december 2014 student loan seminar presentation
TRANSCRIPT
INTRO
Introductions
Eat cookies to stay awake!
PAW
Supporting local paper companies
Sources are cited; sites are sourced
Ask questions!
I’ll provide education, not advice
Present the facts, your options, & the process
of student financial aid so that you’re prepared
to make decisions when that time comes.
Source: Bureau of Labor Statistics; Current Population Survey, unpublished tables, 2012visual.ly/why-go-college
Source: Carnevale, Anthony P., Jayasundera, Tamara, and Cheah, Ban. (2012). The College Advantage: Weathering the
Economic Storm. Georgetown University: The Center on Education and the Workforce.
$$ SAVED MONEY $$
$$ FREE MONEY $$Scholarships & Grants
$$ BORROWED MONEY $$
Federal or Private Loans
Source: Sallie Mae; Go to: http://news.salliemae.com/research-tools/america-pays-2013
for this study & more information on how America pays for college.
Start early, save whatever you can
It’s not too late to start now
Keep saving as long as you can
Encourage good spending habits
Change your spending habits
College = Financial Independence
GET ADVICE ON HOW TO SAVE*
$100 = Initial Deposit
+ $50 = Monthly Deposit
X .15% = Interest Rate
X 18 = Years of contribution
$10,900 (Actual) + $150 (Interest)
$100 = Initial Deposit
+ $50 = Monthly Deposit
X 3% = Interest Rate
X 18 = Years of contribution
$10,900 (Actual) + $3800 (Interest)
Standard Savings
Money Market Savings
CD (Certificate of Deposit)
Traditional IRA
Roth IRA
Custodial Account (UGMA/UTMA)
Educational Savings Bonds
Named for tax code
Savings product tied to mutual funds Return is based on performance of the market
Can be used only for higher education expenses
Each state has their own 529 Plan WI 529 Plan is called Edvest or Tomorrow’s Scholar
WI residents receive state income tax deduction for contributions up to $3000 per child, per year
DIY & Advisor plans offered
Earnings can be exempt from WI & Federal tax
You can use ANY state’s 529 plan
No income limits
Contribute up to $350,000 per child
Named for Senator who pushed through Congress
Savings product tied to mutual funds/securities
Return is based on performance of the market
Qualified distributed earnings are federal income tax free
No state income tax benefits
Can be used for elementary, secondary, or higher
education expenses (K – grad school)
Not available to high income families
$220K max joint income/$110K max single income
Contribute up to $2000 per beneficiary, per year
I have $_____ per month to
save for my child’s education. What do you recommend?
I’ve been putting $____ into
a _____ to save for my
child’s education. Do you
have any other recommendations?
Do your best in school
SAT/ACT scores are important
Colleges you apply to will offer “merit”
scholarships with your financial aid package
Start looking for private scholarships early
Junior year of high school
Do your research to find the best fit
Ask questions
Use your time wisely
USE YOUR RESOURCES!
Guidance Counselor
On-line Databases contain info on millions of
scholarships worth BILLIONS of dollars
Cfffoxvalley.org (Local)
Salliemae.com/scholarships
Studentaid.ed.gov/scholarship
Careerinfonet.org/scholarshipsearch
College Financial Aid Office
Be smart about the applications you complete
Watch the deadlines
Based on terms of the scholarship
No need! (the best part)
Federal Pell Grant
Undergrad, up to $5,730 (2014-2015 award year)
Fed Supplemental Ed Opportunity Grant (FSEOG)
Undergrads with exceptional financial need, up to $4,000
TEACH Grant
Elementary or secondary school teacher
Must teach full-time in a designated teacher shortage area
4 year commitment, up to $16,000
Iraq & Afghanistan Service Grant
Parent passed away as a result of military service after 9/11
Federal Work Study
Guaranteed employment while you’re in school
On campus – usually work for your school
Off-Campus – usually private NPO or public agency
You will earn at least minimum wage
Employer must pay you directly, once a month
Important considerations:
Will work interfere with studies or sports?
Do I want to work while in school?
Could I get a higher paying part-time job elsewhere?
What is a federal student loan? Money from the government that’s repaid WITH
INTEREST
Helps you pay for educational expenses at an eligible college, tech school, vocational school, or grad school
Who gets aid? Every student, regardless of age or family income
Must meet some basic eligibility requirements
14 MILLION students currently receive aid
How much aid is available? More than $150 BILLION is available every year
WHY FEDERAL STUDENT LOANS?
Lower interest rates
Flexible repayment options
Longer repayment terms
Tax-deduction of interest paid
Student can borrow to build credit
When considering the options to borrow for a
college education, it’s recommended that you
exhaust federal funds BEFORE private loans!
KNOW YOUR COLLEGE
KNOW YOUR EMPLOYMENT OUTLOOK
UNDERSTAND THE FINANCIAL AID OPTIONS
KNOW YOUR FINANCIAL AID OUTLOOK
WHAT IS THE “COST OF COLLEGE”?
Education expenses might include any of the following..
Tuition
Room & Board
Supplies, books, & equipment
Child care expenses
Transportation
Personal PC
Lab fees
COLLEGE AFFORDABILITY & TRANSPARENCY
CENTER
US Department of Education
www.collegecost.ed.gov
1. College Scorecard
2. College Navigator
3. Net Price Calculator
COLLEGE SCORECARD
Basic, quick information
Enter the name of the college to see:
Average Net Price (Cost)
Graduation Rate
Loan Default Rate
Median Borrowing
COLLEGE NAVIGATOR
National Center for Education Statistics (US D.O.E)
In-depth analysis
Enter the name of the college to see:
Tuition, fees, net price, & financial aid
Faculty, enrollment, ethnicity, & gender
Programs, majors, varsity athletic teams
Crime stats
NET PRICE CALCULATOR CENTER
Links to Net Price Calculator on college site
Enter the following info for personalized analysis of
your cost & an estimated financial aid package:
ACT/SAT scores, GPA, & high school rank
Student Tax info
Parents Tax info
Family Assets
OCCUPATIONAL OUTLOOK HANDBOOK Bureau of Labor Statistics Bls.gov/oco
Guide to career info on hundreds of occupations
Highest median pay for 2012
Projected # of new jobs
Projected growth rate
Job Category
HOW MUCH CAN A STUDENT BORROW? How much you get depends on:
Financial Need
Cost of Attendance
Enrollment Status (F/T vs. P/T)
There are limits: Annual (per year)
Aggregate (total)
The limits depend on: Year in school
Dependant Status
HOW MUCH AID WILL WE RECEIVE?
Must complete Free Application for Federal Student Aid
(FAFSA) for official eligibility
Fafsa4caster.ed.gov
Early eligibility indicator
For anyone not ready to file an official FAFSA
Provides an estimate
The FAFSA determines your eligibility for
federal loans, grants, work-study, & some
state & institutional aid.
It’s the ONLY way to apply for federal financial aid
It’s REQUIRED if you want federal financial aid
Completed online at fafsa.gov
Complete ASAP after Jan. 1 of the year you’ll start
school b/c some aid is awarded on a first-come,
first-served basis
The Student Aid Report (SAR) summarizes
the info you provided on the FAFSA & will
contain your Expected Family Contribution
SAR is returned 3-10 days after FAFSA is submitted
Review the SAR carefully to make sure it’s correct
Colleges listed on your FAFSA will also receive your
SAR
From this point, stay in contact with your college’s aid
office as they will put together your aid package
Expected Family Contribution (EFC) is
calculated based on the info you reported on
the FAFSA, according to a legal formula
How much are you expected to contribute
EFC will appear on your SAR
Income, assets, family size, & # attending college are
considered in the formula
EFC is used to determine need for federal student aid
• Cost of attendance – EFC = Financial Need
Colleges that accept you for admission will
send an award letter detailing the financial
aid package you’re being offered
Award letter shows COMPLETE aid package
This is all grants, scholarships, loans, & work-study
offered from state, federal, & institutional sources
Evaluate the aid package paying close attention to
loan interest rates, fees, & repayment terms
“I’d recommend applying to 3-4 schools, even if you’re SURE you know where you want to go. It might cost a little to apply but you’ll get a better comparison of what different colleges offer for financial aid. Then, don’t take the first offer on your aid package. Negotiate
with the financial aid office if you feel the offer could be better.
Colleges will compete for your student! What’s the worst they can say?”
WHAT IS A LOAN? A loan is a borrowing agreement made between two
parties, where one party lends money to another party who
agrees to repay the borrowed money on specific terms,
with interest.
A loan is made up of 2 components:
PRINCIPAL = Original amount borrowed
INTEREST /FEES = Expenses paid by the borrower
Interest is calculated (compounded) monthly. With
student loans, the interest can be paid right away, or
CAPITALIZED (added to the unpaid principal).
WHAT IS A SUBSIDIZED LOAN? “Subsidized” means the US Dept of Ed. pays
the loan interest during certain time periods
You’re in school ½ time
During your grace period
During periods of deferment
“Unsubsidized” means you are responsible
for the loan interest during ALL periods
Interest accrues as soon as the loan is disbursed
You can choose to pay the interest right away
You can choose to capitalize the interest
WHAT’S A LOAN ORIGINATION FEE? Basically, a processing fee
Some federal loans have origination fees
Fee is subtracted from the loan amount before
disbursement
Your loan is $1,000 with a 1% origination fee
$1000 (amount borrowed) - $10 (1%
origination fee) = $990
$1000 is the amount you pay back
Loan = $5000 (Disbursed 9/2015), No Origination Fee, 5% Interest Rate, Subsidized thru 1/2020
$5000 (Principal)
- $0 (Origination Fee)$5000 (Amount disbursed on 9/2015)
$5000 (Value of Loan)X $0 (Monthly Interest accruing @ 5%)
$0 (Monthly interest added for 54 months)
= What you owe in Jan, 2020 (+ interest)
Loan = $5000 (Disbursed 9/2015), 1% Origination Fee, 5% Interest Rate, Unsubsidized, Interest NOT capitalized
$5000 (Principal)
- $50 (1% Origination Fee)$4950 (Amount dispersed on 9/2015)
$5000 = Value of loan$21 = Monthly interest charge @ 5% APY
54 = Number of months you make this payment$1145 = Total interest paid over 54 months
= What you owe in Jan, 2020 (+ interest)
Loan = $5000 (Disbursed 9/2015), 1% Origination Fee, 5% Interest Rate, Unsubsidized, Interest capitalized
$5000 (Principal)
- $50 (1 % Origination Fee)$4950 (Amount dispersed on 9/2015)
$5000 = Value of loan$21+ = Monthly interest charge @ 5% APY
54 = Number of months interest capitalizes$1258 = Total interest capitalized over 54 months
= What you owe in Jan, 2020 (+ interest)
FEDERAL PERKINS LOAN:
Awarded for exceptional financial need
5% Fixed Annual Interest Rate
Unsubsidized
No Origination Fee
$5,500 per year limit ($27,500 maximum)
Student is the borrower
College is the lender
Funds applied to college “bill” first with a refund
issued for excess funds
FEDERAL DIRECT SUBSIDIZED LOAN:
Also known as: Stafford Loan
Awarded to students with financial need
Undergrad students only
4.66% Fixed Annual Interest Rate (As of 7/1/14)
Subsidized
1.073% Origination Fee (As of 10/1/14)
Maximum Eligibility Period is 150% of the
published length of your academic program
School determines eligibility
Student borrows; US Dept of Education lends
FEDERAL DIRECT UNSUBSIDIZED LOAN:
Also known as: Stafford Loan
No requirement to demonstrate financial need
Undergrad & grad students
4.66% Fixed Annual Interest Rate (As of 7/1/14)
Unsubsidized
1.073% Origination Fee (As of 10/1/14)
School determines eligibility
Student borrows; US Dept of Education lends
FEDERAL DIRECT LOAN LIMITS:
Subsidized & Unsubsidized combined
YEAR 1 = $5,500 (up to $3,500 can be Subsidized)
YEAR 2 = $6,500 (up to $4,500 can be Subsidized)
YEAR 3 = $7,500 (up to $5,500 can be Subsidized)
YEAR 4+ = $7,500 (up to $5,500 can be Subsidized)
AGGREGATE LIMIT = $31,000 (up to $23,000 Subsidized)
WHAT ABOUT THE REST?$12,000 (Annual Net Cost of Attendance)
- $2,000 (Perkins Loan)
- $4,500 (Stafford Loan)
- $1,000 (Private Scholarships)
- $1,000 (Work-Study)
= $3,500 (REMAINING BALANCE)
FEDERAL DIRECT PLUS LOAN: Used to borrow the remainder of cost for education
Parent is likely the borrower
Approval based on credit history
No need to demonstrate financial need
7.21% Fixed Annual Interest Rate (as of 7/1/14)
4.292% Origination Fee
Borrow up to 100% of cost of attendance
No aggregate limits
Unsubsidized
US Dept of Education is the lender
Loan cannot be transferred to student
SMART OPTION STUDENT LOAN: Used to borrow the remainder of cost
Student & Cosigner are likely the borrowerApproval based on credit history
No need to demonstrate financial need5.74-11.85% Fixed Annual Interest Rate
2.25-9.37% Variable Annual Interest Rate
NO Origination Fee
Borrow up to 100% of cost of attendance
Unsubsidized
Sallie Mae is the lender
Cosigner release = Loan can be
transferred to student
HOME EQUITY LOAN OR LINE OF CREDIT:
Also known as: Second Mortgage
Borrowing against the equity in your home
Used to borrow any of the of cost of education
Homeowner is borrower
Loan cannot be transferred to student
No need to demonstrate financial need
Rates are low right now
Interest paid may be tax-deductible
May incur closing costs
To accept, sign the award letter and return it to
the school for processing.
The financial aid office at your college will guide
you thru the paperwork which includes signing a
promissory note, (you PROMISE to repay your loans
according to the terms)
College is required to provide entrance counseling
Loan funds will be “disbursed” in at least 2
installments
Most student loan funds will go directly to the college
or come directly from the college
College will use aid money first to pay for tuition,
fees, room, board, and other expenses on your
student account. If any aid money remains, you will
receive the funds by check
Before loan money is disbursed, you may cancel
all or part of your loan by notifying the school.
After the loan is disbursed, you may cancel all or part
of the loan within certain time frames
Promissory note will explain procedures for
cancelling loans
For MOST student loans, you are not required to make payments during certain periods While enrolled in school
During periods of forebearance
During “grace period” after graduation:• Perkins = 9 months
• Stafford = 6 months
Unsubsidized loans start to accrue interest as soon as the loan is disbursed which will be capitalized onto the principal,
unless you choose to pay the interest charges while in school!
StandardFixed monthly payment, $50 minimum, 10-year term
GraduatedMonthly payment starts low & increases, 10-year term
ExtendedFixed or graduated payments
Must have more than $30,000 in Direct Loans
25-year term
Income Sensitive or ContingentIncome-based repayment options
Student loans are LEGAL obligations!
Student loans are borrowed money that MUST be repaid just like car loans & home
mortgages. You MUST repay a student loan ever if your circumstances become difficult.
Non-payment of student loans has serious consequences (legal default on a loan) and
will negatively affect your credit rating.
Repayment schedule from loan servicerExit counseling will be provided at graduation
When first payment is due
Number of, amount of, & frequency of payments
You will be notified if your servicer changes
The loan is YOUR responsibility!Make payments regardless of receiving billing notices
You must pay even if you aren’t getting reminders
Notify your loan servicer of all change of addresses
National Student Loan Data System:www.nslds.ed.gov
Dept of Ed’s central database for student aid
Access & retrieve your student loan data
Repayment Estimatorwww.studentloans.gov
Shonna Prickette
Training & Development Manager
[email protected] 920-882-4801
Jeff Garrett
Licensed Financial Consultant
[email protected] 920-882-4780
FINANCIAL AID PROCESS INFOGRAPHIC
studentaid.ed.gov/prepare-for-college/checklists/#checklists
“FUNDING YOUR EDUCATION – Guide to Federal Student Aid” Document
Studentaid.ed.gov/resources
Checklists to begin preparing (K-12th grade)
Studentaid.gov/prepare-for-college/checklists
Edvest & Coverdell Savings Plans
www.edvest.com
www.edvest.com/learn/compare.shtml
Scholarship Opportunities:
– Careerinfonet.org/scholarshipsearch
– Salliemae.com/scholarships
– Studentaid.ed.gov/scholarship
College Scorecard, College Navigator, and Net Price Calculator
– Collegecost.ed.gov
Labor Statistics Occupational Outlook Hndbk
– Bls.gov/oco
Free Application for Federal Student Aid– Fafsa4caster.gov
– FAFSA.gov
Sallie Mae Smart Option Student Loan– Contact your financial institution
National Student Loan Data System– nslds.ed.gov
Repayment Estimator– studentloans.gov