Grants Are Not Enough

Presented By California Association of Student Financial Aid Administrators California Community Colleges Student Financial Aid Administrators Association California Lenders for Education

Agenda Student Borrower StatisticsStudent Borrower Statistics Types of LoansTypes of Loans Life Cycle of a LoanLife Cycle of a Loan

2006/2007 Cost of Attendance $229 Billion Parent/Student Contributions Federal Student Loans Private Education Loans Other (Includes scholarships, grants, tax relief and other aid from states, colleges, employers and other sources) Source: Based on estimates by Octameron Associates, “Don’t Miss Out”, 29th Edition; College Board, “Trends in Student Aid”; and Sallie Mae. Includes tuition, room, board, transportation and miscellaneous costs for two and four year college degree granting programs.

In twenty years, the cost of tuition and fees has doubled at private and public institutions 2006/2007 Cost of Attendance $229 Billion Source: College Board In one year, private and public tuition, fees, room and board has increased by +6% Western region public institutions  Lowest national tuition and fees  Total COA greater than south and southwest regions

More than fifty percent (50%) of all college students borrow a student loan More than fifty percent (50%) of all college students borrow a student loan Source: College Board, Octameron Associates Borrowing for College Today

Total federal loan dollars borrowed by students  139% increase in number of student loans in 10 years  20% increase in 2 years Source: College Board, Octameron Associates Borrowing for College Today $74 BILLION DOLLARS

Total private loan dollars borrowed by students  1200% increase in 10 years  64% increase in 2 years Source: College Board, Octameron Associates Borrowing for College Today $23 BILLION DOLLARS

Students response to question: “List all types of loans that come to mind that people use to finance college education.” Students response to question: “List all types of loans that come to mind that people use to finance college education.” How Prevalent Are Loans In Paying For College? Source: First Marblehead Study 79% - Federal Student Loans 13% - Bank Loans (Private) 7% - Home Equity Loans 7% - Home Equity Loans 4% - Grants 4% - Grants 5% - Personal Loans 5% - Personal Loans 2% - Scholarships 2% - Scholarships 1% - Work Study 1% - Work Study

Parties Involved in Loan Process Student/Parent: Student (or parent) enrolled in a Title IV Eligible School at least half time; US Citizen or Permanent Resident School: Title IV Eligible School certified to offer student loans by the US Department of Education Lender: Source of funds for student loan for the purpose of financing a post-secondary education Guarantor: State or private agency which repays the lender if the borrower fails to make payments resulting in default

Types of Loans Federal Stafford Loans Offered by private lenders who participate in the Federal Family Education Loan Program (FFELP) or by the Federal Government in the Direct Loan Program (DLP)Offered by private lenders who participate in the Federal Family Education Loan Program (FFELP) or by the Federal Government in the Direct Loan Program (DLP)

More… Academic Level Dependent Student Annual Limits Independent Student Annual Limits Freshman$3,500$7,500 Sophomore$4,500$8,500 Junior/Senior$5,500$10,500 Graduate/ Professional N/A$20,500 Federal Stafford Student Loans borrowing limits established by the US Department of Education

Parent PLUS Loan Option for parents of undergraduate dependent studentsOption for parents of undergraduate dependent students Loan funds borrowed by the parent to make up the gap up to Cost of Attendance less any other financial aidLoan funds borrowed by the parent to make up the gap up to Cost of Attendance less any other financial aid Types of Loans

Graduate PLUS Loan Option for graduate studentsOption for graduate students Used to finance the student’s education, not to exceed the student’s Cost of Attendance less any other financial aidUsed to finance the student’s education, not to exceed the student’s Cost of Attendance less any other financial aid Types of Loans

Federal Perkins Loan Campus-based student loan program, limited funds availableCampus-based student loan program, limited funds available Not all schools participateNot all schools participate Annual student borrowing limits:Annual student borrowing limits:  $4,000 Undergraduate Students  $6,000 Graduate Students Types of Loans

Private Loans Private Loans “Credit-Based” loans with or without a cosigner“Credit-Based” loans with or without a cosigner Financing up to the Cost of AttendanceFinancing up to the Cost of Attendance Many must be certified by a school officialMany must be certified by a school official Varying interest rates and fees based on credit ratingVarying interest rates and fees based on credit rating Deferred repayment options available while the student attends schoolDeferred repayment options available while the student attends school Types of Loans

Direct to Consumer (DTC) Loans Credit-based borrowingCredit-based borrowing Student “self-certifies” their loan eligibility and need for the loanStudent “self-certifies” their loan eligibility and need for the loan School is not typically involved in the processSchool is not typically involved in the process Types of Loans

Summary Types of Loans Federal Stafford Loans Federal Family Education Loan (FFEL) Direct Lending (DL) Federal PLUS Loans ParentGraduate Federal Perkins Loan Private Loans Direct to Consumer (DTC)

CSU & CCC Unmet Need Comparison Parents' Income & Cal Grant Assumption CSU $30,000 Income, no Cal Grant CCC $30,000 Income, no Cal Grant On-campus Budget$16,752$15,306 Parent Contribution$0 Student Contribution$0 Net Need$16,752$15,306 Pell Grant$4,310$4,176 Cal Grant A, B Fees$0 Cal B Access$0 SUG$2,772$0 EOPG / BOG Fee Waiver$0$600 SEOG$0$750 Work-Study$3,000$4,000 Perkins Loan$0 Stafford Subsidized Loan$3,500 Stafford Unsubsidized Loan$0 PLUS Loan$0 Total Aid Applied to Need$13,582$13,026 Unmet Need$3,170$2,280

20 Life Cycle of a Loan In-School & Grace Period Repayment Application & Origination

21 Life Cycle of a Loan Student Submits FAFSA School Certifies Loan Eligibility Student Completes MPN Application/Origination Process Application/Origination Process

22 Life Cycle of a Loan Guarantor Issues Guarantee to Lender Disburses Funds to School Lender Approves Loan Application/Origination Process Application/Origination Process

23 Life Cycle of a Loan Application/Origination Process Application/Origination Process School Credits/Pays Borrower

24 Life Cycle of a Loan Student Submits FAFSA School Certifies Loan Eligibility Student Completes MPN Application/Origination Process Application/Origination Process Guarantor Issues Guarantee to Lender Disburses Funds to School Lender Approves Loan School Credits/Pays Borrower

25 Life Cycle of a Loan In-School/Grace In-School Servicing Entrance Counseling Enrollment Status Updates Demographic Updates Loan Sales Exit Counseling Grace Period

26 Life Cycle of a Loan Repayment Repayment Payments Paid in Full Deferment/Forbearance Delinquency Default

27 Grants Are Not Enough Education is the most important investment any student will ever make during their lifetime

28 EDUCATION is the best INVESTMENT Today’s Children are California’s Future

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