2010 TASFAA New Aid Officer’s Workshop
Student Loans
Melet Leafgreen Assistant Director, Loan Programs TCU Financial Aid
[email protected]
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Student Loans - Agenda • • • •
Interest Rates, Fees, Counseling Federal Perkins Loan Federal Direct Parent PLUS & Grad PLUS Loan Federal Direct Sub & Unusb Stafford Loan – Loan Limits and Proration Requirements – Life Cycle of a Loan
• • • • •
Unpaid Interest Accumulation Federal Direct Consolidation Loan Repayment Facts and Options Deferments and Forbearances Consequences of Default (borrower and school) 3
Interest Rates & Fees • Perkins Loans – no fees – Fixed IR 5% • Direct Stafford Loans - .5% orig fee (actually 1.5% minus rebate of 1%)** – Fixed IR 4.5% for Undergrad Subsidized Loans – Fixed IR 6.8% for all other Stafford Loans • Direct Parent Plus/Grad Plus – 2.5% orig fee (actually 4% minus rebate of 1.5%)** – Fixed IR 7.9% ** to retain rebates, borrowers must make first 12 payments on time
(All above rates and fees effective 7/1/2010.) 4
Loan Counseling • Entrance Counseling – First-time borrowers • Inform them of their rights and responsibilities of taking out this loan
• Exit Counseling – All loan recipients that depart from your institution • Graduate, withdraw, transfer, do not return
(Stafford, Grad Plus, CAL, Perkins, Nursing Loans…) 5
Federal Perkins 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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Parent Plus Loan • Loan for parents of dependent students • Parent borrower is fully liable for loan (with any endorser) • FAFSA not required by regulation, but schools can require it if they wish • Eligibility – Parent must be the natural or adoptive parent of the student, or spouse of one of those people – Parent must be a US Citizen, U.S. National or eligible NC – Parent must have no Title IV loans in default – Parent must be credit worthy, or have credit worthy endorser 7
Graduate Plus Loan • Eligibility – 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
• Loan Limits – COA less other aid Can be used when Stafford Annual and/or Aggregate limits have been met (but not exceeded). 8
Federal Stafford Loan Terms • • • • • •
U.S. Citizen, U.S. National or Eligible N.C. 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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Sub vs. Unsub
Subsidized
Unsubsidized
(Need-based)
(Non need-based)
Interest:
Interest:
ED pays during • In-school • Grace • Deferment Student pays during • Repayment
Student responsible for all • Can be capitalized, or • Student can choose to pay interest
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2010/2011 Stafford Loan Limits Year in School
Dependent Student
Independent Student
First Year Undergraduate
Total Stafford $5500*
Total Stafford $9500*
Second Year Undergraduate
Total Stafford $6500*
Total Stafford $10,500*
Third Year and Remaining Undergraduate
Total Stafford $7500*
Total Stafford $12,500*
Graduate Student
Total Stafford $20,500*
*No k
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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Stafford Loan Proration • Must occur when a student’s academic program is less than 1 year in length • Must occur when a student is completing a remaining period of enrollment that is less than one academic year • Standard proration formula: Amount of Stafford student could have for grade level ÷ 24 x number of enrolled hours 12
Stafford aggregate loan limits Current 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 13
Federal Stafford Loan FFELP Borrower School Lender Federal government Guarantor Servicer Secondary markets
Direct Lending Borrower School Federal Government Servicer
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Lifecycle of a Direct Loan • Origination Phase - Borrower: FAFSA, MPN, Entrance (?) - School: Certification, Verify Elig., Delivery - ED: Disclosure, Provide Funds to school
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Lifecycle of a Direct Loan • Interim Phase - In school, Grace Periods - Sub (interest paid on borrower’s behalf by fed. govt.) vs. Unsub (accrues interest) • Repayment Phase - at end of grace
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Unpaid Interest Example • 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
• 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 17
Federal Consolidation loan • Federal education loans that may be consolidated ― FFELP ― Perkins ― Direct ― HEAL • • • •
No minimum loan amount Thirty-year repayment (maximum) Same repayment schedules as Stafford 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. 18
Maximum Repayment Of Consolidation Loans Under $7500
10 Years
$7500 - $9999.99
12 Years
$10000 - $19999.99
15 Years
$20000 - $39999.99
20 Years
$40000 - $59999.99
25 Years
Over $60000
30 Years
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Repayment of Federal Loans 10 year repayment period, $50 minimum, or interest accruing (whichever is larger) • Stafford loan – Enters at end of grace period (6 months after student graduates or drops below half-time)
• Parent PLUS loan – Enters 60 days after full disbursement (parent can request deferment while student is enrolled at least half-time and during six months following that)
• Grad PLUS loan – Enters when borrower falls below halftime enrollment 20
Ways to Repay your Federal Loans • Standard Plan – Monthly payment remains consistent for 10 years • Graduate Plan – Monthly payments are lower at first but then increase over the repayment term • Income-sensitive – Monthly payments are based on your monthly gross income • Extended Plan – Monthly payments over a 25 year plan. Must have a debt greater than $30,000 • Income Based Plan – (7/1/09) – 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. 21
Deferments • Period of postponing payments • Federal government will pay interest for the borrower on Subsidized Stafford • Entitlement • Some possible deferments: - Education - Peace Corps/ Public Service/ Military - Economic Hardship 22
Forbearances • Temporary cessation, reduction, or extension of payments • Student is responsible for interest that accrues • Borrower is willing but temporarily unable to pay
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Default • 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 • Student is susceptible to wage garnishment, seizure of income tax refunds, lottery winnings, license nonrenewal, sued by DOE • Student not eligible for fed. financial aid 24
Cohort default rate (CDR) • Includes Stafford loans, and Stafford loans underlying consolidation loans (no Perkins or PLUS) • CDR = % of borrowers who enter repayment in a given year who then default within that year or the next year (soon to be the next two years) • High rate has consequences for schools 25
Alternative/ Private Loans • Designed to bridge the gap between other aid and total college costs • Interest rates from 5% - 18%, usually based on Prime or LIBOR + margin (www.bankrate.com) • Origination and repayment fees vary • Co-borrower requirements (underwriting) • Most now school-certified (lower risk) • Three Disclosures • Self-Certification Form
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Federal Regulations
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Questions ??????? Melet Leafgreen
[email protected]
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