As part of a statewide effort to support education in math and science, the Missouri Higher Education Loan Authority has agreed to forgive nearly $444,000 in student loans for almost 300 engineering and pre-engineering college students (“MOHELA Forgives Over $400,000 in Pre-Engineering Loan Program,” MarketWatch, Oct. 17, 2008).

The lender’s Prospective Engineering Student Loan Forgiveness Award Program will forgive up to $3,500 in federal Stafford student loans for any Missouri college freshman who enrolls in and completes two years of engineering classes in certain degree programs.

Students at 11 Missouri schools are eligible for the loan forgiveness program, which complements the state’s Math, Engineering, Technology, and Sciences Alliance (METS), an initiative created by Gov. Matt Blunt to improve student achievement in METS-based industries.

MOHELA’s loan forgiveness program will be funded, in part, by the revenues generated from tax-exempt bonds, says Raymond Bayer, Jr., MOHELA’s executive director and chief executive officer.

The state student loan agency also made a second announcement on Friday that it had recently closed on a $262.5 million bond issuance with Bank of America Securities (“MOHELA Announces $262.5 Million Bond Issuance,” MarketWatch, Oct. 17, 2008). This bond will give MOHELA the capital it needs to continue issuing federal student loans through the Federal Family Education Loan Program.

Stafford Loans are federal student loans made available to college and university students to supplement personal and family resources, scholarships, grants, and work-study. Nearly all students are eligible to receive Stafford loans regardless of credit. Stafford loans may be subsidized by the U.S. Government or unsubsidized depending on the student’s financial need.
Stafford Loan Eligibility

* You must have submitted a FAFSA to be eligible for a Stafford loan.
* For subsidized Stafford loans, you must have financial need as determined by your school.
* You must be a U.S. citizen or national, a U.S. permanent resident, or eligible non-citizen.
* You must be enrolled or plan to enroll at least half time.
* You must be accepted for enrollment or attend a school that participates in the Federal Family Education Loan Program.
* You must not be in default on any education loan or owe a refund on an education grant.

Stafford Loan Interest Rates

Note: Graduate Stafford Loans (both subsidized and unsubsidized) have a fixed interest rate of 6.8% through 2013.

How To Determine Your Dependency Status

The paper FAFSA and the FAFSA online clearly explain the conditions by which a student is considered to be independent student. If you qualify for independent student status it means your parents financials are not included on the FAFSA. Unless you are a returning college student it is unlikely that you are an Independent student.

The following FAFSA dependency questions, taken directly from the 2008-2009 FAFSA, determine your dependency status. If a student can answer yes to any of these, the student is independent.

1. Were you born before January 1, 1985?
2. At the beginning of the 2008-2009 school year, will you be working on a master’s or doctorate program (such as an MA, MBA, MD, JD, PhD, EdD, or graduate certificate, etc.)?
3. As of today, are you married? (Answer “Yes” if you are separated but not divorced.)
4. Do you have children who receive more than half of their support from you?
5. Do you have dependents (other than your children or spouse) who live with you and who receive more than half of their support from you, now and through June 30, 2009?
6. Are (a) both of your parents deceased, or (b) are you (or were you until age 18) a ward/dependent of the court?
7. Are you currently serving on active duty in the U.S. Armed Forces for purposes other than training?
8. Are you a veteran of the U.S. Armed Forces?

If you answered yes to any of these questions you are an independent student and should learn how to maximize your financial aid package. Otherwise, you must use your parent’s information on the FAFSA and other financial aid forms.

The amount you can borrow is based on your grade level and your status as a student. Independent students may be eligible to borrow more because they are paying for college without assistance from family.

It is important to note that even if a student is financing their education on their own, dependency status is still determined by the school.

Based on your award letter, you may not always qualify for the maximum Stafford Loan amount. For additional loan funding, consider private student loans which allow you to borrow up to the total cost of education less other financial aid received.

Citibank announced it is canceling its private student loan program for international students in an effort to minimize its financial risk during the global financial crisis, Bloomberg reports (“Citigroup Curbs Foreign-Student Loans at Harvard, MIT, Michigan,” Oct. 15, 2008).

The lender’s CitiAssist private student loan program allowed international students at certain schools to borrow as much as $150,000 in private student loans without a cosigner; similar programs required that international borrowers have a U.S. citizen or permanent resident cosign on the loans.

Citibank informed MIT and the University of Michigan this month that it will stop making CitiAssist loans to the schools’ international students in November, just before students begin borrowing for the 2009–2010 academic year. Earlier this month, the bank also terminated its international lending program at Harvard University.

CitiAssist “did fill a very important role,” says Elizabeth Hicks, executive director of student financial services at MIT, where more than 200 of the school’s foreign students at the Sloan School of Management will have fewer borrowing options to help them meet their education costs, which total nearly $76,000.

International Student Loans Drying Up, More Banks Unwilling to Lend

In suspending its lending program to international students, Citibank joins Bank of America, one of the largest providers of student loans to foreign students, which terminated its foreign student lending program in April.

Other lenders are not likely to fill in the lending gap to international students, due, in part, to the fact that international students have a higher likelihood of default than U.S. students and because loans to “international students are not the most profitable loans,” says Mark Kantrowitz, publisher of Finaid.org, a financial aid website sponsored by Citibank’s parent company Citigroup.

Analyst Daniello Natoli, of New York-based financial firm Matrix USA, adds, “It makes sense for [Citibank] to move away from riskier products such as loans to international students, whose creditworthiness is more difficult to assess.”

Concerned that students who are eligible to go to college won’t be able to pay for their education costs in light of the current credit crisis and a steadily worsening economy, Sen. Charles Schumer is urging the federal government to make sure student loans are still available, according to an Associated Press article (“Schumer Wants Student Loan market to Be Protected” Oct. 6, 2008).

Schumer recently wrote Secretary of Treasury Hank Paulson and Federal Reserve Chairman Ben Bernanke, advising them to keep tabs on the student loan market as the government implements a $700 billion bailout plan for the financial sector. The senator fears that the deteriorating credit market might burden college students with higher interest rates on loans or may prohibit borrowers from qualifying for student loans all together.

“The price we’ll pay will be that of a generation,” Schumer said.

Over 100 third-party lenders in the Federal Family Education Loan Program have suspended their participation in the federal student loan program, which is responsible for nearly half of all public and private student loan money, or about $60 billion. Students can access these federal student loan funds either through private lenders in the FFEL program, or through the government itself using the Direct Loan Program.

Schumer recommends that all colleges allow students to get loans through the government’s Direct Loan Program, instead of through a middleman, FFELP lender. The senator says he will be drafting letters to encourage New York college presidents and the American Council on Education to pursue a similar course of action.

Just last month, Congress passed legislation that will enable students who rely on loans to continue their education, regardless of the difficulties in the private credit market. The legislation is effective through the 2010 academic year.

FICO comes from the Fair Isaac Company, which came up with the process of condensing all of your credit information into one three-digit number.

Three major credit bureaus hold your FICO score; Equifax, TransUnion, and Experian, and each calculate it a little different than the others. Should you wish to dispute a mark on your credit report from one of the three bureaus you can write to them like I have done previously (see below for address information).

Equifax Information Services
P O BOX 740256
Atlanta, GA 30374
800-997-2493

TransUnion
Customer Disclosure Center
Trans Union Consumer Relations
PO Box 2000
Chester, PA 19022-2000
800-888-4213

Experian
NCAC
PO Box 9556
Allen TX 75013
888-397-3742

Your FICO score is used in determining your interest rate, and is even used as a barometer for getting a job. FICO scores range between 300 and 850. Ratings are as follows:

Excellent: Over 750
Very Good: 720 or more
Acceptable: 660 to 720
Uncertain: 620 to 660
Risky: less than 620

The formula used to calculate your FICO score includes information based on several factors:

~ 35% on your payment history
~ 30% on the amount you currently owe lenders
~ 15% on the length of your credit history
~ 10% on the number of new credit accounts you’ve opened or applied for (fewer is better)
~ 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)

Now that you know what your FICO score is and how it is calculated you’ll want to work on getting it as high as possible. I’ll be offering some tips in the coming weeks!