1. Status Of Federal Student Loans Presented by: Trisha Malloy, Outreach Representative, FAME October 10, 2008

2. Basic educational loan information New loan limits Changes to the PLUS loan Current & expected changes to federal loan availability Agenda

3. Types of Federal Loans Federal Perkins Loan Federal Stafford Loan –Direct or FFELP –Subsidized & Unsubsidized Federal PLUS Loans –Direct or FFELP –Parent PLUS & Grad PLUS

4. Federal Perkins Loan Federally regulated Student is the borrower & must be enrolled at least half-time Money comes from the federal government and previously repaid Perkins loans at the school Only some schools have Perkins Loan Funds to offer to students

5. Federal Perkins Loan Must complete the FAFSA and meet eligibility guidelines Borrowers must complete a Master Promissory Note (MPN) - good for 10 years Disclosure form must be completed each year of borrowing Student will repay the loan to the school from which it was borrowed

6. Federal Perkins Loans Undergraduate: up to $5500* a year Graduate: up to $6000* a year * Amount actually received depends on financial need, amount of other aid and availability of funds at school

7. Federal Perkins Loan Fees & Repayment –5% Fixed Interest Rate –No fees –No interest accrues while in school –Up to 10 year repayment period depending on amount owed –Exit Interview must be completed once student is no longer enrolled at least half- time –Numerous deferment & cancellation provisions exist

8. Federal Stafford Loan – Direct or FFELP Many schools choose to participate in either Direct Loan Program or FFEL Program. –Direct Loans funded by the federal government – student repays the feds –FFEL Loans funded by banks and private lending institutions – student repays the lending institution Some schools choose to offer both programs to students. –Become more common over the past year with changes in lender programs.

9. Federal Stafford Loan Federally regulated Student is the borrower Student must be enrolled at least half-time Student must complete the FAFSA form each year Direct and FFEL Stafford Loans have same regulations and different funding source

10. Federal Stafford Loan – Direct or FFELP Two types of Stafford Loan: –Subsidized: Need-based –Unsubsidized: Can replace EFC or fill need. Maximum amount of Subsidized and Unsubsidized is determined based on: –Need –Grade Level Maximum –Aggregate Borrowing Limit

11. Federal Stafford Loan – Loan Limit Increases Effective 7/1/08 1 st Year - $5500 (no more than $3500 subsidized) 2 nd Year - $6500 (no more than $4500 subsidized) 3 rd, 4 th 5 th Year – $7500 (no more than $5500 subsidized) Dependent students whose parents are denied a PLUS loan and independent students still qualify for the additional $4,000 or $5,000 unsubsidized Stafford loan based on grade level.

12. Federal Stafford Loan – Aggregate Loan Limits Dependent Undergraduate Student: $31,000 (no more than $23,000 subsidized) Independent Undergraduate Student or Dependent Undergraduate Student whose parents are denied a PLUS Loan: $57,500 (no more than $23,000 can be subsidized) Graduate/ Professional Student: $138,500 (no more than $65,500 can be subsidized)

13. Stafford Loan Interest Rates Loans first disbursed between: –7/1/08 - 6/30/09 = 6% –7/1/09 - 6/30/10 = 5.6% –7/1/10 - 6/30/11 = 4.5% –7/1/11 - 6/30/12 = 3.4% –7/1/12 and after = 6.8% Unsubsidized remains at 6.8% fixed Rate Reductions apply to Undergraduate Subsidized Stafford Loans only.

14. Stafford Loan Fees Up to 1% origination fee deducted proportionately from each disbursement 1% default fee The origination fee will drop by.5% each July until it is phased out completely

15. Stafford Loan Repayment Student has between 10 and 25 years (up to 30 yrs. for direct loans) to repay, depending on the amount owed and the type of repayment plan selected Numerous deferment provisions as well as some cancellation provisions exist

16. Stafford Loan Application Student must complete the FAFSA Check with each individual school to determine Stafford Loan application process Student signs Master Promissory Note the first time they borrow and it is good for 10 years Entrance Interview is required the first time the student borrows Stafford Loan prior to receiving funds Exit Interview must be completed when the student is no longer enrolled at least half- time

17. PLUS Loan Program Direct or FFELP Schools may choose to participate in either Direct Loan Program or FFEL Program. –Direct Loans funded by the federal government – student repays the feds –FFEL Loans funded by banks and private lending institutions – student repays the lending institution Some schools choose to offer both programs to students. –Many schools historically offered FFEL PLUS loans even if they offered only Direct Loan Program Stafford Loans

18. Federal PLUS Loan Program There are 2 PLUS Loan Programs: –Parent PLUS Loans allow parents of dependent undergraduate students to borrow to pay for educational expenses. –Grad PLUS Loans allow graduate students to borrow to pay for educational expenses that are not covered by Stafford Loan or other financial aid.

19. PLUS Loan Program Changes Effective 7/1/2008: Lenders are allowed to consider parents eligible for PLUS loans, even if parent has adverse credit during the period 1/1/07 to 12/31/09 if the adverse credit was a result of being delinquent on mortgage payments. PLUS Loan grace period now allows parents to defer payments on a parent PLUS loan until six months after the student ceases to be enrolled at least ½ time – Accrued interest can be paid or capitalize quarterly

20. PLUS Loan Program Standard repayment – 10 years –Minimum $50 per month Interest accrues during periods of deferment Interest payments can be made during periods of deferment Interest may be capitalized no more frequently than quarterly

21. Current and Expected Changes to Federal Loan Availability 2008-09 Some students experienced delays in loan process and funding FAME continues to provide information and assistance to schools and students facing federal loan issues Extension of ECASLA (Ensuring Continued Access to Student Loans ACT) to include 2009/2010 Academic Year Loans will help the continuation of FFELP Loan Programs

22. Current and Expected Changes to Federal Loan Availability Some lenders have exited student loan market Some lenders have suspended student loan origination Many lenders have eliminated borrower benefit programs or significantly reduced these benefits Still many student lenders in the marketplace Many lenders are expecting to grow

23. Questions? Trisha Malloy Outreach Representative FAME tmalloy@famemaine.com 800-228-3734 ext. 3555