Housekeeping Items

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Housekeeping Items
Financial Aid Issues and Federal Update Webinar

• In order to hear the audio portion of this
  webinar please dial 888-617-3400 passcode
  820254
• Orientation of buttons available during the
  webinar
• Everyone is currently on mute
• Questions via text message will be answered at
  end of the program
• End of program please complete the evaluation!

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Mission

• We advocate for, and provide a continuum of
  services to support, Iowa students and families
  as they explore and finance educational
  opportunities beyond high school

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Who We Are

• State Agency 40 years experience
• State designated Guaranty Agency
• Insure Federal Student Loans death, disability,
  bankruptcy, or default
• FY07 Guaranteed 430,048,908 (Stafford/PLUS)
• FY07 recouped 33 million thru collection
  activities helped 1,433 borrowers rehabilitate
  over 10.7 million in defaulted loans
• 10 member board with 4 legislative
  representatives
• Administer grants and scholarships for State of
  Iowa
• Administered over 61.2 million in state
  scholarships, grants and work-study

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Notable Services

• iLINK Service Center
• Client Services Unit
• Marketing and Communications
• Information Service Center
• Default Prevention and Default Aversion
• Outreach Unit
• Research
• Legislative interaction
• Regulatory

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Recent Headlines

• 10/07 NYT, New York Official Faults
  Student-Loan Marketing 
• 12/07 Inside Higher Ed, A Gloomy Projection
  on Lender Profits
• 02/08 - The Minneapolis Star-Tribune, Students
  Pinched by Credit Markets
• 04/08 CNN.com, Parents have a lot to worry
  about in these difficult economic times
• 05/08 - CBS News, Homeowners arent the only
  ones caught in the crosshairs of the credit
  crunch
• 05/08 - The Washington Post, Loan Programs Will
  Leave Some Students Behind
• 05/08 USA Today, Lenders request federal help
  on student loans
• 06/08 - USA Today, Credit crisis weakens relief
  for states' student-loan programs.
• 06/08 - The Wall Street Journal, Credit Crisis
  May Limit Options for Student Loans

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Loan Access Concerns

• CCRAA and Subprime Crisis perfect storm
• Nationally, 80 lenders have dropped out over the
  past ten months
• Reduction in Private Loan programs
• Reduction in Consolidation Loan providers
• Reduction in FFELP Loans
• Access in Iowa?

• Chase Bank
• Citibank
• Iowa Student Loan
• Bank of America

• Sallie Mae
• Nelnet
• US Bank

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Federal Update
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HR 5715

• Ensuring Continued Access to Student Loans Act of
  2008
• Public Law 110-227
• President Bush signed into law May 7, 2008

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Stafford Loan Limit Increases

• Increases annual and aggregate loan limits only
  for undergraduates
• No increase in final bill for graduate/professiona
  l students
• Annual and aggregate loan limit increases are
  self-implementing, effective for loans first
  disbursed on/after July 1, 2008

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Parent PLUS Deferment

• Allows a parent PLUS borrower to request
  in-school deferment while the dependent student
  remains enrolled at least half time
• Deferment includes a six-month grace period after
  the students less-than-half-time date

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Parent PLUS Deferment

• Borrower may pay the accruing interest during
  deferment, or the lender will capitalize no more
  than quarterly
• New parent PLUS deferment is available only on
  PLUS loans first disbursed on/after July 1, 2008

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Parent PLUS Eligibility

• A lender may, but is not required to, approve a
  parent PLUS loan for an applicant who has adverse
  credit, if
• At any point during the period January 1, 2007,
  through December 31, 2009, the parent was/is no
  more than 180 days delinquent on
• A home mortgage (primary residence)
• Medical bills
• Effective upon enactment

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Liquidity Solutions

• Authorizes USDE to act as a national secondary
  market, purchasing FFELP loans originated
  on/after 10/01/03
• Authorizes USDE to offer stand-by purchase
  agreements
• FFELP lender must use proceeds of sale to ensure
  continued FFELP participation
• Purchase cannot result in net loss to federal
  government
• USDE authority expires June 30, 2009
• Urges the Federal Financing Bank (FFB) and other
  federal financial entities to use surplus funds
  to provide FFELP access

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Dear Colleague May 21

• Outlines 2 short-term liquidity options
• Option 1 Purchase loans originated during 08-09
• Agreements must be final by July 1, 2009
• Sale will be complete by Sept. 30, 2009
• Equal to par value, accrued interest and 75 per
  loan
• Servicing would be transferred to DE
• Option 2 Purchase participation interests in
  pools of loans made during 08-09
• Yield the commercial paper rate plus 50 basis
  points
• Upon expiration, trust may be paid off or sold to
  DE

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Federal Register July 1, 2008

• 2 Options Purchase and Participation Program
• Maximize student loan availability
• No net costs to the Federal Government
• Terms and Conditions outlined
• Lender must complete the Letter of Intent for
  either programs or both
• Loans 1st disbursed prior to the date on which DE
  receives notice will not be permitted
• Except, if notice was received within 15 days of
  published FR, loans 1st disbursed on or after May
  1, 2008

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Federal Register July 1, 2008

• Loan Purchase Commitment Program
• Execute the Master Loan Sale Agreement with DE no
  later than March 31, 2009
• Must notify DE by August 14, 2009 of intent to
  sell in order to proceed with transfer
• Purchase price
• Outstanding principal balance
• Accrued and unpaid interest
• Reimbursement of the1 loan fee
• Flat 75 fee/loan covers all servicing,
  origination, and deconversion costs
• Forward all electronic records to DE

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Federal Register July 1, 2008

• Loan Participation Purchase Program
• Agree to sell participation interests to DE
  aggregate unpaid principal balance no less than
  50,000,000
• Must make good faith estimate of amount of
  Participation Interests it proposes to sell
• Master Participation Agreement must be entered
  into with sponsor (lender), DE and a custodian
• Commercial Paper rate plus 50 basis points

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Unified Front

• Commission is in communication with school
  partners
• Access Conference Call April 7, 2008
• Field Rep visits
• Participating Lender list
• Direct Loan migration
• Call to Action

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Questions from your customers

• Will I be eligible for a loan?
• Who should I borrow from?
• My child is going to a community college will
  there be loans available?
• Will I be able to consolidate?
• I was told my child will not be eligible for a
  private loan. Where can I get one?
• Will I need to co-sign?

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Quick look Financial Aid Process

• Student completes the FAFSA
• Expected Family Contribution (EFC) determined
• School packages aid award letter sent
• Student and parent complete loan paperwork
• School certifies loan
• Lender and Guarantor process the loan
• Loan funds are disbursed to school

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Subsidized vs. Unsubsidized

• Subsidized Stafford Loan
• Need-based
• Government pays the interest while in school
• Six-month grace period
• Unsubsidized Stafford Loan
• Not need-based
• Government does not pay the interest
• Payments on interest and principal amount of loan
  can be deferred until the student graduates

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Stafford Interest Rates

• Subsidized Stafford Loan
• New borrowers
• Prior to 7/1/08 Fixed at 6.8
• After 7/1/08 Fixed at 6.0
• After 7/1/09 Fixed at 5.6
• After 7/1/10 Fixed at 4.5
• After 7/1/11 Fixed at 3.4
• After 7/1/12 Fixed at 6.8
• Old borrowers with variable rate that changes
  every 7/1 (1998-2006) 4.21 (projected)
• Unsubsidized Stafford Loan
• New borrowers Fixed at 6.80
• Old borrowers with variable rate that changes
  every 7/1 (1998-2006) 4.21 (projected)

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Borrowing Amounts
Other Options ? PLUS ? Perkins Loan ?
Institutional Repayment Plan ? Federal, State
or Institutional Work-Study ? Private Loan

• Stafford Dependent
• 1st year - 5,500
• 2nd year - 6,500
• 3rd year Up - 7,500

• Stafford Independent
• 1st Year - 9,500
• 2nd Year - 10,500
• 3rd Year and Up - 12,500

• Grad and Professional
• 20,500

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PLUS Loans

• Eligibility not based upon income or assets
• May borrow up to childs full cost of education
  minus other financial aid
• Fixed rate of 8.5
• Loan forgiveness available death and disability
• Interest paid may be tax deductible
• Minimal credit check performed
• Applicant is 90 days or more delinquent
• During 5 year period default determination,
  foreclosure, tax lien, repossession, wage
  garnishment, or a write-off of Title IV debt
• Exclusion 01/01/07- 12/31/09 no more than 180
  days delinquent on a home mortgage (primary
  residence) or medical bills

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Deferments and Forbearances

• Borrower is entitled to defer principal payments
  on a loan when applicable eligibility criteria
  are met
• A forbearance is a tool used to assist borrowers
  in meeting their loan repayment obligations
• Borrower In-school Deferment Summer Bridge
  Extension
• When in trouble, encourage borrower to
• contact their servicer/loan holder to discuss
  options
• Keep record of all their paperwork
• Keep track of the beginning and ending date of
  forbearance or deferment

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Repayment Plans

• Standard
• Graduated
• Income Sensitive (FFELP only)
• Income Contingent Repayment (Direct only)
• Extended Repayment

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Cancellations and Forgiveness

• Total and Permanent Disability requires a
  physician to certify
• Death
• Teacher State and Federal Programs
• Bankruptcy caused by undue hardship
• Closed school before student could complete
  program
• False Certification identity theft
• Public Service Loan Forgiveness Direct Loans
  only!

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Questions from your Customers
?
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What should I be doing to prepare for college
costs during my next year?

• Apply for financial aid as soon as possible
• Borrow just enough in student loans to pay direct
  costs which include tuition, fees, and room and
  board
• Consider part-time employment to help pay
  everyday living expenses

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Will I be eligible for a loan?

• Has the FAFSA been completed?
• Has the student received an award letter?
• Generally, all students are eligible to receive a
  Stafford Loan. Student must
• Be enrolled at least half time,
• Meet Satisfactory Academic Progress
• Credit is not a factor for Stafford Loans

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Will I be eligible for a Private Loan?

• Check with previous lender
• Check with financial aid office
• Counsel borrower on
• PLUS Option
• More stringent credit check will be performed
• Might need a co-signer

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Who Should I Borrow From?

• Who have they borrowed from in the past?
• Check with financial aid office
• Previously borrowed Stafford and private loans
  Who is lender and are they still participating?
• New borrower Colleges preferred lender list
• Commission Participating Lender List

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How can I minimize my debt?

• Enrollment in a community college
• Live at home and attend local college
• Institutional Payment Plans
• Shorten the time it takes to earn a degree
• Earn college credit while in high school
• Work while earning a degree through distance
  learning and online courses
• Work part-time throughout college
• Consider benefits offered by the military
• Can parents help?

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Will there be loans available for my child
attending a community college?

• Student needs to check with financial aid office
• No access problems at any Iowa community colleges
• Need a new lender
• Sign new Master Promissory Note
• Should try and keep with same servicer if
  previously borrowed

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Should I Consolidate?

• Currently, very few lenders participating
• Why do they want to consolidate?
• Multiple loan holders
• Need smaller loan payments
• Direct Loan Consolidation
• In default
• Public Service Loan Forgiveness Program
• Income Contingent Repayment Plan
• Consider the Extended Repayment Plan
• Must owe more than 30K
• Up to 25 year repayment

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Questions from You
?
My contact info Natalee Girardi Natalee.girardi_at_i
owa.gov 515.725.3460