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CFP® | FP511 > LO 8.2.1: Recommend an education funding strategy that utilizes loans, scholarships, grants, and work study efficiently. > Flashcards

LO 8.2.1: Recommend an education funding strategy that utilizes loans, scholarships, grants, and work study efficiently. Flashcards

1
Q

Federally Funded Loans

A

Directly from the U.S. Dept. of Education, under Direct Loan Program

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2
Q

How can federally funded loans be dispersed to the student?

A

Loans used to pay for education expenses may be dispersed directly to the student (direct student loans) or disposed by the institution (campus-based aid)

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3
Q

Can most loans be used for either undergraduate or graduate study?

A

Yes.

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4
Q

Stafford Loans

A
  • Known as William D. Ford Direct Stafford Loans
  • Common type of loan
  • Offer direct subsidized and direct unsubsidized loans
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5
Q

Are Stafford Loans need-based?

A

Subsidized Stafford loans are need-based — If a student qualifies for a loan based on financial need, the loan generally will be subsidized.

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6
Q

What is the subsidy in a subsidized Stafford Loan?

A

Subsidy takes the form of the gov’t paying the interest due while the student is in school and during 6 months following graduation

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7
Q

When is interest on a Stafford Loan due and what are the rates?

A
  • Unsubsidized loans have interest due within 60 days of disbursement of the money
    See p. 280 Figure 8.1: 2019-2020 Stafford Loan Interest Rates
  • Directed subsidized loans (undergraduates): 4.53%
  • Direct unsubsidized loans (undergraduates): 4.53%
  • Direct unsubsidized loans (graduate or professional students: 6.08%
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8
Q

Can students defer payments on a Stafford Loan while in school?

A

Yes, A student may defer payments on the loan, but interest usually continues to accrue and will increase the total amount payable when repayment begins

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9
Q

Can students pay interest only while in school?

A

Yes, while in school, the student may pay interest only

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10
Q

What are federal loan interest rates tied to?

A
  • Financial markets
  • Each spring, interest rates are determined for new loans being made for the upcoming award year which runs Jun 1 to next June 30
  • Each loan will have a fixed interest rate for the life of the loan
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11
Q

Stafford Loans | What is the normal repayment period?

A
  • 10 years

* But various repayment options, and repayment term extensions may be available

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12
Q

Parent Loans for Undergraduate Students (PLUS loans)

A
  • Parents may borrow funds for their children’s undergraduate studies
  • Amount that can be borrowed is unlimited, except the total of all aid received cannot be higher than cost of schooling.
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13
Q

Are part-time students eligible for PLUS loans?

A

No, Part-time students are not eligible for PLUS funds.

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14
Q

Are students enrolled in programs shorter than an academic year eligible for PLUS loans?

A

May be eligible for reduced loan amounts.

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15
Q

Are graduate students eligible for PLUS loans?

A

Yes, Graduate and professional students can borrow money directly (i.e., for themselves) through the Grad PLUS loan program.

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16
Q

Are PLUS loans need based?

A

No, these loans are NOT need-based.

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17
Q

What is the interest rate of PLUS loans?

A

The interest rate charged in 2019-2020 is fixed at 7.08% (prior to this, the rate had been variable but could not exceed 9.0%)

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18
Q

When does PLUS loan repayment begin?

A
  • Begins 60 days of distribution
  • Although may be delayed until the student is out of school, the interest on the loan continues to build during this time.
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19
Q

What is the source of PLUS loans?

A

Private lenders (as with Stafford loans)

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20
Q

Are origination fees charged on PLUS Loans?

A

Yes.

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21
Q

Are insurance fees charged on PLUS Loans?

A

Yes.

22
Q

Direct Consolidation Loans

A
  • Program allows for the combination of multiple student loans into one loan
  • A parent loan cannot be consolidated with student loans and become the student’s responsibility to repay.
  • Currently, the interest rate remains the weighted address of the interest rates on the loans included in the consolidation, rounded to the next 1/8th of 1%.
23
Q

Direct Consolidation Loans | When does a borrower become delinquent?

A
  • A borrower becomes delinquent on a student loan the first day after missing a payment.
  • After the borrower is more than 90 days delinquent on a student loan, the loan servicer may report this delinquency to the major credit bureaus—could negatively affect the borrower’s credit score
  • If a loan continues to be delinquent for 270 days under the Federal Direct Loan Program or the Federal Family Education Loan Program, it is considered to be in default.
24
Q

Perkins Loans

A
  • Officially ended on September 30, 2017
  • Students may still have these loans, as the final loans were approved for disbursement through June 30, 2018.
  • Were low interest rate loans funded by the federal gov’t but administered by individual schools
  • Were available both to undergraduate and graduate students
  • Were need-based and available to students who were attending on at least a half-time basis and who had an exceptional financial need.
25
Q

Were Perkins Loans need-based?

A

Yes.

26
Q

Perkins Loans | Were there limits applied to the amount of funds borrowed?

A

Yes.

27
Q

Perkins Loans | What was the interest rate?

A
  • 5%

* Not charged during the period the individual was a student.

28
Q

Perkins Loans | When was interest charged?

A

When repayment begins, which is 9 months after graduation, leaving school, or dropping to less than half time.

29
Q

Perkins Loans | What is the normal repayment period?

A

10 years.

30
Q

Federal Grants

A
  • Are gifts by the federal gov’t to a student to be applied toward education funding.
  • The student is not required to pay back the gov’t-provided grants
  • Like loans, grants are either disbursed directly to the student by the federal government or by the institution (campus-based aid).
31
Q

Pell Grants

A
  • Are available to undergraduate students only

* Distributed on the basis of substantial financial need

32
Q

Are Pell Grants need-based?

A

Yes.

33
Q

Pell Grants | Who is eligible?

A
  • All students, including part-time who are attending less than half time, are eligible for Pell Grants.
  • Part-time students may be eligible for reduced grants.
  • Not eligible: graduate students.
34
Q

Pell Grants | What is the maximum award amount available?

A
  • Changes year by year, but will seldom (if ever) be enough to completely pay tuition expenses
  • Maximum for 2019-2020 award year is $6,195
35
Q

Federal Supplemental Educational Opportunity Grants (FSEOGs)

A
  • Are funded by the federal gov’t but administered by individual schools
  • Are available to undergraduate students only
  • Are need-based
  • May be available for part-time students and full-time students.
  • Awards are limited based on amount available (current amounts range from $100 to $4,000)
36
Q

Are Federal Supplemental Educational Opportunity Grants (FSEOGs) need-based?

A

Yes.

37
Q

Federal Supplemental Educational Opportunity Grants (FSEOGs) | Which grant recipients are given highest priority in receiving FSEOGs?

A

Pell Grant

38
Q

Teacher Education Assistance for College and Higher Education (TEACH) Grant Program

A
  • Created as part of the College Cost Reduction and Access Act of 2007
  • Provides grants up to $4,000 per year to students who 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.
39
Q

TEACH Grant Program | What happens if a grant recipient does that complete the service obligation?

A

Failure to complete this service obligation will result in conversion of all amounts received to a federal direct unsubsidized Stafford loan.

40
Q

TEACH Grant Program | What is the eligibility for students enrolled less than full-time?

A

Grant amounts reduced, additional requirements apply.

41
Q

Pell Grants | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?

A
  • Undergraduate students — yes.
  • Graduate students — no.
  • Part-time students — yes.
  • Half-time students — yes.
  • Full-time students — yes.
42
Q

FSEOGs | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?

A
  • Undergraduate students — yes.
  • Graduate students — no.
  • Part-time students — yes.
  • Half-time students — yes.
  • Full-time students — yes.
43
Q

TEACH Grant | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?

A
  • Undergraduate students — yes.
  • Graduate students — yes.
  • Part-time students — no.
  • Half-time students — yes.
  • Full-time students — yes.
44
Q

PLUS Loans | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?

A
  • Undergraduate students — yes.
  • Graduate students — yes.
  • Part-time students — no.
  • Half-time students — yes.
  • Full-time students — yes.
45
Q

Stafford Loans

A
  • Undergraduate students — yes.
  • Graduate students — yes.
  • Part-time students — no.
  • Half-time students — yes.
  • Full-time students — yes.
46
Q

Federal Work-Study Program

A

Eligible students are provided employment, which may be on or off campus, to help cover the cost of their education

47
Q

Federal Work-Study Program | How is the program funded?

A
  • Federal funds are used by individual schools.

* The government and the employer share in the payments made to students.

48
Q

Federal Work-Study Program | How is eligibility determined?

A

Based on financial need.

49
Q

Federal Work-Study Program | Who is this eligible to?

A

Part-time and full-time students

50
Q

Federal Work-Study Program | Is there a limit on the number of hours worked?

A

Yes, based on course loan and academic progress.

51
Q

Federal Work-Study Program | What does this program provide?

A
  • Income to students, which may be used to reduce college expenses.
  • Paid by the hour.
  • Graduate students may be paid by the hour or by salary.
52
Q

State-Funded Financial Aid

A
  • Varies from state to state

* Another source of education funding.

CFP® | FP511 (61 decks)

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