Federal loan types and eligibility

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(No Transcript)
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Agenda

• Federal loan types and eligibility
• Rights and responsibilities
• Borrowing tips
• Repayment
• Delinquency and default

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Funding Your Education

• Grants
• Scholarships
• Work-study
• Gifts from family and friends
• Federal Stafford loans
• Federal Grad PLUS loans

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Loan Eligibility Requirements

• Be a U.S. citizen or eligible non-citizen
• Have a valid Social Security number
• Register with Selective Service
• Maintain satisfactory academic progress
• Enroll in an eligible degree or certificate
  program
• Enroll at a participating college at least half
  time
• Not have any defaulted student loans
• No adverse credit history (for Grad PLUS)
• Have applied for your maximum annual federal
  Stafford loan amount (for Grad PLUS)

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Calculating Your Need

• Cost of Attendance
• Tuition fees
• Room board
• Books supplies
• Transportation
• Personal expenses
• Miscellaneous

• Expected Family Contribution
• What you your family can reasonably be expected
  to contribute
• From the FAFSA

Cost of Attendance Aid received Max Grad
PLUS amount
Aid received as certified by school.
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Subsidized Stafford Loans

• Need-based
• Federal government pays interest
• In school
• During grace period (six months)
• During deferment periods
• Repayment is not required while in school

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Unsubsidized Stafford Loans

• Not need-based
• You are responsible for the interest that accrues
  while in school
• Interest begins accruing at disbursement
• Option to pay interest as you go
• Capitalization of interest
• Unpaid interest is added to the principal
• Increases total debt monthly payment

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Interest Rates and Loan Fees

• Loans disbursed after July 1, 2006
• Fixed rate of 6.80 percent
• Loans disbursed before July 1, 2006
• Variable rate adjusted annually every July 1
• Interest rate cap of 8.25 percent
• 1 percent origination fee
• 1 percent default fee

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Annual Stafford Loan Limits
New loan limits for undergraduate dependent
students (up to 2,000) and independent students
(up to 6,000) effective July 1, 2008.
Assumes 6.80 percent interest rate and 10-year
term
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Aggregate Stafford Loan Limits
New loan aggregate limits for undergraduate
students effective July 1, 2008.
Assumes 6.80 percent interest rate and 10-year
term
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for the Health Professions
Additional Unsubsidized Stafford Loans
Aggregate Stafford loan limit may not exceed
224,000.
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Grad PLUS Loans

• Not need-based
• Must meet credit eligibility requirements
• You are responsible for the interest that accrues
  while in school
• Interest begins accruing at disbursement
• Option to pay interest as you go
• Capitalization of interest
• Unpaid interest is added to the principal
• Increases total debt monthly payment

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Grad PLUS Loans

• No set annual or aggregate limits
• Must sign a PLUS MPN
• No grace period
• Fixed rate of 8.50 percent
• 3 percent origination fee
• 1 percent default fee

Cost of Attendance Aid received Max Grad
PLUS amount
Aid received as certified by school.
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Industry Key Players

• Financial aid office
• Federal government
• Lender
• Servicer
• Secondary market
• Guarantor

• Credit bureaus
• Experian
• Equifax
• TransUnion
• Ombudsman
• 1.877.557.2575
• www.ombudsman.ed.gov

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Master Promissory Note

• Legal contract between you and your lender
• Loan amount is not disclosed on the MPN
• Signing a new MPN
• Change of lender
• Transfer to new school
• After 10 years

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Your Rights

• Receive a copy of your signed Stafford MPN or
  Grad PLUS MPN
• Receive a disclosure statement
• Receive a six-month grace period (Stafford loans)
  
• Prepay all or part of your loan without penalty
• Deferments forbearance, if eligible
• Written notice if your loan is sold
• Proof of discharge after repaying loan in full

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Your Responsibilities

• Repay your loan(s)
• Make on-time, monthly payments
• Read correspondence from lender
• Notify lender of changes within 10 days
• School enrollment status
• Name, address telephone number
• Complete exit interview before leaving school

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How Much to Borrow?

• Calculate your income sources
• Work, financial aid, savings and outside
  assistance
• Calculate your expenses
• Tuition, books, housing, utilities, debt,
  transportation, food, clothing entertainment
• Determine the difference
• Borrow only what you need

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Financial Planning

• EDWISEOnline Financial Planning Guide
• Develop good money strategies
• Create a school spending plan
• Create a post-school spending plan
• Compare salaries
• Compare repayment options
• Find money-saving tips
• www.edwise.org

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Borrowing Tips

• Borrow conservatively
• Keep copies of all documents in one place
• Track how much you borrow
• National Student Loan Data System (NSLDS)
• www.nslds.ed.gov

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The Grace Period

• One-time grace period for subsidized and
  unsubsidized Stafford loans
• Six months
• Begins after you graduate, leave school or drop
  below half time
• Monthly payments begin when your grace period
  ends
• No grace period for Grad PLUS loans

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Repaying Your Student Loan

• Federal loans must be repaid
• Regardless of program completion or obtaining
  employment upon completion
• Four repayment plans
• Standard repayment
• Graduated repayment
• Income-sensitive repayment
• Extended repayment

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Loan Repayment Chart
Interest rates on federal Stafford loans
disbursed after July 1, 2006 are at a fixed 6.80
percent. Grad PLUS loans are fixed
at 8.50 percent.
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Money Saving Benefits

• Interest rate reductions
• Consecutive, on-time monthly payments
• Sign up for automatic payment
• Ask your lender for details
• Tax credits
• www.edfund.org
• www.irs.gov

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Avoid Delinquency and Default

• Pay on time
• A payment received one day late is considered
  delinquent
• Delinquent payments are reported to national
  credit bureaus
• Always call your school or lender for help

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Deferment

• Postponement of payments
• Not automatic
• You must apply and receive approval from lender
• Primary reasons
• In-school
• Unemployment
• Economic hardship
• Military service

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Forbearance

• Temporary reduction or postponement of payments
• Not automatic
• You must apply and receive approval from lender
• Primary reasons
• Poor health
• Residency program
• Financial hardship
• Interest will continue to accrue

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Federal Loan Consolidation

• Combine loans into a single new loan
• You agree to new terms and conditions
• One monthly payment
• Lower payment/longer repayment period
• Payments begin at consolidation
• Be informed
• www.edfund.org

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for Stafford Loans
Loan Forgiveness

• Volunteer work
• Military service
• Teach or practice medicine in certain communities
• AmeriCorpswww.americorps.gov
• Peace Corpswww.peacecorps.gov

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Loan Cancellation

• In extreme extenuating conditions
• Total and permanent disability
• Inability to complete course of study due to
  school closure
• False certification by school
• Identity theft
• Death

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Consequences of Default

• Full amount of loan is due
• Including collection costs
• Subject to federal and state offsets
• Wages and tax refunds may be garnished
• Credit will be tarnished
• Lose deferment and forbearance options
• Lose eligibility for future financial aid
• Responsible for collection charges
• May lose eligibility for certain federal or state
  jobs
• May lose professional license

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Keys to Successful Borrowing

• Use other financial options before borrowing
• Understand your rights and responsibilities
• Borrow conservatively
• Borrow from one lender
• Keep copies of all documents in one place
• Track your total student loan debt
• Build good credit with timely payments

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True or False

• I must repay my student loans even if I fail to
  complete my education.
• My Grad PLUS loan counts towards the loan
  aggregate limit for grad/professional students.
• My Grad PLUS loan is eligible for a grace period.
• I may change repayment plans annually to
• meet my financial needs.

• T
• F
• F
• T

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Questions