Everything you ever wanted to know about Student Loans

1. Everything you ever wanted to know about Student Loans …and a few things you’ll wish you never HAD to know

2. Everything you ever wanted to know about… • THE LANGUAGE • BORROWER ELIGIBILITY • LOAN PROGRAMS • ANNUAL LOAN LIMITS • AGGREGATE LOAN LIMITS • PLUS LOANS • BEHIND THE SCENES • DEFAULTED LOANS • TOTAL AND PERMANENT DISABILITY

3. THE LANGUAGE OF FINANCIAL AID • “If we spoke a different language, we would perceive a somewhat different world.” Ludwig Wittgenstein, 20th century German Philosopher ACRONYMISH

4. THE LANGUAGE OF FINANCIAL AID *FAFSA *CPS *SAR *TPD *AGI *PELL *EFC *COA *DL *EIC *MPN *COD *USDE *ISIR *AYR *FFEL *PJ *PLUS *ATOM “…language manifests itself… in my work because I understand short attention spans.” Barbara Kruger,contemporary American artist.

5. GENERAL ELIGIBILITY REQUIREMENTS • General Eligibility Requirements must be satisfied for all Title IV aid • Which of the following are NOT required for Title IV eligibility? • A valid Social Security Number • Satisfactory Academic Progress • Simultaneous enrollment in a secondary school • Agreement to serve in the military • High School diploma or equivalent

6. GENERAL ELIGIBILITY REQUIREMENTS • Collected from the FAFSA • Citizenship • Valid SSN • Selective Service Registration • Default & Overpayment • Drug offenses/convictions • Statement of Educational Purpose • Incarceration

7. GENERAL ELIGIBILITY REQUIREMENTS • Collected & Monitored by the School • Enrollment as a regular student in an eligible program • High school diploma or equivalent • Borrowing in excess of annual and aggregate loan limits • Satisfactory academic progress • Financial need • Enrollment in high school

8. ELIGIBILITY REQUIREMENTS Willingness to Repay • Perkins Loan -Student must be willing to repay the loan -Prior failure to meet repayment obligation indicates unwillingness to repay, unless special circumstances exist • Stafford & PLUS -Willingness to repay is not a specific eligibility criterion -School may use PJ to refuse to certify or originate a loan, or to certify or originate it for a reduced amount.

9. ENROLLMENT REQUIREMENTS • Can a student enrolled for less than half time receive a Stafford Loan? • Is a PLUS available to parent of a student enrolled less than half time? • Is there a loan available for students enrolled less than half time?

10. ENROLLMENT REQUIREMENTS • Stafford and PLUS programs require at least half-time enrollment • Federal Perkins Loan program does not have enrollment requirements (i.e., eligible if enrolled less than half time), except for teacher certification programs

11. LOAN PROGRAMS • What two types of student Stafford loans are made under both the FFEL and Direct Loan programs? • Are Parent Loans available under both programs?

12. LOAN PROGRAMS • Subsidized Stafford Loans • Unsubsidized Stafford Loans • Parent “PLUS” loans available under each program.

13. LOAN PROGRAMS Subsidized Loans • What is a subsidized loan? • Are subsidized loans need based?

14. Definition: Subsidized Student Loans • USDE pays interest while student is: • In school • In grace period • In deferment • Once in repayment, the student is responsible for interest and principal payments. • School determines PELL eligibility first • To receive a subsidized loan, a student must have demonstrated financial need.

15. Definition: Demonstrated Need “Demonstrated Need?” COA - EFC - Other Aid = NEED Demonstrated financial need establishes the exact amount that a student can borrow in a subsidized loan, subject to loan limits

16. LOAN PROGRAMS Unsubsidized Loans • What is an unsubsidized loan? • Are unsubsidized loans need based?

17. Definition: Unsubsidized Loans • Interest begins to accrue upon disbursement. • Student responsible for interest payments during in-school, grace, & deferment periods. • No interest covered by federal government • Eligibility for subsidized loan determined first • Student may opt to: • Pay interest; or • Have interest capitalized(accrued interest added to principal)

18. LOAN PROGRAMS Unsubsidized Loans “Not need based” COA – All Other Aid = Unsubsidized eligibility (the amount a student can borrow in an unsubsidized loan, subject to loan limits)

19. ANNUAL LOAN LIMITS Two Components to definition: • Base Annual Loan Limits • Additional Unsubsidized Loan Limits Student’s dependency status determines how much can be borrowed during a loan period

20. ANNUAL LOAN LIMITS Base Annual Loan Limits for Dep.Students: • Represents maximum amount that a student may borrow in a combined subsidized/unsubsidized Stafford loan for an Academic Year at a specific grade level.

21. ANNUAL LOAN LIMITS • What is the BASE amount a dependentstudent can borrow during a loan period at these grade levels? • Freshman • Sophomore • Junior • Senior

22. ANNUAL LOAN LIMITS Base Loan Limits for full AY for Dep. Students $2,625 – first year undergraduate $3,500 – second year undergraduate $5,500 – third yr & beyond undergraduate Note: fifth-yr undergraduate base loan limits apply to teacher certification programs and graduate preparatory coursework

23. ANNUAL LOAN LIMITS • What is the BASE amount an independentstudent can borrow during a loan period at these grade levels? • Freshman • Sophomore • Junior • Senior • Graduate/Professional

24. ANNUAL LOAN LIMITS Base Annual Loan Limits for Independent Students $2,625 – first year undergraduate $3,500 – second year undergraduate $5,500 – third yr & beyond undergraduate $8500 – graduate and professional students

25. ANNUAL LOAN LIMITS Additional unsubsidized annual loan limits available to independent students: $ 4,000 – first & second yr. undergraduates $ 5,000 – third yr./beyond undergraduates $10,000 – graduate/professional students

26. ANNUAL LOAN LIMITS “The maximum amount of unsubsidized Stafford loan funds that an independent student may borrow for an academic year cannot exceed the base annual loan limit plus the additional unsubsidized loan limit, minus the amount of the student’s eligibility for Subsidized Stafford Loan funds.” “All true language is incomprehensible…” Antonin Artaud, French Dramatist

27. ANNUAL LOAN LIMITS WHAT?!?*!? Let’s try an example: Bart, an independent sophomore COA $14,300 EFC -11,800 NEED 2,500 = Demonstrated Need (or subsidized Stafford eligibility)

28. ANNUAL LOAN LIMITS Bart, continued: Base annual loan limit $3,500 Additional unsub loan limit +4,000 Total loan limit $7,500 Subsidized eligibility -2,500 Maximum Unsub elig$5,000

29. AGGREGATE LOAN LIMITS • Represents the combined total of borrower’s loans over course of his or her education • Cannot exceed mandated aggregate maximum applicable to borrower’s dependency status and grade level • Capitalized interest does not count

30. AGGREGATE LOAN LIMITS What is the aggregate loan limit for: • Dependent students? • Independent undergraduate students? • Graduate/professional students?

31. AGGREGATE LOAN LIMITS For Dependent Students: The aggregate loan limit for combined subsidized and unsubsidized borrowing: $23,000.

32. AGGREGATE LOAN LIMITS • Independent Undergraduate • Subsidized……………………$23,000 • Combined sub & unsub…….. $46,000 • Grad/Professional* • Subsidized……………………$65,500 • Combined sub & unsub…… $138,500 *Includes amounts borrowed at undergrad level

33. AGGREGATE LOAN LIMITS • Dependent Undergrads whose parent cannot borrow PLUS: • Subsidized………………………….$23,000 • Combined sub & unsub…………….$46,000 If parent later becomes eligible for PLUS, student’s aggregate limit reverts back to the dependent undergrad limit ($23,000) Any unsub borrowed under indep limits ARE NOT counted toward dependent aggregate limit

34. AGGREGATE LOAN LEVELS • Example: Jill, a dependent senior Freshman 2,625Plus denied/unsub3,000 Sophomore3,500Plus denied/unsub4,000 Junior 5,500 $7,000 Senior 5,500 $17,125 + $7,000 = $24,125 $17,125 + $5,500 = $23,000

35. PLUS LOAN Unsubsidized loan for parents of dependent students • Parent may borrow up to cost of attendance minus other aid received for loan period • No Aggregate Limit • Parent responsible for all loan payments • Federal government does not pay interest at any time • Repayment begins within 60 days after final disbursement

36. PLUS LOAN • For the purpose of applying for a PLUS loan, who qualifies as a parent? • Is a FAFSA required to apply for a PLUS? • What eligibility factors is the school responsible for verifying?

37. PLUS LOAN Definition of Parent: • Biological or adoptive mother or father Either may apply even if one parent’s information is not on the FAFSA due to divorce or separation 2. Stepparent If financial data used, or would have been used, to calculate student’s EFC - Legal guardian NOT considered a parent unless also adoptive parent

38. PLUS LOAN • FAFSA not required, BUT • School has option to require FAFSA …A few good reasons why an institution mightconsider requiring a FAFSA:

39. PLUS LOAN • School is responsible for verifying that student is: • U.S. citizen or eligible noncitizen • Registered with Selective Service (if applicable) • Not in default on a Title IV loan • Not responsible for Title IV grant or loan overpayment

40. PLUS LOAN School is responsible for verifying that parentmeet same citizenship, default, and overpayment eligibility criteria as student. If a FAFSA is filed, this data will be checked against ED’s database matches for both student & parent

41. PLUS LOAN • By certifying or originating a PLUS, school is certifying that both student and parent are eligible to receive Title IV funds • Policies and procedures are needed to confirm parent’s and student’s eligibility if no FAFSA is completed

42. PLUS LOAN Lender or COD determines parent credit history Adverse credit indicated by: • More than 90 days delinquent on repayment of debt • Within 5 years preceding credit report date: • Default determination, bankruptcy discharge • Foreclosure, repossession • Tax lien, wage garnishment • Write-off of Title IV debt • Lenders may vary in credit standards, some being stricter than others.

43. PLUS LOAN What happens if a dependent student’s parent cannot borrow a PLUS loan? What happens if a dependent student’s parent chooses not to borrow a PLUS loan? If one parent cannot borrow a PLUS, is the other parent required to try?

44. PLUS LOAN If parent does not pass the credit check and cannot borrow PLUS funds: • Student allowed to borrow under the independent student loan limits • Can apply for the additional unsubsidized loan

45. PLUS LOAN CANNOT VS OPT NOT A parent’s choice not to borrow PLUS on the student’s behalf does not allow consideration of additional unsubsidized loan limits for the student.

46. PLUS LOAN If one parent cannot borrow PLUS, the student doesnot have to turn to another parent to do so. In cases where one parent cannot borrow, the student can receive the additional unsubsidized loan even if the other parent is reported on the FAFSA. However, if one parent is denied and the other parent does apply and is approved for PLUS, the student is not eligible for the additional unsubsidized loan funds.

47. BEHIND THE SCENES • Student • School • Lender • Secondary Market/Servicer • Guarantor • USDE

48. BEHIND THE SCENES • Student: able to finance an education through the loan program • School: • Calculates loan eligibility • Certifies the student’s eligibility • Delivers funds to the student • Monitors the student’s academic progress • Provides entrance and exit counseling

49. BEHIND THE SCENES • Lender: • Provides the loan funds • Is guaranteed against loss when the borrower… • Refuses to repay a loan • Gives false information to obtain a loan • Can’t repay a loan (i.e. death, disability, or bankruptcy • Can’t complete program due to school closure • Claims false certification

50. BEHIND THE SCENES • Secondary Market/Servicer: • Contracts to perform loan operations • Purchases loans after disbursement • Frees up capital so lender can make new loans