Cracking the Mystery of Financial Aid Eileen Doyle Crane, Utah Valley University Stephen Brown, Fordham University

Introduction Financial aid world is highly developed industry Rules and regulations are set by Congress and the U.S. Department of Education Schools have their own policies Many are different; many change as needed Need-based aid versus Merit-based aid Negotiation

Topics of Discussion Federal Aid FAFSA Direct Student Loans, subsidized and unsubsidized Perkins Loans Work Study Income-based Repayment Loan Forgiveness Private Educational Lenders Loan Limits Credit Issues Cost of Attendance (COA) Disbursement of Funds Debt Load Salary Data Repayment Issues and Impacts Scholarships and Grants Loan Repayment Assistance Programs (LRAP) Be Creative!

FAFSA Free Application for Federal Student Aid Basic federal need analysis document Available on the Web FREE – No cost to student All graduate & professional students are independent Parental info not required for federal aid May be required for high-cost private schools Complete student (and spouse) section ASAP after January 1st

FAFSA 1 st Step: Apply for a PIN online Collect income, tax, asset information Calculate federal taxes early A PIN number will be ed to you; save it in a safe place Specify up to 10 schools; check correct codes Student Aid Report (SAR) data will be posted on your FAFSA account; check for accuracy; correct as needed If applying to more than ten law schools, add new schools above the ten initial listed after your SAR posted

Federal Aid Programs Federal Direct Stafford Loans: Subsidized and Unsubsidized Federal Direct Grad Plus Loan Program Federal Perkins Loans Federal Work Study Federal Loan Consolidation

Federal Stafford Loans Total of $20,500 per year Interest rate fixed at 6.8% 6-Month grace period after enrollment ends 1/2% origination/ 0% guarantee fees If you fail to make first 12 payments on time, origination fee goes up to 1%

Stafford Loans Subsidized Taxpayers pays interest while student in school Maximum of $8,500 per year Unsubsidized Interest accrues while student in school Maximum of $20,500 less Subsidized Stafford

Perkins Loans Federally guaranteed Campus Based May not be offered by all schools 5% fixed interest 9-month grace period Maximum $6,000 annually

Federal Work Study Campus-based program Some law schools do not offer this in the first year of law school Hourly wage for work Need-based program On campus or off campus sites Minimum wage or higher

Cost of Attendance Each law school prepares a budget for single students Budget includes: tuition and fees, books, room and board, transportation, insurance, child care (some, not all), and personal needs Financial aid administrators may alter budget for unusual situations Creating a relationship with FA administrators to understand your particular situation is always good; they are happy to meet with students

Federal Grad Plus Loans All loan programs are built on the back of the Stafford Loans—up $20,500 available per year Grad Plus Loans--difference between COA and the portion of the $20,500; no cap on borrowing Loans will only be given up to COA; if you need more money, it must come from other sources Terms: 7.9% interest 2 ½ % origination fee Interest accrues while student in school Absence of bad credit required

Absence of Bad Credit No account currently 90 days past-due Any account included in this No write-offs, charge-offs, bankruptcies, or foreclosures allowed More detail:

Private Loans Schools are required to encourage students to borrow through federal program Credit- based Signature- no collateral Market rate interest - no cap Variable interest rate Guarantee fees Co-Signor options/requirements Capitalization may be monthly, quarterly Pay monthly in order to avoid capitalization

Credit Is an important issue in law school finance for public and private schools If your credit is bad, you may not be able to borrow GradPlus or private loans

If you need GradPlus or private loans for graduate school and have bad credit You may not be able to attend!!

Nationally, 15-20% rejection rate for bad credit Likely to increase!

Credit Issues Consumer Debt Credit Bureaus and what they do You are entitled to one free credit report per year; get it early in case there are issues to address Credit Scoring If possible, consider borrowing only for tuition, fees, and books

Credit Reporting Agencies  Experian  Trans Union  Equifax   Annual credit report 

Disbursement of Funds Two times per year at beginning of semester after schools subtract tuition You receive the money AFTER you have moved to graduate school Must live within COA and loan amounts

Graduate Student Borrowing Graduate Education DebtAll EducationDebt Graduate & Professional Degrees % BorrowingCumulative Debt% BorrowingCumulative Debt Total60.1%$37, %$42,406 Master’s58.4%$26, %$32,858 Doctoral51.0%$49, %$53,405 Professional86.5%$82, %$93,134 MBA53.0%$35, %$41,687 MSW76.5%$37, %$37,029 PhD40.0%$36, %$41,540 EdD53.4%$49, %$47,725 Law87.7%$70, %$80,754 Medicine95.0%$113, %$125,819 /

Physician Salary Data Type of Practice Lowest Reported Mean Reported Highest Reported Family Practice $128,000$204,000$299,000 Internal Medicine $154,000$176,000$245,000 Cardiologist$268,000$403,000$811,000 General Surgeon $226,000$291,000$520,000

Legal Salary Data Median HourlyMean HourlyMean Annual $51.97 $57.40$119,390 Hourly Wage 10% 25% 50% 75% 90% $24.32$33.61$49.26>$70>$70 Annual Wage 10% 25% 50% 75% 90% $50,580$69,910$102,470 >$145,600>$145,600 Department of Labor, Bureau of Labor Statistics

Average MBA Starting Salaries by School RankingBusiness School Applicants Accepted Median Total Pay Package 1Harvard15%130,000 2Stanford10%130,00 3Penn19%145,000 4MIT20%113,500 5Northwestern24%133,000 6ChicagoNA136,000 7Dartmouth20%109,000 8UC Berkeley17%118,000 9Columbia17%144,000 10NYU20%128,000 11Michigan28%104,000 12Duke37%114,000 13Virginia41%121,000 14Cornell36%117,000 15Yale22%115,00

Repayment Details Repayment begins 6 months after graduation Equation-- $12 X $1,000 (6.8%/7.9% interest) = Payment Current average indebtedness– Law$ 100,000 Medicine$ 139, 517 Business$ 35,525 Repayment for $100K= $144,000; Monthly payment $1200 Ten-year standard (can go to 20 or IBR) repayment time frame No penalties for early payoff

Repayment Impacts Debt #1 impact on job choice Lifestyle choices: before, during, & after law school Jobs currently available after you pass the bar and are sworn in as a lawyer If you have not been unable to pay credit cards bills and/or student loans, you may not be allowed to be a member of the bar in the state in which you hope to be admitted to the bar

Repayment Impacts How much will this really cost? Can I afford it? Repayment options/incentives 10-, 15-, 20-, 25-, and 30-year repayment plans may be available Be careful of stretching it out: when you should be preparing for retirement, you may still be paying off your college debt AND you may have children in college

Income-Based Repayment Income-Based Repayment (IBR) is a repayment plan for the major types of federal student loans that caps your required monthly payment at an amount intended to be affordable based on your income and family size.

Income-Based Repayment PAY AS YOU EARN — Under IBR, your monthly payment amount will be less than the amount you would be required to pay under a 10-year standard repayment plan, and may be less than under other repayment plans. Although lower monthly payments may be of great benefit to a borrower, these lower payments may result in a longer repayment period and additional accrued interest. INTEREST PAYMENT BENEFIT — If your monthly IBR payment amount does not cover the interest that accrues on your loans each month, the government will pay your unpaid accrued interest on your Subsidized Stafford Loans (either Direct Loan or FFEL) for up to three consecutive years from the date you began repaying your loans under IBR.

Income-Based Repayment 25-YEAR CANCELLATION — If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be canceled. 10-YEAR PUBLIC SERVICE LOAN FORGIVENESS — If you work in public service, on-time, full monthly payments you make under IBR (or certain other repayment plans) while employed full-time in a public service job will count toward the 120 monthly payments that are required to receive loan forgiveness through the Public Service Loan Forgiveness Program. Through this program, you may be eligible to have the remaining balance of your Direct Loans forgiven after you have made the 120 qualifying as described above. The Public Service Loan Forgiveness Program is available only for Direct Loans. If you have FFEL loans, you may be eligible to consolidate them into the Direct Loan Program to take advantage of the Public Service Loan Forgiveness Program. However, only the on-time, full monthly payments made under IBR or certain other repayment plans while you are a Direct Loan borrower will count toward the required 120 monthly payments.

LRAP Loan Repayment Assistance Programs Awarded post-graduation To grads who work in public interest jobs, as defined by their school May be given as a grant or a loan Loan may be forgiven, after certain number of years of working in job ____ programs nationally Not available at all schools

Law School LRAP Programs Public interest jobs Equal Justice Works—former National Association of Public Interest Law High-cost schools pay all/part of loan payments for certain period Limited funds and job descriptions

Scholarships Information School Catalogues—Institutional scholarships

Be Creative!! If you’re paying on your own, and someone want to help you, let them pay one bill while you’re in school (phone, texts, rent, gas, travel, clothes, etc.) Creative entertainment; Find free things to do! Insurance is a MUST!! One medical event could lead to bankruptcy. Stay on parents’ plan, if possible. Holiday presents: textbooks, phone cards, clothes, necessities