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ABC Workshop 2012

ABC Workshop 2012. G. General Audiences. All ages admitted. No content that would be objectionable to most parents. Polite language. No swearing. Only mild violence. Student Loans. Bill Mack Associate Director of Financial Aid University of Texas at Dallas. Federal Loans.

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ABC Workshop 2012

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  1. ABC Workshop 2012 G General Audiences All ages admitted. No content that would be objectionable to most parents. Polite language. No swearing. Only mild violence.

  2. Student Loans Bill Mack Associate Director of Financial Aid University of Texas at Dallas

  3. Federal Loans Federal Insured Student Loans (FISL) Guaranteed Student Loan (GSL) Auxiliary Loans to Assist Students (ALAS) Supplemental Loan for Students (SLS) Federal Family Education Loan Program (FFELP) Robert T. Stafford Loan Program William D. Ford Federal Direct Loan Program

  4. Required Processes

  5. www.studentloans.gov Entrance Counseling First-time borrowers Inform them of their rights and responsibilities of taking out this loan www.nslds.ed.gov Exit Counseling All borrowers that depart from your institution Graduate, withdraw, transfer, do not return Loan Counseling

  6. The school is required to notify the borrower that a loan disbursement has been made, and that the borrower may reduce or cancel the disbursement Loan Notification

  7. 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 school may elect to have the borrower use a Master Promissory Note Promissory Note

  8. Federal Loan Programs

  9. Oldest active educational 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 Federal Perkins Loan

  10. Undergraduate annual limit $5,500 Underclassman (first two years) Aggregate limit $11,000 Undergraduate Aggregate limit $27,500 Graduate annual limit $8,000 Graduate Aggregate limit $60,000 Federal Perkins Loan

  11. Federal PLUS Loan is a loan for parents of dependent students • Parent borrower is fully liable for loan • FAFSA is required, but not based on need • Eligibility • Borrower must be the natural or adoptive parent of the student, or spouse of one of those people (step-parent can borrow if he/she is included in the FAFSA) • Borrower must be a US Citizen, U.S. National or eligible non-citizen • Borrower must have no Title IV loans in default • Borrower must be credit worthy, or have credit worthy endorser Federal Parent Plus Loan

  12. No Annual limit, other that COA minus Aid • No Aggregate limit • If the parent is not eligible, the student may borrow a Stafford Loan using the independent student limits. Federal Parent Plus Loan

  13. Eligibility • Borrower must complete a FAFSA, not need-based • Eligible graduate student attending at least half-time • Borrower must pass a credit evaluation (or have an eligible “endorser”. • Annual Loan Limit • COA minus other aid • No aggregate maximum • 7.9 percent fixed interest. 4% Origination fee. Federal Graduate Plus Loan

  14. William D Ford Federal Direct Robert T. Stafford Loan Program Eligible student in an eligible program at an eligible institution (per General Provisions) Enrolled at least 1/2 time COA-aid= greater than zero COA-EFC-aid=greater than zero for subsidized loan

  15. Subsidized DL (Need-based) Interest: ED pays during • In-school • Grace • Deferment • Student pays during • Repayment Unsubsidized DL (Non need-based) Interest: Student responsible for all • Can be capitalized, or • Student can choose to pay interest while enrolled Direct Loans: Sub vs. Unsub

  16. 2011/2012 DL Limits 17

  17. 2012-2012 Change • As of July 1, 2012 Graduate students will no longer be eligible for subsidized Stafford Loans.

  18. DL aggregate loan limits • * And dependent student whose parent is unable to obtain a PLUS loan; denial of parent’s PLUS produces add’l unsub

  19. Must occur when an undergraduate 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 DL student could have for grade level ÷ 24 x number of enrolled hours DL Loan Proration

  20. Interest Rates & Fees • Perkins Loans – no fees • Fixed interest = 5% (no interest while enrolled or when in grace period) • Direct Loans – 1% origination fee • 0.5% rebate • Undergrad sub = fixed interest of 3.4% • Graduate sub and unsubsidized = fixed interest of 6.8% • Direct Parent PLUS / Grad PLUS – 4% origination fee • 1.5% rebate • fixed interest = 7.9% To retain rebates,1st 12 pymts must be on time

  21. Interest Rates & Fees • As of July 1, 2012 the borrower will be charged the full origination fee at disbursment.

  22. Interest Rates & Fees • Subsidized Stafford interest • 7/1/98-6/30/06 2.36 (varies annually) • 7/1/06-6/30/08 6.8 fixed • 7/1/08-6/30/09 6.0 fixed • 7/1/09-6/30/10 5.6 fixed • 7/1/10-6/30/11 4.5 fixed • 7/1/11-6/30/12 3.4 fixed • 7/1/12- ? 6.8 fixed

  23. Federal education loans that may be consolidated • FISL • FFELP • Direct Loans • National Direct Student Loans • PLUS • Perkins • Nursing Student Loan • Health Education Assistance Loan (HEAL) Federal Consolidation Loan

  24. Thirty-year repayment (maximum) • 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 consolidation loan can “cure” a defaulted federal student loan. Federal Consolidation Loan

  25. Stafford • Begins at the end of grace period (6 months after the borrower drops below half-time enrollment) • Parent PLUS loan • Enters repayment after the full disbursement for the year • Optional-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 • Six months after borrower falls below half-time enrollment Repayment of Federal Loans

  26. Single information source for all federal loans – loan holder info, amounts owed including interest accrual www.nslds.ed.gov Repayment of Federal Loans

  27. 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. • Income Contingent – pymts based on annual calculations and adjusted so as not to cause “undue hardship”; (25 yrforgiveness) • 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) Ways to Repay Federal Loans

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

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

  30. Failure to meet the terms of the promissory note • Failure to repay • Failure to attend • Borrower is considered to be in default after being delinquent for 270 days • Borrower is subject o wage garnishment, seizure of income tax refunds, lottery winnings, license non-renewal, sued by DOE • Student not eligible for federal financial aid • Damage to the borrower’s consumer credit score Default

  31. Satisfactory Repayment Arrangements • Six on-time voluntary payments • Rehabilitation • Nine on-time voluntary payments • Consolidation Default

  32. Includes DL loans, and loans underlying DL consolidation loans • 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 • >15% = loss of 1 installment/semester • >15% = 30 day hold on 1st time, 1st year borrowers • > 40% = loss of participation in Title IV funding Cohort Default Rate (CDR)

  33. Private Educational Loans

  34. Interest rates are usually variable Origination and repayment fees vary Co-borrower requirements (underwriting) Most require school-certification International students SAP ineligible Non-degree students Reached federal aggregate maximum Private (Alternative) Loans

  35. Bill Mack Bill.Mack@utdallas.edu 972-883-4795 Questions ???????

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