The $3,600 solution for student loans

The hot topic of the current season is whether or not Congress should extend the subsidized (lower) interest rate on need-based Stafford loans to college students beyond the July 1 expiration date.  The subsidized rate is currently 3.4%.  After July 1, all loans will be at 6.8%, which is what the unsubsidized loan rate is at present.

But this argument totally  misses the point about student financial aid.  First, loans are not financial aid in the sense that a grant or scholarship is.  Do you call your mortgage or car loan aid? Of course not, they are just a payment plan.  That’s all a student loan is.

Second, student loan terms don’t call for payments to begin until months after the student has graduated.  The rate could be 0% or 20%, and the cash help to the student today is exactly the same.  What the student receives today is the assistance in the form of the principal amount of the loan being paid to the college he or she is attending.  The interest rate on that loan is irrelevant today.

Finally, is this good public policy?  Move ahead four years, two graduates earn their diplomas.  One has parents who qualified for need-based aid, one does not.  Why does the first student deserve a lower interest rate on his loan going forward?  They each are competing for jobs in the marketplace, using their education and experiences and talents to make a living.  Does it make sense to handicap their financial futures in such a way?

Here’s a better solution.  What is the lower interest rate on a ten year loan that starts repayment after graduation worth to a student today? Answer: $3,600.  So let’s give students that qualify for need based student loans $3,600 in aid today, and let everyone pay the same rate after graduation.


UVA Differential Tuition

The McIntire School of Commerce at UVA will cost $4,000 more per year than other undergraduate programs in 2012-13.  This extra charge is known as “differential tuition” and will apply to in-state and out of state students alike.  This extra charge will increase the cost of attendance by a like amount, bringing the COA for McIntire students to close to $30,000 per year.

For families with Virginia Prepaid 529 plans (VPEP) who thought they had tuition and fees covered, think again.  This differential is not covered by VPEP, according to UVA.  You will want to budget accordingly.  This is not an isolated occurrence either; the concept of different tuition rates for different course work is growing among community colleges and public institutions.  Parents, if your son or daughter is interested in a specialized area of study (like business, engineering, or nursing), be sure what the college charges for all four years so you can plan ahead.



Student loans at 50?

According to a piece in the Washington Post by Ylan Q. Mui, student loans are not just for students.  The Federal Reserve Bank of New York released data that show that roughly 20% of student loans that are in default are owed by borrowers over the age of 50.  Ms. Mui attributes this to co-signing, to adults returning to college, and to the inability of borrowers to discharge student loans through bankruptcy.  Who knows.  Borrowers over 50 would have gone to college in the 1970s and 1980s and college was not so expensive then, nor were loans so easily available, so these debts are most likely not lingering from their undergraduate years.  And, note that the 20% figure is for loans in default, so it’s not just that they have the loans, it’s that they aren’t paying.

What does that mean for the hordes of new borrowers who are leaving college with average loans of $25,000 and facing a grim job market?  Student loans might affect life decisions like getting married and buying a home.  (Theories have been postulated that the decline in marriage rates is due in part to debt problems.) The loans certainly delay retirement savings since money is being diverted to repayment of debt.  Now, with data showing the impact on seniors, the real effects might be worse than we knew, at least for some families.

The clear takeaway:  avoid debt if you can.  If you have to include loans in your financial aid package, treat them with respect.  Make a financial plan for your future that shows what you expect to earn after college, what you will need to live on, what you can donate, and what you need for debt.  Parents:  no one will make your teenagers do this if you don’t.


Shocking report about Virginia colleges

Most parents don’t really know what is going on during four years of college.  We know what it costs, certainly, but beyond that, we only hear what is reported through the filter of our young adults.  We don’t see the opportunities not taken, the courses not offered, the ability of the teachers to connect.  Not that we necessarily should; our kids are on the road to adulthood and are those things really our job?

So when you read the report issued by the American Council of Trustees and Alumni, you will be shocked.

  • Over 33% of Virginia schools do not require math.
  • No Virginia schools require a course in economics.
  • Only two schools require a basic course (one) in American history or government.
  • The notion of a core curriculum as fundamental is only lip service.
  • At 22 of the 39 colleges, less than 50% of students graduate in 4 years.
  • At 17 of 39 schools, tuition and fess (notice this excludes room and board and living costs) now represent more than 40% of the median household income.
  • Facilities are significantly underutilized in terms of hours of average weekly use.
  • Most colleges require all sorts of testing of students before they are admitted.  Only a small handful of Virginia schools participate in any sort of academic accountability program once the students are enrolled.

Parents and students, are you getting what you are paying for? 





Here are a few things to keep in mind while you are working on the FAFSA.

If this is your first time dealing with the FAFSA, it can be intimidating.  We suggest you run the FAFSA Estimator first.  It takes less time to fill out and it will give you a chance to get comfortable with the questions before the “test”.  It can be found at null

Decide who is in charge, parents or student?  The FAFSA will be in the student’s name, using his or her social security number, birth date, driver’s license and financial information.  But the real focus of the FAFSA is parental income and assets, and most parents prefer to handle that information themselves.

If your tax return for 2011 is not yet filed, don’t wait.  Go ahead and file the FAFSA now using good estimates and make corrections later.  Be conservative in your estimates; otherwise, the changes you make might yield some unwelcome surprises. 

Most of all, if you think you don’t need to file because there is no reason to, you might be mistaken.  Drop us a note and we’ll help you determine if filing is worth your time.


FAFSA for North Carolina Residents

The North Carolina General Assembly made significant changes in how the state of North Carolina awards state financial aid.  A single, new need-based scholarship will replace a number of old scholarship and grant programs.  Eligibility for this new scholarship will be based on the results of the FAFSA.  But here is the biggest takeaway: 

The new scholarship will be awarded first-come, first-served. That means you want to get your FAFSA in immediately if you expect to qualify for aid from the new program.  Students who are legal residents of North Carolina with EFCs of $15,000 or less and who meet the eligibility of the Pell Grant Program will be eligible.  Check with your school’s financial aid office for more details.  If you are unsure, call their office, this news is so new that many websites are not yet updated with current information.

This is only true for North Carolina residents.  Virginia residents can continue to observe priority deadlines of specific colleges and scholarship programs.  Always check the deadlines, and file sooner rather than later.  You can file the FAFSA without waiting for your 2011 tax return to be completed.  You do this by using estimated information and making corrections when the return is done.


Newspaper Readers – Calculator Report Here


Please follow the above link for our detailed report on Virginia schools’ net price calculators.  If you have any questions, simply drop us a note.  You can also subscribe to our free monthly newsletter using the button at the top of our home page.  Thank you to the Times-Dispatch and the Daily Progress.


Finding net price calculators

Colleges are required to have net price calculators on their websites, but they are not required to make them easy to find.  The best idea is to look under the Financial Aid section.  We put together the following table of clickable links to 27 Virginia colleges’ calculators. (Note: Links updated February, 2018 – please report a broken link here.)

Christopher Newport
William & Mary
George Mason
James Madison
Norfolk State
Old Dominion
Mary Washington
Virginia State
Virginia Tech
Emory and Henry
Mary Baldwin
Washington and Lee
Sweet Briar
Shenandoah University
Hampton University


Deadlines Move Up

Most parents and teenagers know that deadlines are important when it comes to applying for college.  The “system” is built around a certain timing – start getting serious in the spring of junior year in high school, take tests, apply in the fall and winter of senior year, hear back in the spring, make a decision, and graduate.  It’s been that way for years.

But it is changing, subtly.  Students are applying earlier and earlier, and now, colleges are moving up application deadlines.  No longer is January 1 or February 1 the only important date.  Some schools are encouraging applications beginning as early as September!  The new popularity of Early Action programs (as opposed to Early Decision) means that most students will have at least one admissions decision by Christmas.

What does all this mean?  First, you have to know each of the deadlines for every school on your list.  You cannot assume it will be the same as last year, this is a rapidly changing area.  Second, merit aid may have its own deadlines, especially for early applicants.  Third, for families with juniors in high school, you need to be focused on college now.  Do not wait until the spring to get started. 

The entire calendar has shifted forward.  Get started sooner so the shift does not catch you off-guard.  For seniors, be meticulous about your deadlines.


Henrico College and Career Night

Thank you to everyone who stopped by our table at the Henrico College and Career Night.  Here are some websites that we talked about:

EFC Calculator:


No-loan pledge schools:

Information on how generous colleges are with financial aid:

If you run into any questions as you do your research on colleges and aid, please let us know.