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Northeastmom
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Posted: Sun Aug 19th, 2007 11:37 pm |
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| I would love to understand this better. There is a thread on CC about Stafford Loans. As an example, if COA is 30,000, with that figure coming from the school, and EFC is 25,000 as determined by the FAFSA, and the school offers no aid other than a partial subsidized Stafford of $500, can the student take out a subsidized Stafford for more than $500 with his/her lender? In this example, lets say the student is junior, so can he/she take out a subsidized Stafford for the full amount of need as determined by FAFSA, meaning 5,000 to meet need? Who determines that this student was only entitled to a subsidized Stafford of $500? Is it the government that really determines EFC, and can the student go forward to get that need met (30,000-25,000=5,000) despite the school only offering a $500 subsidized loan? Last edited on Sun Aug 19th, 2007 11:38 pm by Northeastmom
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leftcoast
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Posted: Mon Aug 20th, 2007 12:29 am |
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Yes -- eligibility for the federal Stafford loan is determined by the difference between the Cost of Attendance (as reported by the school) -- and the total amount of aid awarded (including outside scholarships), less the FAFSA EFC.
So let's say that FAFSA EFC is 10,000, COA is 30,000 -- and the college awards a Stafford loan of $2000, a a grant of $5000 and work study of $2000 - and the student has won an outside scholarship of $2000.
That's COA less $9000 (not considering the Stafford loan), leaving $21,000. If you subtract out the FAFSA EFC, that leaves a federal "need" figure of $11,000. The maximum that a first year student can borrow is $3500 -- so even though the college specified $2000 in loans, the student can apply to the lender to borrow $3500.
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Northeastmom
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Posted: Mon Aug 20th, 2007 12:43 am |
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.....and may do so subsidized for the full 3500 (despite the subsidized award of 2000)? You left out if the Stafford loan was subsidized. Can we say that they offered 2000 subsidized and 1500 unsubsidized? I know the student can get the 2k subsidized and 1500 unsubsidized. If this is the case, why aren't schools stating this in their award letters? Leftcoast, I knew you would help to respond here, and thank you! Last edited on Mon Aug 20th, 2007 12:45 am by Northeastmom
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jocelynDAD
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Posted: Mon Aug 20th, 2007 05:49 am |
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NE Mom:
First: Subsidized means that the interest is paid by the federal govt during the time the student is in school and interst will be applied for the student to pay 6 months after the stucent either graduates or leaves school.
Unsubsidized means that the student is responsible to repay the interest from the begining of the loan, the federal government does not pay any interest.
Both types of loans do not have to be repaid until that 6 months after graduation or after leaving the school and the student has up to 10 years to repay the loan and accumulated interest.
So you can get loans that are either subsidized or unsubsidized in the same year. The freshman year has a lower limit and the latter years the limit is larger.
You might have additional loans obtained by either the student or the parents or both, that are outside and unrelated to the sub/unsub loans.
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Northeastmom
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Posted: Mon Aug 20th, 2007 12:36 pm |
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| Jocelyndad, Thanks. I understand that. I was asking about if there is unmet need (gap btn. EFC and financial aid offer and COA) and the school offers a partial or only an unsubsidized Stafford, whether a student may still take the full amount (amounts vary depending upon the year the student is in) as a Subsidized Stafford. Apparently, this may be possible which is new info for me. Last edited on Mon Aug 20th, 2007 12:39 pm by Northeastmom
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mominva
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Posted: Mon Aug 20th, 2007 05:08 pm |
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Northeastmom,
The student may take the Full amount of the Stafford loan every year even if there is NO documented need.
We are fortunate in that our EFC is above the COA, but we require that our children 'own' part of their education. They all have taken Stafford loans. The first two are out of school and paying back these loans.
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jocelynDAD
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Posted: Mon Aug 20th, 2007 05:16 pm |
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Northeastmom wrote: Jocelyndad, Thanks. I understand that. I was asking about if there is unmet need (gap btn. EFC and financial aid offer and COA) and the school offers a partial or only an unsubsidized Stafford, whether a student may still take the full amount (amounts vary depending upon the year the student is in) as a Subsidized Stafford. Apparently, this may be possible which is new info for me.
NEMom:
ONly the loan amount that is labled subsidized can be subsidized. If the full stafford loan is taken out and say $1000 is subsidized the balance is unsubsidized period.
Do not mistake this, the federal govt will only pay the interest on the subsidized portion and unless that portion is increased BY THE SCHOOL, the student is accumulating interest charges from the beginning of the unsubsidized loan.
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Northeastmom
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Posted: Mon Aug 20th, 2007 06:35 pm |
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| Jocelyndad, lets say efc determined through the fafsa is 20,000. COA as determined by a public college for an OOS student is 30,000. The school offers 1000 to the incoming freshman as subsidized and the other 2500 as unsubsidized. This student was gapped. Can this freshman full time student ask a private lender for the full subsidized Stafford amount of 3500 despite the fact the school did not award it as part of their financial award? The school is not loaning the money. The lender is loaning the money, and government is paying the interest on that loan until 6 mos. after graduation. Also, how does a school decide how much will be subsidized?
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jocelynDAD
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Posted: Mon Aug 20th, 2007 09:19 pm |
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The school utilizes the federal govt guidelines re: subsidized. No bank can authorize a subsidized loan regardless of any numbers, only the school can establish a subsidized loan. period.
Banks can offer loans at whatever % of interest - find the lowest -although with the current housing/mortgage crisis!! loans will not be as low as in the recent past.
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leftcoast
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Posted: Mon Aug 20th, 2007 09:52 pm |
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Northeastmom, if there is unmet need according to the FAFSA EFC, then the student can take the full amount of the loan SUBSIDIZED.
The school does not make the final determination, other than to document the COA and amount of unmet need. The problem with your example is that with a $30K COA and $25K EFC, if the student is offered any other aid - such as work study -- then there would not be much unmet need.
In my daughter's case, our FAFSA EFC is about $8K; college meets 100% need but counts my home equity and my ex-husband's income in determining "need" - so there is a $12K gap over and above the FAFSA EFC.
The college financial aid offer set my d's Stafford loan at $3500 this year, but as a sophomore she is eligible for $4500. All she did to get that was write $4500 on a piece of paper sent by the college as to how much she wanted to borrow.
The reason a college like my daughter's specifies less than the full Stafford loan on their award is $3500 is the amount that they have set as filling their promise to meet full need in accordance with their own methodology. If they had written $4500, that would have meant $1000 less in grant money. Obviously we like grants better than loans, so I am happy to see that $1000 of our award for next year is a grant rather than a loan -- I'd be happier still if there was no loan specified and my daughter had that $3500 in extra grant money as well.
So from our perspective, my d. is entitled to take a $4500 subsidized Stafford Loan for next year because our FAFSA EFC is $8K but COA less grants & work study is around $25K.
From the college's perspective, they have met full need (as determined by the CSS Profile), but a package that includes grant + loan + work study. The extra money my daughter borrows is not seen as financial aid to meet need, but instead is money borrowed to meet the EFC.
We are in this position because of the big gap between FAFSA EFC and CSS Profile EFC.
Why don't you just have your son apply for the Stafford loan you want him to have and see what happens? If he is not eligible he will get a letter back from the lender explaining why.
Or else contact the school's financial aid office and ask if your son is eligible for a subsidized loan, and if he is not, ask them to explain why. With the $25000 EFC & $30K COA it is possible that the problem may be that the last $5K of COA are not for fees or costs that can be met with federal loans.
Regarding JocelynDad's comments: Stafford loan eligibility is determined by the FAFSA. The college determines COA, but for purposes of federally subsidized aid such as Stafford loans and Pell Grants, the college doesn't determine need -- the FAFSA does. Students have the right to apply to outside lenders not affiliated with their college for Stafford loans if they choose.
I assume that if you do not have a Stafford amount specified in your financial aid award, but the expected family contribution is more than the FAFSA EFC -- the process for working with an outside lender would be to apply for a subsidized loan - and then the lender would verify eligibility with the college financial aid office.
Last edited on Mon Aug 20th, 2007 10:06 pm by leftcoast
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Northeastmom
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Posted: Tue Aug 21st, 2007 12:09 am |
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Okay, thank you both.
Leftcoast, I just used these numbers as an example. The numbers are not the COA or my EFC. My son was offered a fully subsidized Stafford for this year, so I have no problem this year. Last year he was offered a partially subsidized Stafford only. I just wanted the correct information for next year, though I do not think we will qualify (happy to say that) next year. Our income was slightly less this year, and COA went up so we qualified for it this year. I also wanted to have the knowledge about this for others, and bc I have another child who will be going into college in just a few years. Leftcoast, I don't know that anyone on the various college boards has the grasp of this subject the way you do. I so appreciate your sharing this information with us.
One more thing about this subject. Personally, I find it sinful, that schools offer partial subsidized Staffords, or do not offer any subsidized Stafford when need is still not met (and do not disclose that the consumer/student, that he/she might still be entitled to that Stafford as a subsidized loan). In my son's case, he applied to an OOS school last year. No WS, no grant, no other loan, in other words nothing was offered other than an unsubsidized stafford, and that we may apply for parent plus loans up to the full amount of the COA. COA as determined by the school was more than our efc. No mention was made of the fact that we could have gone to a lender and still taken out a subsidized Stafford, regardless of the school not offering it in their financial aid offer. It did not matter bc the school was not my son's first choice, but I still feel that the school's financial aid office should have been upfront about this.
Last edited on Tue Aug 21st, 2007 12:32 am by Northeastmom
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jocelynDAD
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Posted: Tue Aug 21st, 2007 12:29 am |
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leftcoast wrote:
Regarding JocelynDad's comments: Stafford loan eligibility is determined by the FAFSA. The college determines COA, but for purposes of federally subsidized aid such as Stafford loans and Pell Grants, the college doesn't determine need -- the FAFSA does.
The FAFSA Guidelines state on page 19 and 20 of the Student Guide to FAFSA how the subsidized and unsubsidized loans are calculated.
:to determine the amount of your unsubsidized laon, your school will use this equation..."
The federal guidelines that I have referenced are the FAFSA Guidelines. Your student's college is the venue that the FAFSA guidelines has designated to determine the breakout of the sub/unsub loans.
NE Mom: there are probably thousands of different determinations made by varied schools based on individual circumstances and you should always direct your questions to the institution's FA office and seek as much as possible.
I suggest everyone get the FAFSA guidelines, all colleges should have available copies in the FA office.
Last edited on Tue Aug 21st, 2007 12:31 am by jocelynDAD
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leftcoast
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Posted: Tue Aug 21st, 2007 05:38 am |
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Northeastmom, I have three things:
(1) Experience: My daughter will be getting a $4500 subsidized Stafford loan this year. The only thing I neglected to mention (because I forgot about it), was that after my daughter sent back the piece of paper saying she wanted to borrow $4500 rather than $3500, the college sent her back a revised award which showed the increased loan amount. Grant stayed the same (actually it went up, for an unrelated reason).
Again, there was a gap between FAFSA EFC and Profile EFC.
(2) A law degree: A line of text in a guidebook is not dispositive of your rights, especially if the line is quoted out of context or incomplete. Jocelyndad posted a partical line of text, "to determine the amount of your unsubsidized loan, your school will use this equation..." Note that he did not include the equation itself -- you will find the equation he left out by Googling the phrase, "Eligibility Formula Subsidized Stafford Loan".
Here is the formula he left out:
"Cost of Attendance - Expect Family Contribution (EFC) - Estimated Financial Assistance =
Eligibility for subsidized Stafford Loan"
The college determines cost of attendance and estimated financial assistance. EFC is determined by the FAFSA -- it is printed on the SARC.
The college cannot deviate from that formula, though they can make revisions to the FAFSA -- but that also is governed by federal law. If a college makes a mistake it is not the end of the story. It is just the point at which inquiry begins.
So the bottom line is, the formula in the situation you posited is:
$30,000 COA -- $25000 EFC - 0 Financial assistance = $5000 eligibility for subsidized Stafford loan.
Math is math. If those numbers are correct -- then the kid is eligible -- if he is not eligible, then one of the numbers on the left side of the equation must be wrong.
(3) An inquiring mind: Whenever I saw something in a financial aid letter that I didn't like or understand, I calmly wrote out a list of my questions and concerns, and then contacted the financial aid office and asked to talk to someone there in a position of responsiblity. I asked lots and lots of questions.
If you want to know why you haven't been given the option of a subsidized loan when there is a $5000 difference between the FAFSA EFC and COA.... all you have to do is call up the college and ask. My experience thus far has been that need based financial aid tends to be quite rule bound -- so if there is a reason that your son would not be eligible they will tell you what it is.
Last edited on Tue Aug 21st, 2007 05:50 am by leftcoast
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jocelynDAD
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Posted: Tue Aug 21st, 2007 08:12 am |
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For what it is worth:
Experience, I have been completing Financial aid forms and dealing with FA officials since 1980 with my eldest son and for the next 5 children over the past 27 years.
Law Degree: Obtained in 1974, member of Conn Bar since 1975
Howsoever, each of our children will have a unique experience and we should check carefully and inquire to get the best possible outcome.
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Northeastmom
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Posted: Tue Aug 21st, 2007 11:40 am |
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Again thank you both. Oh and about the law degrees, well my DH is also an attorney. He does not have a clue about the questions that I just discussed with you. It is simply not his area of expertise. He is an excellent litigator, with expertise in corporate and real estate law. I would not seek his help for personal injury queries either. I was going to say that I would not go to him for matrimonial law, but then I could see the jokes coming bc I am married to the man  Oh, and jocelyndad, you have 5 years on my H in the practice of law, and we won't catch up to you in the kiddie department either, since we have 2 children.
Last edited on Tue Aug 21st, 2007 11:43 am by Northeastmom
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Northeastmom
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Posted: Tue Aug 21st, 2007 11:47 am |
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Regarding the other website, there is a poster there who says that she is a financial aid officer at an unspecified college. This is the first paragraph of her response to this topic:
"Only one problem, Stafford Loans must be certified by the school. If the school has determined that the student is not eligible to receive Stafford Loans, they will not certify it. Therefore, self-initiating the Stafford Loan directly through the lender will not work. Also most Staford Loan lenders will direct you to the school when you go to their website to apply for the Stafford Loan, because it is a loan which is dependent upon your FAFSA application. Lenders do not have access to the FAFSA application. They cannot tell whether you have been pulled for verification and refused to supply the information. They are not permitted to just provide Stafford Loans directly to students. Even if you manage to find a lender who is willing to break the rules and disperse a Stafford Loan without the school's aproval, you could find yourself in a world of hurt. This would be considered additional (outside) funding which could reduce other aid you have been awarded, thus making you have to come up with more funding out of pocket."
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leftcoast
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Posted: Tue Aug 21st, 2007 07:43 pm |
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Northeastmom, my reference to the "law degree" doesn't mean I am an expert on financial aid law. It just means that I have the training to read and make sense of regulations, and also to question decisions made by organizations and agencies. The school may be the one to make the decision, but the decision has to be made following a set of rules, and I'm trying to explain what the rules are.
It happened that J-dad posted a quoted statement to the extent that the school decides, but left out the formula that the school is required to use. That's kind of like saying the judge decides a case, without looking at what the law specifies the judge might do. That's the same problem with the quote you have about the school needing to certify eligibility. So yes, the school has to certify eligibility, but the school also has to follow a set formula.
The cost of attendance is a relatively fixed figure. It may vary somewhat with transportation allowances and based on whether the student lives on or off campus, but it is a fixed figure. The college should be able to supply you with that figure.
Similarly, the FAFSA EFC is a number that in the end is determined by the government (through use of an automated form)
You've given an example based on specified numbers -- by the numbers you provided, there is eligibility for $5000 in Stafford loans. If I were in your shoes, I would have insisted on an explanation from the school -- again, its a very simple formula. You posed a question:
$30,000 - $25,000 = ?
I say the answer to that question is $5,000.
There seem to be several people on two different boards who think the answer to that question is "whatever the school says it is" -- in your case, -0-.
Unfortunately, I don't have a math degree, so I am only applying 2nd grade math skills to come up with the conclusion that if you subtract 25 from 30 you have 5 left over. But I just can't get around it --- so to my eyes there is something wrong with the question you posed. Either the COA figure is wrong; or the EFC is wrong; or there is some other sort of aid offered by the college (such as an outside scholarship) which is being subtracted out - or the school is not following the law. If none of the above applies.... I am suggesting that you should contact the school and ask them.
I didn't bother questioning my kids' schools on the financial aid award, because I knew that my daughter had a right to borrow more than the part of the award labeled "recommended" Stafford loan, and I trusted the school would correctly certify eligibility to the lender even though their award letter did not contain that information. At least in my case, I understood that the school's award letter was not the same as a statement of eligibility.
At this point I feel that I've repeated the same message a number of time, so I'm going to turn things around and simply ask you how the school explains the discrepency. The fact that a Stafford loan is not mentioned on an award letter does not mean that the student is ineligible -- for all I know, in the example you gave, the school may have a financial aid application form that asks at the outset whether the student wants a loan, and perhaps the student checked "no" to loans in the mistaken belief that he would be given a need-based grant instead.
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Northeastmom
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Posted: Tue Aug 21st, 2007 11:09 pm |
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| Thanks leftcoast. I realize that you are trained to read contracts, rules, and legal jargon. I was just amused by the 2 you stating that you are attorneys. No, my kid did not check any "no loan" boxes. My H and I sat down to complete the financial aid forms, and my H even needed to call our accountant a couple of times with questions. Last edited on Tue Aug 21st, 2007 11:10 pm by Northeastmom
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leftcoast
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Posted: Wed Aug 22nd, 2007 02:32 am |
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Well, in law school they taught us to think in terms of I.R.A.C. (no, this is not a mideastern country that we need to wage war with) -- the letters stand for:
Issue
Rule
Application
Conclusion
Issue: If the family has unmet need, is the student eligible for a subsidized loan?
Rule: See formula above
Application: Do math
Conclusion: Yes, student has $5000 unmet need.
The one thing I am absolutely sure of is the rule.
What I am not sure of is whether the COA or EFC is what you think it is. Keep in mind that a college can make corrections to the FAFSA -- it is very likely that in your situation that the college calculated a correcction that would have bumped your EFC up several thousand. Both my kids attended colleges that premised their award letters on anticipated corrections to the FAFSA, but neither actually made those corrections until June, after my kids had sent in deposits. So the college may have known something you don't about a change to your EFC.
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Northeastmom
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Posted: Wed Aug 22nd, 2007 11:39 am |
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| Thanks.
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