1. 1 G General Audiences All ages admitted. No content that would be objectionable to most parents. Polite language. No swearing. Only mild violence.

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3. 3 Stephen Brower Associate Director Financial Aid Hardin-Simmons University Financial Aid sbrower@hsutx.edu

4. 4 Terminology Terminology Federal Loans & Background Federal Loans & Background Life Cycle of a Loan Life Cycle of a Loan Entrance / Exit Counseling & MPN Entrance / Exit Counseling & MPN Federal Loans Types Federal Loans Types Perkins Perkins PLUS – undergrad & grad PLUS – undergrad & grad DL Terms & Comparison of Sub & Unsub DL Terms & Comparison of Sub & Unsub Loan Limits; Proration Requirements Loan Limits; Proration Requirements Interest Generation, Accumulation Interest Generation, Accumulation R2T4 R2T4 Federal Direct Consolidation Loan Federal Direct Consolidation Loan Repayment Facts and Options Repayment Facts and Options Deferments and Forbearances Deferments and Forbearances Consequences of Default (borrower and school) Consequences of Default (borrower and school) Private Loans Private Loans Questions Questions

5. 5 Free Application for Federal Student Aid = FAFSA Free Application for Federal Student Aid = FAFSA ≠ FASFA ≠ FAFSER ≠ SAFSER ≠ RAFSA Term = Semester Term = Semester often used interchangeably Academic Year = Academic Year = A period of at least 30 weeks of instructional time during which a full-time student is expected to complete at least 24 semester or trimester hours, or at least 36 quarter hours, at an institution that measures program length in credit hours; at least 900 clock hours at an institution that measures program length in clock hours Cost of Attendance = Cost of Attendance = The student's Cost Of Attendance includes tuition, fees, and standard allocation designed to cover reasonable living expenses while attending school. The cost of attendance is determined by the school using guidelines established by federal regulations. (also known as Cost of Education or Student Budget) FAO = FAO = Financial Aid Office

6. 6 FAM = Financial Aid Management (system) FAM = Financial Aid Management (system) Datatel ®, TopSchool ®, Poise ®, PowerFAIDS ®, Oracle ®, Banner ® DL vs Stafford DL vs Stafford ACH (Automated Clearing House) aka ACH (Automated Clearing House) aka EFT (Electronic Funds Transfer) = movement of funds from lender to school, from school to student R2T4 = Return to Title IV; process of returning unearned FSA funds (federal Title IV funds) R2T4 = Return to Title IV; process of returning unearned FSA funds (federal Title IV funds)

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8. 8 On January 1, 2011, total US educational debt stood at $830,000,000,000.00, which equals $2,700 for every man, woman & child in the US or$33,200 for every resident of Texas or$345,800 for every resident of Dallas or$83,000,000 for every resident of Waxahachie On January 1, 2011, total US educational debt stood at $830,000,000,000.00, which equals $2,700 for every man, woman & child in the US or$33,200 for every resident of Texas or$345,800 for every resident of Dallas or$83,000,000 for every resident of Waxahachie

9. 9 In 2000, 36% of all US college graduates graduated with some loan debt; by 2110, that percentage had increased to 66% In 2000, 36% of all US college graduates graduated with some loan debt; by 2110, that percentage had increased to 66% In 2000, 5% of all US college graduates defaulted on repayment of their loans within 3 years following graduation; in 2010 that rate had nearly tripled to 14.7% In 2000, 5% of all US college graduates defaulted on repayment of their loans within 3 years following graduation; in 2010 that rate had nearly tripled to 14.7%

10. 10 Eligibility Determined by combining: Information & awards from FAFSA Other awards & payments Limited by the Cost of Attendance

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12. 12 Origination Eligibility DLs are entered into the FAM & then transmitted to Dept of Ed.

13. 13 Disbursement Origination Eligibility Funds transmit from DoEd to school on appointed disbursement day

14. 14 Disbursement Origination Eligibility Repayment

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16. 16 www.studentloans.gov Entrance Counseling Entrance Counseling First-time borrowers First-time borrowers Inform them of their rights and responsibilities of taking out this loan Inform them of their rights and responsibilities of taking out this loanwww.nslds.ed.gov Exit Counseling Exit Counseling All loan recipients that depart from your institution All loan recipients that depart from your institution Graduate, withdraw, transfer, do not return Graduate, withdraw, transfer, do not return No Exit Counseling = no transcripts / no diploma No Exit Counseling = no transcripts / no diploma

17. 17 Document executed by borrower, which spells out the terms & conditions of the loan disbursements, use and repayment Document executed by borrower, which spells out the terms & conditions of the loan disbursements, use and repayment If the note is for multiple loan periods and varying amounts, the lender may elect to have the borrower use a If the note is for multiple loan periods and varying amounts, the lender may elect to have the borrower use a Master Promissory Note

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19. 19 Oldest active educational loan Institution administers this loan Institution administers this loan Previous allocations came from the Dept of Ed, now schools operate this loan from repaid funds Previous allocations came from the Dept of Ed, now schools operate this loan from repaid funds Fixed 5% interest rate Fixed 5% interest rate Repayment begins 9 months after student ceases to be enrolled at least 1/2 time Repayment begins 9 months after student ceases to be enrolled at least 1/2 time Minimum payment as low as $30 Minimum payment as low as $30 Maximum repayment term is 10 years Maximum repayment term is 10 years

20. 20 Federal PLUS Loan is a loan for parents of dependent students Federal PLUS Loan is a loan for parents of dependent students Parent borrower is fully liable for loan Parent borrower is fully liable for loan (may require endorser) FAFSA not required by regulation, but schools can requireit if they wish FAFSA not required by regulation, but schools can requireit if they wish Eligibility Eligibility Parent must be the natural or adoptive parent of the student, or spouse of one of those people 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 be a US Citizen, U.S. National or eligible NC Parent must have no Title IV loans in default Parent must have no Title IV loans in default Parent must be credit worthy, or have credit worthy endorser Parent must be credit worthy, or have credit worthy endorser

21. 21 Eligibility (ref. FSA Handbook) Eligibility (ref. FSA Handbook) Borrower must complete a FAFSA Borrower must complete a FAFSA U.S. Citizen attending at least half-time, seeking a Graduate or Professional degree U.S. Citizen attending at least half-time, seeking a Graduate or Professional degree Borrower must pass a credit evaluation Borrower must pass a credit evaluation Loan Limits Loan Limits COA minus other aid COA minus other aid

22. 22 U.S. Citizen, U.S. National, permanent US Residents & aliens, or Eligible non-citizen (ref. FSA Handbook) U.S. Citizen, U.S. National, permanent US Residents & aliens, or Eligible non-citizen (ref. FSA Handbook) Enroll 1/2 time in a degree seeking program Enroll 1/2 time in a degree seeking program SAP - Satisfactory Academic Progress SAP - Satisfactory Academic Progress No default / overpymt on any Title IV Aid No default / overpymt on any Title IV Aid Register with selective service Register with selective service Must complete FAFSA Must complete FAFSA

23. 23 Subsidized DL (-based) (Need-based)Interest: ED pays during ED pays during In-school In-school Grace Grace Deferment Deferment * Student pays during Repayment Repayment Unsubsidized DL (-based) (Non need-based)Interest: Student responsible for all Can be capitalized, or Can be capitalized, or Student can choose to pay interest Student can choose to pay interest

24. 24 Need-based Financial AidNon-Need Financial Aid ScholarshipsUnsubsidized DLs State & Federal GrantsPrivate Loans Subsidized DLs

25. Combined 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 25 * And dependent student whose parent is unable to obtain a PLUS loan; denial of parent’s PLUS produces add’l unsub

26. 26 Must occur when a student’s academic program is less than 1 year in length; an AY = at least 30 weeks Must occur when a student’s academic program is less than 1 year in length; an AY = at least 30 weeks Must occur when a student is completing a remaining period of enrollment that is less than one academic year Must occur when a student is completing a remaining period of enrollment that is less than one academic year Standard proration formula: Amount of DL student could have for grade level ÷ 24 x number of enrolled hours Standard proration formula: Amount of DL student could have for grade level ÷ 24 x number of enrolled hours

27. 27 Perkins Loans – no fees Perkins Loans – no fees Fixed IR = 5% Fixed IR = 5% Direct Loans – 0.5% orig fee Direct Loans – 0.5% orig fee Actually 1.5% minus 1% rebate) Actually 1.5% minus 1% rebate) Undergrad sub = fixed IR of 4.5% Undergrad sub = fixed IR of 4.5% All other DLs = fixed IR of 6.8% All other DLs = fixed IR of 6.8% Direct Parent PLUS / Grad PLUS – 2.5% orig Direct Parent PLUS / Grad PLUS – 2.5% orig Actually 1.5% minus 1% rebate) Actually 1.5% minus 1% rebate) fixed IR 7.9% fixed IR 7.9% To retain rebates,1 st 12 pymts must be on time

28. 28 Interim Phase – time student is in school & for 6 months thereafter Interim Phase – time student is in school & for 6 months thereafter In-school Deferment, Grace Periods Sub (interest accrues, but is paid on borrower’s behalf by fed. govt.) vs. Unsub (accrues interest) Repayment Phase - at end of grace Repayment Phase - at end of grace All DLs

29. 29 Independent Sophomore borrows $7500 and wants to know what his interest payments will be each quarter 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) 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 $7500 @ 6.8% = $39.67 + $500 @ 6.8% = $2.83 $39.67 + $2.83 = $42.50/month $39.67 + $2.83 = $42.50/month How much will I owe in interest with out making monthly payments? 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 3 years left in school, six month grace = 42 months X $42.50 = $1785

30. 30 Return of Title IV funds back to the federal government of funds (including federal loans) a student did not “earn”; Title IV funds are awarded at the beginning of a term on the assumption the student will complete the term & “earn” 100% of the award; funds must be returned if that does not happen Return of Title IV funds back to the federal government of funds (including federal loans) a student did not “earn”; Title IV funds are awarded at the beginning of a term on the assumption the student will complete the term & “earn” 100% of the award; funds must be returned if that does not happen Death Death Withdrawal from all classes prior to completion of 60% of the semester or term (whether calendar days or clock hour calculation) Withdrawal from all classes prior to completion of 60% of the semester or term (whether calendar days or clock hour calculation) All Fs = defacto withdrawal All Fs = defacto withdrawal

31. 31 Federal education loans that may be consolidated Federal education loans that may be consolidated ― FFELP― Perkins ― Direct― HEAL No minimum loan amount No minimum loan amount Thirty-year repayment (maximum) Thirty-year repayment (maximum) Interest rate will be a fixed interest rate, capped at 8.25% 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. A weighted average is used to figure the interest rate and then it is rounded up to the nearest 1/8 of a percent.

32. 32 Consolidation Loan AmountMaximum repayment Years Permitted Under $750010 years $7500 - $999912 years $10,000 - $19,99915 years $20,000 - $39,99920 years $40,000 - $59,99925 years $60,000 and up30 years

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34. 34 DL DL Enters at end of grace period (6 months after student graduates or drops below half-time) Enters at end of grace period (6 months after student graduates or drops below half-time) Parent PLUS loan Parent PLUS loan Enters repayment 60 days after full disbursement (parent can request deferment while student is enrolled at least half-time and during six months following that – up to 25 years to repay) Enters repayment 60 days after full disbursement (parent can request deferment while student is enrolled at least half-time and during six months following that – up to 25 years to repay) Grad PLUS loan Grad PLUS loan Enters when borrower falls below halftime enrollment Enters when borrower falls below halftime enrollment

35. 35 All federal loans All federal loans Keep loan holders current on student borrower contact information Keep loan holders current on student borrower contact information Contact loan holders as quickly as possible, if a single missed payment is anticipated Contact loan holders as quickly as possible, if a single missed payment is anticipated Contact loan holders if payments cannot be made Contact loan holders if payments cannot be made Change in your financial circumstances Change in your financial circumstances Loss of job Loss of job Pay off loans as quickly as possible Pay off loans as quickly as possible

36. 36 Single information source for all federal loans – loan holder info, amounts owed including interest accrual Single information source for all federal loans – loan holder info, amounts owed including interest accrualwww.nslds.ed.gov

37. 37 Standard – Monthly payment remains consistent for 10 years Graduated – Monthly payments are lower at first but then increase every 2 years over the 30 yr repayment term Income-sensitive – Monthly payments are based on your monthly gross income Extended – Monthly payments over a 25 year plan. Must have a debt greater than $30,000 Income Contingent – pymts based on annual calculations and adjusted so as not to cause “undue hardship”; (25 yr forgiveness) Income Based Plan - 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. (25 yr forgiveness)

38. 38 Period of postponing payments Period of postponing payments Federal government will pay interest for the borrower on Subsidized DL Federal government will pay interest for the borrower on Subsidized DL Entitlement Entitlement Some possible deferments: Some possible deferments: - Education - Peace Corps/ Public Service/ Military - Economic Hardship

39. 39 Temporary cessation, reduction, or extension of payments Temporary cessation, reduction, or extension of payments Student is responsible for interest that accrues Student is responsible for interest that accrues Borrower is willing but temporarily unable to pay Borrower is willing but temporarily unable to pay

40. 40 Failure to pay back student loan 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 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 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; 7- year damage to student credit history Student not eligible for fed. financial aid; 7- year damage to student credit history

41. 41 Includes DL loans, and loans underlying DL consolidation loans ( & PLUS not included in calculation) Includes DL loans, and loans underlying DL consolidation loans (Perkins & PLUS not included in calculation) CDR = % of borrowers who enter repayment in a given federal fiscal year who then default within the next 3 fiscals years CDR = % of borrowers who enter repayment in a given federal fiscal year who then default within the next 3 fiscals years High rate has consequences for schools High rate has consequences for schools >15% = loss of 1 installment/semester >15% = loss of 1 installment/semester >15% = 30 day hold on 1 st time, 1 st year borrowers >15% = 30 day hold on 1 st time, 1 st year borrowers > 40% = loss of participation in Title IV funding > 40% = loss of participation in Title IV funding

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43. 43 Designed to bridge the gap between other aid and total college costs Designed to bridge the gap between other aid and total college costs Interest rates from 5% - 18%, usually based on Prime or LIBOR + margin Interest rates from 5% - 18%, usually based on Prime or LIBOR + margin Origination and repayment fees vary Origination and repayment fees vary Co-borrower requirements (underwriting) Co-borrower requirements (underwriting) Most now school-certified (lower repayment risk) Most now school-certified (lower repayment risk) Self-Certification Form Self-Certification Form Three Sequenced Disclosures Three Sequenced Disclosures

44. 44 Eligibility Determined by combining: Information & awards from FAFSA Other awards & payments Limited by the Cost of Attendance

45. 45 Origination Eligibility Private Loan process is a bit more complicated & time consuming

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47. 47 Disbursement Origination Eligibility Funds transmit from private lender to school on appointed disbursement day

48. 48 Disbursement Origination Eligibility Repayment

49. 49 Keep loan holders current on student borrower contact information Keep loan holders current on student borrower contact information Contact loan holders as quickly as possible, if a single missed payment is anticipated Contact loan holders as quickly as possible, if a single missed payment is anticipated Contact loan holders if payments cannot be made Contact loan holders if payments cannot be made Change in your financial circumstances Change in your financial circumstances Loss of job Loss of job Pay off loans as quickly as possible Pay off loans as quickly as possible

50. 50 Stephen Brower sbrower@hsutx.edu