Transcript FINANCING YOUR EDUCATION Let’s talk about student loans… and the REALITY of student loan debt. Last year, student loan debt topped $1 trillion dollars making it the second.

FINANCING
YOUR
EDUCATION
Let’s talk about student loans…
and the
REALITY
of student
loan debt.
Last year, student loan debt topped $1 trillion dollars making it the
second largest category of consumer debt (home mortgages is #1).
Who is the
borrower of a
Federal student
loan?
Who is NOT the
borrower?
Who is responsible
for repaying the
loan?
The Federal government sets limits on
the amount of money students may
borrow to help fund their education.
Freshmen may
borrow up to
$5,500
($9,500 with PLUS denial).
What’s the interest rate?
Subsidized
Stafford Loans
3.86%
Unsubsidized
Stafford Loans
3.86%
Rates are
established each
year on July 1st.
Understand the difference between
Subsidized and Unsubsidized loans.
Subsidized Student
Loans
Are based on financial
need; government pays
the interest while you
are in school.
Unsubsidized Student
Loans
Are not based on
financial need; you
should make interest
payments while in
school.
Are you accruing interest now?
If you borrow $5,500 in unsubsidized
funds during your first year in college,
your interest payment will be $31.17
per month.
Over 4 years that amount will become
$1,496.16
making your first year loan debt
$6,996.16 plus the interest that will
accrue during your repayment period.
Loan debt can add up fast!
Year in School
Amt Borrowed Per Year
Total Borrowed
Freshman Year
$5,500
$5,500
Sophomore Year
$6,500
$12,000
Junior Year
$7,500
$19,500
Senior Year
$7,500
$27,000
The reality of loan payments!
If you borrow $27,000 in a
3.86% interest rate Stafford
Loan,
you'll have to pay $272 every
month for 120 months - 10
years.
By the time you pay back the
$27,000 plus interest, you will
have paid $32,585!
If you borrow $35,000 you will pay $353 per month ($42,324).
If you borrow $50,000 you will pay $504 per month ($60,462).
Future salary required to manage
that payment?
$27,000
Borrowed
$50,000
Borrowed
When does repayment begin?
Student loans…an investment?
It could be the best investment you ever
make…
or the
WORST!
Go to Class!
After all…you paid for it.
Only Pay for a Class One Time!
Do your work and be prepared for tests.
If you are struggling, GET HELP!
Stick to Your Academic Plan!
Take only courses that are REQUIRED for
completion of your degree program.
Borrow Only What You Need!
Learn the difference between
NEED and WANT.
Use Loan Funds for Educational
Expenses ONLY!!
What if I don’t pay my loans back?
CODE OF FEDERAL REGULATIONS (CFR)
PART 685—WILLIAM D. FORD FEDERAL DIRECT LOAN
PROGRAM
Subpart B—Borrower Provisions
Sec. 685.211 Miscellaneous repayment provisions.
(d) Default.
(1) Acceleration. If a borrower defaults on a Direct
Loan, the entire unpaid balance and accrued interest
are immediately due and payable.
(2) Collection charges. If a borrower defaults on a
Direct Loan, the Secretary assesses collection charges
in accordance with Sec. 685.202(e).
(3) Collection of a defaulted loan. (i) The Secretary may
take any action authorized by law to collect a defaulted
Direct Loan including, but not limited to,
• filing a lawsuit against the borrower,
• reporting the default to national credit bureaus,
• requesting the Internal Revenue Service to offset
the borrower's Federal income tax refund, and
• garnishing the borrower's wages.
No problem…I’ll just declare
bankruptcy.
Can’t do it!
Federal student
loans are rarely
dischargeable in
bankruptcy.
In other words…
Borrow
responsibly
NOW…
So you can
live rich LATER.
Federal PLUS Loans for Parents
Borrowers are credit worthy
parents of dependent undergraduate students.

Borrowers are credit worthy
parents of undergraduate
students.

Fixed interest rate of 6.41%.

Origination fee of 4.204%

Annual loan limit equals the cost
of attendance minus other aid.

Repayment begins sixty days after
the loan is fully disbursed.
TOP
Reasons
to
GO TO
CLASS!!
You earn your financial assistance as you
go to class.
You can lose your eligibility to receive Federal
financial assistance (Pell, Stafford Loans, etc.).
Would you borrow that
much money to buy a
car and then…
Leave the lot
without it?
Money Tip #1
You should always have a plan for spending your
money.





Know where your money goes.
Avoid overspending.
Stay out of debt.
Be ready for the unexpected.
Allow for saving and investing.
Be prepared for a life of financial success!!
Money Tip #2
Understand that small purchases add
up to big money.
When you look at your spending, you may
see that you buy a latte every day.
True, a latte only costs about $3, but if you
buy one every day, that's $21 a week.
Over the course of the school year, that
adds up to $1,092.
In four years, that's more than $4,368
you'll spend on coffee and steamed milk!
Money Tip #3
Your credit score is expressed on a scale between 300 and 850. (Fair
Isaac Corporation - FICO score).
•Do you pay your bills on time?
•What types of credit do you use?
•How much do you owe?
•How much credit do you have
available?
•Do you have responsible borrowing
experience?
•Have you applied for several credit
cards over a short period of time?
•Do you have court judgments or
bankruptcies?
•Do you have unpaid bills in collection?
Length
of Credit
History
The information
in your credit
report is used to
evaluate your
applications for
credit, insurance,
employment, and
renting a home.
Money Tip #4
Understand the miracle of compounding interest?
Sally begins investing $1,000 a year in a tax-deferred IRA at age 22 and stops
putting money in the IRA after 10 years, at age 32. She leaves her money so
it will grow through compounding until she reaches age 65.
Joe begins investing $1,000 a year in a tax-deferred IRA at age 30 and
continues to do so for 35 years until he reaches age 65.
Interest Rate
Number of years
of contributions
Total amount
contributed
Value at age 65
Sally’s IRA
Joe’s IRA
9 percent
9 percent
10
34
$1,000 per year for
10 years ($10,000)
$1,000 per year for
34 years ($34,000)
$310,148
$215,711
Money Tip #5
Watch out for credit card debt.