Student Loans – Past and Present

Welcome to the 2024 college admissions season that has left students and their families confused and excited.

Normally this is the time of year when I remind you that financial aid packages are not always what they appear to be.

Families often confuse loans, which must be paid back with interest, and grants, which are essentially FREE money.

This year the issue is even more problematic because of the FAFSA fiasco.

If you haven’t been following the drama surrounding FAFSA, here’s a quick recap: Because there have long been complaints about the Free Application for Federal Student Aid (FAFSA) for federal financial aid, the government has overhauled the whole thing.

The promise was that applicants would be able to use a streamlined form and process for the 2024-2025 school year. The NEW FAFSA was supposed to save time and help more families qualify for federal loans, but there were widespread frustrations and complaints from the start of the rollout.

The good news is that the initial technical issues that delayed applicant submissions have largely been resolved. But there is now another problem: some colleges received incorrect information from the government.

The Department of Education (DOE) acknowledged the issues in late March and provided daily updates to help families make FAFSA corrections and navigate the process. The department notes that as many as “30% of FAFSA forms may be affected” by known processing or data errors.”

Okay, so where does that leave the borrowers?

Some families are in a holding pattern until they receive their financial packages. DOE expects most of the issues to be resolved by the end of April. As a result, many colleges are moving their usual May 1 deadlines to give applicants more time to make a final decision about which college to attend.

During this time, I encourage families to have realistic conversations about the large financial investment they are about to make.

It is imperative that borrowers, their parents or their grandparents avoid signing up for a plan that could effectively impoverish them if things go wrong.

What could go wrong? You ask. Maybe the student doesn’t graduate, maybe the post-grad job market is lousy, or maybe the graduate chooses a profession with a low starting salary.

After the frank (and yes, difficult) discussions and armed with all financial offers in hand, it may be worth having the student contact the university to appeal a decision, especially if there has been since something has changed (think job loss, illness). the application has been submitted.

With all these hoops to jump through, are you wondering if a four-year degree is worth it?

The answer is yes, with one caveat. The data shows that college graduates have lower unemployment rates, earn more money over their careers, and are able to build greater net worth over their lifetimes. But if you borrow too much money, those benefits start to diminish.

One final note: The Biden administration recently introduced more plans to reduce debt on some outstanding federal student loans, depending on income limits. If the rules withstand the expected legal action, they will help borrowers by potentially forgiving the debts of those who:

— Owing more than at the beginning of the repayment.

— Are otherwise eligible for loan forgiveness through plans such as Saving on a Valuable Education (SAVE) Plan, Public Service Loan Forgiveness or other programs, but have not yet applied.

— Have had student debt for more than 20 years and student debt for more than 25 years.

— They experience difficulties in repaying their loans.

— Have participated in institutions or programs of low financial value that did not meet accountability measures.

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