Loan Programs Presented By Drew Johnson Brown Mackie College Atlanta
Loan Programs William D. Ford Federal Direct Loan Program • Stafford (Subsidized and Unsubsidized) • Parent Loan for Undergraduate Students (PLUS) • GradPLUS
Loan Programs Subsidized Stafford Loans • Need based loan – government pays interest for student while student is enrolled, or is in grace period or deferment • Fixed interest rate (6.8% for 07/08, 6.0% for 08/09, 5.6% for 09/10, 4.5% for 10/11, 3.4% for 11/12). Graduate students rate is 6.8% • Fees– 0.5% origination fee, 1% default fee • Six month grace period prior to repayment • For Unsubsidized loans, interest rate is 6.8% and student responsible for interest after loan is fully disbursed
Loan Programs Annual Loan Limits (Sub/Unsub amounts)
Loan Programs Aggregate (Cumulative) Loan Limits • $31,000 for a dependent undergraduate student (no more than $23,000 may be subsidized) • $57,500 for an independent undergraduate student (no more than $23,000 may be subsidized) • $138,500 for a graduate or professional student (no more than $65,000 may be subsidized; includes loans for undergraduate study)
Loan Programs Federal Parent Loan for Undergraduate Students (PLUS) • Borrowers are parents of undergraduate students • Annual limit is the cost of attendance minus other aid received (no aggregate limit) • 7.9% interest rate for life of loan • 3% origination fee and 1% Default fee • Credit check involved on borrower
Loan Programs GradPLUS Loans • Borrowers are graduate or professional students • Annual limit is the cost of attendance minus other aid received (no aggregate limit) • 7.9% interest rate for life of loan • 3% origination fee and 1% Default fee • Credit check involved on borrower • Borrower must first apply for Stafford
Loan Programs Perkins Loans • Part of campus-based programs (FWS, SEOG) • Federal funds with shared contribution by school • 5% fixed interest rate • Must demonstrate exceptional financial need • $4,000 annual limit for undergrads (up to $20,000 cumulative), not to exceed $8,000 in first two years • $6,000 annual limit for graduate students (up to $40,000 cumulative) • No loan fees • 9-month grace period before repayment starts
Loan Programs Private Loans • Private loans are made available by private lending institutions to fill the gap between cost of attendance and aid received • Private/alternative loans are not regulated by the federal government • Rates and terms vary greatly by lender and program of study
Loan Programs Eligibility Requirements • U.S. citizen or national, or eligible non-citizen • Attending an DOE approved school at least half-time • Making Satisfactory Academic Progress (SAP) • No unresolved student loan defaults • FAFSA completion required • Must complete a Master Promissory Note • Entrance and Exit Counseling required
Loan Programs Eligibility Requirements (continued) • For PLUS and GradPLUS, borrower must not have adverse credit • 90 days or more delinquent on any debt • during the five years preceding the date of the credit report, he has been determined to be in default on a debt, his debts have been discharged in bankruptcy, or he has been the subject of foreclosure, repossession, tax lien, wage garnishment, or write-off of an FSA debt • “No credit” is NOT considered adverse credit
Loan Programs Repayment Options (Stafford) • Standard • Graduated • Extended • Consolidation • Income-Based
Loan Programs Standard Repayment • 10 years or 120 months • Equal payments over life of loan repayment • Cheapest overall cost to borrower (less interest)
Loan Programs Graduated Repayment • Lower initial payments • Payments increase every two years • Still set up as a 10-year repayment • Example of $30,000 loan at 6.8% interest • Initial monthly payment of $245.75 • Final monthly payment of $509.58 • Total interest paid $13, 380.41
Loan Programs Extended Repayment • Available to borrowers with $30,000 or more debt • Repayment extended to a 25-year plan • Lower monthly payment, much more interest paid by borrower • Example of $30,000 loan at 6.8% interest • Monthly payment of $208.22 • Total interest paid $32,462.41
Loan Programs Consolidation • Like Extended repayment, can change payments from 10-year to a 25-year or even 30-year plan • Biggest advantage is to combine Stafford loans from multiple lenders (and DL and Perkins Loans) into a single monthly payment • Available for Stafford, GradPLUS, PLUS, Perkins • Federal government (DL) only entity currently offering Consolidation Loans • Extending years of repayment obviously increases interest paid
Loan Programs Income-Based Repayment (IBR) • Monthly payment capped at 15% of discretionary income (difference in AGI and 150% of federal poverty line) • Monthly payment adjusted annually • Available for Stafford, GradPLUS, Consolidation • Any balance after 25 years is forgiven • Borrowers should be careful – payments can become high as income increases
Loan Programs Questions??? Further information available from Federal Student Aid Handbook 2009-10 Federal Student Aid Handbook Volume 3 – Calculating Awards and Packaging Chapter 6 Stafford/PLUS Loan Periods and Amounts Available online at www.ifap.ed.gov
Loan Forgiveness Programs(Teachers) • Teachers who started their qualified teaching service on or after October 30, 2004. These teachers may receive up to $5,000 in loan forgiveness for service as a highly qualified, full-time elementary or secondary school teacher, as defined in the application or up to $17,500 in loan forgiveness for service as a highly qualified, as defined in the application, full-time mathematics or science teacher in an eligible secondary school or for service as a highly qualified special education teacher.
Loan Forgiveness Programs(Teachers) Teacher Loan Forgiveness • Forgiveness of Federal Stafford Loan • 5 Consecutive Years of Service as a Highly Qualified Teacher in a Title I School • $5,000 - $17,500 • Two Forms • Teacher Loan Forbearance Form • Teacher Loan Forgiveness Form
Loan Forgiveness Programs(Teachers) Teacher Loan Forbearance Form • The Teacher Loan Forgiveness Forbearance form is used to determine forbearance eligibility for Direct Loan borrowers who are completing their teaching service requirements before applying for teacher loan forgiveness.
Loan Forgiveness Programs(Teachers) Teacher Loan Forgiveness Form • The Teacher Loan Forgiveness Application is used to evaluate a Direct Loan Program borrower's eligibility for up to $5,000 in forgiveness benefits for highly qualified teachers or up to $17,500 for highly qualified mathematics, science, and special education teachers.
Teach Grant Teach Grant Program • Through the College Cost Reduction and Access Act of 2007, Congress created the Teacher Education Assistance for College and Higher Education (TEACH) Grant Program that provides grants of up to $4,000 per year to students who intend to teach in a public or private elementary or secondary school that serves students from low-income families.
Teach Grant What the Teach Grant Is • The TEACH Grant is not a grant in the truest sense of the word. • *Grants do not have to be repaid* • The TEACH grant is actually a Federal Direct Unsubsidized Loan with a service-cancellable option attached to it.
Teach Grant Conditions • In exchange for receiving a TEACH Grant, the recipient must agree to serve as a full-time teacher in a high-need field in a public or private elementary or secondary school that serves low-income students. (Title I School). • A recipient of a TEACH Grant must teach for at least four academic years within eight calendar years of completing the program of study for which the TEACH Grant was received.
Teach Grant Student Eligibility Requirements To receive a TEACH Grant a student must meet the following criteria: • Complete the Free Application for Federal Student Aid (FAFSA), although you he or she does not have to demonstrate financial need. • Be a U.S. citizen or eligible non-citizen. • Be enrolled as an undergraduate, post-baccalaureate, or graduate student in a postsecondary educational institution that has chosen to participate in the TEACH Grant Program.
Teach Grant Student Eligibility Requirements (con’d) • Be enrolled in coursework that is necessary to begin a career in teaching or plan to complete such coursework. Such coursework may include subject area courses (e.g., math courses for a student who intends to be a math teacher). • Meet certain academic achievement requirements (generally, scoring above the 75th percentile on a college admissions test or maintaining a cumulative GPA of at least 3.25). • Sign a TEACH Grant Agreement to Serve. • Complete TEACH Grant Entrance Counseling
Loan Forgiveness Programs(Teachers) Questions?