| Date post: | 21-May-2015 |
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Education |
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RO S EMARY HILLIARD & DAVID KELLY
G R A D U AT E & P R O F E S S I O N A L C O N C E R N S C O M M I T T E E
M A S FA A C O N F E R E N C E N O V E M B E R 7 , 2 0 1 3
Show Me the MoneyBest Practices in Advising Students on Federal
& Credit-Based Loans
What Now?
Fi-nan-cial Aid
Package
04000080000
120000
TUSDM Award Letter 13-14
Gap
Stafford Loan
HPSL
Grant
Merit Scholarship
Starting the Conversation
Has the family maxed out more favorable loan opportunities?
Has the student (or their parent) taken a look at their credit report?
Has the student developed a realistic budget for themselves?
“If you live like a dentist while you’re in school, then you’re going to have to live like a dental student when you’re a dentist.” – Lori Moore, Access Group
FEDERAL PLUS LOANS VS. PRIVATE EDUCATION LOANS
Funding the Gap
FEDERAL PLUS LOANS•A federally-backed supplemental education loan.
Grad & parent of undergrad.US Citizens, Permanent
Residents, & Eligible Non-Citizens.
COA less other financial aid received.
13-14 interest rate is 6.41%.Student must file a FAFSA
and meet federal financial aid guidelines to apply for a PLUS Loan.
PLUS Loans: The Good
Consolidation available with other federal loans.
Flexible repayment schedules: Standard, Extended, Graduated, IBR, (Grad PLUS), PAYE (Grad PLUS).
Public Service Loan Forgiveness (Grad PLUS).
‘Easier’ credit check than some private loans = possible ease of approval.
Fixed interest rate for all applicants.
PLUS Loans: The Bad
All applicants receive same interest rate regardless of creditworthiness.
Only remaining borrower benefit is interest rate reduction for utilizing ACH.
Rates now fluctuate (yearly, fixed for the life of the loan) up to a 10.5% cap.
High origination fees: currently 4.204%, will be 4.288% starting 12/1.
PRIVATE EDUCATION LOANS
Education loans backed by a private company, such as a bank or a credit union.
Student or student with a co-signer.
US Citizens, Permanent Residents, Eligible Non-Citizens, & Foreign Students.
COA less other financial aid (unless lender sets annual/aggregate caps).
13-14 interest rates between 2.25%-13.99% (anecdotal).
Students not required to meet federal aid guidelines.
Private Loans: The Good
Interest rates based on creditworthiness, typically between 2.25% - 13.99%. Adding a co-signer may further bring down the interest rate.
Often no origination/disbursement fees.Lenders may offer discounts and borrower benefits,
such as interest rate reductions for participating in ACH, making a certain number of on-time payments, and a co-signer release option.
Students not required to complete the FAFSA or meet federal aid requirements.
In most cases, lender/servicer will remain the same through the life of the loan.
Interest Formula Pros & Cons
Credit scoreCredit history (length, consistency re: payment)Default rate of schoolIncomeProgram of study= future earning potential???Does this mean only “worthy” applicants
will be approved?Check with individual lenders for more specific
criteria.
Private Loans: The Bad
Less flexible repayment terms (typically 5-15 years, some offer a max of 20 years).
Limited consolidation options Cannot be included in a Direct Consolidation Loan to receive federal loan repayment benefits.
In-school deferment options vary by lender.Variable interest rates may be more risky
over time.
What Now?
PLUS PRIVATE
Poor Borrowing History….
IF…… PLUS
Additional Unsub?
Excellent credit & high earning potential…
IF… PRIVATE
Enrolled in school for a long time…
IF…PLUS
Low earning potential post-graduation…
IF…PLUS
“Non-traditional” student…
IF… PRIVATE
STRATEGIES FOR SUCCESSFUL COUNSELING
What Now?
Strategies for Successful Counseling
Max out favorable aid/scholarship opportunities.
Live like a student!Financial circumstances post-graduation
(BLS?)Default rate/success of graduates.Transparency.How are you presenting this information?
