loan basics karen trail and julie brumbaugh texas woman’s university 2015 abc workshop

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.