All Access

Income Based Repayment & Public Service Loan Forgiveness for Law Graduates

Heather Jarvis Senior Program Manager for Law School Advocacy – Equal Justice Works and Lori Moore Regional Director, Access Group facilitated this very informative session.

It was a packed room with lots of discussion on the various points relative to Public Service Loan Forgiveness (PSLF) and Income Based Repayment (IBR).  A key point Heather made relative to PSLF was that students need to be sure they are making the right kind of payment on the right kind of loan while working the right kind of job.

A question was posed about what kinds of jobs shouldn’t qualify: labor union work, partisan political organizations (even if non-profit), international work like the United Nations, and certain membership organizations like the ABA.

A point of clarity was shared, confirming that borrowers can piece together more than one part time job and be eligible for PSLF as long as they average 30 hours/week.  We were encouraged to check out the regulation and search on the term full time to see this officially stated.

A good suggestion that was presented that should be passed along to your students is that they should ask their employer for a copy of their 501c3 certificate confirming their status.  Your students should also keep their pay stubs to prove their employment.  Lori added that she encourages students to go to their employer’s HR department each year and request that they write a letter stating the dates of their employment and status.

The opinion was shared that PSLF is one of the safest governmental programs because it is budget neutral and not subject to the appropriation process.

While there is a distinct difference between PSLF and IBR, Lori mentioned that they go arm in arm when talking with students that have high debt relative to their income.  Each student has to pick a repayment plan that best lines up with their situation; if they choose not to commit to public service for the long term, they can choose IBR. 

Heather and Lori’s presentation had some helpful materials so please check our Web site in the coming weeks for their presentation materials.

Posted by: Amy Manfredi

Session Summary: Will Student Loan Debt Be The Next Bubble?

Mark Kantrowitz, founder and publisher of FinAid.org presented this very informative and interesting look at the rising cost of education and the effect it may have on our students and the economy.

With the rapid increase of student loan debt at all levels, some are predicting that just might be the next “bubble” to burst.  While this might not be the case, (we’ll have to wait and see, as bubbles are really only visible after they burst) trends show extreme issues with college affordability and excessive student debt.  Debt-to-income ratios for college graduates will continue to increase and more and more students will graduate with excessive debt. 

Keeping in mind …

• Student loan debt now exceeds credit card debt.
• Grants and scholarships have not kept pace with the increase in the costs related to obtaining a degree - mainly tuition.
• College is less affordable for low-income students and will lead to even more debt.
• Income based repayment (IBR) may prevent an increase in default rates, but it may also cause students to maximize their borrowing when they should be borrowing the smallest amount possible.
• Today’s students graduating with too much debt may still be repaying their loans when their children enroll in college. (That’s a scary thought.)
• Because of their tremendous debt, these students may have to forgo home ownership, paying for their children’s educations or saving for retirement.

… What can we do to help them? 

For starters, we, as Financial Aid Administrators, can require that new students take (and pass) a financial literacy mini-course during orientation their first year.  During this class, we should drive home some key lessons about minimizing your debt.  Doing so now will pay off in spades after graduation by allowing them to live a life not paralyzed by their debt.  They should also be aware of the harsh consequences of loan default and the realities of a poor credit rating.

Hopefully we all received some good advice in administering a campus-based financial literacy program during yesterday’s Financial Literacy Forum.

Posted by:  Kim Siwarski

The Access Group Town Hall Meeting

To start the 3rd and final day of the 2010 Access Group Graduate and Professional Financial Aid Conference, we held the Town Hall Meeting.  This is an opportunity for conference attendees to ask questions of Access Group. Here are a few of those questions and answers ... and a comment too:

1. Q - Will Access Group be holding a conference next year? A - Access Group is committed to serving the graduate and professional community through this annual conference, but in light of the current economic environment we will be making the decision in the spring ... You'll be the first to know.

2. Q -In your loan servicing business, will Access Group be negotiating "life-of-loan" or annual contracts for the loans you will service?  A - Access Group's preference is life-of-loan, as it is more beneficial for the borrower; however, that's not always possible so some of our contracts can vary in duration from 5 years on up.

3. Comment -This conference is the primary source of professional development and education for the graduate and professional financial aid community. In addition, your borrower education programs for our students are some of the best available and we hope you continue to provide them. (Editor's note -  check out the recent additions to the WiseBorrower Series on AccessGroup.Org - the six-book Credit Smart series available in e-book format and the Borrowing Wisely Reality Check e-book.)

Preparing Students Financially for Law School: A Workshop for Admissions Staff

This interactive session was geared to not only help admissions staff better understand financial aid, but to also teach them how to present the financial information prospective students need to finance their legal education.

Whether used as a recruitment tool or as a session for admitted students, the session attendees agreed that educating students on financial aid as well as providing a financial strategy to be successful in law school and beyond is invaluable.

The goal of this session was to provide admissions and financial aid professionals with ready-to-use 30-minute presentation and training guide to be used to educate their students on the basics of financial aid and to assure them that financing is available for law school.

Deciding to pursue a legal education is an exciting time for these students, but it can also be stressful as they worry about how to pay for it.  How they handle their finances during this time period will impact their financial future.  Unfortunately, law school is not free, but there are financing options available and you can help show them the way to responsible borrowing.

Posted by: Kim Siwarski

Loan Consolidation Headaches - By Joe Donahue

I sat down with a recently graduated law student to go through the process of online loan consolidation with him.  I haven’t been through the online process in a long time and thought it would be a good idea to freshen up on the actual process.  If you meet with students and have not done this, I strongly encourage you make the time to do it.  

There are a lot of choices that need to be made and I can easily imagine many students being overwhelmed by trying to figure out what they need to do while also being worried that a wrong selection will cause them to miss a payment, screw something up, or simply not end up with the repayment option they want.

This particular student was not going to consolidate all of his loans (for good reason) and he had to select which loans from the outset he was going to be consolidating.  This required the student to select between direct federal loans and non-direct federal loans, FFEL Loans, Perkins Loans, etc.  The student was dumbfounded and this information isn’t available through NSLDS.  Remember, this was in just the first three questions.  Later we had to select the lender for the loans (or was that the servicer), select the type of loan being consolidated (the list has 20+ options), and then the loan repayment option (another half-dozen choices). 

A lot of decisions are required and the student needs to really have a firm understanding of their student loans to make the process a smooth one.  I would imagine most law students have less confidence about whether they completed the consolidation right than they do about their results on the Bar Exam.  In my mind, this just reinforces how important it is for us to educate student borrowers as thoroughly as possible.

Posted by: Joseph M. Donahue, Guest Blogger

Content submitted by Joe Donahue does not necessarily represent the views and opinions of Access Group.  In addition, Access Group has no control over the nature, content and availability any Web sites referenced in this content, and the inclusion of any links does not necessarily imply a recommendation or endorsement by Access Group of the views expressed within them.

Calling All Financial Aid Advisors: I Want to Hear From You!

In preparation for the upcoming Financial Literacy Forum at the 2010 Access Group Conference I have a few questions for you.

Taking approximately five minutes (really it is short) to complete, the attached survey will enhance aspects of the financial literacy forum by giving me a better understanding of how you currently engage with your students on this topic.

Whether you are planning to attend the conference in person or follow along by reading session summaries here on All Access, your feedback is greatly appreciated.  The more information the better! 
A summary of your responses will be shared initially with attendees at the Financial Literacy Forum and then posted to the blog for all to review.  It’ll be interesting see what you and your colleagues are already doing.

Click here to complete the survey:  http://www.surveymonkey.com/s/NSSMWQC

Many thanks and I look forward to continuing this discussion at the Financial Literacy Forum.

Posted by: Lori Moore

Paying Off Student Loan Debt and Other Financial Matters - By Joe Donahue

When I meet with students regarding their student loan debt, I frequently hear students exclaim that they want to “pay off [my] student loans as quickly as possible” once they go into repayment. 

While I admire their commitment to getting out of debt, I feel it is my responsibility to educate them about their larger financial situation and put their student loan debt into context.  This helps them start thinking of their student loans as one part of a financial framework that many, if not most, have not begun to anticipate.  Hopefully, it also allows them to feel less overwhelmed when they begin to realize the number of financial obligations they will have fighting over a share of an always too limited resource – their income.

First, and foremost, recent graduates need to attack any outstanding credit card debt.  Too many students have carried a balance on their credit cards during their education and have become comfortable with it. This habit must be stopped by making every sacrifice necessary to get the balance down to zero and keep it there.  Any additional monetary resources should go towards credit card debt before increasing educational loan repayments.

Secondly, we need to encourage recent graduates to start building up an emergency cash account.  This can be through various accounts – saving, checking, or money market.  The idea is to have access to highly liquid funds (easy to get to) that should help them to manage any unanticipated economic disaster, e.g., losing their job.  This money is not intended to provide any significant type of return on investment.  It is simply emergency cash. The goal ranges from 3-9 months of salary according to most financial planners. I tell them to shoot for 6 months of their actual take-home salary and expect it will take some time to get there.  It won’t happen in a few months.  This is as important as paying down loan debt and it has to be done at the same time.

More after the jump.

 

Joe Donahue Joins the Ranks of All Access Bloggers

The All Access blog for higher education administrators is pleased to have Joe Donahue as a guest blogger. 

Joe, a financial aid counselor at Loyola University Chicago School of Law, also has a MBA in finance. He is currently studying for the CFP® Certification Exam and he volunteers with The Life After Innocence Project by providing individual financial literacy and education.  His insight, experience, and expertise make him uniquely skilled to counsel students on the big financial picture and the realities of their student loans.

Joe will be regularly sharing his experiences from “the trenches” of counseling financial aid and financial literacy. Look for his posts starting soon!

 Posted by: Libby Rosenberg

Farnoosh Torabi Talks About Financial Literacy and Young People

At this year's Graduate and Financial Aid Conference Farnoosh Torabi, personal finance journalist, author and TV personality, will share her experience and exprtise with educated young people about their personal finances.  She was kind enough to give us glimpse into the material she'll conver at the conference and answer a few of our questions.  Read on ...

AG:  What methods have you found to be most effective in communicating with young adults?

FT:  In terms of approach, I think the best way to grab the attention of young adults, particularly on a subject as potentially dry as money, is to begin with an indirect
conversation that’s less focused on money and more about their every day lives.  For example, if your goal is to eventually discuss budgeting for food, you may want to first
engage by talking about dining out – how often do they eat out? What’s the most popular hangout? Does anyone always find himself often paying for a friend? How do you save money when eating out? What’s the best microwaveable meal? Keep it light and never turn it into a lecture. The key is to keep it conversational and ask them for solutions to make them feel empowered and in control.

AG:  What advice would you give to higher education administrators who may be frustrated by the lack of response from their students on the topic of financial literacy?
 
FT:  Offer them incentives for participating in the topic. Bring them keynote speakers,
free materials, food!, contests to win money, give them assignments that will spark
creativity, like a YouTube video offering your best money-saving tip. At Bank of America
we ran a student contest where we asked college students to write why they were “SO
MONEY.” We got tens of thousands of responses…the grand prize for the best tip was
$25,000.

More after the jump.

 

Reaction - Will Student Loan Debt Be the Next Bubble?

As student indebtedness continues to be an issue in the financial news, I’m sure you’ve seen at least one article lately suggesting that student loans may be the “next bubble to burst.”  Blogs have been abuzz with talk of the Wall Street Journal,and Washington Examiner articles.  Even back in May 2008, Andrew Gillen and Richard Vedder raised the same question on Inside Higher Ed. 

I, too, am worried about the trends in student borrowing. Not only are graduate and professional students borrowing larger amounts, undergraduates too are now averaging more than $20,000 in student loan debt. When you add that all together it does cause one to pause and wonder, “When is student loan debt too much?”

 

We tend to look at student loans as an investment in the future, but as with every investment one must figure the possible ROI (return on investment) and the risk/reward ratio.   Again, asking the question, “How much is too much?”

 

The good news is that the upcoming Access Group Graduate and Professional Financial Aid Conference this November has several programs that are intended to address this issue. They include the session,“Will Student Loan Debt Be the Next Bubble?” and the full-day Financial Literacy Forum that will provide very important information about how we can help students cope with their ever-increasing debt.

 

I’m eager to see what is said and what we may be able to do to cope with the bubble if it does become reality.  In actuality, providing borrower education and improved financial literacy may be one of the most effective ways we can fend off the potential “bubble” that some are predicting.

 

What do YOU think?   As you read these articles and hear what some experts are saying, what is your level of concern?  Is your office already taking steps to prepare your students for the financial realities of a possible “bubble?”

 

Use the “comments" link below to let us know what you’re thinking.

 

Posted by: Jeff Hanson