Managing Student Loans

The first thing to remember about the income protection allowance is that the yearly income numbers come from the 1960 poverty line, not the current one. For instance, the federal government thinks that a family of four can live on around $26,000 per year. The numbers are absurd and not based on current need.

Also, the allowance reduces as the number of students in college increases rather than increasing. The federal government subtracts any earnings of the student has. This often causes the family to receive less of the benefit. Some of the benefits include health insurance received from an employer, workman’s comp, child support, and welfare benefits. These the government subtracts from the allowance. Retirement funds that you withdraw again become part of the EFC (Expected Family Contribution) reducing the amount the student receives.

When a student works or has saved a portion of his salary, a large amount of that goes into the EFC. Here the student may lose most of his assets. The EFC determines his eligibility for the loan. In some cases, the student who doesn’t work has more eligibility than students already part of the work force.

To prevent lose of the student’s bank account; keep the saving in a parent’s or spouse’s account. Spend any money in the student’s name so the benefit increases. Use prepaid or saving plans. Another strategy is to pay off all credit cards and loans before applying for financial aid. Talk over any circumstances that might increase the amount of the loan with a financial aid professional.

Trust funds do not provide shelter when it comes to financial aid or student loans. Grandparents should give student’s money after graduation not before to pay off the loans or debt from school. Be aware the marital status affects how much money the student receives. Two people get more money than a family. 

The only way to receive more money is to have a lower EFC which means the family would live in poverty. This only makes it possible for students to get loans or work study jobs. Do your taxes early so you know exactly what your EFC is. That way, you can calculate and set aside money that you can use without destroying the eligibility and the amount of benefit available for the student.

Sell stocks and bonds before the student goes to college. Otherwise, the amount will affect the EFC, and the student will receive less help.