A recent study by the National Bureau of Economic Research has revealed that simplifying the rules of applying for financial aid is essential to facilitate more low-income students attending college. The study — “Into College, Out of Poverty? Policies to Increase the Post-secondary Attainment of the Poor” — is actually a review of 17 previous studies, all which examined the efficacy of various programs aimed at increasing access to college and keeping students enrolled. The authors of “Into College, Out of Poverty” found that confusing and cumbersome paperwork is a major deterrent to programs, such as the Pell Grant, in reaching their goal of enrolling (and retaining) low-income students who would not otherwise have gone to college. If targeted stud...

President Obama has promised to improve this nation’s student financial aid system, and that includes overhauling the process of applying for assistance. Top on the President’s list is the Free Application for Student Aid, AKA the FAFSA, which is currently a long and rather complex document that needs to be filled out on line or on paper in order to qualify for federal aid. The document asks students questions about their family’s income, savings and other resources in order to determine how much assistance one is eligible for. The President Education Secretary, Arne Duncan, has recently announced that the Administration plans to completely eliminate the FAFSA and rely instead on an individual’s tax returns to figure financial aid. Secretary Duncan plans to launch...

A number of important changes are looming for federal student aid, which may save you some serious cash. Here’s a quick look at the most significant developments: Interest rates on subsidized Stafford loans are dropping — This year, they will go from a 6% to 5.6% (fixed). Under the College Cost Reduction and Access Act of ‘07, the rate will continue to drop until 2011-2012, when it will reach an all-time low of 3.4%. Unfortunately, the lower rate only applies to loans taken out — or consolidated — in that academic year. Remember, with a subsidized loan, the federal government pays your interest while you are in school. Income-based loan repayment — I won’t bother rehashing the details, since I’ve covered them extensively in earlier posts. ...

This story about creative financing for college ran over the weekend in my local paper. The article does a great job of outlining some of the financial challenges families are facing in the midst of this country’s economic crisis. It was good to see that staying in school is still a priority for the two families featured in the piece, but rather heart-wrenching to read the real life stats. For example, did you know that, across the board, the value of savings in 529 Plans has dropped 21% over the past year? And the market drop isn’t just hitting parents who were saving for their kids’ future. It is also hitting universities and their endowment plans, which are a major source of funding for university-based aid like scholarships and tuition reductions. The article cites ...

Yesterday, we talked about whether or not paying for college should be the parents’ responsibility. At the end of the post, I asked what you thought about cosigning a student loan. Is cosigning a great way for parents to help out their kids with the rising cost of college? Or is co-signing a slippery slope that does nothing but hinder both parties? Lots of financial experts out there have an opinion on this matter, and most of them say: Don’t do it! For example, here’s: MSN Money on why you should never cosign a loan Finance author Francine Huff on thinking long and hard before cosigning on a personal loan Talk show host Dave Ramsey on how cosigning can hurt your family Financial expert Suze Orman on why love means never having to say you’ll cosign Why do the expe...

Last week, we launched a four-part series about the best tax-preferred college savings vehicles. So far we have covered three out of the four: 529 College Savings Plans, 529 Prepaid Tuition Plans, and the Coverdell Educational Savings Account. Be sure to review those posts, if you didn’t get a chance to read them yet. Today we are rounding out the series with the least well known of your tax-preferred college savings options, the Uniform Gift to Minor/Uniform Transfer to Minor Act.  In short, UGMA and UTMA are custodial accounts that allow you to save a substantial amount of money in your child’s name for the purpose of college… or anything else… while benefiting from your child’s lower tax bracket. (By the way, I keep emphasizing “tax preferred” because, o...

Remember the President’s plan for student loans that I told you about a few weeks ago? Obama wants the federal government to directly disperse student loans via the Department of Education, rather than the current system of guaranteeing the loans made by private lenders like Sallie Mae. Well, according to this recent story in Politico, some Congressional Democrats aren’t all that thrilled with the idea. Apparently their issue isn’t so much with who disperses the loans, as it is with Obama’s plan to use the savings ($94 billion over 10 years) to increase funding for the Pell Grant. Senate Budget Committee Chairman Kent Conrad (D-ND) and House Appropriations Chairman David Obey (D-WI) seem concerned about creating a new entitlement program out of the Pell Grant. (...

Welcome to the final part of the Financial Aid Finder’s five-part FAFSA Workshop. If you want to catch up on parts 1-4, follow these links: Essential FAFSA Documents FAFSA PIN Common FAFSA Blunders FAFSA Deadlines Well, we have arrived at the final installment of our FAFSA workshop. For some of you, this may no longer be relevant, since you had March 1st (or earlier) deadlines by which to complete your FAFSA. If you are still working on your application, however, you might find some good tips in today’s FAQs. A special thank you to everyone who sent me their questions. I hope that our answers today are able to help you, but if you are still confused, leave me a comment below so I can follow up with you. I am applying to three private schools and two state schools. How many FAF...

Welcome to part 4 of the Financial Aid Finder’s five-part FAFSA Workshop. If you want to catch up on parts 1-3, follow these links: Essential FAFSA Documents FAFSA PIN Common FAFSA Mistakes And remember that next week, I will be answering your FAFSA questions, so send ‘em in to me on email or leave me a comment with your queries. Today, I am focusing on FAFSA deadlines. You would think that with something like a deadline, this post would be pretty short. But the reality is, when it comes to the FAFSA, deadlines are anything but cut and dry. Let’s start with the obvious. The federal deadline for FAFSA on the Web applications is midnight Central Daylight time, June 30, 2009. But June 30th is far from the end of the story and here’s why: Although the FAFSA is the for...

Welcome to part 3 of the Financial Aid Finder’s five-part FAFSA Workshop. As the month of February winds its way down, many of you have just days or weeks left to finish up your FAFSA. In the first two weeks of our series, we gave you a list of the Essential FAFSA Documents and talked about How to Get a FAFSA PIN. Next week we will review the various state and federal FAFSA deadlines and then in week 5, we will be taking your FAFSA questions (so send ‘em in to me on email or leave me a comment.) Today, we are taking a look at some of the most common mistakes students make when completing their FAFSA. I know this process can feel overwhelming when you first get started, but it’s important to stay focused. Mistakes on the FAFSA are serious business, since they can delay...