loan basics karen trail and julie brumbaugh texas woman’s university 2015 abc workshop
TRANSCRIPT
Loan Basics
Karen Trail and Julie BrumbaughTexas Woman’s University
2015 ABC Workshop
Agenda
Student loan programs and regulationsApplication process and eligibilityRepayment options
Federal Student Loans
Federal Direct Subsidized LoanFederal Direct Unsubsidized LoanParent PLUS LoanGraduate PLUS loanPerkins
Federal Direct Subsidized Loan
Need based loan for undergraduates onlyOrigination fee: 1.068% (as of October 2015-2016) Fixed interest rate: 4.29% (as of July 2015-2016)
July 1 rate is adjusted for new loans
Federal Direct Subsidized Loan
Grace period: 6 monthsInterest does not accrue – paid by Dept. of Ed
Enrolled at least half timeDuring 6 month grace period* During other times of deferment
Must meet SAP and enroll at least half time
150% Subsidized Usage Limit Applies (SULA)
Effective 7/1/13 and applies to new borrowers or borrowers with a zero balance taking out a new loanMay only receive Sub for 150% of the published program length
150% Subsidized Usage Limit Applies (SULA)
MEP-SUP=REPMaximum eligibility period (MEP)Subsidized usage period (SUP)Remaining eligibility period (REP)
150% Subsidized Usage Limit Applies (SULA)
Eligibility lost after students exceeds MEPCannot receive any more sub
May receive unsub up to yearly limit in its place
Interest begins to accrue
Federal Direct Unsubsidized Loan
Non-need based loanBorrowers is undergrad, grad, or professionalOrigination fee: 1.068%Fixed interest rate: 4.29% undergrad, 5.84% grad
Federal Direct Unsubsidized Loan
Grace period: 6 monthsInterest accrues while student is in school
Interest capitalizesStudent can elect to pay interest while enrolled
Must meet SAP and enroll at least half time
Independent Undergraduate Student
Base Eligibility (Sub or Unsub)
Additional Unsubsidized Loan
Freshman $3,500 $6,000
Sophomore $4,500 $6,000
Junior/Senior $5,500 $7,000
Maximum Total (Aggregate) Limit:
$57,500 ($23,000 can be subsidized)
Graduate/Professional Student
Unsubsidized Loan $20,500/academic year
Maximum Total (Aggregate) Limit: $138,500 ($65,500 may be subsidized)
Dependent Undergraduate Student
Base Eligibility (Sub or Unsub)
Additional Unsubsidized Loan
Freshman $3,500 $2,000
Sophomore $4,500 $2,000
Junior/Senior $5,500 $2000
Maximum Total (Aggregate) Limit:
$31,000 ($23,000 can be subsidized)
Parent PLUS Loan
Non-need based loanCan borrow up to cost of attendance (COA)
Borrower is parent of dependent undergradStudent must be enrolled at least half timeOrigination fee: 4.272%Fixed interest rate: 6.84%
Parent PLUS Loan
Credit check requiredAdditional PLUS loan counseling required for low creditAdditional unsub up to independent limit may be awarded if parent does not pass credit check
Repayment begins after loan is fully disbursed
Graduate PLUS Loan
Non-need based loanCan borrow up to COA, no aggregate limit
Borrower is graduate or professional studentOrigination fee: 4.272%Fixed interest rate: 6.84%
Graduate PLUS Loan
Credit check requiredLoan payments deferred while at least half time
6 month grace period, interest continues to accrue
Must be enrolled at least half time
Direct Loan Application Process
FAFSAEligible student in eligible program with Pell eligibility determination completeEntrance counseling
First time borrowers informed of their rights and responsibilities Completed at www.studentloans.gov
Direct Loan Application Process
Master Promissory noteIncludes terms and conditions of the loan disbursement and repayment Valid for 10 years and covers multiple loansCompleted on www.studentloans.gov
Direct Loan Application Process
Exit CounselingInformation on repaymentMust be complete when student drops below half-time or graduatesCompleted on www.nslds.ed.gov
PLUS loan application at www.studentloans.gov
Direct Loan Notification
Institution is required to notify the borrower within 14 days that a loan disbursement has been made and that the borrower may reduce or cancel the disbursement.
Direct Loan ProrationApplies to subsidized and unsubsidized loansRequired if:
Student’s academic program is less than 1 year in lengthStudent’s remaining period of study is less than 1 year in length
Amount of direct X loan student could have for grade level
Direct Loan Proration
• Standard proration formula:
Actual enrolled hours----------------------------
24
Amount of direct X loan student could have for grade level
Perkins LoanNeed based loanBorrower is undergrad, grad, or professionalNo origination feeFixed interest rate: 5%
Interest does not accrue while in school or graceGrace period: 9 monthsInstitution is lender and servicerMust meet SAP and enroll at least half time
Perkins Loan
Annual Limit: $5,500 undergrad, $8,000 grad/profLifetime Limit: $27,500 undergrad, $60,000 grad/profMaximum repayment period is 10 yearsProgram ending Sept. 30, 2015 unless congress approves another extension
Grandfathering may apply to some students
Alternative Loans
Non need based loansPrivate banksState loans (College Access Loan, B-On-Time Loan)
Fees, interest rates, terms varyMost require school certificationMay require credit check or cosigner
Student Loan Repayment
Single source with record of all federal loansBorrower infoLoan amountsInterest accruedServicer info
www.nslds.ed.gov
Repayment PlansStandard – 10 years; equal monthly paymentsGraduated – 10 years; monthly payments start low and increase every 2 yearsIncome sensitive repayment – monthly payments based on annual income and change as income changesExtended – 25 years; fixed or graduated monthly payments
Repayment PlansIncome contingent – payments based on annual calculations and adjusted so as not to cause “undue hardship” (25 yr forgiveness)Income Based – monthly payments will not exceed 15% discretionary income (25 yr)Pay As You Earn – monthly payments will not exceed 10% of discretionary income (20 yr)
Loan Repayment TermsForbearance – Period of time payments are postponed, reduced or extended
Interest accruesDeferment – Period of time payments are postponed for approved set of reasons
Interest on subsidized loans does not accrue*
Loan Repayment Terms
Default – payments delinquent for 270 daysConsolidation – Combines loans into one, requiring one monthly payment to one servicer
Can fix defaulted loan
Cohort Default Rate (CDR)
Includes Direct Loans and loans underlying DL consolidation loansCDR = % of borrowers who enter repayment in a given federal fiscal year who then default within the next 3 fiscal years
Cohort Default Rate (CDR)
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
ResourcesStudentaid.gov
FAQs broken down by loan typeRepayment calculators
IFAP – ifap.ed.govHandbooks, regulations, current notificationsThis site is your best friend!
YouTube – FederalStudentAid channelVideos on a variety of topics including repayment
Questions?
Direct Loans Trivia Game! Question #1
• Which of the following students are eligible to receive Direct Subsidized Loans?
Direct Loan Trivia Game! Question #1
• A. Undergraduate students only?• B. Both undergraduate and graduate
students?• C. Graduate Students only?• D. Student and parent borrowers?
Direct Loan Trivia Game Answer to Question #1
• The answer is A Undergraduate students only.
Direct Loan Trivia Game! Question #2
• When calculating the amount of a student’s eligibility for Direct PLUS loans, which of the following factors are considered?
Direct Loans Program Trivia Game! Question #2
• A. Students grade level ?• B. Students expected graduation date ?• C. Expected Family Contribution ?• D. Students aggregate Direct Loan debt?
Direct Loan Trivia Game! Question #2
• The answer is C Expected Family Contribution is a factor for calculating loan amounts.
Direct Loan Trivia Game! Question #3
• Maximum Direct Loan limits may differ according to the student’s ?
Direct Loans Trivia Game! Question #3
• A. Program of study and academic year ?• B. Age and grade level ?• C. Program of study and grade level ?• D. Age and academic year ?
Direct Loan Trivia Game! Answer to Question #3
• The answer is C. Program of study and grade level will affect the eligibility and frequency of Direct Loan amounts and limits.