Entrance Loan Counseling

1
Entrance LoanCounseling
School Logo Here
2
Why You Are Here...

• Federal requirement for loan eligibility
• To learn
• About the Stafford loan program
• Your responsibilities as a borrower
• Help with financial planning

3
What Will We Be Talking About?

• What is Financial Aid?
• Stafford Loans
• Who Are The Players?
• Master Promissory Note (MPN)
• Rights and Responsibilities
• Budgeting
• Repayment
• Staying Out of Trouble

4
What is Financial Aid?

• Cost of Attendance (COA)
• Tuition, fees, books and supplies,
  transportation, personal expenses, and loan fees
• Expected Family Contribution (EFC)
• Amount that family can reasonably be expected to
  contribute toward a students education (taken
  from FAFSA)

5
What is Financial Aid?

• COA - EFC Need
• Schools attempt to package students with enough
  aid to meet their need
• Free money (grants and scholarships) is typically
  awarded before loans

6
What is Financial Aid?
Types of Aid

• Grants are based on need and sometimes merit
  as well
• Federal Pell and Federal Supplemental Educational
  Opportunity Grant (FSEOG)
• State grant
• Scholarships are based on merit or need
• Check out online scholarship searches
  
• Work-Study is based on need
• Work on-campus and receive a paycheck

7
What is Financial Aid?
Types of Aid (cont.)

• Loans
• Stafford
• federal loan program (either FFEL or Direct)
• 10 years to repay
• no prepayment penalties!!
• PLUS (parent loan)
• federal loan program
• based on credit
• can borrow up to COA less other aid

8
What is Financial Aid?
Types of Aid (cont.)

• Alternative (student loan)
• private loan
• based on credit
• may require a co-signer
• last option

9
Stafford Loans

• Subsidized
• Federal government pays interest while
• In school
• Grace period (6 months)
• Deferments
• Need-based
• Who is eligible
• Dependent and independent
• Undergraduate and graduate

10
Stafford Loans
Stafford Loans (cont.)

• Unsubsidized
• Interest begins accruing upon disbursement
• capitalization- to pay or not to pay
• Not need-based
• Who is eligible
• Base unsub dependent and independent
• Additional unsub independent, and dependent if
  parents are unable to borrow a PLUS loan

11
Stafford Loans

• Interest rates
• Interest calculated as a percentage of principal
  loan amount
• The interest rate is variable
• Based on the 91-day T-bill
• Revised every July 1st
• Adjusted annually even while in repayment
• Interest cap (maximum interest rate) of
  8.25

12
Stafford Loans

• Loan fees
• 3 origination fee (and sometimes a 1 guarantee
  fee)
• Borrow 1,000, receive 970 (or 960), payback
  the full 1,000
• Disbursements
• Beginning of each term
• Multiple disbursements for each loan
• First-time borrowers 30 days after beginning of
  term
• Subject to annual and aggregate limits...

13
Stafford Loans
Annual Loan Limits
How much are you borrowing this year?
14
Stafford Loans
Aggregate Loan Limits
How much have you borrowed in total? How can you
find out?
15
Stafford Loans
Know thyself (and thy debt)

• Know what you borrowed/what you owe
• How do I find out?
• Your schools Financial Aid Office
• Your lender
• National Student Loan Data System

16
Stafford Loans
National Student Loan Data System(NSLDS)

• Central database for student aid records
• Track student loans from disbursement to
  pay-off
• Get total of what you owe, at any time
• http//nslds.ed.gov 24 hours a day, 7 days
  a week

17
Stafford Loans
NSLDS (cont.)

• How do I access my information?
• Request personal identification number (PIN) at
  http//pin.ed.gov
• Receive your number via U.S. mail within 7-10
  days
• Keep this number. It will be your access PIN from
  then on.

18
Stafford Loans
NSLDS (cont.)

• Go to http//nslds.ed.gov and key in
• your Social Security number
• the first two letters of your last name
• your date of birth and
• your PIN

19
Stafford Loans
NSLDS (cont.)

• Youll see all the loans you have borrowed
• the date you took out the loan
• how much you borrowed and still owe
• the interest rate
• the status of each loan (in repayment, in
  deferment, delinquent, etc.)

20
Stafford Loans
Loan Eligibility Requirements

• Be a U.S. citizen or eligible non citizen
• Have a valid Social Security number
• Be registered with the Selective Service
  (if applicable)
• Maintain Satisfactory Academic Progress, as
  defined by your college
• A completion rate (per courses attempted)
• A cumulative GPA

21
Stafford Loans
Eligibility Requirements (cont.)

• Be enrolled in an eligible degree or certificate
  program
• Be enrolled at a participating college at least
  half-time
• Must not have a prior student loan in default

22
Who Are The Players?

• Financial Aid Administrators
• Federal Government
• Lenders/Holders
• Servicers
• Secondary Markets
• Guarantors
• Credit Bureaus
• Ombudsman (1-877-557-2575)

23
Who Are The Players?
Most Valuable Player

• The Internet
• Useful tool and important source of information
  for student loans
• Online financial planning guides
• Money management
• Comparative data on loans and lenders
• Available 24/7
• Gives you the power to take control

24
Master Promissory Note (MPN)

• Legal document, signed contract between you and
  lender
• Single-year or multi-year?
• Depends on type of school and decision by
  administrators
• Can be used up to 10 years

25
Master Promissory Note

• Important to understand amount being requested
• Amount will not be disclosed on the MPN, but will
  be on your award letter
• If unsure of the amount, contact your
  financial aid office
• When to sign a new MPN
• Change of lender
• After 10 years
• Transfer to new school which requires a
  new MPN

26
Master Promissory Note
Requesting a Lender

• School may have preferred lenders
• School has established a relationship with these
  lenders
• For best service choose one of these
• To find out more about a particular lender
• Call the lenders 800 number
• Visit EDFUNDs Lender Profile Web page
  
  
  www.edfund.org

27
Rights and Responsibilities

• You have the right to
• receive a copy of your signed MPN
• receive a disclosure statement
• a six month grace period after leaving school
• written notification from lender if loan is sold
• deferments and forbearances, if eligible
• proof of discharge after paying in full

28
Rights and Responsibilities

• As a borrower, you agree to
• repay your loan(s)
• make monthly payments on time
• direct all correspondence to your lender/servicer
• notify lender/servicer of any/all changes
• name
• address
• school or enrollment status
• phone number, etc.

29
Budgeting

• Calculate your income
• Work, financial aid, savings, outside assistance
• Calculate your anticipated expenses
• Tuition/books, housing, utilities, debt,
  transportation, food, clothing, entertainment
• Determine what is left
• Ask yourself How much do I need to borrow?

30
Budgeting

• EDWISE is a useful tool
• Online financial planning guide
• Comprehensive sections while in school
• College Budget
• Loan Reality Check
• Summary Report
• Easy to use
• www.edwise.org

R1
31
Budgeting

• Interested in knowing what salary youll
  be making?
• EDWISE includes average
  salaries for various jobs
  and career types
• Wondering how youll pay your bills?
• EDWISE will walk you through the budgeting process

32
Budgeting
Cost Saving Tips

• Buy used books
• Carpool
• Share living costs with a roommate or two
• Go to matinee movies rather than paying full
  price
• Clip coupons and check weekly ads for specials
• Dont grocery shop when you are hungry
• Leave credit cards at home when running errands
• Buy at supermarkets, not convenience stores

Find these and other tips at www.edwise.org your
online financial planning guide
33
Repayment

• One time grace period (six months)
• Make payments if possible, to lower your
  principle debt
• Repayment plans
• Standard
• Graduated
• Income-sensitive
• Extended
• Consolidation
• Lower payments more to payback

34
Repayment
Repayment Chart
Amounts based on Standard repayment plan at 8.25
interest.
35
Repayment
Repayment Chart
Amounts based on Standard repayment plan at 8.25
interest.
36
Repayment

• Incentives- save some money
• Most lenders offer benefits, such as
• 2 percentage point interest rate reduction after
  48 on-time payments
• 1/4 point interest reduction for signing up for
  direct repay (automatic funds transfer)
• Tax credits (up to 2,000 for the 2000 tax
  year)
• Contact your lender for their most up-to-date
  information

37
Repayment

• Deferments and forbearances are payment
  postponements
• Not automatic -- must be requested from lender
• Deferment options
• Deferment is a temporary postponement of loan
  payments
• In-school
• Unemployment
• Economic Hardship

38
Repayment

• Forbearance options
• Forbearance is a temporary postponement of
  principle payments -- interest is still accruing
• Poor health
• Residency program
• Loan payment exceeds 20 of monthly
  income

39
Repayment

• Loan discharge (cancellation)
• Permanent and total disability
• Loan was falsely certified by school
• Death
• Loan forgiveness programs (government repays a
  portion of loans)
• Programs for both teachers and child care
  providers
• More information can be obtained from your
  Financial Aid Office, your lender, or
  www.edfund.org.

40
Staying Out of Trouble

• Payment is one day late delinquent
• What can you do?
• Can you afford a smaller payment?
• Do you qualify for a deferment?
• Do you qualify for a forbearance?
• Contact your lender/servicer
• Contact EDFUND www.edfund.org
  or 1.877.2EDFUND

41
Staying Out of Trouble
Consequences of Default

• Default after nine months of no payments
• Full amount of loan becomes due, including
  collection charges at 18.5
• May be sued by federal government
• Subject to Federal Offset (wages and tax refund
  may be garnished)
• Credit will be tarnished
• Lose deferment/forbearance options

42
Staying Out of Trouble
Consequences of Default (cont.)

• Lose eligibility for additional financial aid
• May lose eligibility for certain federal or state
  jobs
• Belongings may be repossessed in order to pay off
  your loan debt
• May lose professional license

43
Staying Out of Trouble
Ask for Help

• Contact your lender/servicer
• Ask about options before it gets to this level
• The Key Simply keep in touch with your
  lender/servicer. They want to help!

44
Staying Out of Trouble
Credit Reports

• Include personal, credit, and legal information
• Yes, student loans are included on credit reports
• Even one late payment will affect your credit
  score
• All lending agencies have access
• You are responsible for checking accuracy

45
Staying Out of Trouble
Credit Reports (cont.)

• Important to keep it clean. How?
• Make all payments on time
• Periodically check reports for mistakes
• Contact
• Experian 888.397.3742
• Trans Union Corp. 800.888.4213
• Equifax 800.685.1111

46
Putting It All Together...

• Now you know
• What a Stafford loan is and who is involved
• Why it is important to keep in contact with your
  lender
• A loan is a responsibility
• As you continue your studies, think about
• How much you are borrowing
• Budgeting wisely
• What your monthly payments will be once you are
  finished

47
Questions?
See ya!
Thank you for attendingEntrance Loan Counseling!