LO 8.2.1: Recommend an education funding strategy that utilizes loans, scholarships, grants, and work study efficiently.

Question 1

Federally Funded Loans

Answer 1

Directly from the U.S. Dept. of Education, under Direct Loan Program

Question 2

How can federally funded loans be dispersed to the student?

Answer 2

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)

Question 3

Can most loans be used for either undergraduate or graduate study?

Answer 3

Yes.

Question 4

Stafford Loans

Answer 4

• Known as William D. Ford Direct Stafford Loans
• Common type of loan
• Offer direct subsidized and direct unsubsidized loans

Question 5

Are Stafford Loans need-based?

Answer 5

Subsidized Stafford loans are need-based — If a student qualifies for a loan based on financial need, the loan generally will be subsidized.

Question 6

What is the subsidy in a subsidized Stafford Loan?

Answer 6

Subsidy takes the form of the gov’t paying the interest due while the student is in school and during 6 months following graduation

Question 7

When is interest on a Stafford Loan due and what are the rates?

Answer 7

• 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%

Question 8

Can students defer payments on a Stafford Loan while in school?

Answer 8

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

Question 9

Can students pay interest only while in school?

Answer 9

Yes, while in school, the student may pay interest only

Question 10

What are federal loan interest rates tied to?

Answer 10

• 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

Question 11

Stafford Loans | What is the normal repayment period?

Answer 11

• 10 years

* But various repayment options, and repayment term extensions may be available

Question 12

Parent Loans for Undergraduate Students (PLUS loans)

Answer 12

• 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.

Question 13

Are part-time students eligible for PLUS loans?

Answer 13

No, Part-time students are not eligible for PLUS funds.

Question 14

Are students enrolled in programs shorter than an academic year eligible for PLUS loans?

Answer 14

May be eligible for reduced loan amounts.

Question 15

Are graduate students eligible for PLUS loans?

Answer 15

Yes, Graduate and professional students can borrow money directly (i.e., for themselves) through the Grad PLUS loan program.

Question 16

Are PLUS loans need based?

Answer 16

No, these loans are NOT need-based.

Question 17

What is the interest rate of PLUS loans?

Answer 17

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%)

Question 18

When does PLUS loan repayment begin?

Answer 18

• 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.

Question 19

What is the source of PLUS loans?

Answer 19

Private lenders (as with Stafford loans)

Question 20

Are origination fees charged on PLUS Loans?

Answer 20

Yes.

Question 21

Are insurance fees charged on PLUS Loans?

Answer 21

Yes.

Question 22

Direct Consolidation Loans

Answer 22

• 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%.

Question 23

Direct Consolidation Loans | When does a borrower become delinquent?

Answer 23

• 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.

Question 24

Perkins Loans

Answer 24

• 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.

Question 25

Were Perkins Loans need-based?

Answer 25

Yes.

Question 26

Perkins Loans | Were there limits applied to the amount of funds borrowed?

Answer 26

Yes.

Question 27

Perkins Loans | What was the interest rate?

Answer 27

* 5% | * Not charged during the period the individual was a student.

Question 28

Perkins Loans | When was interest charged?

Answer 28

When repayment begins, which is 9 months after graduation, leaving school, or dropping to less than half time.

Question 29

Perkins Loans | What is the normal repayment period?

Answer 29

10 years.

Question 30

Federal Grants

Answer 30

* 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).

Question 31

Pell Grants

Answer 31

* Are available to undergraduate students only | * Distributed on the basis of substantial financial need

Question 32

Are Pell Grants need-based?

Answer 32

Yes.

Question 33

Pell Grants | Who is eligible?

Answer 33

* 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.

Question 34

Pell Grants | What is the maximum award amount available?

Answer 34

* 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

Question 35

Federal Supplemental Educational Opportunity Grants (FSEOGs)

Answer 35

* 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)

Question 36

Are Federal Supplemental Educational Opportunity Grants (FSEOGs) need-based?

Answer 36

Yes.

Question 37

Federal Supplemental Educational Opportunity Grants (FSEOGs) | Which grant recipients are given highest priority in receiving FSEOGs?

Answer 37

Pell Grant

Question 38

Teacher Education Assistance for College and Higher Education (TEACH) Grant Program

Answer 38

* 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.

Question 39

TEACH Grant Program | What happens if a grant recipient does that complete the service obligation?

Answer 39

Failure to complete this service obligation will result in conversion of all amounts received to a federal direct unsubsidized Stafford loan.

Question 40

TEACH Grant Program | What is the eligibility for students enrolled less than full-time?

Answer 40

Grant amounts reduced, additional requirements apply.

Question 41

Pell Grants | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?

Answer 41

* Undergraduate students — yes. * Graduate students — no. * Part-time students — yes. * Half-time students — yes. * Full-time students — yes.

Question 42

FSEOGs | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?

Answer 42

* Undergraduate students — yes. * Graduate students — no. * Part-time students — yes. * Half-time students — yes. * Full-time students — yes.

Question 43

TEACH Grant | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?

Answer 43

* Undergraduate students — yes. * Graduate students — yes. * Part-time students — no. * Half-time students — yes. * Full-time students — yes.

Question 44

PLUS Loans | Who is eligible: Undergraduate, Graduate, Part-time, Half-time, Full-time?

Answer 44

* Undergraduate students — yes. * Graduate students — yes. * Part-time students — no. * Half-time students — yes. * Full-time students — yes.

Question 45

Stafford Loans

Answer 45

* Undergraduate students — yes. * Graduate students — yes. * Part-time students — no. * Half-time students — yes. * Full-time students — yes.

Question 46

Federal Work-Study Program

Answer 46

Eligible students are provided employment, which may be on or off campus, to help cover the cost of their education

Question 47

Federal Work-Study Program | How is the program funded?

Answer 47

* Federal funds are used by individual schools. | * The government and the employer share in the payments made to students.

Question 48

Federal Work-Study Program | How is eligibility determined?

Answer 48

Based on financial need.

Question 49

Federal Work-Study Program | Who is this eligible to?

Answer 49

Part-time and full-time students

Question 50

Federal Work-Study Program | Is there a limit on the number of hours worked?

Answer 50

Yes, based on course loan and academic progress.

Question 51

Federal Work-Study Program | What does this program provide?

Answer 51

* 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.

Question 52

State-Funded Financial Aid

Answer 52

* Varies from state to state | * Another source of education funding.