The Texas B-On-Time Loan Program THE TEXAS B-ON-TIME LOAN PROGRAM Counseling for Student Borrowers
KNOWLEDGE in Real Time Complete the following as you go through the presentation. 01. The B-On-Time loan is a interest loan administered by the Texas Higher Education Coordinating Board. 02. The loan encourages students to finish their degrees and to graduate with at least a average. 03. You may request a to postpone or reduce your loan payments due to financial hardship. 04. If you are enrolled in school after you enter repayment, you may request a to postpone your payments while you are in school. 05. Payments are considered late and the borrower will be charged a late fee when the past due amount is not received within days of the scheduled due date. BORROWER #1: STUART, THE STUDIOUS BORROWER YEAR 1 Stuart receives his first B-On-Time loan when he enrolls at the university in his hometown. He meets with his academic advisor who helps him with his degree plan. Although Stuart doesn t know what his major will be, he charts out the core courses he will need for the top majors he s considering. He talks with his professors about his goals for each of his courses and joins various study groups to help him stay on top of his coursework. After enrolling in two full-time semesters for a total of 30 hours, Stuart maintains a 3.25 grade point average. YEAR 2 Stuart, in consultation with his academic advisor and several of his professors, decides to declare his major in accounting. His early planning to ensure that his core courses in his freshman year would count toward his degree has paid off, as he s on track to complete his accounting degree over the next three years. Stuart continues to make decisions that support his plan to finish in four years: he determines that he should take a lighter load in his junior year, so he decides to take a summer course between his junior and senior year so he can stay on track to finish on time. YEAR 3 Stuart has more difficulties academically in his third year. Although he completes the number of credit hours he needs to graduate in four years, his GPA slips below a 3.0. Fortunately, his overall GPA is well above the minimum 2.5 GPA required to be eligible for the B-On-Time loan for his senior year. He just needs to keep his grades from slipping any further to ensure his final cumulative GPA is at least a 3.0, the minimum requirement for loan forgiveness. YEAR 4 Stuart enrolls in a full course load, joins a study group for his hardest class, discusses his progress in the course with his professor, and seeks out tutoring to help him prepare for his exams. At the end of his senior year, his cumulative GPA is a 3.3, well above the minimum needed to qualify for forgiveness. Stuart applies for graduation in the spring semester of his senior year and completes the B-On-Time Loan Forgiveness Eligibility Confirmation Form the week after he receives his diploma. AFTER GRADUATION The Texas Higher Education Coordinating Board (alson known as the Coordinating Board) sends Stuart a 1099-C Cancellation of Debt form. He reports the 1099-C when he files his income tax return with the IRS. DISCUSSION QUESTIONS 01. What did Stuart do right that every student and every B-On-Time borrower should also do? Joined a study group and got tutoring for difficult classes Met with his academic advisor Talked with his professors Had a degree plan 02. What other steps did Stuart complete to make sure that he received forgiveness for his B-On-Time loan? He completed the loan forgiveness form He filed the 1099-C Cancellation of Debt form with the IRS 2
BORROWER #2: URSULA, THE UNDECIDED BORROWER YEAR 1 Ursula originally thinks she knows exactly where she s headed. She s excited about the B-On-Time loan because she is confident she will graduate in four years with a degree in marketing and she will make top grades just like she did in high school. In her first year she does well, but is surprised by the amount of studying she has to do. Ursula decides to drop a course so that she can better concentrate on her classes. After the fall and spring of her first year, she has a 3.8 GPA and 24 semester credit hours under her belt. She reapplies for the B-On-Time loan, knowing she meets the minimum qualifications for renewal. YEAR 2 In the second year, Ursula completes 24 semester credit hours toward her marketing degree and another six hours of core math courses she will need to fulfill the basic graduation requirements. Although she keeps her grades up, she decides that marketing isn t all it s cracked up to be and she doesn t feel inspired by the coursework anymore. Over the summer, Ursula volunteers at a local hospital in its rehabilitation clinic. She learns a lot about speech therapy and develops a passion for helping people. She talks to a few health professionals and decides that she wants to become a speech therapist. YEAR 3 Ursula receives her subsequent B-On-Time loan and enrolls in 12 hours of speech therapy classes. She loves her classes and can t wait to take some of the upper division courses during her senior year. YEARS 4 AND 5 Ursula keeps her grades up and finishes her degree in speech therapy. She applies for graduation after her tenth and final semester and visits the financial aid office to figure out what she needs to do to apply for loan forgiveness. When she visits the office, she learns that although she has a high GPA, she didn t finish in four calendar years and she has much more than six hours beyond what she needs to complete her degree. She learns that she must repay her loan. AFTER GRADUATION Six months after graduation, the grace period ends and Ursula starts making payments on her B-On-Time loan. DISCUSSION QUESTIONS 01. What could Ursula have done differently with regard to her new major? Met with an academic advisor to discuss interests and possible majors Before changing majors, determined what courses she needed and whether she would still be on track for loan forgiveness Decided whether she should try to get additional semester credit hours by taking summer courses or through a summer internship 02. Did Ursula do the right thing when she reduced her course load to 12 hours per semester in her first year? If not, why not? Reducing the number of hours you take is not necessarily a bad thing. Some students may need to reduce their hours in a given semester due to a challenging class or other time commitments outside of school. However, student borrowers should consider taking a heavier course load the next semester or taking additional summer courses to stay on track for loan forgiveness. 03. What should a student who is changing majors keep in mind with regard to the B-On-Time loan program? Remember that the B-On-Time loan can only be used for up to 150 semester credit hours Determine whether loan forgiveness is still an option Determine whether it makes sense to change majors For example: Are you within two semesters of completing your current major? Would it be a problem to declare a double major? 3
BORROWER #3: DAN, THE BORROWER WHOSE LOAN GOES INTO DEFAULT Dan graduates after five years with a 2.8 final GPA, and does not meet the requirements for B-On-Time loan forgiveness. His B-On- Time loan goes into repayment six months after he graduates. B-On-Time Just after graduation, Dan finds a full-time job, but it doesn t quite pay the salary he was hoping for. He has both a federal Direct loan and the B-On-Time loan to pay back. He is also living on his own, meaning his rent goes up substantially from his college days, when he always shared an apartment. During his first year on the job, Dan struggles to make ends meet, but manages to make the payments on all of his loans and cover his rent and food. Unfortunately, during his second year after graduation, he gets laid off due to downsizing. He starts looking for work, but he doesn t have any luck getting an interview. Although Dan qualifies for unemployment benefits and is receiving a weekly check, it s only a fraction of his previous income and he struggles to figure out how to cover all of his expenses, especially when his unemployment benefits run out. Dan doesn t have enough money to make all of his loan payments. He continues to make payments on his federal Direct loans, but he stops making payments on his B-On-Time loan. After two months, Dan decides he can t stay in his apartment anymore and moves back in with his parents. He continues to miss payments on his B-On-Time loan, and his account is delinquent for six consecutive months. When Dan finally finds a job and starts working again, he s happy that he can finally get his finances back in order. He immediately logs into his B-On-Time account to see about making a payment and finds that his loan has gone into default. He calls the Coordinating Board to determine what his options are and finds out that the Coordinating Board staff members have been attempting to contact him ever since his account became delinquent. Since Dan did not notify the Coordinating Board of his change of address, he did not know that action was being taken on his case. An interest judgment had already been filed in his case, so he now owes the principal amount of the loan, plus interest, and all fees. DISCUSSION QUESTIONS PROMISSORY 01. What are two things Dan could have done differently when he lost his job? NOTE He could have contacted the Coordinating Board to request a temporary forbearance to either reduce the I, Jane H. Student, amount of his monthly payment or suspend payments promise to repay $. for a specified period of time He could have notified the Coordinating Board of his change of address 02. What else could Dan have done differently to avoid defaulting on his loan? He could have used the six-month grace period to get his finances in order, including making early payments and/or setting aside money for emergencies He could have considered budgeting strategies for his first year out of school that might have helped him save money, including sharing an apartment with a roommate or living at home B-On-Time PAST DUE Be careful to avoid the penalties that come with default. Make a plan to submit your loan payments on time, and take advantage of the favorable terms afforded by the B-On-Time loan. 4
Thinking Ahead: Special considerations for B-On-Time loan borrowers HAVE YOU COMPLETED A DEGREE PLAN? DO YOU KNOW WHICH CLASSES YOU NEED TO GRADUATE WITHIN FOUR YEARS? A degree plan can help you determine the number of hours you need to take and whether you need to enroll in summer courses to stay on track for loan forgiveness. DO YOU KNOW HOW CHANGING YOUR MAJOR CAN IMPACT YOUR ELIGIBILITY FOR LOAN FORGIVENESS? Changing your major can delay your time to graduation and make you ineligible for loan forgiveness. Make sure to determine if you can take the course load necessary to graduate within four years. Consider taking summer courses or evaluate whether your change in major is the right path for you. ARE YOU PLANNING TO DECLARE A DOUBLE MAJOR? If you plan to declare a double major, you should talk with your financial aid office and academic advisor to determine if you will still be able to have your B-On-Time loan forgiven based on the number of hours you must take and whether you re able to complete one or both degrees within four calendar years. Also, if you decide to stagger your coursework to complete the first degree within the first four calendar years and then re-enroll to complete your second degree, you may only be eligible to access federal Direct student loans to complete the second degree. ARE YOU PLANNING TO TAKE TIME OFF FROM SCHOOL TO WORK OR PARTICIPATE IN AN INTERNSHIP? Gaps in enrollment may make you ineligible to receive a subsequent B-On-Time loan during the first semester you reenroll. However, once you meet the enrollment requirements and maintain a 2.5 GPA, you can apply to renew your B-On-Time loan for subsequent semesters. Please keep in mind that gaps in enrollment may affect your eligibility for loan forgiveness if you are unable to meet the degree requirements within four years or within six hours of the total number of hours needed to complete your degree. ARE YOU PLANNING TO TRANSFER TO ANOTHER INSTITUTION? If you plan to transfer to another institution, make sure to notify the new financial aid office that you were a B-On-Time loan borrower at your former institution. You can renew your loan so long as you meet the minimum renewal requirements, the school you are transferring to participates, and the school has available funding. A transfer student should also check with his or her academic advisor at the new institution to determine how many transfer hours will count toward his or her degree. If certain courses are not transferrable, the student may need to enroll in additional coursework to ensure they graduate on time. DO YOU KNOW THAT DROPPING CLASSES CAN SLOW PROGRESS TOWARD YOUR DEGREE? If you drop one or more classes and are no longer enrolled full time, you may be slowing your progress toward completion of your degree, making it difficult to finish within four years. Make sure you have a plan to make up those courses either with a heavier course load in subsequent semesters or by enrolling in summer courses. Keep in mind that if you drop below half-time enrollment for more than one semester, your loan could go into repayment. HOW MUCH WILL MY LOAN AMOUNT BE EACH SEMESTER? The maximum B-On-Time loan award differs each year and varies by institution type; check with your financial aid office or visit www.hhloans.com to find out the loan amounts for this year. Your loan amount will be divided equally between the fall and spring semester, minus a three-percent loan origination fee. WHEN CAN I EXPECT MY B-ON-TIME LOAN DISBURSEMENT? B-On-Time borrowers can expect their loan disbursement for the fall semester sometime after September 1. IF I AM A TRANSFER STUDENT, WHAT GRADES ARE CONSIDERED WHEN CALCULATING MY CUMULATIVE GPA? The institution you graduate from will calculate your cumulative GPA from the credits you earned at the institution, not counting hours transferred. However, if this GPA is below a 3.0, you may ask the institution and the Coordinating Board to include your transfer hours if doing so brings your cumulative GPA to the minimum 3.0 GPA or higher. IF I MEET THE REQUIREMENTS TO RENEW MY B-ON-TIME LOAN, WILL I GET THE SAME ALLOCATION EACH SEMESTER? Not necessarily. The annual loan amount for your B-On-Time loan is subject to available funding. The Texas Legislature determines the level of funding for each of the state financial aid programs for each year, including the B-On-Time loan. WHAT IF I DON T FINISH MY DEGREE IN FOUR YEARS? CAN I STILL QUALIFY IF I COULDN T GET THE CLASS I NEEDED TO GRADUATE WITHIN FOUR YEARS? The short answer: It depends. If the number of hours you completed does not exceed six hours beyond what is required for your degree or certificate, you may be eligible for forgiveness even if it took you longer than four calendar years. It is important to review your eligibility for forgiveness with your financial aid office if you believe you meet these requirements. For example: Annual loan amount $7,100 Minus a 3% loan origination fee $213 Total amount you receive = $6,887 Fall = $3,443.50/Spring = $3,443.50 WILL I OWE TAXES IF MY LOAN IS FORGIVEN? The total sum of your forgiven loan will become taxable income. However, the amount you owe the IRS in a given year will depend on many factors, including the amount of your total taxable income, minus any deductions or tax credits that may apply to you. 5
GLOSSARY Terms Loan: A loan is money borrowed from a lending institution that must be repaid. Grace period: The grace period is the six-month period after you graduate, leave school, or drop below half-time enrollment during which you are not required to make payments on your B-On-Time loan. Promissory note: The promissory note is a binding legal document you sign before receiving your student loan. It is your written promise to repay your loan. Lender: The lender is the organization that makes the loan. The Coordinating Board is the lender for the B-On-Time loan. Loan holder: The loan holder is the entity that holds your loan promissory note and has the right to collect from you. The Coordinating Board is the loan holder for the B-On-Time loan. Loan servicer: The loan servicer is an organization that handles billing and performs other loan servicing functions on behalf of the lender. The Coordinating Board is the lender, loan holder, and the loan servicer for the B-On-Time loan. Disbursement: Disbursement is the release of funds to an institution to credit the borrower s account for tuition, fees, and other student charges. The remaining balance is then issued to the borrower to cover any additional costs, including books, living expenses, transportation costs, or other miscellaneous expenses. Delinquency: A loan is delinquent when a payment on the loan is past due. Forbearance: Forbearance is an arrangement to postpone or reduce the amount of a borrower s monthly payment for a limited, specified time period. Forbearance is available to a borrower who is willing but unable to make scheduled payments due to temporary financial hardship. Student borrowers in the B-On-Time Loan Program must file a request for forbearance directly with the Coordinating Board. Deferment: A deferment is a temporary period to postpone payments while enrolled in school. Student borrowers with B-On-Time loans must file a request for deferment directly with the Coordinating Board. Default: A B-On-Time loan is in default when payments on the loan are 180 days or more past due. Wage warrant: The practice of withholding a portion of a borrower s wages without their consent, also known as wage garnishment. A wage warrant may be obtained against a borrower when they have not made payments on their loan for 90 days or more. Judgment interest: Judgment interest is a judgment to charge interest on a B-On-Time loan when a borrower s account is in default (i.e., 180 days or more past due). Source: U.S. Department of Education, the Texas Higher Education Coordinating Board, and FinAid.org. 6 FOR MORE INFORMATION For questions about payments and managing your loan, contact your school s financial aid office or the Coordinating Board. You may call the Coordinating Board at (800) 242-3062 or (512) 427-6340 (in the Austin area). For information about the B-On-Time 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.
Notes If I have additional questions after today s session, I can contact: Name: Email: Phone:
www.tg.org TG promotes educational access and success so that students can realize their college and career dreams. As a public, 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. To request permission to reproduce any of the information provided, please call TG Communications at (800) 252-9743, ext. 4732. 2013 Texas Guaranteed Student Loan Corporation. 1302-57306 www.aie.org www.aie.org TG s Adventures In Education (AIE ) is a public-service website developed to help students plan and complete their journey through higher education. By providing free resources to students, parents, counselors, and educators, AIE encourages individuals to discover and pursue educational opportunities. AIE promotes a better tomorrow by preparing students and families for the adventure today. For more information abou t the Texas B-On-Time Loan Program, go to www. AIE.org/BOT