Users of one of the most popular features of the Post-9/11 GI Bill – the option to transfer benefits to family members – will find a few quirks in how Congress designed the transfer provisions as they take effect in August.
For example, spouses of active duty members who hope to use transferred benefits to attend private colleges will be delighted at the value of the benefit for them. It will cover full tuition and fees, with no ceiling, and therefore will be worth far more than benefits transferable to college-bound children or even benefits available to veterans using the full plan themselves.
On the other hand, active duty spouses who use transferred benefits to attend public colleges or universities will have a more modest education package than other GI Bill users including eligible children. That’s because active duty spouses will not qualify the GI Bill’s monthly living allowance or annual stipend for books and supplies.
Another quirk about transferability has Defense officials advising service members to transfer at least a month’s worth of GI Bill benefit to every dependent before they leave service. This will lock in an opportunity to transfer benefits to them later. Any family member not approved for transferability before a member retires or separates will be denied the opportunity forever, unless the member reenters service. Likewise, veterans who remarry or have more children after leaving service will not be able to transfer GI Bill benefits to these new family members.
Bob Clark, assistant director of accession policy in the Office of Secretary of Defense, said Department of Defense will open a secure website June 29 for service members to elect to transfer benefits. The address, when activated, will be: https://www.dmdc.osd.mil/TEB .
Only members who are on active duty or in the Selected Reserve on or after Aug. 1, 2009, when the new GI Bill takes effect, will be able to make transfers. The reason, Clark explained, is that transferability was designed to help retention and avoid an exodus of careerists who might be enticed to leave service to use an improved education benefit. The feature seems to have had that effect because interest in transferring benefits to family members, in return for longer service, has been “overwhelming,” Clark said.
Members will be allowed to transfer benefits to a spouse if they have served at least six years and agree to serve four more. They will be allowed to transfer benefits to children if they have served at least 10 years and commit to four more. Obligations under current service agreements count toward this commitment so, for instance, a member already serving under a reenlistment contract with three years remaining would only have to extend by a year to satisfy the four-year commitment on transferability.
An exception to the four-year requirement is allowed for members who have served at least 10 years and are barred by service policy or statute such as high-year tenure or mandatory retirement rules, from serving a full four years more. To be able to transfer GI Bill benefits, they only will have to serve whatever additional time is allowed by policy or law.
There also five temporary exceptions for members nearing retirement or with retirement orders in hand, as we explained in a late April column.
All applications to transfer benefits will be made through the Transferability of Educational Benefit (TEB) website. Though the site goes live June 29 to grant advance approvals of transferability effective Aug. 1, officials ask that service members with no family members attending college this fall delay using the site until at least July 15 so applications from members with students in fall classes can be processed more quickly.
Service members will log in using their Common Access Card or a DoD self-service ID number or the PIN (personal identification number) that they use to access pay accounts with the Defense Finance and Accounting Service. Their applications will be routed to their service where family member status will be checked and a new service commitments set. “Any service commitment, if required, will start on Aug. 1, 2009,” said Clark.
Members will learn if their application is approved by checking the same website periodically. Approved applications will be sent daily to the Department of Veterans Affairs. Family members then can apply to VA for a certificate of eligibility to use a certain number of months of the new GI Bill. Certified family members will use the benefit like any qualified veteran.
“They will have access to veterans’ affairs assistance at their school and use all other procedures the schools have in place for veterans,” Clark explained.
The Post-9/11 GI Bill usually is described as a benefit intended to cover tuition and fees at any college or university, up to ceiling for such charges at the most expensive state-run university. The benefit also pays a monthly living allowance equal to local military housing allowances for a E-5, plus a $1000 annual stipend for books and supplies.
But a more enhanced benefit applies to active duty members using the new GI Bill while in service, and these benefits can be transferred to spouses. For them, the new GI Bill will cover full tuition and fees at any college or university, with no ceiling on coverage tied to the most costly state school.
A spouse of a service member in the Washington D.C. area, for example, will be attend George Washington University, one of the nation’s most expensive schools, and see the GI Bill cover full tuition and fees.
Because active duty members and their spouses either live on base or draw a housing allowance, they will not receive the monthly living allowance. Even so, the top line value of their benefit is significantly higher than new GI Bill benefits as routinely described. Active duty spouses attending private schools will have transferred benefits unmatched for any other users.
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Scholarships for College Dwindle as Providers Pull Back Their Support
By JONATHAN D. GLATER
New York Times
Published: June 26, 2009
Students looking for college scholarships are going to have a harder time this year as providers, hammered by falling investment returns and declining philanthropic support, cut back.
The Fulfillment Fund, a nonprofit that works with Los Angeles public high school students, has reduced the number of college scholarships offered over the last three years by nearly half and has tightened requirements students must meet, said Maria T. Espinosa, director of program operations.
The Davis United World College Scholars Program, which last year began paying $20,000 per scholarship recipient at colleges that had at least five scholarship winners enrolled, has cut the amount in half, returning to pre-2008 levels.
“We’ve just been boxed in by circumstances we didn’t anticipate,” said Philip O. Geier, the program’s executive director, adding that he hoped to increase the scholarship payments in the future.
The recession has led foundations, corporations, state governments and colleges themselves to reduce their support of providers of scholarships, and in recent months programs have been reduced or canceled outright. The cuts come as economic conditions make it harder for families to pay for college and as more unemployed people look for financing for retraining.
The result will probably be a greater role for federal aid programs in supporting students, instead of private scholarship providers and state governments, said Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, whose members are colleges and universities.
“What you’re seeing are some shifts taking place,” Mr. Hartle said. Over all, there may be more aid money available as federal aid programs expand, he continued, “but some individuals may find themselves in much worse situations this year than last year.”
State grant programs have also taken a beating. In Pennsylvania, the maximum amount available to resident college students has fallen to $4,120, from about $4,700 last year, according to the Pennsylvania Higher Education Assistance Agency. California, confronting a severe budget crisis, is weighing the shutdown of a state scholarship program benefiting hundreds of thousands of students. The New York Times Company, which offers the Times College Scholarship to New York City high school students, this year cut the number of scholarships it provided to 12, from 20, according to a spokeswoman.
No one has a complete list of all scholarship providers, let alone a database that tracks how much money those providers pay out every year. But companies that administer and track scholarships say that a downward trend is clear.
According to Scholarship America, a nonprofit company that administers scholarship programs for about 1,200 providers, less money is available for students. Meantime, the number of applications is rising, said Janine Fugate, a spokeswoman.
ACT, a nonprofit company that manages and designs scholarship programs for foundations and companies, has seen a decline of just under 5 percent in total scholarship dollars available, according to a spokesman.
Peterson’s, an online college preparation site owned by the student loan company Nelnet, found that although the number of scholarships rose to 1.7 million in 2008, from 1.4 million a year earlier, the average amount awarded fell nearly 7 percent, to $4,300 from $4,607.
The numbers are tricky — more new, smaller scholarships could drive down the average award without proving that older, established scholarships have declined in size, experts said. Also, the numbers reflect the maximum award amount and would not capture a scholarship provider’s decision, say, to offer less money for some reason. Providers do not report what they actually pay to recipients.
FastWeb, which claims to have the nation’s largest database of scholarships, has not detected a decline in the total dollar amount of scholarships available this year, said Mark Kantrowitz, publisher of FinAid.org and FastWeb.com, both units of the job search company Monster.
“Currently we have $3.1 billion in scholarships,” which is about the same amount as last year, Mr. Kantrowitz said. With less money thrown off by endowments and contributed by donors, scholarship providers must make difficult choices. Should current scholarship recipients have their awards renewed, at the expense of new applicants? Should scholarship amounts be reduced so that the same number of students can benefit? Should the size of awards be protected, but their number cut?
“We set the priority, with the limited funds we have, of funding the renewals first,” said Kristin Shear, director of student financial services at Santa Rosa Junior College, in California.
The college has suspended accepting applications for the Frank P. Doyle Scholarship, named after an executive of a local banking chain and supported by the bank’s dividends. The bank stopped paying dividends last year.
“We have contracted the program, and when dividends and distributions return, we’ll expand,” Ms. Shear said. “It’s just a question of when it will come back.”
Timothy G. Snow, president of the George Snow Scholarship Fund, based in Boca Raton, Fla., said, “Common sense is telling us that we’re going to see less money coming in.”
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New Loan Repayment Program Allows Students to Pay as They Earn
By AUSTIN WRIGHT
Chronicle of Higher Education
June 26, 2009
Washington --Genevieve Grabman borrowed $85,000 to pay for law school at Georgetown University. Over the past six years, she has whittled her debt to $75,000, which is about equal to her annual salary as a policy adviser for two nonprofit groups.
On her current repayment schedule, she will still be paying off her student loans a quarter-century from now.
But Ms. Grabman, and many borrowers like her, is about to get some much-needed help.
The federal government’s new income-based repayment program, which takes effect Wednesday, allows borrowers to repay their loans as a percentage of their income, lowering payments for those with high debt-to-income ratios.
Under the plan, which was created as part of the 2007 College Cost Reduction and Access Act, a borrower’s monthly payment will be set at 15 percent of the person’s monthly disposable income. Borrowers who earn less than 150 percent of the federal poverty level will not have to pay anything on their loan debt until their income rises.
The plan also forgives a borrower’s outstanding debt after 25 years of on-time payments, or after 10 years for people in public-service jobs, like those in law-enforcement, teaching, and nonprofit positions.
For a single borrower who earns $75,000 per year and owes $85,000 in student loans, like Ms. Grabman did, the monthly payment would be $735.
The same borrower now would pay $978 per month under the federal government’s standard, 10-year repayment plan, according to debt calculators on the Education Department’s Web site.
As a general rule, borrowers who owe more in federal student loans than they earn in a year will benefit from the program, said Edie Irons, communications director for the Project on Student Debt, a nonprofit advocacy group.
Ms. Grabman said she expects her outstanding student debt to be forgiven in 10 years under the new program, because she plans to continue working in public-service jobs, a decision she says the income-based repayment plan helped her make.
“The idea is to provide an incentive for people to go into lower-paid but really important work,” said Ms. Grabman, a policy adviser for two nonprofit organizations that deal with women's health.
The new plan caps a borrower's maximum monthly payment at the amount the borrower would have paid per month under the standard, 10-year plan.
“It creates a graduated payment schedule that can go up and down with changes in the borrower’s income," said Patricia M. Scherschel, a vice president at Sallie Mae, the nation’s largest student-loan company.
Not all federal loans can be repaid through the new income-based program. Loans that can be repaid based on income include Stafford Loans, Grad PLUS loans, and consolidated loans, awarded through either the federal direct-loan program or the federal guaranteed-loan program. Loans that borrowers cannot repay based on income include PLUS loans for parents and consolidated loans that repaid a PLUS loan for parents. Loans currently in default also do not qualify for income-based repayment.
Loans that qualify for the new program can be new or old and can be used to pay for any type of education, including job training and professional studies.
Student-loan borrowers will also benefit from another change that is to take effect Wednesday, when interest rates in several federal student-loan programs will drop to all-time lows. That will make it more attractive for borrowers to consolidate their debt and lock themselves in at the new variable rates—2.48 percent for Stafford Loans and 3.28 percent for PLUS loans.
These are the lowest rates in the history of the federal student-loan program, the result of the U.S. Federal Reserve slashing interest rates because of the financial crisis.
A Well-Timed Program
The federal government’s income-based plan comes at a time when the recession has forced many states to cut loan-forgiveness programs for graduates who pursue public-service careers. “The timing of this becoming effective is as good as it gets as far as meeting the need,” said Mark Kantrowitz, publisher of FinAid, a student-aid Web site.
“Lots of graduates out there would love to pursue a public-service career, but the financial realities put a stop to it,” he said. “This program makes it easier for people to pursue their dream.”
But there are downsides to the new program. The plan requires borrowers to submit their tax returns each year to their lenders so that lenders can recalculate monthly payments as borrowers' incomes rise and fall. Also, any debt that is forgiven under the new program is considered taxable income.
Several Congressional lawmakers are trying to change that through a House bill they have introduced to create a tax exemption for forgiven student debt.
“We don’t want to discourage participating in this program by taxing the amount that is forgiven,” said Rep. Sander Levin, a Democrat from Michigan who is a sponsor of the bill. “The fact that [income-based repayment] becomes available to borrowers this week gives a sense of urgency to our efforts.”
Ms. Grabman, the Georgetown graduate, said she would probably earn double her current salary if she went into the private sector, a move she has considered because of her high monthly student-loan payments. But because of the forgiveness offered through the new repayment program, she believes she will be able to continue her career in public service while meeting other financial goals.
“Maybe someday I’ll be able to own a house,” she said.