Financing Options

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Financing Options

• Financial Aid 101
• Mary Dyer, Default Prevention Specialist
• October 10, 2008

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Agenda

• Choices that impact college costs
• Ways to reduce expenses
• Financing options available to students
  families
• - Tuition Payment Plans
• - Federal PLUS Loans
• - Private Alternative Loans

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How Can Students Families Reduce College Costs?

• Answer

Choices!!!
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Choices Include

• School selection
• Choice of major
• Enrollment level
• Work or play?
• Housing options
• Drive or walk?
• Optional expenses

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School Choice

• School Choice
• Consider community college
• In-state school vs. out-of-state
• What can the family afford for travel expense?
• State schools may cost less

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School Choice (cont)

• Important that students compare award packages
  when selecting a school
• What types of loans are included in the package?
• Apply on time EVERY YEAR to ensure the best
  package possible

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Choice of Major

• Choice of major can impact the number of schools
  available
• Consider earning potential upon graduation
• Major can also impact the amount of financial aid
  received
• Consider loan forgiveness options

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Enrollment Level

• Is tuition charged based on per credit hour
  basis or enrollment level (i.e. full time vs.
  half time)?
• Reducing course load may save money, but consider
  length of time needed to complete school
• Impact of attending school year round

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Work or Play?

• Students should be working and SAVING for college
  expenses.
• At a minimum, students should save enough to pay
  for books and miscellaneous expenses (cell phone,
  late night pizza, entertainment, etc.)

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Work or Play?, cont.

• Summer employment can result in significant
  savings
• The more students work, the less they borrow
• Myth If I work, they will take away my
  financial aid

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Housing Options

• On campus vs. off campus is one option cheaper
  than the other?
• Need to consider cost of rent, transportation and
  food
• If on campus, type of room can impact cost
  singles typically cost more than doubles and
  suites tend to cost more than standard rooms

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Housing Options (cont.)

• If off campus, is the student willing to share
  with several people?
• Living at home can often save the student
  thousands of dollars

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Drive or Walk?

• If the student is living on or near campus,
  consider leaving the car at home
• Gas, insurance, parking passes tickets
• Unexpected repairs and maintenance can be costly
• Students often have access to public transit

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Reduce Expenses

• You mean my cell phone is optional???
• Computer purchase/laptop
• Many colleges have invested
• in expensive computer labs
• Cable/Internet
• use college provided resources
• Cell phones
• choose a prepaid plan

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Reduce Expense, cont.

• Textbooks
• buy early and USED!!!
• Clothes
• Vacations
• spring break or working break???
• Entertainment
• campus events are often FREE!!

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A Word About Credit Cards

• These can be deadly
• Consider a debit card
• Have credit card available only for emergencies
  and have limit on it
• Student need to better understand the cost of
  credit and how expensive it is

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Financing Options
Financing options available to students
families

• - Tuition Payment Plans
• - Federal PLUS Loans
• - Private Alternative Loans

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Tuition Payment Plans

• Most colleges offer some type of tuition payment
  plan
• Plans are short-term (usually 12 months)
• These plans allow students families to make
  monthly payments on tuition and room board

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Tuition Payment Plans, cont.

• Can spread the payments out over the course of a
  semester or year
• Plans are interest-free
• Nominal fee (usually 50-100) is charged
• IMPORTANT Can utilize a payment plan in
  combination with student and parent loans

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Tuition Payment Plans, cont.

• Many offer an auto-debit option
• Payment plan counselors assist families in
  calculating their remaining bill
• Common plans include AMS Tuition Pay, FACTS
  Tuition Management and Advantage School Tuition
  Payment Program

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Federal PLUS Loans

• Borrower is the parent of a dependent
  undergraduate student, or graduate/professional
  student
• Direct PLUS Loan funded through the federal
  government borrower repays the feds
• FFEL PLUS Loan is funded through private lending
  institutions borrower repays private lender

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Federal PLUS Loans

• Borrowers must
• pass a credit check
• be citizens or eligible non citizens
• not in default on federal student loan
• not owe a refund on any federal student aid
  program (nor can the student)
• PLUS Loans can fill need and/or replace EFC
• Undergraduate students are NOT required to file a
  FAFSA in order for the parents to borrow a PLUS
  Loan, but graduate students ARE required

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PLUS Loan - Amounts

• Students cost of attendance
• - Other aid student receives
• Maximum loan amount
• No aggregate maximum

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PLUS Loans Interest Rate

• The interest rate on FFELP PLUS Loans first
  disbursed after July 1, 2006 is fixed at 8.5
  for Direct PLUS Loans the rate is fixed at 7.9.
• A few lenders reduce the interest rate under
  certain circumstances as a borrower benefit

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PLUS Loans Interest Rate Fees

• PLUS Loan charges loan fees of up to 4, deducted
  evenly from each disbursement
• While in deferment, interest accrues

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PLUS Loans - Repayment

• Repayment begins 60 days after the funds are
  fully disbursed
• The repayment term is up to 10 years
• NEW!! Graduate students and parents can defer
  while student and/or parent is enrolled at least
  half-time, as well as during a six-month grace
  period.
• IMPORTANT - Interest that accrues on PLUS loans
  during deferment or grace period can be
  capitalized no more frequently than quarterly.

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PLUS Loans Application Process and Promissory
Note

• Check with financial aid office to determine
  application process
• After credit check, borrower will be notified of
  approval or denial
• Master Promissory Note required good for 10
  years tied to individual student

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Alternative Loans

• Student is the borrower
• Often require co-signer with good credit history
  and debt to income ratio
• Do not need to complete the FAFSA
• Funded through private lenders
• Not federally regulated

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Alternative Loans Amounts

• Students cost of attendance
• -Other aid student receives
• Maximum loan amount
• Aggregate maximum varies by lender

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Alternative Loans Interest Rate and Fees

• Interest rates and fees vary by lender
• Most interest rates are variable and set based on
  the Wall Street Journal prime rate or the LIBOR
  rate
• Often interest rates and fees are structured so
  that they are less for those with better credit
  and debt to income ratio

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Alternative Loans-Repayment

• Repayment varies from one lender to another
• Typically principal is deferred while student is
  in school, but interest accrues
• Many loans do have a grace period
• Repayment period varies depending on lender and
  amount borrowed

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Alternative Loans Application Process and
Promissory Note

• Contact financial aid office
• Often, next step will be to apply directly
  through lender (phone/web site)
• If approved, lender will have student sign
  promissory note and then will send information to
  school
• School will certify the loan
• Some schools will require loan counseling

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Responsible Borrowing

• Borrowing a loan is a given for most students
• Varies tremendously from one school to the next
  not necessarily tied to the cost of the school
• Individual choices have a huge impact on the
  amount eventually borrowed

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In Closing

• Choices made early on can impact college costs
  and loan debt
• Options do exist
• Reach out to your financial aid office or FAME.

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Questions?