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Amie:  CSLF Podcast 7 – Decoding Your Financial Aid Award

Mariana:  Welcome to CSLF’s informational podcast series. The Connecticut Student Loan Foundation, or CSLF, is a non-profit organization dedicated to providing access to funding for higher education through customized and high quality service. We hope to be able to provide you with regular installments of useful, accurate, and up to date student loan and financial aid information. Please feel free to contact us with your questions and comments at our MySpace profile at www.myspace.com/first_rate. You can find our blog at cslf.wordpress.com or find us on Facebook. And, as always, you can visit www.cslf.com. We are your hosts Mariana Evica –

Amie:  — and Amie Aragones.

Amie: It’s finally that time of year. Financial aid award packages are in the mail and soon colleges will be expecting your deposit and commitment to attend. Once you’ve got a few of those financial aid award letters in your hands, how do you decide what’s the best choice for you? Before you can make an informed decision, you must decode the financial aid awards and compare the offers.

Mariana: Unfortunately, financial aid offices are not currently bound by rules making the presentation of financial aid information in award letters uniform across schools, so making comparisons can be tough. Some national financial aid organizations have come up with guidelines for schools to follow, but often you may still be missing important information.

Amie: So, how do you decode the financial aid award to compare the options you have?

First, you have to understand the costs associated with attending each school. Many schools don’t provide the “Cost of Attendance” in their financial aid award letters, but it is a crucial piece of information. This should include direct costs paid to the school, such as tuition, fees, room and board, and also “indirect” costs, such as books, supplies, travel or transportation, and incidental living expenses. If it isn’t listed, contact the school’s financial aid office for the total cost of attendance. This is the “sticker price” of the school, before financial aid is factored in.

Mariana: Next, you should see a list of the types of aid you have been awarded. The first thing you need to determine is which portion of your total award is gift aid, and which portion is self-help. Your total financial aid award may be a combination of types of aid, with different requirements and obligations. It isn’t simply an amount deducted from the costs.

Amie: Gift aid is award money that you do NOT need to pay back, and may include scholarships and grants. This is “free money”, and you want to see as much of it as possible. This doesn’t mean there aren’t requirements you need to meet, though. For instance, if a scholarship requires you to maintain a certain grade point average or take a certain number of classes and you fail to do so, you might lose those funds. Make sure you know what is required to keep your scholarship and grant funding.

If you take the Cost of Attendance and subtract out the amount you are awarded in gift aid, this is the true cost to you, and may be one of the most important figures for you to compare from school to school.

Mariana: Self-help is financial aid that you basically have to earn or pay for, including work-study funds and student loans. Loans may not be money you’re expected to pay toward the cost upfront, but it is still money that you will have to repay. It just comes out of your pocket in the future. You’ll want to minimize the amount of debt you will have when you graduate, because you don’t want to start off too far in the hole.

Also, you need to understand the kinds of loans that may be awarded to you. Be sure to listen to our other podcasts for more details on the types of student loans, but here are a few things you should keep in mind now when looking at your financial aid awards.

Amie: If you are considering taking out loans for school, always take any federal loans you qualify for first. They usually have lower interest rates with protections built in for students, like more flexible repayment terms. You can recognize these in your financial aid award letter by name. They are the federal Stafford Loan and the federal Perkins Loan.

Amie: You may also see a federal PLUS loan listed with your financial aid. This is a federal loan, but it is taken out by your parents, and they must agree to be responsible for that debt. If they don’t, or are not approved, that is another portion of your costs that you’ll have to cover another way.

Mariana: If you aren’t sure if all of the costs are being considered in the cost of attendance, or what types of aid you are getting, be sure to ask the financial aid office to clarify that for you.

Amie: What you need to look at is the true cost to you to attend each school, that is the cost of attendance minus gift aid, and compare. Will you need to pay more upfront or repay more in loans to attend one school instead of another?

Mariana: How will you pay for the balance due each year? Will you be over your head in debt when you graduate?

Amie: Of course there are many factors to consider when you are deciding which school to send that deposit to on May 1st, but these are only a few of the questions you’ll need to ask yourself when looking at how much of the cost of your education will come out of your pocket now, and how much will in the future.

Mariana: If you’d like more information on how to evaluate financial aid awards, the website www.financialaidletter.com has some great information and tools.

Amie: As always, you can call CSLF’s Training and Early Awareness Department at 1 -866-PLAN-4-IF, that’s 1-866-752-6443, and speak with someone who can help you decode your financial aid award.

Mariana:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation.

Amie:  The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana: For more information, visit our website at www.cslf.com or come to our profile on MySpace at www.myspace.com/first_rate. And you can also read our blog at cslf.wordpress.com.

Amie:  You can also find us on Facebook.

Mariana:  Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements. CSLF reserves the right to discontinue or modify benefits at any time without prior notice.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  April 2009.

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In an open letter to industry partners submitted to be published to the NASFAA (National Association of Financial Aid Administrators) website, CSLF president Mark Valenti responds powerfully to recent media coverage in one Connecticut newspaper in order to set the record straight. With over $150,000 to lend, a pending systems conversion to bring state-of-the-art products [...]

These posts are in response to recent press regarding The Connecticut Student Loan Foundation. In accordance with CSLF’s business practices, we are posting our responses. We hope they reveal a continuity of ethical, market-appropriate strategies in as timely and transparent fashion as possible.

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CONNECTICUT STUDENT LOAN FOUNDATION FACT SHEET

CT Student Loan Foundation – Overview The Connecticut Student Loan [...]

Transcript

Amie:  CSLF Podcast 6 – Can Shopping Around for a Student Loan Hurt My Credit?

Mariana:  Welcome to CSLF’s informational podcast series. The Connecticut Student Loan Foundation, or CSLF, is a non-profit organization dedicated to providing access to funding for higher education through customized and high quality service. We hope to be able to provide you with regular installments of useful, accurate, and up to date student loan and financial aid information. Please feel free to contact us with your questions and comments at our MySpace profile at www.myspace.com/first_rate or visit our website at www.cslf.com. Also drop us a line at alternativeoutreach@mail.cslf.org. And you can find our new blog at cslf.wordpress.com – you can join us there and also on Facebook! We have a fan page and groups for borrowers, parents and financial aid professionals. We are your hosts Mariana Evica –

Amie:  -- and Amie Aragones.

Amie: Today, we address the question:  Can shopping around for a student loan actually hurt my credit??

Mariana:  Recently, the New York Times ran an article by Ron Lieber with the title “Danger Lurks When Shopping for Student Loans”.  In the article, Lieber states that, while students have been encouraged to shop around while applying for student loans “there is just one problem with comparison shopping for a private student loan.  Doing so may damage your credit score.”

Amie:  Can shopping around for private student loans damage your credit score?  The short answer is “yes”, but - it doesn’t HAVE to!

Mariana:  First, let’s make it clear that we are referring to credit-based, private student loans, not the federal student loans you are awarded after filling out the FAFSA.  Private loans, also called alternative loans, should be used only after you have exhausted cheaper funding for school, such as grants, scholarships, and the less-expensive federal loans.

Amie:  Whether you qualify for a private student loan will depend on your credit score.  Some lenders also charge lower interest rates and fees to borrowers with better credit scores

Mariana:  Every time you apply for a private student loan, including having a lender run a pre-approval for rate quotes, your credit report and that of your co-signer, if you use one, receives an inquiry.  These inquiries can be treated by the credit bureau formula used to determine your credit score as negatives that will reduce your score.

Amie:  When shopping around for better interest rates, every point on your score counts, and many inquiries in a short period of time can have a BIG difference, resulting in a lower and lower score each time you call a new lender for a new quote! So, how can you be a responsible consumer by looking for the best rates and NOT damage your credit?  It requires a little bit of planning and homework, but it’s worth it.

Mariana:  Here is our step-by-step plan for shopping around for private student loans.  Details and links can be found on The Loan Geek's blog on MySpace at www.myspace.com/first_rate and on our new blog at cslf.wordpress.com.

Amie:  Number 1 - KNOW YOUR CREDIT SCORE BEFORE YOU START. A few years ago, the federal government passed legislation that requires the credit bureaus to provide a free copy of your credit report to you once a year.

Mariana:  While this will allow you to view your entire report, it will not give you your actual credit score.  But you can pay to get your credit score from each bureau for usually under $10 each.

Amie: Just go to each credit bureau’s website and you should be able to pay for access to your score online.  Be careful of the extras and add-on services they will try to sell you!  Keep in mind that depending on your changing credit activity, your score can change on a day to day basis.  But this will give a good idea of where you stand.

Mariana:  Number 2 - RESEARCH LENDERS. The first place to start is your school’s financial aid office.  Many have a list of preferred lenders with rates or practices the school finds favorable to their students.  However it was a few instances of impropriety regarding some schools’ preferred lenders that instigated the increase in shopping around to ensure students were getting the best deals, so you’ll also want to look for other lenders to compare. You can do a web search for lenders that provides private or alternative student loans.  There are also comparison tools at www.simpletuition.com and listings of lenders and their benefits at www.finaid.org.  That’s F-I-N-A-I-D dot org.  Lenders can be traditional banks, finance companies, or nonprofit organizations, such as the lending division of a state’s student loan guaranty agency.

Amie:  Number 3 - RESEARCH THE LENDING CRITERIA AND TERMS. Make sure you get as much information as possible without the lender running a credit check. Find out from the lender what their eligibility criteria and credit score ranges are. Find out what their rates and fees are.  Ask them how your credit score might affect the interest rate you will be offered. Know the terms and conditions before you even ask for a personalized rate quote, as these are the types of inquiries that can damage your credit.

Mariana:  It’s important to know that the sky’s the limit now on this type of loan.  In the last year many lenders stopped putting a cap on interest rates, meaning you might see double digit interest rates someday, especially if your credit is only so-so. Ask about the repayment terms, deferment, and other payment options. Find out if they offer any special discounts and how to qualify. You may also want to know which credit bureau the lender pulls your credit score from, since your score will vary a little between each credit bureau.

Amie:  Don’t be afraid to ask for clarification if things are unclear.  If you can, get the name and extension of a representative to call back in case you have further questions.

Amie: Number 4 - NARROW DOWN TO BEST OPTIONS. The absolute lowest interest rate is not always the best option.  Keep in mind the answers to the other questions from the previous step.  Don’t be afraid to seek out advice from trusted sources!  DO NOT ask for pre-approvals or apply to multiple places until you’ve narrowed down to the top few.

Mariana: Number 5 - WHEN YOU DO CHOOSE TO APPLY, (or ask for pre-approval checks) to get specific quotes from your top choices, do all of the applications within a week or two so it will appear more obvious on your credit report that those inquiries were all tied to shopping around for one loan.

Amie:  Fair Isaac, the company that developed the FICO credit score, has built into its formula that when you are shopping around for mortgages and car loans, the formula knows to treat multiple inquiries around the same time less harshly because you are probably shopping around for the best loan.  It has not extended that to inquiries for student loans, and instead treats it more like you’re looking to actually take out multiple loans.  If you must have multiple inquiries for student loans, clustering them together may help.

Mariana:  You shouldn’t be penalized for being a good consumer and researching the best student loan for you, but the reality is that it can hurt you if you’re not careful.  You always want to make sure you pay attention and tend to your credit history, because it will follow you for the rest of your life! For more information on how the FICO credit score works and how to maintain good credit, go to www.myfico.com.

Amie:  To get your annual free credit report, go to www.annualcreditreport.com.  Please note!  This is NOT the same as the commercials for freecreditreport.com!  That is a site run by one of the credit bureaus, and requires enrollment in one of their services. Of course, you can always check out our other podcasts and blogs for more information on student loans and financial aid.

Mariana:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation.

Amie:  The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana:  For more information, visit our website at www.cslf.com or come to our blog on MySpace at www.myspace.com/first_rate (just spell that out, that’s F-I-R-S-T underscore R-A-T-E), where you can provide feedback and ask more questions.  Those less familiar with MySpace might want to check out our new blog, where you can also ask questions, leave comments and stay up to date on college planning, financial aid and similar topics. That can be found at cslf.wordpress.com. Again, keep those cards and letters coming , virtually of course, at alternativeoutreach@mail.cslf.org.

Amie:  Don’t forget!  You can also find us on Facebook.

Mariana:  Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements. CSLF reserves the right to discontinue or modify benefits at any time without prior notice.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  September 2008.

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Transcript

Amie:  Podcast 5 – PLUS loans

Mariana:  Welcome to our 5th informational podcast.  In this edition, we discuss Federal PLUS loans. Amie:  The Connecticut Student Loan Foundation, or CSLF, is a non-profit organization dedicated to providing access to funding for higher education through customized and high quality service. Mariana:  We hope to be able to provide you with regular installments of useful, accurate, and up to date student loan and financial aid information. Please feel free to contact us with your questions and comments at our MySpace profile at www.myspace.com/first_rate, or visit our website at www.cslf.com. We are your hosts Mariana Evica – Amie:  -- and Amie Aragones.

Amie:  As students prepare to leave and begin their first semesters in college, parents often are doing last minute calculations on the best way to finance all of the costs they’re about to encounter.

Mariana:  Tuition, fees, and other associated costs of attending college continue to increase, and it’s not uncommon for parents to find that the gap between the aid their child has received and the cost of attendance will be difficult, or impossible, for them to afford.

Amie:   Before taking the risk of tapping into retirement savings or home equity, parents have an opportunity to apply for federal financial aid, called the Parent PLUS loan.

Mariana:  The PLUS loan is a low interest, fixed rate federal student loan available to parents to cover the difference between the student’s financial aid package and the cost of attendance.

Amie:  In 2006, a type of PLUS loan became available to graduate students, called the Grad PLUS, which is similar to the Parent PLUS loan, in that it offers graduate and professional students a federal, low-interest rate alternative to higher rate private loans.

Mariana:  We’ll be addressing Parent PLUS loans in this podcast, but the Grad PLUS loans work very similarly, and you should check with your lender for more information on applying for a Grad PLUS loan.

Amie:  Currently, the interest rate on PLUS loans is 8.5%, fixed.  In the past, it has been variable, depending on the Treasury Bill rates.

Mariana:  While the rate is fixed and does not vary depending on credit history, the borrower must have favorable credit history, in general.  If the borrower is in doubt that they will be able to pass this credit test, then they may need an “endorser” who will guarantee the loan like a cosigner, being responsible for repayment should the borrower not be able to repay the loans.

Amie:  Parents can borrow for multiple children per year, and there is no cumulative limit on how much parents can borrow. But interest is not subsidized on PLUS loans.

Mariana:  There is a 4% origination fee that is deducted from the funds when you get the loan. And repayment is typically over a maximum of 10 years, and begins 60 days after the loan is fully disbursed. And there is no grace period for PLUS loans.

Amie:  There are no prepayment penalties.  So if you want to make early or additional payments and save yourself money down the road, you can do that at any time.

Mariana:  But if you are having temporary difficulty making payments, some deferment and forbearance options are available, and you should contact your loan servicer if you are in need of assistance.

Amie:  Interest may be capitalized while the student is in school, and some lenders have options for parents to defer payments until the student is out of school. As part of the federal loan program, these loans may be eligible for federal tax benefits.

Mariana:  The FAFSA form is not required for the PLUS loan.  Parents fill out an application and sign what’s called a Master Promissory Note. The lender performs a credit check to ensure the borrower isn’t ineligible due to an adverse credit history.  If the borrower is found to have an adverse credit history, they may need a endorser for the loan. If a parent is denied a PLUS loan, the student is then eligible to apply for an increased Stafford loan limit.  Both parents don’t need to apply for this to happen, but if they do, and one is approved, then the student is not going to be eligible for the increased Stafford limits.

Amie:  Some parents have agreements with their children that the child will assist or be responsible for payments on the PLUS loans their parents took out for their education, but legally, the responsibility ultimately falls on the parent to ensure payments are being made, and the parent, as the borrower, will face the consequences if they are not.  By the same token, the student is responsible for repayment on his or her Stafford and Perkins loans, and parents are not held responsible if their child doesn’t make those payments.

Mariana:  PLUS loans can be consolidated, and may then qualify for a longer repayment term to ease the monthly payment burden.  While the Parent PLUS loans can’t be consolidated with the student’s Stafford loans, if the parent themselves have a Stafford or Perkins loan for their own education, those can be consolidated together.  Loans can’t be consolidated with other borrower’s loans, including spouses.

Amie:  Consolidation gives further repayment options, possible longer repayment terms resulting in lower monthly payments, and may come with additional lender benefits and discounts.  And because consolidation loans have an interest rate cap of 8.25%, there is already a slight rate reduction upon consolidating PLUS loans that are at the current 8.5% rate.

Mariana:  PLUS loans are great opportunities for parents to assist their kids with paying for college, by taking out a loan at a relatively low interest rate, rather than putting their retirement funds or homes at risk.

Amie:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation. The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana:  For more information, visit our website at www.cslf.com, or come on over to our blog at our MySpace profile called The Loan Geek which is at www.myspace.com/first_rate.. Make sure to add “The Loan Geek” as your friend on MySpace and subscribe to our blog to receive regular updates and notices of future podcasts. Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements. CSLF reserves the right to discontinue or modify benefits at any time without prior notice.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  August 2007.

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Transcript

Amie:  Podcast 4 – Basics of financial aid for new borrowers (parents and students).

Mariana:  Welcome to CSLF’s informational podcast series. The Connecticut Student Loan Foundation, or CSLF, is a non-profit organization dedicated to providing access to funding for higher education through customized and high quality service. We hope to be able to provide you with regular installments of useful, accurate, and up to date student loan and financial aid information. Please feel free to contact us with your questions and comments at our MySpace profile at www.myspace.com/first_rate or visit our website at www.cslf.com. We are your hosts Mariana Evica –

Amie:  -- and Amie Aragones.

Amie:  You’ve weathered the college application process and have gotten acceptance letters. No matter which school you choose, you will have to make important decisions regarding your, or your child’s, financial aid.

Mariana:  The first step is to complete the school’s financial aid application materials, and to complete the Free Application for Federal Student Aid, or FAFSA, which is required for any federal financial aid, including loans, and often required for state and school based aid programs.  There is also a form called the CSS/Profile, which many schools also use to determine the aid they provide.

Mariana:  First, we’ll discuss the FAFSA. The FAFSA is a form that allows you to provide pertinent information to determine financial aid eligibility.

Amie:  It’s FREE to obtain and submit this form, which can be done on paper or electronically online. If anyone is charging you to fill out the FAFSA, regard them with a critical eye.  Unless they are offering other valuable services to you as well, you may be being charged for something that you should be able to do for free!

Mariana:  More and more, people are choosing to complete the FAFSA online, but copies can be obtained in high schools, public libraries, and college financial aid offices.  Or, you can request a copy by mail by calling 1-800-4 (that’s the numeral 4) FED-AID, that’s F-E-D-A-I-D. And the web version is found at www.fafsa.ed.gov, and to spell that it’s WWW.F-A-F-S-A.E-D.G-O-V, and there you will also find instructions on how to complete the form.

Amie:  If you feel more comfortable submitting the FAFSA on paper, feel free to do so, but there are benefits to doing it electronically. Processing is quicker and you’ll get your Student Aid Report, or SAR, S-A-R, faster, which tells you what aid you are eligible for. The web form has built in mechanisms to help you avoid common errors, which helps you complete the form more accurately. The federal government saves money on processing And you get to save some trees!

Mariana:  Please be sure to note all the deadlines for submission, for each school, for your state, and for federal aid. Most state financial aid programs have much earlier deadlines. In general, the earlier you can get your financial aid paperwork submitted, the better, so schools can determine their award packages.

Amie:  Also note what kind of deadlines you are dealing with.  Does a form have to be postmarked, received, or processed by a certain date? You don’t need to wait until your taxes are actually done to submit the FAFSA.  You are allowed to use estimates, and correct them at a later time. But, you can’t submit your FAFSA before January 1st for the upcoming school year.

Mariana:  You will need to have several documents and financial records in order to complete the FAFSA. This includes the student’s and parents’ income tax returns, W-2 and 1099 forms for the previous year, banking, investment, and other financial records. If the student is married, the spouse’s forms are required as well.

Amie:  Social security number and driver’s license number must be provided. And, if the family has recently experienced unusual financial situations that may affect the ability to contribute to educational costs, documentation may be required. The FAFSA website has complete information on what documents you should assemble before you begin.

Mariana:  It’s always a good idea to keep a file with copies of your forms and the documents you used to complete them. This helps if applications are lost, or if you are selected by your school to verify the information. It’s also useful for future reference, since you need to complete the FAFSA every year that you are applying for aid.

Amie:  In order to electronically sign your FAFSA or to access your FAFSA and SAR information online, you will need a FAFSA PIN. For those completing the FAFSA for the first time, you may apply for a PIN when you complete the FAFSA. If you have previously completed the FAFSA, you can apply online at www.pin.ed.gov, or WWW.P-I-N.E-D.G-O-V. If you provide an email address, instructions to retrieve your PIN will be emailed to you in 1-3 business days.  Otherwise, it will be mailed to you in 7-10 days.

Mariana:  The PROFILE is a financial aid form provided by the College Scholarship Service, or CSS, and was formerly known as the F-A-F, the FAF, the Financial Aid Form.  It’s a service provided by the College Board. Many schools use this form to determine eligibility for non-governmental aid, such as the school’s own scholarships, grants, and loans. The PROFILE can also be found online, at profileonline.collegeboard.com. And while the FAFSA is free to submit, the CSS/PROFILE charges a small fee to complete it and for each program you submit it for.

Amie:  The PROFILE website has a listing of which programs use their service and an online guide to completing it, which answers important frequently asked questions It includes the codes for each of the programs that use the PROFILE. Unlike the FAFSA, which cannot be submitted before January 1st, the PROFILE can be submitted in the Fall.

Mariana:  The PROFILE determines eligibility differently than the FAFSA, and requests additional, and sometimes more in-depth, information than the FAFSA. It includes questions specific to the school or program you are applying to, rather than a single set of generic questions. It also allows financial aid counselors greater freedom in assessing an individual’s particular circumstances relating to their need for aid.

Amie:  First, you will need to register with the CSS/PROFILE website, which requires submission of some preliminary personal information. Next, you’ll use your financial and personal information to complete the PROFILE application. Then, after carefully reviewing your information, you will submit the PROFILE.

Mariana:  CSS recommends you register at least 2 weeks before your earliest priority filing date as specified by the programs you are applying to. You can complete the PROFILE application immediately after registering, or come back and finish it, but CSS also recommends that you submit your PROFILE application at least 1 week before your earliest priority filing date, to accommodate delivery time.

Amie:  CSS then will send you an online PROFILE acknowledgement. This serves as a record of your application and provides important additional instructions for completing the financial aid application process.  Be sure to read this information carefully! Also: be sure to review your PROFILE information carefully before submitting it.  You are not able to revise the information online once it has been submitted.  If changes are necessary, you will have to submit them to each program you applied to.  You can, however, go back and add schools to send the PROFILE to.

Mariana:  Once you’ve submitted the FAFSA and the PROFILE, and any other local, state, or miscellaneous applications, you wait for the Financial Aid Award letter from each institution or program. The financial aid office may request additional information to verify, or clarify, information you provided.

Mariana:  One last note:  What if your family encountered special circumstances that could affect your ability to pay for school that the financial aid forms don’t account for? If this is the case, you will need to contact the Financial Aid Office at the schools and ask for what is called a “professional judgment”.  Financial Aid Administrators have the authority to make certain adjustments that can help account for special circumstances.

Amie:  There is a lot to know about financial aid, but we hope to have given you enough information to get started. If you need more information on college planning, CSLF has an Early Awareness department, specializing in assisting with all aspects of planning and preparing for higher education.  When you go to our website, you can check out our “Investing in Futures” section.

Mariana:  And all of the links in question are also available on the Loan Geek’s sister site on MySpace called the Loan Ranger, and I’ll give you the web address for that.  It’s www.myspace.com/susie_mae_loans.  That’s spelled “Susie” S-U-S-I-E underscore “Mae” M-A-E underscore “loans” L-O-A-N-S.

Mariana:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation.

Amie:  The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana:  For more information, visit our website at www.cslf.com or come on over to our blog on MySpace at www.myspace.com/first_rate , where you can provide feedback and ask more questions. If you would like to speak with an Early Awareness and Training officer in our Investing in Futures program, please call 1-866-PLAN-4 (that’s the numeral 4) I-F, which is a toll-free hotline.  And you can also find a link from the CSLF homepage. Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements. CSLF reserves the right to discontinue or modify benefits at any time without prior notice.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  July 2007.

GLOSSARY

Here are some important terms you will need to be familiar with.  Some of them are pretty self explanatory, but here they are as a brief review.

FAFSA – the Free Application for Federal Student Aid; used to determine eligibility for federal financial aid.

CSS/Profile – another financial aid form used to determine eligibility for non-governmental aid, provided by the College Board’s College Scholarship Service; formerly known as the, F-A-F, or FAF, or Financial Aid Form.

SAR – Student Aid Report; Summary of the information provided on the FAFSA.

EFC – Expected Family Contribution; calculated using the FAFSA, and shown on the S-A-R, or SAR.

COA – Cost of Attendance; What it sounds like, the cost of education in a particular program or institution, including tuition and fees, room and board, books and supplies, transportation, and other necessary personal or incidental expenses.

Financial Need – Financial Need is the Cost of Attendance (COA) minus Expected Family Contribution (EFC).

Financial Aid Award Letter – This is a letter sent by the Financial Aid Office which details a student’s Financial Aid Package.

Financial Aid – funds given to students to assist in paying for education.  This can include grants, scholarships, loans, and work-study programs.

Grant - a type of aid that does not need to be repaid, and is based on financial need.

Scholarship – another form of aid that does not need to be repaid, and is not generally based on need, but for which students may qualify if they meet certain criteria.

Loan – a Loan is financial aid that must be paid back, including interest. –    There are federal student loans, guaranteed by the federal government, which have favorable terms for students and families, but have loan limits. –    And then there are Private or Alternative loans, offered by private lenders for education, and can be used to supplement other aid available, but these loans are dependent on creditworthiness and can have much higher rates than federal loans. – Work Study – the Work-Study is a program in which the federal government pays part of a student’s salary so they can work part-time for participating departments and employers on campus and in the community.

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Transcript

Amie:  Podcast 3 – A few frequently asked questions about Student Loan Lenders

Mariana:  Welcome to CSLF’s informational podcast series.

The Connecticut Student Loan Foundation, or CSLF, is a non-profit organization dedicated to providing access to funding for higher education through customized and high quality service. We hope to be able to provide you with regular installments of useful, accurate, and up to date student loan and financial aid information. Please feel free to contact us with your questions and comments at our MySpace profile at www.myspace.com/first_rate or visit our website at www.cslf.com. We are your hosts Mariana Evica –

Amie:  -- and Amie Aragones.

Today we’re bringing you a short podcast to answer a few typical questions people have about student loans.

With so much about student loans in the news lately, a lot of people have had questions about the differences in types of education loans and student loan providers.  With so many entities involved in student loans, understanding who you’re dealing with can be confusing and downright frustrating.

So here’s the first question: What is the difference between the two federal loan programs, FFELP and Direct?

Mariana: I’m delighted that you would ask us that, Amie.  [laughter]

There isn’t much of a difference between how the programs themselves are intended.  FFELP is the Federal Family Education Loan Program, and Direct is the William D. Ford Federal Direct Student Loan Program, which is often referred to simply as Direct, Direct Lending, or abbreviated in some writings as DL or FDSLP.  Both FFELP and Direct offer the same federally backed Stafford loans, with regulated low interest rates determined by the federal government, deferments, forbearances, and the option to consolidate federal student loans.

Amie:  The main difference between the programs is where the money comes from.  With Direct, the money to originate the loans comes straight from the federal government.  With FFELP, the money comes from private financial institutions.

Mariana:  For borrowers, a key difference, however, is that FFELP lenders often give additional discounts and savings incentives to borrowers who choose their institution.  This helps them remain competitive with each other and Direct, while providing some extra savings opportunities for borrowers.

Amie:  Next question: Since FFELP lenders are private lending institutions, are they all for-profit companies?

Mariana:  Well, FFELP lenders can be commercial, for-profit companies OR non-profit organizations.  For profit companies have shareholders to please, of course, and increasing the profit margin is important for their business.  Non-profit agencies have guidelines and regulations to qualify for non-profit status which require maintaining a low profit margin.  Excess revenue from interest is turned over into borrower benefits and improved services for borrowers and schools. As an example, CSLF, or the Connecticut Student Loan Foundation, is a non-profit private lender.

Amie:  This does not mean that one is a better choice than the other.  The larger lenders tend to be for-profit, and due to economies of scale, even if they are making a lot of profit for themselves, they may be able to offer more attractive discounts and incentives. However, many borrowers like to be informed about the type of company their loans are with and weigh that information appropriately.

Mariana:  Okay, question number 3: There are private lenders and the Department of Education’s Direct lending.  Where do private loans come from, compared to federal loans?

Amie:  FFELP lenders, or “private” lenders can offer both federal loans and what are known as “private” or “alternative” loans.  Unlike federal loans, private or alternative loans don’t have strictly regulated rates and terms.  They are commercial, credit based loans, so borrowers rates may vary depending on their creditworthiness, or they may need a co-borrower to get the loan or to get more favorable rates.  Many lenders do try to offer comparable benefits, such as deferring the loan payments if the student borrower is in school, but they’re not required to do so.

Mariana:  Also, private loans cannot be consolidated into federal consolidation loans. And while federal loans are still your best bet, financially, private loans fill the gap if the federal aid you qualify for is not enough.

Amie:  That brings us to the end of today’s podcast. Thank you for listening, and check back with us for more updates and information on student loans and financial aid.  If you have specific questions, let us know!  We may be able to answer them in future podcasts and blog updates.

Mariana:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation.

Amie:  The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana:  For more information, visit our website at www.cslf.com or come to our blog on MySpace at www.myspace.com/first_rate , where you can provide feedback and ask more questions. Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements. CSLF reserves the right to discontinue or modify benefits at any time without prior notice.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  June 2007.

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Transcript Podcast 2 extras

Amie:  Podcast 2 Extras – more detailed examples of Consolidation benefits

Mariana:  Welcome to CSLF’s podcast “extras” for podcast #2, Federal Student Loan Consolidation. This is an additional section where we will provide an example with real numbers and give estimates on rates and repayment amounts under consolidation.

Amie:  If you’re a graduating senior and you’ve never consolidated your loans, then you probably have a mix of variable and fixed rate Stafford loans, since the federal government made a change last year making *new* Stafford loans a fixed rate. You may also have a Perkins loan as well.  Perkins loans are lent through your school and always have a fixed 5% interest rate.  In most cases, you will want to include this in your consolidation to make your payments more convenient and to extend some of the additional benefits to these loans as well, but whether you include your Perkins loans is up to you, since some Perkins benefits are lost when you consolidate.  Again, you can discuss your particular situation with a consolidation representative.

Mariana:  Let’s say you went to school continuously for the past four years and took out the maximum Stafford loan amounts (which vary depending on your year in school), your total Stafford loan amount would be $17,125. The first three years of that, or 11,625, would be at the current, variable, in-grace rate of 6.54.  The final year, $5500, would be at the new fixed rate of 6.8% Keep in mind we’re using the current, variable Stafford rates, but these rates will change on July first.

Amie:  To get the weighted average interest rate, you would do the following calculations (You can follow along with a pen and paper if you’d like): Take 11,625 and multiply by its interest rate of 6.54% (the variable rate while you are in your grace period), and you’ll get $760.28. Take 5500 and multiply by 6.8% and you’ll get 374. Add these two calculations of interest together, to get $1134.28 Now you divide this figure by the total loan amount of the loans that you’re consolidating, or 17,125, to get a weighted average of 6.6%.

This number is a little closer to 6.54% than 6.8%, because a larger portion of the loan is at the lower rate, and provides greater weight in the calculation. However, because consolidation requires us to round up to the next 1/8th percent, your interest rate would be 6.625%, fixed.  Usually this rounding effect is minimal, and the other benefits of consolidation outweigh this small increase by rounding.

Mariana:  Now, say you have a $2000 Perkins loan, at a 5% interest rate.  The formula for determining the weighted average interest rate would be as follows: Take the original 11,625 and multiply, again, by its interest rate of 6.54% and get that $760.28. Take the 5500 and multiply it by 6.8% to get the 374. Now, take the $2000 and multiply by 5% to get $100. Now, add all three of these results together and now you’ll get $1234.28 Now, divide by the total to be consolidated of 19,125 to get a new weighted average of 6.45, and then round that up to 6.5%.

In this example, the total loan balance of 19,125 (which is, of course, greater than 10,000, but less than $20,000) falls into the repayment bracket of having a 15 year repayment term. This resulting monthly payment would be about $167 a month.

Amie:  The same loans would cost around $217 per month with their original 10 year terms.

Mariana:  Thanks for listening to the “extras” for Podcast # 2 on Federal Student Loan consolidation. If you would like to speak with someone about consolidation, you can give the CSLF consolidation center a call at 1(800)901-1480.  That number again to dial is 1(800)901-1480.  Or, as always, you can go to the CSLF website.  That’s www.cslf.com, where you’ll find loan calculators and other tools. Keep listening for more podcasts.  We hope to be able to bring you additional information to help you through the financial aid process and to understand your student loans.

Amie:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation. The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana:  For more information, again, visit our website at www.cslf.com or come and visit us on MySpace again, and that’s www.myspace.com/first_rate , where you can provide feedback and ask questions. Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements. CSLF reserves the right to discontinue or modify benefits at any time without prior notice.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  May 2007.

UPDATE October 2008: Amie:  And now, an update.  Since this podcast was recorded in May, 2007, there have been some changes in the student loan industry.  Fewer lenders are offering consolidation, and borrower benefits have been adjusted, but the program is largely the same where available.  Call your lender or servicer, or research online, for current information.

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Transcript Podcast 2 part 3

Amie:  Podcast 2, Part 3 – When and How to Consolidate

Mariana:  Welcome to part 3 of CSLF’s three part informational podcast on Federal Student Loan Consolidation.  In this section, we’ll go over when to consolidate, and how you go about getting a federal student loan consolidation. The Connecticut Student Loan Foundation, or CSLF, is a non-profit organization dedicated to providing access to funding for higher education through customized and high quality service. We hope to be able to provide you with regular installments of useful, accurate, and up to date student loan and financial aid information. Please feel free to contact us with your questions and comments on our MySpace profile found at www.myspace.com/first_rate or visit our website at www.cslf.com. We are your hosts Mariana Evica –

Amie:  -- and Amie Aragones. How do you know when to consolidate? First, you must wait until your loans are eligible.  That is, you’ve entered your grace period or repayment on the loans, or if you’re in a deferment or forbearance. If you have variable rate loans, you want to try to consolidate them while you are in your grace period.  This is because the rate is slightly lower during this time, and thus will be entered into the weighted average formula to your advantage.

Mariana:  Also remember that the variable interest rate change on July 1 of every year are related to the 91-day Treasury Bill or T-Bill.  In the past few years, those rates have been going up significantly, from historically low rates.  While no one can predict the future, watching these rates and being aware of the economic patterns can help to make reasonable estimations of where the interest rates will go.  We tend to know what the new rates will be in the late spring or early summer.

Amie:  The first step in the consolidation process is to apply.  Applications are typically available by calling your chosen lender.  At CSLF we will discuss your consolidation questions and get some basic information from you.  We like to send you the application materials pre-filled with as much information as possible to make it easier for you to complete the application.  We include additional information in this packet and include a prepaid envelope to make it easier to mail back the application. If you already have loans with us, we’ll have a great deal of information we already need, and we’ll verify your personal information, such as address and phone number.

Mariana:  We may need to ask you for additional information to assist with completing your application or to give you accurate consolidation estimates.  It is always helpful if you have your loan information on hand when you’re completing the application or discussing your questions with us.  If you do not have your loan information on hand, we may be able to assist you in locating it with your lender or accessing loan information online. And we do everything we can to protect your personal information and privacy.

Amie:  Besides personal demographics and loan information, you’ll need to provide two references who you’ve known at least three years and who do NOT live at the same address as you and each other.  They can even be family, as long as they do not live together or with you.  These references must be on file before we can process your application and are required by federal regulations.  But don’t worry.  We don’t need to call them when processing your consolidation loan.  We do need them on file in case we need assistance reaching you about your loans and your usual contact information has failed.

Mariana:  Many lenders also now have online applications.  These require the same kinds of information as the paper applications, and allow you to “e-sign” or provide an electronic signature verifying your identity through your FAFSA pin or by checking key information against your credit records.  This is NOT a credit check and will not negatively affect your credit.  You may also download a copy of the application to print out and return.

Amie:  After your application is received, we must send out Loan Verification Certificates, or LVCs.  This allows us to verify with the servicers of your loans, even for loans we hold, the current status of your loans, including the correct current balance with applicable interest and crediting any payments.  Once that information is received, checks are processed to send to lenders to pay off the loans based on the LVC information. When that is complete, your consolidation is completed and you’re done!  You’ll then get a new loan disclosure statement and repayment schedule with your new consolidation loan information. This process usually takes about 6 to 8 weeks, but during particularly busy periods with high volume, or if your application is incomplete when it is returned, it may take quite a bit longer.

Mariana:  This is the end of part 3 of CSLF’s three part podcast on Federal Student Loan Consolidation.  Thank you for listening.  As a reminder, you may also listen to some podcast “extras” that we have included if you want some more detailed examples of the interest rates and repayment terms when you consolidate.

Amie:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation. The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana:  Again, you can visit us on the web in two different places: our website www.cslf.com or you can visit us at our blog on MySpace.  Come to www.myspace.com/first_rate , where you can provide feedback and ask further questions. Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements. CSLF reserves the right to discontinue or modify benefits at any time without prior notice.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  May 2007.

UPDATE October 2008: Amie:  And now, and update.  Since this podcast was recorded in May, 2007, there have been some changes in the student loan industry.  Fewer lenders are offering consolidation, and borrower benefits have been adjusted, but the program is largely the same where available.  Call your lender or servicer, or research online, for current information.

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Transcript Podcast 2 part 2

Amie:  Podcast 2, Part 2 – Interest rates, payments, and other consolidation notes

Mariana:  Welcome to part 2 of CSLF’s three part informational podcast on Federal Student Loan Consolidation.  This section discusses interest rates, payments, and other important final notes on consolidation.

Amie:  The Connecticut Student Loan Foundation, or CSLF, is a non-profit organization dedicated to providing access to funding for higher education through customized and high quality service. Mariana:  We hope to be able to provide you with regular installments of useful, accurate, and up to date student loan and financial aid information. Please feel free to contact us with your questions and comments at our MySpace profile at www.myspace.com/first_rate or visit our website at www.cslf.com. We are your hosts Mariana Evica –

Amie:  -- and Amie Aragones.

Mariana:  When you take out a student loan, no matter if it is for a thousand dollars or a hundred thousand dollars, your standard maximum term is 10 years for repayment.  This can result in overwhelming monthly payments, especially if you take out several loans over multiple years.  The repayment term for consolidation depends on the combined balance of the borrower’s loans, and increases as balances reach higher brackets, thereby decreasing the monthly payment.  These range from a 10 year maximum for consolidations up to $7500 to a 30 year maximum term for loans totaling over $60,000.

Amie:  Of course taking longer to pay off your loans means you ultimately pay more in interest.  Luckily, there’s no prepayment penalty for consolidation loans.  A lot of borrowers still choose consolidation when they graduate because it gives them a lot more flexibility and control over their payments.

Mariana:  You can have lower minimum payments but choose to pay as high a payment as you feel comfortable above that without any penalty.  Applying these extra payments to the principal of your loan shortens how long you’ll have to repay and reduced principal means that you’re accruing less interest even if it is by a small amount every month. You can also make large, lump sum payments to your principal or pay off the loan in total.  And if you want a permanently shorter term or higher payment, you can make that request in writing while still getting the other consolidation benefits.

Amie:  Federal Student Loan interest rates are determined by the federal government, although different lenders may offer discounts and incentives.  For consolidation, in order to combine loans with different rates the consolidation rate is a weighted average of the rates of the loans being consolidated, rounded to the next 1/8th of a percent, and is a fixed rate. This means that for each loan, you’re essentially paying the same amount of interest, but in one, convenient loan combining them.

Mariana:  The rate for consolidation is also capped at 8.25%, so if you happen to be a PLUS loan borrower or have older Stafford loans that are at an even higher rate, you might get immediate savings on your interest rate just by consolidating. The weighted average will always be between your highest interest rate and your lowest interest rate, and this is in proportion to the size of the loans involved. Our special podcast extras for this podcast give more specific examples of how the weighted average interest rate is determined and how consolidation repayment terms affect monthly payments.

Amie:  Borrowers can choose the lender they wish to consolidate their loans, so if you want to look for different incentives, you can shop around.  If you’ve been unhappy with the service you’ve gotten with your loans in the past, consolidation allows you to take your loans to another lender, however, keep in mind that the lender may use a separate servicer, and in some cases that may be the same company your loans had been at previously.

Mariana:  Since consolidation is like refinancing a mortgage, you may wonder if you can keep reconsolidating to get a better rate.  Regulations do NOT permit borrowers to reconsolidate loans that have already been consolidated, and because consolidation interest rates depend on your existing rates, reconsolidation won’t get you to a better federal interest rate.  However, if you have any loans that are not included in your consolidation, you may do a NEW consolidation that includes the excluded loans, provided they are otherwise eligible. To make adding loans easier, if you have new, eligible loans to include within 180 days, or 6 months, of the completion of the consolidation, you can fill out an Add-On form instead of a whole new consolidation application.

Amie:  Repayment on consolidation begins within 60 days of the completion of the consolidation, and typically about 30 days after the consolidation is disbursed.  This means that if you were in your grace period on the underlying loans, you’ll forfeit the remainder of your grace period.  Keep this in mind when you are determining when to apply for consolidation, and if you need help with planning, discuss it with your consolidation representative.

Mariana:  Alternate repayment options are available beyond standard repayment.  If you think you may need and qualify for extended, income sensitive, or graduated repayment, also discuss this with your consolidation representative. You still have forbearance and deferment options, as discussed in the previous segment.  Always talk with your lender or servicer if you may be encountering problems being able to make your payments, even on consolidation loans.  Some loan forgiveness or cancellation options are lost when you consolidate.  For instance, if you are a teacher who will be serving in and under-served population, you may qualify for certain kinds of loan forgiveness.  These programs have a lot of qualifications and guidelines, so you may need to seek guidance on whether you want to include certain loans in your consolidation or whether it is the right time for you to consolidate.

Amie:  If you have subsidized Stafford loans, those retain their subsidy, meaning if you go back to school or enter other qualifying types of deferment, the federal government pays the interest during that time.  Perkins loans lose their subsidy when consolidated, however often Perkins loans do not make up the largest portion of your total loan burden, and the long term consolidation benefits often outweigh the loss of that subsidy, especially if you have no plans to go back to school more than half time or go into deferment.  You can always choose to exclude Perkins loans, or any loans, and decide to include them at a later time.

Mariana:  Some lenders have minimum balances that they require for consolidation, or minimum balances before they will extend to you their additional incentives.  CSLF allows interested, qualified borrowers with ANY balance to consolidate. Remember, consolidation does not hurt your credit, but it can help you by helping you to maintain a positive credit history with timely payments.  And education loans are considered “good debt”. Also keep in mind the effects of inflation.  A dollar in your pocket today is worth more than a dollar in your pocket later on.

Amie:  And while student loan interest rates have been going up significantly the past couple of years, up from historic lows, they are still relatively low rate loans.  Money you save on your monthly payments by consolidating can go toward paying off higher rate debts that are costing you more.  And the federal student loan program has a lot of built in features that other, commercial loans do not, such as the ability to defer or forbear your loan under certain circumstances, if you can’t make payments.  Most commercial loans do not have such provisions.

Amie:  This is the end of part 2 of our podcast on Federal Student Loan Consolidation.  Thank you for listening, and tune back in to part 3 to find out how to consolidate your student loans and when you should do it.

Mariana:  You may also listen to some supplemental podcast “extras” with a more detailed example of the interest rates and payments when you consolidate.

Amie:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation. The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana:  For more information, visit our website www.cslf.com or our blog on MySpace at www.myspace.com/first_rate , where you can provide feedback and ask questions. Make sure to add “The Loan Geek” as your friend on MySpace and subscribe to our blog to receive regular updates and notice of future podcasts. Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements. CSLF reserves the right to discontinue or modify benefits at any time without prior notice.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  May 2007.

UPDATE October 2008: Amie:  And now, and update.  Since this podcast was recorded in May, 2007, there have been some changes in the student loan industry.  Fewer lenders are offering consolidation, and borrower benefits have been adjusted, but the program is largely the same where available.  Call your lender or servicer, or research online, for current information.

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Transcript

Amie:  Podcast 2, Part 1 – Federal Student Loan Consolidation

Mariana:  Welcome to CSLF’s informational podcast series.  This is part one of a three part podcast on Federal Student Loan Consolidation.  The Connecticut Student Loan Foundation, or CSLF, is a non-profit organization dedicated to providing access to funding for higher education through customized and high quality service. We hope to be able to provide you with regular installments of useful, accurate, and up to date student loan and financial aid information. Please feel free to contact us with your questions and comments at our MySpace profile at www.myspace.com/first_rate or visit our website at www.cslf.com. We are your hosts Mariana Evica –

Amie:  -- and Amie Aragones. The federal government provides an option for borrowers with loans in repayment called Consolidation.  It allows for borrowers with higher balances to have longer standard repayment terms and lower payments.  It’s a fixed rate loan, whereas not all Stafford loans may be fixed rates, depending on when they were taken out.

Mariana:  Under consolidation, you still have deferments and forbearances available, and if you’ve already used up the allowances on your underlying Stafford loans, that time period gets reset or re-allowed under consolidation.  Borrowers with multiple lenders get the convenience of having all their loan funds in one place, with one payment, once consolidated.  And federal income tax benefits still apply.

Amie:  There’s no credit check required, and there’s no fee charged to the borrower to consolidate.  Many lenders give additional discounts and savings incentives to borrowers who choose to consolidate.

Mariana:  One type of incentive is an interest rate reduction.  Many lenders will give you a discount, say 1-2%, off your interest rate if you establish yourself as a borrower who makes payments on time.  Usually this requires 2 to 4 years of consecutive on-time payment before this benefit will be given.  And often if you are late on even one payment you forfeit this benefit for the life of the loan.  Check the fine print with these offers to find out what constitutes a late-payment, and how long it takes to earn this discount, and whether it can be reinstated at any time.

Because it may take years to earn the benefit and more of your total interest is at the beginning of your loan, this kind of benefit may not be as much of a value as it seems.  Also, statistics have shown that surprisingly few borrowers are able to make on-time payments long enough to even earn the benefits.  And less than 10% of borrowers get the full benefits this kind of rate reduction incentive promises for the life of the loan.

Amie:  Another type of incentive is a rebate.  These are usually credited to your account as a principal reduction.  This is helpful, because of course with a reduction of your principal, you are accumulating interest on a lower balance.  Some of these are given a short time after the consolidation is completed, and some also require a certain amount of on-time payments before the rebate is given, but often that may be sooner than an interest rate reduction.

While the potential savings is less than the potential savings with a rate reduction on a high balance loan, the likelihood of getting this one-time rebate is higher than getting the full benefits of the rate reduction, and may be greater than your odds of getting the rate reduction at all. Also, check to see what the rebate is based on.  For example, CSLF gives the 2% rebate after 24 consecutive on-time payments.  That is 2% of the original consolidation principal, not whatever the balance is after 2 years of payments, which would result in a lower rebate.

Mariana:  Most lenders also offer a discount if you enroll in their automatic payment option.  This is usually a small rate reduction, such as a quarter of a percent off your rate, as long as you’re enrolled in the automatic payment plan.  These discounts are given immediately and are not contingent upon meeting other payment criteria, like the other discounts.  Having your payments withdrawn automatically helps you to make your payments on time, making it easier to earn the other discounts.  Payments can still be late, though, if you have insufficient funds in your account at the time of your scheduled payment.  Repeated instances of insufficient funds may result in your enrollment being canceled.

At CSLF, we currently give a 2% rebate of the original consolidation principal after 24 consecutive on-time payments.  That means if you make your payments on-time for 2 years, you get 2% of your original consolidation balance credited back to you, like an additional payment to principal.  We also give you a quarter of a percent interest rate reduction immediately if you do your payments through automatic debit called EasyPay.

Amie:  When you apply for consolidation, you’re applying for a new loan that replaces all of the loans you’re including in the consolidation.  This loan effectively pays off the underlying loans, which then will be shown as “paid in full” in your records and on your credit report.  In many ways, it’s like refinancing your student loans.

Mariana:  Most federal student loans are eligible for consolidation for students as well as parents.  Loans must be in repayment or in their grace period, and can also be consolidated while in deferment of forbearance.  In general, loans in default cannot be consolidated, but sometimes arrangements can be made.  It is best to check with your lender or servicer in cases where you have defaulted loans you wish to consolidate. Loans can only be consolidated under the original borrower’s name, and cannot be transferred or combined with another borrower, even a parent or spouse.

Amie:  This is the end of part 1 of our podcast on Federal Student Loan Consolidation.  Thank you for listening, and tune back in for part 2 to find out about interest rates and payments with consolidation.  Part 3 will tell you how and when to consolidate your loans.  You may also listen to some supplemental podcast “extras” with a more detailed example of the interest rates and payments when you consolidate.

Mariana:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation.

Amie:  The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana:  For more information, visit our website www.cslf.com or come to our blog on MySpace at www.myspace.com/first_rate , where you can provide feedback and ask questions. Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements. CSLF reserves the right to discontinue or modify benefits at any time without prior notice.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  May 2007.

UPDATE October 2008: Amie:  And now, and update.  Since this podcast was recorded in May, 2007, there have been some changes in the student loan industry.  Fewer lenders are offering consolidation, and borrower benefits have been adjusted, but the program is largely the same where available.  Call your lender or servicer, or research online, for current information.

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Transcript

Amie:  Podcast 1 – Student Loan Essentials for New Graduates

Mariana:  Welcome to the first edition of CSLF’s informational podcast series. The Connecticut Student Loan Foundation, or CSLF, is a non-profit organization dedicated to providing access to funding for higher education through customized and high-quality service. We hope to be able to provide you with regular installments of useful, accurate and up to date student loan and financial aid information Please feel free to contact us with your questions and comments at our myspace profile at www.myspace.com/first_rate or visit our website at www.cslf.com. We are your hosts, Mariana Evica –

Amie:  -- and Amie Aragones Graduation season is here! Many new graduates have spent several years acquiring student loans, but have not had to give much thought to what happens once they have graduated Today’s podcast will tackle what new graduates must know about their student loans

Mariana:  Graduation is an important and overwhelming time of your life.  You have just accomplished a great deal to get there.  You are preparing for a new career, and possibly moving to a new location. Among your new responsibilities is your need to begin repaying your student loans.

Amie:  You must pay back your student loans.  When you signed your loan documents, you signed a promissory note, indicating that you understand that you must pay these loans back.  You must pay them even if you did not complete your education, or are disappointed with the outcome.  This applies even if you were under 18 when you signed. There are some limited circumstances where your responsibility to pay your loans is cancelled, or your loans are “discharged”, but these circumstances are rare.  We will not address loan discharge in this podcast, but you may learn more online or by calling your servicer. And in most cases where you file bankruptcy, your student loans cannot be included.

Mariana:  Federal Stafford and Perkins loans have a grace period, or a period of time in which you are not required to make payments.  This buffer before you make your first payment typically begins the day after your final class, and lasts 6 months for Stafford loans and 9 months for Perkins loans. If you have ever entered repayment on your loans before, for instance having taken extended time off from school, you may have exhausted your grace period already.

Amie:  There may be several companies involved in your student loans.  When you are entering repayment on your loans, you should contact your loan SERVICER. The servicer keeps the most up to date records on your student loan account, processes your payments, and helps answer questions on the status of your loans.  They’ll inform you how much you owe per month, and when payments are due, as well as other pertinent information on a loan disclosure statement and repayment schedule.

The servicer may be the same as your lender.  If you’re unsure, your lender should be able to tell you who is servicing your loans.  Or, you can check the Department of Education’s federal student loan database, the National Student Loan Data System, or NSLDS, at www.nslds.ed.gov or call 1(800) 4FEDAID. For a Perkins loan, the school is your lender, and you should contact the financial aid or student loan office for repayment information.

Mariana:  Even if you do not receive statements or bills, you’re required to make your payments, in full, every month. Also, it is YOUR responsibility to make sure your servicer has your current contact information.  If you move or change telephone numbers, you must provide that information to the servicer of your loans, or you may not receive important information.

Amie:  You may be wondering what happens if can’t make a payment to your loans.

Mariana:  Many loan borrowers encounter situations where they may be unable to make their student loan payments temporarily.  This may include periods of unemployment, financial or medical hardship, and other major changes in living circumstances, such as active duty military service or returning to school. If you find that you may not be able to make payments, be sure to contact your student loan servicer.  They will tell you about DEFERMENT and FORBEARANCE.

Different kinds of deferment or forbearance apply depending on your circumstances and when you originally took out the loans. Some are limited by time and can be eventually used up. Deferment or forbearance essentially give you time off from paying your loans.  Payments are not expected, and nothing is reported to the credit bureaus.

Amie:  Always check with your loan holders for your deferment or forbearance options rather than NOT paying.  These tools exist to help you! Skipping payments and becoming delinquent has negative consequences for your credit. If you neglect to make payments for an extended period of time, you may go into default, which has many more negative consequences, including wage garnishment, withholding of your federal income tax refunds, and suspension of your professional licenses.

Mariana:  If you think you may need help with your Stafford Loan payments for an extended time period, you may want to consider alternate repayment schedules. Standard Payments for Stafford loans begin with a maximum repayment term of 10 years, with even, monthly payments for the life of the loan (with the possible exception of the final payment)‏ Graduated payment begins with low payments, which increase over a fixed period of time, usually 10 years, usually at 2 year increments.

Extended payment allows some qualified borrowers with over $30,000 in loans to extend the repayment of their loans over a longer period of time, possibly up to 25 years. Income sensitive or Income contingent payment takes into consideration your annual income to determine payment amounts.  You’ll have to submit salary documentation, such as current pay stubs, to verify your income.

Amie:  Remember, there are consequences to choosing non-standard payment plans. The longer you take to pay off the principal of your loan, the more you will end up paying in interest over the life of the loan

Mariana:  Of course, if one of these options is best for you, it is best to go ahead and choose it rather than to become delinquent or to go into default! You may choose to change these repayment schedules later on, if your circumstances change. Perkins loans do NOT have alternate repayment schedules

Amie:  Another major option to consider once you have graduated is Federal Student Loan Consolidation, which allows you to combine all of your federal student loans into one loan, for ease of payment and different terms and benefits, including possibly lowering your monthly payments We’re going to focus on Consolidation in podcast # 2 of our series, so tune back in for the details on how Consolidation can help you

Mariana:  You need to be well informed to be a good consumer and responsible borrower.  Making mistakes with your loans can have serious consequences for your future.  Luckily, there is a wealth of information available to you, especially on the internet.  If you have trouble navigating this often changing and confusing information, you should feel comfortable contacting your student loan provider for assistance with understanding your student loans.

Amie:  This is the end of CSLF’s podcast #1, the student loan essentials for new graduates. Thanks for listening! Tune in next time for Podcast #2, where we help you navigate the benefits of Federal Student Loan Consolidation in a multi-part podcast.

Mariana:  To get immediate updates on new podcasts, remember to add the loan geek as a friend by visiting our profile on MySpace at www.myspace.com/first_rate.

Amie:  This podcast has been brought to you by CSLF, the Connecticut Student Loan Foundation. The purpose of CSLF is to improve the education opportunities of individuals who wish to obtain a postsecondary education.  CSLF supports its purpose by promoting access to higher education, by providing services designed to educate individuals about higher education opportunities and by offering affordable financing solutions that best meet the education funding needs of families.

Mariana:  Again, for more information, visit our website www.cslf.com or our blog on MySpace at www.myspace.com/first_rate , where you can provide feedback and ask more questions. Information in this podcast was accurate at time of production.  CSLF is not responsible for changes in federal regulations, which modify program guidelines or requirements.

Amie:  This CSLF podcast is copyright of the Connecticut Student Loan Foundation, all rights reserved.  May 2007.

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