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May 1998 Two - 11998-99 Instructor's Guide

Session TwoOverview of the Title IV Programs

Instructor's NotesSESSION

2Overview of the Title IVPrograms

By the end of this session, you will be able to:

explain the difference between a grant and a loan,

recognize the basic facts about the Title IV programs,and

locate specific information in The Student Guide.

INTRODUCTIONThis session provides an introduction to the six main TitleIVprograms. Much of what we mention here will be discussedin greater detail later in the week.

Those of you who are new to the Title IV programs shouldbear in mind that this session is only the start of theexplanation.

During this session, well work as a group to answer all ofthe quiz questions found on pages 4 and 5 in yourWorkbook. All of the answers can be found in The StudentGuide. [IG, pgs. 14-15]

Lets begin by looking at The Student Guide.

The Student Guide is an excellent resource for students andparents who are interested in learning more about thefederal student aid programs administered by the U.S.

Department of Education (ED). If you are not alreadyfamiliar with it, then please add it to your list of things toread once you get back to your office.

Time Estimate:

Lecture 55 minutes

Total Time: 55 minutes

PW 4-5


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Instructor's Notes

THE TITLE IV PROGRAMS

Turning to page 4 in The Student Guide and page 4 of yourWorkbook, please take a minute to answer the first quizquestion.

Allow participants 1 minute to read and answer the question.

As you have just read, a grant doesnot have to be paid back,but students must pay back a loan. Grants are often referredto as gift aid and loans as self-help aid.

Many students dont understand the difference between agrant and a loan. One of your ongoing challenges will be tohelp generations of students understand this basic concept.

The Federal Pell Grant Program

Please turn to page 10 in The Student Guide as we discuss thePell Grant Program. Before we begin the discussion, pleaseanswer Questions 2 and 3 in your Workbook.

Allow participants a few minutes to read and answer the questions.

Page 10 in The Student Guide tells you about the Pell Grant

providing a foundation of financial aid for the studentbecause its the first source of aid that a student is awarded.It is a grant for undergraduates only. They may be enrolledfulltime,halftime, or (unlike loans) less than half time.(OH1)

The maximum Pell Grant award for each award year isestablished by Congress.

Q2: What is the maximum Pell Grant award for1998-99?

A2: Thats right. You should have filled in $3,000 forthe 1998-99 award year. The amount in the Guideis $2,700, from the 1997-98 award year. At the timethis publication came out, the new Pell maximumhad not yet been established.

PW 4

1


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Instructor's Notes

Even though this amount is not listed in The Student Guide,you may have already read about this increase through themailings ED sends to you. Dear Colleague Letter P-98-2notified schools of the increase, and includes new payment

schedules for calculating Pell awards.The amount a student can actually receive is based on his orher Expected Family Contribution (EFC). The EFC, whosecomponents are defined by statute, is generated from thedata a student and his or her parent(s) or spouse report onthe Free Application for Federal Student Aid (FAFSA).

Working with an official federal document that shows theapplicants data and EFC, a schools financial aid

administrator checks student eligibility and determines thePell Grant award amount using payment schedulespublished annually by ED.

s The payment schedules take into account the studentscost of attendance (also sometimes called the cost ofeducation) at the postsecondary institution, EFC, andenrollment status.

Pell funds arent awarded on a school-by-school basis, so

theres no Pell Grant limit at a school. This means that everystudent receives the maximum Pell Grant for which he orshe is eligible.

The total Pell Grant award is divided into payments forspecific payment periods during the award year.

So, looking at Question 3 on page 4 in your Workbook, youfound out that in most cases, schools may not disburseTitle IV aid in a single chunk. Instead, the disbursements arespread over the course of the year.

We will be discussing the Federal Pell Grant Program inmore detail when we get to Sessions 18-21.

PW 4


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Instructor's Notes

Lets look now at the federal loan programs,which are:

The William D. Ford Federal Direct Loan (Direct Loan)Program and the Federal Family Education Loan (FFEL)Program.

The Direct Loan Program and FFEL Program loans include:(OH 2)

s Subsidized and unsubsidized loans,

s PLUS Loans (for parents), and

s Consolidation Loans.

The primary difference between the Direct Loan Programand the FFEL Program is the source of funds.

Looking at page 11 in The Student Guide, please answerQuestions 4, 5, and 6 in your Workbook.

Allow participants 2 minutes to read and answer the questions.

Q4: Since the primary difference between the DirectLoan Program and the FFEL Program is the sourceof funds, what answer did you find for

Question 4?

A4: For the Direct Loan Program, ED is the source offunds. It pays students through the school, withthe school disbursing loan proceeds to thestudents. For the FFEL Program, private lenders(such as guaranty agencies, banks, and creditunions) are the source. They disburse studentloan proceeds to the school. The school then

delivers the funds to the students.

The application procedure for the two programs is alsodifferent. To apply for subsidized and unsubsidized loans, astudent must complete:

s a FAFSA for the Direct Loan Program or

2

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Instructor's Notes

s a FAFSA and a common loan application for the FFELProgram.

A student attending a school that offers both Direct andFFEL Program loans may not receive loans from bothprograms in the same award year. If a student is receiving aFFEL Program loan, for instance, he or she would not be ableto get a Direct Loan the same year. The school decides forwhich type of loan the student may apply.

Subsidized and Unsubsidized Loans

There are two types of loanssubsidized and unsubsidized.

Q5: What differences did you find between asubsidized loan and an unsubsidized loan?

A5: A subsidized loan is based on financial need; theunsubsidized is not. The government paysordoesnt chargeinterest while the student is inschool or in deferment for the subsidized loan.An unsubsidized loan accrues interest that is paidby the borrower from the time the loan is madeuntil it is repaid in full.

The maximum interest rate is 8.25%.

Undergraduate, graduate, and professional students must beenrolled at least half time to be eligible. Also, Pell Granteligibility must be determined before a school can certifyloans.

There are annual loan limits for both dependent andindependent students as shown on page 11 ofThe StudentGuide.

Q6: What answer did you find for the largest loan afirst-year, dependent student may borrow?

A6: $2,625.

Note to Instructor:The interest rate for

Stafford Loans made on or

after July 1, 1997 is 7.66%The new interest rates for

1998-99 were not deter-mined when this material

went to print.


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Instructor's Notes

Students may receive both subsidized and unsubsidizedloans in an award year. Schools must make sure not toexceed the allowed loan limits when determining these loanamounts.

s This can get tricky when considering such factors asstudents transferring into your school who borrowedpreviously at other schools and students whoseprograms of study vary in length.

Repaying loans and the interest that accrues on them begins6 months after the borrower ceases to be at least a half-timestudent.

Students generally have up to 10 to 30 years to repay FFELProgram Loans and Direct Loans.

Loans have deferment, forbearance, and cancellationprovisions.

s Deferment and forbearance mean that the loanpayments are temporarily suspended or reduced.

s Cancellation means that the borrower is no longerobligated to pay back the loan.

The PLUS Program

Turning to page 17 in The Student Guide, you can learn aboutPLUS Loans, which are loans for parents. Both the DirectLoan Program and the FFEL Program offer these parentloans.

The PLUS Loan Program allows parents to borrow on behalf

of their dependent children who are at least half-timeundergraduate students. To apply for a PLUS Loan, theparent borrower must complete a PLUS Loan application.

s There is a variable interest rate with a maximumannual rate of 9%.

Note to Instructors:

The interest rate for PLUS

Loans made on or afterJuly 1, 1997 is 8.72%.The

new interest rates for1998-99 were not deter-

mined when this material

went to print.


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Instructor's Notes

s Unlike loans for students, there is no grace period; loanrepayment begins 60 days after the loan is fullydisbursed.

s Parents have up to 10 years to repay, depending oncertain repayment criteria; for example, there arepayment minimums.

s PLUS Loans have some deferment provisions foreligible borrowers.

s The maximum PLUS Loan that a parent can borrow isequal to his or her dependent students cost ofattendance minus any other financial aid the

dependent student receives.Q7: If Susan is receiving $2,000 in financial aid, and

the cost of attendance is $8,000, how much PLUSLoan can her parents borrow?

A7: $6,000. ($8,000 cost of attendance minus the $2,000Susan is receiving in financial aid.)

There is no dollar maximum for a PLUS Loan, butthe PLUS Loan, together with all other financial aid,cannot exceed the cost of attendance at theinstitution.

s To receive a PLUS Loan, a parent cannot have anadverse credit history. If a parent borrower is unableto get a PLUS Loan because of adverse credit, thedependent student is eligible to apply for an additionalunsubsidized loan amount.

Consolidation Loans

Information on Consolidation Loans is provided inThe Student Guide beginning on page 20.

Consolidation Loans allow a borrower to combine differenttypes of federal student loans to simplify repayment.

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Instructor's Notes

The FSEOG Program

To be eligible for the FSEOG program, a student must be anundergraduate without a previous B.A. or B.S. degree.

In the FSEOG program, priority is given to Federal PellGrant recipients with the lowest EFCs.

s Nontraditional studentsthat is, independent orless-than-full-time studentsmust receive 5% of theFSEOG funds available at the school.

Take a few minutes now to answer Question 9 in yourWorkbook.

Allow participants a few minutes to read and answer the question.

Q9: Whats a major difference between an FSEOG andFederal Pell Grant?

A9: ED guarantees that eligible students will receive aFederal Pell Grant, but theres no guarantee thatevery eligible student will receive an FSEOG.

FSEOG funds must be made reasonably available to students

throughout the award year. In addition, schools withmultiple financial aid deadline dates must make FSEOGfunds reasonably available to eligible students who apply bythose deadline dates.

The FSEOG award limits are shown on the overhead.(OH 3)

s Using these limits, the amount of student FSEOGawards are determined by the institution.

The FWS Program

Federal Work-Study (FWS) is an opportunity for students toearn financial aid. FWS employment is for undergraduate,graduate, or professional students.

PW 5

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Instructor's Notes

Take a few minutes now to answer Question 10 in yourWorkbook. The answer is on page 23 in The Student Guide.

Allow participants a few minutes to read and answer the question.

Q10: Where can FWS jobs be located?

A10: FWS job placement may be with an eligibleon-campus employer or off-campus employer, or itmay be in community-service work. Jobs off-campus tend to be for private, nonprofitorganizations or public agencies. (OH 4)

A school is required to use at least 5% of the total FWS fundsgranted to the institution to compensate students employed

in community-service activities, unless the school is granteda waiver by the U.S. Secretary of Education.

The employer must pay at least the federal minimumwagecurrently $5.15 per hour. The total amount a studentcan earn, which is an amount the school determines prior tothe students employment, is based on the students financialneed.

Federal Perkins Loan Program

Perkins Loans are low-interest loans for students withexceptional financial need. Undergraduate, graduate, andprofessional students are eligible.

The schools Federal Perkins Loan Fund is maintained andadministered by the institution.

Funds for new loans come from:

s New federal allocations to the school, called theFederal Capital Contribution (FCC), which provide75% of new funding;

s the schools matching share, called the InstitutionalCapital Contribution (ICC), which is 25% of the newfunding;

4

PW 5


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Instructor's Notes

s repayments made to the fund by previous borrowers;

s interest earned on the Perkins Loan funds (the fundsmust be deposited in an interest-bearing account); and

s ED payments to reimburse the fund for teacher,military, Peace Corps/VISTA, and law enforcement/correction officer loan cancellations.

The maximum amounts that can be borrowed are shown onthe overhead, including annual and aggregate loan limits.(OH 5)

Please look at the last question in your Workbook and take amoment to find the answer to it on page 23 in The StudentGuide.

Allow participants 1 minute to read and answer the question.

Q11: Who does a Perkins Loan borrower repay?

A11: The school. Since Perkins is a campus-basedprogram (which means it is administered by theschool), the student must repay the school.

Repaying a Perkins Loan begins after the student graduates,withdraws, or drops to less-than-half-time enrollment.

s An initial grace period of nine months is allowedbefore the first payment must be made.

s The student has up to 10 years to repay, depending oncertain repayment criteria; for example, there arepayment minimums and maximums.

s As with Direct Loans and FFEL Program loans, thereare cancellation, deferment, and forbearanceprovisions for special circumstances.

Schools that participate in the Perkins Loan Program mustfollow important due diligence requirements. These include:

s full and timely disclosure to borrowers of their rightsand responsibilities and

5

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Instructor's Notes

s the use of extensive, persistent, and diligentprocedures for collecting loans, such as mailingdemand letters and using credit bureaus and skip-traceagencies.

There will be more about the campus-based programs inSessions 22 and 23.

Other Federal Programs

You may have heard references to other federal student aidprograms, including the State Student Incentive Grant(SSIG), the Douglas Scholarship, and the Byrd Scholarship.Funding levels vary from state to state and year to year.

The Paul Douglas Teacher Scholarship, for future teachers, isregulated under Title V of the HEA.

The Robert C. Byrd Honors Scholarship is for students whodemonstrate outstanding academic achievement and showpromise of continued academic excellence.

A chart on page 2 of your Workbook provides references tothe 1998-99 Federal Student Financial Aid Handbook, the HEA,

and the Title IV regulations for each of the main Title IVprograms we just discussed. The chart on page 3summarizes the type of aid, application requirements, whodetermines award or loan amounts, aid recipients, award orloan limits, need analysis, and disbursement and repaymentrequirements. [IG, pgs. 16-17]

Let's take a moment to look at the charts.

Allow participants 1 or 2 minutes to review the charts.

Before we finish this session, does anyone have anyquestions?

PW 2

PW 3


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Instructor's Notes

BACK AT THE OFFICE

Once you get back to your office, you will probably want tobecome more familiar with The Student Guide, especially withthe sections on the Title IV programs your school plans toadminister. Also, youll want to keep the charts handy foreasy reference.

What else should you do when you return to your office?

PW 6


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Instructor's Notes

Title IV Quiz

Referring to your copy ofThe 1998-99 Student Guide, answerthe questions listed below.

1. What is the basic difference between a grant and aloan?

Grants do not have to be paid back. Loans must bepaid back.

2. What is the maximum Pell Grant award for 1998-99?$3,000.

3. How often must a school disburse a Pell Grant award

to a student during an academic year?

At least once per term for standard-term schools andat least twice during the award year for schools thatdo not use standard terms.

4. What is the source of funds for Direct Loans? Howabout for Federal Family Education Loans?

For the Direct Loan Program, ED is the source of

funds.

It pays students through the school, with the schooldisbursing loan proceeds to the students.

For the FFEL Program, private lenders (guarantyagencies, banks, and credit unions) are the source.They disburse student loan proceeds to the school.The school then delivers the funds to the students.

5. What are the differences between a subsidized loanand an unsubsidized loan?

A subsidized loan is based on financial need; theunsubsidized is not. The government will pay (ornot charge) interest while the student is in school orin deferment for the subsidized loan.


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Instructor's Notes

An unsubsidized loan accrues interest that will bepaid by the borrower from the time the loan is madeuntil it is repaid in full.

6. What is the largest loan a first-year, dependent studentmay borrow?

$2,625

7. If Susan is receiving $2,000 in financial aid, and thecost of attendance is $8,000, how much PLUS Loan canher parents borrow?

$6,000

8. Why might the amount of a FSEOG, FWS, or PerkinsLoan a student can receive depend on when thestudent applies for Title IV aid?

Because limited campus-based funds are available ateach school, there may be no funds available for anapplicant who applies late in the award year.

9. Whats a major difference between a FSEOG and aFederal Pell Grant?

ED guarantees eligible students will receive aFederal Pell Grant, but theres no guarantee everyeligible student will receive a FSEOG.

10.Where can FWS jobs be located?

FWS job placement may be with an eligible on-campus employer or off-campus employer, or it maybe in community-service work. Jobs off-campus tend

to be for private, nonprofit organizations or publicagencies.

11.Who is repaid by a Perkins Loan?

The school. Since Perkins is a campus-basedprogram (which means it is administered by theschool), the student must repay the school.


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Instructor's Notes

Federal Pell

Grant

Chapter 4Part 690Part AGrants for financially needy undergraduatestudents who have not earned bachelor's degrees

or a first professional degree.

Grants for undergraduate students with

"exceptional financial need." (Federal Pell Grantrecipients with lowest EFCs)

Part A Part 676 Chapter 8

Chapter 7Self-help program that provides on-campus andoff-campus employment to eligible undergraduate

and graduate students.

Part 675

Part E Part 674 Chapter 6

Part D Part 685 Chapter 11

Federal

SupplementalEducationalOpportunity

Grant (FSEOG)

FederalWork-Study

(FWS)

Federal

Perkins Loan

Federal Direct

SubsidizedLoan

Low-interest loans for financially needyundergraduate and graduate/professional

students.

Loans to help financially needy graduates andundergraduates; interest subsidized by federal

government; made by federal government.

Part C

Title IV Programs

Federal Direct

UnsubsidizedLoan

Loan funds without interest subsidies for

graduate and undergraduate students; made byfederal government.

Part D Part 685 Chapter 11

Chapter 11Federal Direct

PLUS LoanPart D Part 685Loans to parents for college expenses of their

dependent undergraduate children; made byfederal government.

Low-interest loans to help financially needystudents; from lenders, guaranteed and interest

subsidized by federal government.

Federal

SubsidizedLoan

Part B Part 682 Chapter 10

Federal

UnsubsidizedLoan

Loan funds without interest subsidies forundergraduate and graduate students; from

lenders, guaranteed by federal government.


Federal PLUSLoan

Loans to parents for college expenses of theirdependent undergraduate children; from lenders,

guaranteed by federal government.


Description Law(HEA)

1998-99 FSFAHandbook

RegulationsTitle IV

Program


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May 1998 Two 171998 99 Instructor's Guide


Instructor's Notes

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