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Housekeeping Items

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Chase Bank. Citibank. Iowa Student Loan. Bank of America. Sallie Mae. Nelnet. US Bank. Federal Update ... the Federal Financing Bank (FFB) and other federal ... – PowerPoint PPT presentation

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Title: Housekeeping Items


1
(No Transcript)
2
Housekeeping Items
Financial Aid Issues and Federal Update Webinar
  • In order to hear the audio portion of this
    webinar please dial 888-617-3400 passcode
    820254
  • Orientation of buttons available during the
    webinar
  • Everyone is currently on mute
  • Questions via text message will be answered at
    end of the program
  • End of program please complete the evaluation!

3
Mission
  • We advocate for, and provide a continuum of
    services to support, Iowa students and families
    as they explore and finance educational
    opportunities beyond high school

4
Who We Are
  • State Agency 40 years experience
  • State designated Guaranty Agency
  • Insure Federal Student Loans death, disability,
    bankruptcy, or default
  • FY07 Guaranteed 430,048,908 (Stafford/PLUS)
  • FY07 recouped 33 million thru collection
    activities helped 1,433 borrowers rehabilitate
    over 10.7 million in defaulted loans
  • 10 member board with 4 legislative
    representatives
  • Administer grants and scholarships for State of
    Iowa
  • Administered over 61.2 million in state
    scholarships, grants and work-study

5
Notable Services
  • iLINK Service Center
  • Client Services Unit
  • Marketing and Communications
  • Information Service Center
  • Default Prevention and Default Aversion
  • Outreach Unit
  • Research
  • Legislative interaction
  • Regulatory

6
Recent Headlines
  • 10/07 NYT, New York Official Faults
    Student-Loan Marketing 
  • 12/07 Inside Higher Ed, A Gloomy Projection
    on Lender Profits
  • 02/08 - The Minneapolis Star-Tribune, Students
    Pinched by Credit Markets
  • 04/08 CNN.com, Parents have a lot to worry
    about in these difficult economic times
  • 05/08 - CBS News, Homeowners arent the only
    ones caught in the crosshairs of the credit
    crunch
  • 05/08 - The Washington Post, Loan Programs Will
    Leave Some Students Behind
  • 05/08 USA Today, Lenders request federal help
    on student loans
  • 06/08 - USA Today, Credit crisis weakens relief
    for states' student-loan programs.
  • 06/08 - The Wall Street Journal, Credit Crisis
    May Limit Options for Student Loans

7
Loan Access Concerns
  • CCRAA and Subprime Crisis perfect storm
  • Nationally, 80 lenders have dropped out over the
    past ten months
  • Reduction in Private Loan programs
  • Reduction in Consolidation Loan providers
  • Reduction in FFELP Loans
  • Access in Iowa?
  • Chase Bank
  • Citibank
  • Iowa Student Loan
  • Bank of America
  • Sallie Mae
  • Nelnet
  • US Bank

8
Federal Update
9
HR 5715
  • Ensuring Continued Access to Student Loans Act of
    2008
  • Public Law 110-227
  • President Bush signed into law May 7, 2008

10
Stafford Loan Limit Increases
  • Increases annual and aggregate loan limits only
    for undergraduates
  • No increase in final bill for graduate/professiona
    l students
  • Annual and aggregate loan limit increases are
    self-implementing, effective for loans first
    disbursed on/after July 1, 2008

11
Parent PLUS Deferment
  • Allows a parent PLUS borrower to request
    in-school deferment while the dependent student
    remains enrolled at least half time
  • Deferment includes a six-month grace period after
    the students less-than-half-time date

12
Parent PLUS Deferment
  • Borrower may pay the accruing interest during
    deferment, or the lender will capitalize no more
    than quarterly
  • New parent PLUS deferment is available only on
    PLUS loans first disbursed on/after July 1, 2008

13
Parent PLUS Eligibility
  • A lender may, but is not required to, approve a
    parent PLUS loan for an applicant who has adverse
    credit, if
  • At any point during the period January 1, 2007,
    through December 31, 2009, the parent was/is no
    more than 180 days delinquent on
  • A home mortgage (primary residence)
  • Medical bills
  • Effective upon enactment

14
Liquidity Solutions
  • Authorizes USDE to act as a national secondary
    market, purchasing FFELP loans originated
    on/after 10/01/03
  • Authorizes USDE to offer stand-by purchase
    agreements
  • FFELP lender must use proceeds of sale to ensure
    continued FFELP participation
  • Purchase cannot result in net loss to federal
    government
  • USDE authority expires June 30, 2009
  • Urges the Federal Financing Bank (FFB) and other
    federal financial entities to use surplus funds
    to provide FFELP access

15
Dear Colleague May 21
  • Outlines 2 short-term liquidity options
  • Option 1 Purchase loans originated during 08-09
  • Agreements must be final by July 1, 2009
  • Sale will be complete by Sept. 30, 2009
  • Equal to par value, accrued interest and 75 per
    loan
  • Servicing would be transferred to DE
  • Option 2 Purchase participation interests in
    pools of loans made during 08-09
  • Yield the commercial paper rate plus 50 basis
    points
  • Upon expiration, trust may be paid off or sold to
    DE

16
Federal Register July 1, 2008
  • 2 Options Purchase and Participation Program
  • Maximize student loan availability
  • No net costs to the Federal Government
  • Terms and Conditions outlined
  • Lender must complete the Letter of Intent for
    either programs or both
  • Loans 1st disbursed prior to the date on which DE
    receives notice will not be permitted
  • Except, if notice was received within 15 days of
    published FR, loans 1st disbursed on or after May
    1, 2008

17
Federal Register July 1, 2008
  • Loan Purchase Commitment Program
  • Execute the Master Loan Sale Agreement with DE no
    later than March 31, 2009
  • Must notify DE by August 14, 2009 of intent to
    sell in order to proceed with transfer
  • Purchase price
  • Outstanding principal balance
  • Accrued and unpaid interest
  • Reimbursement of the1 loan fee
  • Flat 75 fee/loan covers all servicing,
    origination, and deconversion costs
  • Forward all electronic records to DE

18
Federal Register July 1, 2008
  • Loan Participation Purchase Program
  • Agree to sell participation interests to DE
    aggregate unpaid principal balance no less than
    50,000,000
  • Must make good faith estimate of amount of
    Participation Interests it proposes to sell
  • Master Participation Agreement must be entered
    into with sponsor (lender), DE and a custodian
  • Commercial Paper rate plus 50 basis points

19
Unified Front
  • Commission is in communication with school
    partners
  • Access Conference Call April 7, 2008
  • Field Rep visits
  • Participating Lender list
  • Direct Loan migration
  • Call to Action

20
Questions from your customers
  • Will I be eligible for a loan?
  • Who should I borrow from?
  • My child is going to a community college will
    there be loans available?
  • Will I be able to consolidate?
  • I was told my child will not be eligible for a
    private loan. Where can I get one?
  • Will I need to co-sign?

21
Quick look Financial Aid Process
  • Student completes the FAFSA
  • Expected Family Contribution (EFC) determined
  • School packages aid award letter sent
  • Student and parent complete loan paperwork
  • School certifies loan
  • Lender and Guarantor process the loan
  • Loan funds are disbursed to school

22
Subsidized vs. Unsubsidized
  • Subsidized Stafford Loan
  • Need-based
  • Government pays the interest while in school
  • Six-month grace period
  • Unsubsidized Stafford Loan
  • Not need-based
  • Government does not pay the interest
  • Payments on interest and principal amount of loan
    can be deferred until the student graduates

23
Stafford Interest Rates
  • Subsidized Stafford Loan
  • New borrowers
  • Prior to 7/1/08 Fixed at 6.8
  • After 7/1/08 Fixed at 6.0
  • After 7/1/09 Fixed at 5.6
  • After 7/1/10 Fixed at 4.5
  • After 7/1/11 Fixed at 3.4
  • After 7/1/12 Fixed at 6.8
  • Old borrowers with variable rate that changes
    every 7/1 (1998-2006) 4.21 (projected)
  • Unsubsidized Stafford Loan
  • New borrowers Fixed at 6.80
  • Old borrowers with variable rate that changes
    every 7/1 (1998-2006) 4.21 (projected)

24
Borrowing Amounts
Other Options ? PLUS ? Perkins Loan ?
Institutional Repayment Plan ? Federal, State
or Institutional Work-Study ? Private Loan
  • Stafford Dependent
  • 1st year - 5,500
  • 2nd year - 6,500
  • 3rd year Up - 7,500
  • Stafford Independent
  • 1st Year - 9,500
  • 2nd Year - 10,500
  • 3rd Year and Up - 12,500
  • Grad and Professional
  • 20,500

25
PLUS Loans
  • Eligibility not based upon income or assets
  • May borrow up to childs full cost of education
    minus other financial aid
  • Fixed rate of 8.5
  • Loan forgiveness available death and disability
  • Interest paid may be tax deductible
  • Minimal credit check performed
  • Applicant is 90 days or more delinquent
  • During 5 year period default determination,
    foreclosure, tax lien, repossession, wage
    garnishment, or a write-off of Title IV debt
  • Exclusion 01/01/07- 12/31/09 no more than 180
    days delinquent on a home mortgage (primary
    residence) or medical bills

26
Deferments and Forbearances
  • Borrower is entitled to defer principal payments
    on a loan when applicable eligibility criteria
    are met
  • A forbearance is a tool used to assist borrowers
    in meeting their loan repayment obligations
  • Borrower In-school Deferment Summer Bridge
    Extension
  • When in trouble, encourage borrower to
  • contact their servicer/loan holder to discuss
    options
  • Keep record of all their paperwork
  • Keep track of the beginning and ending date of
    forbearance or deferment

27
Repayment Plans
  • Standard
  • Graduated
  • Income Sensitive (FFELP only)
  • Income Contingent Repayment (Direct only)
  • Extended Repayment

28
Cancellations and Forgiveness
  • Total and Permanent Disability requires a
    physician to certify
  • Death
  • Teacher State and Federal Programs
  • Bankruptcy caused by undue hardship
  • Closed school before student could complete
    program
  • False Certification identity theft
  • Public Service Loan Forgiveness Direct Loans
    only!

29
Questions from your Customers…
?
30
What should I be doing to prepare for college
costs during my next year?
  • Apply for financial aid as soon as possible
  • Borrow just enough in student loans to pay direct
    costs which include tuition, fees, and room and
    board
  • Consider part-time employment to help pay
    everyday living expenses

31
Will I be eligible for a loan?
  • Has the FAFSA been completed?
  • Has the student received an award letter?
  • Generally, all students are eligible to receive a
    Stafford Loan. Student must
  • Be enrolled at least half time,
  • Meet Satisfactory Academic Progress
  • Credit is not a factor for Stafford Loans

32
Will I be eligible for a Private Loan?
  • Check with previous lender
  • Check with financial aid office
  • Counsel borrower on
  • PLUS Option
  • More stringent credit check will be performed
  • Might need a co-signer

33
Who Should I Borrow From?
  • Who have they borrowed from in the past?
  • Check with financial aid office
  • Previously borrowed Stafford and private loans
    Who is lender and are they still participating?
  • New borrower Colleges preferred lender list
  • Commission Participating Lender List

34
How can I minimize my debt?
  • Enrollment in a community college
  • Live at home and attend local college
  • Institutional Payment Plans
  • Shorten the time it takes to earn a degree
  • Earn college credit while in high school
  • Work while earning a degree through distance
    learning and online courses
  • Work part-time throughout college
  • Consider benefits offered by the military
  • Can parents help?

35
Will there be loans available for my child
attending a community college?
  • Student needs to check with financial aid office
  • No access problems at any Iowa community colleges
  • Need a new lender
  • Sign new Master Promissory Note
  • Should try and keep with same servicer if
    previously borrowed

36
Should I Consolidate?
  • Currently, very few lenders participating
  • Why do they want to consolidate?
  • Multiple loan holders
  • Need smaller loan payments
  • Direct Loan Consolidation
  • In default
  • Public Service Loan Forgiveness Program
  • Income Contingent Repayment Plan
  • Consider the Extended Repayment Plan
  • Must owe more than 30K
  • Up to 25 year repayment

37
Questions from You…
?
My contact info Natalee Girardi Natalee.girardi_at_i
owa.gov 515.725.3460
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