Returning or Graduating, HKS Students Enter a Time of Financial Decision Making
by Matt Homer, Asst. News Editor on March 11, 2009 in HKS News, News
Whether HKS students are returning next year or graduating this spring, financial decisions loom large. For those with a second year to go, this means putting together funding for financing next year’s school and living expenses. And for graduating students, it includes developing a strategy for paying off student loans.
Returning domestic students typically face three tasks in this process: completing tax forms, a Free Application for Federal Student Aid (FAFSA) application, and an HKS financial aid form.
One most pressing concerns in getting all of this done in time.
“It’s a shame that instead of allowing us to focus on our studies and being prepared for public service, we’re peppered with multiple forms – and all due within a short period of time and all within our midterms timeframe,” commented V-Khye Fan (MPP ’10) on the compressed timetable.
In addition to being labor intensive, at least one of these forms has been criticized for its required content. The FAFSA has over 100 questions and, while most aren’t very difficult to answer, some of them might not be relevant or provide an accurate picture of a student’s financial situation.
In his campaign, President Obama advocated eliminating the FAFSA by “enabling families to apply simply by checking a box on their tax form, authorizing their tax information to be used.” Whether or not this goal will be met is unclear, but Obama has incorporated this into his list of agenda items on the White House Web page.
Anthony Gallonio, director, and Michael Silvernail, assistant director, respectively, of Student Financial Services both agree Obama’s idea would be a good one. But they are skeptical the switch would occur anytime soon.
Tax forms are a perennial area of frustration, but can be particularly daunting for students who, in addition to federal taxes, may need to file in Massachusetts and the state where they were previously living. A variety of tax credits and deductions available for students can be beneficial, but since some are mutually exclusive, it can also be difficult to determine which provides the greatest impact. Student Financial Services recently hosted a student workshop with a CPA to address these and other issues.
Although many graduating students will be strapped with debt, those with U.S. loans will soon be able to deduct the loan interest they have paid (up to a maximum of $2,500) for a given year. They will also benefit from the newly established Income-Based Repayment and Public Service Loan Repayment programs. Under the first of these programs, monthly repayment amounts are tiered according to an income level and all remaining debt is forgiven after 25 years. For someone graduating with $100,000 of student loan debt and entering a job that pays $50,000 a year, monthly payments would be around $420 a month – and all remaining debt after 25 years would be forgiven. The second program provides debt forgiveness after 10 years for students going into public service. More information on these options can be found at www.ibrinfo.org.
Student Financial Services also recommends students barter with future employers for loan repayment assistance. According to Silvernail, students going into government can often find some help. Congressional offices and the Department of State are two examples that frequently offer loan repayment plans. But assistance varies widely throughout the government. The Department of Education, for instance, rarely offers repayment support.
Although returning students will add more debt to their load with the coming year’s expenses, Gallonio and Silvernail say students can incur less debt in their second year. This is because first year students sometimes take out more than they need, as it can be difficult to gauge what their living expenses will be once they move to Cambridge. But after the first year, students have a better sense of costs and may be able to live on less by finding a cheaper room and saving in other areas.
For both returning and graduating students, financial decision-making – especially regarding savings and cutting down on expenses – will remain paramount in these tough economic times.
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Judging by this and other articles, it seems like a major capital campaign would be a high priority for the HKS administration and students. Is this already in the works and if not, what is holding back the effort?