1. 2010 TASFAA New Aid Officer’s Workshop

2. 2 Student Loans Melet Leafgreen Assistant Director, Loan Programs TCU Financial Aid m.leafgreen@tcu.edu m.leafgreen@tcu.edu

3. Student Loans - Agenda Interest Rates, Fees, Counseling Federal Perkins Loan Federal Direct Parent PLUS & Grad PLUS Loan Federal Direct Sub & Unusb Stafford Loan –Loan Limits and Proration Requirements –Life Cycle of a Loan Unpaid Interest Accumulation Federal Direct Consolidation Loan Repayment Facts and Options Deferments and Forbearances Consequences of Default (borrower and school) 3

4. 4 Interest Rates & Fees Perkins Loans – no fees –Fixed IR 5% Direct Stafford Loans -.5% orig fee (actually 1.5% minus rebate of 1%)** –Fixed IR 4.5% for Undergrad Subsidized Loans –Fixed IR 6.8% for all other Stafford Loans Direct Parent Plus/Grad Plus – 2.5% orig fee (actually 4% minus rebate of 1.5%)** –Fixed IR 7.9% ** to retain rebates, borrowers must make first 12 payments on time (All above rates and fees effective 7/1/2010.)

5. Loan Counseling Entrance Counseling –First-time borrowers Inform them of their rights and responsibilities of taking out this loan Exit Counseling –All loan recipients that depart from your institution Graduate, withdraw, transfer, do not return (Stafford, Grad Plus, CAL, Perkins, Nursing Loans…) 5

6. Federal Perkins Loan Institution administers this loan Previous allocations came from the Dept of Ed, now schools operate this loan from repaid funds Fixed 5% interest rate Repayment begins 9 months after student ceases to be enrolled at least 1/2 time Minimum payment as low as $30 Maximum repayment term is 10 years 6

7. Parent Plus Loan Loan for parents of dependent students Parent borrower is fully liable for loan (with any endorser) FAFSA not required by regulation, but schools can require it if they wish Eligibility –Parent must be the natural or adoptive parent of the student, or spouse of one of those people –Parent must be a US Citizen, U.S. National or eligible NC –Parent must have no Title IV loans in default –Parent must be credit worthy, or have credit worthy endorser 7

8. Graduate Plus Loan Eligibility –Borrower must complete a FAFSA –U.S. Citizen attending at least half-time, seeking a Graduate or Professional degree –Borrower must pass a credit evaluation Loan Limits –COA less other aid Can be used when Stafford Annual and/or Aggregate limits have been met (but not exceeded). 8

9. 9 Federal Stafford Loan Terms U.S. Citizen, U.S. National or Eligible N.C. Enroll 1/2 time in a degree seeking program SAP - Satisfactory Academic Progress No default/ overpymt on any Title IV Aid Register with selective service Must complete FAFSA

10. Sub vs. Unsub Subsidized (Need-based) Unsubsidized (Non need-based) Interest: ED pays during In-school Grace Deferment Student pays during Repayment Interest: Student responsible for all Can be capitalized, or Student can choose to pay interest 10

11. 2010/2011 Stafford Loan Limits 11

12. Stafford Loan Proration Must occur when a student’s academic program is less than 1 year in length Must occur when a student is completing a remaining period of enrollment that is less than one academic year Standard proration formula: Amount of Stafford student could have for grade level ÷ 24 x number of enrolled hours 12

13. Stafford aggregate loan limits Current Sub & Unsub Sub may not exceed Undergrad Dependent $31,000$23,000 *Undergrad Independent $57,500$23,000 Grad and Professional $138,500$65,500 * And dependent student whose parent is unable to obtain a PLUS loan 13

14. FFELP Borrower School Lender Federal government Guarantor Servicer Secondary markets 14 Direct Lending Borrower School Federal Government Servicer Federal Stafford Loan

15. Lifecycle of a Direct Loan 15 Origination Phase - Borrower: FAFSA, MPN, Entrance (?) - School: Certification, Verify Elig., Delivery - ED: Disclosure, Provide Funds to school

16. Lifecycle of a Direct Loan 16 Interim Phase - In school, Grace Periods - Sub (interest paid on borrower’s behalf by fed. govt.) vs. Unsub (accrues interest) Repayment Phase - at end of grace

17. Unpaid Interest Example Independent Sophomore borrows $7500 and wants to know what his interest payments will be each quarter –Go to the Repaying my loans section on the MPN (or online www.aie.org  calculators)www.aie.org $7500 @ 6.8% = $39.67 + $500 @ 6.8% = $2.83 $39.67 + $2.83 = $42.50/month How much will I owe in interest with out making monthly payments? –3 years left in school, six month grace = 42 months X $42.50 = $1785 17

18. Federal Consolidation loan Federal education loans that may be consolidated ― FFELP― Perkins ― Direct― HEAL No minimum loan amount Thirty-year repayment (maximum) Same repayment schedules as Stafford Interest rate will be a fixed interest rate, capped at 8.25% A weighted average is used to figure the interest rate and then it is rounded up to the nearest 1/8 of a percent. 18

19. Maximum Repayment Of Consolidation Loans Under $7500 10 Years $7500 - $9999.99 12 Years $10000 - $19999.99 15 Years $20000 - $39999.99 20 Years $40000 - $59999.99 25 Years Over $60000 30 Years 19

20. Repayment of Federal Loans Stafford loan –Enters at end of grace period (6 months after student graduates or drops below half-time) Parent PLUS loan –Enters 60 days after full disbursement (parent can request deferment while student is enrolled at least half-time and during six months following that) Grad PLUS loan –Enters when borrower falls below halftime enrollment 20 10 year repayment period, $50 minimum, or interest accruing (whichever is larger)

21. Ways to Repay your Federal Loans Standard Plan – Monthly payment remains consistent for 10 years Graduate Plan – Monthly payments are lower at first but then increase over the repayment term Income-sensitive – Monthly payments are based on your monthly gross income Extended Plan – Monthly payments over a 25 year plan. Must have a debt greater than $30,000 Income Based Plan – (7/1/09) –Monthly payments will not exceed 15% of the amount by which your adjusted gross income exceeds 150% of the poverty line for your family size. 21

22. Deferments Period of postponing payments Federal government will pay interest for the borrower on Subsidized Stafford Entitlement Some possible deferments: - Education - Peace Corps/ Public Service/ Military - Economic Hardship 22

23. Forbearances Temporary cessation, reduction, or extension of payments Student is responsible for interest that accrues Borrower is willing but temporarily unable to pay 23

24. Default Failure to pay back student loan Student is considered in default after being delinquent for 270 days; lender may file claim as early as day 271 Student is susceptible to wage garnishment, seizure of income tax refunds, lottery winnings, license non- renewal, sued by DOE Student not eligible for fed. financial aid 24

25. Cohort default rate (CDR) Includes Stafford loans, and Stafford loans underlying consolidation loans (no Perkins or PLUS) CDR = % of borrowers who enter repayment in a given year who then default within that year or the next year (soon to be the next two years) High rate has consequences for schools 25

26. Alternative/ Private Loans 26 Designed to bridge the gap between other aid and total college costs Interest rates from 5% - 18%, usually based on Prime or LIBOR + margin (www.bankrate.com)www.bankrate.com Origination and repayment fees vary Co-borrower requirements (underwriting) Most now school-certified (lower risk) Three Disclosures Self-Certification Form

27. Federal Regulations 27

28. Questions ??????? 28 Melet Leafgreen m.leafgreen@tcu.edu m.leafgreen@tcu.edu