10/4/2011. D404: Protecting the Financial Aid Consumer. Today s Topics. Choosing a School

Transcription

1 D404: Protecting the Financial Aid Consumer Cindy Forbes Cameron & Lisa Rhodes, U.S. Department of Education Washington, DC Rohit Chopra, Consumer Financial Protection Board Washington, DC For Training Purposes Only Today s Topics Choosing a School Estimating Aid and Debt Burden Applying for Aid Managing Aid Responsibly CFPB Issues Choosing a School 1

2 School Searches MyFSA College Matching Wizard College Navigator Gainful Employment Goal to protect students from attending programs that leave them with high debt and without the means to repay it Requirements for schools list on program s web site (among other things): Occupation the program prepares students for Program costs Job placement rates Loan debt incurred For detailed information: Estimating Aid and Debt Burden 2

3 Net Price Calculators Purpose to help consumers estimate the individual net price of the school. Requirements for schools By 10/11, each U.S. school that participates in federal student aid programs must post a net price calculator on its website. About the calculator Students must answer 9 questions to establish: dependency status, estimated cost of attendance, and approximate Expected Family Contribution (EFC) Outcome: net price after COA, EFC, median aid taken into account FAFSA4caster Purpose: early estimate of aid eligibility Asks: dependency status questions, AGI, parents marital status, household size and number in college Provides: College Cost Worksheet Student fills in COA of school; how much state, school, and private scholarship aid student will get; amount of savings 4caster provides Pell amount; Work-Study based on national average; max Stafford Loan amount; calculates how much student would need to come up with Estimating Loan Burden Remind students that loans must be repaid with interest! Repayment Plans and Calculators: (click on Repay Your Loans, then Repayment Plans and Calculators ) Students can use the calculators to get an idea of what their loan payments (burden) will be using the different repayment plans. 3

4 Estimating Potential Earnings Students can get information re income potential of occupations relevant to course of study using: Occupational Outlook Handbook Provides job info including: training and education needed earnings expected job prospects what workers do on the job Earnings info by region, state, some metro areas: CareerOneStop Info on careers, latest career fields in demand, how to get training for a particular job, and where to look for a job. Comparing Loan Burden Against Potential Earnings Get expected annual income in different careers by checking the Occupational Outlook Handbook. Subtract 30% from the estimated salary for federal, state and local taxes. Divide this figure by 12 to get an estimated monthly take-home pay. Suggest loan burden to be no greater than 8% of monthly take-home pay. Example: Annual wages = $43,410 Income after 30% allowance for taxes = $30,387 $30,387/12 = $2532 monthly take-home 8% of $2532 = $ allowance for monthly loan payment On estimated salary of $43,410, student could borrow approx $17,500* (6.8% interest) for all years of study These are rough estimates; income and expense figures are likely to change due to inflation or other factors. *initial debt when entering repayment Applying for Aid 4

5 Scholarship Fraud Major types of fraud paid search services, scholarships for profit, seminars, FAFSA sites, impostors How to avoid fraud Looking for Student Aid Without Getting Scammed web site; downloable flyers How to report fraud FTC, ED OIG, BBB, state attorney general See fraud resources handout Paying for the FAFSA There s no need to pay to file the FAFSA How to remind students about free FAFSA Don t Get Stung at Looking for Student Aid at Managing Aid Responsibly 5

6 Budgeting Budgeting to minimize borrowing Look at COA school provided: is it realistic? Sometimes students can live on less Cut back in various ways to live within means ideas at /funding (click on Reducing College Costs ) Budgeting tools see Tools, Budgeting Worksheets ID Theft How to avoid it Keep personal info safe (dorm awareness!) Don t reveal Federal Student Aid PIN to anyone Shred credit card offers etc Don t give personal info unless you know/trust the requesting organization How to report it Social Security Administration Credit bureaus, credit card companies, bank, etc Police Resources Avoiding Default Consequences of default Bad credit Tax refund taken Wages garnished No additional student aid Avoiding default Deferment, forbearance Change repayment plan Consolidate KEEP IN TOUCH WITH LOAN SERVICER Resources Got a Federal Student Loan? Be a Responsible Borrower at 6

7 CFPB Issues Questions and Comments Ask now or visit us in booth 701 7