pell Grant maximums remain at $5,550; however, students are now only able to receive one Pell Grant per calendar year (and possibly one for summer courses if eligible) whereas the old regulations allowed two grants per year. As always, the grants remain need-based and available to students who show the most need.

One stipulation of these changes is that students must be able to show academic progression. What does this mean? In order to be eligible for up to 2 Pell Grants in the calendar year, students must have accumulated at least 24 credit hours throughout the Fall 2010 and Spring 2011 semesters, or, if taking summer courses, by the end of the summer semester.

While so far, these have been the only cuts, the House of Representatives has drafted a bill that would cut Pell Grant funding drastically, should it be passed. It is currently being reviewed by the Senate, who will then make suggestions (hopefully decreasing Pell Grant cuts!)

After these recent changes, should you find yourself short on money, you can look into getting a private student loan. While it is best to exhaust all federal options first, getting a private loan can help with a lot of added expenses like books, housing, and fees.

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Poll Results: Student Loan Debt

Now that graduation season is upon us, we asked students to share with us the amount of debt they have accumulated (and will soon need to repay). Here are the results of our poll:

It’s awesome, albeit surprising, to see the number of students graduating debt free- conGRADulations! For everyone else, loan repayment might be a growing concern as that 6 month date draws nearer. If you’re concerned about making payments for whatever reason, there are some steps you can take to either lower or postpone your repayment.

First, I would suggest consolidating your loans. Consolidation offers a number of benefits including lower monthly payments; Plus, it makes keeping track of multiple loans easier. To defer federal loans, you will need to contact the Department of Education Direct Consolidation department. To consolidate private loans, grads will need to contact a consolidation lender. Interested? Read more about consolidation in our blog, From our Archives: Consolidation.

If you are unemployed or do not make enough money to repay loans, I suggest looking into an Unemployment Deferment or Economic Hardship Deferment. Deferments allow you to postpone payment for a certain amount of time, allowing grads a little extra time to get on their feet financially. While available for most federal loans, deferment options vary by private lender, so make sure to ask if this option is available for you!

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The financial aid offer poll results!

I just want to take a minute to thank all of the student’s who took our recent poll! Based on the results, it seems that only a mere 23% of you were satisfied with the amount of financial aid you received. This means a whopping 77% of students who replied did not get enough financial aid to pay for college! Considering the cost of college, this is no surprise, but now the question is what to do next.

In some special cases, students can appeal their financial aid award in order to prove that they need more money for school. Appeals will be most successful if students can show that their family contribution is less than indicated on the FAFSA due to outside issues such as medical bills or mortgage payments. By proving your family cannot afford to contribute substantially to your education, financial aid offices will be more lenient when distributing aid. Read more about how to do this in Appealing a Financial Aid Offer.

If you’re at the point where getting more money from your school is not an option, then your next step is to look into getting a private student loan. Private loans are available through a number of different lenders, so students are able to compare loans, and choose the right option for their situation. As with any loan, before signing, make sure you’re well aware of the conditions of the loan, especially repayment terms. Private loans are a great way to supplement federal aid, plus, they can often be consolidated once you graduate.

>>Apply for a Private Student Loan!

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Seniors, graduating with debt?

For seniors, graduation is quickly approaching! Unfortunately, so are those pesky loan repayments, yikes! Take a few seconds to vote on our most recent poll to let us (and all those soon-to-be-graduates out there) know how much debt you’ll be graduating with, and see where you fall on the scale!

If you’re graduating with loans, make sure to look into loan consolidation to help with repayment!  Still in school?  Find a better way to pay search for scholarships or compare student loans.

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Student Loan Options for Canadian Students (and CanHelp)

For foreign students, searching for loans to attend American universities can be difficult. In previous years, students could apply for the CanHelp student loan, but unfortunately, CanHelp loans were discontinued in 2008. Instead, through the Canadian Student Loan Program, students have the option to apply for a Smart Option loan through Sallie Mae.

The Canadian Student Loan Program allows students to take out a loan up to the cost of education. What’s great about this loan is that there are no early repayment penalties and students don’t need to start repayment until 6 months after they graduate. However, it’s important to note that any student who wishes to apply for a loan, must have a US cosigner.

Additionally, StudentScholarshipSearch has a number of scholarship listings for international students and would be a great place to search for a little extra money for school.

>>To apply for a Canadian Student Loan, visit InternationalStudentLoans.com.

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MORTGAGES; Defaulting on Second Homes

CORRECTION APPENDED

SOME affluent homeowners have been walking away from a second home or investment property that is worth less than what is owed on the mortgage, even though they can still afford to make the payments.

But dumping that beach condo or country cottage, or even a home bought for an adult child -- a practice known in the industry as a ''strategic default'' -- is not the same as discarding a poorly performing stock or bond. Among the lingering effects is wrecked credit that can prevent the homeowner from getting another loan of any kind for 7 to 10 years.

In July, a study by researchers from the European University Institute, Northwestern University and the University of Chicago concluded that the strategic default trend was ''large and rising'' among homeowners with an equity shortfall of $100,000. As of last March, it said, strategic defaults accounted for 35.6 percent of all foreclosures, compared with 23.6 percent a year earlier.

''I'm increasingly seeing people who are middle class or higher on the pay scale coming to the conclusion that 'I may be able to carry it, but should I?,' '' said David Shaev, a bankruptcy lawyer in New York who assists homeowners in distress.

''But the question is, can the bank come after you, and if so, what is your position? What is your liability?''

The answer depends largely on where the property is.

In ''recourse'' states, a lender can come after you, and usually other assets like a primary residence, for the full mortgage amount. In ''nonrecourse'' states, a lender agrees to accept whatever the property fetches at a short sale, foreclosure sale, or a deed-in-lieu, in which the property is taken back but not formally foreclosed on, and generally can't sue for the full loan amount. Connecticut and Arizona are among the nonrecourse states, while Florida, Colorado, Maine, New Jersey and Hawaii are recourse states.

There is a third category of state, called ''single-action'' or ''one-action,'' which allows the lender either to foreclose on the owner or file a civil lawsuit for the full loan amount. New York, California and Idaho are in that category.

Even in a nonrecourse state, however, those homeowners who opt for a strategic default on a previously refinanced property may not be protected from lenders, because the mortgage in such a case was not accorded for a first purchase, said Philip Faranda, a mortgage broker for J. Philip Real Estate, in Briarcliff Manor, N.Y.

When home-equity loans are involved, he added, it gets more complicated. In nonrecourse states like Florida and Connecticut, the lender cannot sue to collect any home-equity loan taken out on the property. But in nonrecourse states like Arizona and California, the lender can still sue for repayment of a second mortgage or line of credit.

Filing Chapter 13 bankruptcy protection, in which the homeowner arranges to pay off debts at lowered amounts over a maximum of five years, is typically the only way to avoid being on the hook for the second loan, mortgage experts say. Affluent homeowners who strategically default on a second home often don't qualify for Chapter 7 bankruptcy, which leads to liquidation but limits eligibility to those earning no more than state median income levels.

Though not illegal, strategic defaults are controversial, because they are viewed in some circles as unethical. The practice is common among property developers.

For homeowners under water, experts say, it can make economic sense. ''It's a business cash-flow decision,'' Mr. Faranda said, ''but the risk is that you're rolling dice with your future credit.''

A foreclosure from default stays on a homeowner's credit report for 7 years, while filing for bankruptcy stays on the report for 7 to 10 years, he said. A default can lower a credit score by 85 to 160 points, according to FICO, the company that created the scoring method.

CHART: INDEX FOR ADJUSTABLE RATE MORTGAGES: 1-year Treasury rate (Source: HSH Associates)

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Revival In Auto Lending Spurs Surge in Sales

Sales of new cars rose 11 percent, to around 11.4 million, in 2010 and are off to an even stronger start this year, according to Autodata, an industry research service. Sales of used cars have been similarly robust.

After radically scaling back auto lending during the financial crisis, banks and the lending arms of the automakers have started to issue loans more aggressively. Borrowers of all types are now finding it much easier to obtain a loan compared with a few months ago.

Even car buyers with tarnished credit histories are getting financing, in some cases without making a down payment. More than 859,000 new cars were sold to consumers with a so-called subprime credit rating in 2010, a nearly 60 percent increase from the year before, according to CNW Marketing Research.

The revival of auto lending is emblematic of an increased appetite for risk in the American economy. Consumers, showing renewed confidence in the recovery, are opening their wallets again after putting off car purchases during the recession.

Banks, flush with deposits to lend out, have eased their standards for extending credit. And investors, who fled from the bond market during the throes of the crisis, are starting to snap up higher-risk debt as they seek higher yields.

Wall Street’s loan packaging business has once again become a crucial engine for supplying money to auto and credit card lenders — and it is happening much faster than most economists had predicted.

Nobody is suggesting an imminent return to the heady, reckless days of the housing boom, and any one of a number of factors — like the recent surge in oil and commodities prices — could set the recovery off track. But the gradual expansion of credit in virtually every area except real estate is an important sign that the American economy is returning to health.

The rebound in auto lending has been especially pronounced. Michael E. Maroone, the president of AutoNation, which has a coast-to-coast network of more than 200 dealerships, called it the single biggest factor spurring the sharp increase in car sales last year.

“We had people coming to our showrooms that wanted to buy, but we couldn’t get them financed,” Mr. Maroone said in an interview. “We are now getting them the financing.”

Kevin Lauterbach, 29, an operations manager from Coral Springs, Fla., said he was surprised that so many lenders were willing to give him a loan when he went shopping for a new car in December. Although he had worked hard to repair a mildly damaged credit score, several major lenders rejected his application for a new credit card a few months earlier. But five banks offered to help him finance a car, all with no money down.

Mr. Lauterbach eventually locked in a 4.75 percent rate on a $19,000 loan from City County Credit Union of Fort Lauderdale to cover the cost of a 2008 Jeep Liberty. The 72-month loan requires payments of $150 every two weeks.

“My credit wasn’t great, and what I had been hearing is that credit is tight right now,” he said. “But it wasn’t really as difficult as I was anticipating.”

For the auto industry, the surge in sales represents a remarkable reversal. Only two years ago, Detroit’s Big Three automakers were in such dire condition that they took more than $87 billion in federal aid; Chrysler and General Motors required Chapter 11 bankruptcy protection to turn themselves around, with the government’s help.

The Obama administration provided other forms of assistance as well. It engineered the rescues of the CIT Group, a major lender to auto dealerships and parts suppliers, and also bailed out the troubled auto finance companies Chrysler Financial and GMAC, now known as Ally Financial.

Just as crucial, economists say, was the administration’s effort to lure private investors back into what was once a $100 billion-a-year bond market for auto finance companies, according to Deutsche Bank Securities. That market had all but dried up by the end of 2008.

The federal program provided more than $11.7 billion in below-market financing to dozens of private investors — a group that included hedge funds like FrontPoint Partners, money managers like BlackRock and Pimco, and even a retirement fund operated by the City of Bristol, Conn. — to encourage them to resume buying bonds backed by auto loans. Although the amount of government financing was relatively small, it accomplished its goal: to revive the market for packaged consumer loans and get credit flowing again, especially to weaker borrowers.

That market stood at $36 billion in 2008, during the throes of the crisis, but by 2010 it had bounced back to almost $58 billion. Bankers and analysts project that could rise by as much as 15 percent in 2011.

“To me, it feels like it’s returning to normal,” said Ted Yarbrough, Citigroup’s head of global securitized products.

Several factors contributed to the quick recovery of auto lending. Both banks and auto lenders can reap large profits on new loans, since interest rates near zero have kept the cost of their funds extremely low. Auto lending was also largely unaffected by the Dodd-Frank Act and other regulations, which reduced the fees that banks could charge for services like credit cards and overdraft protection.

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MORTGAGES; A Refinancing Alternative

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HOMEOWNERS looking to lower their monthly mortgage payments and also save some on interest may be able to do so without all the hefty fees and daunting credit requirements of refinancing.

A little-known strategy, called ''recasting,'' or ''re-amortization,'' is available through some mortgage lenders and servicers.

It involves paying off a lump sum of the principal amount and asking to have the monthly payments reset according to the original interest rate and loan terms. The lump sum reduces the principal, so your new monthly payments decrease slightly and you save on interest paid over the life of the loan.

Lenders typically charge an administrative fee of $150 or more for this service, though borrowers are not required to pay closing costs or submit to another credit check, because they are not asking for a new loan.

Recasting works well for those unable to qualify for refinancing amid the ever-toughening credit guidelines -- perhaps because they are self-employed or have less-than-stellar credit -- as well as for those with extra cash, like a year-end bonus.

''People don't really know about it,'' said Alan Rosenbaum, the founder and chief executive of the Guardhill Financial Corporation in New York, ''but it's become more common recently.''

Although the term ''recasting'' is often used by the mortgage industry to refer to interest-rate resets on adjustable-rate mortgages, here the interest rate and loan term stay the same.

Here's how it might work. Let's say that as of late December, you had just over $230,449 of principal left on a 30-year fixed-rate loan for $300,000 taken out at 7.93 percent in 1995. You have been paying just under $2,187 a month in principal and interest. But if you put in $20,000 toward that remaining principal and asked your lender to reamortize your payments over the remaining 15 years on the loan, your monthly payment would drop by $184, to around $2,002. Putting in $100,000 would save $945 a month and bring payments to $1,241.

Making extra payments toward the principal while not asking the bank to recast a loan keeps monthly payments the same and merely shortens the time it takes to pay off the loan.

There are a few caveats to recasting, however. The first is that you may need to have a large sum on hand. JPMorgan Chase, for example, charges a $150 fee and requires a minimum $5,000 payment toward the principal.

Another issue is having a lender, or loan servicer, that offers the service. And even those that do may impose restrictions. JPMorgan Chase and Bank of America exclude loans backed by the Federal Housing Administration and the Department of Veterans Affairs, and loans that were sold off and securitized may also need investor approval.

While few if any lenders advertise recasting, ''they are trying to become more customer-service-oriented, and they will do it on a case-by-case basis,'' Mr. Rosenbaum said. Homeowners should contact their lender's customer service department.

Lenders, which would probably rather earn thousands of dollars in closing fees from refinancing your loan, are not obliged to recast mortgages. And certain types of mortgages, for example interest-only and adjustable-rate loans, usually aren't eligible. The borrower will also need to have been current with all mortgage payments to qualify.

Edward Ades, the owner of Universal Mortgage in Brooklyn, says recasting can be especially useful to recent buyers, for whom it makes little financial sense to refinance but who expect to receive a tax refund or other substantial money after closing on their property, like proceeds from a relative's sale of property, stocks or other assets.

If your interest rate is 5 percent or lower, Mr. Ades added, it may not make sense to recast a loan, because the extra cash could be put into an investment with a higher return. ''At the end of the day,'' he said, ''I always tell people they have to do whatever makes them sleep better.''

CHART: INDEX FOR ADJUSTABLE RATE MORTGAGES: 1-year Treasury rate (Source: HSH Associates)

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MORTGAGES; New Lending Guidelines

CORRECTION APPENDED

NEW lending guidelines being rolled out by Fannie Mae will make securing a mortgage a lot easier for some borrowers but harder for others.

The rules, effective on Dec. 13, will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment, which is the threshold set by Fannie Mae, the government-owned company that sets lending standards and buys mortgages from lenders. (Freddie Mac is considering similar new guidelines, said Brad German, a spokesman.)

Previously, borrowers had to contribute a minimum 5 percent down payment from their own funds, but additional down payment money could be from a gift (though never from a home seller). The exception was for borrowers who put 20 percent down: all that money could come as a gift.

Because many lenders now require a down payment of 10 percent or more, the new rules mean that borrowers will still have to come up with extra funds -- either their own or gifts.

Still, ''this is definitely going to help upgrade buyers and young couples who for whatever reason don't have enough money and are getting some from their families,'' said Edward Ades, the owner of Universal Mortgage, a broker in Brooklyn.

The gift rules apply only to single-family principal residences, including town houses, co-ops and condominiums, and covers mortgage amounts in excess of 80 percent of the property's value. Also, there is a limit on the loan balance -- $729,000 in high-cost areas like New York City, and $417,000 in other areas.

Now, the not-so-good news.

Fannie Mae is getting tougher on debt-to-income ratios, or the amount of a borrower's gross monthly income that goes toward paying off all debts. The maximum ratio for those seeking a conventional mortgage will drop to 45 percent from 55 percent under the new guidelines.

The agency is also taking a harder look at payment histories on revolving debt. In the past, if a borrower missed a monthly payment, Fannie Mae ignored it, or required that lenders add a few percentage points to the total balance when calculating the debt-to-income ratio. Now, buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Mr. Ades said that new hurdle could sink many potential borrowers with student-loan debt that has been deferred.

Susan A. Kreyer, the president of the New York Association of Mortgage Brokers, added that buyers who had bought big-ticket items through financing with delayed payments would also be affected.

In addition, Fannie Mae is scrutinizing people who are at the end of their mortgages, with 10 or fewer payments left. It will now count those remaining balances in the debt-to-income ratios -- another departure. Mortgage experts say that older buyers near the end of their loans may now have a tougher time securing a loan for a second home.

But perhaps the toughest news from Fannie Mae concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a Fannie-backed loan for seven years, up from five. ''That's a long time in this economy,'' Ms. Kreyer said. That change was announced separately from the gift and debt rules, but will also take effect in Fannie Mae's automated underwriting systems next month.

Fannie Mae buys or guarantees around $3.2 trillion in residential loans, about 28 percent of the entire residential mortgage market in the United States. Lenders typically issue loans based on the agency's guidelines.

Buyers who do not meet the new Fannie Mae requirements may have to consider a nonconforming loan from the Federal Housing Administration. These loans, which do not follow Fannie Mae underwriting guidelines, require mortgage insurance premiums and, for those with low credit scores, higher interest rates and steeper down-payment requirements.

CHART: INDEX FOR ADJUSTABLE RATE MORTGAGES (SOURCE: HSH Associates)

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Where Are the Chinese Cars?

For at least half a decade, Chinese manufacturers including Brilliance, Geely, Great Wall and BYD Auto have displayed vehicles at the Detroit and Los Angeles auto shows, often with news releases announcing plans to sell cars in the near future. But the cars never materialized in the dealer showrooms — which also remain missing.

The BYD F3DM could become a notable exception. BYD says its plug-in-hybrid car from China is on track to reach the United States in spring 2012. Even if that proves true, it may register as barely a blip in an increasingly crowded market for alternative-power cars, industry analysts say.

Still, just getting the car to market would represent a leap forward for a Chinese manufacturer. In 2006, Brilliance said it would start selling its cars in the United States by 2009. To date, none have arrived. And Chery Automobile backed out of an agreement with Chrysler, which was supposed to provide a beachhead in the American market.

In 2006, the Nanjing Automobile Group, which bought the assets of the bankrupt MG Rover, said it wanted to be the first Chinese carmaker to build vehicles in the United States — including a new edition of the MG sports car — but its plans to open an Oklahoma factory never materialized.

Geely, which bought Volvo last year, showed small sedans at the 2006 and 2008 Detroit auto shows, but those cars have not been certified to meet American safety and emissions standards.

The false starts are a result of Chinese automakers’ letting their ambitions get ahead of the hard work of cracking the ultracompetitive American market, analysts say. Fueled by cheap financing and booming domestic demand, Chinese automakers have been growing rapidly at home. That has given them the confidence, though not necessarily the tools, to start selling to Americans.

“This isn’t computers or cellphones, where you just get into a big-box store,” said Bill Visnic, a senior analyst at Edmunds.com. “You need some dealerships, and those things are tremendous investments of time and resources. They thought it was going to be a lot easier than it was.”

It hasn’t helped, of course, that the last few years have been a terrible time to introduce cars. When the housing market plunged, followed by the general economy, consumers hunkered down. Vehicle sales in the United States fell about 40 percent from 2005-9, General Motors and Chrysler received government bailouts, hundreds of dealerships were shuttered and auto loans dried up. Even sales of hybrids suffered as oil prices receded.

While the economy has improved somewhat, the Chinese still face big challenges. Partly, they must determine which part of the market to attack. Compact cars may be one of the easier entry points for a new company, but competition is fierce and margins are slim.

The Chinese could try to leapfrog the market by selling more advanced hybrids and plug-ins. Indeed, Coda Automotive of Santa Monica, Calif., plans to import the bodies of a Chinese sedan, the Hafei Saibao, into which the company will install electric powertrains. But hybrids and electric vehicles account for just 2.2 percent of global sales, according to J. D. Power & Associates.

“Because consumers are wary about electric vehicles and their driving range and batteries, they are even more likely to go with more established companies like G.M. and Nissan,” said Mike Omotoso, who follows the sales of hybrids and electric vehicles for J. D. Power.

Mr. Omotoso said the Chinese could buy competitors and use their dealers to reach Americans. The most likely candidate for this strategy is Geely, which acquired Volvo last summer. Even then, Geely would have to spend millions of dollars on marketing — and hope American consumers are adventurous enough to try a new brand.

“The problem with the Chinese car companies,” Mr. Omotoso said, “is they are trying to run before they walk.”

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MORTGAGES; When Rate Locks Expire

CORRECTION APPENDED

AS mortgage rates have edged higher, many borrowers have been locking in loan rates for a home purchase or refinancing.

A lock-in agreement -- also called a rate lock or rate commitment -- protects against sudden spikes in interest rates by freezing the terms of a loan while it is being processed, which could ultimately save a borrower tens of thousands of dollars in interest costs over the life of the loan.

For every percentage point rise in rates, 300,000 to 400,000 would-be buyers historically are priced out of the market in a given year, according to the National Association of Realtors.

The average rate nationwide on a 30-year fixed-rate loan, the most common type of home mortgage, hit 4.86 percent at the end of 2010, up from 4.17 percent in early November, according to Freddie Mac. On Thursday, the rate was 4.77 percent.

While lenders and mortgage brokers have reported an increase in lock-ins as rates have risen in recent weeks, they say these guarantees have been complicated by changes in the Truth in Lending Act -- which add more protection for consumers but also lengthen the loan-application process.

In 2010, the average mortgage took 52.1 days to close, up from 46.9 in 2009, the year the new regulations took effect, according to J. D. Power and Associates, a marketing information company. (It was also the third consecutive annual rise, the company said.)

As a result, an increasing number of borrowers who elected to lock in their rates at the end of last year but did not close on time must now arrange extensions of their lock-in agreements.

Borrowers could end up paying at least several hundred dollars in extension fees to lenders. Most lenders charge from 0.10 to 0.25 of a percentage point of the loan amount for a 15-week extension; for a $400,000 loan, that can amount to $400 to $1,000.

Of course, a number of other factors can also impede a closing -- especially considering the industry's tighter lending requirements. These range from lower credit scores, to delays in securing appraisal, to incomplete submission of documents verifying income.

Most rate locks last from 30 to 60 days, though some may be as short as 7 days or as long as 120.

Irene Amato, the owner of the A.S.A.P. Mortgage Corporation in Cortlandt Manor, N.Y., recommended that borrowers take out a lock for 60 to 90 days, especially for a refinancing -- which, she said, could take a little longer than a home purchase because of a backlog of applications.

Another big hurdle for borrowers is navigating a crazy quilt of lock-in policies from different lenders. Some may require that a borrower have a specific property chosen, for instance, while others may not.

''EVERY lender is different,'' said Jim Guerriero, the branch owner of First Lenders Mortgage, a mortgage broker in Middletown, N.J.

Some lenders will offer 60-day lock-ins free of charge, while others may charge ''points'' -- or fractions thereof -- based on the size of the loan, which could amount to several thousand dollars. (A point is equal to 1 percent of the loan amount.)

If your credit score plummets after you've signed a rate lock, lenders in some cases might rescind the lock. And some rate locks have buried in their fine print a caveat that a rate can in fact rise a quarter of a percentage point or so and still be considered applicable to the borrower.

''All I can say,'' Ms. Amato said, ''is get everything in writing -- every last detail.''

The Federal Reserve recommends having a real estate lawyer review a rate-lock agreement before you sign one. It has a consumer guide available at its Web site.

CHART: INDEX FOR ADJUSTABLE RATE MORTGAGES: 1-year Treasury rate (Source: HSH Associates)

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Seniors, Stay on Top This Summer!

To all you high school seniors out there, I want to say a quick congrats for making it this far! But while you hopefully know your college plans for next year, there are still some last minute items you should stay on top of.

Your final HS transcripts should be available any day now, and it’s important to remember to have these sent to your college or university. The final transcripts can have a big impact on your college admission. Schools can not only revoke an acceptance if you show significantly poorer grades, but any merit aid you may have received could also be in jeopardy. While these are extreme cases, it’s still important to get your final transcripts in!

During the early summer months, you should find out when tuition and room and board payments are due. You can also look into different payment plans that the school may offer. If you’re worried about finding ways to pay for school, it’s not to late to look into private student loans. They do not take long to approve and you can apply anytime throughout your college career.

While you’ll probably be busy working or relaxing this summer, make sure to check your mail and email regularly. Over the summer months, schools will bombard you with important notifications and forms. You wouldn’t want to miss sending in your roommate selection form, because who knows who you would end up living with!?

While it’s important to have fun this summer, just remember to keep tabs on any upcoming deadlines and stay up to date on your college admissions news!

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Entry-Level Salaries and the Indebted

One of the articles in our special section on Money Through the Ages profiles Courtney McNair, a 25-year-old who is living at home in Los Angeles and going further into student-loan debt while training to become a teacher.

For the article, by Tess Vigeland of the public radio program Marketplace Money, we paired Ms. McNair up with Lauren Lyons Cole, a financial planner just a few years her elder, for advice. Ms. Cole made reference to a maxim that I’ve heard once or twice before, the notion that your student loan debt should be no higher than whatever your starting salary will be.

Ms. McNair may be able to keep her student loan balances in check. We’ve written in the past about others who did not. How have the rest of you fared when your debt was higher than your starting salary?

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How Colleges Use Test Scores in Admissions

Of all of the qualifying criteria a student is judged on, such as high school transcripts and extracurricular activities, standardized test scores seem to incite the most panic from college-bound students. Whether it is because it seems like such a definitive number to be judged on, or because you are not the “testing type”, it is important to know this isn’t the only factor colleges consider.  In this post we break down the relative importance of test scores in the college admissions process and offer a little more background about the tests to put you at ease!

Admissions officers look at a variety of information that make up a student’s profile before making a decision.  In general, this criteria falls into three categories: academic record, test scores, and extracurricular activities. Each of these three factors will hold around the same weight in the decision process, but will vary from school to school, and possibly even from applicant to applicant.

After looking at these three aspects of a student’s profile, admissions officers will narrow the pool further by considering more personal factors such as interviews, personal statements, admissions essays, letters of recommendation or a demonstrated interest in the school.

To help you get a better understanding of the importance test scores, here’s a breakdown of where it falls in a student’s profile before personal factors are put into consideration:

Standardized test scores have been part of the college admission process since the SAT test was first developed in 1926 as the Scholastic Aptitude Test by the College Board. Later, in 1959, the ACT test was developed as a competitor to the SAT and is now considered the second most important test in college admissions. These tests were developed as a numerical way to determine a student’s academic strengths and weaknesses.  While these scores still allow all students to be evaluated on a relatively similar scale, some argue it isn’t 100% accurate or fair, despite the fact that other factors are now considered in college admissions as well.

While most schools require SAT scores, more and more colleges are making these tests optional, or allowing ACT scores instead. Schools will look at any SAT II scores, though these are not a significant part of the overall score. If you take the SAT test more than once, schools today will generally look at your best score, so if you take it multiple times and your scores vary, you can most likely assume schools will judge you based on the highest.

Overall, schools are looking for students who display academic growth, performance, and desire to learn, along with a range of interests outside of the classroom, and are asking themselves “is this student the right fit?” If you’re lacking in one area such as test scores, admissions offices will use all of the other factors to make an informed decision. If you want to learn more about these tests themselves visit the College Testing pages on HowToGetIn.com.

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Chrysler Falls Behind as G.M. and Ford Recover

Sergio Marchionne, Chrysler’s chief executive, has been preaching patience and promising a successful turnaround from the company’s bankruptcy — just over a longer timeframe than G.M.’s.

But as investors clamor for a piece of the new G.M. and also bid up Ford’s stock price, Chrysler is increasingly being cast as the odd man out in Detroit’s automotive resurgence.

Chrysler’s sales in the United States are less than half what they were five years ago and its product lineup is still in the early stages of an overhaul.

On Wednesday, the company showed off its new Dodge Durango sport utility vehicle at the Los Angeles auto show, as well as the tiny Fiat 500 microcar that Chrysler dealers will begin soon begin selling in the United States.

But industry analysts said that the company remained in low gear and was quite a way from its own public stock offering.

“Chrysler is nowhere near ready,” said David Whiston, an equity analyst with the investment firm Morningstar. “It still needs way more car model product than it has.”

Mr. Marchionne has said that Chrysler was hurt more by the severe drop in overall auto sales in 2008 and 2009 than other automakers. While G.M. and Ford took a big hit in sales, too, Ford is back to prerecession levels, and G.M. has some of the industry’s fastest-growing brands.

“We got a bloody nose on the way into the recession and I’m not sure we got it all back on the way out,” he said last week in a conference call on third-quarter earnings. “So we need to fight harder.”

Mr. Marchionne is also the chief executive of Fiat, the Italian automaker that controls Chrysler by virtue of the 20 percent stake it received in the bailout deal negotiated last year with the United States government. With Fiat at the wheel, Chrysler is working to add new fuel-efficient cars to its lineup beginning next year. But in the interim, Chrysler’s sales are stagnant and the company continues to lose money.

Chrysler cut its losses in the third quarter to $84 million, but still owes $7.4 billion to the United States and Canadian governments for loans it received. The interest payments on the loans — $899 million so far this year — has prevented it from posting any profits.

The United States government owns 8 percent of Chrysler, whose largest stockholder is the United Automobile Workers retiree health care trust, which owns 55 percent.

Mr. Marchionne, who previously led Fiat to a comeback, has pledged a public stock offering for Chrysler in the second half of 2011, suggesting that the G.M. stock would help set the stage.

“The success our competitor in town is achieving with its own offering is an indication of the receptiveness of the capital markets,” he said.

But industry analysts said it was too soon to tell whether a Chrysler stock offering would generate anything close to the interest shown by investors in G.M.

Chrysler’s sales in the United States have rebounded some from last year’s dismal performance, when it fell below one million vehicles sold for the first time in decades. Its two biggest brands, Dodge and Jeep, have benefited from some new offerings, like the Jeep Grand Cherokee. But its Chrysler brand has plunged to 14th in sales among all the brands sold in the United States, behind traditionally smaller players like Volkswagen, Subaru and Mazda.

“They’re going to have to prove themselves in the marketplace, and that’s going to take a little bit of time,” said Jeff Schuster, head of auto forecasting at J. D. Power & Associates.

This year through October, Chrysler sales have risen 16 percent, to 910,000 vehicles. As recently as 2005, Chrysler sold 2.3 million vehicles in the United States. Over all, it currently ranks fifth among carmakers in the market, behind G.M., Ford, Toyota and Honda. This year, G.M. has sold 1.8 million vehicles in the United States.

Chrysler is banking on some refreshed versions of older models, like its Sebring sedan and the Town and Country minivan, to add some luster to its namesake brand. It also should get a big lift when it rolls out a new version of its Chrysler 300 full-size passenger car.

But the company continues to struggle to get traction in the revived market for pickup trucks. Sales of the Ram pickup have increased less than 2 percent this year, while pickup sales at Ford have risen 30 percent and at G.M. by 15 percent.

In the long term, industry analysts said, Chrysler’s prospects depend heavily on the new Fiat-based cars coming in the next couple of years. Fiat was able to acquire its 20 percent stake in Chrysler without expending any cash, partly because the federal government considered Fiat’s expertise in high-mileage cars a big plus for Chrysler.

Fiat also has options to increase its stake to 35 percent by fulfilling conditions laid out by the Obama administration.

Fiat hopes that Americans have forgotten the embarrassing quality problems that led to its derogatory nickname — “Fix It Again, Tony” — and to its abandonment of the United States market nearly three decades ago.

Now, Fiat is returning with 130 new dealerships connected to existing Chrysler stores. Chrysler on Wednesday announced that the dealers that would get Fiat franchises.

This year, G.M. and Ford have been piling up billions of dollars in profits, with Ford on pace to set a record, while Chrysler remains the only Detroit automaker still in the red.

“It’s a shame that Chrysler’s sort of been in the background,” said Rebecca Lindland, director of Automotive Research for North and South America at the forecasting firm IHS Global Insight. “But I also think their day will come.”

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Community College vs. Student Loan Debt

One of the articles in our special section on Money Through the Ages (produced in partnership with the public radio program Marketplace Money) is about an 18-year-old high school senior with a choice to make. Should he go into at least $6,500 in debt each year to attend a private college or university like Juniata or Clark, or is he better off working part time and attending community college for two years before transferring to one of those colleges?

Zac Bissonnette, the author of Debt-Free U and a senior in college himself, encourages students and families to take on as little debt as possible. He urged the subject of our profile, Mino Caulton of Shutesbury, Mass., to consider the University of Massachusetts, though Mr. Caulton was worried that he wouldn’t get enough individual attention there.

Mr. Caulton is leaning toward community college, and at the risk of leaning too heavily on what Mr. Bissonnette refers to as the “tyranny of the anecdote,” I’d be curious to hear from young adults who did (and did not) choose community college. How did it work out for you?

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MORTGAGES; Taking Custody of the Loan

DIVORCED homeowners wrangling with the task of removing a former spouse's name from the mortgage after buying out his or her equity stake in the marital house may think that refinancing is the only choice.

There is another, little-known option that can avoid refinancing and its costs, which generally run 3 to 6 percent of the outstanding loan principal, according to LendingTree. You simply ask your lender to remove the former spouse's name, leaving the loan note in your name only.

The problem is that not all lenders or mortgage servicers offer this option, known as release of liability. The lenders and servicers that do will most likely run a separate credit check on you -- requiring, for example, that you meet minimum credit scores (typically from Fannie Mae, the giant government buyer of loans), and ensuring that you are current with the monthly mortgage payments. They may also require that any investors in the loan, after it is sold off, agree to the deal.

And if you are ''under water,'' and owe more on the mortgage than the home is currently worth, this process is not an option.

''This is a common and often messy business,'' said Jack Guttentag, a mortgage expert and emeritus finance professor at the Wharton School of Business at the University of Pennsylvania. ''Lenders seldom have a reason to take a co-borrower's name off the note.''

But, he added, if a homeowner can prove that he or she can afford the payments and meet the required credit criteria -- typically those of the investor in the loan -- then release of liability may work.

Neil B. Garfinkel, a real estate and banking lawyer at Abrams Garfinkel Margolis Bergson in New York, says the lender ''will require the borrower to prove that the borrower is able to support the monthly payments without the co-borrower spouse,'' typically through monthly bank statements, annual tax returns and investment statements.

Having the name removed protects the credit of both parties, actually. If the former spouse failed to pay other debts, a lien could be placed on the home, and if you were delinquent on the mortgage payments, your former spouse's credit could be hurt.

Most divorce settlements stipulate one of two outcomes for marital property. Either the house must be sold, or the person wanting to keep the property must buy out the other's share, usually within months of the date of the settlement, and get the other party's name off the mortgage -- either through refinancing or a release of liability -- typically within a year.

Under the second option, the former spouse signs a quit-claim deed at the divorce settlement, relinquishing his or her claim to the property. But while that action takes the former spouse off the house's title and leaves it in one name only, it does nothing to remove his or her name from the actual mortgage.

Lenders or servicers typically charge $300 to $1,000 to execute a release of liability and require the property owner to pay an additional, nonrefundable application fee, typically $250 to $500. The process can take from 30 to 90 days, mortgage experts say.

One mortgage servicer, PHH Mortgage of Mount Laurel, N.J., requires that a homeowner with a loan sold to Fannie Mae have a minimum FICO credit score of 620 and a debt-to-income ratio of 50 percent or below (the ratio measures the amount of gross monthly income that goes to paying off all debts).

Still, a lender or servicer ''generally has no obligation to release one of the borrowers,'' Mr. Garfinkel said.

But Mr. Guttentag says homeowners may have one point of leverage. He suggested that qualified borrowers not accorded the release they seek tell their servicer or lender that unless a release of liability can be executed, the borrower will refinance the mortgage -- at another lender.

''In such cases,'' he said, ''the servicer might agree to do it.''

CHART: INDEX FOR ADJUSTABLE RATE MORTGAGES: 1-year Treasury rate (Source: HSH Associates)

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Out of College, Not on Her Own

COURTNEY McNAIR has been out of college for three years. She has a degree in political science and Spanish. She also has the same address she had in high school and the same bedroom in her parents’ Los Angeles home. Not to mention $40,000 in student loan debt, $2,000 in credit card bills and $10,000 left to pay on her red 2008 Chrysler PT Cruiser.

And this is what she worries about: winning the lottery.

“I’ll just spend it all and have no idea where it went,” said the 25-year-old graduate of Wellesley College.

That would be a luxurious problem. At the moment, she’s taking out more loans for graduate school in an effort to pursue a career as a special education teacher.

So someday she’ll have a steady income. Her biggest problem, however, is getting a better grip on where her money goes. She doesn’t know how to budget and hasn’t put much thought into her financial future. “I’ve always hated money; I’m scared of it,” said Ms. McNair.

After she graduated in 2008, Ms. McNair took the first job she was offered, as a match coordinator at the Los Angeles Boys and Girls Club. It paid $25 an hour, but she didn’t like working in an office. She switched to tutoring high school students, for $13 an hour, three hours a day. “That was enough to, I guess, swing it for a while. Make my car payments, pay my phone bill and all that other stuff.”

Now she’s tutoring and working part time for a foundation started by her parents, who are both lawyers. The foundation provides low-cost legal services for students with special needs and eventually hopes to open a charter school. Her father, Greg, pays her $13 an hour. Her parents don’t charge her rent, but she has to do the grocery shopping and make dinner for her family four nights a week. She’s also responsible for all expenses related to her terrier, Queen Anne.

The McNairs have three other daughters, including a 22-year-old who lives at home. But she didn’t want to end up like her sister, so she didn’t take out student loans.

Margaret McNair, Courtney’s mother, said her children had expectations different from hers when she finished school. “When I was in my 20s, I couldn’t wait to get out there,” she said. “Nobody could hold me back.”

A 2009 survey by CollegeGrad.com found that 80 percent of college graduates moved back in with their parents. And Courtney said that many of her friends were back in their old bedrooms, too. “So it doesn’t feel like, oh my gosh, I’m the only one still here. I figure if I’m 30 and living at home, there’s something wrong.”

Without better budgeting skills, however, she could easily end up having to stay in her childhood bedroom. Ms. McNair decided about a year ago that she wanted to teach special education students. For that, she needed to return to school. So she’s taking classes at California State University, Los Angeles.

According to PayScale.com, the starting salary for a special-education teacher is $29,000 to $40,000. After graduate school, Ms. McNair will owe roughly $50,000 in student loans, with payments of over $500 a month.

Lauren Lyons Cole, 29, is a certified financial planner in New York City. Her concern about Ms. McNair’s situation is the risk of taking on more loan debt than she will earn when she graduates. “I see that so many young people don’t understand that $40,000 a year, $50,000, even $60,000, it just really doesn’t go far,” she said.

But to Ms. McNair, that kind of salary seems comparable to winning the lottery. Asked about her dream financial situation, she replied, “I’d find a job that paid me goo-gobs of money to do what I love.” Her definition of “goo-gobs”?

Something around $25 an hour. Or $52,000 a year.

Ms. Cole said Ms. McNair was wise to pursue a graduate degree in a field where there were jobs. But she was underestimating the salary she should ultimately shoot for, given her education and skills. “Nobody’s telling her that she has to work on Wall Street or sell her soul,” Ms. Cole said. “But the reality is life is expensive.”

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Auto Loans Spur Rise in January’s Consumer Borrowing

The Federal Reserve said Monday that total borrowing rose at an annual rate of $5 billion in January, or 2.5 percent, the fourth consecutive gain. Strong car sales drove the increase. The category that includes auto loans rose 6.9 percent.

Credit card debt fell 6.4 percent in January, the 28th decline in 29 months. Americans increased their use of plastic in December for the first time since the financial crisis. But they cut back in January, even though a Social Security tax cut is giving most households an additional $1,000 to $2,000 this year.

Combined, total consumer credit equaled $2.41 trillion, a slight 0.7 percent above a three-year low hit in September. Consumer borrowing is 6.6 percent below the high reached in July 2008.

Analysts predict that consumers will borrow more in the months ahead, responding to the strengthening economy, a brighter outlook for jobs and the tax cut. The government reported Friday that the unemployment rate fell to 8.9 percent in February, the first time it had been below 9 percent in nearly two years.

Households began borrowing less and saving more as they struggled to cope with the deep recession that began in 2007. People trimmed their spending, which accounts for 70 percent of total economic activity, when the jobless rate began to rise.

The rise in auto loans was the sixth consecutive month of increases, reflecting a rebound in auto sales.

Even if economists’ forecasts are accurate and borrowing increases this year, analysts are not predicting that consumers will increase debt the way they did during the housing boom.

During that time, households felt wealthier because of soaring home values. But when home prices fell, they cut back on borrowing. The trend accelerated after job losses mounted and many people struggled to get their debt under control.

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3 Tips for Saving Big Money on Grad School

As a recent graduate, I say with utmost certainty that the major thing keeping me from doing masters degree right away is the crazy price tag. Well, that and I want to work a few years beforehand.

If there is one trend that has continued unabated by the economy, it is the growth of tuition costs in education. Schools have announced hikes of anywhere between 4-8% for their students to meet next year; this is a staggering jump on a product that many argue is already overpriced.

So, how can we beat the high cost of an advanced degree?

There are a number of different paths you can take toward trimming down your academic expenses, let’s go over them.

1) Consider a public (state) college instead of a private one.

I know the allure of a prestigious-sounding private school can be hard to overcome, but in reality, there are an absolute ton of public schools that offer an education just as robust, at a much lower cost. Although prices are set individually by each school, it isn’t a long shot to expect at least a 30% decrease in school costs, assuming in-state status.

In addition, online degree schools can sometimes be less expensive than private schools. Above all else, make sure the school you plan to attend has exactly the major and concentration you want for your advanced degree; don’t settle for a school that is cheap over a school that is targeted for your career.

2) Scholarships, scholarships, scholarships!

If you thought you were done with scholarship searching when you graduated with your bachelors, think again! Scholarships and grants remain the best money you can possibly get to pay for school, because, well…. you don’t have to pay it back.

There are a bunch of different websites you can use to find said scholarships, including ones like StudentScholarshipSearch.com and ScholarshipPoints.com. FastWeb.com and Scholarships.com are excellent excellent resources too. Bottom line, plan to set aside some time each week to look for free money.

3) Build your credit history beforehand.

Did you know that you can save thousands of dollars during your loan repayment period(s) if you can qualify for a low interest rate? If you are planning to undergo a graduate degree, financial planning is key to reducing your overall debt burden by the time you are finished.

If you’re interested in learning more about how to build your credit and what all the terms mean, check out Student Platinum’s credit education center.

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Selective Service and Financial Aid

Guys, I’m sure most of you are well aware of the option to register for Selective Service (yup, the draft) once you turn 18, but did you know that it could have severe financial repercussions if you don’t? Unfortunately, many students either do not sign up on purpose or simply forget to, however this can affect how much money you get for school!

There is a federal rule that states that “Any man required to register with Selective Service at any time must have done so to receive aid.” If you’re 25 or younger, make sure to register because after this age, it is impossible to register and you will be unable to receive federal aid from that point forward (or at least until the law changes).

Even if you’re not planning to go to school right now, still register! You may want to go back for your degree later in life.Don’t assume you’ve automatically registered when you register to vote, not all states do this!Double check that you are registered and get paper confirmation! Government offices do make mistakes, don’t allow yourself to fall through the cracks. You can go to the selective service website to find your name on the list of registered males, and while you’re there, print off a copy to have on hand.

You’ll have to prove that your lack of registration was not knowing and willful. This means providing as much information as possible as to why you did not register. For example, if you were living abroad at the time, this would be a legitimate reason why you may have forgotten to register. In order to go through with this process, you should contact your financial aid office.

If you are still unable to get federal aid for school, private student loans can be another good way pay for school.

For more information on these Selective Service rules, read this publication from the Department of Education.

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Most popular student loans for college

Not everyone is aware of all the loan options available to pay for college. Here are just a few to consider:

1) Federal Stafford Loans – These are federally guaranteed student loans. You can apply for subsidized Stafford loans and the government will pay the interest for you while you are enrolled. This is a great option for students and the most popular loan program available.

2) Parent PLUS Loans – The Parent Loan for Undergraduate Students allows parents to borrow through the federal loan program to pay for their child’s education. The loan is in the parent’s name.

3) Private Student Loans – Private college loans are not sponsored by the government but offer an alternative sources of funds for those that may not qualify for federal aid or who need additional funds. Private school loans are often in the students name with the parent acting as a cosigner.

4) Perkins Loan – Perkins loans are another federal loan for low income students based on eligibility. These loan funds are limited so apply early.

5) Credit Cards – Believe it or not, approximately 30% of students/parents put a portion of the tuition bill on their credit card. While we don’t recommend this option, it is a reality. To find and compare the best student credit cards, visit www.StudentPlatinum.com.

Once you graduate, consider consolidating your student loans to lower your monthly payment. The downside is you will pay more interest over the life of the loan by extending your repayment period. For additional resources, visit: www.studentloans.com, www.collegeloansolutions.com and www.gradloans.com.

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1040 Form – How to File your FAFSA before your Federal Tax Return

Did you know you are not required to complete your IRS federal tax return before filing your FAFSA? It is a common misnomer that it is required when it is simply encouraged. However, there will be a question on the FAFSA about which IRS Tax Form you will fill out in the future, if you haven’t already, and that is where the 1040 Form comes up.

Why you should fill out the 1040 while preparing your FAFSA form:

Having your federal tax return complete will save you a lot of time when filling out your FAFSA. However, some of you will want to file your FAFSA form earlier than you are able to complete your IRS federal tax return. In some cases, federal aid, grants and scholarships are awarded on a first-come, first-served basis and you’ll want to get the ball rolling early in January before you receive your income reports from the previous year.

So what are your options? You can fill out a 1040 form using estimated income amounts, either using your previous year’s tax return or your current pay stubs. You are allowed to report estimated tax data on your FAFSA, as long as you correct the estimates once you finish your taxes.

What is the 1040? Well, it is actually your Federal Income Tax Return form. There are a few different versions of this form and it is important to determine which you will be filing. The FAFSA-on-the-web application will populate other parts of the form for you based on qualifications you would have in order to file the specific types of federal return.  This should help guide you:

To qualify for the 1040EZ:

Your total income is under $100,000Your interest income is under $1,500You have income only from wages, interest, unemployment compensation, and Alaska Permanent Fund dividendsYou and your spouse are under 65 years oldYour filing status is single or married filing jointly.You do not have any adjustments to incomeYou are claiming only the standard deductionYou may claim the Earned Income CreditYou are not claiming any other tax credits

If you meet all of these conditions, you are eligible to file the 1040EZ, and you will note this on your FAFSA. Most students are eligible to file the 1040EZ.

To qualify for the 1040A:

Your total income is under $100,000Any age, any filing statusYou have income from wages, interest, dividends, capital gain distributions, IRA or pension distributions, unemployment compensation, or Social Security benefitsYou can claim the following adjustments to income: penalty for early withdrawal of savings, IRA contributions, student loan interest, and jury duty pay given to your employerYou can claim the following tax credits: Child and dependent care credit, Credit for the elderly and disabled, Education credits, Retirement savings contributions credit, Child tax credit, and Earned income credit.

Completing one of the 1040 tax forms will give you a better idea of what adjustments can be made to your income, such as tuition and fees deductions and student loan interest. And you’ll be a step ahead on filing your federal taxes when you are able to.

Filing your taxes online? Most tax software will determine for you which form you are to file, and then you may note that on your FAFSA. In addition, part of preparing for the FAFSA is gathering your tax and financial information – so you’ll need to complete that anyway!

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Maximize your Financial Aid With a CD Account

Some students are lucky enough to have money of their own to contribute to college tuition, and even luckier if they can get help from their parents and grandparents as well.  There are a number of ways that grandparents can put away some money toward helping their children’s children pay for college.  You might have heard of trust funds, and 529 plans, but one of the best options is quite a bit simpler than that: a CD. No, not a “compact disc” but a “certificate of deposit.”  A CD account is essentially a savings account with a fixed term and a fixed interest rate.  If you are lucky enough to have grandparents who are willing to help you pay for college, a CD can be one of the best options because these accounts are almost risk-free.  In addition, if the account is in the grandparent’s name, it does not need to be included on the FAFSA!  One of our new forum members shared his experience on the Financial Aid Forums this week.

We discuss topics like this and other financial aid secrets on FAFSA Online.

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Appealing your FAFSA Dependency Status

One of the most common issues students deal with revolves around the FAFSA filing status. Many students feel they should be considered independent, yet the FAFSA still requires them to file as dependent. Under special circumstances, students have the ability to appeal their dependency status. For those students who believe their circumstances qualify them for financial independence (for FAFSA purposes), I’m going to walk you through how to do this, including what documents you may need. If you don’t know your current status, read our post on Dependent VS. Independent Status.

First thing’s first, if your sole reason for filing an appeal is that you support yourself or that your parents refuse to support your education, then you will not qualify for an appeal. However, other circumstances are considered. Some common reasons for appealing dependency include:

AbandonmentDanger of physical or mental abuseYour parents (or parent for single parent family) are incarceratedYour supporting parent is deceased and you have no contact with the other

Keep in mind, these are not the only reasons that are accepted as schools differ in their requirements. If you’re not sure if your particular situation qualifies, you should contact a financial aid officer from your school.

Each school has specific guidelines for the appeals process, and in some cases, there are school-specific forms you will need to fill out. Most of the time you can find the qualifications and forms on the school’s website. However, the one thing that most schools ask for is a letter from the student explaining their circumstances. In this letter, make sure to be specific! After all, you’re arguing your case, so the more information you provide, the better. Included in this letter should be 1) why your parents aren’t helping 2) information regarding your income and what your money is allotted for and 3) your educational goals, explaining why more money is necessary to achieve them through your institution. Each situation is different, so tailor the letter to you and what your needs are. Along with this letter, it is important to provide as much documentation as possible to back up your claim. Acceptable documentation includes (but is not limited to):

Letters attesting to a student’s situation: Most schools require students to submit letters from independent sources. These can be from almost anyone who knows your story- ministers, friends, non-parental relatives, guidance counselors, attourneys etc. These letters should explain the writer’s relationship to the student, and like the student’s letter, provide as much detail as possible about the student’s situation. Depending on school guidelines, these may need to be notarized.Bank statementsW2sCourt documents/ police reportsDocumentation of parental incarcerationDeath certificates

Once all of your required documents have been submitted, all you can do is wait. Depending on your school, your appeal will be reviewed by a financial aid officer or panel of officers who will work with the Department of Education to change your status (hopefully). It is possible that more documentation may be required, and if this is the case, you will be contacted. If you do need to provide more, don’t panic! Simply provide the requested documents and wait it out. Note: If you are approved for a certain year, this does not mean that you are approved for upcoming years as well. For future academic years, you will need to appeal again!

Navigating the FAFSA to get adequate financial aid can be a nightmare for some students, so appealing dependency status may be the difference between going to school or not. If you have any specific questions about your school’s process, they should be directed to your financial aid office. Good luck!

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Top 5 End of year financial aid strategies

Source: FAFSA blog

As we approach the end of calendar year 2010, it’s a good idea to turn our eyes to the future and start thinking about our 2008 financial aid efforts. Here are 5 strategies to help you make the most of the waning days of 2010 with payoffs in the year to come.

1. See an expert. Most community banks and credit unions offer access to a certified financial planner for little or no charge, making them a great, hidden resource for figuring out your finances. Take the opportunity and an hour or two on a weeknight or weekend to see one and review your personal finances. Get a sense for where you are and how your finances are currently set up.

2. Start writing scholarship essays. Scholarship season really starts in earnest in January of each year, and the sooner you can get your applications in to a scholarship foundation, the sooner you can move onto the next application. Do your research for which scholarships would be appropriate to apply to, and download their applications. The most time consuming part of the scholarship search is the essay, so start writing now!

3. Do your budget. January is often thought of as the time to embark on resolutions, but now is the time to plan for those resolutions so you can hit the ground running after the champagne’s gone.

4. Set goals. Set measurable, achievable goals for yourself in 2011, like a scholarship application a weekend. Be sure to have a calendar set up so you don’t miss any deadlines.

5. Get ready to file your FAFSA. The FAFSA process kicks off on January 1, but having your IRS 1040 mostly done will speed up the process, as will doing the FAFSA worksheets. Run through our FAFSA tutorials here on FAFSAonline.com and make notes of where you have questions – then contact your financial aid officer or attend a College Goal Sunday event to get those questions answered!

The FAFSA blog is sponsored in part by:

Five most recent FAFSA form help blog posts:

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What is a CSS Profile?

While the FAFSA Financial Aid Application is the quintessentially required form in the financial aid world, it’s not the only form you’ll be expected to fill out, especially if you are applying to any private colleges. Several hundred private colleges and some public colleges also require another form originated by the College Board, the CSS Profile: The College Scholarship Service Profile.

The profile is college specific, and is used to determine aid eligibility for non-federal financial aid, such as institutional scholarships and grants.  This form tends to be more detailed than the FAFSA, and focuses on information needed pertaining to specific programs at each school. Having a separate form allows the school to ask more tailored questions.

Unlike the FAFSA, the CSS Profile is not free. The cost for filing your CSS Profile is $24 for the first college, which includes a $5 registration fee and $18 processing fee). There is an $18 processing fee for each additional college.

Deadlines: The FAFSA can be submitted beginning on January 1 (or first business day of the new year). The CSS Profile can be submitted prior to January 1.

Each financial aid application uses different needs analysis formulas.  Among other differences, the methodology used takes into account home equity, and also assumes contribution from the student. The CSS Profile asks you to separate your income throughout the year by season, and requires detailed reports of your assets, medical expenses, tuition reimbursements, scholarships and family gifts. There also exists a Prospective Spouse Form if you plan to marry before October 2011.

Visit the College Board to sign up (if you don’t already have an account) and download the various CSS Profile forms.

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Understanding the Financial Aid Roadmap

Applying for and receiving financial aid can be a long and confusing process, but don’t fret, we’re here to help! We’ve compiled information on all of the steps necessary for receiving financial aid to help answer your most common questions. The financial aid roadmap outlines all of the steps you should take, from how to fill out your FAFSA to tips on comparing financial aid packages.

So, what are the steps?

Prepare for, and fill out your FAFSA formReview your Student Aid Report (SAR)Compare your award letters and financial aid packagesReview your federal loan options and applyApply for additional aid to cover your full cost of tuition

Now that you have the entire process at your fingertips, make sure to start early! It’s important to file your FAFSA as soon as possible so that you can receive maximum aid and be on your way to that college degree.

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Stafford Loan Interest Rates Lowered

As I’m sure many of our readers out there know, the interest rate for subsidized undergraduate Stafford Loans has recently lowered for the 2010-2011 year. As of July 1, 2010, the interest rate dropped from 5.6% to 4.5% which was a major step forward for federal loans.

Well, lucky for all the students out there with Stafford loans, because it’s scheduled to happen again. The Subsidized Federal Stafford Loan interest rate for the 2011-2012 academic year is planned to drop to 3.4%, hitting an all-time low!

For more information on student loan interest rates, visit Staffordloan.com where you can also read about loan repayment options.

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Applying for Federal Grants

Applying for federal loans is a common task for most college students, but did you know that when you file your FAFSA you’re automatically applying for federal grants as well? Unlike loans, federal grants do not need to be paid back and are both tax and interest-free. By submitting your FAFSA you are considered for a number of grants including:

Federal Pell GrantsFederal Academic Competitiveness GrantsFederal National Science and Mathematics Access to Retain Talent GrantsFederal Supplemental Education Opportunity GrantsTeacher Education Assistance for College and Higher Education Grants

While not all of the grants are need based, you still must qualify in order to receive aid. Eligible students will receive notice of all aid including grants in their Student Aid Report (SAR).

For more information on these grants, check out our page on Federal College Grants and Scholarships at FAFSAOnline.com.

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FAFSA 2011-2012 Summary of Changes

As many of you may know, the 2011-2012 Free Application for Federal Student Aid (FAFSA) will be available on January 1, 2011. In order to be prepared for this day, it is important that students, parents and financial aid officers become acquainted with the most recent changes.

The National Association of Student Financial Aid Administrators (NASFAA) recently released their “Summary of Changes” for the 2011-2012 FAFSA. This document covers everything from changes in design to changes in the way questions are worded. Whether you are a student filing the FAFSA for the first time, or a seasoned financial aid professional, this information will help you approach this year’s FAFSA with the right information.

Summary of Changes, 2011-2012 Free Application for Federal Student Aid (FAFSA)

Colors – The colors are yellow for student information and purple for parent information

Elements added – New question #27 is added, for applicants who indicate they have earned a high school diploma. The question is worded as follows: What is the name of the high school where you received or will receive your high school diploma? Write in the high school name, and the city and state where the high school is located.

Elements deleted – Enrollment status questions (formerly, #30) has been removed.  The question about plans to become a teacher (a.k.a. the TEACH grant question, formerly #32) has been removed.

Other changes – State Deadlines have been updated on the FAFSA application.  The new deadlines will be available on FAFSAOnline.com on December 30, 2011.  Deadlines have changes this year for Kentucky, New York, Oklahoma, South Carolina, and Tennessee.  The post office box for mailing a FAFSA has been updated.

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When are the 2011 2012 FAFSA Deadlines?

It’s January, 2011. So, what does that mean?  Well, for starters, Happy New Year!  I’m sure many of you have been thinking about your plans for the upcoming year, maybe even jotting down some of those resolutions.  There are two in particular that we might have in common: go back to school or finish up school, and save money.

Well, with that in mind, the team at FAFSAOnline.com has been working diligently to bring you the most current and most beneficial information about the new FAFSA form for the 2011-2012 school year.  If you’re not familiar with the FAFSA already, it is the Financial Application for Federal Student Aid and the first step in your financial aid process.  Federal grants and loans are the best source for financial aid, and private student loans can fill in the gaps.

We have recently updated the FAFSA deadlines pages for both federal deadlines and state deadlines.

The new FAFSA form was released this past week.  FAFSAOnline provides you with a free guide and eBook for help with the FAFSA form.  There are also a number of special financial aid tips we share, that can help you maximize your aid and avoid common mistakes on your FAFSA form.  You can also go to FAFSAOnline to get your Federal School Code, which you will need to identify the school(s) you are attending or applying to.

Stay tuned for a brand new 2011 eBook for the FAFSA form.

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Accepted Students Day

First of all, congratulations on getting into college! The stressful waiting is over, but now you have that life-changing decision of what school to choose. For many students, this is chosen based on financial aid awards, but picking the perfect school may not be so clear for everyone. Either way, attending a school’s accepted students day (or weekend) can be extremely beneficial. Read on to learn why…

Accepted students days are designed to help students choose a college. These days include programs, events and activities to help you get to know the school better. These activities might be mock college classes, or lectures from top faculty from various departments. (Read more about events at accepted students day by clicking here.) Depending on your school’s specific agenda, they can help students get more familiar with the college layout, faculty, and class styles. It’s also a great way to meet other future incoming freshman (should you decide to go).
While everything mentioned thus far is an important factor in the college decision process, perhaps the most beneficial aspect that many colleges offer is financial aid workshops (especially for financial aid newbies). These can play a crucial role in a student’s decision, which is why I’m here to help guide you through it. If your school offers a financial aid workshop, this is an excellent way to learn more about the financial aid package you were awarded. You can find out things like appealing your award amount or how to go about receiving a loan. Having the opportunity to chat with a financial aid officer is HUGE! But first, make sure to do your research. Learn as much as you can about basic financial aid like Direct Stafford loans and private student loans before you go, that way, you’ll have time to ask the not-so-obvious questions. (Find a list of suggested Financial Aid Questions to Ask by clicking here.)
So what if you cannot attend your schools’ accepted students days? Don’t sweat it. You can still get answers to all of your questions about paying for college. Some schools allow you to make appointments with financial aid officers to go over your award, or you can compile some questions to ask over the phone. Many schools also offer pages on their website dedicated to providing similar information for accepted students, which is worth checking out. If you have questions on financial aid, you can also post a question on the Financial Aid Forum, or see if it’s already been asked!
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