1. MoneyCounts: A Financial Literacy Series
Student Loans
11-A Grange Building
University Park, PA 16802
financialliteracy.psu.edu

2. Description
A Student loan is a type of loan designed to help students pay for post-secondary education costs such as tuition, books, supplies, and living expenses
If you apply for financial aid, your school will likely include student loans as part of your financial aid package
It is important to understand what types of loans you are offered, and what types of repayment plans available to students and parents

3. Learning Outcome
Understand the types of Loans available to college students and their parents
Understand the steps to take before students borrow loans
Understand the relationship between future income and current loan borrowing
Understand the various loan debt process and re-payment plans available to students

4. Who are you borrowing from?

5. What is the difference? search for college financing
Federal Loans
Private Loans
Lower interest rate
No credit check or co-signer needed for students
Repayment after graduation or dropping below half-time
FAFSA application is needed each year
Sub, Unsub, Parent loans
Different loans depending on institutions
Higher interest rate
Terms can be complicated
May include pre-payment penalty
Requires a co-signer for students

6. Steps before you borrow loans!
Have a family financial meeting
Make a financial plan to coincide with your academic plan
Factor in family support and saving
Part-time employment
Search for Scholarships and Grants
Check with your College (Penn State)
Check with your community, civic organizations, church, family members

7. Terminology

8. What you need to know!

9. What you need to do!
The first step in getting student aid is to complete FAFSA at
You must renew every year!
Complete entrance counseling
Complete loan agreement (MPN)
Complete financial awareness counseling
Complete exit counseling (graduation)
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10. Federal aid eligibility!
The William D. Ford Federal Direct Loan Program is the largest federal student loan program. Under this program, the U.S. Department of Education is your lender.
No credit check is necessary for the student borrower
Credit check is required for PLUS (Parent or Graduate)
What you are offered in federal aid is based on your eligibility, what you accept is based on your preference and choice!
You do NOT have to accept all loans offered to you!
Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans

11. Subsidized Unsubsidized
First year
$3,500
$6,000
Second year
$4,500
Third year
$5,500
Beyond
$7,000
Maximum
$23,000 Loan 6.8% (2013)
$34,500
Plus accrued (2013)
Summary
$264.68
$383.02
Monthly Principal & Interest
Total of 120 Payments
$31,762.00
$45,962.49
Total Interest Paid
$8,761.60
$11,462.49

12. Be a responsible borrower
Make a financial plan & an academic plan
Calculate your “true” cost of attendance (Sort your wants and needs)
Create a budget
Know your loan servicer
Keep track of total amount borrowed

13. Investing in your future!
Follow your passion, but make a plan for future financial earning and stability
Know your market value after graduation
Invest in the practical side of education
Rule of thumb
e.g.) First year gross salary is $40,000, (net is $28,000); Debt should not exceed $28,000 total
Total borrowing should not exceed first year salary (net)
Total Borrowing
First year salary (net)

14. Rules for the student loan repayment
Get FSA ID and enter the National Student Loan Data System
Complete/update your information
Understand the financial awareness counseling
Reconcile your loans with your records
Use the payment estimator tool
Find your Student Loan Servicer
Familiarize yourself with your loan servicer
Understand various repayment plans
Research various programs (consolidation, deferment, forbearance, public service loan forgiveness, etc.)
Follow similar steps for private loans as well

15. How many loans do you have?

16. Who is your loan servicer?

17. Which repayment plan to choose?
Standard Repayment Plan
Graduated Repayment Plan
Extended Repayment Plan
Income-based Repayment Plan
Pay As You Earn Repayment Plan
Income Contingent Repayment Plan
Income Sensitive Repayment Plan
Repayment Plans -Office of Federal Student Aid

18. What Happens if I Don’t Pay My Student Loan Back?
Borrowers who default on their student loans are reported to credit bureaus
Your credit rating and future borrowing ability will be negatively impacted
Legal action can be taken to require payment through garnishment of wages and withholding of tax refunds
Student Loans are NOT dischargeable through bankruptcy!

19. Tips for success!
Increase your emergency fund from 10% to 20% of your net income
Start paying into the fund as soon as you start earning income (3 months payments)
Pay off credit card debt before you enter student loan repayment
Remain in touch with your servicer and notify them of any financial problems, do not default at any cost
Depending on your income level, speed pay your student loans so you can free money for other future commitment

20. Loan-Debt repayment chart
Amount Borrowed
Number of Payments
Estimated Monthly Payments*
Recommended Annual Salaries**
$ 5,000
120
$55.51
$8,326.50
$10,000
$111.02
$16,653.00
$15,000
$166.53
$24,979.35
$20,000
$222.04
$33,306.00
$25,000
$277.55
$41,632.50
$30,000
$333.06
$49,959.00
$35,000
$388.57
$58,285.50
$40,000
$444.08
$66,612.00
$45,000
$499.59
$74,938.50
$50,000
$555.10
$83,265.00
$55,000
$610.61
$91,591.50
$60,000
$666.12
$99,918.00

21. Repayment Plan
Term (years)
Monthly Payment
Interest Paid
Total Paid
Standard 10
$575
$19,048
$69,048
Graduated Standard
$395 (initial) $863 (final)
$22,778
$72,778
Graduated Extended 25
$283 (initial) $496 (final)
$62,770
$112,770
Extended
$347
$54,112
$104,112
Income-Contingent
15.8
$403 (initial) $443 (final)
$32,397
$82,397
Income-Based
$234 (initial) $477 (final)
$74,341
$104,812 ($21,722 forgiven)
*Loan of $50,000 *AGI $35,000

22. National Student Loan Data System Allows borrowers to look up information about their Title IV federal student loans FREE
Federal Student Aid Information Center/Student Aid on the Web Provides information on federal student loans FREE
Direct Loan Servicing Center Allows borrowers with Direct loans to make payments online and manage their account FREE
Department of Education’s Default Resolution Group Provides information on defaulted student loans FREE
Federal Direct Consolidation Loans Information Center Provides information on the Direct consolidation loan program FREE

24. MoneyCounts: A Financial Literacy Series
Comments and questions
11A Grange Building
University Park, PA 16802
financialliteracy.psu.edu