2010
TASFAA
New Aid Officer’s Workshop

Student Loans
Melet Leafgreen
Assistant Director, Loan Programs
TCU Financial Aid m.leafgreen@tcu.edu
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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)
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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.)
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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…)
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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
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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
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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).
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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
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(Need-based)
Interest:
ED pays during
• In-school
• Grace
• Deferment
Student pays during
• Repayment
(Non need-based)
Interest:
Student responsible for all
• Can be capitalized, or
• Student can choose to pay interest
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2010/2011 Stafford Loan Limits
Year in School Dependent Student Independent Student
First Year
Undergraduate
Second Year
Undergraduate
Total Stafford
$5500*
Total Stafford
$6500*
Total Stafford
$9500*
Total Stafford
$10,500*
Third Year and
Remaining
Undergraduate
Total Stafford
$7500*
Total Stafford
$12,500* k
Graduate Student Total Stafford
$20,500*
*
No more than $3500 Sub may be awarded for First Year Student, No more than $4500 Sub for 2 nd
year students, no more than $5500 Sub for 3 rd
year
+ undergrad students, no more than $8500 Sub for grad/prof students
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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
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Stafford aggregate loan limits
Current
Sub &
Unsub
$31,000
Sub may not exceed
Undergrad
Dependent
*Undergrad
Independent
Grad and
Professional
$57,500
$138,500
$23,000
$23,000
$65,500
* And dependent student whose parent is unable to obtain a PLUS loan
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FFELP
Federal Stafford Loan
Direct Lending
Borrower
School
Lender
Federal government
Guarantor
Servicer
Secondary markets
Borrower
School
Federal Government
Servicer
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Lifecycle of a Direct Loan
• Origination Phase
- Borrower: FAFSA, MPN, Entrance (?)
- School: Certification, Verify Elig.,
Delivery
- ED: Disclosure, Provide Funds to school
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Lifecycle of a Direct Loan
• 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
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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)
$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
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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.
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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
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Repayment of Federal Loans
10 year repayment period, $50 minimum, or interest accruing (whichever is larger)
• 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
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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.
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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
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Forbearances
• Temporary cessation, reduction, or extension of payments
• Student is responsible for interest that accrues
• Borrower is willing but temporarily unable to pay
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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 nonrenewal, sued by DOE
• Student not eligible for fed. financial aid
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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
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Alternative/ Private Loans
• 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
)
• Origination and repayment fees vary
• Co-borrower requirements (underwriting)
• Most now school-certified (lower risk)
• Three Disclosures
• Self-Certification Form
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Federal Regulations
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Questions ???????
Melet Leafgreen m.leafgreen@tcu.edu
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