Direct Loan Basics Susan Young Director, Financial Aid Bob Jones University
Agenda Types Eligibility Rates, Fees and Loan Limits Counseling Repayment
Types of Direct Loans Subsidized, Unsubsidized, PLUS
Subsidized Loans Available to undergraduate students with financial need. School determines the amount a student can borrow; amount cannot exceed financial need. U.S. Department of Education pays the interest while student is in school at least half-time, for the first six months after student leaves school (grace period) during any period of deferment Note: Subsidized loans first disbursed between July 1, 2012, and July 1, 2014, will accrue interest during the grace period.
Direct Unsubsidized Loans Available to undergraduate and graduate students School determines the amount student can borrow based on cost of attendance and other financial aid. Interest accrues during all periods. Student may pay the interest only or interest will accrue and be capitalized, added to the principal of the loan
Direct PLUS Loans Types of Direct PLUS Loans Graduate PLUS Loans Parent PLUS Loans Credit based loan (complete application at www.studentloans.gov) Repayment begins 60 days after last disbursement Graduate students qualify for in-school deferment Parents may request deferment
Eligibility Subsidized, Unsubsidized, PLUS
Eligibility for Subsidized and Unsubsidized Student MUST complete a FAFSA and be an eligible student Citizen or eligible non-citizen Registered with selective service Not in default on any Title IV loans or owe a repayment on any federal grant Not over the federal loan limit for dependency status Student MUST be enrolled in an undergraduate degree or certificate program at least half-time (6 credits) at a Title IV school. Must complete Entrance Counseling and MPN at www.studentloans.gov
Parent PLUS Eligibility To receive a Parent PLUS Loan, the Student must meet the following criteria: Must have completed a FAFSA Must be a dependent student Must be enrolled at least half-time Must be a U.S. citizen or eligible non-citizen Must not be in default on any federal education loans or owe an overpayment on a federal education grant
PLUS Loan Eligibility for Parent To receive a Parent PLUS Loan for a dependent student, the Parent must meet the following criteria: Must be the student's biological or adoptive parent or the student's stepparent, if the biological or adoptive parent has remarried at the time of application Not be in default on any federal education loans or owe an overpayment on a federal education grant
Parent PLUS Loan Denial If Parent PLUS is denied: Parent borrower can add endorser OR Undergraduate student is eligible for additional unsubsidized Stafford $4,000 per year for first and second year students $5000 per year for third year and beyond Parent must apply and be denied each year
Available Amounts Subsidized, Unsubsidized, PLUS
Annual Loan Limits Year Dependent Students Independent Students First-Year $5,500 No more than $3,500 can be subsidized Second-Year $6,500 No more than $4,500 can be subsidized Third-Year and Beyond $7,500 No more than $5,500 can be subsidized $9,500 No more than $3,500 can be subsidized $10,500 No more than $4500 can be subsidized $12,500 No more than $5500 can be subsidized Graduate and Professional Not applicable $20,500 unsubsidized only
Aggregate Loan Limits Dependent Undergraduates $31,000 No more than $23,000 subsidized Independent Undergraduates $57,500 for undergraduates No more than $23,000 may be subsidized Graduate or Professional $138,500 No more than $65,500 may be subsidized *Graduate limit includes all loans received for undergraduate study
PLUS Loan Limits The maximum PLUS loan amount that can be borrowed is the cost of attendance (determined by the school) minus any other financial assistance received.
Rates and Fees Subsidized, Unsubsidized, PLUS
Interest Rates Federal student loan interest rates are tied to the financial markets under the Bipartisan Student Loan Certainty Act of 2013. Loan rates are determined each spring for the upcoming award year, July 1 to the following June 30. Each loan has a fixed interest rate for the life of the loan
Current Interest Rates through June 30, 2016 Loan Interest Rate Subsidized - undergraduate 4.29% Unsubsidized - Undergraduate 4.29% Unsubsidized Graduate 5.84% PLUS Loans 6.84%
How is interest calculated? Amount of interest that accrues from month to month is determined by a simple daily interest formula Simple daily interest formula: Outstanding principal balance x number of days since last payment x interest rate factor = interest amount Interest rate factor = Loan interest rate divided by days in the year
Loan Fees Origination fee is subtracted from amount borrowed. Student is responsible for paying entire amount borrowed Fees are updated October 1 of every year Current fees (loans disbursed between 10/1/15 and 10/1/16 Subsidized and unsubsidized loans 1.068% PLUS Loans 4.272%
Direct Loan Counseling Subsidized, Unsubsidized, PLUS
Entrance Counseling Must be completed by any student who has not previously received a Direct subsidized or unsubsidized loan Must be completed for graduate PLUS loan if student has never borrowed a PLUS loan Must be done for Parent PLUS loan if an appeal of the credit decision or pursuit of an endorser for credit approval is made
Exit Counseling Is required before a student withdraws, graduates, or drops below half time enrollment Explains rights and responsibilities of the borrower Provides useful tips for managing loans Student must complete online exit counseling or the school must mail or email exit counseling material to the last known address or personal email address.
Repayment Subsidized, Unsubsidized, PLUS
Repayment Begins When a student leaves college OR Drops below half-time enrollment Loan repayment terminology Deferment Grace period Repayment plan Default Forbearance
Grace Period One time 6 month period (subsidized and unsubsidized only) Begins when a student graduates, leaves school or drops below halftime enrollment Interest does not accrue on subsidized loans unless the loan was first disbursed between July 1, 2012, and July 1, 2014. If student returns to at least half-time enrollment, grace period is saved. If student re-enrolls after grace period ends, no future grace period.
Repayment Plan Servicer contacts student when loan goes into repayment Payment amount will depend on Type of loan How much borrowed Interest rate Repayment plan student chooses (8 different plans)
Standard Repayment Payments are fixed amount Up to 10 years to repay All borrowers are eligible Pay less over time than other plans
Graduated Repayment Payments are lower at first and then increase, usually every two years Up to 10 years to repay All borrowers are eligible Pay more than 10-year standard plan
Extended Repayment Payments may be fixed or graduated Up to 25 years to repay Must have more than $30,000 in subsidized or unsubsidized loans Pay more than 10-year standard plan
Income Based Repayment Payments are 10-15 percent of discretionary income Payments are calculated each year and based on updated family size and income If married, spouse income and loan debt will be considered if filing jointly Any outstanding balance will be forgiven if not paid in full after 20 or 25 years May have to pay income tax on amount forgiven
Income Based Repayment - continued Must have high debt relative to income Monthly payment will never be more than the 10-year Standard Plan Will pay more over than the Standard Plan Good option for those seeking Public Service Forgiveness (PLSF)
Loan Consolidation Allows student to combine multiple federal education loans into one loan No application fee through Department of Education Allows up to 30 years to repay loans May have access to alternative repayment plans not available before Considerations May pay more because of extending life of loan May lose some borrower benefits.
Deferment Period during which repayment of principal and interest is temporarily delayed Do not need to make payments Available during a period of unemployment or inability to find fulltime employment or period of economic hardship Requested through loan servicer
Forbearance If borrower does not qualify for a deferment, servicer may grant a forbearance May be able to stop making payments or reduce monthly payments for up to 12 months Interest continues to accrue Two types of forbearance Discretionary servicer decides to grant based on financial hardship or illness Mandatory servicer is required to grant for particular reasons
Other Options Borrower should always contact loan servicer when experiencing difficulty making payments on student loans Never ignore the problem. Loan debt does not go away.
Susan Young Director of Financial Aid Bob Jones University 1700 Wade Hampton Blvd. Greenville, SC 29614 syoung@bju.edu 864.241.1637 To Contact Me