Going Private The Ins and Outs of Alternative Loans

2 What you will learn  How private loans differ from federal loans  How to maximize your financial aid sources  What to ask when shopping for a private loan

How Private Loans Differ from Federal Loans

4 Credit qualifications  Private loans –most lenders will require a credit check  Federal Stafford loan –not required  Federal PLUS loan –credit check required –all approved borrowers receive same interest rate, regardless of credit rating

5 Interest rates  Private loans –interest rates vary based on market conditions, borrower’s credit, lender  Federal Stafford loan –fixed at 6.8%  Federal PLUS loan –fixed at 8.5% (FFEL) or 7.9% (Direct)

6 Repayment options  Private loans –vary by lender –may not have a grace period  Federal Stafford loan –several choices (standard, extended, graduated, and income-sensitive) –grace period Stafford: six months PLUS: no grace period

7 Hardship assistance  Private loans –differ by lender  Federal Stafford and PLUS loans –deferment –forbearance

8 Fees  Private loans –vary by lender  Federal Stafford and PLUS loans –origination fee: Stafford - 2% PLUS - 3% –1% default fee –fees are not always passed on to the borrower; varies by lender/guarantor

Maximizing Your Financial Aid Sources

10 Grants  Sources: –federal government –state governments  Eligibility criteria: –financial need –mostly for undergraduates

11 Grants  Funds available: –generally as academic terms begin  Repayment: –not unless you drop out

12 Scholarships  Sources: –private donors –your college  Eligibility criteria: –academic or athletic excellence –community involvement –course of study or career choice –employment or membership –financial need

13 Scholarships  Funds available: –generally as academic terms begin  Repayment: –generally not unless you drop out –may have to repay if you don’t fulfill certain conditions

14 Scholarships  Fastweb –  College Board’s FUND FINDER – lcome.jsp  SRN Express –  Scholarships.com –

15 Scholarships  Peterson’s scholarship search –  NextStudent – holarship_search.asp  Broke Scholar –

16 Work-study  Sources: –federal government and your college  Eligibility criteria: –financial need  Funds available: –earn by working part-time while in college –paid weekly to monthly no up-front money for tuition and fees

17 Work-study  Repayment: –no  Other advantages: –on-campus job –usually hours per week –work experience in your field

18 Best to worst types  Grants and scholarships  Work-study  Loans –federal –private educational loans

19 Additional sources of income  Part-time job –do not work too much  Education tax credits and deductions

What to Ask When Shopping for a Loan

21 Who to go to for private loans  Your school’s financial aid office  Banks or other lenders Private loans may affect your eligibility for other forms of financial aid—be sure to check with your financial aid office first!

22 What to ask  What is the interest rate on the loan and how is the rate calculated?  At what point, and under what circumstances, might the rate change?  Will I need a co-signer to qualify for a loan or to receive a lower interest rate?  What fees are associated with the loan?

23 What to ask  When do I begin making payments and what are my repayment options?  Can I defer or reduce loan payments during tough times?  How will this loan affect my eligibility for other forms of financial aid?

24 What you have learned  How private loans differ from federal loans  How to maximize your financial aid sources  What to ask when shopping for a private loan

25 Now what?

26 More information Sharon Cabeen Vice President of Financial Literacy Brenda Vaughn Director of Financial Literacy

27 More information Mel Stephens Money Management Consultant Nic Ourso, CPA, CFP Money Management Consultant Pauline Balta Financial Literacy Coordinator