Higher Education News
A Direct Consolidation Loan allows you to combine multiple federal education loans into one loan. Before making the decision to consolidate your loans, you’ll want to carefully consider whether loan consolidation is the best option for you. Keep in mind, once your loans are combined into a Direct Consolidation Loan, they cannot be removed.
Advantages of consolidating your student loans:
- It’s Free!
It’s free to apply to consolidate your federal student loans. If you are contacted by someone offering to consolidate your loans for a fee, you are not dealing with the U.S. Department of Education.
- Simplified Payments
You’ll have a single monthly payment and a single lender (the U.S. Department of Education) instead of multiple payments and multiple lenders.
- Lower Monthly Payments
You may get a longer time to repay your loans, often resulting in lower monthly payments.
- Qualify for Income-Driven Repayment or Loan Forgiveness
Some benefits such as the Pay As You Earn Repayment Plan and Public Service Loan Forgiveness Program are only available for Direct Loans. If you choose to consolidate your Federal Family Education Loan Program loans into a Direct Consolidation Loan, you may be able to take advantage of these programs.
- Fixed Interest Rate
Direct Consolidation Loans have a fixed interest rate, meaning your interest rate won’t change year to year. The fixed interest rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%.
Disadvantages of consolidating your student loans:
- More Interest Paid Over Time
You will likely pay more money in interest over the life of the loan. The amount of time you have to repay your Direct Consolidation Loan can vary from 10-30 years depending on the amount of your Direct Consolidation Loan and the amount of your other student loan debt. The longer it takes to repay your loan, the more you will make in interest payments.
- Loss of Borrower Benefits
You may lose any borrower benefits, such as interest rate discounts, principal rebates, or some loan cancellation benefits, offered with the original loans.
In weighing your options, be sure to compare your current monthly payments to what your monthly payments would be if you consolidated your loans. If you’re just interested in temporarily lowering your monthly payment, consolidation might not be the answer. Contact your loan servicer to consider alternative options such as switching repayment plans or requesting a deferment or forbearance.
To find out more information about loan consolidation, including eligibility requirements, visit https://studentaid.ed.gov/repay-loans/consolidation.
Tara Marini is a communication analyst at the Department of Education’s office of Federal Student Aid.
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What You Need to Know About New Rules to Protect Students from Poor-Performing Career College Programs
Cross-posted from the White House blog.
Yesterday, the Administration announced new regulations to protect students at career colleges from ending up with student loan debt that they cannot pay. The new rules will ensure that career colleges improve outcomes for students — or risk losing access to federal student aid.
To qualify for federal student aid, the law requires that most for-profit programs and certificate programs at private non-profit and public institutions prepare students for “gainful employment in a recognized occupation.” The new rules are part of President Obama’s commitment to help reduce the burden faced by student loan borrowers and make postsecondary education more affordable and accessible to American families.HOW ARE CERTAIN PROGRAMS LEAVING BORROWERS WITH THE BURDEN OF STUDENT LOAN DEBT?
Too often, students at career colleges — including thousands of veterans — are charged excessive costs, but don’t get the education they paid for. Instead, students in many of these programs are provided with poor quality training, often for low-wage jobs or in occupations where there are simply no job opportunities. They frequently find themselves with large amounts of debt and, too often, end up in default. In many cases, students are drawn into these programs with confusing or misleading information. The situation for students at for-profit institutions is particularly troubling:
- Students who attend a two-year for-profit institution costs a student four times as much as attending a community college.
- Eighty-eight percent of associate degree graduates from for-profit institutions had student debt, while only 40 percent of associate degree recipients from community colleges had any student debt.
- Students at for-profit institutions represent only about 11 percent of the total higher education population but receive 19 percent of all federal loans and make up 44 percent of all loan defaulters.
The Department of Education estimates that about 1,400 programs serving 840,000 students — of whom 99 percent are at for-profit institutions — would not pass the new accountability standards. All programs will have the opportunity to make immediate changes that could help them avoid sanctions, but if these programs do not improve, they will ultimately become ineligible for federal student aid — which often makes up nearly 90 percent of the revenue at for-profit institutions.HOW WILL THE FINAL RULE IMPROVE ACCOUNTABILITY AND TRANSPARENCY?
The rule also provides useful information for all students and consumers by requiring institutions to provide important information about their programs, like what their former students are earning, their success at graduating, and the amount of debt they accumulated.DOES THE NEW RULE ONLY APPLY TO FOR-PROFIT COLLEGES?
The final rule apply to all sectors of higher education. In order to receive federal student aid, the law requires that most for-profit programs, regardless of credential level, and most non-degree programs at non-profit and public institutions, including community colleges, prepare students for “gainful employment in a recognized occupation.” The new rule sets the standards for “gainful employment” programs to remain eligible to accept federal student aid.
So, to maintain federal student aid eligibility, gainful employment programs will be required to meet minimum standards for debt vs. earnings for their graduates. A program would be considered to lead to gainful employment if the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of his or her total earnings. Programs that exceed these levels would be at risk of losing their ability to participate in taxpayer-funded federal student aid programs.HOW MANY INSTITUTIONS WILL BE AFFECTED BY THE NEW RULES?
The new rule is significantly stronger than the 2011 regulation, and followed an extensive rulemaking process that involved public hearings, negotiations and nearly 95,000 public comments. The new rule is tougher than the Department of Education’s 2011 rules because they set a higher passing requirement and lay out a shorter path to ineligibility for the poorest-performing programs. In 2012, the Department estimated that 193 programs would not have passed the previous regulations; with respect to these new rules, based on available data, the Department estimates that about 1,400 programs would not pass the accountability metric.WHEN DO THE NEW REGULATIONS GO INTO EFFECT?
The rule announced today will become effective on July 1, 2015. Institutions will have the opportunity to make immediate changes that will improve their programs and avoid ineligibility. The first several years will include a transition period that will take into account any immediate steps by institutions to reduce costs and debt.
Stay informed on the Obama Administration’s commitment to college affordability by signing up for White House education updates here.
Cecilia Muñoz is Assistant to the President and Director of the Domestic Policy Council.
#StudentLoanForgiveness. It’s a hashtag now, so you’ll all pay attention, right? Everyone wants their student loans forgiven. The perception is that very few qualify for any forgiveness programs. But did you know that there is one broad, employment-based forgiveness program for federal student loans? Most people don’t, or misunderstand how it works. Let me break down some key points of the Public Service Loan Forgiveness Program to help you figure out if you could qualify.
Can you check the all the boxes?
[ 1 ] Work in “Qualifying Employment”
First, you need to work in “qualifying” employment; that is, you must work in “public service.” But what does that mean? Everyone seems to have a different definition. Ours is based on who employs you, not what you do for your employer. The following types of employers qualify:
- Governmental organizations – Federal, state, local, Tribal
- Not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code
- A not-for-profit organization that provides some specific public services, such as public education, law enforcement, public health, or legal services
The following types of employers do not qualify:
- Labor unions
- Partisan political organizations
- For-profit organizations
[ 2 ] “Qualifying Employment Status”
If you work at one of these types of organizations—great! That’s the most difficult criteria to meet. Next, you need to work there in a “qualifying” employment status, which means that you must be a full-time employee of the organization. Full time, for our purposes, generally means that you meet your employer’s definition of full time or work at least 30 hours per week, whichever is greater.
[ 3 ] Have a “Qualifying Loan”
A “qualifying” loan is a Direct Loan. It’s that simple. Of course, it’s the government, so nothing is actually that simple. You see, there are (or were) three big federal student loan programs:
- The Direct Loan Program, which is now the biggest program,
- The Federal Family Education Loan (FFEL) Program, which is what many students borrowed from until mid-2010, and
- The Federal Perkins Loan Program, which is a relatively small program.
You may have loans from just one of these programs, or you may have borrowed from all three. If you’re not sure which loan program you borrowed from, I can’t blame you—I had 20 separate loans by the time that I finished graduate school! You can use the National Student Loan Data System to determine which program you borrowed from. Here’s a tip from me to you: basically, if you see “Direct” in the loan type name, it’s a Direct Loan. Otherwise, it’s not.
Don’t have a Direct Loan? Don’t despair! You can consolidate your other federal student loans into a Direct Consolidation Loan and qualify that way. Not having a Direct Loan is the biggest reason that borrowers who are seeking Public Service Loan Forgiveness aren’t on the right track, so be sure that all of your loans that you want forgiven are Direct Loans before you proceed to the next step. If you do need to consolidate, be sure to check the box in the application that says that you’re consolidating for the purposes of loan forgiveness. It will make your life easier, I promise.
[ 4 ] Have a “Qualifying Repayment Plan”
Next, you need a “qualifying” repayment plan. All of the “income-driven repayment plans” are qualifying plans for Public Service Loan Forgiveness. So is the 10-year Standard Repayment Plan, but if you’re on that repayment plan, you should switch to an income-driven repayment plan straight away, or you will have a drastically lower loan balance left to be forgiven after you meet all of the criteria.
If you’re consolidating your loans, you can apply for an income-driven repayment plan in the consolidation application, but if you don’t, you will be placed on the Standard Repayment Plan for Direct Consolidation Loans, which is almost never a qualifying repayment plan for Public Service Loan Forgiveness. If you already have Direct Loans, you can submit an income-driven repayment plan application on StudentLoans.gov.
[ 5 ] Make 120 “Qualifying Payments”
Lastly, you need to make “qualifying” payments—120 of them. A qualifying payment is exactly what you would expect it to be. You get a bill. It has an “amount due” and it has a “due date”. Make the payment in that amount by the due date (or up to 15 days after), and the payment is a “qualifying payment”. If you make a payment when you’re not required to—say, because, you’re in a deferment or you paid your student loan early—then that doesn’t count. But if you reliably make your payment every month for 10 years, you should be okay. The best way to ensure that your payments qualify is to sign up for automatic payments with your loan servicer.
Note that these payments do not need to be consecutive. So, if you had made 10 qualifying payments, and then stop for a period of time (say, you go on a deferment), then start making qualifying payments again, you don’t start over; instead, you pick up where you left off.
And, I’m sorry to have to mention a seemingly arbitrary date, but a payment only qualifies if it was made after October 1, 2007, so nobody can qualify for Public Service Loan Forgiveness until 2017 at the earliest.
Ok, so do I qualify?
Now that you have the details, let me explain how all of the criteria work together. For any payment to count toward Public Service Loan Forgiveness, you need to meet all of the criteria when you make each payment. Stated differently, you need to be working for a qualifying employer on a full-time basis when you make a qualifying payment under a qualifying repayment plan on a Direct Loan. When you break these criteria down separately, it seems simpler. It’s when you try to pack it into one sentence that it seems overwhelming.
As much as I’d like to think that all of you now have a perfect understanding of this program and how it works, I know all of you are thinking—“okay, but do I qualify?” Here’s how you find out. Download this form. Fill it out. Have your employer certify it. Send it to FedLoan Servicing (one of our federal student loan servicers), queue up How I Met Your Mother on Netflix, and wait for an answer. FedLoan Servicing will do the following:
- Check whether you have any qualifying loans.
- If you have qualifying loans, validate that your employment qualifies. If none of your loans qualify, they’ll tell you so.
- If your employment qualifies, they will send you a letter confirming that your employment qualifies. Then, any of your federally held loans that are not serviced by FedLoan Servicing will be transferred to them so that we can keep better track of your loans and payments for Public Service Loan Forgiveness. If your employment doesn’t qualify, they’ll tell you so.
- After your loans are transferred, they will match up the dates of employment on the form that you submitted to the payments you made during that time and determine how many qualifying payments you made. You’ll receive a letter with a count of qualifying payments and an anticipated forgiveness date (which assumes that all your future payments also qualify).
It’s after you get this payment count back that you’ll know whether you’re on the right track. So, it really is a good idea to submit this form early and often. We recommend that you submit the form once per year or when you change jobs. The beauty of submitting these forms early and on an ongoing basis is that it means that you won’t have to submit 10 years’ worth of them when you ultimately want to apply for forgiveness. It also means that when you apply for forgiveness, that you’ll be able to do so with confidence that you qualify for it.
One more piece of good news: Public Service Loan Forgiveness is not considered income by the IRS. That means that it’s tax-free.
Ian Foss has worked as a Program Specialist for the Department of Education since 2010. He’s scheduled to be eligible for Public Service Loan Forgiveness on October 6, 2021, if all goes according to plan.
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Doing it for Me: A U.S. Department of Education Documentary Screening and Panel Discussion on Personal Struggle and Supporting Youth
School dropouts are saddled with so many preconceptions. The popular narrative is that they are either lazy, they give up, or they simply don’t want to go to school.
To many students who decide to leave middle or high school, these stereotypes couldn’t be further from the truth.
Recently, the student-produced documentary Doing it for Me was screened at ED’s Washington, D.C. headquarters. The audience was given an intimate look into the personal story of D.C. high school dropout Precious Lambert, and learned how she got back on track and helped her two best friends – Victoria Williams and Jessica Greene – navigate tough life-altering decisions.
Following the screening, Leah Edwards, the film’s co-director; Jessica Greene, who is featured in the film; Maureen Dwyer, executive director of Sitar Arts Center; and former high school dropout and current alternative school student Cristian A. Garcia Olivera, participated in the panel discussion. Before an audience of ED staff and policy makers, they gave examples of how both the arts and the concern of teachers for their students can promote a successful learning environment.
Despite being in the top 2 percent of her high school class, Jessica lacked relationships with her teachers. “It was up to me to drive myself,” she explained. She believed there was a major problem in her education due to poor communication between students and teachers, and discovered that the only way to get back on track was to take personal responsibility.
Jessica found an outlet and a path to success at Sitar Arts Center, a local organization that advances life skills for underserved youth through holistic arts programs. Though she often denied her feelings at home, Jessica said, “At Sitar I could be me; I could let loose.”
Through the work of Sitar Arts Center, Maureen was able to show how the arts are essential to critical and creative thinking — and how arts education can help students at risk of dropping out persevere beyond school. This aligns with the National Endowment for the Arts research that show students with low socioeconomic status perform better when they are engaged in the arts, and are two times more likely to enroll in four-year colleges.
Christian said that when teachers show an interest in their students it can make a huge impact on their lives. He dropped out of his traditional school and is currently (and happily) enrolled in an alternative school. “At alternative schools the teachers are really nice. The classes are really small, with only 20 kids per class, and . . . teachers teach you in a way to get to know you better,” he said.
Getting a second chance can make all the difference in the world for students like Precious, Victoria, Jessica and Christian. An audience member summed up his understanding of the film’s powerful message: “If you’ve made the bad choice, you can still fix it.”
Watch the entire discussion on ED Stream.
This event was a part of the ED Youth Voices Policy Briefing Session program, aimed at providing U.S. Department of Education staff and stakeholders with student perspectives on educational policy issues.
Samuel Ryan is a special assistant and youth liaison in the Office of Communications and Outreach at the U.S. Department of Education.