1. Student Loans 101: Know Before You Borrow Revised 9/2013

2. Agenda Financial Aid OverviewTypes of Student LoansGetting a Student LoanAfter the Loan: Rights and Responsibilities

3. Financial Aid: Education Pays Postsecondary degrees lead to greater weekly earnings Source: Bureau of Labor Statistics, Current Population Survey, 2012.

4. Financial Aid: Education Costs

5. Financial Aid Paying for College Family Financing =

6. Financial Aid: The Hierarchy Low High Private LoansPLUS LoansUnsubsidized Stafford LoansSubsidized Stafford LoansPerkins LoansSelf-Help Aid: Work StudyGift Aid: Scholarships COST AVAILABILITY Gift Aid: Grants *Need-based *Available to everyone *On financial aid award letter

7. Agenda Financial Aid OverviewTypes of Student LoansGetting a Student LoanAfter the Loan: Rights and Responsibilities

8. Student Loans: Misconceptions Some say…But really… College is not worth the cost College graduates are more likely to obtain higher- paying jobs and keep them during periods of high unemployment. Student debt is badIf you borrow responsibly and take advantage of applicable repayment options, you can manage student debt. Remember, it’s an investment! Dropping out of college=no more student debt Student loans don’t away just because you don’t finish. Low-income students don’t have to borrow money to go to college Every student has to invest to go to college. Need- based aid often doesn’t cover the entire cost of attending college.

9. Student Loans: FFELP vs. Direct Before July 1 st, 2010:After July 1 st, 2010 (today) Federal Family Education Loan Program (FFELP)Federal Direct Student Loans:  Higher interest rates on PLUS loans  Different repayment options  Must be repaid, with interest  Origination fee  No co-signer required  Multiple payment options  Not discharged in bankruptcy

10. Student Loans: Federal Overview Low High Private LoansPLUS LoansUnsubsidized Stafford LoansSubsidized Stafford LoansPerkins LoansSelf-Help Aid: Work StudyGift Aid: Scholarships COST AVAILABILITY Gift Aid: Grants

11. Student Loans: Perkins Perkins AvailabilityNeed Based Interest5% Fixed Subsidized?Yes $/year Maximum $5,500 (undergraduate) $8,000 (graduate) Total Maximum $27,500 over 4 years (undergraduate) $60,000 (graduate) Grace Period9 months Options Loan forgiveness or cancellation for certain careers Fixed Rate: Interest rate does not change from year to year, but remains constant over the life of the loan Grace Period: The period of time between full-time enrollment and when you are required to make your first payment.

12. Student Loans: Subsidized Stafford Subsidized Stafford/Direct AvailabilityNeed Based Interest3.86% Fixed Subsidized?Yes (while in-school only) $/year MaximumVaries depending on year in school Total Maximum$23,000 Grace Period6 months Options Unavailable for graduate students Interest not subsidized during grace period Subsidized: The amount borrowed does not accrue interest until you graduate, leave school, or drop below full-time enrollment.

13. Student Loans: Unsubsidized Stafford Unsubsidized Stafford AvailabilityAvailable to Everyone Interest 3.86% fixed (undergraduate) 5.41% fixed (graduate) Subsidized?No $/year MaximumVaries depending on year in school Total Maximum $ 31,000 (undergrad) $138,500 (graduate) Grace Period6 months Options Loan forgiveness available for certain careers Unsubsidized: Interest will accrue on the loan amount while you are in school. Calculating Interest: Principal amount - $3,000 w/ 3.86% interest Year 1: $3,000 Interest for 1 st year: 3000 x 0.0386 = $116 Interest payment: $5/month Remaining Interest for 1 st year: $116 - $60 = $56 Year 2: $3,000 + $56 = $3,056 Interest for 2 nd year: 3084 x 0.0386 = $119 No interest payments during 2 nd year Year 3: $3,056 + $119 = $3,175 Interest for 3 rd year: 3,175 x.00386 = $123

14. Student Loans: Stafford Limits Dependent Undergraduate Independent Undergraduate Graduate Student 1 st Year$5500 $3500 subsidized $9500 $3500 subsidized $20,500 2 nd Year$6500 $4500 subsidized $10,500 $4500 subsidized $20,500 3 rd Year +$7500 $5500 subsidized $12,500 $5500 subsidized $20,500 Maximum Total of Stafford Loans $31,000 $23,000 subsidized $57,500 $23,000 subsidized $138,500 Stafford Loan Limits per Year in School

15. Student Loans: PLUS Loans PLUS Availability No, Credit Check Required Interest 6.41% Fixed Subsidized? No $/year Maximum Gap in Financial Aid Total Maximum Gap over period you are in school Grace Period None, repayment beings immediately Options For parents and graduate students Repayment begins immediately Gap: The difference between the financial aid offered to you and the cost of attendance.

16. Student Loans Types of Student Loans PerkinsSubsidized Stafford Unsubsidized Stafford PLUS AvailabilityNeed-Based Everyone Everyone, Credit Check Required Interest5% fixed3.86% fixed 5.41% fixed (grad) 6.41% fixed Subsidized?YesYes (while in school)No $/year Maximum $5,500 (undergrad) $8,000 (graduate) Varies depending on year in school Gap in Financial Aid Total Maximum $27,000$23,000 $31,000 (undergrad) $138,000 (grad) Gap for 4 years Grace Period9 months6 months None, repayment immediate Options Loan Forgiveness or cancellation for certain careers Unavailable for grad students. Interest not subsidized during grace period Loan Forgiveness available for certain careers For parents and graduate students. Repayment begins immediately.

17. Student Loans: Private Loans Low High Private LoansPLUS LoansUnsubsidized Stafford LoansSubsidized Stafford LoansPerkins LoansSelf-Help Aid: Work StudyGift Aid: Scholarships COST AVAILABILITY Gift Aid: GrantsPrivate Loans

18. Student Loans: Private Loans  Compare interest rates  Large loans sometimes required to access lower interest rates  Private interest rates more likely to be variable  Compare fees  Private loans usually associated with higher fees  Compare grace periods  You may not be able to predict what will happen during your college career. Some private loans may have you paying back before you are finished with school.  Compare repayment options  Government loans offer options for repayment, deferment, forbearance, forgiveness, consolidation. Private loans don’t.  Consider the sustainability  Will I have to continue borrowing private loans?  Compare interest rates  Large loans sometimes required to access lower interest rates  Private interest rates more likely to be variable  Compare fees  Private loans usually associated with higher fees  Compare grace periods  You may not be able to predict what will happen during your college career. Some private loans may have you paying back before you are finished with school.  Compare repayment options  Government loans offer options for repayment, deferment, forbearance, forgiveness, consolidation. Private loans don’t.  Consider the sustainability  Will I have to continue borrowing private loans? Should I consider a private loan?

19. Agenda Financial Aid OverviewTypes of Student LoansGetting a Student LoanAfter the Loan: Rights and Responsibilities

20. Financial Aid Overview Loan Entrance Counseling Master Promissory Note Disbursement notice

21. Agenda Financial Aid OverviewTypes of Student LoansGetting a Student LoanAfter the Loan: Rights and Responsibilities

22. Rights  Copies of your promissory notes  Loan disbursement notification  Loan disclosure statement  Repayment schedule  Grace period  Deferment or forbearance  Prepay without penalty  Notification if loan is sold or transferred  Consolidate loans  Notification when loan is paid in full

23. Responsibilities  Pay back your loan in full  Stay informed about:  Loan balances  Payment amounts  Notify your loan servicer:  Name or contact info changes  Graduation, leaving school, transferring to another school or dropping below half-time enrollment  Trouble with loan payments

24. Responsibilities: Borrow Responsibly! Cabinet MakerHistory TeacherDentist What do you expect to earn when you graduate? Also consider, depending on the demand for your career, how long it may take you to find a job. Entry-level salary: $25,100/year $2,091/month Entry-level salary: $44,500/ year $3,708/month Entry-level salary: $118,300/year $9,858/month How much do you expect to have to borrow? What kind of school will you attend and for how long? How much will you have to borrow each year? $3,000/year for a 2- year program @ a community college = $6,000 total $5,500/year for 4 years @ a state school = $22,000 total $5,500/year for 4 years @ a state school + $20,500/year for 4 years @ a state school =$104,000 total Calculate what your estimated monthly payments will be once you start repayment. Look online for student loan calculators to help with this. $69.75/month$255.73/month$1,208.92/month Calculate between 8-10% of your monthly income. $167.28-$209.10$296.54-$370.80$788.64-$985.80

25. Responsibilities: Borrow Responsibly! Cabinet MakerHistory TeacherDentist What do you expect to earn when you graduate? Also consider, depending on the demand for your career, how long it may take you to find a job. Entry-level salary: $25,100/year $2,091/month Entry-level salary: $44,500/ year $3,708/month Entry-level salary: $118,300/year $9,858/month How much do you expect to have to borrow? What kind of school will you attend and for how long? How much will you have to borrow each year? $3,000/year for a 2- year program @ a community college = $6,000 total $5,500/year for 4 years @ a state school = $22,000 total $5,500/year for 4 years @ a state school + $20,500/year for 4 years @ a state school =$104,000 total Calculate what your estimated monthly payments will be once you start repayment. Look online for student loan calculators to help with this. $69.75/month$255.73/month$1,208.92/month Calculate between 8-10% of your monthly income. $167.28-$209.10$296.54-$370.80$788.64-$985.80 Can they afford it? What other financial responsibilities or choices may come into play?

26. Responsibilities: Debt Levels Key Points:  Choose a school and program wisely.  Only borrow what you need.  Find out how much your total debt level should be.  How much income will I have?  How much of my income am I willing to spend on loans?  How much can I borrow before my loans are no longer affordable?  Student loan payments should be no more than 8-10% of your monthly income.  Make and keep a budget to work with those debt levels.

27. Responsibilities: Making Informed Choices  Borrow for direct educational costs only  Work during college  Pay unsubsidized loan interest while enrolled  Compare repayment plans and monthly payment amounts based on what you expect to borrow  Reduce expenses  Learn to manage money well

28. Responsibilities: Repayment Terms Repayment The process of paying back your loans or the period in which you pay back your loans. Different options may be available to fit your situation. Consolidation Creates one large loan with a potentially longer term out of your smaller loans. Deferment Suspends repayment for in-school periods, periods of military service, and economic hardship. ForbearanceSuspends repayment due to financial difficulty. DischargeEliminates any further repayment. ForgivenessReduces any remaining repayment. Default When you fail to make payments on your loan as scheduled according to your promissory note.

29. Responsibilities: Repayment Repayment Plan StandardGraduatedIncome- Contingent ExtendedIncome- Based Pay As You Earn Term10-year term Up to 25- year term Up to 20- year term Minimum Payment At least $50/month Interest payments ($25 minimum), gradually increasing over time At lease $5/month. Depends on family size, adjusted gross income, loan debt Either fixed or graduated payments. Payments depend on family size, adjusted gross income, loan debt Caps monthly payments at 10% of monthly income. Additional Info “Cheapest” for borrowers Later payments cannot be more than 3x earlier payments Borrower must reapply each year For borrowers with over $30,000 in loans Loans must present “partial financial hardship” Only for new borrowers as of 10/1/07 who received loans after 10/1/11. All repayment plans except the standard plan require you to apply for them

30. Repayment: Consolidation  Direct (current)  Consolidates all federal student loans into one big loan  Interest rate the “weighted average” of all loans  Same repayment options as Federal Direct  May reduce monthly payments  Consolidating PLUS loans negates eligibility for income- based repayment plans  Direct (current)  Consolidates all federal student loans into one big loan  Interest rate the “weighted average” of all loans  Same repayment options as Federal Direct  May reduce monthly payments  Consolidating PLUS loans negates eligibility for income- based repayment plans Consolidation may lower monthly loan payments.

31. Responsibilities: Deferment, Forbearance, Discharge Deferment Postpones repayment. Interest subsidy resumes on subsidized portion. Requested by the borrower while in school, on active military duty, or experiencing temporary financial difficulties. Forbearance Postpones repayment due to economic hardship. Interest accrues. Requested by the borrower. Discharge Eliminates any further repayment under very limited conditions.

32. ProgramCondition Teacher Up to $5,000 in Stafford Loans after five consecutive years teaching in elementary or secondary school serving low-income families. Up to $17,500 in Stafford Loans after five consecutive years in a school serving low- income families as a highly qualified full-time secondary school math or science teacher or as a highly qualified special education teacher. National Service $5550 scholarship or loan forgiveness per 12-month AmeriCorps term. 70% of Perkins loan cancelled for Peace Corps service. Perkins Loan Cancellation Up to 100% of loan cancelled for five years of employment in specific positions, including teaching in low-income schools, nursing, and law enforcement. Public Service After 120 on-time monthly payments while employed by the federal or state government, or by a 501c3 nonprofit. Loan must be in repayment status. Amount forgiven is not taxable. Income-Based, Income- Contingent and Pay As You Earn After 25 years of making on-time payments in these programs any remaining balance will be forgiven. Amount forgiven is taxable under current law. Does not apply to loans currently in default status. For Pay As You Earn, the balance is forgiven after 20 years. Responsibilities: Forgiveness

33. Wrap-Up: Summary  Take advantage of “free” money.  Complete the FAFSA every year.  Borrow wisely.  Assess your spending and stick to your budget.  You have options with student loans. Know them!  Ask for help!

34. Resources  Studentaid.gov – Federal Student Aid Website  Your college financial aid office  Finaid.org  StudentLoanBorrowerAssistance.org  MappingYourFuture.org  IRS.gov  Student Loan Ombudsman (info on studentaid.gov)

35. A nonprofit corporation, USA Funds ® works to enhance postsecondary education preparedness, access and success by providing and supporting financial and other valued services.