1 Financing Options Financial Aid 101 Mary Dyer, Default Prevention Specialist October 10, 2008.
Post on 15-Dec-2015
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Agenda
• Choices that impact college costs
• Ways to reduce expenses
• Financing options available to students & families:
- Tuition Payment Plans
- Federal PLUS Loans
- Private Alternative Loans
Choices Include
• School selection• Choice of major• Enrollment level• Work or play?• Housing options• Drive or walk?• Optional expenses
School Choice
School Choice
• Consider community college
• In-state school vs. out-of-state – What can the family afford for travel
expense?
• State schools may cost less
School Choice (con’t)
• Important that students compare award packages when selecting a school
• What types of loans are included in the package?
• Apply on time EVERY YEAR to ensure the best package possible
Choice of Major
• Choice of major can impact the number of schools available
• Consider earning potential upon graduation
• Major can also impact the amount of financial aid received
• Consider loan forgiveness options
Enrollment Level
• Is tuition charged based on “per credit hour” basis or enrollment level (i.e. full time vs. half time)?
• Reducing course load may save money, but consider length of time needed to complete school
• Impact of attending school year round
Work or Play?
• Students should be working and SAVING for college expenses.
• At a minimum, students should save enough to pay for books and miscellaneous expenses (cell phone, late night pizza, entertainment, etc.)
Work or Play?, cont.
• Summer employment can result in significant savings
• The more students work, the less they borrow
• Myth: “If I work, they will take away my financial aid”
Housing Options
• On campus vs. off campus– is one option cheaper than the other?
• Need to consider cost of rent, transportation and food
• If on campus, type of room can impact cost – singles typically cost more than doubles and “suites” tend to cost more than standard rooms
Housing Options (cont.)
• If off campus, is the student willing to share with several people?
• Living at home can often save the student thousands of dollars
Drive or Walk?
• If the student is living on or near campus, consider leaving the car at home
– Gas, insurance, parking passes & tickets
– Unexpected repairs and maintenance can be costly
– Students often have access to public transit
Reduce Expenses
You mean my cell phone is optional???
• Computer purchase/laptop– Many colleges have invested
in expensive computer labs
• Cable/Internet– use college provided resources
• Cell phones– choose a prepaid plan
Reduce Expense, cont.
• Textbooks– buy early and USED!!!
• Clothes
• Vacations– spring break or working break???
• Entertainment– campus events are often FREE!!
A Word About Credit Cards…
• These can be deadly…
– Consider a debit card – Have credit card available only for
emergencies and have limit on it– Student need to better understand the
cost of credit and how expensive it is
Financing Options
- Tuition Payment Plans
- Federal PLUS Loans
- Private Alternative Loans
Financing options available to students &
families:
Tuition Payment Plans
• Most colleges offer some type of tuition payment plan
• Plans are short-term (usually 12 months)
• These plans allow students & families to make monthly payments on tuition and room & board
Tuition Payment Plans, cont.
• Can spread the payments out over the course of a semester or year
• Plans are interest-free
• Nominal fee (usually $50-$100) is charged
• IMPORTANT: Can utilize a payment plan in combination with student and parent loans
Tuition Payment Plans, cont.
• Many offer an auto-debit option
• Payment plan counselors assist families in calculating their remaining bill
• Common plans include AMS Tuition Pay, FACTS Tuition Management and Advantage School Tuition Payment Program
Federal PLUS Loans
• Borrower is the parent of a dependent undergraduate student, or graduate/professional student
• Direct PLUS Loan funded through the federal government – borrower repays the feds
• FFEL PLUS Loan is funded through private lending institutions – borrower repays private lender
Federal PLUS Loans• Borrowers must:
pass a credit check be citizens or eligible non citizens not in default on federal student loan not owe a refund on any federal student aid
program (nor can the student)
• PLUS Loans can fill need and/or replace EFC
• Undergraduate students are NOT required to file a FAFSA in order for the parents to borrow a PLUS Loan, but graduate students ARE required
PLUS Loan - Amounts
Student’s cost of attendance
- Other aid student receives
= Maximum loan amount
No aggregate maximum
PLUS Loans – Interest Rate
• The interest rate on FFELP PLUS Loans first disbursed after July 1, 2006 is fixed at 8.5%; for Direct PLUS Loans the rate is fixed at 7.9%.
• A few lenders reduce the interest rate under certain circumstances as a borrower benefit
PLUS Loans – Interest Rate & Fees
• PLUS Loan charges loan fees of up to 4%, deducted evenly from each disbursement
• While in deferment, interest accrues
PLUS Loans - Repayment
• Repayment begins 60 days after the funds are fully disbursed
• The repayment term is up to 10 years
• NEW!! Graduate students and parents can defer while student and/or parent is enrolled at least half-time, as well as during a six-month grace period.
• IMPORTANT - Interest that accrues on PLUS loans during deferment or grace period can be capitalized no more frequently than quarterly.
PLUS Loans – Application Process and Promissory Note
• Check with financial aid office to determine application process
• After credit check, borrower will be notified of approval or denial
• Master Promissory Note required – good for 10 years – tied to individual student
Alternative Loans
• Student is the borrower• Often require co-signer with good
credit history and debt to income ratio
• Do not need to complete the FAFSA• Funded through private lenders• Not federally regulated
Alternative Loans – Amounts
Student’s cost of attendance
-Other aid student receives
= Maximum loan amount
Aggregate maximum – varies by lender
Alternative Loans – Interest Rate and Fees
• Interest rates and fees vary by lender
• Most interest rates are variable and set based on the Wall Street Journal prime rate or the LIBOR rate
• Often interest rates and fees are structured so that they are less for those with better credit and debt to income ratio
Alternative Loans-Repayment
• Repayment varies from one lender to another
• Typically principal is deferred while student is in school, but interest accrues
• Many loans do have a grace period
• Repayment period varies depending on lender and amount borrowed
Alternative Loans – Application Process and Promissory Note
• Contact financial aid office
• Often, next step will be to apply directly through lender (phone/web site)
• If approved, lender will have student sign promissory note and then will send information to school
• School will “certify” the loan
• Some schools will require loan counseling
Responsible Borrowing
• Borrowing a loan is a given for most students
• Varies tremendously from one school to the next… not necessarily tied to the cost of the school
• Individual choices have a huge impact on the amount eventually borrowed
In Closing…
• Choices made early on can impact college costs and loan debt
• Options do exist
• Reach out to your financial aid office or FAME.
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