College Student Loans Reconstructing Success through the student loan pipeline

1. College Student LoansReconstructing Success through the student loan pipeline September 20, 2013 PattMcCafferty

2. Background • $1 Trillion Aggregate outstanding student debt • Student loans are the 2nd largest consumer liability, mortgages #1 • Student loans do not require credit checks or in-depth credit analysis • Average student loan debt for 2 year college is $13,289 • Average student loan debt for 4 year college is $23,118 • Aggregate loan limit (undergraduate) • Dependent students $31,000 • Independent students $57,500

3. Federal student loan programs • Two Federal Student Loan Programs • Subsidized – need based (23,000 aggregate limit for undergraduate) • Unsubsidized – non need based • Both Require the FAFSA • Both Require Loan Entrance Counseling • Both Require a Master Promissory Note • Current interest rate 3.86 for new borrowers • Borrower repayment plans: Fortunately, there are several

4. New 150% rule 150% Limit on Subsidized Loans • Per the Moving Ahead for Progress in the 21st Century Act, a new borrower on or after July 1, 2013 cannot receive subsidized loans for more than 150 percent of the published length of the borrower’s educational program. • The law also provides that a borrower who becomes ineligible for subsidized loans because of the 150 percent limit is ineligible for interest subsidy benefits on all subsidized loans first disbursed to that borrower on or after July 1, 2013.

5. Impact of Student Loans • Current lifestyle: Multiple priorities. Societal pressures to “have” non-essentials. Unemployment, homelessness, loss of benefits. • Future lifestyle: Loan payments, rent/mortgage, utilities, phone, internet, car, health care, credit card debt • Future credit: student loans help build credit, but too much debt can prevent a person from qualifying for a car loan, a mortgage, etc • Potential employers are doing credit checks and students don’t realize this will happen

6. Influencing Student Borrowers • Loan Limits • Packaging Philosophy • Counseling • Worksheets • Forms • Messaging • Financial Literacy programs

7. Loan Limits • ITCC is participating in a ED Experimental Site Initiative. • Reducing annual loan limits for independent students • $9500 to $7500 • $10500 to $8500 • Tuition and fees for 12 credits at Ivy Tech is $1383. Books around $500. Around $2000 for a semester. Many students do not go full time, yet borrow the maximum loan allowed.

8. Making the Part-time Student Point Semester # credit hours $ borrowed Fall 6 $3750 Spring 6 $3750 Summer 3 0 Fall 6 $3750 Spring 6 $3750 Summer 3 0 Fall 6 $4750 Spring 6 $4750 Summer 0 Fall 6 $4750 Spring 6 $4750 Summer 4 $0 TOTAL AMOUNT BORROWED FOR 60 CREDIT HOUR AS DEGREE: $33,000 Total Tuition and Fees for 60 credits @ $8000

9. Student loan “packaging” • Automated Packaging (Awarding) • Subsidized Loan Eligibility Only, as an OFFER • Only to students in Good Standing and Previous Borrowers • Manual Packaging (Awarding) • Students complete a Direct Loan Request Form • New borrowers or those on Academic Progress of Warning or Probation • Any student wanting to borrow “Unsubsidized” loan

10. The Direct Loan Request Form(see handout) • Student has to consciously complete form and follow a set of three instructions • Loan Entrance Counseling • Complete the Master Promissory Note • Retrieve loan history from National Student Loan Data System and report on the request form and attach a print out. • Student must indicate a loan amount that they would like to have offered • Student must write in the amount they have already borrowed • www.nslds.ed.gov

11. National Student Loan Data System • Two levels of impact • Student learns where s/he can go to get current information about their own student loan history • Gives them “in-time” data and sometimes encourages them to borrow less • Used in face to face counseling • Ask “do you know how much you’ve already borrowed?” “Do you know how much your monthly payments will be?” “How much do you really need to borrow?’ • www.nslds.ed.gov

12. Loan Counseling • Federal requirement for on-line counseling • www.studentloans.gov • Differences in default rates between ITCC Gary and Bloomington • Biggest difference, anecdotally, was the personal counseling Gary gave to every student • Bloomington implemented counseling to each student requesting a DL Request Form from our front desk

13. Counseling- Point of Contact • Address the cost of attendance • Review how much aid the student has to meet direct costs • Discuss the ways other expenses are being met • Determine if student needs to borrow • Encourage to borrow the least amount possible • Review repayment and how much monthly payments are • Compare loan borrowing to other borrowing • Handouts and role plays

14. Financial Literacy Campaign • What does it really mean? • Quick announcements • Messaging to students • Web based tools • Workshops and events • Meaningful one/one counseling

15. Practical Application • Counseling in action • Completing the Worksheet • Web tools and what is availble

16. Discussion, Questions, concerns ? Patt McCafferty Director of Financial Aid Ivy Tech Community College Bloomington 812-330-6010 pmccaffe@ivytech.edu