Financial Wellness Curriculum Understanding Financial Aid

1. Financial Wellness Curriculum Understanding Financial Aid

2. Financial Wellness Curriculum Understanding Financial Aid More information available at YouCanDealWithIt.com. THIS PRESENTATION HAS BEEN DEVELOPED BY AND PAID FOR BY PHEAA. The information contained herein is believed to be accurate at the time of printing. Due to the rapidly changing nature of the law and the industry, information contained in this document may become outdated, and PHEAA/AES does not guarantee the accuracy of the information herein. You should verify that this information is correct. Any Stafford or PLUS loan first disbursed on or after July 1, 2010 must be obtained directly from the federal government through the Federal Direct Loan Program (FDLP). Please contact the financial aid office at your school for additional information.

3. Objectives • Understanding Financial Aid • Types of Financial Aid • Use Your Student Loan Money Wisely • Grace Period • Student Loan Repayment • Resources and Reminders

4. Understanding Financial Aid Financial aid allows you to obtain a college education. A responsible student should be able to answer these questions: • What type(s) of financial aid do I have? • What is the renewal process for my aid types? • Does my aid have specific requirements such as GPA or employment specifications? • What type of aid has to be repaid? • When does repayment begin? • What are my rights and responsibilities? It is important to know the financial aid deadlines at the schools you are considering so you don’t miss out on available financial aid.

5. Types of Financial Aid:Grants Grants Federal and state grants provide students with financial assistance and, in most cases, do not have to be repaid. Eligibility requirements include but are not limited to: • Meet criteria for financial need • Be enrolled at least half-time (does not apply to Pell grant eligibility) • Be a high school graduate or recipient of a GED • Demonstrate academic progress for continued aid Contact your state agency or the schools you plan to apply to for the submission deadline(s).

6. Types of Financial Aid:Grants Common Federal Grant Programs • Federal Pell Grant • Federal Supplemental Educational Opportunity Grant (FSEOG) • Iraq and Afghanistan Service Grant • Teacher Education Assistance for College and Higher Education (TEACH) Grant State grant programs are also a possibility. See the individual state for details.

7. Types of Financial Aid:Scholarships Scholarship Scholarships are often based on academic merit, pursuit of a specific program of study, special talents, or participation in athletics. They are awarded by government agencies or by schools, local businesses, and organizations. EducationPlanner.org has one of the largest free federal private scholarship databases in the country.

8. Types of Financial Aid:Scholarships Scholarship Scams Several hundred thousand students and parents are defrauded yearly by scholarship scams. The victims of these scams lose more than $100 million annually. Warning Signs • “This scholarship is guaranteed or your money back.” • “The scholarship service will do all the work.” • “The scholarship will cost some money.” • “You are a finalist.” or “You have been selected by the national foundation to receive a scholarship.” • “The scholarship service needs your credit card or checking account number in advance.”

9. Types of Financial Aid:Work-Study Work-Study Federal work-study programs provide jobs for students who demonstrate a financial need. Salaries are paid by funds from the federal or state government and by the college. Benefits of Participating • Gain experience working in your field of study. • Network with people in your field of study. • Work on campus. Check with your school to see what work-study opportunities are available.

10. Types of Financial Aid:Federal Student Loans Federal Student Loans • Long-term, fixed-interest rate loans • Can be either subsidized or unsubsidized • Must complete the FAFSA to apply • The federal student loan Master Promissory Note (MPN) is available for completion online. If, for some reason, you are unable to complete this form online, be sure to sign and return the application. William D. Ford Federal Direct Loan • Loans made to students directly through the U.S. Department of Education

11. Types of Financial Aid:Federal Student Loans Master Promissory Note (MPN) • Is a legally binding contract • Must be signed before you receive your loan • Is usually signed once and can be used for multiple loans • States that you will repay the loan according to specific terms You are legally required to pay the entire loan even if you do not finish the program of study, can’t get a job after graduating, or are dissatisfied with the school’s education program or other services. You may request in writing that your multiyear MPN only be used once and you would like to sign a new MPN for each additional loan.

12. Types of Financial Aid:Federal Student Loans Borrower Rights • Receive written information on loan obligations, including rights and responsibilities • Receive an explanation of default and its consequences • Receive, when paid in full, the original copy of the note or notification that the loan is paid in full • Receive, before repayment, information on interest rates, fees, the balance owed on loans, and a loan repayment schedule • Receive notification of the name, address, and telephone number of your new lender when the payment address has changed due to a sale or transfer of your loan

13. Types of Financial Aid:Federal Student Loans Borrower Responsibilities • Participate in an exit counseling session before leaving school • Pay the loan according to the repayment schedule • Notify the lender of anything that affects your ability to repay or eligibility for deferment • Notify your lender and school when you graduate, withdraw from school, drop below half-time status, or transfer to another school • Notify your school and lender of a change of name, phone number, address, Social Security number, or email address • Notify your lender if you change your employer, if your employer’s address/phone number changes, or if any change in status would affect your loan (for example, the loss of eligibility for an unemployment deferment by obtaining a job)

14. Types of Financial Aid:Federal Student Loans Eligibility Requirements • Be a U.S. citizen or eligible noncitizen • Be accepted for enrollment in a participating school and, if enrolled, be making satisfactory progress • Be classified at least as a half-time student working toward a degree or certificate • Not be in default on a student loan • If required, be registered with the Selective Service • Have financial need in order to receive a subsidized loan NOTE: This list is not all encompassing.

15. Types of Financial Aid:Federal Student Loans

16. Types of Financial Aid: Federal Student Loans Annual Loan Limits Loan limits refer to the maximum amount of money a lender or loan program is able to loan you each year • Federal loan programs base their loan limits on your year in school. • The loan limits are less for freshmen than they are for upper classmen and graduate students (for example, $5,500 for freshman vs $9,500 for grad students). • Review the loan limits before you begin your search for aid, so you can get an idea how much money you will be able to get for college using loans. View federal loan limits at Student Aid on the Web at http://studentaid.ed.gov.

17. Types of Financial Aid:Perkins Loans Perkins Loan • Disbursed by the attending school • Need-based • May be used only for educational expenses • Interest does not accrue while you are in school, during your grace period, or during deferment periods • The interest rate is fixed at 5% Contact your financial aid office for more information on Perkins loans.

18. Types of Financial Aid:Alternative (Private) Loans These loans are not borrowed from the government, but rather directly from a lender and without certain benefits offered through federal student loan programs. Alternative student loans are like common types of debt. • Larger up-front fees • Higher interest rates • More stringent repayment terms • Must be creditworthy Do your homework to determine if an alternative loan is the most beneficial option for you.

19. Use Your Student Loan Money Wisely Reimbursement Checks Use student loan money only for school-related expenses, such as tuition, housing, books, transportation, and food. Send any loan money not needed for educational purposes back to your servicer. The more loans you receive now, the more money you are required to repay later, for example: $ 7,000 Loan Amount $ 5,500 Loan Amount 6.8% Interest Rate (Estimated) -OR- 6.8% Interest Rate (Estimated) 120 Number of Monthly Payments 120 Number of Monthly Payments $80.56 Monthly Payments $63.29 Monthly Payments $9,667.20 Total Loan Amount$7,594.80 Total Loan Amount

20. Grace Period • Begins when you graduate, withdraw, or drop to less than half-time status • You only get one, and it only lasts 6 months. • You will receive your repayment obligation, which includes: • Date payments are to begin (Payment is expected even if you do not receive a payment booklet or monthly statement.) • Monthly payment amount • Repayment terms • Current principal balance • Interest rate

21. Student Loan Repayment Loan Consolidation • Student loan consolidation allows borrowers to combine two or more existing student loans into a single new loan. • Interest rate becomes fixed at the time of consolidation. • Various repayment options may be available. • An extended repayment term offers a lower monthly payment. • Borrowers with only one student loan may consolidate to receive these benefits as well.

22. Student Loan Repayment Level Repayment Schedule Example Loan Balance: $24,000 Loan Interest Rate: 6.8% Loan Term: 10 years (120 months) Monthly Loan Payment: $276.19 Number of Payments: 120 Total Repayment Amount: $33,143.28 Total Interest Paid: $9,143.28

23. Student Loan Repayment Graduated Repayment Schedule Example Loan Balance: $24,000 Loan Interest Rate: 6.8% Loan Term: 10 years (120 months) $194.92 for 24 months $233.90 for 24 months $280.68 for 24 months $336.81 for 24 months $404.17 for 24 months Number of Payments: 120 Total Repayment Amount: $34,811.73 Total Interest Paid: $10,811.73

24. Student Loan Repayment Extended Repayment Schedule • Your current loan balance must be more than $30,000. • Your first loan must have been disbursed on or after October 7, 1998. • If you qualify, you can request this schedule to be set up on either a level or a graduated repayment plan. Level Repayment ScheduleExtended Repayment Schedule Loan Balance: $30,000 Loan Balance: $30,000 Loan Interest Rate: 6.8% Loan Interest Rate: 6.8% Loan Term: 10 years (120 months) Loan Term: 20 years (240 months) Monthly Loan Payment:$345.24Monthly Loan Payment:$ 229.75 Number of Payments: 120Number of Payments: 240 Total Repayment Amount: $41,400Total Repayment Amount: $54,960 Total Interest Paid:$11,400Total Interest Paid:$24,960

25. Student Loan Repayment Income-Sensitive Repayment---Payments are based on a percentage of your gross monthly income but must cover the interest that accrues each month. Income-Based Repayment (IBR)---The IBR monthly payment amount is based on income (or combined income with spouse, if married), family size, and applicable loan debt and may be adjusted annually depending on these factors. Loan forgiveness may be granted after 25 years of qualifying IBR payments. Income-Contingent Repayment (ICR)---Eligibility is based on income (or combined income with spouse, if married), family size, and total federal Direct Loan debt. Monthly payments may be adjusted annually and loan forgiveness can be granted after 25 years of qualifying ICR payments. Pay As You Earn-Pay As You Earn is an income-driven repayment based on gross income (or combined income with spouse, if married), and family size and may be adjusted annually depending on these factors. Loan forgiveness is granted after 20 years of qualifying payments instead of 25. Do your homework to determine what repayment option is most beneficial for you!

26. Student Loan Repayment Loan Forgiveness Programs Loan forgiveness programs promote employment in certain fields by forgiving part or all of your loan debts, provided you fulfill certain work-related requirements. Federal Loan Forgiveness Programs • Federal Teacher Loan Forgiveness Program • Public Service Loan Forgiveness Program State loan forgiveness programs vary. Please check with the individual state.

27. Student Loan Repayment Deferments and Forbearance • If you are unable to send payments during your repayment period, call your lender/loan servicer immediately. • You may qualify for a temporary suspension of payments. Common Types of Deferment • In-School • Unemployment • Economic Hardship Ignoring the problem is not a solution---call for help.

28. Student Loan Repayment Delinquency • Failing to make your scheduled monthly loan payments will negatively affect your credit. • Late payments stay on your credit history for 7 years. • Your lender, loan servicer, and school will begin contacting you via letters and phone calls, which will continue until you resolve the delinquency.

29. Student Loan Repayment Repayment Tips • Always forgetting to send your payment? Sign up for automated payments and never worry about sending a check again. • Realize you forgot to put the check in the mail the day before it is due? Make the payment online. • If your student loan is due the same pay period as your car payment, call your lender/loan servicer to ask if you can change the due date. • Payments too high? • Call to discuss other repayment options. • Check out YouCanDealWithIt.com. • Consider consolidation. Remember, YOU have the power to fix the problem!

30. Student Loan Repayment Default If a loan remains delinquent, you will default. If you default, the entire unpaid balance and any accrued collection fees on the applicable loans will become immediately due and payable. Consequences of default may include any or all of the following: • Damage to your credit rating • Garnishment of your wages • Legal action against you • Collection charges (including attorney fees) being assessed against you • Loss of deferment eligibility • Loss of your professional license • An increase in the interest rate on your loan • Withholding of your federal and state income tax refunds • Loss of eligibility for state and federal financial aid • Loss of other state or federal payments

31. Resources and Reminders Get Organized • You can avoid delinquency and default consequences by being organized. • Keep all your financial records together. • Know your lender/loan servicer contact information. • Make sure your lender/loan servicer is always informed of name and address changes, as well as your enrollment status. • Keep your PINs in a safe place. • Financial aid has varying deadlines, so use a planner to keep track of important dates. School Policies It is important to understand your school’s academic progress policy, refund policy, and how the return of federal student aid funds will affect your loan repayment.

32. Resources and Reminders National Student Loan Data Systems (NSLDS) • NSLDS allows borrowers to obtain their personal information on all your federal student loans. • The NSLDS website provides the borrowers’ balances and past attendance status and identifies the lender(s)/loan servicer(s) of their federal student loan(s). www.nslds.ed.gov 1-877-557-2575

33. Resources and Reminders Summary • Exhaust all sources for free educational money before taking out a student loan. • Complete the FAFSA early. • Avoid scholarship scams by consulting educationplanner.org. • Refund all loan money not needed for your education. • Pay loans/interest early to save big bucks. • Avoid default. (The consequences could be with you for a long time.) Any questions?

34. Objectives • Understanding Financial Aid • Types of Financial Aid • Use Your Student Loan Money Wisely • Grace Period • Student Loan Repayment • Resources and Reminders

35. Questions? Comments?