Wednesday, June 04, 2008

Are student loans credit based

It seems like these days students are having to take out more and more in student loans. College is getting more expensive and the government is certainly not giving out more and more money.

Students have to rely on student loans to get through college and earn a degree. It is very hard to get grants and scholarships, as they are reserved for people with very little income.

There are great federal student loan programs out there like the Perkins loan and the Stafford loan. The Stafford loan is is the most popular option for students these days.

The big question is, are student loans based on your credit?
Most students come into college with zero credit and it is pretty stressful thinking you have to have credit to get a student loan.

The answer is no; federal student loans are not credit based. Your school will not even check your credit and unless you have another student loan in default, you will be approved.

WAIT....

Just because the loan is not based on credit does not mean that it will not affect your credit report. Your federal student loan WILL be reported to the credit agencies. This is good though, as paying it back will help you build great credit for your future.

If you decide not to pay back your student loan, your credit can be ruined for a long time. Additionally, any tax refunds or stimulus checks due to you will be intercepted to pay off the debt, so make your payments.

Tuesday, June 03, 2008

Scholarship entry fees

I have been asked several times over the past week or so about paying an entry fee for a scholarship.

This is a very touchy subject that gets lots of attention from school administrators and government officials. There is no right answer to the question and there are pros and cons to the situation.

First of all, there are legitimate scholarship granting companies that offer scholarships and don't charge an application fee. They are hard to find and you must do your research. There are also companies that charge an application fee to enter the scholarship contest and give tons of scholarships, as well as companies that charge and never give a single one.

Lets say you enter a scholarship contest where there is a $5 entry fee. The company says they are going to give out 5 $1000 scholarships. Well this is fine if only 1000 people or less enter the contest, but this is usually not the case. What happens if 10,000 students enter the contest? Looks like the company will make a hefty $45,000 profit for not really doing much.

I have found scholarships that do give 100% of the money from application fees back to students. Of course everyone who enters will not receive a scholarship.

There might also be issues with this type of scholarship being a lottery or game of chance. Those are generally illegal in the United States. This is why most companies require that you submit a scholarship essay of some sort. This takes away the element of chance in the contest.

Whether the application fee is $1 or $100, please conduct research on the company you are applying to. Also, you can always check the BBB in your state.

Sunday, June 01, 2008

FAFSA Dependancy Override

I get questions every day from students who believe they should be considered an independent student in the eyes of the FAFSA. Unless a student is 24 years old by January 1st of the school year they are going to attend, have a child, are married, have a 4 year degree, have other dependents, or are a military veteran, then the student must provide parental financial information on the FAFSA. I know this does not sound fair because some students are on their own after high school. Your parents are not going to help you with college, or maybe you just want to get out and want to do everything on your own. Well, this is not the case most of the time. Even if your parents are not claiming you on their taxes anymore, you still need their financial information.

There is an exception to this rule called Dependency Override. A dependency override is when the financial aid office at your school determines that you should not have to use your parents information on your FAFSA. This sounds really great, but in all actuality, it is very hard to get a dependency override from your school.

Here are some reasons why your school will NOT give you a dependency override:
1. A student says that they are on their own and the parents do not help out at all.
2. A parent is unwilling to give the student any financial information
3. A parent no longer claims the student on tax forms.

Here are some reasons why your school would grant a dependency override:
1. You are or were living in an emotionally or physically abusive household.
2. You left a household that was unsafe.
3. Parental abandonment of the student.
3. The custodial parent is incarcerated.
4. The student was removed from the parent's house by court order.

The first step in applying for an override is to talk to the financial aid office at your school. You should do this before attempting to file your FAFSA. The financial aid office will review your dependency override case and tell you what steps you need to take to file your FAFSA.

Most financial aid offices are going to ask for detailed documentation regarding your situation and will probably ask for letters from adult mentors in your life to back up your story.

The school has the final word on your override and you can not appeal it to the school or the federal government. If you truly are in a situation where a FAFSA dependency override is necessary, then your school will give you one.

All schools might have different criteria on granting the override, so if you had one at one school and then change schools, it is not automatic that you are going to be granted one at your new school.