Daily Aid 17: My Rich Uncle suspends lending, FAFSA stuff, PLUS loan rates
Daily Aid 17: My Rich Uncle suspends lending, FAFSA stuff, PLUS loan rates
Student Financial Aid News
From Inside Higher Ed:
In a speech tonight at Harvard University, the U.S. education secretary will unveil a proposal to greatly simplify the process by which students apply for federal financial aid. Under the plan, which flows from a set of ideas floated by Under Secretary Sara Martinez Tucker at an Education Department summit in July, the Free Application for Federal Student Aid would shrink from more than 100 questions now to 26, and students would find out, before their senior year of college, how much federal financial aid they would qualify for.
From Inside Higher Ed:
MyRichUncle, the maverick student loan company that angered many college officials and other lenders with its highly critical advertising, appears to be in trouble. The company said this summer that it was suspending its participation in the federal student loan program to concentrate on private loans, but a notice on its Web site now says that it has “paused” its private loan operations, too. “Due to continued disruptions in the capital markets, combined with the continued demand we have experienced this year, we are reaching funding capacity limits,” MyRichUncle said. “As a result, we are unable to receive new applications at this time. We regret not being able to serve you, but hope to in the near future. We are working to try to obtain funds that would enable us to continue to accept new customers.”
Commentary
No surprise from My Rich Uncle. Further consolidation in the student loan industry is widely expected.
As for the FAFSA, simplification is great, but it’s all in the execution. How the form gets simplified will be the test - and already, the 2009 FAFSA is a little simpler but in some ways more complex.
Scholarship Update
Thomas H. Lutsey Scholarship : This award provides financial assistance to needy graduating seniors pursuing degrees that enhance rural communities. During the freshman year, the scholarship amount is $1,750 and can be renewed up to four (4) years for students maintaining a 3.0+ GPA. Each successive year the award increases ($2,000, $2,250 and $2,500) and is subject to Scholarship Committee review and approval.
Details at our free college scholarship search site.
Mail Bag
Someone wrote in:
“With our country having hard economic times, where do we get loans with reasonable rates.? My daughter’s school, Indiana unversty told me I had to deal with direct loans with the government.My interest rate is 7.9 and they wouldnt let me go through Mohela,Missouri program. I guess they were afraid they would go broke so this raised my interest rate lots.”
The rate you’re referring to is the rate for the PLUS loan, and believe it or not, that’s a BETTER rate than you would have gotten through MOHELA. MOHELA would have given you a PLUS loan with a rate of 8.5% fixed. These rates were set a few years back and are locked in; Stafford loans at 6.8% fixed, PLUS from the Department of Education at 7.9% and from banks and lenders besides the Department at 8.5%.
Here’s the gotcha: the federal student loan program is structured in such a way that a school can either use the third party program, called the Federal Family Education Loan Program (FFEL) or the Federal Direct Student Loan Program (FDSL). A school isn’t both, which means that if your daughter’s school is FSDL, you couldn’t borrow from MOHELA even if they had a 1% rate.
How do you get around that? You really can’t, not without your daughter changing schools. Some private student loans may have variable rates that are better than 7.9% - do some Googling to see what rates are, but be aware that private student loans have variable rates, so they may be a good deal this year but a terrible deal in a couple of years. It really all depends on the economy.
Thanks for writing in!
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