Money Matters
Money Matters
Mastering Financial Aid from A to Z
Unlock the secrets to navigating the FAFSA process with ease as we explore the recent changes with financial aid expert Deborah Paul. Have you ever wondered how the shift from Expected Family Contribution (EFC) to the Student Aid Index (SAI) could impact your eligibility for aid? Join us on Money Matters as Deborah breaks down these updates, including the simplified FAFSA form and the integration of the IRS data retrieval system, designed to streamline your application experience and potentially increase need-based aid.
Discover how to maximize your financial aid opportunities with practical tips for finding local scholarships, which often present better odds than national awards. Deborah and I shed light on the nuances of student loan application periods, especially how different schools like LSU handle summer sessions. We also discuss the importance of understanding the timing of financial aid awards and the valuable resources available to students and parents navigating the FAFSA process.
Get empowered with essential knowledge on student loans, from disbursements and refunds to managing repayment options and exploring loan forgiveness. Deborah shares crucial advice on responsible borrowing, understanding loan obligations, and staying financially literate. Whether you're curious about deferment, forbearance, or public service loan forgiveness, this episode offers a comprehensive guide to help you optimize your financial aid and loan management, supporting your academic journey every step of the way.
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Welcome to Money Matters, the podcast that focuses on how to use the money you have, make the money you need and save the money you want – brought to you by Neighbors Federal Credit Union.
The information, opinions, and recommendations presented in this Podcast are for general information only and any reliance on the information provided in this Podcast is done at your own risk. This Podcast should not be considered professional advice.
Welcome to Money Matters, the podcast that focuses on how to use the money you have, make the money you need and save the money you want. Now here is your host, ms Kim.
Speaker 2:Chapman, welcome to another edition of Money Matters. I'm your host, kim Chapman. Do you have a kid in college getting ready to head to college? Do you need to know what's going on with FAFSA? What about student loans? What about student loan forgiveness? Well, we're going to tackle all of that information today, joining me as returning guest, ms Deborah Paul, and she's going to be able to fill in all those gaps, answer those questions. I have two kids in college. I'm confused. If you're confused, hopefully by the end of this episode we'll be enlightened and we'll know what to do going forward.
Speaker 2:Welcome, deborah, welcome back. Thanks, kim, glad to be here. I'm glad to have you right now. It's time for kids to go back to school. There have been so many changes in the news that it's kind of hard to keep up with. Like you know what's going on with FAFSA, what's going on with student loan forgiveness, and so I know that you are going to be the right person that can give us some good, concrete information and if you're having fog brain about this situation, hopefully you know you'll be able to give us those answers. So let's just catch up. What's been going on.
Speaker 1:There's a lot going on and hopefully I can provide those answers that students and parents who are anxiously awaiting the start of the fall semester can get. It's been a busy FAFSA season. Fafsa season usually opens on October 1st of every year for the next award year, but they made major, major changes to the FAFSA for the 24-25 academic year so it didn't roll out October 1st of 2023 as expected. So there were delays, major delays, and by law it had to roll out by December 31st. So I think on December 30th they rolled it out Ready or not.
Speaker 1:Ready or not. It was out there and students and parents in early January started completing the FAFSA. Then they noticed there were some issues with the processing of the financial aid information. So that caused some delays and colleges really didn't start getting that information until late February, early March, which affects decisions of some students, because students want to know early in the spring where they're going to go, what financial aid package College A versus College B is offering them and so forth. So that did cause some anxiety and anxiousness among students and parents of what do I do, where do I go, how much will I get, and that sort of thing. So now they've done all of that.
Speaker 1:There were some changes. One of the major changes is that the FAFSA was too long. We heard that repeatedly. It takes me all day to complete it. So the FAFSA was shortened through the simplification efforts on that. And one thing that really helped now is the IRS data retrieval system. It was an option before but now once a student enters their information and the parents' information in SSN, it automatically goes through the IRS database and pulls that information from the tax return. So you don't have to get your tax return and look on line 15 for the AGI or line 60 for disinformation of that information. So that's been helpful. And it also one major change was we all knew about EFC, which is an acronym for expected family contribution. Well, there's no longer EFC. It changed to SAI, which is Student Aid Index. With the formulas and all the changes that have made, more students are supposed to qualify for need-based federal aid. So you fill out the FAFSA. It determines your eligibility for several programs, mainly the Pell Grant and the student loan programs.
Speaker 2:Well, let me back up just a second. So I filled out a number of FAFSAs in my day and you mentioned the time in terms of the change. I wish I knew I could have complained. I would have put that in myself. I just sucked it up and did it. I remember when you log in, it will tell you you need at least 30 minutes and I imagine that can be tweaked just according to how tech savvy you are and how readily you have that information. So if it was, on average, 30 minutes before, can you give us an idea in terms of what should we expect now? Is it 15 minutes, is it 10 minutes, is it five minutes and I know it's going to vary from person to person, but on average, are they even putting that on the screen that it should be 15 minutes now?
Speaker 1:I'm really not sure what you know and it depends on your preparedness If you have all of your information, just in case you have your tax documents. Parents and students make a lot of mistakes with the birthday Is it October 1st or October 2nd, the year the child was born, and all of those things can cause delays. So I always advise students and parents when you're getting ready to complete the FAFSA, do a cursory look of what they're asking for. If you're not sure, have your child's social security number, have the birth certificate or the birth date to make those things sure they're written down. And a lot of times the parents are filling out the form for the students, all right. So when it says birthday, they may mistakenly put in their birthday for the student, which causes errors.
Speaker 1:One of the things that we see with the FAFSA is the name.
Speaker 1:Students are also filling out completing the ACT form to take the ACT exam.
Speaker 1:So when you're looking at applying for federal and state aid because we use the application from the FAFSA for TOPS Tail Opportunity Program for Students so when a student fills out the FAFSA, we need them to use their correct given name on their birth certificate.
Speaker 1:Now, just this week I was helping in the office and we were trying to match the student's file for TOPS and found out her name on the FAFSA is Lillian, okay, but then on the ACT she goes by Lily and then she was something else on the student transcript system for her high school diploma. So the computer is really really smart, but they can't match Lily to Lil to Lillian Okay, that's three different names. So we advise them to use the same name on all of the documents that they're completing, because it can cause a delay in processing. But once they have all the documents in, the form is simplified. They've taken out some things that they found were unnecessary. So I just think if they have everything, it shouldn't take an inordinate amount of time to get it done, but just plan and also always say pack your patience when you're dealing with forms and that sort of thing.
Speaker 2:Absolutely. Was there any key reason that they decided to revamp it? I would imagine it would be more than just consumers complaining that it's taking 30 minutes of their day every year for the next four years. Was there any particular reason?
Speaker 1:Well, they felt some information was no longer needed to determine eligibility for students and by simplifying it and changing from EFC to SAI, more students would qualify for the Pell Grant. So those were some of the major changes behind making the FAFSA shorter and able for more students to get need-based aid to attend post-secondary school, whether it's at the vocational, technical level, two-year, four-year, that sort of thing. So one thing is the maximum Pell Grant has increased for the 24-25 award year. A student who has a zero or a negative SAI can get $7,395. So that's a pretty hefty amount, particularly if you have a student who's going, to say, a two-year campus and they're staying at home. That will cover the majority of their costs with the Pell Grant. So more students should qualify. They've taken out questions on assets and that sort of thing, so it makes the form more user-friendly and able for more students to get Pell Grant.
Speaker 2:Turnaround time. Previously I remember I'd fill it out maybe on a Monday and generally within maybe two business days. I'd say it was a pretty quick turnaround in terms of them saying it's been completed, and I know that I'd have to contact the actual university to get what my student would be required to pay or would be responsible for. What has that turnaround time been like since the changes have been incorporated?
Speaker 1:Well, a couple of months ago was longer, but now they're back on that rotation because what happens when the student completes the FAFSA, as you said, the student and parent get back their notification and then the notification is also sent to the college. So then the college will process that. So they're back to normal on that particular schedule. And so you know the FAFSA when you think about it. Students all across the country are completing this form and Louisiana had a big change this year where, starting with 24, 25 high school graduates, it's no longer a high school graduation requirement for public school students. So we were up to 70-something percent of all high school graduates completing the FAFSA. We were always first or second in the nation battling with Tennessee on FAFSA completion, so our numbers are probably going to go down.
Speaker 1:There were various reasons that the state passed that law, but that's what we have to deal with now. Some students who were taking the ACT maybe weren't planning to go to college, maybe they were going to the military or just not deciding on post-secondary at that time. So there are some opponents that said it brought down Louisiana's ACT average. So we'll have to probably get a couple of years of data to see where that actually is. But for this year the results at the end of July we were, I think, in third or fourth place, with 60-something percent of high school seniors completing the FAFSA.
Speaker 1:So hopefully the efforts that we had in the past will continue to inspire those students, because students may have an idea of what they're going to do oh, I'm not going to college. And then last minute decision oh, I'm going to do. Oh, I'm not going to college. And then last minute decision oh, I'm going to college. So at least if you have the FAFSA completed, that's one of the first steps you need, and particularly if you're going to a community college, their enrollment period's a little bit more lenient and they take students closer to registration as opposed to maybe some of your elite or private colleges or four-year universities that have enrollment caps.
Speaker 2:And I know you said that October was ideally that target date and, like this year or should I say in 2024, 2023, they ran into some issues. And what can we expect this year? Is it going to be ready for October? And then, even if it is ready, what is like the ultimate deadline that students want to make sure they have that completed by for the upcoming school year?
Speaker 1:Well, for those who will be starting their senior year this fall, october 1st is still proposed and I think the Department of Education is really extending its efforts to get it ready for October 1st because there was a lot of backlash. It was, you know, congress got involved. Even the president of the United States got involved, assuring parents and students that we're going to work these issues out and get it ready. So they're really looking at October 1st for it to be ready. Always, students and parents should look at what schools they're applying for and if they're applying for state aid In Louisiana, we want you to have it filled out by July 1st, which is after your high school graduation, to ensure that we can process your tops if you're looking to get that award for school. But some colleges have earlier deadlines, like February of March.
Speaker 1:If you're senior year, particularly colleges that have limited institutional aid, they want you to have that application in Once you apply for admissions.
Speaker 1:I always say go ahead and apply for financial aid, but apply for admissions first, because in some cases the college will not process your financial aid. If you haven't applied, you can send your financial aid information to a college but when they look at your record, oh, he hasn't or she hasn't applied for admissions. Here they're processing something that may not materialize, so it's always good apply for admissions and then apply for financial aid so that you can get an award notification from that school even though you haven't totally decided to go there. In some campuses like, for instance, my youngest child went out of state and this has been a couple of years ago, but he had to have an admissions deposit in with his scholarship offer, like March of his senior year. So it just depends on the school and check and see what their timeline is for that, to see where you should be as far as applying for filling out the FAFSA and applying for even scholarships. Some scholarship deadlines may be as early as December 1st of your senior year.
Speaker 2:As early as December 1st of your senior year. Now you mentioned that there's been some changes in terms of what students may be awarded in terms of grants, that that number has increased for most families. Has there been any change in terms of the amount for the federal student loans, for example, I believe freshmen can get up to a max of $5,500, and then, when they have enough hours to be a sophomore, $6,500, so forth and so on. Have those numbers changed at all?
Speaker 1:Not for the upcoming year Now. Years ago it used to be $2,625 for freshmen and then that went up to $3,500 plus the unsubsidized loans. So those numbers have not gone up. You know, we always tell students look at all need-based sources. You know, a lot of times students will look at scholarships and apply for a lot of national awards and if you're competing with 50,000 students when you're looking at I would just say maybe like a national retailer award, and if you read the fine print it'll say we expect 50,000 applications, that we're going to give out six awards, your chances aren't that great. Six out of 50,000.
Speaker 1:But then look locally. You know maybe where your parents were, your parents' employer, some of you know we have a big petrochemical industry in Louisiana. We have, you know, hospitals and we have a lot of private sector jobs that offer scholarships to children or grandchildren of employees there and even nonprofit organizations. So look locally because, for instance, my sorority sponsors a local scholarship and this is for students. Just I'll just use East Baton Rouge Parish. So we give out six $1,000 awards which can help with a lot going to college, and so we normally don't get over 30 applicants. So now six out of 30.
Speaker 1:Odds are pretty good, Odds are pretty good. You're writing an essay, doing a short interview, boom $1,000. So look at sororities, fraternities, the other nonprofit organizations that provide those scholarship aids, and start local and then work your way up and I think you can look at maximize your resource, maximize your efforts and get a lot of little ones which may equate to helping out with, you know, furnishing your dorm or getting books or a new laptop, a printer and those things that are needed for college.
Speaker 2:The name of this session should be Changes or Confusion, because I definitely have a question. I was literally listening to orientation for my child, because she's transferring to LSU, and something I heard kind of threw me because I was like have I been looking at it wrong or did they change it? And what I'm referring to is when you apply for a student loan, typically it's for your. I always thought it was for the fall, the spring and then the summer that comes after the spring. But what I heard, or at least what I thought I heard, is that actually you're applying for the summer, the fall and then the spring. Can you clarify that for me specifically? Right?
Speaker 1:Well, that can be quite confusing. So you have an academic year, so academic year begins usually July 1st through June 30th. Some schools put summer as a header. So in the case of LSU, which is probably one of the few post-secondary schools in Louisiana that put summer at the beginning of the academic year, and most schools use summer as a trailer. So it depends on the school.
Speaker 2:It depends on the school.
Speaker 1:So for instance, lsu, if you're eligible for $3,500 and you indicate that I'm going to summer school, they will divide that $3,500 between summer, fall and spring. If you're going to say Southeastern or Southern University and summer is a trailer there, and you don't indicate you're going to say Southeastern or Southern University and summer is a trailer there and you don't indicate you're going to summer school, you will divide that $3,500 between fall and spring. So it just depends Summer can be a header or a trailer, but in most schools summer is a trailer.
Speaker 1:But, LSU is different, okay.
Speaker 2:So that really threw me, because when my son was going to school and I always dealt with his, it was always the trail, it was always fall, spring and summer and like. I said I just learned this in orientation for her this week and they did summer as the header and I was like did this change with FAFSA?
Speaker 1:Have I been confused, so I'm glad that you clarified that I worked in the LSU student aid office in the late 90s and we used to start processing FAS for early February because some students wanted to go to summer school. So we had to get them ready and then their loan amount. So it's a little bit different, because if you know you're not going to summer school, then that's cool, but if you go to summer school you're going to get a smaller loan for each semester summer, fall and spring because you're already dividing it by three, Whereas most students who just do fall and spring, their amounts are more for those two semesters and then if they decide later to go to summer school, then they're having to find more funds on how to finance that. So it's different. Yeah, it's tricky, it is it can be tricky.
Speaker 2:Okay, so any other changes that we can look forward to in terms of now that we're right on the brink of the fall semester starting? Can schools and students expect to have their awards delayed because of the changes?
Speaker 1:I think the schools are pretty much caught up. I work at the TOPS office, so LSU fee bills went out and they're due soon and we've been working with them. So I think things are getting back to normal. And then the federal government provided grants for organizations to help students complete the FAFSA. For instance, with our agency we have gone all across the state. Across the state Some colleges have had Zoom calls or open extended hours in the afternoons to help evenings, to help students and parents make sure that their financial aid application is in and it's done correctly, if they have corrections and that sort of thing. So we've done an all-out effort to do that. And then, for instance, we have our website, mylawsfordlagov, where students can do a virtual office hour. So if they're still having questions they can schedule that and we will have a representative work with them one-on-one for that particular amount of time needed to make sure everything is done. So I think we're gearing up for a pretty good fall.
Speaker 2:And something else I've learned for you because from you definitely my right-hand person when it comes to all things student loans once the student loan is received or dispersed by the school, I've learned that it can vary from institution to institution in terms of if a student is going to receive an actual refund after they've taken care of their tuition room and boards or any other expenses or obligations. How can a student find out, based on their university, when they can expect that particular refund? Because obviously we found out, or I found out, lsu's obviously is a lot quicker than the university that my son attended, because it would be months and months after the school, after the semester, started.
Speaker 1:It's the school and LSU is different in that also, At LSU, if you're receiving a refund once your tuition and visas have been met, the refund goes to the student prior to the first day of class. So those students get their money early. Some schools that may be concerned that students would get that money and not stay enrolled will wait until the semester has started. So it just depends. Schools have a default rate so that could factor in as to when they decide to disperse those funds. Lsu has, you know, they give out more loans than Pell Grants because of the population of the student, well, the diversity of the student body and the income, the income and assets of the students who attend there. So LSU has a low default rate and they have been successful in getting students to repay their student loans and they do an excellent job at entrance and exit counseling. So those students pay back their loans. So they have a lot of students from LSU live off campus. So by giving them their money at the beginning of the semester, some of them will take it and pay their, say they're living off campus, pay their rent for the rest of the semester, as opposed to not having to wait and borrow money from somewhere else to make ends meet or they can have their books and that sort of thing done. Other schools who are concerned that students might get that money and not complete the semester or term sometimes wait until classes have started and they wait until after the 14th class day, which is usually two or three weeks into the semester, before they disperse those funds. So it varies from school to school and they can check all that out during orientation. They'll give them that information and so forth.
Speaker 1:But each student who receives a federal direct student loan is required to do entrance counseling and it tells them about the responsibilities of the student borrower. And a lot of times students just you know, yeah, check yes and say I agree, I understand, and they really don't. And the same thing when a student gets a TOPS award, I always say students and parents spend a lot of time from eighth grade, because sometimes your eighth grade classes can count as high school classes. They spend a lot of time getting tops I'm getting tops, I'm getting tops and monitoring the ACT scores and the GPA in the courses and then, once they get the rights and responsibilities, they're like I'm done, they have tops. And then after the first semester when the student had too much fun during football season and their GPA is a 1.9, and then we tell them you're suspended from TOPS. What do you mean? Well, if you had read the rights and responsibilities, it says if you go below a 2.0, you'll be on suspension until you get your GPA back up.
Speaker 1:But they didn't read that part because they put all their eggs into getting TOPS and then, once they got it, they just thought okay, I'll always have it for four years of school. And that's not necessarily the truth. So read the fine print, particularly when you're looking at what the responsibilities are, the requirements to keep it. Same thing with student loans. You can receive a student loan and if you don't meet the satisfactory academic progress, the SAP requirements, you could lose your student loan because you have to earn 66% of the hours that you enroll in. So if you enroll in 12 hours and you pass in three, you're going to end up in trouble.
Speaker 2:And while I would like to think that if some parents and college students are listening to this, they're going to do an about phase and go back and read those disclosures, but we know that that's probably not going to happen. So are there any two or three top things that are important for every student and parent to know that has chosen, has elected, not to really read the fine print that you think it's important for every parent and student to be aware of?
Speaker 1:Stay in contact. You know for students, visit your academic advisor. Get to know who that is. If you're having trouble in a class, don't wait until finals to say I don't understand this trigonometry or calculus course. There's free tutoring on college campus. That could be a stigma. Oh, you're going to tutoring. You're not high school anymore, but a lot of schools are going to peer tutoring, which you know you're talking to someone on your age level. That can really help you understand and break it down. Use common terminology. The counseling center is your friend. Go to the counseling center, see what resources, because a lot of students suffer because they don't have that transition from high school to college.
Speaker 1:You know, in high school if a student's overslept, the parent was like you know, helen or Johnny, wake up, you're going to be late for school. Well, when you're on college campus you have to set your alarm clock and if you hit snooze too many times you might miss that class. Or if you live off campus and you miss your ride, your car's not working or your battery's dead or you miss the bus, you might miss class. So the time, the management and then the balance, because when you think, in high school you're in class from seven to three. If you're in college and you're only enrolled in 12 hours, that means you're only going to class 12 hours a week in a 40 hour work week. So that means a lot of free time. Are you sleeping too much? Are you staying at the rec center because they have a really nice lazy pool there, or are you exploring all of the options in the food court? So you have to really balance. When are you going to study? You're only in class 12 hours a week, but you have to plan for when are you going to study.
Speaker 1:If you're in a dormitory and you have a roommate and you've always had your own room, how are you working that out with your roommate? Do you have a roommate contract, like on the Big Bang Theory Roommate contract? So all of those things matter. Are you eating right? So the transition from high school to college is real and some students aren't prepared for that.
Speaker 1:And then if they're going from small high school to LSU, for instance, that's a small fish in a big pond. Are you okay with that? So, looking at all of that, or do you miss your cat or your dog that you love home? Do you miss your parents? So all of those things can cause students to not have the best success. So go to the counseling center and even across campus they have workshops. You know how to study smarter, not longer, how to transition from being away from home, and those kinds of things which all help with academic success. So use the tools and the resources that are available on the college campus. Ask questions, don't wait till it's too late. Students appeal their tops because they've gone through some traumatic experiences which, if they had used the resources on campus, maybe some of those could have been alleviated. So I just you know, use the resources on campus, ask questions and read the fine print. I promise some of the top three things I would say.
Speaker 2:OK, and just to kind of round up before we switch gears from FAFSA is there, if I'm going to school in the fall? Is there an absolute deadline, or when is it just too late for me to complete a FAFSA?
Speaker 1:a FAFSA. Well, the FAFSA for the 24-25 academic year, it's good, from October 1 of 23 until the end of the academic year, which is June of 25. So if you start college this fall and you have not completed a FAFSA and you're paying on your own, which is fine, you can fill out a FAFSA anytime during the academic year. So say, you decide November 1st, I'm going to apply for financial aid for this year, you've paid your tuition and then, oh, you have a zero SAI. You qualify for a full Pell Grant, so you're going to get the full Pell Grant amount for the fall at that period. Oh, wow, so you can do it during the academic year. Now, if you're applying for a loan, in most cases loans have to be dispersed no later than 60 days after the end of the academic year. So if you apply for a loan in April of your freshman year, you're still within that 60 days before the academic year ends to apply to receive the proceeds from that.
Speaker 2:And if I get a student loan and it's for $10,000, but my tuition is only $8,000. So ideally that's going to come to me as a $2,000 refund, do I have to take that extra $2,000? What can I do with it if I don't want to have $10,000 worth of debt, if I only need to have $8,000?
Speaker 1:Borrow only what you need, borrow responsibly, and that's a big thing. Borrow only what you need, borrow responsibly, and that's a big thing. And you know, 18-year-olds now they're, I think, adding financial literacy to some of the high school curriculums.
Speaker 1:Yes, you have to jumpstart right, and that's very needed because students don't have an idea of what things cost. You know, when you're in high school mom, dad, auntie, cousin, big sister, godmother I need X amount of dollars. So here you go and you know students spend an extraordinary amount of money on things like prom dresses and tennis shoes and phones and hairstyles and all of that, and they don't really know the value of that. Now, when they start working, they're like oh my God.
Speaker 2:And spending their own money.
Speaker 1:Yeah, they're like what is FICA and you know who's that. And I'm giving all my money.
Speaker 2:We're not paying taxes, yeah.
Speaker 1:So I think financial literacy is very important, but borrow responsibly, because that follows you. So if you borrow the max and you really don't need it once you graduate and interest counseling touches on that and at the end, exit counseling definitely makes it real you don't want to be saddled with an extraordinary amount of debt if you don't have to, because when you're starting out as a young college graduate, you may want to get a new car or a car. They do credit checks if you want to rent an apartment, if you have to buy a house, to buy a house. And so I always say, when you look at borrowing, for each $10,000 that you borrow, you could expect to pay about a hundred dollars a month when you go into repayment. So if you borrow $5,000, I'm sorry, $50,000, you're looking at about $500 a month in repayment. It's just a regular repayment option. So borrow wise that you don't think about it when you're 18, 19, 20 years old, but when you get to be 23 and 24 and your student loan debt is more than your car.
Speaker 2:Note that's a problem and that's a good way to transition into talking about when should students especially if you're new to college and getting student loans when should they expect to have to start paying back that money, that student loan money?
Speaker 1:With the federal direct student loan program, repayment starts six months after you graduate or are no longer enrolled at least half time. So if you go to college for two years and you say this is not for me, and after May you're just like, okay, I'm not going back to school in August, november will roll around because that's your six months, and then you have to start repaying, unless you go into deferment or forbearance, which we can talk about a little bit later. So it's real and there are options for students who can't pay, you know, like consolidation and other things, but you start paying back six months after you graduate or are no longer enrolled. At least have time.
Speaker 2:So if I take a six-month break, or maybe even a year break, and then I go back to school, re-enroll, maybe I finish my bachelor's, and there's six months comes by, I'm working, and then I decide, maybe a year later I want to go back and get my master's or get another degree, can I then go back to not having to pay? How does that work?
Speaker 1:Right. So if a student re-enrolls, at least have time, they can put those loans in a deferment status. So deferment means that you're not making any payments because you're back in school at least have time. There are other reasons for deferment Unemployment or serious illness or injury and those if you go into the military those kinds of things. You can put your loan in deferment, but it doesn't excuse you from having to repay it. It just means that you're on pause and you're not paying during that period of time. But it's real.
Speaker 2:All right, and so we talked a little bit about deferment. Let's talk about forbearance, or what's the difference between a deferment and forbearance?
Speaker 1:OK, so deferment and forbearance, okay so a deferment means that you're on an authorized pause from paying your loan. Maybe you had an injury that stopped you from working for six months or for a year, or you went back to school. So you're not making any payments and you're not being charged interest and so forth. Forbearance means you just can't afford to make the payments that you're required to make. So usually in forbearance students will pay the interest on the loan and not pay the actual payment, which will reduce their payment for a specified period of time. Maybe you had to switch from a higher-paying job to something lower-paying because of the economy or your job title and that sort of thing. So forbearance means that you're only paying a small part, which will just continue to. You know your principal is still there. So there are options to help students. But students need to just not ignore those and say I'm just not paying anything and then when that happens, then you run into default.
Speaker 2:So we've covered, you know, FAFSA, those students that are on their journey into college, hopefully getting scholarships and Pell Grants and maybe even student loans. We've covered those that have those student loans that are in school now. But I think there is a whole host of listeners or population that want to know about student loan forgiveness. A couple of years ago, that carrot was dangled in front of many of us saying, hey, there's an opportunity that maybe we can just wipe away $10,000 or $20,000 of your debt. And of course, you know, through politics and government stepping in, that didn't happen, and so a lot of us are sitting here waiting to see is it ever going to happen? Where are we now with student loan forgiveness? What has happened since that initial proposal was rejected by Congress?
Speaker 1:Well, there's something going on where they'll be ruling soon to see if what President Biden has done with relief. So we'll talk about public service forgiveness first. So that's still available to borrowers who worked, say, at a nonprofit organization city, state or federal government positions, nonprofits, those sort of things so that still works. If you paid on your loan for 10 years, you can get public student, public service, student loan forgiveness. So I know several people, friends and family members. I have a niece who's now an assistant principal and she was like she called and she was like Angie. I got this in the mail. I don't even know if this is true, but she had paid for 10 years and she's still old. I think 50,000 plus and all that was forgiven and I said you just got a raise.
Speaker 1:So, yeah, so. So student loan public service services available, but there are a lot of options they're looking at for regular forgiveness for students who just can't pay. You know, for whatever reasons. They're looking at taking action on that. Since 2005, which is almost 20 years, and you still owe over a certain amount, that's the group they're looking at helping for those who had student loans or parent loans over that period of time. It's still to be decided, so they're still trying to finalize the student debt relief package. So the jury is still out to see what will happen in this administration regarding that.
Speaker 2:You mentioned nonprofit. Obviously, if you work for a nonprofit and you've been paid on it for 10 years, then you're most likely eligible, and I'm not sure if this is a question that you can answer. But let's say, for example, you may not necessarily work, your employer's not on that list, because there is a list of employers that you can check and say hey, is my company listed here? Perhaps your company is not listed on there, but the work you do might be considered non-profit work. Is there an option to appeal?
Speaker 1:I'm not sure, because I think they look at the 501c3 status of the organization. So maybe they're operating as a nonprofit but they haven't received all of the federal approvals to get their 501c3. So you're working as a nonprofit employee but your company, or your organization rather, has not received all of the approvals that are necessary, then that wouldn't count. What I tell students who are doing public service forgiveness is get your employment verification every year. So even if you're in the same job because you may work, say, for City of Baton Rouge for three years and then you switch to state, government and federal Don't wait until you've worked for the federal government. And now you have to go back six years to the city and say I need verification that I worked here from 2012 to 2015. And say I need verification that I worked here from 2012 to 2015. At the end of every year, your anniversary at that organization that company or the agency ask them for that.
Speaker 1:There's a public service forgiveness form you can go online and download. Get that form, get it signed by the HR. So you're building your folder. So at the end of 10 years you may have three years here, four there and four somewhere else. So that gives end of 10 years. You may have three years here, four there and four somewhere else. So that gives you your 10 years to apply, because you will need verification for each year of employment that you're seeking the forgiveness for. So with the death relief, like I said, they're aiming to help certain borrowers, those who have borrowed, who still owe more than $20,000 after paying on their loans for 20 years. That's the main group that they're looking at those who had consolidation loans that right now what they owe is greater than what they've borrowed. Those are the students that the Biden-Harris administration is trying to assist.
Speaker 2:And will they reach out to those borrowers? Or should we still be paying attention to the news? How often maybe should we check for updates? And then where would we find that information? To make sure that you know, of course there's Google, but you know, if you go on Google you'll find so many different answers. Where what's the best place to get up to date, accurate information?
Speaker 1:OK, the federal government has a really good website called studentaidedgov I'm sorry, studentaidgov, it's T-U-D-E-N-T-A-I-Dgov and there they can find lots of all the information regarding student loan relief. Deadline of August 30th if students want to opt out. But who would opt out if you owe that much money, right? So if you want to be included in the potential debt relief, you don't have to do anything only if you want to opt out.
Speaker 1:So if you don't want to be part of it, then you need to contact your student loan servicer by August 30th of this year and let them know. Otherwise you'll be included in the debt relief anything that passes from the administration Congress right.
Speaker 1:So they're emailing all borrowers to tell them about the potential student loan debt relief. Whether or not you receive an email, you can still follow the opt-out instructions, but if you want to be included, then you don't have to do anything at this point. So they're looking at borrowers who borrow from the direct student loan program and those who have a balance that's greater than what they originally started with, and that those who've been paying on their loans prior to July 1st of 2005. So that's basically 19 years.
Speaker 2:Are there? So in the mail I get tons of information about consolidating student loans. I guess my question is is there any action that a student loan borrower could take that would automatically disqualify them from having student loan forgiveness, for example? If I do consolidate that, does that impact how long I've been paying on the loans? Does it start all over again from day one with this new lender?
Speaker 1:Consolidation. You know it helps students who have borrowed like over $50,000. So it extends the repayment period from like 10 to 25 years, because a basic student loan repayment schedule is for 10 years. Whether you borrow $10,000 or $50,000, you're on a 10-year repayment schedule is for 10 years. Whether you borrow $10,000 or $50,000, you're on a 10-year repayment schedule. So if you consolidate, that can extend it up to 25 years. So those years still count. It's just giving you a longer amount of time. So if you have a longer amount of time your note is probably going to decrease. It's like buying a house. If you say you want to buy your house and pay for it in 10 years, then your note's like oh my God. But if you say I want to do 25 or 30 years, then that reduces what your monthly note would be. So that's the major benefit for consolidation loans giving the student more time to pay their loan. But those years still count.
Speaker 2:And back to student loan forgiveness. If you have a parent that has their own student loans and then they're also a cosigner for their children, their child or their children's student loans, can that parent apply for themselves and then the students as well, or is it each individual, whoever the primary borrower is?
Speaker 1:Okay, for parent loans that is in the parent's name and the parent may have received a cosigner, so they're responsible for the parent loan. With the federal direct student loan students don't have a cosigner. But if a student borrowed from a private loan source, that's a different case. So if they borrowed from a private loan source and there are some lenders who borrow private loans, particularly for students who go to high cost institutions, and the direct loans they've exceeded or they've maxed out on those limits, then yes, they would go through a private loan and a private loan would have probably required a cosigner and then that would be different. But the private loans are not considered under the student loan debt relief. Ok, so private loans are not. Yeah, the debt relief is for the federal direct student loans and the federal direct parent loans, not for private loans. All right?
Speaker 2:Well, and as we get ready to wrap up this session, are there any other changes that we should be looking for, at least in the next six months, in terms of FAFSA, student loan forgiveness, anything that you know that may be coming down the pike, that we need to really kind of be paying attention to in the next six months? I would say the debt relief package that's being proposed.
Speaker 1:Check the studentaidgov site for updates regarding that. Stay in contact with your servicer if you're paying back your student loan. Don't skip payments, thinking, oh, I'm waiting on debt relief because debt relief may not come. Hopefully it does, which would really improve the financial livelihood of millions of students across the country. But don't wait on that. Continue making payments.
Speaker 1:If you're having trouble, look see if you qualify for a deferment or forbearance or you can do the income contingent repayment plan based on your income, where you would pay lower because you're making a lower salary. So just stay tuned for that. The FAFSA for 25-26 should come out October 1st. Just stay tuned on that with the studentaidgov. I go to studentaidgov all the time and if that's something I know and I don't look at some of those sites that want to charge you for something or let me help you get out of your student loan debt. Students should be very wary of that students and parents because most of the times they're charging you a fee for something that you can do on your own. Contact your lender, email your lender, seek relief and other options available through the federal government.
Speaker 2:Well, it seems like this is a topic that will never get old, and we'll probably have you back in another six months just to see what changes, especially with FAFSA, if they have everything together, if there are any new quirks or hangups that parents and students need to be aware of. I think there are millions of people that are sitting on the edge of their seat waiting to see if we will ever have student loan forgiveness and yes, I say we and so thank you so much for coming back, returning and being the expert that you are giving us all this good information. I know that I will have you back. As a matter of fact, I'll just get you your own little parking spot. So, until as long as there's student loan debt out there, we're going to need you to come and keep us up to date. So thank you again for joining me. Thank you, Kim. I appreciate it Anytime. I appreciate it.
Speaker 2:Anytime. I want to leave you with some essential tips to help you navigate the financial aid process and manage your student loans more effectively. First, start early. Begin the FAFSA application process as soon as possible. Early submission can increase your chances of receiving more financial aid, and the sooner you have your information, the better off you will be when it comes to planning. Gather your documentation. Have all necessary documents ready before you start the FAFSA. Although they've shortened the process, you'll be a lot smoother throughout the process if you are prepared. Double-check your information. Ensure all your information entered on the FAFSA is accurate. Remember, as Ms DeBoer mentioned, if you use multiple names Lily, lillian and Lil that can slow down the process of getting your information and it may even inhibit you from being able to get your award simply because there's a hang-up over who's the correct person. And, of course, to learn more, check out neighborsfcuorg forward slash financial education to learn more on how to use the money you have, make the money you need and save the money you want.
