LO 8.2.1: Recommend an education funding strategy that utilizes loans, scholarships, grants, and work study efficiently. Flashcards
Federally Funded Loans
Directly from the U.S. Dept. of Education, under Direct Loan Program
How can federally funded loans be dispersed to the student?
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)
Can most loans be used for either undergraduate or graduate study?
Yes.
Stafford Loans
- Known as William D. Ford Direct Stafford Loans
- Common type of loan
- Offer direct subsidized and direct unsubsidized loans
Are Stafford Loans need-based?
Subsidized Stafford loans are need-based — If a student qualifies for a loan based on financial need, the loan generally will be subsidized.
What is the subsidy in a subsidized Stafford Loan?
Subsidy takes the form of the gov’t paying the interest due while the student is in school and during 6 months following graduation
When is interest on a Stafford Loan due and what are the rates?
- 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%
Can students defer payments on a Stafford Loan while in school?
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
Can students pay interest only while in school?
Yes, while in school, the student may pay interest only
What are federal loan interest rates tied to?
- 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
Stafford Loans | What is the normal repayment period?
- 10 years
* But various repayment options, and repayment term extensions may be available
Parent Loans for Undergraduate Students (PLUS loans)
- 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.
Are part-time students eligible for PLUS loans?
No, Part-time students are not eligible for PLUS funds.
Are students enrolled in programs shorter than an academic year eligible for PLUS loans?
May be eligible for reduced loan amounts.
Are graduate students eligible for PLUS loans?
Yes, Graduate and professional students can borrow money directly (i.e., for themselves) through the Grad PLUS loan program.
Are PLUS loans need based?
No, these loans are NOT need-based.
What is the interest rate of PLUS loans?
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%)
When does PLUS loan repayment begin?
- 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.
What is the source of PLUS loans?
Private lenders (as with Stafford loans)
Are origination fees charged on PLUS Loans?
Yes.
Are insurance fees charged on PLUS Loans?
Yes.
Direct Consolidation Loans
- 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%.
Direct Consolidation Loans | When does a borrower become delinquent?
- 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.
Perkins Loans
- 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.
Were Perkins Loans need-based?
Yes.
Perkins Loans | Were there limits applied to the amount of funds borrowed?
Yes.
Perkins Loans | What was the interest rate?
- 5%
* Not charged during the period the individual was a student.
Perkins Loans | When was interest charged?
When repayment begins, which is 9 months after graduation, leaving school, or dropping to less than half time.
Perkins Loans | What is the normal repayment period?
10 years.
Federal Grants
- 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).
Pell Grants
- Are available to undergraduate students only
* Distributed on the basis of substantial financial need
Are Pell Grants need-based?
Yes.
Pell Grants | Who is eligible?
- 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.
Pell Grants | What is the maximum award amount available?
- 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
Federal Supplemental Educational Opportunity Grants (FSEOGs)
- 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)
Are Federal Supplemental Educational Opportunity Grants (FSEOGs) need-based?
Yes.
Federal Supplemental Educational Opportunity Grants (FSEOGs) | Which grant recipients are given highest priority in receiving FSEOGs?
Pell Grant
Teacher Education Assistance for College and Higher Education (TEACH) Grant Program
- 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.
TEACH Grant Program | What happens if a grant recipient does that complete the service obligation?
Failure to complete this service obligation will result in conversion of all amounts received to a federal direct unsubsidized Stafford loan.
TEACH Grant Program | What is the eligibility for students enrolled less than full-time?
Grant amounts reduced, additional requirements apply.
Pell Grants | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?
- Undergraduate students — yes.
- Graduate students — no.
- Part-time students — yes.
- Half-time students — yes.
- Full-time students — yes.
FSEOGs | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?
- Undergraduate students — yes.
- Graduate students — no.
- Part-time students — yes.
- Half-time students — yes.
- Full-time students — yes.
TEACH Grant | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?
- Undergraduate students — yes.
- Graduate students — yes.
- Part-time students — no.
- Half-time students — yes.
- Full-time students — yes.
PLUS Loans | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?
- Undergraduate students — yes.
- Graduate students — yes.
- Part-time students — no.
- Half-time students — yes.
- Full-time students — yes.
Stafford Loans
- Undergraduate students — yes.
- Graduate students — yes.
- Part-time students — no.
- Half-time students — yes.
- Full-time students — yes.
Federal Work-Study Program
Eligible students are provided employment, which may be on or off campus, to help cover the cost of their education
Federal Work-Study Program | How is the program funded?
- Federal funds are used by individual schools.
* The government and the employer share in the payments made to students.
Federal Work-Study Program | How is eligibility determined?
Based on financial need.
Federal Work-Study Program | Who is this eligible to?
Part-time and full-time students
Federal Work-Study Program | Is there a limit on the number of hours worked?
Yes, based on course loan and academic progress.
Federal Work-Study Program | What does this program provide?
- 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.
State-Funded Financial Aid
- Varies from state to state
* Another source of education funding.
