What is the difference between a private student loan and a federal student loan?

Transcription

1 Student Lending - FAQ General Questions What is a WSFS Bank Private Student Loan? The WSFS Bank Private Student Loan can be used to pay for qualified educational expenses including tuition, room and board, books, and other school related expenses. Private student loans serve as a way for students to fill the funding gap between the cost of attending school and the amount of federal loans, grants, and available scholarships. What is the difference between a private student loan and a federal student loan? Federal student loans follow guidelines set forth by the U.S. Dept of Education and typically offer fixed and lower interest rates compared to private student loans. However, federal loans, unlike most private loans, have borrowing limits, which may not allow a student to borrow enough to cover the entire cost of education. Private loans help students fill the funding gap between the cost of attending school and the amount of federal loans, grants, and available scholarships. Both private and federal student loans typically allow students to defer payments while in school and some offer economic forbearance options once a student completes school. Unlike federal loan programs, private lenders assess the credit history of the borrower and cosigner before making a loan. How do I know if I m eligible for financial aid? Eligibility for federal, state and university funded financial aid is determined by completing the Free Application for Federal Student Aid (FAFSA). All students are strongly encouraged to apply for federal aid by completing the FAFSA, which can be obtained online at How much financial aid am I eligible to receive? The financial information you provide in the Free Application for Federal Aid (FAFSA) is used by the government to determine your Expected Family Contribution (EFC), which is the amount you and your family are expected to pay towards your education. The EFC is then subtracted from the cost of attendance for your respective school to determine the amount of financial aid you are eligible to receive.

2 What is an Expected Family Contribution (EFC)? The EFC is a calculated assessment of how much your family is expected to contribute to your college costs. The EFC takes into consideration your family s financial strength income and assets. Other factors considered include the number of family members and number of family members in college. Private Student Loan Eligibility Who is eligible for a loan? To apply for a WSFS Bank Private Student Loan, you must be a US Citizen or Permanent Resident enrolled at least half-time in a degree-granting program at an eligible school. You or your cosigner also must meet our credit requirements. Choosing a creditworthy cosigner will increase the likelihood of being approved and may lead to a lower loan rate. You can apply without a cosigner if you meet all of the credit criteria by yourself. How do I know if my school is eligible for a loan? You can confirm whether or not your school is an eligible school on the first page of the application. Does applying for a federal loan impact my ability to obtain a loan? No. Students are encouraged to explore and exhaust all federal aid options first, and then use private loans to help pay the remaining education expenses. What is a cosigner? A cosigner is a parent, grandparent, guardian or other adult who is creditworthy and willing to assume legal responsibility for the loan liabilities along with you. The cosigner must be a US Citizen or Permanent Resident. Is a cosigner required to obtain a loan? In most instances, a cosigner is required to obtain a loan. A creditworthy cosigner increases the likelihood of your loan approval and may lead to a lower loan rate. Creditworthy students that meet the credit requirements may apply without a cosigner. Will the cosigner s credit record be affected? Yes, in a cosigned loan both the borrower and the cosigner are jointly liable for making all loan payments. The loan will appear on both the borrower and cosigner s credit report.

3 Is the cosigner responsible for repaying the loan? If the borrower fails to repay the loan, then the cosigner is responsible for repaying the loan. However, the cosigner may be released of this obligation once the borrower is able to meet certain criteria to determine creditworthiness and makes 48 consecutive and ontime full payments of principal and interest during the Repayment Period. Application Process When should I begin the process? We encourage you to start early. You can start the loan application process once you know what school you will be attending, the Cost of Attendance for the current academic year, and can provide a proof of enrollment. You should allow yourself 6-8 weeks from the time of the initial application until your school receives your funds. How much can I borrow? You can borrow as little as $2,000 or up to $30,000 per year for a maximum of $100,00 in undergraduate loans or $125,000 in graduate loans. How do I apply for a loan? The application process must be completed online at Do I need to be enrolled in an educational institution to complete the application process? Yes, you must provide proof of enrollment at an eligible school to complete the application process. What proof of enrollment do I need to provide? If you are a returning student, you must provide an unofficial copy of your most recent graded transcript as proof of enrollment at the school you are attending to complete the application process. If you are an incoming freshman, your school will confirm your enrollment during the certification process.

4 What proof of income do I need to provide? You must provide a copy of your two most recent pay stubs within the last 60 days. Pay stubs submitted for review must clearly display the following five pieces of information: 1) Employer Name 2) Pay Period 3) Employee Name 4) Gross Income 5) Deductions Depending on your type of employment or financial situation, we may be able to accept alternate proof of income: If you are self-employed, you must provide a 2011 and 2012 tax return and required schedules. If you are retired, you must provide a pension and/or social security award letter or 1099R. If you are a commission-based employee, you must provide a 2011 and 2012 W-2 and two recent pay stubs within the last 60 days. If the loan is cosigned, only the cosigner needs to submit these documents. What is school certification? School certification is normally completed by the financial aid staff and will include information like the Cost of Attendance and the registration status of the student. Certification ensures that the student is not over-awarded in total funding beyond the Cost of Attendance. Will this loan be certified? Yes, all loans are certified with the school. How does my cosigner complete his/her portion of the application? During the application process, cosigners will be asked to create an account and complete their own application. They complete the same application procedures as the borrower for joint-credit. Will both the borrower and cosigner s credit be checked? Yes. During the application process, and as part of the underwriting process, a credit bureau report is pulled on both the borrower and cosigner.

5 What is ACS? ACS (Academic Credit Score) is a proprietary scoring model that assesses borrower creditworthiness by taking into account not only the credit bureau data, but also the student s academic characteristics such as GPA, course of study, class standing, and year of study. How do I check the status of my application? The status of your application is available by signing in to your account. The green status bar you see immediately after login indicates which state your application is currently in. What do the stages of the status bar mean? Applying: The borrower started the application but it has not been credit reviewed for one of two reasons: The borrower hasn't submitted the application yet The borrower invited a cosigner that has yet to complete his/her portion of the application Reviewing: LendKey forms an initial credit decision on the borrower and cosigner (if applicable) Gathering: The borrower is conditionally approved The borrower uploads the requested documents Approving: WSFS Bank makes a final review of the application Signing: The application is final approved The borrower signs the loan agreement and disclosures Disbursing: The loan disbursement is scheduled

6 Private Student Loan Terms What is the repayment term of the loan? The repayment term begins 6 months after the borrower graduates or ceases to be enrolled at least half-time in an eligible degree-granting program. Once repayment begins, the borrower has 15 years to repay the loan. How soon will a borrower receive the loan proceeds? The loan proceeds will be sent to the school by check or through electronic funds transfer (EFT). The check will usually be mailed within 5-7 business days of the borrower accepting their final disclosure unless the school requests a later date. How is the interest rate calculated? Interest Rate = Base Rate + Loan Margin The Base Rate is the Wall Street Journal Prime Rate, which is a variable component that resets quarterly on the first day of January, April, July, and October. The Loan Margin stays constant for the life of the loan and is determined at loan inception, depending on the borrower's credit history and ACS Grade. How often is accrued interest capitalized? Unpaid interest accrues while the borrower is in school. Upon entering full repayment, all accrued and unpaid interest is capitalized (or added) to the principal balance once at the time repayment begins. What documentation is provided to borrowers? Borrowers receive electronic monthly statements summarizing all account activities. What are the Forbearance policies? Borrowers may request Forbearance due to economic hardship for up to 18 months over the life of the loan. Borrowers are eligible to receive three Forbearance periods up to 6 months each. However, only one Forbearance period may be requested in a calendar year. Interest continues to accrue during Forbearance and the term of the loan is not extended.

7 Repayment What repayment options are available? Two in-school repayment options allow the borrower to defer full principal + interest payments until six months after separating from the school: Interest-Only Repayment: the borrower is immediately responsible for making full monthly interest payments on the loan while enrolled in school. Six months after separating from the school or ceasing to be enrolled at least-half time in a degree granting program, the borrower enters repayment status and is responsible for making full interest and principal payments. Proactive Payment: while enrolled at least half-time in a degree granting program, the borrower is only required to make monthly $25 Proactive Payments during the in-school period. Any unpaid accrued interest is capitalized (or added) to the outstanding loan amount once at the end of the in-school period. Six months after separating from the school or ceasing to be enrolled at least-half time in a degree granting program, the borrower enters repayment status and is responsible for making full interest and principal payments. What is the In-School Repayment period? The in-school period lasts while the borrower is enrolled at least half-time and includes a 6-month Grace Period once the borrower leaves school. During this time, the borrower is required to either make full interest payments or a monthly $25 Proactive Payment. Any unpaid interest continues to accrue during the in-school period. What is a Grace Period? The Grace Period is a 6-month period of time that begins once a borrower graduates or is no longer enrolled at least half-time in a degree granting program. After the Grace Period, the borrower must begin making regular principal and interest payments. Borrowers are required to either make full interest payments or a monthly $25 Proactive Payment during the Grace Period. What is a Proactive Payment? A Proactive Payment is a $25 monthly payment the borrower must make while they are in school. The borrower will begin making full principal + interest payments once they have separated from the school or dropped below half-time status. The Proactive Payment helps the borrower demonstrate financial discipline and saves the borrower interest expenses over the life of the loan.

8 How are payments made? All monthly loan payments are made to the servicer, LendKey, using either an electronic transfer from a financial institution account designated during the application process or mailed in by check. Borrowers can set up automatic monthly ACH payments directly from their account by logging into their account, clicking the Payments tab, and Manage Payments. Please have the following information available: Financial Institution Name, Account Type, Account Holder Name, Routing Number, and Account Number. Borrowers can submit payments via paper check to the following loan payment address: LendKey P.O. Box Philadelphia, PA Please write your Loan ID and the payment date in the memo line. For example, if your payment is for your October 1st invoice, please put 10/01/13 next to your Loan ID. When do borrowers enter full repayment status? Borrowers are given a six month Grace Period once they graduate or separate from school before they enter repayment status. Once a borrower enters repayment status they are responsible for making full principal and interest payments. Some students may not yet have found employment six months after leaving school; therefore, borrowers may request to pay just the interest expense on the loan for the first two years while in repayment status, this is referred to as the "Initial Interest Only" option. Can a borrower prepay the loan at any time? Yes, a borrower may prepay the loan either partially or in full at anytime without incurring any fees or penalties. Please submit prepayments via paper check and ensure to write your Loan ID and Toward Principal in the memo line. Privacy & Security Will my personal information be shared with third parties? Personal information is not shared with third parties for marketing purposes. Only information that is necessary and required to complete the loan application process, make payments, and transfer funds may be shared. Please consult our privacy policy for additional details.

9 How is financial information protected? Our servers are equipped with Secure Socket Layer (SSL) certificate technology, which encrypts the user's entire online session. Automatic sign out occurs after a period of inactivity. All banking information and social security numbers are stored in a secure offsite data center. All users must pass through our secure verification systems to prevent identity theft. Please consult our privacy policy for additional details. How does identity verification work? All borrowers must have a valid driver s license or social security number. This information is used to obtain non-credit based questions from an identity verification agency. The user is asked a series of questions that must be answered correctly. Since these questions are not based on a person s credit history, obtaining another person s credit report does not provide sufficient information to pass our identity verification test. Those who violate our security and privacy protections are subject to disciplinary action, including prosecution to the fullest extent allowable by law. Please consult our privacy policy for additional details. [TOP] Student Lending - FAQ