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Texas Association of Student Financial Aid Administrators
2019 New Aid Officer Workshop
Loan Basics and Repayment
Julie Wittmis – Texas Woman’s University
Lindsay Partridge – UT Southwestern Medical Center
Texas Association of Student Financial Aid Administrators
Agenda
• Student loan programs and regulations
• Application process and eligibility
• Repayment options
Texas Association of Student Financial Aid Administrators
Federal Student Loan Options
• Direct Subsidized Loan
• Direct Unsubsidized Loan
• Direct Graduate PLUS Loan
• Direct Parent PLUS Loan
Texas Association of Student Financial Aid Administrators
Direct Subsidized Loan
• Need based loan for undergraduates only
• Origination fee: 1.062% (as of October 2018)• Adjusted annually October 1 for new loans
• Fixed interest rate: 5.05% (as of July 2018)• Adjusted annually July 1 for new loans
• Grace period: 6 months
• Interest does not accrue:• Enrolled at least half time
• During 6 month grace period
• During other times of deferment
• Must meet SAP and enroll at least half time• Half time defined by school
Texas Association of Student Financial Aid Administrators
150% Subsidized Usage Limit Applies (SULA)
• Effective 7/1/13 and applies to new borrowers or borrowers with a zero balance taking out a new loan
• May only receive Sub for 150% of the published program length
• MEP-SUP=REP• Maximum eligibility period (MEP)• Subsidized usage period (SUP)• Remaining eligibility period (REP)
Texas Association of Student Financial Aid Administrators
150% Subsidized Usage Limit Applies (SULA)
• Eligibility lost after students exceeds MEP
• Cannot receive any additional subsidized loans• May receive unsub up to yearly limit in its place
• Interest subsidy lost on outstanding Direct Subsidized Loans (including Direct Consolidation Loan that repaid a Direct Subsidized Loan) if borrower attends undergrad program at least half-time when remaining eligibility period is zero or less.
Texas Association of Student Financial Aid Administrators
Direct Unsubsidized Loans
• Non-need based loan
• Borrowers is undergrad, grad, or professional
• Origination fee: 1.062% (October 2018)
• Fixed interest rate: • Undergraduate – 5.05%
• Graduate – 6.6%
• Interest accrues while student is in school
• Interest capitalizes (unpaid interest added to principal)
• Student can elect to pay interest while enrolled
• Grace period and SAP requirements remain the same
Texas Association of Student Financial Aid Administrators
Direct Graduate PLUS Loan
• Non-need based loan• Can borrow up to COA minus other aid, no aggregate limit
• Borrower is graduate or professional student• Origination fee: 4.268% (October 2018)• Fixed interest rate: 7.6% (July 2018)• Credit check required
• Appeal is available for those who do not initially meet credit reqs
• Loan payments deferred while at least half time• 6 month grace period, interest continues to accrue
• Must be enrolled at least half time• School determines half-time eligibility
Texas Association of Student Financial Aid Administrators
Direct Parent PLUS Loan
• Non-need based loan• Can borrow up to cost of attendance (COA) minus other aid
• Borrower must be parent of dependent undergrad
• Student must be enrolled at least half time
• Origination fee: 4.268% (October 2018)
• Fixed interest rate: 7.6% (July 2018)
• Credit check required• Additional PLUS loan counseling required for low credit• Additional unsub up to independent limit may be awarded if parent
does not pass credit check
• Repayment begins after loan is fully disbursed• Parent may apply for deferment if student is enrolled at least half-time
Texas Association of Student Financial Aid Administrators
Loan LimitsDependent Undergraduate Student
Base Eligibility (Sub or Unsub)
Additional Unsubsidized Loan
Freshman $3,500 $2,000
Sophomore $4,500 $2,000
Junior/Senior $5,500 $2000
Maximum Total (Aggregate) Limit: $31,000 ($23,000 can be subsidized)
Independent Undergraduate Student
Base Eligibility (Sub or Unsub)
Additional Unsubsidized Loan
Freshman $3,500 $6,000
Sophomore $4,500 $6,000
Junior/Senior $5,500 $7,000
Maximum Total (Aggregate) Limit: $57,500 ($23,000 can be subsidized)
Graduate/Professional Student
Unsubsidized Loan $20,500/academic year
Maximum Total (Aggregate) Limit: $138,500 ($65,500 may be subsidized)
NOTE: certain health professions students have a combined aggregate of $224,000
Texas Association of Student Financial Aid Administrators
Direct Loan Application Process
• FAFSA
• Eligible student in eligible program with Pell eligibility determination complete
•PLUS loan application and credit check are completed on www.studentloans.gov
Texas Association of Student Financial Aid Administrators
Direct Loan Application Process
• Entrance Counseling• First time borrowers informed of their rights and responsibilities•
• Master Promissory Note (MPN)• Sub/Unsub and PLUS Loan MPN’s are separate• Includes terms and conditions of the loan disbursement and repayment • Valid for 10 years and covers multiple loans
• Exit Counseling• Information on repayment• Must be complete when student drops below half-time or graduates
www.studentloans.gov
Texas Association of Student Financial Aid Administrators
Direct Loan Notification
Institution is required to notify the borrower within 14 days after
disbursement is made and give the borrower the opportunity to reduce or
cancel the disbursement.
Texas Association of Student Financial Aid Administrators
Direct Loan Proration
• Applies to subsidized and unsubsidized loans
• Required if:• Student’s academic program is less than 1 year in length
• Student’s remaining period of study is less than 1 year in length
• Standard proration formula
Actual enrolled hours------------------------------
24
Amount of direct X loan student could
have for grade level
Texas Association of Student Financial Aid Administrators
Alternative Loans
• Non need-based loans
• Private banks
• State loans (College Access Loan)
• Fees, interest rates, terms vary
• Most require school certification
• May require credit check or cosigner
Texas Association of Student Financial Aid Administrators
Student Loan Repayment• Single source with record of all
federal loans• Borrower information
• Loan amounts
• Interest accrued
• Servicer information
• Student view available in NSLDS Professional Access
http://nslds.ed.gov
Texas Association of Student Financial Aid Administrators
Loan Repayment Terms• Forbearance
• Period of time payments are postponed, reduced or extended• Interest accrues
• Deferment • Period of time payments are postponed for approved set of reasons
• Interest on subsidized loans does not accrue*
• Default • Payments delinquent for 270 days
• Consolidation• Combines loans into one, requiring one monthly payment to one servicer• Can fix defaulted loan
Texas Association of Student Financial Aid Administrators
Repayment Plans
• Standard• 10 years; equal monthly payments
• Graduated• 10 years; monthly payments start low and increase every 2
years
• Extended• 25 years; fixed or graduated monthly payments
Texas Association of Student Financial Aid Administrators
Repayment Plans
• Revised Pay As You Earn (REPAYE)
• Payments adjusted annually, outstanding balances forgiven* after
20 years (undergrad only) or 25 years (if grad loans taken out)
• 10% of discretionary income
• Pay As You Earn
• Adjusted annually
• Monthly payments will not exceed 10% of discretionary income
(20 yr forgiveness*); must be new borrower on or after 10/1/07
Texas Association of Student Financial Aid Administrators
Repayment Plans
• Income-Based Repayment (IBR)• Payments will be 10 or 15% of discretionary income
(dependent on when loans were first received)
• Need high debt relative to income
• 20 or 25 year forgiveness*
• Income-Contingent Repayment (ICR)• Payment will be lesser of either 20% of discretionary
income OR the amt student would pay on a repayment plan with a fixed payment over 12 years
Texas Association of Student Financial Aid Administrators
Loan Forgiveness
• Teacher Loan Forgiveness• Up to $17,500 on sub or unsub (Direct or Stafford) loans if teach full-
time for 5 complete consecutive years in certain elementary/secondary schools serving low-income families
• Public Service Loan Forgiveness• Forgives the remaining balance on Direct Loans after 120 qualifying
monthly payments made while working full-time for qualifying employer
https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/
Texas Association of Student Financial Aid Administrators
Cohort Default Rate (CDR)
• Includes Direct Loans and loans underlying DL consolidation loans
• CDR = % of borrowers who enter repayment in a given federal fiscal year who then default within the next 3 fiscal years
• High rate has consequences for schools• >15% = loss of 1 installment/semester• >15% = 30 day hold on 1st time, 1st year borrowers• >40% = loss of participation in Title IV funding
Texas Association of Student Financial Aid Administrators
Resources
• www.studentaid.gov• FAQs broken down by aid type• Repayment calculators
• IFAP – ifap.ed.gov• Handbooks, regulations, current notifications• This site is your best friend!
• YouTube – FederalStudentAid channel• Videos on a variety of topics including repayment