The United States Department of Education which is also referred to as ED or DoEd was created by the Department of Education Organization Act in 1979 by signing into law by Jimmy Carter. It started operations on May 16, 1980 and is the smallest cabinet level department with about 5000 employees. The department of Education is administered by the United States Secretary of Education.

• The creation of this department met with a lot of opposition by the republicans but has managed to survive. It was opposed at the time of its inception and it was opposed by President Ronald Reagan during the 1980 elections. Ronald Reagan stated that the budget he planned to submit would cut expenditure by dismantling the Department of Education. However it still continues to operate and on March 23, 2007 President George W Bush signed into law H.R. 584, which designates the ED Headquarters building as the Lyndon Baines Johnson Department of Education Building.
• The Department of education primarily focused on elementary and secondary education under George W Bush. The “No Child Left Behind” act led to the increase of budget for ED) by 69% from 2002 to 2004. As with other federal agencies, the ED functions with the help of numerous advisory committees. The Federal Interagency Committee on Education (FICE) is known in higher education for creating the FICE code, the six-digit institutional identifier allocated to every higher education (two-year and above) establishment.
• The FICE code is a six-digit classification code that was used for identifying every school that was doing business with the Office of Education during the early 1960’s. This code is no longer used in IPEDS; instead it has been substituted by the Office of Postsecondary Education (OPE) ID code. More information related to ED can be found on the official website of Department of Education ed.gov.
• According to the website the mission of the department is to “promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access.” Moreover it states its four major activities as – Establishing policies associated with federal education funding, administration of distribution of finances and supervise their utilization, collection of information and managing research on America’s schools, identifying major issues in education and focusing nationwide awareness on them, and enforcing federal regulation that helps in keeping out unfairness in programs that obtain federal finances.

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The American Opportunity Tax Credit is a partially refundable tax credit given in the section 1004 of the American Recovery and Reinvestment Act of 2009. Originally proposed by President Barack Obama to help students and families pay for post secondary education, the act required a person to perform community service to avail of the tax credit, along with some other eligibility criterion.

• In short, the Act specifies – raises the Hope Scholarship Credit to hundred percent qualified tuition, fees and course materials shelled out by the taxpayer for the duration of the taxable year not to go beyond $2,000, in addition twenty five percent of the next $2000 in eligible tuition, fees and course supplies. The total credit does not surpass two thousand five hundred USD. This tax credit is subject to a phase-out for taxpayers with adjusted gross income in surplus of $80,000 ($160,000 for wedded couples filing together).
• Furthermore the act also lays down that 40% of the credit is refundable and provisions are specific to tax years 2009 and 2010 for the first four years of post-secondary learning. Moreover, the act directs numerous Treasury studies including harmonization with non-tax student financial support, manage the credit permissible under the Federal Pell Grant program to take full advantage of their efficiency at encouraging college affordability, scrutinize methods to accelerate the release of the tax credit, and with the Secretary of Education, revise the viability of requiring including community service as a stipulation of taking their tuition and associated expenses into account.
• On January 6, 2009, Congressman Chaka Fattah introduced H.R.106, The American Opportunity Tax Credit Act of 2009. The planned act specified any full-time college or university scholar is qualified, a $4000 refundable tax credit in replacement for a hundred hours of community service, community service should be with a governmental unit, hospital, or 501(c) 3 institutes, and the Secretary of Education will be accountable for confirming community services requirements.

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A student loan default occurs when there is no payment on the loan for 270 days and may have long term negative repercussions. The consequences of defaulting on a student loan can range from loan forgiveness to being sued by the loan providers (or the government) depending on the circumstances. It may also adversely affect a person’s credit report and score for a long time.

• A person who has defaulted on a student loan cannot receive any Federal aid in case he or she decides to go back to school in the United States unless the loan is repaid in full. In addition to this there may be a garnishment of wages and tax refunds used as collection tools. The Internal Revenue Service (IRS) can collect this way and the latter is the easiest and the most popular way of collecting on loan debt.
• A person can object to such garnishment of wages and reduction of tax refund under certain circumstances by giving (within 65 days of IRS’ notice) a written statement and evidence that – The loan has been repaid, payments have been made under a negotiated repayment contract, or a cancellation, postponement or leniency has been granted, the borrower has filed for bankruptcy, the borrower dropped out of school and the school owes a reimbursement, the borrower attended a trade school and the school subsequently closed, the borrower is completely and eternally disabled, the loan in question is not the loan of the borrower, or the school wrongly certified the borrower as being qualified for a loan.
• The government can also garnish the wages of the borrower in case of default and the United States Department of Education (ED) or a student loan guarantor can garnish fifteen percent of the earnings of a defaulter. The defaulter can also be sued if he or she fails to object to the garnishment (in cases of genuine incapability of repaying). The lawsuit can be filed at any time by the loan provider or the government and these is no time limit for doing so.
• The option of getting out of default voluntarily is also available and rehabilitation programs are designed in order to help borrowers get out of debt. Rehabilitation brings the loan out of the default mode and again into the repayment status; however the borrower has to make some payments in order for this to happen. After the borrower completes the agreement under the rehabilitation program, the loan is transferred to a loan servicer from the guarantor and is considered out of default.
• There are numerous benefits of rehabilitation and it can reverse many negative consequences that are faced by being in default. The borrower becomes eligible for Federal aid if he or she decides to go back to school. The garnishment of income stops and the borrower can get the complete tax return. However, the biggest advantage is that the borrower is no longer in debt and amount is completely repaid.

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A guarantor is a person or an agency that agrees to pay a loan, which has gone into default, because of non-payment by the borrower. A student loan in the United States is guaranteed by the government in case it is a federal student loan. Loan guarantors can either be state run organizations or can be private entities. Both of these are in charge of managing or administration of the Federal Family Education Loan Program (FFELP), which subsidizes participating student lenders.

• A guarantor can be used by student in case where the student is incapable of securing a loan on their own. For instance if a person has a poor or no credit history then a guarantor can be used. However this does not mean that the loan is automatically approved because of the presence of a guarantor. The credit of the guarantor is checked in order to approve the loan since the guarantor becomes a part of the loan application. In case the lending entity feels that the guarantor can pay back the loan then the chances of approval are high.
• Having a guarantor does not absolve the borrower from repayment and even if the loan is paid back by the guarantor, the borrower now owes the amount to the guarantor. There can even be multiple guarantors on a single loan and each one is responsible for paying the full amount that is due. Following is a list of private non-profit guarantors in the United States which are designed to administer the Federal Family Education Loan Program (FFELP).
• 1) American Education Services/PHEAA – Delaware, Pennsylvania, West Virginia
  2) American Student Assistance – District of Columbia, Massachusetts
  3) College Assist – Colorado
  4) Educational Credit Management Corporation – Connecticut, Oregon, Virginia
  5) EDFUND – California
  6) Finance Authority of Maine – Maine
  7) Georgia Student Finance Commission – Georgia
  Great Lakes Higher Education Corporation – Minnesota, Ohio, Wisconsin, South 9) Dakota, Puerto Rico – Virgin Islands
  10) Higher Education Student Assistance Authority – New Jersey
  11) Illinois Student Assistance Commission -Illinois
  12) Iowa College Student Aid Commission – Iowa
  13) Kentucky Higher Education Assistance Authority – Kentucky
  14) Louisiana Office of Student Financial Assistance – Louisiana
  15) Michigan Higher Education Assistance Authority – Michigan
  16) Missouri Department of Higher Education – Missouri
  17) Montana Guaranteed Student Loan Program – Montana
  18) Nebraska National Student Loan Program – Nebraska
  19) New Hampshire Higher Education Assistance Foundation – New Hampshire
  20) New Jersey After 3, Inc. – New Jersey
  21) New Mexico Student Loan Guarantee Corporation – New Mexico
  22) New York State Higher Education Services Corporation – New York
  23) North Carolina State Education Assistance Authority – North Carolina
  24) Northwest Education Loan Association     Oregon – Washington
  25) Office of Student Financial Assistance – Florida
  26) Oklahoma Guaranteed Student Loan Program – Oklahoma
  27) Rhode Island Higher Education Assistance Authority – Rhode Island
  28) South Carolina Student Loan – South Carolina
  29) Student Loan Guarantee Foundation of Arkansas – Arkansas
  30) Student Loans of North Dakota – North Dakota
  31) Tennessee Student Assistance Corporation – Tennessee
  32) TG (Texas Guaranteed Student Loan Corporation) – Texas
• 33) USA Funds – Wyoming, American Samoa, Commonwealth of the Northern  Mariana Islands.

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The Free Application to Federal Student Aid is a form that needs to be filled by prospective and current students (graduate or undergraduate) in order to determine the eligibility for student aid in the United States. These aids may take the form of Pell grants, Stafford loans, and other federal loans such as Perkins loans. Also called the FAFSA form, it is an instrument for measuring the capability (or lack thereof) of a potential or existing student to pay for his or her education.

• The FAFSA has many questions that are fed into a formula in order to determine the Expected Family Contribution (EFC). This makes it possible to determine whether the family or the student or the applicant is capable or incapable of contributing for education. A number or factors are taken into consideration such as the household income, number of students from that family, and assets in order to determine if the student qualifies for aid.
• A student aid report (SAR) is given to the students which has a summary of FAFSA responses. SAR can be reviewed by the student in order to detect any mistakes and to determine the accuracy of responses. This report can also be downloaded from the internet and is the electronic version which is called ISAR. Almost all students are qualified for some type of financial aid. Students that might not be entitled for need-based aid can still be eligible for an unsubsidized Stafford Loan not considering the income or circumstances.
• The criteria for being qualified to receive aid are as follows – the student is a U.S. citizen, a U.S. national, or an eligible non-citizen; has a legitimate Social Security number; has a high school diploma or GED or for adult students, pass an Ability-to-Benefit test; is registered with the U.S. Selective Service (male students age 18-25); completes a FAFSA promising to use any federal aid for educational reasons; does not owe refunds on any federal student grants; is not in default on any student loans; and has not been found guilty of the sale or possession of illicit drugs while federal aid was being received.
• The FAFSA is only valid for one year of school. Once the school year comes to a close, the student will have to fill out a renewal FAFSA. The renewal FAFSA permits the student to only have to fill out any fresh financial tax information, with no need for having to fill out the rest of the form.
• The quantity of aid will differ depending on how much money both the student and their family made the preceding year. Financial aid offers might also differ once the student attains the age of 24, as at that point they are considered self-sufficient and not dependent on their parents. This makes them eligible for larger amounts of funds in federal loan, and might also make those students eligible for aid who would not otherwise meet the criteria for the reason that their parents made a lot of money.
• The FAFSA works on a first come first served basis and it is advisable to fill out the form as soon as possible since thousands of students apply for aid each year. The fact that education can burn a hole in anyone pocket is true and it makes sense to be an early bird in this case in order to enjoy any type of federal aid.

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The Higher Education Act of 1965 (Pub. L. No. 89-329) (the “HEA”) was a legislation which was signed into law in the United States.  The law was part of the then President Lyndon Johnson’s agenda and its aim was “to strengthen the educational resources of our colleges and universities and to provide financial assistance for students in postsecondary and higher education”. Not only did the law poured more money into Federal student loans but it also created the National Teachers Corps. Moreover, it also strove to give scholarships and low-interest student loans.

• The Higher Education Act of 1965 was reauthorized eight times and is set to expire in the year 2013. Changes which were made in the year 1998 included the Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP) and the denial of Federal student aid to anyone who has been convicted of drug charges. This is where the question no. 31 in the Free Application for Federal Student Aid (FAFSA) form originates which asks whether the student has indeed been convicted of any drug related offence(s).
• In 2003 many parts of the legislation were set to expire and many minority groups came together to ask for changes in the law. The objective of the group was to provide incentives for minority students and help them in getting into fields where they were underrepresented. However, the request to increase the amount offered in Pell Grants was denied by the senate. On the other hand some beneficial steps that were taken by the government included increase in the amount of funds made available and abolishing the grace period required for applying for a loan by educational institutions.
• In the year 2008 the Higher Education Opportunity Act was enacted which reauthorized the amended version of the Higher Education Act of 1965. It made major changes in student loan discharges for disabled people. Before, to be eligible for a discharge, a disabled person could have no income. This has been changed to a no “substantial gainful activity” test, which is the equivalent standard used by the Social Security Administration in determining eligibility for Social Security Disability Insurance (SSDI). The changes will take effect on July 1, 2010.
• The HEA was changed again in he year 2007 when many changes were made to student loans through the College Cost Reduction and Access Act (CCRA). These changes included increase in the amount of Pell Grants, capping the interest rate at 15% of a person discretionary income, enacting loan forgiveness for public servants in the Direct Loan program, and took steps to correct problematic practices in the lending industry.
• Therefore the HEA has made several changes to the way education is offered and at the cost at which it is offered in the United States. The law has been continuously amended since its inception and it seems like it is here to stay. The benefits derived from this legislation cannot be denied; however, it is a reality that education is still a costly affair in the United States and not many people can afford higher education.

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Coverdell Education Savings Account which is named after the late Senator Paul Coverdell is a tax exempt savings plan in the United States that promotes savings for expenses incurred towards education. It is also known as the Education Savings Account (ESA), Coverdell ESA, Coverdell account, or simply ESA. According to the legal definition under US Code Title 26, Coverdell Education Savings Account is a trust created or organized in the United States for paying the qualified educational expenses of a designated beneficiary of the trust.

• Under this Code, only contributions in cash which are made before the beneficiary attains the age of 18 and rollover contributions which would result in an aggregate contribution of more than $2000 in that taxable year are allowed. The fact that a Coverdell Education Savings Account also pays for elementary and secondary school expenses sets it apart from other similar savings strategies such as the 529 plan.
• Qualified educational expenses include those given under Section 529 (b) and the elementary and secondary school expenses elaborated in this law. Qualified educational expenses for elementary and secondary school expenses include expenses for tuition, fees, special needs services in the case of a special needs beneficiary, supplies, books, academic tutoring, and other equipment which are incurred in connection with the enrollment or attendance of the designated beneficiary of the trust as an elementary or secondary school student at a public, private, or religious school.
• Furthermore, expenses incurred for room and board, transportation, uniforms, and supplementary items and services (including extended day programs) which are required or provided by a public, private, or religious school in connection with such enrollment or attendance are also included in the trust. In addition to this, any expense incurred for acquiring computer technology, equipment or services used by the beneficiary or his family during the tenure of the tutoring or schooling which is used in connection with the schooling is also included.
• Although the Coverdell Account is similar to the 529 plan, there are numerous differences between the two. Coverdell savings allow any type of investment including, stocks, bonds, and mutual funds in contrast to the 529 plan where only investments in State run allocation programs are allowed. The maximum limit for Coverdell ESAs is $2000 per child, per year, whereas in a 529 plan there are no restrictions on the contribution up to the maximum lifetime contribution.
• The balance in the Coverdell ESA must be disbursed for qualified educational expenses before the beneficiary attains the age of 30 in order to avoid taxes and penalties. There is no such restriction under the 529 plan. Although it seems that a 529 plan is a better option, the major advantage of a Coverdell ESA is that it allows tax-free withdrawal of the amount if used for qualified educational expenses.
• The similarities between a 529 plan and a Coverdell ESA are that both allow the account owner to change the beneficiary at any time without incurring any penalty or tax. However, the new beneficiary should be an eligible family member of the previous beneficiary. Both plans consider the money to belong to the account holder and not the beneficiary. This is in case Junior decides to take a world tour instead of using it for college.
• There are advantages to both the 529 as well as the Coverdell ESA however as far as tax treatment is considered, Coverdell ESA are a much better option. On the other hand a Coverdell ESA is limiting in nature and cannot provide limitless wealth (which may be required) for higher education.

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Upromise is the largest private source of college funding contributions in the United States. Members obtain contributions when making daily purchases of goods and services at more than 21,000 grocery and drug stores, 14,000 gas stations, and 8,000 restaurants, in addition to thousands of retail stores and in excess of 600 online shopping locations.

• Upromise provides marketing services and incentives to create brand loyalty in college students as well as their families on “everyday” purchases. Nevertheless, the nature of the program is intended to encourage brand loyalty for the company’s customers. Upromise dynamically solicits college students and their families to join its program through express mailings, tabling at colleges, fliers, and commercials in periodicals.
• Upromise works on the simple principle of giving some cash back on all the purchases made through affiliates. Over a period of time, as inevitable restaurant and other purchases grow in amount, so does your contribution towards savings for educational purposes. Everyone can earn money for college including parents with adolescent children; relatives and friends that desire to contribute and students and graduates with qualified student loans to pay.
• According to the president of Upromise- “Upromise’s goal is to help individuals attain the dream of higher education. Merely 5 percent of people are ready to fully pay the anticipated costs of college. Through Upromise earnings and low-cost college savings plans, we make it easier for people at all life stages and income levels to help pay for college.”
• According to Upromise some members are making no less than $1,000 per year. actually according to Upromise their  “Super Savers” have accrued thousands of dollars each to assist in paying for college just by doing most of their usual activities through Upromise partners including shopping on the internet, charging expenses, filling up their gas tank, eating out, traveling, buying groceries, the opportunities seem almost infinite. The more you engage with the choices of the Upromise service, the bigger your earnings prospective.
• The money you earn through Upromise on no account expires. It’s a rewards plan where you get capital to pay for school, save for a cherished one yet to go to college, someone in college, or even for upcoming generations. Your earnings never depart; they just keep on accumulating the more you engage with the Upromise service. There are many other advantages of adopting this plan of Upromise it seems it has “delivered” by the simplest means where many have tried and failed.

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A 529 plan is a tax-advantaged investment vehicle in the United States intended to promote saving for the upcoming higher education costs of a nominated recipient. There are two types of 529 plans: prepaid and savings. Prepaid plans allow one to purchase tuition credits, at current rates, to be used in the future. Consequently, performance is based upon tuition inflation. Savings plans are special in that all escalation is based upon market performance of the principal investments, which usually comprise of mutual funds. The majority of 529 savings plans offer an array of age-based asset allocation choices where the underlying investments become more conventional as the beneficiary gets nearer to college age.

• Funds from a 529 plan can be used for tuition, fees, books, supplies and equipment necessary for learning at any qualified college, university or vocational school in the United States and at several overseas universities. You shell out no taxes on the account’s earnings, the child doesn’t have power of or access to the account and if the child doesn’t want to go to college, you can roll the account over to a different family member, anybody can make a payment to the account, there are no earnings restrictions that may disqualify for an account. Furthermore the majority of states have no age restriction for when the funds has to be used and if the child gets a scholarship, any unemployed funds can be withdrawn without paying any penalty.
• Therefore the main advantage of 529 plans is that the donor can control the account without worrying about what Junior will do will he gets hold of the funds. Moreover, even if there are no federal tax breaks, state taxes are deferred on the principal and are tax exempt if distributed for qualified student benefits in the future. Another advantage of the 529 plan is that the assets in the account are not counted as the estate for estate tax purposes. Therefore people with extensive estates can open more than one account (one account per state is allowed) and relieve some of the estate tax burden.
• It cannot be denied that there are some disadvantages of this plan such as paying a penalty of ten percent if the funds are withdrawn for something other than student education and attract taxes. Each beneficiary needs to have an individual account which means that two people cannot share an account. Although the plan offers some flexibility as far as investments are concerned, the account holder does not have any control once the plan is set in action. Investment savvy people may lose out on some of the benefits enjoyed by directly influencing the investments.
• Choosing the right type of plan is important and some things can be taken into consideration before opting for a particular plan. There are currently 16 states that offer tax deductions on 529 plans; therefore choosing the right state is important. Moreover, the capabilities of the fund manager also influence the returns on the investment and the long term benefits of the same. Flexibility is another important point to be taken into consideration in order to avoid penalties and unwanted taxes.

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SLM Corporation or Sallie Mae as it is commonly known is a publicly funded U.S corporation whose functions include originating, servicing, and collecting on student loans. Simply put, this corporation helps students in paying for their graduate and undergraduate programs. The corporation started in 1972 and primarily provides loans originated under the Federal Family Education Loan Program (FFELP).

• SLM or Student Loan Marketing association was created as a Government Sponsored Enterprise (GSE); however in the year till 2004, it had severed all ties with the U.S government. Still Sallie Mae remains one of the biggest originator of federally insured student loans. Not only does this corporation provide loans to students, it also provides debt management services, and other financial products to universities and colleges.
• Sallie Mae has many other subsidiaries and it acquired Upromise in 2006 and started to provide rebates to some brands which could be applied to student loans. Together Upromise and Sallie Mae plan to provide comprehensive financial aid to students and parents throughout the United States. However Sallie Mae also helps students to lead an independent and financially healthy life after they have completed college. It does this through its debt management services and by offering credit, insurance and other related products.
• The company also helps families save for college through 529 college savings plans and through its Upromise savings program. Through its subsidiaries, the company handles $180 billion in education loans and caters to the need of 10 million student and parent clients. Through its Upromise associate, the corporation also supervises over $17.5 billion in 529 college-savings plans, and is a key, private resource of college funding assistance in America with 10 million affiliates and more than $475 million in member rewards.
• Sallie Mae and its subsidiaries offer debt management services in addition to commercial and technical products to a range of commercial consumers, together with higher education establishments, student loan guarantors and state and federal agencies. It also provides loans to schools including dental schools, medical schools, law schools, and business schools. Some of the loans provided by Sallie Mae are Graduate PLUS loans, Stafford loans, Sallie Mae Bar study loan, and Sallie Mae Smart Option student loans.
• Sallie Mae is also involved in many charitable drives and operates The Sallie Mae fund that aims to increase access to higher education in the United States. It also organizes many events which help in raising funds for causes such as cancer support and hurricane relief. However, Sallie Mae has been criticized by many for racial discrimination and a class action lawsuit was filed regarding the same.
• References and further reading: Wikipedia.org, salliemae.com.

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A student loan is intended to assist students pay for college tuition, books, and living everyday expenditure. It is different from other category of loans in that the interest rate is considerably lesser and the compensation plan is postponed while the student are still in school. Prior to accommodating any type of student loan one should be well-known with its fundamental features.

• There are four sorts of federal student loans for college. Stafford loans are the mainly accepted, followed by Perkins, and two sorts of PLUS loans. Each has their individual function.
• Stafford loans proffer a small, permanent interest rate for undergraduate students. The school being focused must be recognized, and the student should be registered at least partially time. There are limits to the sum that can be rented, varying from $5,500 US Dollars (USD) for first year dependent students to $20,500 USD for independent graduate undergraduate.
• Federal Perkins loans are very small interest student loans planned for students with fiscal complexity defined as “exceptional.” Students should submit an application for the loans with particular documentation for their private or family financial trouble. Annual loan limits vary from $3,500 USD for initial year student to $8,500 USD for graduate students.
• PLUS loans were at first called Parent Loan for Undergraduate Students, however have since dropped that name. These loans are small interest loans taken out by parents for their reliant students to cover extra learning expenses on top of those covered by the Stafford and Perkins loans. The loans are capable of funding the complete price of education further than what the other kinds of loans will cover. Graduate PLUS loans are taken out by a graduate student to pay for their own education in an analogous method.
• Private Loans are one more alternative for those looking for student loans for college. These loans are also every so often called alternative student loans, or personal student loans. The interest rates of these loans, while more often than not elevated than a federal loan, are usually lesser than other lines of credit issued by private banks. A number of students prefer these sorts of loans to shell out for books and other comparable expenses related to school.
• Compensation starts six months subsequent to graduating on the majority student loans for college. For those who are having trouble discovering gainful employment, there are alternatives such as forbearance or postponement that can put off payments. Numerous people find it supportive to combine their loans into one lump sum, because it can lessen the interest rate, and lengthen the repayment terms of the loan in lots of cases.

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