While included in the term "financial aid" higher education loans differ from scholarships and grants in that they must be paid back. They come in several varieties in the United States:
* Federal student loans made to students directly: No payments while enrolled in at least half time status. If a student drops below half time status, the account will go into its 6 month grace period. If the student re-enrolls in at least half time status, the loans will be deferred, but when they drop below half time again they will no longer have their grace period. Amounts are quite limited as well.
* Federal student loans made to parents: Much higher limit, but payments start immediately
* Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances. Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.
Federal loans to students
See Federal Perkins Loan, Stafford loan, Federal Family Education Loans, Ford Direct Student Loans, and Federal student loan consolidation
Federal student loans in the United States are authorized under Title IV of the Higher Education Act as amended.
The first type are loans made directly to the student. These loans are available to college and university students and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized depending on the student's financial need.
Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education either directly or through guarantee agencies. Nearly all students are eligible to receive them (regardless of credit score or other financial issues). Both types offer a grace period of six months, which means that no payments are due until six months after graduation or after the borrower becomes a less-than-half-time student without graduating. Both types have a fairly modest annual limit. The limit effective for loans disbursed on or after July 1, 2007 is as follows: is $3,500 per year for freshman undergraduate students, $4,500 for sophomore undergraduates, and $5,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. Subsidized federal student loans are offered to students with a demonstrated financial need. Financial need may vary from school to school. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe $10,000 upon graduation.
Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, rather the interest accrues during college. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation. For example, those who have borrowed $10,000 and had $2,000 accrue in interest will owe $12,000. Interest will begin accruing on the $12,000. The accrued interest will be "capitalized" into the loan amount, and the borrower will begin making payments on the accumulated total. Students can choose to pay the interest while still in college; however, few students choose to exercise this option.
Federal student loans for graduate students have higher limits: $8,500 for subsidized Stafford and $12,500 (limits may differ for certain courses of study) for unsubsidized Stafford. Many students also take advantage of the Federal Perkins Loan. For graduate students the limit for Perkins is $6,000 per year.
Federal student loans to parents
See PLUS loan
Usually these are PLUS loans (formerly standing for "Parent Loan for Undergraduate Students"). Unlike loans made to students, parents can borrow much more — usually enough to cover any gap in the cost of education. However, there is no grace period: Payments start immediately.
Parents should be aware that THEY are responsible for repayment on these loans, not the student. This is not a 'cosigner' loan with the student having equal accountability. The parents have signed the master promissory note to pay and, if they do not do so, it is their credit rating that suffers. Also, parents are advised to consider "year 4" payments, rather than "year 1" payments. What sounds like a "manageable" debt load of $200 a month in freshman year can mushroom to a much more daunting $800 a month by the time four years have been funded through loans. The combination of immediate repayment and the ability to borrow substantial sums can be expensive.
Under new legislation, graduate students are eligible to receive PLUS loans in their own names. These Graduate PLUS loans have the same interest rates and terms of Parent PLUS loans.
Monday, July 30, 2007
Student loans in Germany
German universities are usually free for students (although many Federal States of Germany plan to introduce a student fee of about €1000 per year in 2007). Giving out student loans is seen as a means to pave the way to higher education for lower class children whose parents can't afford to fund their children's education otherwise. The federal law that regulates student loans is called "Bundesausbildungsförderungsgesetz" (Federal Education and Trainings Assistance Act) or "BAföG" for short, and student loans are usually referred to simply as "BAföG" by students (as in "I'm getting BAföG"). Eligible groups include high school students, part-time and full-time university students, second path education students (i.e., those starting to study after having been in the workforce), and students of schools for professional training.
The eligibility for student loans is (usually) dependent from parent income, as parents are required by law to fund their children's education (including higher education), and therefore students could theoretically sue their parents for funds for their education (although this is rarely done for obvious reasons). For low-income families, BAföG loans take over when these obligations can not reasonably be met by parents.
BAföG-loans are usually given out half as zero interest loan (to be repaid only after the receiver exceeds a certain income level after graduation) and half as grant money to university students. High school students get the full amount as grant money if they are eligible. The current maximum amount per month (for a university student) is 521 Euros. This can be lowered gradually if student or parent income or student assets exceed certain amounts. Thus the amount paid out can be lower than the maximum amount and even loans of 1 Euro per month are given out if the calculation returns that amount. Such low grants seem nonsensical at first, but they are usually accepted by students (loans can be refused by the student), because eligibility for a BAföG loan (even of 1 Euro per month) makes the student eligible for some other benefits like cut-rate telephone service or waiving of public television licence fees (which otherwise are paid by everyone who owns a working TV set).
Generally, BAföG loans are independent from student achievement or grades at least for two years. After that, a certain minimum grade level has to be met and proof of participation in required, but ungraded courses, needs to be provided to stay eligible. Change of field of study is allowed once during the first two years without becoming ineligible. For university studies, every field of study has predefined a maximum study duration (usually around five years), after which the student becomes ineligible for BAföG. Further funds can be granted as low-interest loan for another two years if certain criteria (like reasonable likelihood that the student will graduate during that time) are met.
In some cases, like most notably if the student has worked full time for a number of years before returning to student status, BAföG eligibility is calculated independent from parent income, because parents' obligation to fund their children's education ends once the children enter the workforce full-time. In those cases, only student income and assets are consulted for BAföG eligibility and amount calculation.
The eligibility for student loans is (usually) dependent from parent income, as parents are required by law to fund their children's education (including higher education), and therefore students could theoretically sue their parents for funds for their education (although this is rarely done for obvious reasons). For low-income families, BAföG loans take over when these obligations can not reasonably be met by parents.
BAföG-loans are usually given out half as zero interest loan (to be repaid only after the receiver exceeds a certain income level after graduation) and half as grant money to university students. High school students get the full amount as grant money if they are eligible. The current maximum amount per month (for a university student) is 521 Euros. This can be lowered gradually if student or parent income or student assets exceed certain amounts. Thus the amount paid out can be lower than the maximum amount and even loans of 1 Euro per month are given out if the calculation returns that amount. Such low grants seem nonsensical at first, but they are usually accepted by students (loans can be refused by the student), because eligibility for a BAföG loan (even of 1 Euro per month) makes the student eligible for some other benefits like cut-rate telephone service or waiving of public television licence fees (which otherwise are paid by everyone who owns a working TV set).
Generally, BAföG loans are independent from student achievement or grades at least for two years. After that, a certain minimum grade level has to be met and proof of participation in required, but ungraded courses, needs to be provided to stay eligible. Change of field of study is allowed once during the first two years without becoming ineligible. For university studies, every field of study has predefined a maximum study duration (usually around five years), after which the student becomes ineligible for BAföG. Further funds can be granted as low-interest loan for another two years if certain criteria (like reasonable likelihood that the student will graduate during that time) are met.
In some cases, like most notably if the student has worked full time for a number of years before returning to student status, BAföG eligibility is calculated independent from parent income, because parents' obligation to fund their children's education ends once the children enter the workforce full-time. In those cases, only student income and assets are consulted for BAföG eligibility and amount calculation.
Student loans in the United Kingdom
British undergraduate and PGCE students can apply for a loan through their local education authority (LEA) in England and Wales, the Student Awards Agency for Scotland (SAAS), or their local education and library board in Northern Ireland. The LEA, SAAS, or education and library board then assesses the application and determines the amount that the student is eligible to borrow, as well as how much tuition fees, if any, the students' parents must pay. The family's income; whether the student will be living at home, away from home, or in London; disabilities; and other factors are taken into account. 75% of the full loan (around £3,000) is available to all students in England and Wales, with only the final 25% being means-tested (taking the total available up to as much as £4,000). There is also extra money (currently roughly another £1,000) if you go to university in London, where it is deemed the extra cost of living necessitates a higher loan. Scotland has a slightly different assessment method where more of the loan is means-tested with a minimum loan of only £840. However much you get, it is paid in three installments during each year of the student's course (one per term). Special rules apply for some courses and for part-time courses.
Loans are provided by the Student Loans Company and do not have to be repaid until students have completed their course and are earning £15,000 a year (£10,000 until April 2005). The interest rate is updated annually and is tied to inflation (currently 3.1%), making the loan interest-free in real terms. The loan is normally repaid using the PAYE system, with 9% of the graduate's gross salary over £15,000 automatically being deducted to pay back the loan. There is no particular schedule for clearing the debt, but, if it has not been cleared 25 years after repayment began, or the student turns 65 years old, the remaining debt will be cancelled. For students beginning courses before 1998, the arrangements for repaying and deferring are different. Although Scottish students have their tuition fees covered by the SAAS during their time of study, much of this is actually repaid in a Graduate Endowment.
The Higher Education Act 2004 will make significant changes to the loans system in England, Wales and Northern Ireland from 2006. Upfront tuition fees will be abolished, with the fee being added to students' loans for them to pay back after their course is finished. However, instead of the tuition fee being fixed at around £1,150 for all universities (which, due to means-testing, not all have to pay), universities will be able to charge variable fees of up to £3,000. For students who have already started their courses and, as such, are still paying the upfront fees, can now add these fees to their loans if they want. Critics claim these top-up fees will create tiers of "expensive" and "cheap" universities and make university financially inaccessible to many students. As a result, there have been national demonstrations and protests by students' unions.
Loans are provided by the Student Loans Company and do not have to be repaid until students have completed their course and are earning £15,000 a year (£10,000 until April 2005). The interest rate is updated annually and is tied to inflation (currently 3.1%), making the loan interest-free in real terms. The loan is normally repaid using the PAYE system, with 9% of the graduate's gross salary over £15,000 automatically being deducted to pay back the loan. There is no particular schedule for clearing the debt, but, if it has not been cleared 25 years after repayment began, or the student turns 65 years old, the remaining debt will be cancelled. For students beginning courses before 1998, the arrangements for repaying and deferring are different. Although Scottish students have their tuition fees covered by the SAAS during their time of study, much of this is actually repaid in a Graduate Endowment.
The Higher Education Act 2004 will make significant changes to the loans system in England, Wales and Northern Ireland from 2006. Upfront tuition fees will be abolished, with the fee being added to students' loans for them to pay back after their course is finished. However, instead of the tuition fee being fixed at around £1,150 for all universities (which, due to means-testing, not all have to pay), universities will be able to charge variable fees of up to £3,000. For students who have already started their courses and, as such, are still paying the upfront fees, can now add these fees to their loans if they want. Critics claim these top-up fees will create tiers of "expensive" and "cheap" universities and make university financially inaccessible to many students. As a result, there have been national demonstrations and protests by students' unions.
HECS becomes HECS-HELP: changes to the system in 2005
As of 2005, the Howard government have deregulated university fees. HECS-HELP (formerly HECS) maintains the same principles of HECS, however have since undergone major changes. The deregulation of university fees permits universities to increase tuition costs for university places (by a maximum of 25%). If a student receives a HECS-HELP loan, the Australian Federal Government pays the loan amount directly to the higher education provider on behalf of the student. "HECS" now refers to pre-2005 debt, and HECS-HELP refers to debt from 2005 onwards.
This deregulation of HECS-HELP has also resulted in a limit in the number of years a student may study in a Commonwealth Supported Place (CSP). As of 2007, all students may only study for a maximum of 7 years full-time in commonwealth supported university places (16 years part-time). This does not include any existing HECS debt (prior to 2005).
Known as Student Learning Entitlement (SLE), Students may only study in a Commonwealth Supported Place for a maximum of 7 years full time.. Once these SLE points are used, students are no longer entitled to CSPs, and must take either a post-graduate FEE-HELP load (if available) or undertake a FULL-FEE place.
An alternative option is FEE-HELP (formerly PELS). FEE-HELP provides eligible fee-paying students with a loan to cover their postgraduate tuition fees. This option is only available for post-graduate students attempting an eligible post-graduate course. In 2007, the FEE-HELP lifelong limit is $80,000, and $100,000 for students studying dentistry, medicine or veterinary science. Students cannot borrow any more than $50,000, even if once debt is repaid. See the official website for details.
Once a student has used up all of their SLE points, they may only study under a FEE-HELP course (capped at $50,000) or as part of a FULL-FEE course. Full-Fee courses are relatively expensive courses where students must pay their all of their tuition costs upfront, which is a significantly larger debt than a standard HECS-HELP loan, usually taken for its lower academic entrance requirements.
FEE-HELP courses are available at a post-graduate level (and occasionally for some undergraduate FULL-FEE places) however they are not available at every institution or in every course. The only remaining option is a FULL-FEE place paid upfront.
Once students have used all of their SLE points, students however cannot enroll in an undergraduate degree again unless it is a FULL-FEE place.
This deregulation of HECS-HELP has also resulted in a limit in the number of years a student may study in a Commonwealth Supported Place (CSP). As of 2007, all students may only study for a maximum of 7 years full-time in commonwealth supported university places (16 years part-time). This does not include any existing HECS debt (prior to 2005).
Known as Student Learning Entitlement (SLE), Students may only study in a Commonwealth Supported Place for a maximum of 7 years full time.. Once these SLE points are used, students are no longer entitled to CSPs, and must take either a post-graduate FEE-HELP load (if available) or undertake a FULL-FEE place.
An alternative option is FEE-HELP (formerly PELS). FEE-HELP provides eligible fee-paying students with a loan to cover their postgraduate tuition fees. This option is only available for post-graduate students attempting an eligible post-graduate course. In 2007, the FEE-HELP lifelong limit is $80,000, and $100,000 for students studying dentistry, medicine or veterinary science. Students cannot borrow any more than $50,000, even if once debt is repaid. See the official website for details.
Once a student has used up all of their SLE points, they may only study under a FEE-HELP course (capped at $50,000) or as part of a FULL-FEE course. Full-Fee courses are relatively expensive courses where students must pay their all of their tuition costs upfront, which is a significantly larger debt than a standard HECS-HELP loan, usually taken for its lower academic entrance requirements.
FEE-HELP courses are available at a post-graduate level (and occasionally for some undergraduate FULL-FEE places) however they are not available at every institution or in every course. The only remaining option is a FULL-FEE place paid upfront.
Once students have used all of their SLE points, students however cannot enroll in an undergraduate degree again unless it is a FULL-FEE place.
Domestic Students
Commonwealth Supported Students
The Government allocates a number of undergraduate places to each public higher education provider in Australia that are designated as Commonwealth supported places at university. These places are allocated to students via the tertiary admissions centre in each state or territory but are usually based on secondary school results (through the TER), TAFE qualifications and previous university results. Commonwealth supported places are available to citizens of Australia and New Zealand, as well as some Australian permanent residents. If a student is in a Commonwealth supported place, they only make a contribution towards the cost of their education (known as the student contribution) while the Australian Government contributes the majority of the cost.
Student Contribution
Band Curriculum Areas Contribution For 1 EFTSL[2]
National Priority Education, Nursing $0 – $3,998
Band 1 Humanities, Arts, Behavioural science, Social studies, Foreign languages, Visual and Performing arts $0 – $4,996
Band 2 Accounting, Commerce, Administration, Economics, Mathematics, Statistics, Computing, Architecture, Health Sciences, Engineering, Science, Surveying, Agriculture $0 – $7,118
Band 3 Law, Dentistry, Medicine, Veterinary science $0 – $8,333
The student contribution varies for each course. It is based upon the expected earnings following a students' graduation, not the cost of providing the course. The Government allows higher education providers to set their own contribution up to a maximum level (although since the government underfunds universities per place themselves, the universities almost always charge the highest level allowable[citation needed]). A student can pay the entire contribution and receive a 20% discount or defer payment on the contribution through a HECS-HELP loan from the Commonwealth Government. It is possible to defer payment on some of the contribution and pay part upfront. In cases of part payment, a 20% discount is received on the amount paid. Students who are New Zealand citizens or new Australian permanent residents are ineligible for HECS-HELP loans and must pay the entire contribution upfront and receive no discount.
The Government allocates a number of undergraduate places to each public higher education provider in Australia that are designated as Commonwealth supported places at university. These places are allocated to students via the tertiary admissions centre in each state or territory but are usually based on secondary school results (through the TER), TAFE qualifications and previous university results. Commonwealth supported places are available to citizens of Australia and New Zealand, as well as some Australian permanent residents. If a student is in a Commonwealth supported place, they only make a contribution towards the cost of their education (known as the student contribution) while the Australian Government contributes the majority of the cost.
Student Contribution
Band Curriculum Areas Contribution For 1 EFTSL[2]
National Priority Education, Nursing $0 – $3,998
Band 1 Humanities, Arts, Behavioural science, Social studies, Foreign languages, Visual and Performing arts $0 – $4,996
Band 2 Accounting, Commerce, Administration, Economics, Mathematics, Statistics, Computing, Architecture, Health Sciences, Engineering, Science, Surveying, Agriculture $0 – $7,118
Band 3 Law, Dentistry, Medicine, Veterinary science $0 – $8,333
The student contribution varies for each course. It is based upon the expected earnings following a students' graduation, not the cost of providing the course. The Government allows higher education providers to set their own contribution up to a maximum level (although since the government underfunds universities per place themselves, the universities almost always charge the highest level allowable[citation needed]). A student can pay the entire contribution and receive a 20% discount or defer payment on the contribution through a HECS-HELP loan from the Commonwealth Government. It is possible to defer payment on some of the contribution and pay part upfront. In cases of part payment, a 20% discount is received on the amount paid. Students who are New Zealand citizens or new Australian permanent residents are ineligible for HECS-HELP loans and must pay the entire contribution upfront and receive no discount.
History
In 1940, the Curtin Labor Government decided to increase the size of the universities to conduct more civil and military research. In order to do this, it dramatically increased the number of scholarships it offered to enter university and it allowed women to win these scholarships (they were previously exclusive to men). The Menzies Liberal Government also supported and extended the ability of ordinary Australians to attend university.
In the 1960s, the Federal Government encouraged and funded the states to establish new universities to cater for increasing demand. These universities were to be built in outlying suburbs and offer special research scholarships to encourage students to undertake postgraduate research studies. Many of the universities that were established under this scheme are members of Innovative Research Universities Australia.
In 1967, the Menzies government established the College of Advanced Education sector, by defining a category of non-University tertiary institutions that were to receive some federal funding. They were easier to access and cheaper to attend than Universities, while delivering many University-equivalent Batchelor awards.
During the early 1970s, there was a significant push to reform tertiary education in Australia to make it more accessible to working and middle class Australians and the Whitlam Labor Government abolished university fees in 1973. This decision did not greatly change the socio-economic backgrounds of students attending universities because only 20 to 25 percent of students paid fees as most had Commonwealth scholarships. Another reason for the lack of change was because low high school retention rates had resulted in many young people from disadvantaged backgrounds not completing secondary education and therefore never having the opportunity to choose to attend university.
In 1989, the Hawke Labor Government instituted a programme in the Higher Education Funding Act 1988 called "Higher Education Contributions Scheme" or HECS. It was developed by economist and lecturer at the Australian National University, Bruce Chapman and championed by Education Minister John Dawkins (see Dawkins Revolution). When introduced it was a fee charged to all university students of $1,800, but this fee could be deferred and repaid through the tax system when the student's income reached a certain level.
At the same time, the Colleges of Advanced Education entered the University sector by various means.
The new Howard Coalition Government in 1996 made significant changes to the HECS. It created a three-tier fee system with the courses that the government considered to have most likelihood of generating higher income for students in the future (eg. Law and Medicine) being the most expensive and those least likely to generate higher income (eg. Nursing and Arts) being the least expensive. The government also increased HECS charges by an average of 40 percent and permitted universities to charge full up-front fees to students who missed out on a HECS place at university in return for entry into a course.
In the 1960s, the Federal Government encouraged and funded the states to establish new universities to cater for increasing demand. These universities were to be built in outlying suburbs and offer special research scholarships to encourage students to undertake postgraduate research studies. Many of the universities that were established under this scheme are members of Innovative Research Universities Australia.
In 1967, the Menzies government established the College of Advanced Education sector, by defining a category of non-University tertiary institutions that were to receive some federal funding. They were easier to access and cheaper to attend than Universities, while delivering many University-equivalent Batchelor awards.
During the early 1970s, there was a significant push to reform tertiary education in Australia to make it more accessible to working and middle class Australians and the Whitlam Labor Government abolished university fees in 1973. This decision did not greatly change the socio-economic backgrounds of students attending universities because only 20 to 25 percent of students paid fees as most had Commonwealth scholarships. Another reason for the lack of change was because low high school retention rates had resulted in many young people from disadvantaged backgrounds not completing secondary education and therefore never having the opportunity to choose to attend university.
In 1989, the Hawke Labor Government instituted a programme in the Higher Education Funding Act 1988 called "Higher Education Contributions Scheme" or HECS. It was developed by economist and lecturer at the Australian National University, Bruce Chapman and championed by Education Minister John Dawkins (see Dawkins Revolution). When introduced it was a fee charged to all university students of $1,800, but this fee could be deferred and repaid through the tax system when the student's income reached a certain level.
At the same time, the Colleges of Advanced Education entered the University sector by various means.
The new Howard Coalition Government in 1996 made significant changes to the HECS. It created a three-tier fee system with the courses that the government considered to have most likelihood of generating higher income for students in the future (eg. Law and Medicine) being the most expensive and those least likely to generate higher income (eg. Nursing and Arts) being the least expensive. The government also increased HECS charges by an average of 40 percent and permitted universities to charge full up-front fees to students who missed out on a HECS place at university in return for entry into a course.
Tertiary education fees in Australia
Higher education fees in Australia are charged to all students, but Australian citizens and (with some limitations) permanent residents[1] are able to obtain interest free loans from the government under the Higher Education Loan Programme (HELP) which replaced the Higher Education Contribution Scheme (HECS). Most students are Commonwealth supported, which means the Commonwealth Government pays a contribution to the fees and students are able to defer payment of the remainder of the fees, which for Commonwealth supported students are called the "student contribution". Some domestic students are full fee-paying (non-Commonwealth supported) and while they are able to obtain subsidised loans from the Government up to a lifetime limit of $100,000 for medicine, dentistry and veterinary science programs and $80,000 for all other programs, they receive no other direct government contribution to the cost of their education. Overseas students are charged fees for the entire cost of their education and are ineligible for any loans from the Commonwealth.
Subscribe to:
Posts (Atom)