Cracking the Mystery of Financial Aid

1. Cracking the Mystery of Financial Aid Eileen Doyle Crane, Utah Valley University Stephen Brown, Fordham University

2. Introduction • Financial aid world is highly developed industry • Rules and regulations are set by Congress and the U.S. Department of Education • Schools have their own policies • Many are different; many change as needed • Need-based aid versus Merit-based aid • Negotiation

3. Topics of Discussion • Federal Aid • FAFSA • Direct Student Loans, subsidized and unsubsidized • Perkins Loans • Work Study • Income-based Repayment • Loan Forgiveness • Private Educational Lenders • Loan Limits • Credit Issues • Cost of Attendance (COA) • Disbursement of Funds • Debt Load • Salary Data • Repayment Issues and Impacts • Scholarships and Grants • Loan Repayment Assistance Programs (LRAP) • Be Creative!

4. FAFSAFree Application for Federal Student Aid • Basic federal need analysis document • Available on the Web • www.fafsa.gov • FREE – No cost to student • All graduate & professional students are independent • Parental info not required for federal aid • May be required for high-cost private schools • Complete student (and spouse) section ASAP after January 1st

5. 1st Step: Apply for a PIN online www.pin.ed.gov/ Collect income, tax, asset information Calculate federal taxes early A PIN number will be emailed to you; save it in a safe place Specify up to 10 schools; check correct codes Student Aid Report (SAR) data will be posted on your FAFSA account; check for accuracy; correct as needed If applying to more than ten law schools, add new schools above the ten initial listed after your SAR posted FAFSA

6. Federal Aid Programs • Federal Direct Stafford Loans: Subsidized and Unsubsidized • Federal Direct Grad Plus Loan Program • Federal Perkins Loans • Federal Work Study • Federal Loan Consolidation

7. Federal Stafford Loans • Total of $20,500 per year • Interest rate fixed at 6.8% • 6-Month grace period after enrollment ends • 1/2% origination/ 0% guarantee fees • If you fail to make first 12 payments on time, origination fee goes up to 1%

8. Subsidized Taxpayers pays interest while student in school Maximum of $8,500 per year Unsubsidized Interest accrues while student in school Maximum of $20,500 less Subsidized Stafford Stafford Loans

9. Perkins Loans • Federally guaranteed • Campus Based • May not be offered by all schools • 5% fixed interest • 9-month grace period • Maximum $6,000 annually

10. Federal Work Study • Campus-based program • Some law schools do not offer this in the first year of law school • Hourly wage for work • Need-based program • On campus or off campus sites • Minimum wage or higher

11. Cost of Attendance • Each law school prepares a budget for single students • Budget includes: tuition and fees, books, room and board, transportation, insurance, child care (some, not all), and personal needs • Financial aid administrators may alter budget for unusual situations • Creating a relationship with FA administrators to understand your particular situation is always good; they are happy to meet with students

12. Federal Grad Plus Loans • All loan programs are built on the back of the Stafford Loans—up $20,500 available per year • Grad Plus Loans--difference between COA and the portion of the $20,500; no cap on borrowing • Loans will only be given up to COA; if you need more money, it must come from other sources • Terms: • 7.9% interest • 2 ½ % origination fee • Interest accrues while student in school • Absence of bad credit required

13. Absence of Bad Credit • No account currently 90 days past-due • Any account included in this • No write-offs, charge-offs, bankruptcies, or foreclosures allowed • More detail: www.studentloans.ed.gov

14. Private Loans • Schools are required to encourage students to borrow through federal program • Credit- based • Signature- no collateral • Market rate interest - no cap • Variable interest rate • Guarantee fees • Co-Signor options/requirements • Capitalization may be monthly, quarterly • Pay monthly in order to avoid capitalization

15. Credit • Is an important issue in law school finance for public and private schools • If your credit is bad, you may not be able to borrow GradPlus or private loans

16. If you need GradPlus or private loans for graduate school and have bad credit You may not be able to attend!!

17. Nationally, 15-20% rejection rate for bad credit Likely to increase!

18. Credit Issues • Consumer Debt • Credit Bureaus and what they do • You are entitled to one free credit report per year; get it early in case there are issues to address • Credit Scoring • If possible, consider borrowing only for tuition, fees, and books

19. Credit Reporting Agencies • Experian • www.experian.com • Trans Union • www.transunion.com • Equifax • www.equifax.com • Annual credit report • www.annualcreditreport.com

20. Disbursement of Funds • Two times per year at beginning of semester after schools subtract tuition • You receive the money AFTER you have moved to graduate school • Must live within COA and loan amounts

21. Graduate Student Borrowing http://www.finaid.org/loans/

22. Physician Salary Data http://www.studentdoc.com/salaries.html

23. Legal Salary Data Median Hourly Mean Hourly Mean Annual $51.97 $57.40 $119,390 Hourly Wage 10% 25% 50% 75% 90% $24.32 $33.61 $49.26 >$70 >$70 Annual Wage 10% 25% 50% 75% 90% $50,580 $69,910 $102,470 >$145,600 >$145,600 Department of Labor, Bureau of Labor Statistics www.bls.gov

24. Average MBA Starting Salaries by School http://www.admissionsconsultants.com/mba/compensation.asp

25. Repayment Details • Repayment begins 6 months after graduation • Equation-- $12 X $1,000 (6.8%/7.9% interest) = Payment • Current average indebtedness– • Law $ 100,000 • Medicine $ 139, 517 • Business $ 35,525 • Repayment for $100K= $144,000; Monthly payment $1200 • Ten-year standard (can go to 20 or IBR) repayment time frame • No penalties for early payoff

26. Repayment Impacts • Debt #1 impact on job choice • Lifestyle choices: before, during, & after law school • 2006 Study: • 55% of graduates in repayment report feeling burdened by their debt, especially law graduates • Up from 50% in 1997 • 54% report that they would have borrowed less had they known the extent of the burden • 15% report that the benefits of borrowing were out-weighed by the burden of repayment

27. IBR

28. Repayment Impacts • How much will this really cost? • Can I afford it? • Repayment options/incentives • 10-, 15-, 20-, 25-, and 30-year repayment plans may be available • Be careful of stretching it out: when you should be preparing for retirement, you may still be paying off your college debt AND you may have children in college

29. Debt Management Software • Access Group Advisor • 1-800-282-1550 • www.accessgroup.org • Nellie Mae EDvisor • 1-800-EDU-LOAN • www.nelliemae.org

30. Scholarships Information • School Catalogues—Institutional scholarships • www.fastweb.com • www.finaid.org

31. LRAPLoan Repayment Assistance Programs • Awarded post-graduation • To grads who work in public interest jobs, as defined by their school • May be given as a grant or a loan • Loan may be forgiven, after certain number of years of working in job • ____ programs nationally • Not available at all schools

32. Law School LRAP Programs • Public interest jobs • Equal Justice Works—former National Association of Public Interest Law • www.equaljusticeworks.org • High-cost schools pay all/part of loan payments for certain period • Limited funds and job descriptions

33. Be Creative!! • If you’re paying on your own, and someone want to help you, let them pay one bill while you’re in school (phone, texts, rent, gas, travel, clothes, etc.) • Creative entertainment; Find free things to do! • Insurance is a MUST!! One medical event could lead to bankruptcy. Stay on parents’ plan, if possible. • Holiday presents: textbooks, phone cards, clothes, necessities