2014 Counselor Training Paying For College Strategies after all of the student’s “free” money has been exhausted

2 OASFAA is a non-profit organization OASFAA has provided the information today as a free service to access staff and high school counselors You have permission to copy and distribute these materials to your students and families. Charges may not be assessed for the material or for the information presented. Permission must be granted for other use of this information or these materials. Contact the Outreach Chairperson listed on the OASFAA web site or

Agenda  Counseling Framework  Federal Student Loans  After Stafford or Gap Financing 3

How does America pay for college? Sources of Funds for College by Percentage Source: Sallie Mae “How America Pays for College,” 2009

“There are only 3 Ways To Pay for College”  Before  Savings from Summer Job  Income protection allowance - $6,260  Gifts – Holidays, birthdays…  Summer classes at CC after Senior Year  Parents - planning opportunity – 529 5

“There are only 3 Ways To Pay for College”  During - Families are not in this alone!  File the FAFSA to find out eligibility for Grants (federal and state) and Scholarships (from the school "outside“)  Work study  Summer classes, summer jobs  Parents – Tuition Payment Plans  Tax credits (Consult your tax advisor) 6

“There are only 3 Ways To Pay for College”  After  Federal Student Loans  Perkins  Direct Subsidized and Unsubsidized Loans (aka Stafford)  Parent PLUS versus Private Loans  Other financing 7

8 Perkins Loans,  Eligible students (priority to exceptional need)  Undergraduate or graduate students  Must file the FAFSA  Annual and aggregate loan limits  up to $5,500 annually for undergraduates (actual awards, if any, will vary between schools)  $27,500 aggregate for undergraduates  Interest rate: 5% (fixed) during repayment  Interest subsidized during in-school and nine-month grace period  Deferment and cancellation provisions available

Direct Loans, Direct Subsidized and Unsubsidized Loans are two separate, unique types of loans that are awarded separately. *Interest rates recalculated annually and are effective July 1st based on the 10-year Treasury note index plus 2.05%, capped at 8.25% SubsidizedUnsubsidized Need basedNot based on financial need Interest is fixed at 3.86% for new undergraduate loans disbursed during *. Interest is subsidized while the student is in school and during deferment. Interest is fixed at 3.86% for all new loans disbursed during *. Interest accrues from time of disbursement of the funds.

10 Direct Loans, Independent Students and Dependent Students whose parents have been denied the PLUS Loan are eligible for additional Unsubsidized Stafford Loans ($4,000 as Freshmen and Sophomores and $5,000 as Juniors and Seniors) Class YearBase Amount Additional Unsubsidized Amount Total Available to Borrow Freshman$3,500$2,000$5,500 Sophomore$4,500$2,000$6,500 Junior$5,500$2,000$7,500 Senior$5,500$2,000$7,500

Direct Loans, Subsidized and Unsubsidized Loans 1.072% origination fee. Parent and Graduate PLUS 4.288% origination fee. 11

12 Direct Loans, FAFSA Follow instructions at school attending Entrance Counseling MPN Disbursement to student account Notification of servicer (instruct students to watch and save /snail mail)

IBR – Income Based Repayment  Available to federal loan borrowers experiencing financial hardship  Borrower qualifies if annual monthly student loan payments exceed 15% of “discretionary income”  If eligible for IBR, borrower’s monthly payment will be determined by a formula that takes into account household size and adjusted gross income. Increases in income will impact the required monthly payment amount  Unpaid balance may be forgiven after 25 years of scheduled monthly payments (taxable event)

Pay As You Earn  Available to new Direct loan borrowers (except Parent PLUS) experiencing financial hardship  No loan balance as of October 1, 2007, and  Received a Direct loan on or after October 1, 2011  Borrower qualifies if annual monthly student loan payments exceed 10% of “discretionary income”  Similar to IBR, borrower’s monthly payment will be determined by a formula that takes into account family size and adjusted gross income. Increases in income will impact the required monthly payment amount  Unpaid balance may be forgiven after 20 years of qualifying repayment (which is a taxable event) 14

Public Service Loan Forgiveness 120 qualifying payments on Direct Loans while on qualified repayment plans while working at a qualified employer. Borrower must also be employed by a qualifying organization at the time that the borrower applies for and receives PSLF According to the IRS, the forgiven amount is not treated as taxable income Source: Slide 39, FSA Conference 213, “Pay As You Earn & Other Income-Driven Repayment Plans”

Public Service Loan Forgiveness Qualifed employer:  Any government organization  501(c)3 not-for-profit organization  Other not-for-profit organizations providing specific qualifying services Borrower can work at multiple organizations  Does not matter what the borrower’s job duties are Source: Slide 43, FSA Conference 213, “Pay As You Earn & Other Income-Driven Repayment Plans”

Public Service Loan Forgiveness Qualified Repayment Plans  10 year standard  ICR  IBR  Pay As You Earn  Others>= 10-Year Standard (Any other Direct Loan Repayment Plan, but only payments that are at least equal to the standard payment)  Source: Slide 41, FSA Conference 213, “Pay As You Earn & Other Income-Driven Repayment Plans”

IBR and PSLF FAQ’s Federal Student Aid Public Service Loan Forgiveness Frequently Asked Questions ublic-service-loan-forgiveness.pdf ublic-service-loan-forgiveness.pdf Income-Based Repayment Program Questions and Answers ublic-service-loan-forgiveness.pdf ublic-service-loan-forgiveness.pdf

Student Loan Calculators Department of Education loans/understand/plans/income- based/calculator loans/understand/plans/income- based/calculator IBRinfo.org

“After Stafford” or Gap Counseling  Parent PLUS  Home Equity Line of Credit  Retirement Plan Loans  Roth IRA  401(k)  Private Student Loans  Importance of Providing Planning Framework 20

Parent PLUS Parent PLUS Loans  Loans to parents of dependent students.  Loan limits are up to the cost of education less any financial aid received.  Interest rate is 6.41% fixed* for  Repayment begins within 60 days of full disbursement. Payments may be deferred while the student is in school.  FAFSA completion is required. 21 *Interest rates recalculated annually and are effective July 1st based on the 10-year Treasury note index plus 4.60%, capped at 10.50%

Private Loans Private Loans (sometimes called Alternative Loans) are credit based loans from a bank or credit union.  More thorough underwriting process than PLUS to include debt to income and credit score analysis  Students often require a cosigner  Rates and fees, if any, are set based on the credit worthiness of borrower and/or cosigner 22

Education Financial Planning Best Practices  Develop a 4 year plan  Families often focus just on the upcoming semester  Connect your plan to expected future income and future student loan payments 23

Questions? Thank you for attending! John Brown: Jeff Johnston: 24