Student Aid Fo Education Loan

That’s the conclusion of the Education Sector, which has released a study that focuses on lowering federal student loan default rates.

Student loan defaults are becoming a hot topic as a growing number of recent college graduates struggle to find jobs that pay a living wage. The most recent federal loan default rate is 6.7% which might not sound all that alarming.

That 6.7% rate, however, is a sugar-coated statistic. This official rate only examines a student loan default that occurs within a two-year period after the student loan payments begin. According to Ben Miller, a policy analyst at Education Sector, it often takes 14 months before the federal government even characterizes a record of nonpayments as a defaulted account.

When the time period is stretched to three years, the default rate jumps to 11.8%, which is a 76% increase.

Not surprisingly, for-profit schools occupy the epicenter of college debt crisis. Seven percent of students attend for-profit, higher-ed institutions, but they generate 44% of the federal loan defaults.

Among schools in the hall of shame is Clinton Junior College in South Carolina. Thirty percent of students graduated from the school in three years, while more than 36% of the borrowers defaulted on their student loans.

When evaluating schools, check on each institution’s student loan default rates. High rates can often mean that a school is packaging too many loans in financial aid awards and are not counseling students about managing their college debt.

Don't dawdle on college aid requests

Colleges are bracing for another year of high demand for financial student aid - and that means students need to get their applications in as quickly as possible.

Federal student aid loans remain plentiful, but other types of aid from states and colleges are more limited. By missing one of the many deadlines, students could receive fewer sought-after grants and scholarships that don't have to be repaid, and end up having to apply for loans that do.

"It will be another competitive year," says Sarah Bauder, director of financial aid for the University of Maryland, College Park. Aid applications so far at the state university are up 12 percent over last year, while federal funding for work-study and certain education grants has been slashed, Bauder says.

Blame the continued weak economy for the stiff competition for student aid. Unemployment remains high. Families that have burned through cash reserves now are applying for aid for the first time, aid officials say.

In addition, a bumper crop of high school seniors and more people returning to school for advanced degrees will add to the aid demand, says Patricia Nash Christel, a spokeswoman for student loan giant Sallie Mae.

The first step to getting aid is filling out the Free Application for Federal Student Aid at fafsa.ed.gov. It not only will determine your federal aid, but states and colleges also use the FAFSA to award their money.

The earliest you can submit a FAFSA is Jan. 1. States and schools set their own deadlines for when the FAFSA must be submitted.

The state of Maryland's deadline is March 1. Gov. Martin O'Malleyhas set aside nearly $110 million in his proposed budget for scholarships and grants this year, which could help more than 58,000 students, says Christopher Falkenhagen, director of communications for the Maryland Higher Education Commission.

Schools often set priority deadlines so that applications submitted by that date will be the first batch that aid officers look at when making their awards. Goucher's deadline, for instance, was Feb. 1. The Towson college typically awards $22,000 to the neediest of students, about half the cost of attending the college for a year. In years past, the college has been able to offer that amount of aid even to students submitting the FAFSA after the college's deadline, says Sharon Hassan, director of financial aid.

But this year, with aid applications more than double those of a year ago, Goucher might be forced to be less generous with latecomers, Hassan says.