1. Student Loans Information from http://studentaid.ed.gov/types http://studentaid.ed.gov/types

2. What percentage of four-year college graduates have student loan debt? ▫70%. More than 37 million Americans are currently paying off loans.

3. About how much student loan debt does the average college grad carry? ▫$27,000. You’ve probably heard horror stories about people with over $100,000 in debt, but that’s a rare case. There are lots of things you can do to make sure it doesn’t happen to you. $27,000 is a lot of money, but there are ways to make your payments manageable.

4. About how much more do annual tuition and fees cost for an out-of-state school versus an in- state school? ▫$13,000. The average in state tuition for a public 4 year university is $8,655 and out of state is $21,706 according to the College Board.

7. Financial Aid Financial aid is money to help pay for college or career school. Aid can come from the U.S. federal government,U.S. federal government the state where you live,state where you live the college you attend, orcollege you attend a nonprofit or private organization.nonprofit or private organization

8. Federal Aid When you fill out the FAFSA which three types of aid are you applying for? Grants—financial aid that doesn’t have to be repaid (unless, for example, you withdraw from school and owe a refund)Grants Work-Study—a work program through which you earn money to help you pay for schoolWork-Study Loans— borrowed money for college or career school; you must repay your loans, with interestLoans

9. Federal Pell Grant A Federal Pell Grant, unlike a loan, does not have to be repaid. ▫Awarded only to undergraduate students who have not earned a bachelor's or a professional degree.

10. Student Loans If you apply for financial aid, you may be offered loans as part of your school’s financial aid offer. If you decide to take out a loan, make sure you understand who is making the loan and the terms and conditions of the loan. Student loans can come from the federal government or from private sources such as a bank or financial institution. Borrow only what you absolutely need to pay for college.

11. Federal Student Loans Take out loans from the federal government first. ▫Loans made by the federal government, called federal student loans, usually offer borrowers lower interest rates and have more flexible repayment options than loans from banks or other private sources. ▫The interest rates do not change during the life of the loan.

12. Federal Student Loan Types Subsidized Student Loans: Loans backed by the government and will not accrue interest until you graduate and start making payments Unsubsidized Student Loans: Loans will start accruing interest from the time the loan is taken out; you must reapply for student loans annually, and the terms of these loans, including the interest rate, may change each year

14. Federal Student Loan Types PLUS loans are federal loans that graduate or professional degree students and parents of dependent undergraduate students can use to help pay education expenses. ▫The U.S. Department of Education is the lender. ▫The borrower must not have an adverse credit history. ▫The maximum loan amount is the student’s cost of attendance (determined by the school) minus any other financial aid received.

15. Federal Student Loan Types Perkins Loan: low-interest federal student loans for undergraduate and graduate students with exceptional financial need. ▫Interest rate for this loan is 5%. ▫Not all schools participate in the Federal Perkins Loan Program. ▫Your school is the lender; you will make your payments to the school that made your loan or your school’s loan servicer. ▫Funds depend on your financial need and the availability of funds at your college.

16. Private Student Loans Offered by banks, credit unions, and private non-profit lenders Typically have a higher variable interest rate and fewer deferment options.

17. Student Loans Remember, student loans are real loans, just like car loans or mortgages. You must repay a student loan even if your financial circumstances become difficult. Your student loans cannot be canceled because you didn’t get the education or job you expected, or because you didn’t complete your education.

18. Check Point What is the difference between federal and private student loans? Would you rather have a grant or student loan? Why? What eligibility requirement exists for the Perkins loan? What advice would you give to a high school senior who is about to take out student loan debt?

19. Student Loan Repayment Tips Don’t Miss Payments ▫One quarter to one third of borrowers are late on the very first payment on their student loans ▫Most student loans have a six month grace period before repayment begins and students often move after graduation, losing track of bills Set up an automatic direct debit from your checking account to make the monthly payments on your loans

21. Federal Loan Repayment Plans Standard Repayment (10 year term) Extended Repayment (10 to 30 year term) Income-Based Repayment ▫Payments based on income, not amount owed ▫Lower payment than income-contingent repayment and income-sensitive repayment Graduated Repayment ▫Initially low payments are increased every two years Either income-based or extended repayment yields the lowest payment for most borrowers

22. Example Repayment Plans Repayment Plan Monthly Loan Payment Total Interest Total Payments Standard – 10 Years$288$9,524$34,524 Extended – 12 years$254$11,639$36,639 Extended – 15 years$222$14,946$39,946 Extended – 20 years$191$20,802$45,802 Extended – 25 years$174$27,054$52,054 Extended – 30 years$163$33,674$58,674 Assumes $25,000 unsubsidized Stafford loan at 6.8% interest and ignores balance-based setting of extended repayment term.

23. Accelerate High Interest Debt First After you make the required payments, direct any extra money toward accelerating repayment of the most expensive debt first The most expensive debt is the debt with the highest interest rate, not the lowest monthly payment, usually credit cards and private loans

24. Student Loan Consolidation After graduation many choose to consolidate student loans ▫Consolidate: get a new student loan that pays off all the existing student loans When you consolidate you want a fixed interest rate and lower payments than you would have had with separate loans You give up the option of deferment or forbearance when you consolidate and your grace period ends

25. Loan forgiveness A program by the federal government to encourage young people to consider giving back to society by performing public service ▫Examples: Job Corps or a job in education

26. If you can’t repay your loans… Deferment ▫A deferment is a period during which repayment of the principal and interest of your loan is temporarily delayed. Forbearance ▫If you can't make your scheduled loan payments, but don't qualify for a deferment, your loan servicer may be able to grant you a forbearance. With forbearance, you may be able to stop making payments or reduce your monthly payment for up to 12 months. Interest will continue to accrue.

27. Dealing with Financial Difficulty Use a temporary suspension of loan payments for short-term financial difficulty ▫Economic Hardship Deferment (3 year limit) ▫Forbearances (5 year limit) Change repayment plans for longer-term financial difficulty ▫Income-based repayment reduces the monthly payment based on your discretionary income ▫Extended repayment reduces the monthly payment by increasing the loan term to 12-30 years All of these options increase the cost of the loan

28. Bankruptcy Discharge Less than 1% of bankrupt borrowers succeed in getting student loans discharged because of the requirement to demonstrate undue hardship in an adversarial proceeding ▫Undue hardship is a present and future inability to repay the debt and maintain a minimal standard of living even after exhausting options for repayment relief and cutting living costs

29. Check Point What is the difference between a deferment and forbearance? If you had the choice, which would you rather have? Why? What happens if you consolidate student loan debt? What is one strategy for repaying debt we discussed? What is a grace period? How does it apply to student loans?

30. Scenario 1 Anna is a high school senior who plans to go to UT in the fall. Her parents have saved up some money for her college education, but it will not be enough to pay for her tuition all four years. She does not believe she will qualify for need based assistance. What advice would you give Anna?

31. Scenario 2 Kara is a high school senior who plans to go to UTC in the fall. Based on her parent’s income she believes she may qualify for need-based assistance. What type of financial aid do you think Kara may be qualified for?

32. Scenario 3 Alyssa just graduated from college and got her first job, she has $45,000 in student loan debt, wants to buy a new car, and is considering opening up a retirement account. She has a disposable income of $300/month, what would you recommend she do with this money? Why?