2014 Counselor Training Paying For College Strategies after all of the student s free money has been exhausted
OASFAA is a non-profit organization OASFAA has provided the information today as a free service to access staff and high school counselors You have permission to copy and distribute these materials to your students and families. Charges may not be assessed for the material or for the information presented. Permission must be granted for other use of this information or these materials. Contact the Outreach Chairperson listed on the OASFAA web site or e-mail: outreach@oasfaa.org 2
Agenda Counseling Framework Federal Student Loans After Stafford or Gap Financing 3
How does America pay for college? Sources of Funds for College by Percentage Source: Sallie Mae How America Pays for College, 2009
There are only 3 Ways To Pay for College Before Savings from Summer Job Income protection allowance - $6,260 Gifts Holidays, birthdays Summer classes at CC after Senior Year Parents - planning opportunity 529 5
There are only 3 Ways To Pay for College During - Families are not in this alone! File the FAFSA to find out eligibility for Grants (federal and state) and Scholarships (from the school "outside ) Work study Summer classes, summer jobs Parents Tuition Payment Plans Tax credits (Consult your tax advisor) 6
There are only 3 Ways To Pay for College After Federal Student Loans Perkins Direct Subsidized and Unsubsidized Loans (aka Stafford) Parent PLUS versus Private Loans Other financing 7
Perkins Loans, 2014-2015 Eligible students (priority to exceptional need) Undergraduate or graduate students Must file the FAFSA Annual and aggregate loan limits up to $5,500 annually for undergraduates (actual awards, if any, will vary between schools) $27,500 aggregate for undergraduates Interest rate: 5% (fixed) during repayment Interest subsidized during in-school and nine-month grace period Deferment and cancellation provisions available 8
Direct Loans, 2014-2015 Direct Subsidized and Unsubsidized Loans are two separate, unique types of loans that are awarded separately. Subsidized Need based Interest is fixed at 3.86% for new undergraduate loans disbursed during 2013-14*. Interest is subsidized while the student is in school and during deferment. Unsubsidized Not based on financial need Interest is fixed at 3.86% for all new loans disbursed during 2013-14*. Interest accrues from time of disbursement of the funds. *Interest rates recalculated annually and are effective July 1st based on the 10-year Treasury note index plus 2.05%, capped at 8.25%
Direct Loans, 2014-2015 Class Year Base Amount Additional Unsubsidized Amount Total Available to Borrow Freshman $3,500 $2,000 $5,500 Sophomore $4,500 $2,000 $6,500 Junior $5,500 $2,000 $7,500 Senior $5,500 $2,000 $7,500 Independent Students and Dependent Students whose parents have been denied the PLUS Loan are eligible for additional Unsubsidized Stafford Loans ($4,000 as Freshmen and Sophomores and $5,000 as Juniors and Seniors) 10
Direct Loans, 2014-2015 Subsidized and Unsubsidized Loans 1.072% origination fee. Parent and Graduate PLUS 4.288% origination fee. 11
Direct Loans, 2014-2015 FAFSA Follow instructions at school attending Entrance Counseling MPN Disbursement to student account Notification of servicer (instruct students to watch and save email/snail mail) 12
IBR Income Based Repayment Available to federal loan borrowers experiencing financial hardship Borrower qualifies if annual monthly student loan payments exceed 15% of discretionary income If eligible for IBR, borrower s monthly payment will be determined by a formula that takes into account household size and adjusted gross income. Increases in income will impact the required monthly payment amount Unpaid balance may be forgiven after 25 years of scheduled monthly payments (taxable event)
Pay As You Earn Available to new Direct loan borrowers (except Parent PLUS) experiencing financial hardship No loan balance as of October 1, 2007, and Received a Direct loan on or after October 1, 2011 Borrower qualifies if annual monthly student loan payments exceed 10% of discretionary income Similar to IBR, borrower s monthly payment will be determined by a formula that takes into account family size and adjusted gross income. Increases in income will impact the required monthly payment amount Unpaid balance may be forgiven after 20 years of qualifying repayment (which is a taxable event) 14
Public Service Loan Forgiveness 120 qualifying payments on Direct Loans while on qualified repayment plans while working at a qualified employer. Borrower must also be employed by a qualifying organization at the time that the borrower applies for and receives PSLF According to the IRS, the forgiven amount is not treated as taxable income Source: Slide 39, FSA Conference 213, Pay As You Earn & Other Income-Driven Repayment Plans
Public Service Loan Forgiveness Qualifed employer: Any government organization 501(c)3 not-for-profit organization Other not-for-profit organizations providing specific qualifying services Borrower can work at multiple organizations Does not matter what the borrower s job duties are Source: Slide 43, FSA Conference 213, Pay As You Earn & Other Income-Driven Repayment Plans
Public Service Loan Forgiveness Qualified Repayment Plans 10 year standard ICR IBR Pay As You Earn Others>= 10-Year Standard (Any other Direct Loan Repayment Plan, but only payments that are at least equal to the standard payment) Source: Slide 41, FSA Conference 213, Pay As You Earn & Other Income-Driven Repayment Plans
IBR and PSLF FAQ s Federal Student Aid Public Service Loan Forgiveness Frequently Asked Questions http://studentaid.ed.gov/sites/default/files/p ublic-service-loan-forgiveness.pdf Income-Based Repayment Program Questions and Answers http://studentaid.ed.gov/sites/default/files/p ublic-service-loan-forgiveness.pdf
Student Loan Calculators Department of Education http://studentaid.ed.gov/repayloans/understand/plans/incomebased/calculator IBRinfo.org http://www.ibrinfo.org/calculator.php
After Stafford or Gap Counseling Parent PLUS Home Equity Line of Credit Retirement Plan Loans Roth IRA 401(k) Private Student Loans Importance of Providing Planning Framework 20
Parent PLUS Loans Parent PLUS Loans to parents of dependent students. Loan limits are up to the cost of education less any financial aid received. Interest rate is 6.41% fixed* for 13-14. Repayment begins within 60 days of full disbursement. Payments may be deferred while the student is in school. FAFSA completion is required. *Interest rates recalculated annually and are effective July 1st based on the 10-year Treasury note index plus 4.60%, capped at 10.50% 21
Private Loans Private Loans (sometimes called Alternative Loans) are credit based loans from a bank or credit union. More thorough underwriting process than PLUS to include debt to income and credit score analysis Students often require a cosigner Rates and fees, if any, are set based on the credit worthiness of borrower and/or cosigner 22
Education Financial Planning Best Practices Develop a 4 year plan Families often focus just on the upcoming semester Connect your plan to expected future income and future student loan payments 23
Questions? Thank you for attending! John Brown: JBrown@glhec.org Jeff Johnston: jeff.johnston@salliemae.com 24