Student loan debt is back in the news again. Based on data from the 2009 National Postsecondary Student Aid Study, the Project on Student Debt has recently publicized these numbers:

• For the past 4 years, approximately two-thirds of students graduating from four-year colleges have student loan debt upon graduation
• Nationwide, the average debt for graduating seniors with student loans rose to $23,200 in 2008, an increase of about 6%/year between 2004 and 2008
• At some colleges, average debt soared to as high as $106,000

The good news is that there are ways to minimize and control student loan debt and many personal finance experts who offer tips on how to do this. These tips for affording student loans are not new—just a little dusty from not having been used for a while.

Liz Pulliam Weston, a personal finance advisor at MSN Money, wrote a terrific article with tips for affording college and student loans:

How much college debt is too much?

Two years later, with the country in a deep recession, that question is even more important. In addition to a refresher course on understanding your personal finances and federal loans vs. private loans, Ms. Weston also provides recommendations for student loan limits based on the degree you plan to pursue.

If you’re starting to think about going back to school next year, now is a good time to familiarize yourself with tips for affording your student loans after you’ve graduated.

EducationGrant often hears from single moms who are looking for ideas about going back to school and the financial aid that can help them accomplish this goal. It’s inspiring to see how many single moms are determined to get the higher education they need to create a better quality of life for their families!

Single moms have many factors to balance when it comes to going back to school: scheduling, child care, transportation, time management, college tuition and fees, money for schoolbooks, and keeping children fed, clean, and rested while mothers work, study, or both. (Not sure how they do it all!) It won’t come as a surprise to any single mother that money, or the lack of it, is the biggest worry that most single moms deal with every day. So going back to school can feel like a Catch-22. To earn more money and make your family financially stable, it helps to have a quality college degree. But to get the college degree, you need money.

Even still, finding financial aid isn’t always the first necessity in ideas for single moms going back to school. Another important goal, especially in this bleak economy, is to NOT end up with a lifelong mountain of student loan debt after you’ve graduated.

Are you determined to get your college degree? Here are some ideas on how to get started:

1) Choose a realistic education goal. Are you going back to school so you can qualify for a particular job or change your career? What’s the average pay for the new career? (How about the pay for an entry-level worker?!) Will this industry still need workers once you’ve graduated?

2) Comparison-shop for the best accredited school and program for your needs. When considering schools, keep these factors in mind:

• Where is the school? Can you get to its campus easily by public transportation if you don’t have a car? How long is your commute?
• How much time on campus will the program require? Will you be able to get child care to cover the time you want to devote to your classes and schoolwork? (Besides federal financial aid, look for grants and scholarships that provide funding for child care and other living expenses.)
• Would an accredited online program work better for you?
• Is there an admissions representative at the school that can tell you about the program and what it will require from you?
• How much does the program cost? What fees are there in addition to tuition?
• Is there a financial aid officer who can walk you through the financial aid process? Does the school have education grants for single moms? (If not, maybe consider a different school.)

3) Fill out the Free Application for Federal Student Aid (FAFSA).

• This application opens the door to all federal financial aid, such as Pell Grants and low-cost student loans, as well as single mom education grants from individual schools and states.
• Federal and state financial aid can be used for any accredited higher education program registered with the U.S. Department of Education as a “Title IV” school. These include community colleges, state universities, and online programs in addition to traditional 4-year schools.
• You don’t need to be accepted or enrolled in a school before you submit your FAFSA. All you have to do is list the school(s) you’ve applied to. You’ll get a report back that tells you how much money you’ll be expected to contribute to your degree costs, and the school(s) will use that number to determine how much financial aid they can offer you. If you qualify for a Pell Grant, you’ll get one automatically.

4) Consider choosing the school that will allow you to graduate with the least amount of debt.

Single mothers do it all, and both the news and personal family histories are filled with countless stories of single moms whose children remember and honor them as role models and heroes. A college degree may be your ticket to the quality of life you want your children to have, but only if it doesn’t leave you worse off financially than you were before.

For more college planning details, see the earlier blog-post, How to Prepare for the FAFSA: 3 Pre-FAFSA Steps. You can also find more information about the FAFSA, scholarships for single moms, scholarships for women, adult learning scholarships, and low-cost student loans in earlier blog posts and the grants, loans, and scholarship pages in this site.

And if you have other tips and ideas for single moms going back to school, please share them here in the comments. The very best advisors for single moms are… other single moms!

Check out Grants for Single Mothers too!

News stories this week reported that contributions from wealthy donors will result in new college grants and loans for students in Kentucky, New York, Ohio, and West Virginia. The money probably won’t be available until next year, but the opening bell for the 2010 FAFSA is only 6 weeks away, anyway.

One happy recipient of a generous financial aid donation is the University of the Cumberlands in Williamsburg, Kentucky. The Charles E. Schell Foundation awarded the University a $100,000 grant to be used for interest-free student loans. To be eligible, college students will need to be citizens of Ohio, Kentucky, or West Virginia (or some unspecified adjoining states), between the ages of 18 and 25, with a minimum 2.0 GPA on a 4.0 scale.

A little research on the Charles E. Schell Foundation shows that the Foundation has awarded many such grants to dozens of schools in the region, including Ivy Tech Community College, Midway College, Union College, Denison University, Oakland University, University of Evansville, and Shawnee State, to name just a few. If you’re a college student in this part of the country, you should check with your financial aid office about whether your school may have the same interest-free loan program. Clearly, the Charles E. Schell Foundation is a generous supporter of higher education.

And numerous news publications reported a new $200 million grant from investment bank Goldman Sachs to provide scholarships for business students at community colleges. The first school to get money for scholarships will be La Guardia Community College in Queens, New York, but the plan is to roll out business education scholarships to other local community colleges as well. Goldman Sachs also apologized for its contribution to the collapse of the economy a year ago, but said that the apology and its new scholarship program were not necessarily related. But The New York Times could not resist mentioning that Rolling Stone Magazine has referred to Goldman Sachs as “a great vampire squid wrapped around the face of humanity,” so now, regretfully, I can’t resist either. The scholarships are a good idea, though.

Financial scams that seek college students the way great white sharks seek seals are back in the news again. Some scams are tried and true; some are new. Whichever one comes after you, don’t take the bait.

For an update on scams to watch out for, read Kim Clark’s article, “6 Scams That Target College Students,” over at U.S. News & World Report. She provides an interesting refresher on who sees you their favorite prey.

The scams that really stand out are the ones that try to reel you in with scary letters. These official-looking mail advertisements and letters use dramatic and urgent come-ons to make you think you could be in trouble, somehow. (Sounds similar to the email you get from financial frauds, illegally using your own bank’s real logo in the email to trick you into thinking there’s a real problem with your account.)

Any mail or email that claims you have to “Act now!” and “Before It’s Too Late” because “Time is Running Out,” but all you have to do is hand over some money, should be treated with caution. If you’re wondering if the mail you’ve received could be legitimate, talk to the financial aid advisors at your school.

And just because it’s Friday, here’s a gem on scams from the Federal Trade Commission…

The National Student Loan Data System (NSLDS) is the U.S. Department of Education’s online mega-database of federal financial aid accounts. This database keeps track of all federal student grants and loans (Title IV financial aid) awarded to students through the FAFSA program, including FFELP and Direct Lending student loans.

The information about all these student loans comes from the institutions that loaned or manage the money awarded to borrowers via the FAFSA, including banks, financial institutions, loan guaranty agencies, individual schools, and the U.S. Department of Education (Direct Loans).

The National Student Loan Data System provides you with a convenient way to check on the status of your FAFSA loan yourself, without having to go to a physical location or wait in line or on hold to speak to a bank teller or customer service rep. By logging in to the National Student Loan online database, you can see what your loan status is 24/7 and find information such as:

• the FAFSA grant and loan amounts you were awarded
• how much money was paid out to you or your school, and when
• what your FAFSA loan’s outstanding balance is
• whether you are up-to-date or falling behind on any required interest payments or loan repayments

You’ll need a FAFSA PIN (Personal Identification Number) to check your FAFSA loan status at the National Student Loan Data System site. If you filed your FAFSA online, you already have a PIN. If you mailed in a paper FAFSA, you’ll need to get a PIN before you can check your account status.

You can find more information about getting a FAFSA PIN and checking your FAFSA loan status on the Frequently Asked Questions (FAQ) page of the federal Student Aid website.

Nontraditional students often attend community college, which has the flexibility and affordability that work best for adult learners. There are almost 12 million fulltime and part-time nontraditional students from all walks of life pursuing degrees, professional certificates, and lifelong learning at community colleges from one end of the country to the other.

Nontraditional Students Depend on the Lower Tuition of Community College

The relatively low cost of community college is a tremendous benefit for nontraditional students, many of whom may be single parents, workers in lower-paying jobs, newly laid-off workers, or the first in their family to attend college. Despite some tuition increases, a recent College Board financial aid report noted that tuition and fees for an average community college are still only about 36% of the tuition and fees of an average four-year college.

Federal Student Loans for Community College: A Problem Revealed

Since community colleges provide a substantial higher education service to nontraditional students, you may be surprised to learn that many community colleges don’t offer their students federal student loans. That’s the discovery of the Project on Student Debt, who reported last month that approximately 900,000 community college students in 31 states could not get federal Stafford, Perkins, and PLUS loans because their schools chose not to participate in the federal loan program. (Download a copy of the user-friendly report here.)

The main reason seems to be the schools’ earlier bad experience with the consequences of high student loan default rates. In the 1990s, schools with very high default rates were penalized by being shut out of ALL of federal financial aid programs, including the invaluable Pell Grants that so many nontraditional students depend on. After a few close calls with losing their Pell Grants, those schools developed a little bit of paranoia about offering any more federal student loans.

The good news is that loan default rates have improved a lot since then and no community college has lost access to Pell Grants in many years. The bad news is that old fears die hard and today, thousands of nontraditional students end up having to take out private loans to cover the last of their community college costs when they can’t get Stafford, Perkins, or PLUS loans.

Private loans typically have higher interest rates, more borrower fees, and less protection than federal loans, and can turn into unmanageable debt for the students who can least afford it.

How to Find Out If Your Community College Offers Federal Student Loans

What can you do if you think you may need a student loan for community college? Before you apply, call the financial aid office of the community college(s) you’re considering and ask if they participate in the federal student loan program (Title IV). Be sure to ask specifically about loans (Stafford, Perkins, and PLUS loans), not just the financial aid program in general. (All eligible colleges participate in the federal grants program, but apparently they don’t all participate in the student loan program.)

If it turns out that the community college you were considering does not provide federal student loans, you may want to talk to other community colleges in your area until you find one that does. Community colleges fulfill a vital mission in the higher education service they provide to nontraditional students. Making federal student loans available to students who need them should be part of that mission.

One thing that has never been said about the federal financial aid system is that understanding it is a piece of cake. If you have ever had to fill out a FAFSA, you already know that your first college challenge is figuring out how to get money for your tuition from the feds. If this is you, you’ll be glad to hear that it may be possible to change big bureaucracy after all.

On July 21st, the U.S. House of Representatives will discuss the new Student Aid and Fiscal Responsibility Act, which the Hon. George Miller (D-CA), Chairman of the House Committee on Education & Labor, introduced last week. The SAFRA, as it’s already being referred to, contains sweeping changes to the ways federal money for education is allocated and managed. Theoretically, some of the changes would free up funds to pay for all the others, which means that the reorganization would cost us taxpayers nothing.

The new legislation also reemphasizes the Education Department’s plan to more closely align work and higher education.

How does the SAFRA help you find money for your college tuition? There are several changes to the student aid system that will make things easier for students at both the start and the end of the financial aid timeline. SAFRA:

• Boosts the Pell Grant maximum to $5,550 in 2010 and $6,900 by 2019. (About 6 million students received a Pell Grant in 2007-2008.) Starting in 2010, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index + 1%.

• Lowers the interest rates on need-based (subsidized) Stafford loans, the primary federal student loan, and changes the interest rate from fixed to variable in 2012, to keep the rate low. (Nationwide, about 5.5 million students take out Stafford loans each year.)

• Increases access to the Perkins Loan program by expanding it to every U.S. college campus. (Last year approximately 495,000 students received a Perkins Loan.)

• Follows through on simplifying the FAFSA, cutting down the number of questions on the form by allowing students and families to use their tax return information. (In 2003-2004, over 1.5 million college students who likely were eligible to receive Pell Grants didn’t apply for financial aid because they found the FAFSA form too confusing.)

• Converts all new federal student loans to the Direct Loan program. Beginning July 1, 2010, all new federal student loans will be originated through the Direct Loan program, instead of through lenders subsidized by taxpayers in the federally-guaranteed FFEL student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to low-cost federal college loans, in any economy. Having the feds provide the money for and set interest rates on federal student loans also removes any potential for conflicts of interest between lenders and colleges.

• Uses a competitive bidding process to select private loan servicers based on how well they serve borrowers, educate them financially, and prevent loan defaults. The Education Department wants to acknowledge private lenders for their customer service effort and create a new public-private partnership that would sustain it.

• Invests $1.2 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate, and invests $3 billion to increase college access and completion support programs for students. There’s also more funding for the College Access Challenge Grant program, and for state and college programs to increase financial literacy and student retention.

In short, SAFRA makes much more federal money for tuition available, makes it easier to apply for, insulates it a little better from roller-coastery financial markets, and makes repaying it a little less painful (if the legislation survives the House and Senate mostly intact, that is). What’s not to like?

The United States Student Association, a longstanding advocate for college students, gave Mr. Miller’s bill an A+: Students Thrilled with Student Aid Reform Bill. In a previous statement about the substantial budget investments targeted for higher education, USSA President Carmen Berkley commented, “Funding for these programs is important not only for the financial health of the country, but because everyone has the right to an affordable college education.” (Don’t miss USSA’s press release today, which summarizes data from a new report on the Direct Loan program.)

Stay tuned to EducationGrant.com as we follow the coming House and Senate debates about the SAFRA. Sometimes criticism and debate uncover genuine problems with a plan; other times, they are just a lot of posturing and hot air. There is good intent in Mr. Miller’s bill, and so far, the Congressional Budget Office says it will pay for itself. If it becomes law, the process of getting money for tuition from the feds may become a little more user-friendly.

July 1, 2009 — The student loan interest rate on new Subsidized Stafford Loans for undergraduates drops to 5.6% today, a new low intended to make federal loans more palatable for students considering higher education. If you’re a laid-off worker thinking about going back to school for new education or training, this applies to you, too. Subsidized Stafford loans for undergrads are based on financial need; there is no age restriction for eligibility.

The interest rate for new Subsidized Stafford loans for graduate students, new Unsubsidized Stafford loans (not need-based), and new PLUS loans are unchanged from the 2008-2009 financial aid year: 6.8% for Graduate Subsidized Stafford loans and all Unsubsidized Stafford loans, 8.5% for PLUS loans taken out through the FFEL program, and 7.9% for PLUS loans taken out through the Direct Loan program.

However, interest rates also drop on variable-rate Stafford loans and PLUS loans issued between 1998 and 2006. For a student still in school, or whose loans are already in repayment, grace period, deferment, or forbearance, the rates on these loans now range from 1.8% to 3.28%. A table on the Department of Education’s website lists all the Stafford and PLUS loan interest rates effective today. You may be able to consolidate your existing student loans issued before 2006 at one of these rates.

While federal student loan interest rates go down, the upper limit on Pell Grants goes up: the maximum amount for Pell Grants for the 2009-2010 school year is now $5,350. Pell grants are awarded to students whose FAFSA, the Free application for Federal Student Aid, calculates Pell grant eligibility.

To qualify for Pell grants and the low interest rates on federal student loans, you must fill out a FAFSA every year.

The Wall Street Journal outlines the intricacies of federal loan interest rates and fees.

Financial aid definition for the day: the difference between “Lender” and “Loan Servicer.” A student loan lender and a student loan servicer are two different roles, although some financial institutions may be both (for example, Sallie Mae). A student loan Lender is a financial institution, bank, or lending organization that actually loans you the money for your student loan. A Loan Servicer is an organization that monitors the loan transactions and collects the money for the lender, but is not necessarily the organization providing the loan funds.

If the Obama administration succeeds in its proposal to eliminate the FFEL program and handle all federal student loans through the Direct Loan program, then the U.S. Treasury will be the Lender and the four financial institutions recently selected by the Department of Education will be the Loan Servicers handling future federal loans.

On July 1, 2009, a new federal program, called the Income-based Repayment Plan, goes into effect. If you’re a student in the process of repaying your federal student loans, you may qualify for the Income-based Repayment Plan, also referred to as the IBR, which caps your monthly loan payment at an amount calculated to be affordable based on your income and family size. Typically, the cap is set at 15% of your discretionary income.

An excellent IBR overview in the Boston Globe points out that one of the program’s goals is encouragement in a difficult employment climate: as a new grad, you may be willing to accept a lower-paying job if you don’t have to worry about a student loan payment bigger than your monthly take-home pay.

Since the Income-based Repayment Plan is a federal program, it bases your discretionary income on your adjusted gross income. The federal financial aid website has a preliminary calculator that can give you an idea of whether you qualify for the IBR program, but the financial institution you got your student loan from will ultimately calculate your lowered payment for you.

Only federal loans qualify for income-based repayment. Eligible federal loans include:

• Stafford loans
• Graduate PLUS loans
• Most federal consolidation loans

Loans that are not eligible for IBR are:

• Parent PLUS loans
• Federal consolidation loans that include Parent PLUS loans
• Private loans

Sallie Mae, a lender authorized to issue and manage federal student loans, also has information on the IBR program, and a downloadable worksheet that may help you determine your eligibility and monthly payment.

If you have, or have applied for, a federal student loan, you’ll be glad to know the U.S. Department of Education has been doing some spring cleaning in its $100 billion federal financial aid program. Between the swirling credit market and the lingering effects of corruption in the student loan industry, the availability of loans for college has been a concern for many students. The Department has done some work to sort things out and move to a more streamlined loan process.

First, four financial services companies have awarded federal contracts to manage both new student loans and the many existing student loans that may end up on the Education Department’s doorstep as a result of the credit crisis. The fact that the financial services companies had to compete for the Department’s gigantic student loan business reflects the decision to make federal financial aid a contract arrangement based on performance, similar to the way contracts are awarded in the private sector.

“The award of these contracts is another step in the Department’s efforts to ensure that all eligible students have access to federal student loans and that, in partnership with the private sector, schools and borrowers receive excellent service,” Department of Education Secretary Arne Duncan said.

From now on, financial services companies who want to offer student loans through the Department’s Title IV financial aid program will be evaluated on the quality and reliability of their customer service. Or at least, that’s the plan, which is certainly an encouraging first step. We’ll see how it works out over time.

Second, in addition to taking on any necessary management of existing loans, the government wants to make arrangements to handle all student loans from 2010 on through the Education Department’s Direct Lending program.

Loans awarded through the Direct Loan program provide money directly from the U.S. Treasury, even though contracted financial services institutions handle the loan transaction. The Obama administration wants to go with this arrangement for all students, and to abolish the FFEL program in which the private financial services institutions themselves provide the loan money. Supporters of the direct loan program argue that it cuts out the middleman and offers students lower interest rates; supporters of the FFEL program claim that private industry provides better customer service. With the Department’s decision to contract out loan servicing based on performance, we may see more financial institutions joining the federal direct lending program.