Posted in financial aid

3 Student Loan Forgiveness Lies

In 2007, the United States signed into law the Federal Public Service Loan Forgiveness program.  Here’s the deal:  If you meet the following 3 requirements, you were (are) supposed to be eligible to participate:

  • Your loans must be federal direct loans.
  • Your employer must be a government organization at any level, a 501(c)(3) not-for-profit organization or some other type of not-for-profit organization that provides public service.
  • By the end, you need to have made 120 qualifying, on-time payments in an income-driven repayment plan or the standard repayment plan.

In other words, by working for 10 years without missing a payment, whatever is left will be wiped clean.  If you think this sounds like a great program, you’re not alone.  This program is often cited as one of the “reasons” to justify attending an expensive college program or taking out student loans despite plans to work in a lower paying industry like public service.

Over the past 10 years, these kinds of programs have been so popular, that CNBC reported that 70% of the public service employees they spoke to believed that they were accruing years toward full forgiveness (10 years) and would receive full forgiveness in the future.

“Just 96 people across the country have been released from their debt, thanks to public service loan forgiveness. Last year was the first year of eligiblity, since the program was signed into law in 2007 and it requires at least 10 years of payments to qualify. Nearly 30,000 borrowers have applied for the forgiveness, according to the Education Department’s data.” – CNBC @ANNIEREPORTER

In a nightmare of red tape, “gotcha” rules and restrictions, out of the 30,000 who had already worked a FULL 10 YEARS and made payments for all 10 years, only 96 have been granted loan forgiveness.

96

That’s not a typo, 96 out of 30,000 who did their 10 years of service actually had their loans forgiven.  I’ve only found a small bit of media attention around this issue, but I can’t figure out why it’s not making headlines!?  That’s not even 1%, that’s not even half a percentage!  That’s no one.  That’s a big, fat, goose-egg.

As bad as I feel for those hoping to qualify for this program, what we have to do for our teens is in front of us- not behind us. Let’s talk about moving forward and talk about wisdom.


LIE #1) Everyone graduates.  Truth:  only 1/2 will.  That’s a hard pill to swallow, and naturally, everyone thinks they’re in the half that will graduate.  Together we could build a list of 50 reasons people don’t graduate college – and most of them are legitimate,, valid or unexpected.  (as opposed to a person just randomly flunking out, which isn’t usually the reason, though as long as we believe that’s the reason, we avoid considering that it could happen to our teens).  The only way to proceed with wisdom is to proceed under the “worst case scenario” assumption.  I know 3 people in real life who left college with only a few classes left to take. These are smart people, but life happened. The truth is that predicting the future 4 years in advance is impossible.  Unfinished degrees do not qualify for loan forgiveness.

  • wisdom:  bring the goal post of a degree closer if you can.  Reduce the number of classes/ credits your teen needs for their degree by starting in high school.  You can homeschool for college credit, use AP classes, use dual enrollment, and even summer sessions. A typical bachelor’s degree requires 40 courses total.  At least 10 of those can be done in high school.  Bring the goal post closer to leverage the odds of finishing.

LIE #2)  Loan forgiveness will erase my debt.  Truth: to even be eligible for loan forgiveness, you must first make payments perfectly for 10 years.  Literally, perfectly.  That means not a single late payment, no deferment, no gaps at all.  Want to cut your hours from full to part-time?  Can’t do it – disqualified.   Want to stay home and raise your children? Can’t do it – disqualified.  A moment ago we considered how hard it would be to predict the future 4 years in advance when we’re talking about a full decade, it’s not even a conversation.  While there are plenty of allowances and exceptions, tens of thousands who applied (after 10 years of work) were denied for not meeting the exact allowance or exception.

  • wisdom:  assume all debt must be repaid.  If you must borrow for your degree, wisdom is to borrow only for the LAST year of college, when your odds of completion are significantly higher.  If you do borrow, make repayments immediately –  don’t even wait for the “6 month grace period” that starts after graduation. Begin immediately and with intensity.

 

LIE #3) Loan forgiveness makes good financial sense.   EVEN if you’re one of the 96 who was meticulous and received forgiveness, let’s look at the math.  The Federal student loan’s official repayment calculator allows us to enter in the amount of our loan, and determine the monthly payments.  I’m trying to avoid being too mathy here, but let’s assume you borrow $50,000 for your 4-year degree (or $12,500 per year).  Only a maximum of about $20,000 can be “subsidized” which means you don’t get billed interest while you’re in school (about $5,000 per year borrowed this way) and the remaining $30,000 starts charging you interest from the day you borrow (about $7,500 per year borrowed this way).

Since people seeking loan forgiveness must deliberately HAVE A BALANCE at the end of the typical 10-year term, the Federal Student Loan Repayment program doesn’t put you on a “regular” repayment schedule. The schedule for students who want this method are typically placed on a 25-year repayment schedule.

Under the standard 120-month repayment, a student will pay $550 per month for 120 months.  The total they’ll repay with interest is about $67,000.

A student who enters repayment with the intention of using forgiveness will enter a 300-month repayment program.  They’ll pay only $270 per month.  As such, at the 10-year mark, this student has only repaid $14,000 of their whole loan! (even though they’ve made payments totaling over $32,000)  If forgiveness is granted, the remaining $36,000 will disappear (hooray if you’re one of the lucky 96) but the other tens of thousands locked into this repayment program will actually repay $87,000.  A significantly larger amount to repay – not to mention being more than 40 years old by the time you get out from under the loan.

  • wisdom:  use your college’s transfer policy and CLEP/AP policy to the maximum.  Start in high school and take advantage of transfer agreements.  Whittle the “rack rate” tuition down by resourcefully planning the degree as carefully as possible.  (see our Cost Maps to see this in action)  Apply for scholarships every week that you’re enrolled in college, and if you have college savings, use them as late in the game as possible.  Borrowing the absolute minimum to pay the tuition bill (pay cash for living expenses) and tighten the budget.  Once you’ve decided to borrow, repay immediately and with gusto.  Repaying your loans as quickly as possible assures that you’re not wasting 10 years of your life working at a job that may not even forgive your loans.  By taking control of the college process, you remain in control of your finances and power over your future.

 

Posted in financial aid, Scholarships, Transfer Credit, working

Saving and Shaving: Debt-Free College

Debt free college, is it possible?  It is- but it won’t be easy!  Debt-free college isn’t a matter of just having a huge bank account, rich uncle or perfect SAT scores.  Average parents with almost no college savings can send their (large) homeschool families to college debt-free, but it takes planning and exceptional motivation!

Who has time?  You have to make time.  As a homeschool parent, you’re in a prime position to dedicate an extra two or three hours per week to your new “job” as a high school guidance counselor and college financial aid planner.  If you need an extra nudge, know that those extra three hours per week (150 hours per year) can save you $50,000 or more per child! This might be the most important (and best-paying) part-time job you’ve ever had.


Important Steps to Debt-Free College

Make a commitment to avoid loans.   Not to be glossed over, some may be tempted to think “yeah, we’ll do what we can, but if we have to borrow, we will.” That approach almost always undermines your determination to go hard at a goal.  If you absolutely set a conviction to borrow ZERO dollars, you’ll be amazed at how resourceful you can become.  Plus, you need to know it’s possible – it is.

Calculate the tuition.  For a bachelor’s degree, your teen will earn 120 college credits.  Credits cost money, so figure out what the college expects you to pay per credit.  If it’s $200 per credit (x120) you’re looking at $24,000.  If it’s $500 per credit (x120) you’re looking at $60,000.  If it’s $2000 per credit, you’re looking at one of the most expensive colleges in the country- and there are about 50 in that price range!

Inexpensive tuition does not always equal an inexpensive degree. Saving the most money is usually dependent upon how many credits you can transfer in- keep reading.

Homeschool for college credit.  Homeschooling parents can align their teen’s high school courses with college credit opportunities, many of which are free or very low cost. College credit earned in high school costs about $35 per credit – roughly $100 per class.  There are more and less expensive options, but by paying for 1 college credit course each semester of high school, a family may pay only $200-$300 (cash) per year in tuition.  The average family who homeschools for college credit will graduate a teen with 1 year of college already complete.  A few very motivated families have graduated teens with 2 or more years, and a few have aligned their entire high school education to result in a bachelor’s degree at high school graduation.  Remember that homeschooling for college credit isn’t successful without a motivated student too.

Exploit transfer policy to the max.  Whether in high school or out, before your teen sets foot on their campus, be sure you’ve shaved off the maximum number of allowable transfer credits.  A good number of colleges (about 25% of them) allow you to transfer in 75% of your degree before you start!  The majority of colleges (about half) allow you to transfer in half your degree, and the remaining 25% of colleges have tight transfer criteria or don’t allow transfer at all.  Schools with tight / limited transfer policy will always require you to spend the most money.  While I would encourage you to reconsider your college choice, if you’re determined to attend a limited transfer school anyway, your teen will need to focus on earning everything through scholarships (see below).

Why transfer?  Because whatever the rack rate tuition is for your target college, you can find transfer credit for less money.  There are 30 ways to earn college credit on this website, and all are significantly less money than what your target college will charge for tuition.  Max out the transfer policy first!   If you want to see what this looks like, be sure to check out our Cost Maps – maximizing transfer credit is my superpower.  Before you write a single check, you should have the maximum allowable transfer- only then can you see what you *really* have to pay for.

Rack rate: $100,000 – max transfer (50%) = $50,000 left to pay

Rack rate: $80,000 – max transfer (30%) = $56,000 left to pay

As you can see, the rack rate is part of the math, but it’s not the full picture.  Assuming you will take advantage of max transfer (and pay a fraction of the cost) you can sometimes attend a more expensive college for less money.  This is before scholarships!

Rack rate:  $80,000 – max transfer (75%) = $20,000 left to pay

Rack rate:  $80,000 – max transfer (90%) = $8,000 left to pay

The trick is finding a way to earn college credit as early as possible (high school) for as cheaply as possible and max the transfer policy as fully as possible.  Remember that credit earned in high school averages about $35 per credit.  After high school, you can still keep earning transfer credit, and you can use the community college if necessary (averages about $100/credit).  No matter how you slice it, you want to get your “left to pay” amount as low as possible.

The amount you have left to pay is your starting point for funding!

Apply for scholarships.  Like any good extremist, I don’t mean applying for “a” scholarship, I mean applying for scholarships like it’s your job.  Every week. Every. Single. Week.  From now until your teen is walking across the stage and being handed their degree.  My good friend and scholarship guru Jocelyn Paonita Pearson is exceptionally skilled at teaching parents how to win with scholarships. She runs a company called The Scholarship System. If you’d like to hear what she’s all about, I highly recommend listening to her being interviewed on  Higher Ed Parthenon podcast (episode #22).  She has skills!! In short, no matter what your tuition balance after maxing out your transfer, you can probably cover it with scholarships.

Apply for financial aid.  I realize that this seems like it should happen “before” you apply for scholarships, but I want you to focus all of your effort on lowering your “left to pay” portion by getting it down to zero or close to it before you’ve ever filled out a single financial aid form.  Since high school students are not eligible for federal financial aid anyway, most of the credit earned toward your transfer max happens in high school or before enrollment.  In other words, Mom and Dad’s homework starts in high school!

The typical time to apply is October of their senior (12th grade) year.  You’ll begin by filling out the FAFSA. It’s an online form that everyone fills out and is used by all colleges.  The application is then sent to your selected colleges (assuming you have selected colleges) and a “package” is created by each college.  The package may include scholarships issued by the college based on SAT scores or other academic merits, and it may include a Pell Grant (up to $6,000) based on financial need – but the rest of the “package” is loans!  So when people say they don’t qualify for financial aid, they’re wrong- everyone qualifies for student loans (short of having a criminal history).

Refuse the loans.  Believe it or not, student loans are so common, that your college will create a “budget” for your student that not only includes tuition, but also their “living expenses” for the year.  When they’ve computed this (inflated) total, they’ll happily provide an opportunity to take a student loan to cover all the costs (real or imagined).  Refuse the loans! Debt free means no acquiring debt to pay for college, and if you accept the loans, you are taking on debt.  You can, however, accept any grants or scholarships that the college has to offer- these do not need to be repaid, they are gifts. You can also participate in a work-study or college-sponsored internship program (instead of a paycheck, the wage goes toward tuition or college credit).

Working, it’s what adults do.  If you’ve resourcefully planned your teen’s high school years, and you’ve maxed out their transfer credit allowance, and are applying for scholarships every week, I hope your balance left to pay is zero, but if it’s not, it’s time to go to work.  Work isn’t a punishment, it’s the entire point of earning a degree- to launch a career!

If your teen is studying to become a chef, they should work weekends in a restaurant.  Future nurses should work weekends as a CNA.  Computer specialists should work the help desk, and future anythings can work weekends as temporary anythings.  In short, working is for everyone.  If you can find a way to tie it into a future career, all the better.  If not, do it anyway.  A teen working weekends (15 hours) at minimum wage can contribute almost $5,000 per year toward tuition.  A summer working full time (at minimum wage) can generate another $3,000.  If your teen chooses carefully, some employers will pay a portion of their tuition too! 


recipeRecipe for Debt Free College

From the kitchen of Chef Jennifer Cook-DeRosa

Amount Ingredient
5 minutes Commitment
5 minutes Tuition calculation
3 years Homeschool for College Credit
   
   
Method of Preparation

 1.  Blend your commitment and tuition calculation in a large bowl.

2.  Homeschool for college credit while resourcefully planning and correcting for time, talent, and temperament.

3.  Bake for 3 years.

4.  During the final year of baking, apply for scholarships and financial aid.  Be sure to refuse the loans, or they’ll ruin your recipe!

5.  Adjust for seasoning to taste with a little bit of hard work.

 

 

Posted in financial aid, High School, Resources, Scholarships, working

100 Employer / Employee Scholarships

 

Parents:  check with Human Resources immediately!  Scholarship application deadlines are sometimes a year in advance.

Who qualifies?

It depends.  In some cases, a parent’s dependents are eligible to apply, but in other cases, the teen must be an employee.  If you or your teen already work for one of these companies, simply contact your Human Resources department and ask for more information.

My teen wants a job that isn’t on this list

Working is great, no matter how you slice it, but rather than browsing and hoping to find your teen’s employer, be proactive and talk to them about seeking employment at a company that offers educational benefits through scholarships or tuition reimbursement.  That’s being smart and planning ahead.  A summer job isn’t supposed to be a permanent career that’s deep and rewarding. It’s a nice way to earn some spending money, learn responsibility, develop a work ethic……. and possibly earn a scholarship!

What’s the difference between tuition reimbursement and a scholarship?

Tuition reimbursement generally requires continued employment with the company while you go to school.  When you’ve finished a course, the company writes you a check to reimburse you for the tuition you paid.  Tuition reimbursement can sometimes pay for a full degree, but often has a service requirement or other obligation in exchange for the educational benefit.

Scholarships are awards given to a student for achievement.  Often, these are one-time awards.  Scholarship amounts vary by employer, but it’s not unusual to see scholarship awards for $500 – $2,500.  Typically, a scholarship is a one-time award without further obligation.

I’m seeing a few names that are also on a tuition reimbursement list.

That’s right!  Many companies consider investing in an employee’s education as a very important part of their mission.  According to the Society for Human Resource Management (the largest HR organization in the world), as many as 91% of large companies maintained or increased their educational benefits since 2014.  In contrast, as few as 4% offer any kind of student loan forgiveness program.  In short:  plan to find these benefits before you start college and resort to borrowing.  Among millennials, as many as 1/3 reports falling behind on their student loan payments.  Ouch!

Tuition Reimbursement Companies

  1. A&W
  2. Abbott Laboratories
  3. Adobe Systems
  4. ADP
  5. Aetna
  6. Alcoa
  7. Amazon.com
  8. American Airlines
  9. American Cancer Society
  10. AT&T
  11. Baxter International
  12. Biogen Idec
  13. BMW Group
  14. Bosch
  15. Build A Bear
  16. Burger King
  17. California Grape Grower
  18. California State University Bakersfield
  19. Capital One Financial
  20. Carmax
  21. CenterPoint Energy
  22. Chevron
  23. Chobani
  24. Citigroup
  25. Community Bankers Assoc. of Illinois
  26. ConocoPhillips
  27. Costco
  28. CPS Energy
  29. Cracker Barrel
  30. CVS Pharmacy
  31. Darden Restaurants
  32. DirecTV
  33. Dish Network
  34. Dominion Resources
  35. Duke Energy Corporation
  36. DuPont
  37. Edison International
  38. Express Scripts
  39. Exxon
  40. GameStop
  41. General Electric
  42. General Mills
  43. Genzyme
  44. H&R Block, Inc.
  45. Harley Davidson
  46. Hewlett- Packard (HP)
  47. Home Depot
  48. Humana
  49. Hyundai Motors
  50. IBM
  51. Intel
  52. J Crew
  53. JetBlue Airways
  54. Kentucky Fried Chicken
  55. L.L. Bean
  56. Land O’ Lakes
  57. Long John Silver’s
  58. Lowe’s
  59. Marathon Petroleum
  60. Mayo Clinic
  61. McDonald’s Corporation
  62. Meijer
  63. Morgan Stanley
  64. Mutual of Omaha
  65. National Roofing Contractors Assoc.
  66. Nordstrom, Inc.
  67. Nucor
  68. Oshkosh
  69. Pacific Gas & Electric
  70. PepsiCo
  71. Pfizer Inc.
  72. Phillips 66
  73. Pizza Hut
  74. Rockwell Collins
  75. Roller Skating Association
  76. SAS
  77. Servco – HI
  78. Southwest Airlines
  79. Starbucks
  80. State Farm
  81. Subway Restaurant
  82. Sunoco
  83. Taco Bell
  84. Texas Instruments
  85. Tj Maxx
  86. Uline
  87. Union Pacific
  88. United Technologies
  89. US Bank
  90. USDA
  91. Valero Energy
  92. Verizon
  93. Vermont Grocers Assoc. Member
  94. Wakefield Healthcare Center
  95. Wal-Mart
  96. Walgreens
  97. Walt Disney
  98. Wells Fargo
  99. Whole Foods
  100. Yum!