Federal Direct Loan Programs Dan Robinson Campus Director of Financial Aid Pace University

What is it Really Called ?… (William D Ford) Federal Direct Loan of the (Robert) Stafford loan programs

LOAN TYPES Subsidized Stafford Loan Unsubsidized Stafford Loan PLUS /Grad PLUS Perkins Loan – R.I.P

Subsidized Loans Eligibility based on financial need Cost of Attendance - Expected Family Contribution - Other Financial Assistance = Maximum Loan Amount (subject to annual and aggregate limits) Interest “subsidized” (i.e. paid by the federal government for the student) while student is enrolled at least half-time and for appropriate grace period

Subsidized Loans – Interest Rates Fixed for the life of the loan 4.66% for loans first disbursed July 1, 2014 to June 30, 2015 4.29% for loans first disbursed July1, 2015 to June 30, 2016 3.76% for loans first disbursed July 1, 2016 to June 30, 2017 4.45% for loans first disbursed July 1, 2017 to June 30, 2018 5.045% for loans first disbursed July 1, 2018 to June 30, 2019 The origination fee is currently 1.062% - this fee will change effective October 1 each year. The interest rate is calculated each year based on the 10-year Treasury Bill rate plus 2.05 percent and is capped at 8.25%

Unsubsidized Stafford Eligibility not based on financial need, but total aid cannot exceed Cost of Attendance (COA) Subject to annual and aggregate limits Interest not “subsidized”(Accrues while student is in-school) Interested capitalized at repayment For 2018-19, fixed rate of 5.045% for undergraduates; 6.595% for graduates Single promissory note for both Sub and Unsubsidized loans NOTE: Does not consider the EFC

Parent Loan for Undergraduate Students (PLUS) Parent is Borrower Can be biological, adoptive or current step-parent Non-custodial, biological or adoptive parent can be borrower Eligibility – Student must file the FAFSA Simple Credit Check performed on borrower – good for 180 days Not based on financial need Total aid cannot exceed COA Cost of Attendance - Other Financial Assistance = Maximum Loan Amount (not to exceed COA)

PLUS (UNDERGRAD) Interest not “subsidized” (Accrues while student is in-school) Yearly fixed rate of 7.595% (through June 30, 2019) 4.248% origination fee (through Sept. 30, 2019) Borrower may defer payments while student in-school Starting with PLUS disbursed on/after July 1, 2015: Loan Counseling mandatory for any PLUS applicant who has an adverse credit history Credit check for a PLUS Loan applicant will remain valid for 180 days (prior years was 90 days)

Graduate PLUS Loan Graduate Student is Borrower. Parent is not involved Loan is modeled after Undergraduate PLUS, but without the parent Eligibility not based on financial need, cannot exceed COA Not subsidized (accrues interest while in-school) 7.595% fixed interest rate – through June 30, 2019 4.248% origination fee – through Sept. 30, 2019

Federal Perkins Loan The Federal Perkins Loan Program was a school-based loan program for undergraduate students with exceptional financial need. This loan program expired on September 30,2017

Basic Eligibility To receive any federal loan (including the parent loan), the STUDENT must file the FAFSA and meet the “eligible student” definition including: Citizenship, selective service registration, matriculation, etc. Not be in default on Title IV loans or owe a repayment on any federal grant Be enrolled at least half-time in an approved program leading to a degree or certificate

PLUS Eligibility A parent can receive a Parent Loan as long as the parent & student both meet the basic eligibility requirements. The PLUS borrower must: Be the biological or adoptive parent, or stepparent Be a U.S. citizen or eligible non-citizen Have a valid social security number An undergraduate PLUS Loan can ONLY be used to pay for the educational expenses for a dependent undergraduate child

Credit Eligibility Direct student loan borrowers do not need to pass a credit check to receive a Stafford Loan (or consolidation loan) PLUS/Grad PLUS borrowers must not have an “adverse” credit history Parent borrowers cannot be in default on any of their own federal student loans

PLUS Loans & Adverse Credit If a parent is denied a PLUS loan, the parent may: Secure an endorser Appeal the decision Choose to do federal loan counseling If a parent is still denied a PLUS loan after appealing the lender’s decision, the FAO can certify an additional unsubsidized loan for the student

Best money first… ‘Gift aid’ is awarded prior to awarding loans Subsidized loans are always awarded first with any remaining eligibility given in an unsubsidized loan PLUS/Alternative loans are determined last Some award letters include the maximum PLUS/Alt loan amount – each school’s award letter differs

Annual Loan Limits – U/G Dependent Undergrads whose parents can borrow PLUS Subsidized Base Unsubsidized Base Total Sub/ Aggregate Limit 1st year $3,500 $2,000 $5,500 Dependent Undergrads: Sub = $23,000 Total = $31,000 2nd year $4,500 $6,500 3rd year $7,500 4th & 5th year Graduate $20,500 Grad Students: $138,500

Annual Loan Limits – U/G Independent Undergraduates & Dependent Students whose parents cannot borrow PLUS Subsidized/ Unsubsidized Base Add’l Unsubsidized Total Subsidized/ Aggregate Limit 1st year $3,500 $6,000 $9,500 Sub = 23,000 Total $57,500 2nd year $4,500 $10,500 3rd year $5,500 $7,000 $12,500 4th & 5th year

Graduate Loan Limits Per year $20,500 Aggregate Limit Independent Undergraduates & Dependent Students whose parents cannot borrow PLUS Subsidized Unsubsidized Aggregate Limit Per year $20,500 $138,500 – combined UG and Grad. No more than $65,500 can be subsidized*

Prorating Annual Loan Limits Undergraduate Loans ONLY Two situations require loan pro-ration: The student’s academic program is shorter than a full academic year in length The program is a year or more in length, but the student remaining period of study is shorter than a full year (Student will be graduating in less than one year)

Programs Shorter Than a Full Academic Year When a student is enrolled in program shorter than a full academic year, you must use a relative pro-ration that is based on the lesser of: # of terms or clock hours enrolled # of terms, clock hours in the academic year Or # of weeks enrolled # of weeks in the academic year

Programs with Remaining Period of Study Shorter Than an Academic Year When a student is enrolled in a program that is an academic year or more but the remaining period of study is shorter than an academic year; proportional pro-ration must be used: # of credit or clock hours enrolled # of credit or clock hours in the academic year Ex: 12/24 = ½ of annual award $5,550/2 = $2,775

Prorating Annual Loan Limits You may readjust a prorated loan when a student drops or adds after originating a loan, but it is not required.

Academic Year Concept Since each student’s annual loan eligibility is based on an academic year, we must define the academic year for each student A Scheduled Academic Year (SAY) is used to standardize when the majority of a school’s students attend in a similar pattern (usually fall-spring). A standard academic year is made up of 30 weeks of instruction.

Two Types of Academic Years… Scheduled Academic Year (SAY) Most “traditional” schools use a SAY Only term based credit-hour programs can use SAY A SAY has defined beginning and ending points for all students Addition of a Summer term as a “header” or “trailer” is permissible in SAY BBAY (huh, what’s that?) can be used at a SAY school for selected individuals

Two Types of Academic Years… Since you asked on the previous slide…. Borrower-Based Academic Year (BBAY) Clock-hour and non-term credit-hour programs must use BBAY A BBAY must include at least 30 weeks of instruction A BBAY is specific to an individual student The beginning point of a BBAY is when the student begins classes, or immediately after the previous BBAY ends

Loan Eligibility and Academic Year Generally, a student who has received the annual loan limit cannot receive another loan until the following academic year A student can receive additional funds if: The student moves to a higher grade level during the academic year The student dependency status changes during the academic year – not a likely scenario

Loan Period vs. Academic year For most students, the “Loan Period” (on the loan certification) is the SAME as the academic year The minimum loan period is the shortest of these periods: The academic year (AY) as defined by the school The period between the beginning of the student AY and the end of the student program (i.e. Dec. grads) The remaining portion of the SAY (i.e. spring starts)

LOAN PERIOD CAN NEVER EXCEED TWELVE MONTHS Maximum Loan Period The maximum loan period is normally the school academic year, but the LOAN PERIOD CAN NEVER EXCEED TWELVE MONTHS

Subsidized Usage Limit Applies (SULA) – 150% rule I apologize in advance… A borrower’s Maximum Eligibility Period is a period of time that is equal to 150% of the published length of the student’s academic program Only for Sub loans More complicated if student transfers or has inconsistent enrollment history (part-time/full-time)

Certifying Eligibility A loan cannot be certified for more than: The amount borrower has requested The student’s unmet need (sub loan only) The student’s Cost of Attendance (COA) The student’s maximum eligibility for the academic year/loan period

Borrower Confirmation The borrower confirmation process is used to ensure that a student wants to borrow loans in subsequent academic years The confirmation process can be: Active - The loan will not be disbursed until the borrower accepts the proposed loan amounts and types, or requests changes to the package Passive - The loan will be disbursed unless the student declines the loan

Certification & Verification If a student has been chosen for verification, a loan origination can be processed before the verification is complete as long as you believe the information on the FAFSA is correct.

Multi-year use of the MPN A MPN is valid for up to 10 years from the 1st anticipated disbursement date PLUS note is not multi-year if a co-signer is required

What is a Disbursement??? Disbursement is the delivery of funds (money) to the student account at the school. Federal regulations prohibit those that award aid (FA staff) from participating in the actual disbursement of funds. Financial Aid professionals usually set the rules and conditions under which the disbursement can be processed by the Bursar

Rules for Disbursements Multiple Disbursements - In most cases, loan funds must be disbursed in at least two installments with no installment exceeding 1/2 of loan amount. Schools with low default rates are exempt from this rule for single-term loans 30 Day Delay - Schools are required to wait 30 days after the start of classes before disbursing to first time, first year undergraduates. Schools with low default rates may be exempt from this rule A disbursement cannot be made earlier than ten days before the beginning of the loan period/term

Origination fees must be included in student “Cost of Attendance” Can be actual or an average Loan Origination fees reduce the amount of actual funds sent to the school to be applied towards the university bill Loan origination fees are updated for October 1 each year for federal loans

Loan Counseling Completion of Loan Entrance Counseling (LEC) is required prior to the first disbursement LEC helps students understand their rights and responsibilities with regard to their student loans Each school determines if LEC is yearly or only once Must be done for each school student attends School chooses the method of LEC: www.studentloans.gov In –person Other web-based services (Mapping Your Future)

Loan Counseling Must Include: Obligation to repay regardless of education outcome Rights and responsibilities Repayment terms Consequences of default For all schools – average loan indebtedness and monthly repayment

Recommended Elements of Entrance Counseling Communication with Servicer (Address changes, changes in enrollment) Deferments, forbearance and cancellation options Consolidation New: First time borrowers as of July 1, 2013 – 150% limit for subsidized loans

Exit Counseling MUST INCLUDE: Detailed information of each payment plan Debt management strategies Pre-payment options Terms and conditions of all forgiveness programs facilitated by ED Terms and conditions of forbearances Consequences of default Effects of consolidation Tax benefits available to borrowers Notice of availability of the National Student Loan Database (NSLDS)

Questions?