Release date: July 26, 2004
Contact: Elaine Justice, Associate Director, University Media Relations,
at 404-727-0643 or ejustic@emory.edu

Emory Offers Financial Aid Advice for Middle-income Families

Students from middle-income families who are anxious about rising college costs preventing them from attending their dream college should know there is help for them, says Julia Perreault, director of financial aid at Emory University.

Emory is one of 28 member schools in the 568 Presidents' Working Group, consisting of colleges and universities that are "need-blind," meaning they do not take into account during the admissions process a student's ability to pay, says Perreault. (The "568" refers to Section 568 of the Improving America's Schools Act, which allows private colleges to collaborate on qualifications for financial aid.)

These schools have adopted a new policy for determining the value of family assets--hence their ability to pay--by changing the way they calculate the asset value of the family home, says Perreault. Rather than counting the full market value of the home, minus the debt, as part of the family's available assets, financial aid officers in the 568 group have the option of using income cap provisions, limiting the home's value to 2.4 times the family's annual income.

The income caps are especially helpful to middle income families who purchased a home years ago, built up lots of equity, but don't have adequate income to allow them to tap into all the equity in the home for help in financing a college education, says Perreault. The income cap also helps families who've recently experienced unemployment or reduced income.

For parents looking for the best deal on educational loans, Perreault advises weighing the options when deciding between a Federal Parent PLUS Loan for Undergraduate Students or a home equity loan. While home equity loan rates are rising, such loans still might have an advantage over PLUS loans because of their income tax benefits.

"The home equity loan lowers a family's asset value because it reflects lower equity in the home. If parents take out a PLUS loan, they have the same amount of debt, but it isn't reducing their assets." Families need to do the math, says Perreault, to find out which loan would be best for them.

Graduate students also need to be smart loan consumers, says Perreault. Some credit-based loans can become problems after the first year of the loan. At the outset, "students don't have a credit history, and therefore appear credit ready," she says. But during the loan's second year, the student may miss or fall behind in other payments or the lender may notice there is not enough income to support the debt--called debt-to-income ratio--and decide not to renew the loan.

"That's when students really get into difficulties trying to fund their education," says Perreault. She advises two strategies: Get a copy of your credit report annually, and talk to potential lenders prior to borrowing. "Ask lenders up front what will happen the second or third year of the loan," says Perreault. Will you still have access to funds as long as you don't fall behind on payments, even if you have little or no income?

"One thing you want to do is avoid surprises," says Perreault. "You don't want to invest one or two years of your life in graduate or professional school and suddenly lose the option of using loans to help finance your education."

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