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MONEY MATTERS. Carla A. Lord-Hardy Coordinator of Debt Management. Money Matters. Student Loans State Aid, Scholarships Loan Processing & Procedures Document/Paperwork Flow How It All Comes Together Loan Cancellation/Forgiveness Student Rights and Responsibilities Debt Management
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MONEY MATTERS Carla A. Lord-Hardy Coordinator of Debt Management
Money Matters • Student Loans • State Aid, Scholarships • Loan Processing & Procedures • Document/Paperwork Flow • How It All Comes Together • Loan Cancellation/Forgiveness • Student Rights and Responsibilities • Debt Management • Repayment
Money Matters • What is Financial Aid? • Who is eligible for aid? • What are the types of aid available?
Money Matters • Financial Aid • “Free Money” – Money that a student receives from the State that is not required to be paid back. • SEOG • FRAG • PELL • FSAG
STUDENT LOANS Stafford Subsidized & Unsubsidized Loans Health & Human Services Loans (HHS) Perkins Loans Private Loans FINANCIAL AID State Aid – FRAG, SEOG, PELL, FSAG Scholarships – Internal & External Grants Money Matters
Other Forms of Aid Pell - Need-based gift aid available to undergraduate students who demonstrate financial need. FSEOG - Administered by the financial aid office to UG students. Limited funding. FWS - Federal Work-study is a need based program that lets a student earn money and work experience while they are in school. Money Matters
Other Forms of Aid Parent Loans/Student Loans - Certain federal education loans are available to parent of undergraduate students. Federal Perkins Loans - Funded by the federal government. Available only to the neediest of students. 5% fixed interest, 10 yr pay-off and 9 month grace. Money Matters
Other Forms of Aid Scholarships- Internal & External www.usafunds.collegeanswer.com, www.fastweb.com, www.nova.edu/cwis/finaid Money Matters
Who is eligible for Federal Financial Aid? Citizens Eligible non-citizens Students who have not “Defaulted” on a prior school loan. Money Matters
Money Matters • What steps need to be taken to apply for financial aid? • All federal student aid begins with the FAFSA. • The student will need his/her current year’s income tax return in order to complete the application. • Ample time needs to be set aside, regardless of whether the form is completed online or on paper. • www.fafsa.ed.gov • For questions or problems with completing the FAFSA, the student can call 1-800-4FED-AID. • A student must re-apply each year aid is needed.
Money Matters • What steps need to be taken to apply for financial aid? • After a few weeks, the student will receive a Student Aid Report (SAR), which will state the student’s expected financial contribution (EFC) to his/her education. The same information is sent to the school electronically. • The financial aid office will compare the student’s EFC against the school’s cost of attendance to determine financial need. An award is then generated and may include scholarships, work-study, & loans.
Money Matters • Budgeting of the Award • Students are sent their award notice via mail or e-mail. Award information can also be reviewed on their Webstar account. • The notice states the type of aid offered, the amount of aid, and how the aid is disbursed. • Students should only borrow the amount necessary to complete their education.
Budgeting for School Cost of attendance in GTEP program for two years - $13,500 Cost of attendance in Dr. Ed. Leaders program for three years - $37,000 Money Matters
Money Matters • GTEP/C.O.A = $13,500 • Student borrows = $46,250 (average) • Dr. Ed. Leaders/C.O.A = $37,000 • Student borrows = $74,000 (average)
What did I borrow and where did the money go? DEL/DOL – 3 yrs Sub = $34,000 Unsub = $40,000 Total = $74,000 Standard monthly payment on loans with 4% interest (10 yrs) $749.00 monthly Money Matters
What did I borrow and where did the money go? DEL/DOL – 3 yrs Sub = $17,000 Unsub = $20,000 Total = $37,000 Standard monthly payment on loans with 4% interest (10 yrs) $378.00 monthly Money Matters
What did I borrow and where did the money go? GTEP – 2 yrs Sub = $8,500 Unsub = $5,000 Total = $13,500 Standard monthly payment on loans with 4% interest (10 yrs) $137.00 monthly Money Matters
What did I borrow and where did the money go? GTEP – 2 yrs Sub = $21,250 Unsub = $25,000 Total = $46,250 Standard monthly payment on loans with 4% interest (10 yrs) $447.00 monthly Money Matters
Students who borrow the maximum amount allowed run the risk of reaching their aggregate borrowing limits before completing their education. UG Limits Sub – $23,000 Unsub – $23,000 Total – $46,000 Grad Limits Sub – $65,500 Unsub – $73,000 Total – $138,500 Money Matters
Once I start loan repayments, are there any programs that would reduce or eliminate any of my debt? Loan Cancellations Loan Forgiveness Money Matters
Loan Cancellation Perkins Loans – A student is entitled to have up to 100 percent of the original principal cancelled. A student will need to perform qualifying services in certain areas after the enrollment period covered by the loan. Teaching – Full-time teacher/special education teacher in a public or other nonprofit elementary or secondary school. Early Intervention Services– Full-time qualified professional provider of early intervention services in a public or other nonprofit program. Money Matters
Loan Cancellation Child or Family Service Agency – Full-time employee of an eligible public or private nonprofit child or family service agency who is directly providing or supervising the provisions of services to high-risk children. Money Matters
Loan Cancellation Nurse or Medical Technician – Full-time nurse providing health care services. Law Enforcement or Corrections Officer – Full-time enforcement officer for an eligible local, state, or federal law enforcement agency. Money Matters
Loan Forgiveness Stafford Loans For Teachers – Certain elementary and secondary teachers who teach for at least five consecutive years in schools serving low-income students may qualify to receive up to $5,000.00 in loan forgiveness on their Federal Stafford loans or on the outstanding portion of a consolidation loan. Money Matters
Loan Forgiveness For Child-Care Providers – Subject to annual appropriations approved by Congress, the US. Department of Education will repay up to 100 percent of an eligible child-care provider’s Stafford-loan obligations. Money Matters
Preparing to Pay Back School Loans • Q1. When do I have to start repaying my student loans? • Immediately upon graduation • After I receive my inheritance • Never – I took out a Stafford Scholarship • Six months after I graduate or leave school
Preparing to Pay Back School Loans • Q2. Will I be able to afford the monthly repayments? What will my monthly payments be? • www.usafunds.org/direct/index.html • www.paycheckcity.com
Repayment Plans • Standard Repayment • Fixed monthly payment (minimum of $50) • Payable over 10 years • Income-Sensitive • Adjusted yearly for up to 10 years • Based on annual income and the amount of the loan • Graduated Repayment • Begins with smaller monthly payments that gradually increase every 2 years • Repayment period varies from 12 to 30 years
Repayment Plans cont’d • Extended Repayment • A new option if you were a first time borrower on or after October 7, 1998 • Your debt must be in excess of $ 30,000 • You may take up to 25 years to repay your loans using either Standard or Graduated Repayment Plan
Consolidation • Depending on the loan amount, a Federal Consolidation Loan extends your repayment and offers smaller monthly payments. • You may consolidate while you are in repayment or in grace. • After receiving a Federal Consolidation Loan you have 180 days (approx. 6 months) to add new loans. • A consolidation loan cannot be reversed.
Eligible Loans for Consolidation • Federal Subsidized and Unsubsidized Stafford Loans • Federal PLUS Loans • Guaranteed Student Loans • Direct Consolidation Loans and Federal Consolidation Loans • Federal Insured Student Loans • Federal Perkins Loans • National Defense Student Loans • Health Professions Student Loans • Loans for Disadvantaged Students • Nursing Student Loans
Married Borrowers • Married borrowers are eligible for joint consolidation. • If one spouse dies or becomes permanently disabled, the other spouse is still responsible for repayment of the entire consolidation loan. • In case of divorce, both parties are still accountable until the loan is paid in full.
Should You Consolidate? • Does consolidation offer you a lower rate? • What consolidation benefits do your current lenders offer? • Are your monthly payments manageable? • How much are you willing to pay over the long term? Extending the years of payment increases the total amount you have to repay. • If you are already in repayment, how many payments do you have left on your loans?
Benefits of Consolidation • Lower interest rate • One lender and one monthly payment • Reduced monthly payments • Four different repayment plans • Deferment options
Disadvantages of Consolidation • Extended repayment (30 years) adds more interest expense. • Interest rate may be higher than the original amount. • Federal Perkins loan borrowers may lose eligibility for different types of cancellations.
Consolidation Agencies Federal Direct Loan Consolidation 800-557-9372 www.ed.gov/DirectLoan Nelnet 866-4CONSOL (426-6765) www.consolidation.nelnet.net Sallie Mae 800-448-3533 www.salliemae.com
Deferment • A deferment allows you to postpone your monthly payments. • No interest accrues during deferment. • With Federal Subsidized Stafford Loans, the government pays the interest during the deferment period . • Obtaining a deferment requires you to: • Submit an application with supporting documents and • Secure approval from the lender. • Note: Until the approval is given, you MUST continue to pay on your current repayment plan. • There are different types of deferments. One type, an Economic Hardship deferment, may be renewed for a max of 3 years.
Forbearance • A forbearance allows you to delay or reduce payments, usually for 3-12 months at a time • Interest will continue to accrue • No application is required • It can be renewed yearly for a max of 5 years • If your Federal Stafford Loan debt exceeds 20% of your monthly income, lenders are required to honor your request
Default • When you fail to make payments on your student loans for 270 days (approx. 9 months), you are in DEFAULT!
Consequences of Default • Your entire loan will become immediately due • You may be forced to pay attorney’s fees, court costs, and other expenses if the lender employs a collection agency to recover the debt • You will not be able to obtain future deferments or forbearances • You will not be able to obtain additional financial aid • Your tax return refund may be withheld to pay the debt • Your wages may be garnished • Your professional license may be revoked • Your default will be on your credit report for 7 years
Tips on Lowering Your Interest Rates • Most lenders offer incentives to help you reduce your student loan • Pay on time • Set up automatic deduction
Conclusion • Wrap-up • Questions • Comments • Contact Information • Carla Lord-Hardy, Coordinator of Debt Management • Phone: 954-262-7421 • Email: lordcarl@nova.edu