Undergraduate Entrance Loan Counseling

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

Undergraduate Entrance Loan Counseling Will give you idea for:

Explain the options available for financing your education and is required for each student borrower who is obtaining his or her first federal Stafford loan. Also review Stafford loan eligibility, your rights and responsibilities as a borrower, borrowing tips, repayment information, and how to avoid delinquency and default.

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.)

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 with. (Explain your schools 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 schools 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 loans.

Eligibility Requirements For Federal Stafford Loans:

Each student seeking a Stafford loan must meet the following requirements. Review your school’s satisfactory academic progress and refund policies. Reviews general federal Stafford loan eligibility requirements.

Calculating Your Need

COA - EFC = Financial Need

Cost of Attendance (COA)

Also known as the cost of education or also known as the student budget, the total amount it should cost the student to go to school, including tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses. Find more about Cost of Attendance (COA)

Expected Family Contribution (EFC)

The amount of money that the family is expected to be able to contribute to the student's education, as determined by the Federal Methodology need analysis formula approved by Congress. Find more about Expected Family Contribution (EFC)

Reviews how financial need is calculated. How is your financial need for a Stafford loan calculated? Your financial need is calculate by subtracting the cost of attendance from your expected family contribution. 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 includes your and your parents’ income (if dependent), number in household, number in college, the amount of savings, investments and taxes due. Subtracting the school’s cost of attendance from your expected family contribution determines your need and the financial aid package you may be awarded.

Subsidized Stafford Loan

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 Loan

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 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.

Interest Rates and Loan Fees

Explains Stafford loan interest rates and fees. Student loan interest rates are fixed at 6.8% for loans taken after July 1, 2006. Stafford loans made to undergraduate students, with a first disbursement date on or after July 1, 2008 the interest rate on the subsidized Stafford will gradually reduce. Student loan interest rates are variable for loans taken 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. (Insert current interest rate information to customize the slide.)

Federal Stafford loans also carry fees. A fee of up to two percent may be deducted from the amount borrowed—One percent for origination from the lender and a one 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.

Subsidized Interest Rates

Only for Undergraduate Subsidized Stafford Loans Rate
On or after July 1, 2008 and before July 1, 2009 6.00%
On or after July 1, 2009 and before July 1, 2010 5.60%
On or after July 1, 2010 and before July 1, 2011 4.50%
On or after July 1, 2011 and before July 1, 2012 3.40%
On or after July 1, 2012 6.80%

Explains new undergraduate subsidized Stafford loan interest rates for the next 5 years. Legislation lowered interest rates for a five year period for undergraduate subsidized Stafford loans for both the FFEL and Direct loan programs.

Annual Stafford Loan Limits

Academic Year Base Subsidized  (All Students) Additional Unsubsidized (Dependent  Students)* Additional  Unsubsidized (Independent Students)** Maximum Subsidized & Unsubsidized   Estimated Monthly Payment on Maximum* Estimated Total Amount
First Year $3,500 $2,000 $6,000 $9,500 $109 $13,119
Second Year $4,500 $2,000 $6,000 $10,500 $121 $14,500
Third & Remaining Years $5,500 $2,000 $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 (except students whose parents cannot borrow PLUS) effective July 1, 2008.
**New loan limits for undergraduate independent effective July 1, 2008.

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 Maximum Subsidized & Unsubsidized Estimated Monthly Payment on Maximum* Estimated Total Payment Amount
Dependent/ Undergraduate $23,000 $31,000* $357 $42,810
Independent/ Undergraduate $23,000 $57,500* $662 $79,405
Graduate/ Professional $65,500 $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

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

Key Industry Participants

Provides an overview of key industry players. Now that you know the types of federal Stafford loans available, let us review the players in the loan process. (Review counseling guide definitions.) Students can request a copy of their credit report from the 3 major credit bureaus once every 12 months.

Will be asked students to read a different industry players’ role from the counseling guide. Then supplement each description with your own information. (For example, review your school’s list of preferred lenders.)

Master Promissory Note

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. 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.

Rights and Responsibilities

Your Rights

Summarizes of Stafford 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 the 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.

Your Responsibilities

Summarizes Stafford 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 online financial planning guide such as EDWISE. EDWISE is one tool that provides all this information at your fingertips and is easy to use. EDFUND and UCLA developed the EDWISE® Online Financial Planning Guide in a collaborative effort to provide a useful loan management tool for students. Student loans help place the world of higher education within everyone's reach. While they open doors to exciting careers, they also pose the challenge of financial management.

Online tools can help you create a spending plan and calculate how much you should. Several Web sites offer tools for creating a college spending plan, tips for developing good money management strategies, ways to cut expenses, compare salaries and even repayment options. Students will be asked about their favorite online financial planning tools.

Borrowing Tips

Provide students with the average student loan debt for students at your school or in the same program of study. Financial experts agree—borrow conservatively and from one lender throughout your academic years to simplify the repayment process and make payments to one lender. 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.

The Grace Period

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

How many of you plan to relocate after graduation? Be sure to verify your lender has your address. Even if you do not receive a bill from your lender, you are still responsible for making each monthly payment.

National Student Loan Data System

Explains the availability of federal loan information online. How many of you know your total student loan debt?

Provide students with the average student loan debt for students at your school or in the same program of study. How much did you borrow while you were in school? One way to find out is to contact the financial aid office. Another way is to use the National Student Loan Data System, more commonly known as NSLDS. NSLDS is an online central database for the U.S. Department of Education's student financial aid programs, which contains a history of all your federal loans.

To access NSLDS, you must have a Personal Identification number or PIN. You can request a PIN by going to www.pin.ed.gov. After you successfully submit a request, the U.S. Department of Education will mail your PIN to you, usually within seven to 10 days. If you provide an e-mail address, you will receive an e-mail within three to five days explaining how to retrieve your PIN at a secured Web site. Be sure to keep your PIN confidential.

Repaying Your Student Loan

Provides an overview of loan repayment options. Your federal student loan must be repaid weather 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 Insight or Outlook counseling guides.)

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)
Interest Rate 6.80% 8.25%
Total Amount Borrowed Number of Payments Monthly Payments Total Interest Number of Payments Monthly Payments Total Interest
$2,000 45 $50 $271 47 $50 $347
$3,500 89 $50 $966 95 $50 $1,278
$4,000 106 $50 $1,332 117 $50 $1,827
$5,000 120 $58 $1,904 120 $61 $2,359
$7,500 120 $86 $2,857 120 $91 $3,539
$8,000 120 $92 $3,047 120 $98 $3,775
$10,000 120 $115 $3,810 120 $123 $4,718

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. Estimating your monthly payment is important. This chart illustrates sample monthly payments based on a range of student levels of amounts borrowed using a standard repayment plan. (Review chart.) However, your payment may be different depending on the plan you select and the current interest rate. Have students to estimate their anticipated monthly payment using the Loan Repayment Chart in Insight or Outlook counseling guides.

Money-Saving Benefits

Provides an overview of repayment incentives. 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.

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

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.

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 loans are deferred, the principal payments are postponed, but you are responsible for paying the accrued interest.

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.

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. 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 u some of your benefits.

Consolidation is not for everyone. Before you choose to consolidate, talk to your lender about your options and get informed.

Loan Cancellation

Reviews loan cancellation. A loan may be canceled under extreme circumstances.

Consequences of Default

Reviews the consequences of default. If you default on your loan, there are serious consequences.

Keys to Successful Borrowing

Provides the keys for successful borrowing. The keys to responsible borrowing are simple.

Challenges students By Quiz

Reinforce key concepts using true or false quiz and expand on concepts covered. Such as:

Additional Slides for Customization

The next five slides are optional. New HEOA regulations (signed into law on 08/14/2008) required schools to provide entrance and exit counseling to students receiving Perkins loans and/or TEACH grants.

Perkins Loans

Provides an overview of Perkins loans. The Perkins Loan is awarded to undergraduate and graduate students with exceptional financial need. This is a campus-based loan program, with the school acting as the lender using a limited pool of funds provided by the federal government. It is a subsidized loan, with the interest being paid by the federal government during the in-school and 9-month grace periods. There are no origination or default fees, and the interest rate is 5%. There is a 10-year repayment period.

Perkins Loan Limits

Academic  Year Annual Loan Limits Cumulative Loan Limits Estimated Monthly Payment on Maximum Estimated Total Payment Amount
Undergraduate $5,500 $27,500 $292 $35,002
Graduate $8,000 $60,000* $636 $76,367

Sign Denotes: *Cumulative is $60,000 for undergraduate and graduate loans combined.

Presents annual Perkins loan borrowing limits. http://ifap.ed.gov/dpcletters/attachments/GEN0812FP0810AttachHEOADCL.pdf page 139-140. Perkins loans also have loan limits. The annual loan limit is the maximum you may borrow for a single academic year. The amount of Perkins Loan you receive is determined by your school's financial aid office. (Review chart.)

Loan Limits: HEOA section 464 HEA section 464(a)(2)Effective date: August 14, 2008

Otherwise eligible students may receive the increased loan amounts beginning with any 2008-2009 award year payment period (where the first disbursement is made on or after July 1, 2008) that includes or begins on or after August 14, 2008. In addition to awarding the increased loan limits to students for the current and future payment periods, an any eligible payment period that has ended as long as the student is still enrolled for the 2008-2009 award year.

The new Perkins Loan annual and aggregate loan limits are as follows:

GRADE LEVEL ANNUAL LOAN LIMIT AGGREGATE LOAN LIMIT
ONE AND TWO  $5,500  $11,000
THREE AND ABOVE $5,500  $27,500
GRADUATE  $8,000  $60,000

Teach Grant

Provides an overview of the TEACH Grant. The U.S. Department of Education’s (the Department’s) TEACH Grant Program provides grant funds to postsecondary students who are completing or plan to complete coursework that is needed to begin a career in teaching, and who agree to serve for at least four years (within 8 years after completing the course of study) as a full time, highly qualified teacher in a high-need field, in a school serving low-income students. Example of high need field- mathematics, science, foreign language, bilingual or special education, plus more. Check with the Dept of Ed.

You must sign an Agreement each year before receiving a TEACH Grant. The Agreement is a legally binding document that defines the teaching service obligations you must meet and specifies your repayment obligation if a TEACH Grant that you receive is converted to a Federal Direct Unsubsidized Loan.

If you receive a TEACH Grant but do not complete the required four years of teaching service within eight years after completing the coursework for which you received the grant, or if you otherwise do not meet the requirements of the TEACH Grant Program, all TEACH Grant funds that you received will be converted to a Federal Direct Unsubsidized Stafford/ William D. Ford Loan (Direct Unsubsidized Loan). This must be repaid in full, with interest that has been accruing since the time you received the funds, to the Department. Once a TEACH Grant is converted to a loan, it cannot be converted back to a grant.

TEACH Grant Limits

Academic  Year Annual Grant Limits Cumulative Grant Limits Estimated Monthly Payment on Maximum* Estimated Total Payment Amount*
Undergraduate & Post -baccalaureate $4,000 $16,000 $184 $22,095
Graduate $4,000 $8,000 $92 $11,048

Sign Denotes: *Estimated monthly payment and total loan pay off based on 6.8% and 10 year term. Assuming all grant converted to Federal Unsubsidized Stafford Direct loan.

Presents TEACH Grant limits. Eligible full-time students may receive $4,000 per year in TEACH Grant funds, up to a maximum of $16,000 for undergraduate and post baccalaureate study, and $8,000 for graduate study.

TEACH Grant Resources:

PUT Program

Provides an overview of Put loans. Due to the Ensuring Continued Access to Student Loans Act of 2008 (Pub. Law 110-227) (ECASLA), the loan servicing for selected FFELP loans are being transferred to the Department of Education Student Loan Servicer, ACS. The purpose of the program is to provide lenders with the means to continue offering student loans to students.

It may be possible that some of your loans will be sold during the loan purchase program time frame. You may then have multiple servicers during repayment. You will need to make sure you keep track of all loans borrowed and keep any documentation you receive from your lenders/servicers. You may also want to check NSLDS to view any updates on your Federal Student Loans as a way to keep track of your loans. This will effect Stafford subsidized, unsubsidized and PLUS loans in the 2007/08, 2008/09 and 2009/10 academic years.

PUT Loans Repayment

Servicer Phone Website
ACS 800.508.1378 www.ed-servicing.com
Fedloan Servicing (PHEAA) 800.699.2908 www.myfedloan.org
Great Lakes 800.236.4300 www.mygreatlakes.org
Nelnet 888.486.4722 www.nelnet.com
Sallie Mae 800.722.1300 www.salliemae.com
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