Family Webinar Series: Comparing Loan Options

Transcription

1 Family Webinar Series: Comparing Loan Options Celebrating 30 years of Excellence Planning, Saving & Paying for College 1

2 Your Presenter Today Stephanie Wells, Director of Community Outreach Stephanie joined MEFA in 2001 and has over 20 years of experience in the higher education financing industry. As Director of Community Outreach she is responsible for working with colleges, high schools and community based organizations to further MEFA s public mission of educating and supporting families on the college enrollment and financing process. 2

3 Facts About MEFA MEFA s mission has remained constant since we began in 1982 to help make higher education more accessible and affordable for Massachusetts students and families. Massachusetts Educational Financing Authority Not-for-profit state authority that works to make higher education more accessible and affordable Created in 1982 by the State Legislature Helping families: o Plan: Extensive community outreach o Save: U.Fund and U.Plan college savings plans o Pay: Affordable fixed interest rate college loans for over 30 years 3

4 Understand the Fine Print Celebrating 30 years of Excellence Planning, Saving & Paying for College 4

5 Read the Fine Print Application and Solicitation Disclosure Statements Required for private lenders such as MEFA Can be found on lender websites and loan comparison tools Things to consider: Is it easy to find? Do you know the rate before applying? What are the fees? Total Cost? 5

6 Annual Percentage Rate (APR) Total Cost of the Loan, including fees, repayment term, etc. Quick way to compare loan options 6

7 Co-Borrower Signs the loan agreement along with primary and/or student borrower A co-borrower has equal responsibility on the loan agreement Adding a co-borrower may increase chances for approval Co-borrowers with good credit may help decrease rate Co-borrower release options Consider student s major/career choice, employment rates and starting salary 7

8 Repayment Term Several repayment options to choose from Repayment term has a direct impact on Total Cost Provides flexibility based on family s affordable monthly payment 8

9 Tiered Pricing Advertised rate may not be the rate you receive! Rate is based on credit score and credit criteria Pricing is based on credit risk to the lender May not know the rate Before you apply 9

10 Interest Rate Fixed vs. Variable Transparency Cap on variable rate? May be tied to repayment option chosen 10

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12 Be A Wise Borrower Celebrating 30 years of Excellence Planning, Saving & Paying for College 12

13 1. Start with Federal Student Loans Student is the borrower no credit check Annual limits: $5,500 for freshman year Fixed interest rate changes annually: 4.29% for Two types: Subsidized Interest accrues after graduation Unsubsidized Interest accrues immediately 1.073% fee deducted from loan amount Promissory Note & Entrance Counseling: StudentLoans.gov No payments while in school Several repayment options: StudentAid.gov MEFA recommends that students exhaust their federal student loan options before borrowing from other sources. 13

14 2. Minimize Borrowing Past Income (Savings) Balance Due $20,000 Student Savings -$1,000 Parent Savings -$4,000 Present Income (Current Wages) Parent Contribution to Payment Plan -$3,000 Future Income (Education Loans) Education Loan -$12,000 $0 14

15 3. Affordability Visit mefa.org to access the Monthly Payment Calculator Print your plan and call MEFA at MEFA(6332) to discuss. 15

16 4. Get Advice from Trusted Resources Ask Questions Look for Transparency Utilize Free resources Work with Financial Aid and Student Accounts if you need help 16

17 MEFA and PLUS Loan Comparison MEFA Loan Direct PLUS Loan Interest rate Starting at 4.99% fixed interest rate 6.84% fixed interest rate (Re-set every July 1st) Fee 4% origination fee added to loan amount 4.292% origination fee deducted from loan amount Student co-borrower on loan? Yes No Responsibility to repay Student and parent or other creditworthy borrower are co-borrowers and share responsibility Parent or custodial step-parent is borrower Can responsibility be transferred? Credit Criteria Yes, family loan with shared responsibility; Student Deferred option with cosigner release Minimum credit score based on repayment option No Minimal Standards Repayment Term years years Repayment Options Immediate Repayment, Interest-Only, Immediate Repayment and Deferred and Deferred Enrollment status At least half-time At least half-time Consumer safeguards Student Death & disability loan forgiveness Parent Death & disability loan forgiveness Requires filing of FAFSA No Yes 17

18 5. Timing: Paying Your Bill Bills for the fall semester sent in June/July, due in July/August Includes direct costs only (tuition, fees, dorm, meal plans and health insurance*) Enrollment deposit, outside scholarships and financial aid will be deducted from the bill Families who set up their payment plan and/or loans may see those amounts as a soft credit towards the bill as well Work-study is not deducted from the bill Apply for a MEFA Loan or other education loan before the billing due date Set up payment plans according to the college or university s schedule 18

19 Thank You! Questions? Stephanie Wells MEFA is your trusted advisor, helping to make your college goals a reality. 19