The Texas B-On-Time Loan Program What do I need to know?
TABLE OF CONTENTS What is the Texas B-On-Time (BOT) Loan Program?...1 I m not sure I ll meet the requirements for loan forgiveness. Should I still apply for a BOT loan?...1 How do I know if I m eligible for a BOT loan?...2 If I am eligible for the loan, does that mean I will definitely receive it?...3 What do I have to do to remain eligible for the BOT loan after the first year?...3 How do I apply for the BOT loan?...4 What will be the amount of my BOT loan?...4 If I am awarded a BOT loan, when can I expect to receive it?...4 How do I repay my BOT loan?...6 What do I need to do to qualify for forgiveness of my BOT loan?...6 Is there a form I need to submit in order to have my loan forgiven?...7 If I qualify for loan forgiveness for my BOT loan, will I have to pay income tax on the amount forgiven?...7 If I have trouble repaying my BOT loan, what should I do?...7 If I fail to make BOT loan payments on time, what will happen?...8
THE TEXAS B-ON-TIME (BOT) LOAN PROGRAM You may have heard about the BOT loan from news stories, family members, friends, or other sources. Perhaps you re interested in taking out a BOT loan, and have questions about the terms of the loan, its availability, and how to qualify for loan forgiveness once you graduate. This brochure will answer these questions, and help you get the information you need on the BOT loan. WHAT IS THE TEXAS B-ON-TIME LOAN PROGRAM? Simply put, the Texas B-On-Time (BOT) Loan Program provides zero-interest loans (BOT loans) to Texas residents attending 4-year colleges in Texas. Designed to encourage students to finish school on time while meeting high standards, the loan can be forgiven if students meet certain requirements. I M NOT SURE I LL MEET THE REQUIREMENTS FOR LOAN FORGIVENESS. SHOULD I STILL APPLY FOR A BOT LOAN? Whether or not you qualify for forgiveness, the BOT loan is a good deal. If you meet the requirements for forgiveness, you won t have to pay back the BOT loan, and graduating within the specified time period may mean you can start working and earning a paycheck earlier. If you don t qualify for forgiveness, you have still financed part of a college education with a zerointerest loan, and you literally can t get a better interest rate than that. 1
HOW DO I KNOW IF I M ELIGIBLE FOR A BOT LOAN? To find out if you re eligible to take out a BOT loan, contact your school s financial aid office; staff members there will determine your eligibility. To be eligible, an applicant must: Be a Texas resident or be entitled to pay resident tuition rates as a dependent child of a member of the U.S. Armed Forces; and Meet one of the following academic requirements: Have graduated no earlier than the 2002 2003 academic year under the Recommended or Distinguished Achievement Program (or its equivalent) from a Texas public or private high school; As a dependent child of a member of the Armed Forces of the United States, have graduated no earlier than the 2002 2003 academic year from a high school operated by the U.S. Department of Defense; or Have earned an associate degree from an institution of higher education no earlier than May 1, 2005. To be eligible, an applicant must also: Not have been granted a bachelor s degree; Be enrolled in an eligible institution s undergraduate degree or certificate program full time as determined by your school; and Have completed a Free Application for Federal Student Aid (FAFSA) and be eligible for federal financial aid (Texas Administrative Code, 2003). Note: Beginning with the 2014 15 academic year, the eligibility requirements for the BOT loan have changed. However, qualifying students who received one or more BOT loans under the previous requirements may still be eligible to receive a subsequent BOT loan. If you have already borrowed and have questions about whether you qualify for another BOT loan, please contact your school s financial aid office. 2
IF I AM ELIGIBLE FOR THE LOAN, DOES THAT MEAN I WILL DEFINITELY RECEIVE IT? No. The BOT loan is not part of an entitlement program, and is dependent on funding from the Texas Legislature. The availability of loan funds at a particular school is based on whether the school participates in the program and on the amount of loan appropriations the school has received. Once a school has awarded these funds, no further BOT loans can be awarded at that school. For this reason, if your school has loan funds available, you are strongly encouraged to apply early. Fill out the FAFSA as soon after January 1 as possible, and talk to your school s financial aid office to find out when you should submit your BOT loan application to have the best chance of receiving the loan. WHAT DO I HAVE TO DO TO REMAIN ELIGIBLE FOR THE BOT LOAN AFTER THE FIRST YEAR? To remain eligible for the BOT loan after the first year, you must: Make satisfactory academic progress toward a degree or certificate as determined by your institution. To remain eligible for the BOT loan after the second and subsequent years of the award, you must: Complete 75 percent of all semester credit hours you attempt each semester. Note: Keep this in mind when making decisions about how many courses you should take each semester, and when deciding whether you should drop any courses. Try to plan your course load so that it is manageable from the outset. Maintain a cumulative grade point average (GPA) of at least 2.5 on a 4.0 scale (or the equivalent) on all coursework previously attempted at institutions of higher education. Not have exceeded 150 attempted hours at all institutions of higher education you have attended. 3
HOW DO I APPLY FOR THE BOT LOAN? To apply for a BOT loan, first contact your school s financial aid office. Staff members there can tell you more about whether the BOT loan is available at your school. Since BOT loans require a school certification prior to starting your application, contacting the financial aid office is also a necessary first step to applying for the loan. Once this is complete, go to www.hhloans.com to fill out the BOT loan application. You will need to set up a personal account in order to complete the process. When applying for the loan, you will also need to use Internet Explorer (version 6.0 or newer) as your Web browser. Any other Web browser may cause errors and prevent the submission of applications. Finally, you will need to complete a promissory note in order to receive the BOT loan. A promissory note is a written promise to repay your loan. The promissory note includes information pertaining to the loan principal, the loan s repayment grace period (see below), and your obligation to repay the loan, regardless of whether you complete your degree or certificate. Be sure to keep the promissory note in a secure location for your records. WHAT WILL BE THE AMOUNT OF MY BOT LOAN? The maximum BOT loan amount varies each year, and is determined by the Texas Higher Education Coordinating Board (THECB). The THECB is the lender and servicer of the BOT loan. To learn the maximum loan amount for the year you are applying, contact the financial aid office at your school. Note that the BOT loan includes a three percent origination fee, which will be deducted from your loan disbursement each semester. In other words, if your school awards you a $3,000 BOT loan for the fall semester, you will receive a BOT loan disbursement of $2,910. IF I AM AWARDED A BOT LOAN, WHEN CAN I EXPECT TO RECEIVE IT? The BOT loan disbursement date will vary from semester to semester. You should plan for the BOT disbursement to arrive after other sources of financial aid. 4
To apply for a BOT loan, go to www.hhloans.com, click on Apply for a Loan, and then click on B-On-Time Loan Program. 5
HOW DO I REPAY MY BOT LOAN? If you do not qualify for loan forgiveness, you will have a six-month grace period after you are no longer continuously enrolled in a degree program during which no payments will be due. At the end of this grace period, your loan will be in repayment, and you will be required to make regular monthly payments to the THECB. Your minimum monthly payment will be $75 ($900 per year), to be paid over a 15-year period. Depending on your total balance, however, your specific minimum payment may be higher. WHAT DO I NEED TO DO TO QUALIFY FOR FORGIVENESS OF MY BOT LOAN? After you complete your degree, if you meet certain requirements, you may qualify to have your BOT loans forgiven. To qualify for forgiveness, you must have received: An undergraduate degree from an eligible institution, having earned a B average, or the equivalent of a cumulative GPA of at least 3.0 on a 4.0 scale. You must also have received: A bachelor s degree within four calendar years of the date you initially enrolled in an eligible institution; A bachelor s degree within five calendar years of the date you initially enrolled if the institution reports that you graduated with a degree in architecture, engineering, or any other program that requires more than four years to complete; or No more than six hours more than the number of credit hours required to complete a bachelor s degree (Texas Administrative Code, 2003). 6
IS THERE A FORM I NEED TO SUBMIT IN ORDER TO HAVE MY LOAN FORGIVEN? Yes. In order to have your BOT loans forgiven, you must submit the B-On-Time Loan Forgiveness Eligibility Confirmation Form to the THECB. Your school must also verify to the THECB that you qualify for forgiveness. Although there is no deadline to submit the form, the THECB recommends that both the forgiveness form and verification from your school be submitted no later than 90 days after the completion of your program. If the THECB does not receive your loan forgiveness form, your loan account will be scheduled for repayment beginning six months after you are no longer continuously enrolled in a degree program. To find the B-On-Time Loan Forgiveness Eligibility Confirmation Form, go to www.hhloans.com, click on Forms, and then click on BOT. IF I QUALIFY FOR LOAN FORGIVENESS FOR MY BOT LOAN, WILL I HAVE TO PAY INCOME TAX ON THE AMOUNT FORGIVEN? Yes. IRS regulations require that forgiven loans be reported as taxable income. The THECB will mail you IRS Form 1099-C, Cancellation of Debt at the end of the following January. Use the form in preparing your income tax return. IF I HAVE TROUBLE REPAYING MY BOT LOAN, WHAT SHOULD I DO? If you have difficulty making the required monthly payments on your BOT loan, contact the THECB. You have several options should you experience financial hardship, including: Education deferment: If you are enrolled in school after completing your degree, you may claim an education deferment to postpone payments on your BOT loan. You are eligible for a deferment of payments as long as your account is not in default and you provide enrollment documentation of at least a halftime course load directly to the THECB. 7
Forbearance: If you are experiencing significant financial hardship, you may be granted periods of forbearance in the form of postponed or temporarily reduced payments if the THECB receives a written request stating the circumstances that merit such consideration. Deceased or disabled borrowers: Should a borrower die or become permanently or totally disabled, BOT loans will be discharged. IF I FAIL TO MAKE BOT LOAN PAYMENTS ON TIME, WHAT WILL HAPPEN? If a payment is not received within 20 days of the scheduled due date on your BOT loan, a late fee amounting to five percent of the scheduled monthly payment or five dollars ($5.00), whichever is less, will be assessed on your account. If your account is 90 days or more past due, the THECB is required to notify the Comptroller of Public Accounts. At this point, the state may impose a wage warrant to collect a portion of your wages in payment on your BOT loan without notifying you. If you miss five consecutive monthly payments, the full remaining principal balance on the loan comes due, and you are required to pay that and all other assessed charges and late fees. Note: You should contact the THECB to determine if they will accept a one-month payment with late fees to avoid further penalties. If you miss six consecutive payments (making your loan a total of 180 days or more past due), the loan will be in default. Upon establishing loan default, the Office of the Attorney General, at the request of the Commissioner of Higher Education, may file suit for the unpaid balance plus court costs, attorney fees, and judgment interest. Be careful to avoid any of the penalties described above. When you leave school, make a plan to submit your loan payments on time, and take advantage of the favorable terms afforded by the Texas BOT loan. 8
FOR MORE INFORMATION For questions about payments and managing your loan, contact your school s financial aid office or the THECB. You may call the THECB at (800) 242-3062 or (512) 427-6340 (in the Austin area). For information about the BOT loan, go to www.aie.org/bot. For questions about all federal and state financial aid programs, you may also contact the Texas Financial Aid Information Center (TFAIC). TFAIC representatives are available to take your calls in English and Spanish Monday through Thursday from 8 a.m. to 6 p.m., and Fridays from 8 a.m. to 5 p.m., Central Time. You can also email TFAIC at TXFinAidInfo@tgslc.org. 9
About TG TG promotes educational access and success so that students can realize their college and career dreams. As a nonprofit corporation, TG offers resources to help students and families plan and prepare for college, learn the basics of money management, and repay their federal student loans. For more information about TG, visit www.tg.org. To learn more about college and career planning, visit TG s Adventures In Education at www.aie.org. Contact us (800) 845-6267 cust.assist@tgslc.org P.O. Box 83100 Round Rock, Texas 78683-3100 www.tg.org Was this publication helpful? Do you have any suggestions for improving it? Please send your comments about publication 1511-59811 to communications@tgslc.org To request permission to reproduce any of the information provided, please call TG Communications at (800) 252-9743, ext. 4732. 2014 TG 1511-59811