Lesson 8 Quiz Questions

Question 1

Stafford Loans

Answer 1

Administered by the US Dept of Education and available to students who demonstrate financial need.

Question 2

Subsidized Stafford Loans

Answer 2

Federal Government pays interest on the loan while the borrower is in school and during 6 month grace period

Question 3

Unsubsidized Stafford Loans

Answer 3

Borrower pays interest from the time the funds are dispersed

Question 4

Maximum Loan Limits under Stafford Loan Program for dependent students

Answer 4

Year 1: $5,500; $3,500 subsidized
Year 2: $6,500; $4,500 subsidized
Beyond: $7,500; $5,500 subsidized

Question 5

Maximum Loan Limits under Stafford Loan Program for independent students

Answer 5

Year 1: $9,500; $3,500 subsidized
Year 2: $10,500; $4,500 subsidized
Beyond: $12,500; $5,500 subsidized

Question 6

Standard Repayment Plans

Answer 6

Repay up to 10-years with minimum monthly payments of at least $50.

Question 7

Extended Repayment

Answer 7

Repay up to 25 years (must have $30,000+ of Federal Loans)

Question 8

Graduated Repayment

Answer 8

• Repay up to 10 years
• Borrowers initially make low payments
• Payments increase every 2 years, up to 3 times original amount
• Allows borrows to increase payments as income increases

Question 9

Income Drive Repayment Plans

Answer 9

Calculate the monthly payment based on AGI and the Federal Poverty Guideline

Question 10

Income-Contingent Repayment (IRC)

Answer 10

• Payment no more than 20% of borrower’s discretionary income
• If payments insufficient to pay interest, shortfall added to principal
• After 25 years, outstanding balance is forgiven and taxable as cancellation of indebtedness income

Question 11

Income-based Repayment (IBR)

Answer 11

• Amount of payment calculated must be less than standard payment
• Payment is 10% of discretionary income
• After 20 years, outstanding balance is forgiven and taxable as cancellation of indebtedness income.

Question 12

Pay As You Earn/Revised Pay As You Earn

Answer 12

• Minimal differences between these programs.
• Available if borrower has high debt-to-income ratio
• Payment is 10% of discretionary income (income over 150% of poverty level based on family size) and cannot be more than required under the standard plan.
• For subsidized loans, if payment is less than interest due, federal gov’t pays 50% to 100% of shortfall for up to 3 years from the date loan payments commence. Beyond that, shortfalls increase loan balance.
• After 20 to 25 years, outstanding balance is forgiven and taxable as cancellation of indebtedness income.

Question 13

Expected Family Contribution (EFC)

Answer 13

A measure of a family’s financial strength and an estimate of how much it will contribute toward education costs

Question 14

Income & Assets considered in the EFC calculation under Regular Formula

Answer 14

Parents: 47% of income plus 5.65% of assets
Students: 50% of income plus 20% of assets

Question 15

Simplified Method

Answer 15

Available only to low-income families (AGI < $50,000) and ignores family assets and considers only income

Question 16

Automatic Zero EFC

Answer 16

Used when student’s or parent’s AGI is $26,000 or less.

Question 17

Pell Grant

Answer 17

Need based for undergrad students, maximum of $6,345.

Question 18

Teach Grant

Answer 18

Up to $4,000/year for students that intend to teach in low-income communities for at least 4 years

Question 19

Federal Supplemental Educational Opportunity Grant (FSEOG)

Answer 19

Awarded to students with exceptional financial need; $100 - $4,000/year

Question 20

ATOC Calculation

Answer 20

100% of the first $2,000 + 25% of the remainder up to $4,000 total.

Question 21

LLC Calculation

Answer 21

20% of up to $10,000 in qualified expenses