Graduate/Professional Entrance Loan Counseling

"Graduate/Professional Entrance Loan Counseling" submitted by SchoolGrantsfor Editorial Team and last updated on Monday 9th January 2012

Students completing entrance loan counseling as an "undergraduate student" must complete entrance loan counseling as a "graduate/professional student" when borrowing a GradPLUS loan. Before your school disburses your Direct Subsidized or Unsubsidized Loan or Direct PLUS Loan borrowers who have not received prior PLUS loans through the Direct Loan Program or the Federal Family Education Loan (FFEL) Program, regulations require that you complete an entrance counseling session.

Continuing your education is a major investment for your future. If you decide to make loans a part of this investment, managing the debt you incur is a major responsibility. To ensure that you understand this responsibility and the obligation you are assuming, the Federal Government requires you to participate in loan counseling prior to receiving a Direct Loan, if you have not previously received a Direct Loan, Federal Family Education Loan, or Supplemental Loans to Students (SLS) Loan.

Graduate and Professional Degree Students Entrance Loan Counseling will give you an idea for:

Graduate and Professional Degree Students Entrance Loan Counseling is designed to explain the options available for financing your education. This presentation will review Stafford and Grad PLUS loan eligibility, your rights and responsibilities as a borrower, borrowing tips, repayment information, and how to avoid delinquency and default. (Review bullets.)

Select an activity from the Ice-Breakers and Openers section of the Building Futures Appendix (I-82 Entrance Loan Counseling for undergraduate students instructor’s guide) to energize students and facilitate introductions.

Thoughts of graduate or professional school conjure up images of increased education costs and more student loans, as well as more personal expenses to juggle. While there’s no simple way to sidestep the essential costs of higher education, there are ways to ease the burden. Once you understand the ins and outs of financial aid, you’re well on your way to taking full advantage of the options available to you.

Funding Your Education

Explains sources of financial aid for college. Before applying for a loan, explore other ways to pay for college that do not require you to repay them back. Federal and state grants are one source of aid that you do not need to repay. (Explain your schools options.)

Before applying for a loan, explore other ways to pay for college that do not require you to pay them back. Some schools may offer institutional grants, which are one source of aid that you do not need to repay. (Explain your school’s options.)

Your financial aid counselor, libraries and the Internet are good sources for scholarship information. Other sources may include your employer, your parents’ employers and/or civic and social organizations with which you or your family or friends are affiliated. (Explain your school’s options.)

In a work-study program, the money you earn from employment is used to help with your educational costs. Jobs are provided on- and off-campus, with hourly wages paid directly to you. (Explain your school’s options.) Family members and friends may also contribute to your college fund. After pursuing other avenues of funding, you may consider a loan. In today’s workshop we will cover your eligibility and options for federal Stafford and Grad PLUS loans.

You should first look into scholarships, grants, employment opportunities and other financial aid you don't have to pay back. If you have to borrow for college, determine how much you'll need and can afford to repay. The financial planning tool can help you calculate how much you can afford to borrow based on both your current and potential earnings, what your payments will be and more.

When it comes time to repay your loans, keep in mind that if you fall behind in your payments, your delinquency will be reported to the national credit reporting agencies. A damaged credit rating will make it harder and more expensive to get a loan later should you want to finance a car, a house or additional education.

If you allow your loan to go into default, your wages may be taken from you, your tax refunds could be seized, and you could be charged hefty collection costs, among other penalties. You can take steps to temporarily postpone or reduce loan payments to avoid delinquency and the consequences of default. If you're having problems making your payments, ask your lender about a deferment or forbearance, or other options.

Scholarships may be offered for academic achievement and other criteria and are applied to college costs. To find out what’s available to you, talk with your financial aid counselor, utilize resources at your local library or explore on the Internet. Try key word searches such as “graduate school scholarships” or narrow your search based on your chosen field of study. Also look into additional sources, such as your employer, civic and social organizations or your parents’ employers.

Loan Eligibility Requirements

Let’s start by exploring whether or not you qualify for assistance. Each student seeking a Stafford and/or Grad PLUS loan must meet the following requirements. (Review bullets.)

Reviews general federal Stafford and Grad PLUS loan eligibility requirements. Review your school’s satisfactory academic progress and refund policies.

Each student seeking a Stafford and/or Grad PLUS loan must meet the following requirements. (Review bullets.) A graduate/professional student is required by HERA to apply for their annual Stafford loan maximum first, but they are not required to accept these funds. These students can choose to decline their Stafford loan maximum and move straight into the Grad PLUS loan program, borrowing up to the cost of attendance minus other financial aid each year

Calculating Your Need

Cost of Attendance — Aid Received = Max Grad PLUS amount
*Aid received as certified by school.

Reviews how financial need and Grad PLUS loan amounts are calculated. In addition, some schools may also require an institutional application, the CSS Profile, or Need Access form to analyze a student’s financial need.

Eligibility for need-based financial aid hinges on this:

How is your financial need for a Stafford loan calculated? Your financial need is calculated by subtracting the cost of attendance from your expected family contribution. And for your Grad PLUS? Subtract any financial aid resources from your need to obtain your maximum Grad PLUS amount.

Your financial need is the difference between the cost of attending school and the amount you and your family are expected to contribute. Cost of attendance refers to tuition and fees, room and board, books and supplies, transportation, personal expenses, possibly a computer and student loan fees if you borrow. Your expected family contribution is based on information from the Free Application for Federal Student Aid, the FAFSA. This calculation takes into account your and your parents’ income (if dependent), number in household, number in college, the amount of savings, investments and taxes due. Subtracting your expected family contribution from your cost of attendance determines your need and the financial aid package you may be awarded. Your Grad PLUS loan amount is determined by subtracting any aid awarded (resources) from your cost of attendance. Remember, you must first apply for a federal Stafford loan before you can apply for a federal Grad PLUS loan.

Subsidized Stafford Loans

Provides an overview of subsidized Stafford loans. There are two types of federal Stafford loans: subsidized and unsubsidized. Subsidized Stafford loans are based on need and interest is paid by the federal government while you are in school at least half time, during your grace period and during periods of deferment. Repayment is not required while you are in school, but begins six months after you graduate, leave school or drop below half-time enrollment.

Unsubsidized Stafford Loans

Provides an overview of unsubsidized Stafford loans and loan capitalization. An unsubsidized Stafford loan is not need-based. You are responsible for paying the interest that begins accruing when the loan is disbursed. You have the option of paying the interest while in school or having interest capitalized. Capitalization is when the unpaid interest on your student loan is added to the principal, resulting in a higher total loan balance and possibly a higher monthly payment.

Interest Rates and Loan Fees

Explains Stafford loan interest rates and fees. Student loan interest rates are fixed at 6.8 percent for loans disbursed after July 1, 2006. Student loan interest rates are variable for loans disbursed before July 1, 2006 and adjusted annually every July 1, even while in repayment. Federal Stafford loans have an interest rate cap of 8.25 percent.

Federal Stafford loans also carry fees. A fee of up to 2.5 percent may be deducted from the amount borrowed—1.5 percent for origination from the lender and a 1 percent default fee from the guarantor. Fees are subtracted from the loan before each disbursement, so you will receive a little less than the amount you applied for. For example, if you borrow $1,000, you will receive a disbursement of $975. However, you are still responsible for repaying the entire $1,000 originally borrowed.

Lenders may offer borrower benefits that reduce the interest rate and/or fees. We will cover that later in the presentation. Some lenders’ borrower benefits may also reduce the interest rate on the unsubsidized interest accrual while the student is enrolled in school. Contact your lender for more information.

Annual Stafford Loan Limits

Academic Year Base Subsidized Additional Unsubsidized* Maximum Subsidized & Unsubsidized Estimated Monthly Payment on Maximum** Estimated Total Payment Amount
First Year $3,500 $6,000 $9,500 $109 $13,119
Second Year $4,500 $6,000 $10,500 $121 $14,500
Third & Remaining Years $5,500 $7,000 $12,500 $144 $17,262
Graduate/ Professional $8,500 $12,000 $20,500 $236 $28,310

Sign Denotes:
*New loan limits for undergraduate dependent students (up to $2,000) and independent students (up to $6,000) effective July 1, 2008.
**Assumes 6.80 percent interest rate and 10-year term

Presents annual Stafford loan borrowing limits. Federal Stafford loans also have loan limits. The annual loan limit is the maximum you may borrow for a single academic year. (Review chart.)

Aggregate Stafford Loan Limits

Academic Year Maximum Subsidized & Unsubsidized* Estimated Monthly Payment on Maximum** Estimated Total Payment Amount
Dependent/Undergraduate $31,000 $357 $42,810
Independent/Undergraduate $57,500 $662 $79,405
Graduate/Professional $138,500 $1,594 $191,264

Sign Denotes:
*New loan aggregate limits for undergraduate students effective July 1, 2008
**Assumes 6.80 percent interest rate and 10-year term

Presents total Stafford loan borrowing limits. How many of you have previously borrowed? Do you know your total student loan indebtedness?

It is important to recognize that federal Stafford loans also have aggregate loan limits. An aggregate loan limit is the maximum allowable unpaid principal balance you may borrow throughout your academic career. If you are planning to continue your education and borrow in the future, borrow wisely starting now to ensure you do not exceed total aggregate loan limits later. (Review chart.)

Additional Unsubsidized Stafford Loans for the Health Professions

Health Professions Nine-month academic year 12-month academic year
For doctorate degrees: Allopathic Medicine, Osteopathic Medicine, Dentistry, Veterinary Medicine, Optometry or Podiatric Medicine. $20,000 $26,667
For Master of Science in Pharmacy (also fourth- and fifth-year bachelor’s and some doctoral students), graduate in Public Health, Doctor of Chiropractic, doctorate in Clinical Psychology or master’s or doctorate in Health Administration. $12,500 $16,667

Note: Aggregate Stafford loan limit may not exceed $224,000.

Provides an overview of additional unsubsidized Stafford loans for the health professions. Certain graduate and health professions students may be eligible to borrow additional unsubsidized loans. Aggregate Stafford loan limit for the preceding examples (chart) may not exceed $224,000.

Grad PLUS Loans

Cost of Attendance – Aid received (Aid received as certified by school) = Max Grad PLUS amount

Provides an overview of Grad PLUS loans and loan interest capitalization.

A Grad PLUS loan is not need-based. You must meet credit eligibility requirements. Credit will be checked by the lender annually. You must not have adverse credit history. You are considered to have an adverse credit history if you are 90 or more days delinquent on any debt or if, within five years of the date of the credit report, you have been the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off.

If you have an adverse credit history, you may still receive a Grad PLUS loan if you obtain an endorser who does not have an adverse credit history. An endorser is someone who agrees to repay the loan if you do not repay it.

You are responsible for paying the interest that begins accruing when the loan is disbursed – repayment commences within 60 days after the loan has been fully disbursed. You have the option of paying the interest while in school or having interest capitalize. Capitalization is when the unpaid interest on your student loan is added to the principal, resulting in a higher total loan balance and possibly a higher monthly payment.

There are no set annual or aggregate limits. You may borrow up to your full cost of attendance, minus any other financial aid you receive (including subsidized loans, unsubsidized loans, scholarships, and certain fellowships).

Only Direct subsidized/unsubsidized loans and federal Stafford loans (subsidized and unsubsidized) made through the Federal Family Education Loan Program (FFELP) count toward the $138,500 aggregate.

You are eligible for a Grad PLUS loan if you have reached the $138,500 Direct/FFELP subsidized/unsubsidized loan aggregate loan limit for graduate/professional students. However, if you have exceeded the $138,500 aggregate, you must either repay the excess loan amount or make satisfactory arrangements to repay it before you can receive any additional federal student aid, including FFELP/Direct Grad PLUS loans.

You cannot use the MPN that was signed for your subsidized/unsubsidized Stafford loans for Grad PLUS loans. You must sign a PLUS master promissory note.

Grad PLUS loans are not eligible for a grace period. Payment will commence within 45 days after the end of the in-school deferment.

Grad PLUS loans also carry fees. A fee of up to 4 percent may be deducted from the amount borrowed—3 percent for origination from the lender and a 1 percent default fee from the guarantor. Fees are subtracted from the loan before each disbursement, so you will receive a little less than the amount you applied for. For example, if you borrow $1,000, you will receive a disbursement of $960. However, you are still responsible for repaying the entire $1,000 originally borrowed.

Lenders may offer borrower benefits that reduce the interest rate and/or fees. We will cover that later in the presentation. Some lenders’ borrower benefits may also reduce the interest rate on the unsubsidized interest accrual while you are enrolled in school. Contact your lender for more information.

Grad PLUS loan Features

Who Qualifies For Grad PLUS loan?

Credit Eligibility Requirements For Grad PLUS loan

Industry Key Players

Provides an overview of key industry players. Students are asked to read a different industry player’s role from the counseling guide. Then supplement each description with your own information. (For example, lender, guarantor and other industry player contact information.) Now that you know the types of federal loans available, let us review the players in the loan process. (Review counseling guide definitions.)

Master Promissory Note (MPN)

Provides an overview of the MPN. To apply for a federal Stafford loan, you must complete a Federal Stafford Loan Master Promissory Note, commonly know as the MPN, or a Grad PLUS Master Promissory Note if applying for a Grad PLUS loan. The MPN includes detailed information on the terms of your loan. By signing the MPN, you certify that you have read the information and understand the terms of the loan, including your rights and responsibilities as a borrower. It is also a contract between you and your lender promising that you will repay your loan. A new MPN may be necessary if you change lenders, transfer to a new school or after 10 years have passed.

Your Rights

Summarizes federal loan borrowers’ rights. As a Stafford loan borrower, you have a number of important rights. When you accept a federal Stafford loan, you have the right to receive a copy of your signed MPN with a disclosure statement. You have the right to a six-month grace period before the first payment of your loan is due and you may prepay all or any part of your unpaid balance on your loans at any time without penalty.

Under certain circumstances, you have the right to deferment and forbearance options. Should ownership of your loan be transferred, you will be notified of the name, address and telephone number of the new lender. Finally, you have the right to receive proof of discharge after you have repaid your loan in full.

Grad PLUS loans are not eligible for a grace period. Payment will commence within 45 days after the end of the in-school deferment.

Your Responsibilities

Summarizes federal loan borrowers’ responsibilities. Accepting a loan means you accept legal and financial responsibilities until your loan is repaid in full. A student loan must be repaid regardless of whether you complete your program or get a job after graduation. You are also obligated to make on-time, monthly payments—even without notice from your lender—and read all correspondence regarding your student loan.

In addition, you must notify your lender within 10 days if you reduce your status to less than half time, withdraw from school, stop attending classes, fail to re-enroll for any term, change your expected graduation date, or change your name, address or telephone number. Finally, shortly before leaving school, you are required to attend exit counseling.

How Much to Borrow?

Provides general information on budgeting and personal financial management. Calculating how much to borrow is an important step that will help you budget and plan ahead to make your repayment experience better. (Refer to budgeting worksheet in counseling guide.)

First, calculate your income sources—money from work, financial aid, savings and other outside sources. Second, calculate your anticipated expenses for the year—tuition, books, housing, utilities, debt, transportation, food, clothing and entertainment. Next, subtract your total expenses from your income. What’s left? Now, only borrow what you need.

Financial Planning

Introduces an online financial planning guide such as edwise.org Students will be asked about their favorite online financial planning tools.

Online tools can help you create a spending plan and calculate how much you should borrow. Several Web sites offer tools for creating a college spending plan, tips for developing good money management strategies, ways to cut expenses and compare salaries and even repayment options. EDWISE is one tool that provides all this information at your fingertips and is easy to use.

Borrowing Tips

Provides borrowing tips. Students will be provided with the average student loan debt for students at your school or in the same program of study.

Financial experts agree—borrow conservatively. Also, keep copies of all your documents and keep them in one place for future reference. Finally, keep track of how much you borrow to avoid repayment surprises.

To track how much you borrow or find out who your lender is, visit the National Student Loan Data System, commonly know as NSLDS. This central database for the U.S. Department of Education's student financial aid programs contains a history of all your federal loans. (Refer to Web address.)

The Grace Period

Explains the grace period for federal loans. After you graduate, leave school or drop below half-time enrollment, you are entitled to a six-month grace period if you have taken out subsidized and/or unsubsidized Stafford loans. Whether or not you are required to pay interest during this period depends on your loan type. For subsidized loans, the federal government pays the interest during your grace period. With unsubsidized loans, you are responsible for the interest. Do not forget monthly payments are due the day after your grace period ends.

Grad PLUS loans are not eligible for a grace period.

How many of you plan to relocate after graduation? Make sure your lender has your current address. Even if you do not receive a bill from your lender, you are still responsible for the payment.

Deferment and forbearance will be reviewed later to discuss how some borrowers are able to align their Grad PLUS payments with their Stafford payments.

Repaying Your Student Loan

Provides an overview of loan repayment options. Your federal student loan must be repaid whether or not you complete your academic program or get a job after graduation. There are four options for repaying your student loan. (Review repayment plan definitions in the counseling guide.)

Your lender will automatically set you up under the standard repayment plan, unless you indicate otherwise. Take the time to compare repayment plans and find one that fits your finances. If necessary, you may change your repayment plan at least once a year to meet your financial obligations. You will receive more detailed information regarding repayment when you attend exit counseling.

Loan Repayment Chart

Federal Stafford Loans (subsidized & unsubsidized) and Grad PLUS loans
Interest Rate 6.80% 8.50%
Total Amount Borrowed Number of Payments Monthly Payment Total Interest Number of Payments Monthly Payment Total Interest
$10,000 120 $115 $3,810 120 $124 $4,878
$20,000 120 $230 $7,624 120 $248 $9,757
$50,000 120 $575 $19,060 120 $620 $24,391
$100,000 120 $1,151 $38,120 120 $1,240 $48,783
$138,500 120 $1,594 $52,736 120 $1,717 $67,540
$189,125 120 $2,176 $72,050 120 $2,345 $92,275

Note: Interest rates on federal Stafford loans disbursed after July 1, 2006 are at a fixed 6.80 percent. Grad PLUS loans are fixed at 8.50 percent.

Illustrates sample monthly repayment amounts based on a range of loan amounts. Students will be asked to estimate their anticipated monthly payment using the Loan Repayment Chart in their counseling guide.

Estimating your monthly payment is important. This chart illustrates sample monthly payments based on a range of amounts borrowed using a standard repayment plan. (Review chart.) However, your payment may be different depending on the repayment plan you select and the current interest rate–if you borrowed when interest rates were variable.

Money Saving Benefits

Provides an overview of repayment incentives. How many of you use automatic payment for paying bills? Use this same benefit for making your student loan payment on time each month. For more information, check with your lender.

Most lenders offer incentives for responsible repayment behavior. Some lenders offer an interest rate reduction for consecutive, on-time monthly payments or for signing up for automatic payment. Lenders may also offer additional incentives. Lenders sometimes refer to these savings programs as “repayment incentives” or “borrower benefits.”

In addition, you may benefit from annual tax credits, such as the Hope and Lifetime Learning credits. Student loan interest may also be deducted from taxable income. For more information, read EDFUND’s Tax Benefits for Higher Education booklet or visit www.edfund.org or www.irs.gov.

Avoid Delinquency and Default

Provides tips for avoiding the consequences of delinquency and default. It is important to avoid becoming delinquent. One way is to make on-time monthly payments to your lender. A payment received one day late is considered delinquent and a lender may collect a late charge for each late installment. Delinquent payments are also reported to national credit agencies and will damage your credit for years to come. Your school or lender will help you if you have difficulty making your payments.

Deferment

Reviews deferment options. One option for avoiding delinquency and default is deferment. A deferment is a postponement of payments on your student loan. Deferments are not automatic; you must apply for one and receive approval from your lender. Your lender or guarantor can let you know if you are eligible for a deferment. Reasons for a deferment include returning to school at least half time, becoming unemployed or working less than 30 hours a week, economic hardship or military service.

When subsidized loans are deferred, the principal payments are postponed and the federal government pays the interest. When unsubsidized and Grad PLUS loans are deferred, the principal payments are postponed, but you are responsible for paying the accrued interest.

Economic hardship deferment is often used when law graduates are studying for the bar exam or medical students are in residency.

Current regulations state that Grad PLUS loans must enter repayment within 60 days of the loan’s final disbursement. However, Grad PLUS loan borrowers can automatically receive an in-school deferment if they are enrolled at least half time or are enrolled in a graduate fellowship program approved by the U.S. Secretary of Education. Do not forget to request deferments for your Consolidation loans as well.

The Grad PLUS loan has the same repayment, deferment, forbearance and cancellation provisions as the Federal Stafford Loan Program.

Forbearance

Reviews forbearance options. If you do not qualify for a deferment but are having difficulty repaying your loans, you may be eligible for a forbearance. Forbearance is the temporary reduction or postponement of your monthly payment. Like a deferment, a forbearance is not automatic. You must apply and receive approval from your lender.

You are responsible for paying all accrued interest during the forbearance period. Common reasons for forbearance include poor health, a rigorous residency program or undergoing financial hardship. Remember, a forbearance often results in an extended repayment period which means you will pay more interest on your loan in the long run.

The Grad PLUS loan has the same repayment, deferment, forbearance and cancellation provisions as the Federal Stafford Loan Program.

Federal Loan Consolidation

Reviews loan consolidation. In the future, you may consider loan consolidation which allows you to combine any or all of your outstanding federal student loans into a new single loan. When you consolidate you agree to new terms and conditions with that lender. Federal loan consolidation has an interest rate cap of 8.25%. Although you may have a lower payment, your repayment period may also be extended, costing you more in the long run, and you may be giving up some of your benefits.

Consolidation is not for everyone. Before you choose to consolidate, talk to your lender about your options and get informed. (Refer to Web addresses and EDFUND’s consolidation brochures, I-41 and I-59.)

You may consolidate your Grad PLUS loans with your other federal student loans into a single Consolidation loan after you leave school. Note that the repayment period for a Consolidation loan begins as soon as the loan is made – there is no grace period. Therefore, if you want to consolidate your Grad PLUS loans with your other student loans that have a grace period, you should wait to do so until shortly before the end of the grace period on the other loans.

Loan Forgiveness for Stafford Loans

Reviews types of loan forgiveness programs available for federal Stafford loans. Also review Teacher Loan Forgiveness brochure (I-40.1) with students, if appropriate.

Under certain circumstances, the federal government may cancel all or part of a loan; this is called loan forgiveness. Borrowers may have their federal student loan debt forgiven or assumed for volunteer work, military or teaching service, or practicing medicine in designated communities. In addition, AmeriCorps volunteers can use their education awards to repay their student loans and Peace Corps volunteers may receive financial assistance at a number of universities to pursue graduate study. (Review Web addresses.)

When the Grad PLUS loan program was set up, it was to mirror and be treated like the parent PLUS loan program. Parent PLUS loans do not qualify for the forgiveness programs; therefore, nor do Grad PLUS loans. Until we receive further guidance from the U.S. Department of Education, that is how it stands.

Loan Cancellation

Reviews loan cancellation. A loan may be canceled under extreme extenuating circumstances. (Review bullets.)
For those students with dependents (either a spouse or children), this is a reassuring feature of the federal loan programs. If something happens to you, your estate does not have to pay back your federal student loans.

Yes, Grad PLUS loans are also eligible for loan cancellation under certain circumstances.

The Grad PLUS loan has the same repayment, deferment, forbearance and cancellation provisions as the Federal Stafford Loan Program.

Consequences of Default

Reviews the consequences of default. Select an activity from the Closers & Reviews section of the Building Futures Appendix to revisit important concepts. If you default on your loan, there are serious consequences. (Review bullets expanding.)

Keys to Successful Borrowing

Provides the keys for successful borrowing. The keys to responsible borrowing are simple. (Review bullets.)

Challenges students By True or False Quiz

Reinforce key concepts using true or false quiz and expand on concepts covered. (Animation on click.) Remind students to complete their evaluation (optional).

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