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CFFO MEETING JUNE 11, 12, 2008

CFFO MEETING JUNE 11, 12, 2008. Student Loans Where’s the Presented by: Suzanne Traaseth, sue.traaseth@csu.mnscu.edu Tel: 651-917-4701. Perkins Student Loans. Federal Perkins Loan Program, formerly the National Defense Student Loan Program was first authorized in 1958.

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CFFO MEETING JUNE 11, 12, 2008

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  1. CFFO MEETING JUNE 11, 12, 2008 Student Loans Where’s the Presented by: Suzanne Traaseth, sue.traaseth@csu.mnscu.edu Tel: 651-917-4701

  2. Perkins Student Loans • Federal Perkins Loan Program, formerly the National Defense Student Loan Program was first authorized in 1958. • Why Perkins? • Loan borrowers are predominantly from lower income families/ highest need • Low interest loans 5% • No interest while student in school • 9-month grace period before interest and payments begin • Deferments and Cancellations available for teaching, law enforcement, nursing, med tech fields and social services providing care to children at risk.

  3. Perkins Student Loans Income Facts about Perkins Loan Recipients from 2005-2006 • 38% of Families with Dependent Students have incomes below $42,000. • 28% of Families with Dependent Students have incomes below $30,000. • 6% of Families with Dependent Students have incomes below $12,000. See http://www.ed.gov/finaid/prof/resources/data/databook2007/cb-1b.xls

  4. Perkins Student Loans Why Perkins Collections Increased? • Between July 2002 and July 2006 Stafford and PLUS loans dropped to historically low interest levels • Perkins loans were included in consolidations • Defaulted Borrowers eligible, including loans with judgments • “In School” Borrowers were eligible for consolidation • Perkins is a revolving fund and schools are expected to use all available funds. If not, expected to return “excess cash”.

  5. Perkins Student Loans What Changed? • Beginning 7/1/2006 “In School” consolidations were eliminated • Judgment loans not eligible • Defaulted loans eligible IF satisfactory arrangements made • Increase in interest rates for Stafford and PLUS loans • Perkins loans not being consolidated

  6. Perkins Student Loan CONSEQUENCES: NACUBO/COHEAO Survey • 273 schools responded • 28 % indicated they expect their institution to have a shortfall in their Perkins fund on 6/30/2008, which will require their school to make a loan to the fund. • 80% reported they expect to have, on average, about one third less money for loans than they did two years ago • Students receive less support

  7. Perkins Student LoansFollowing Example for MSU, Mankato

  8. Perkins Student Loans Loan Counts MSU, Mankato Enrolled & GraceRepaymentTotal 7/01/02 1350 1906 3256 4/30/08 1573 1283 2856 • Fewer Borrowers • Fewer Borrowers in Repayment • No Federal Capital Contributions

  9. Perkins Student Loans NOW WHAT? • Communication between Business Office and Financial Aid Office to avoid over awarding • NACUBO and *COHEAO are planning to work with the Department of Education to provide guidance to institutions that are experiencing shortfalls in their Perkins Loan funds. • Go to http://www.nacubo.org/x10526.xml to see article • 05/29/08 Dept of Ed addresses shortage: http://www.ifap.ed.gov/dpcletters/CB0805.html *COHEAO is Coalition of Higher Education Assistance Organizations http://www.coheao.org/

  10. Benefits of Direct Lending (Information obtained from NACUBO webcast) • Completely integrated • FAFSA is the loan application • Transferable master promissory note • Simpler business process for schools • Single point of contact for all borrowers • No guarantee agency or other “third parties

  11. Benefits of Direct Lending • Simpler for students & families • Easier to understand process • No need to remember lender • No uncertainty about fund availability • No confusing marketing campaigns • No separate loan application

  12. Benefits of Direct Lending • Better for borrowers • Every student gets “best deal” • Interest capitalized least often • Change payment plans anytime • Loan forgiveness • Loans are never sold

  13. Direct LendingAdvantages for Schools • No conflict of interests • Problems reported by Congress, attorneys general, and media did not occur in Direct Lending • Eliminates preferred lender list • No need for a process to narrow lender choice • Fewer staff needed to administer program

  14. Direct LendingAdvantages for Schools • Fewer telephone calls • To loan providers to problem solve • From students asking help in selecting lender or locating lender • Improved institutional cash flow • Same business process as Pell Grant • No delays in delivery of funds to students • Significantly fewer complaints

  15. Direct Lending • Can Direct Lending handle increase in volume? Yes • Reconciliation • Schools presenting* stated their Financial Aid Office was responsible for reconciliation *Schools presenting: University of Nebraska, Lincoln University of Minnesota, Twin Cities Rutgers, The State University of New Jersey Ramapo College Kirkwood Community College

  16. Direct Lending • Challenges • Change • Lack of IT Resources • To obtain additional information regarding Direct Lending go to: http://www.ed.gov/offices/OSFAP/DirectLoan/professional.html

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