Education Analysis Flashcards
Pell Grants
-Awarded only for vocational school students or undergraduate students.
-Eligibility for families with income up to 60k, most awarded for incomes below 30k.
-Amount can change each year, 2023 max is $6,895
FSEOG (Federal Supplemental Educational Opp Grant)
- Exceptional financial need
- Amt between $100 and $4,000 a year
TEACH Grants (Teacher Education Assistance for College & Higher Education)
- teach in high-need field
- teach at a school that serves low-income families
- teach for at least 4 yrs within 8 yrs after completing the course of study
Direct Plus Loans
- Made by federal gov’t
- For parents of dependent undergrad students
- Interest is set at fixed rate. 7.54% for loans 7/1/22-7/1/23.
- Interest accrues once the pmt is disbursed.
- Repayment of interest may be deferred until 6 months after student no longer enrolled. Repayment term is 10 yrs. If loan is more than 30k, repayment is 25 years.
All federal educational loans charge loan origination fees that are deducted from payments. 4.228% for Direct Loans disbursed before 7/1/23.
Direct Consolidation Loan
- consolidates outstanding loans into one monthly payment with interest rate based on weighted average of student loans.
Private Loans
- not used or backed by federal gov’t.
- issued by school or commercial lender such as Sallie Mae, Navient, or banks
Federal Loans
- Direct Loans
- Direct Subsidized Loans (max 8.25% int rate)
- Direct Unsubsidized Loans
- Direct PLUS Loans (max 9% int rate; 4% origination fee; must be repaid in 10yrs)
- Direct Consolidation Loans
- Federal Family Educational Loans (FFEL)
- FFEL Subsidized Loans
- FFEL Unsubsidized Loans
- FFEL PLUS Loans
- Other
- FFEL Consolidation Loans
- Perkins Loans (5% interest, grace period 9months)
- Primary Care Loans (PCL)
- Loans for Disadvantaged Students (LDS)
Student Loans
- rule of thumb : borrowing should be limited to the amount that a student expects to earn from their first year salary
Repmt of Federal Loans
- repmt of principal and interest begins 6 months after graduation.
- two types of repmt plans:
- balance-based repmt plan and income-driven repmt plan
- default is 10 year balance-based plan with 120 equal pmts. Balance-based plan is best when total monthly debt obligations are less than 10% of pretax pay.
- Income-Driven Repmt Plan based on AGI, a certain amt up to 20k is excluded and income percentage (10-20%) is applied to the remaining amt, further adjusted for family size. Amt may change each year
Repmt of Fed Loans, Income-Driven Repmt Plans
- Income-Contingent (ICR)- most expensive. 25 yr term, based on 20% discretionary income
- Income-Based (IBR) - 25 yr term, based on 15% discretionary income; 150% of poverty level is excluded.
- Pay As You Earn (PAYE) - cheapest , 20 yr term, based on 10% of discretionary income.
- Revised Pay As You Go (REPAYE) - 20 yr term for undergraduate loans and 25 yr term for graduate loans
Fed Loan Forgiveness
- income-driven repmt plan results in lower pmt
- remaining balance is forgiven at the end of the term
- balance forgiven is taxable income
Fed Loan Default after 270 days of delinquency. If the full balance of loan cannot be repaid at that time, it is sent for collection.
- private loans go into collections after only a few missed pmts
- student loans cannot be discharged through bankruptcy
Deferments may be available for federal loans which allow to postpone pmts while borrowers are in school half-time, are unemployed, or because of economic hardship. The interest will freeze on subsidized loans and gov’t will cover the interest. However interest on Unsubsidized loans will continue to accrue.
Forbearance is available for both federal and private loans. It is very costly because the interest is added to the principal balance resulting in interest accruing upon interest.
Loan Forgiveness
Direct Loan Forgiveness After 10 years
- Direct Loan
- employment at least 30 hours of full-time work in public service entity, a nonprofit agency, or gov’t
- in Income-Driven repmt plan
- guaranteed death and disability discharge
Other Federal Loans - forgiven after 20 or 25 years.
- Forgiven loan is a taxable income
Perkins Loans can be forgiven based on profession - police, firefighters, nurses, speech pathologists, early intervention, sped teachers on some low-income schools, public defenders, public prosecutors.
- up to 20% of loan is forgiven each year up to 5 yrs.
Private Loan borrowers should purchase adequate life insurance and LT Disability insurance in case premature death occurs