Transcript Student Loans

2011
G
General Audiences
All ages admitted. No content that would be objectionable to
most parents. Polite language. No swearing. Only mild violence.
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Stephen Brower
Associate Director Financial Aid
Hardin-Simmons University Financial Aid
[email protected]
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• Terminology
• Federal Loans & Background
• Life Cycle of a Loan
• Entrance / Exit Counseling & MPN
• Federal Loans Types
• Perkins
• PLUS – undergrad & grad
• DL Terms & Comparison of Sub & Unsub
• Loan Limits; Proration Requirements
• Interest Generation, Accumulation
• R2T4
• Federal Direct Consolidation Loan
• Repayment Facts and Options
• Deferments and Forbearances
• Consequences of Default (borrower and school)
• Private Loans
• Questions
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Free Application for Federal Student Aid = FAFSA
≠ FASFA ≠ FAFSER ≠ SAFSER ≠ RAFSA
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Term = Semester often used interchangeably
Academic Year = A period of at least 30 weeks of instructional time during
which a full-time student is expected to complete at least 24 semester or trimester hours,
or at least 36 quarter hours, at an institution that measures program length in credit hours;
at least 900 clock hours at an institution that measures program length in clock hours
Cost of Attendance =
The student's Cost Of Attendance includes tuition,
fees, and standard allocation designed to cover reasonable living expenses while attending
school. The cost of attendance is determined by the school using guidelines established by
federal regulations. (also known as Cost of Education or Student Budget)
FAO =
Financial Aid Office
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FAM = Financial Aid Management (system)
Datatel®, TopSchool®, Poise®, PowerFAIDS®,
Oracle®, Banner®
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DL vs Stafford
ACH (Automated Clearing House) aka
EFT (Electronic Funds Transfer) =
movement of funds
from lender to school, from school to student
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R2T4 = Return to Title IV;
FSA funds (federal Title IV funds)
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process of returning unearned
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On January 1, 2011, total US educational debt
stood at $830,000,000,000.00, which equals
$2,700 for every man, woman & child in the
US
or
$33,200 for every resident of Texas
or
$345,800 for every resident of Dallas
or
$83,000,000 for every resident of Waxahachie
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In 2000, 36% of all US college graduates
graduated with some loan debt; by 2110,
that percentage had increased to 66%
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In 2000, 5% of all US college graduates defaulted
on repayment of their loans within 3 years
following graduation; in 2010 that rate had
nearly tripled to 14.7%
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Eligibility
Determined by combining:
Information & awards from FAFSA
Other awards & payments
Limited by the Cost of Attendance
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Year in School
Dependent Student
Independent Student
First Year
Undergraduate
Total DL $5500*
Total DL $9500*
Second Year
Undergraduate
Total DL $6500*
Total DL $10,500*
Third Year &
Remaining
Undergraduate
Total DL $7500*
Total DL $12,500*
Graduate Student
k
Total DL $20,500*
*No
more than $3500 Sub may be awarded for First Year Student, No more
than $4500 Sub for 2nd year students, no more than $5500 Sub for 3rd year
+ undergrad students, no more than $8500 Sub for grad/prof students
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Eligibility
DLs are entered into the
FAM & then transmitted
to Dept of Ed.
Origination
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Eligibility
Funds transmit from
DoEd to school on appointed
disbursement day
Disbursement
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Origination
Eligibility
Repayment
Origination
Disbursement
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www.studentloans.gov
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Entrance Counseling
• First-time borrowers
• Inform them of their rights and responsibilities of taking out this
loan
www.nslds.ed.gov
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Exit Counseling
• All loan recipients that depart from your institution
• Graduate, withdraw, transfer, do not return
• No Exit Counseling = no transcripts / no diploma
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Document executed by borrower, which
spells out the terms & conditions of
the loan disbursements, use and
repayment
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If the note is for multiple loan periods
and varying amounts, the lender
may elect to have the borrower use a
Master Promissory Note
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Oldest active educational loan
• Institution administers this loan
• Previous allocations came from the Dept of
Ed, now schools operate this loan from
repaid funds
• Fixed 5% interest rate
• Repayment begins 9 months after student
ceases to be enrolled at least 1/2 time
• Minimum payment as low as $30
• Maximum repayment term is 10 years
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Federal PLUS Loan is a loan for parents of dependent
students
Parent borrower is fully liable for loan
(may require endorser)
FAFSA not required by regulation, but schools can
requireit if they wish
Eligibility
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Parent must be the natural or adoptive parent of the student, or spouse of
one of those people
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Parent must be a US Citizen, U.S. National or eligible NC
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Parent must have no Title IV loans in default
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Parent must be credit worthy, or have credit worthy endorser
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Eligibility (ref. FSA Handbook)
• Borrower must complete a FAFSA
• U.S. Citizen attending at least half-time, seeking
a Graduate or Professional degree
• Borrower must pass a credit evaluation
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Loan Limits
• COA minus other aid
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U.S. Citizen, U.S. National, permanent US
Residents & aliens, or Eligible non-citizen
(ref. FSA Handbook)
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Enroll 1/2 time in a degree seeking program
SAP - Satisfactory Academic Progress
No default / overpymt on any Title IV Aid
Register with selective service
Must complete FAFSA
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Subsidized DL
Unsubsidized DL
(Need-based)
(Non need-based)
Interest:
Interest:
ED pays during
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Student responsible for all
In-school
• Can be capitalized, or
• Student can choose to pay
Grace
Deferment
interest
* Student pays during
• Repayment
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Need-based Financial Aid
Non-Need Financial Aid
Scholarships
Unsubsidized DLs
State & Federal Grants
Private Loans
Subsidized DLs
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Combined
Sub & Unsub
Sub may not
exceed
Undergrad
Dependent
$31,000
$23,000
*Undergrad
Independent
$57,500
$23,000
Grad and
Professional
$138,500
$65,500
* And dependent student whose parent is unable to obtain a
PLUS loan; denial of parent’s PLUS produces add’l unsub
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Must occur when a student’s academic program
is less than 1 year in length; an AY = at least
30 weeks
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Must occur when a student is completing a
remaining period of enrollment that is
less than one academic year
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Standard proration formula: Amount of DL
student could have for grade level ÷ 24 x
number of enrolled hours
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Perkins Loans – no fees
• Fixed IR = 5%
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Direct Loans – 0.5% orig fee
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Actually 1.5% minus 1% rebate)
Undergrad sub = fixed IR of 4.5%
All other DLs = fixed IR of 6.8%
Direct Parent PLUS / Grad PLUS – 2.5% orig
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Actually 1.5% minus 1% rebate)
fixed IR 7.9%
To retain rebates,1st 12 pymts must be on time
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Interim Phase – time student is in school &
for 6 months thereafter
In-school Deferment, Grace Periods
Sub (interest accrues, but is paid on
borrower’s behalf by fed. govt.)
vs.
Unsub (accrues interest)
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Repayment Phase - at end of grace
All DLs
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Independent Sophomore borrows $7500 and wants
to know what his interest payments will be
each quarter
• Go to the Repaying my loans section on the MPN (or online
www.aie.org  calculators)
• $7500 @ 6.8% = $39.67 + $500 @ 6.8% = $2.83
• $39.67 + $2.83 = $42.50/month
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How much will I owe in interest with out making
monthly payments?
• 3 years left in school, six month grace = 42 months X $42.50 = $1785
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Return of Title IV funds back to the federal
government of funds (including federal loans)
a student did not “earn”; Title IV funds are
awarded at the beginning of a term on the
assumption the student will complete the
term & “earn” 100% of the award; funds must
be returned if that does not happen
• Death
• Withdrawal from all classes prior to completion of
60% of the semester or term (whether calendar
days or clock hour calculation)
• All Fs = defacto withdrawal
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Federal education loans that may be consolidated
― FFELP
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― Perkins
― Direct
― HEAL
No minimum loan amount
Thirty-year repayment (maximum)
Interest rate will be a fixed interest rate, capped at
8.25%
A weighted average is used to figure the interest rate
and then it is rounded up to the nearest 1/8 of a
percent.
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Consolidation Loan Amount
Maximum repayment Years
Permitted
Under $7500
10 years
$7500 - $9999
12 years
$10,000 - $19,999
15 years
$20,000 - $39,999
20 years
$40,000 - $59,999
25 years
$60,000 and up
30 years
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DL
• Enters at end of grace period (6 months after
student graduates or drops below half-time)
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Parent PLUS loan
• Enters repayment 60 days after full disbursement
(parent can request deferment while student is
enrolled at least half-time and during six months
following that – up to 25 years to repay)
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Grad PLUS loan
• Enters when borrower falls below halftime enrollment
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All federal loans
• Keep loan holders current on student borrower contact information
• Contact loan holders as quickly as possible, if a single missed
payment is anticipated
• Contact loan holders if payments cannot be made
• Change in your financial circumstances
• Loss of job
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Pay off loans as quickly as possible
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Single information source for all federal
loans – loan holder info, amounts owed
including interest accrual
www.nslds.ed.gov
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Standard – Monthly payment remains consistent for 10 years
Graduated – Monthly payments are lower at first but then
increase every 2 years over the 30 yr repayment term
Income-sensitive – Monthly payments are based on your
monthly gross income
Extended – Monthly payments over a 25 year plan. Must have
a debt greater than $30,000
Income Contingent – pymts based on annual calculations and
adjusted so as not to cause “undue hardship”;
(25 yr forgiveness)
Income Based Plan - Monthly payments will not exceed 15% of
the amount by which your adjusted gross income exceeds
150% of the poverty line for your family size.
(25 yr forgiveness)
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Period of postponing payments
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Entitlement
Federal government will pay interest for the
borrower on Subsidized DL
Some possible deferments:
- Education
- Peace Corps/ Public Service/ Military
- Economic Hardship
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Temporary cessation,
reduction, or extension of
payments
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Student is responsible for
interest that accrues
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Borrower is willing but
temporarily unable to pay
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Failure to pay back student loan
Student is considered in default after being
delinquent for 270 days; lender may file
claim as early as day 271
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Student is susceptible to wage garnishment,
seizure of income tax refunds, lottery
winnings, license non-renewal, sued by
DOE
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Student not eligible for fed. financial aid; 7year damage to student credit history
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Includes DL loans, and loans underlying DL
consolidation loans (Perkins & PLUS not included
in calculation)
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CDR = % of borrowers who enter repayment in a
given federal fiscal year who then default
within the next 3 fiscals years
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High rate has consequences for schools
• >15% = loss of 1 installment/semester
• >15% = 30 day hold on 1st time, 1st year borrowers
• > 40% = loss of participation in Title IV funding
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Designed to bridge the gap between other aid
and total college costs
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Interest rates from 5% - 18%, usually based on
Prime or LIBOR + margin
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Origination and repayment fees vary
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Self-Certification Form
Co-borrower requirements (underwriting)
Most now school-certified (lower repayment
risk)
Three Sequenced Disclosures
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Eligibility
Determined by combining:
Information & awards from FAFSA
Other awards & payments
Limited by the Cost of Attendance
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Eligibility
Private Loan process is
a bit more complicated
& time consuming
Origination
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Eligibility
Funds transmit from
private lender to school on
appointed disbursement day
Disbursement
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Origination
Eligibility
Repayment
Origination
Disbursement
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Keep loan holders current on student borrower
contact information
Contact loan holders as quickly as possible, if a
single missed payment is anticipated
Contact loan holders if payments cannot be made
• Change in your financial circumstances
• Loss of job
Pay off loans as quickly as possible
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Stephen Brower
[email protected]
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