CFA SOCIETY OF PITTSBURGH Student Loans High School

CFA SOCIETY OF PITTSBURGH Student Loans High School Financial Literacy 1

STUDENT DEBT The Facts 44. 2 Million Americans have student loan debt. • Delinquency rate is 11. 2%. Since 1980, tuition costs at public universities have risen from $2000 to $9, 410…a Jump of 344%! Average Cost Per Year 4 Year Private: $50, 900 Average Cost Per Year 4 Year Public: $25, 290 So What’s the lesson? • It’s about how much you can afford! • Not about how much you can borrow 2

Basics of a Loan • • Lessens the burden of paying cash outright Personal Loan How are rates established? Credit rating is considered: high credit score= low risk! • Variable interest rate loan changes • Payments can also change • Fixed interest rate loans do not change 3

Federal Vs. Private Loans • Important to know the difference • William D. Ford Direct Loan Program • Major Difference= cost and credit scores • What’s better? You tell me 4

Grant, Loan, or Scholarship? • Grants & Scholarships are “gift aid” • Grants are need based • Scholarships are merit based • Can come from the federal government, state government, your college, or private organization • Pell Grants • Unlike a loan, grants and scholarships don’t need to be paid back! • Meet the requirements and deadlines! Thank the donors! 5

Options for Repayment Methods for Paying Off Loans • Scholarships • Grants • Cash • Other Loans (Not suggested) 6

Who Else Offers Student Loans? • Many institutions offer loans • Most notable are banks • Discover • Sun. Trust • Citizens Bank • PNC • Ascent • These are more costly! 7

Types of Loans

Subsidized Vs. vs. Unsubsidized • Federal government pays the interest for Direct Subsidized Loans • Accrues as soon as it is taken out (just like most loans) • Undergraduates who don’t qualify, may borrow Unsubsidized Loans • No subsidy How are they Distributed? (In this Order) • Tuition and Fees • Room and Board • Other charges with your permission These Loans are LEGAL AGREEMENTS • Must sign a Master Promissory Note Loan Type 18 -19 Rate 17 -18 Rate 16 -17 Rate Direct Subsidized Loans 5. 05% 4. 45% 3. 76% Direct Unsubsidized Loans (Graduate) 6. 60% 6. 00% 5. 31% Direct PLUS Loans (Graduate and Parents) 7. 60% 7. 00% 6. 31% 9

Parent PLUS Loan • • • Parent loan for undergraduate students Government backed Enrolled Half-Time Not based upon financial need Parent applies for loan and is responsible for repayment Graduate students may borrow as well 10

Stafford Loan • • • Most common type Backed by US Government Subsidized and unsubsidized 11

Stafford Loan cont. • Payments upon graduation • Government covers interest (in school) • Family income less than $50, 000 Column 1 Freshman Sophomore Junior/Senior Subsidized $3, 500 $4, 500 $5, 500 • Cannot accrue more than $23000 • No subsidy, payments still deferred • Annual limit: $5, 500 -$12, 500 • Cannot exceed $138, 500 • Medical students: $40, 500 annually, $224, 000 total 12

FAFSA

Free Application for Federal Student Aid • Fill out to determine need!

Where are My Loans!? • Here’s a step-by-step guide 1. Go to studentloans. gov 2. Sign in 15

Where are My Loans cont. 3. View My documents 16

Where are My Loans cont. • 4. “Filter by Disclosure Statements” • 5. Click on a year 17

Where are My Loans cont. • 6. “View and Print Disclosure Statement” • 7. View type of loan, amount, and interest rate! 18

Where do I Start? How to Apply for Federal Loans • Complete the FAFSA (or renewal FAFSA) • Review Financial Award Letter • Contact School’s Financial aid office • Review and sign paperwork (MPN) *Parental guidance is recommended 19

I Graduated! Now What? Methods for Paying Off Loans • Compare interest rates • Pay off loans with the highest interest rate first • Make minimum payments on others Refinancing is an Option • Interest rate on a private loan too much? • It’s possible to refinance at a lower rate 20

Importance of Loan Payments • Ex: Graduate with $25, 000 personal loan • Interest Rate: 7. 5% • Minimum Payment: $200 per month • Time Period of Repayment: 244 Months (20 years) • Ex: Graduate with $25, 000 personal loan • Interest Rate: 7. 5% • Chosen Payment: $850 per month • Time Period of Repayment: 32 Months (2. 7 years) • Interest Paid Scenario 1: $24, 000 • Interest Paid Scenario 2: $2, 700 21

What’s the Point? • Affordability vs Excessive Borrowing • Determining if college is right for YOU 22

Questions? 23