Industry Series ©2005 Texas Guaranteed Student Loan Corporation FFELP Loan Packaging

Industry Series Course objectives Learn the components of the cost of attendance and basic FFELP packaging principles Discuss current and future Stafford annual and aggregate loan limits Discuss PLUS loan “limits” Engage in packaging examples including Stafford and PLUS loans Learn tips for handling overawards

Cost of attendance and basic packaging principles

FFELP Loan Packaging Industry Series Cost of attendance (COA) components Tuition and fees Room and board Books and supplies Transportation Personal/miscellaneous expenses Loan fees

FFELP Loan Packaging Industry Series COA may also include allowances for: Dependent care expenses Disability related expenses Study-abroad expenses Effective July 1, 2006, a one-time cost to the student of obtaining his/her first professional credentials

FFELP Loan Packaging Industry Series Basic packaging “formula” Cost of attendance (COA) ― Expected Family Contribution (EFC) ― Estimated Financial Assistance (EFA) Financial need

FFELP Loan Packaging Industry Series Before packaging Stafford loans for undergrads School that participates in Pell Grant Program must determine the student’s eligibility for Pell If student is eligible for Pell, the amount must be included in student’s estimated financial assistance (EFA) when determining student’s Stafford loan eligibility

FFELP Loan Packaging Industry Series Before packaging unsub Stafford loans A school must determine a student’s eligibility for a subsidized Stafford loan

Stafford loan annual and aggregate limits

FFELP Loan Packaging Industry Series Base Stafford loan annual limits (undergrad) Maximum amount that dependent undergraduate student may be awarded in Stafford loan (in sub or unsub or both): Grade levelBefore 7/1/07On/after 7/1/07 1 st year$2,625$3,500 2 nd year$3,500$4,500 3 rd year$5,500 4 th year and beyond $5,500

FFELP Loan Packaging Industry Series Additional unsubsidized Stafford loan annual limits (undergrad) For independent students and students whose parents are unable to obtain a PLUS loan Provides unsubsidized Stafford loan funds in addition to the Stafford base annual loan limits – 1 st year: $4,000 – 2 nd year: $4,000 – 3 rd year: $5,000 – 4 th year and beyond: $5,000

FFELP Loan Packaging Industry Series Important note At school with 2-year programs, 2 nd year limits are highest that can be offered – No matter how long it takes student to complete program

FFELP Loan Packaging Industry Series Multiple programs A school may not link separate, stand-alone programs of study to allow a student to qualify for a higher annual loan limit than the student would otherwise be eligible to receive

FFELP Loan Packaging Industry Series Preparatory/certification annual limits For students who are: – Taking preparatory courses to be able to enroll in an undergraduate or graduate program, or – Taking courses to obtain a teacher certification

FFELP Loan Packaging Industry Series Preparatory/certification annual limits Undergrad preparatory coursework Grad preparatory coursework Teacher certification Base Stafford limit $2625$5500 Additional unsub Stafford limit $4000$5000* *These limits will increase to $7000 effective 7/1/07

FFELP Loan Packaging Industry Series Stafford loan annual limits (grad) Maximum amount that graduate student may be awarded in Stafford loan funds: *No more than $8,500 of total can be subsidized Before 7/1/07On/after 7/1/07 Sub and unsub total*$18,500$20,500

FFELP Loan Packaging Industry Series Stafford loan aggregate limits (undergrad) Maximum that a dependent student can borrow in Stafford loan funds (sub or unsub or both) as an undergrad― $23,000 Maximum that an independent student can borrow in Stafford loan funds as an undergrad― $46,000 (no more than $23,000 of which can be subsidized)

FFELP Loan Packaging Industry Series Stafford loan aggregate limits (grad) Maximum that an independent student can borrow in Stafford loan funds as a grad*― $138,500 (no more than $65,500 of which can be subsidized) *Including any Stafford loan funds borrowed as an undergrad

FFELP Loan Packaging Industry Series PLUS loan annual/aggregate “limits” PLUS loan is available to: – Parents of dependent undergraduate students – Graduate/professional students (effective 7/1/06) There is no annual or aggregate limit for PLUS loans PLUS loans are only limited by COA minus estimated financial assistance (i.e., any other aid student is receiving)

Basic packaging examples

FFELP Loan Packaging Industry Series Awarding subsidized Stafford Student must have financial need to be awarded a subsidized Stafford loan Example (2 nd year, dependent undergrad student): COA = $10,000 EFC = - $4,000 Other aid =- $2,000 Need =$ 4,000 School may award $3,500 in subsidized Stafford loan

FFELP Loan Packaging Industry Series Awarding unsubsidized Stafford Student does not have to have financial need to be awarded an unsubsidized Stafford loan Example (1 st year, dependent undergrad student): COA =$10,000 EFC =-$ 8,000 Other aid =-$ 2,000 Need =$ 0 School may award $2,625 in unsubsidized Stafford loan

FFELP Loan Packaging Industry Series Important note A student can borrow an unsubsidized Stafford loan to replace all or part of the EFC

FFELP Loan Packaging Industry Series Awarding sub and unsub COA =$20,000 EFC =-$5,000 Other aid =-$8,000 Need =$ 7,000 Example (graduate student) School may award $12,000 in Stafford ($7,000 sub and $5,000 unsub)

FFELP Loan Packaging Industry Series Awarding PLUS COA = $10,000 Other aid (sub Stafford) = -$ 2,625 Unmet COA= $ 7,375 $7,375 (maximum PLUS loan that can be awarded)

FFELP Loan Packaging Industry Series Important note A PLUS loan borrower can borrow a PLUS loan to replace all or part of the EFC

Overawards

FFELP Loan Packaging Industry Series Overawards An overaward occurs when: – A school has awarded a Stafford loan in excess of a student’s annual or aggregate loan limit – A school has awarded a student need-based aid in excess of his or her financial need – A school has awarded a student in excess of his or her COA

FFELP Loan Packaging Industry Series Preventing overawards A school must have procedures in place to ensure that it does not overaward a student

FFELP Loan Packaging Industry Series Resolving overawards An overaward may exist after a school has awarded a student if: – The student’s EFC changes – The student receives aid that was not previously reported to the school

FFELP Loan Packaging Industry Series Resolving overawards School must reduce or eliminate overaward using one of these options: – Use unsub or PLUS to replace EFC, if not already done – Return the full undelivered amount of loan to lender and ask lender to reissue only the portion for which borrower is eligible – Return only the portion of the disbursement for which borrower is no longer eligible

FFELP Loan Packaging Industry Series Overaward example COA = $10,000 EFC = -$ 4,000 Need= $ 6,000 School awards student sub Stafford of $2,625 After awarding student, school finds out student is receiving $4,000 scholarship

FFELP Loan Packaging Industry Series Overaward example (cont’d.) COA = $10,000 EFC = -$ 4,000 Other aid = -$ 4,000 Need = $ 2,000 School revises aid package to $2,000 sub and $625 unsub

FFELP Loan Packaging Industry Series Questions? To order additional copies, or to request permission to reproduce any of the information provided, please call TG Communications at (800) ©2005 Texas Guaranteed Student Loan Corporation