Cracking the Mystery of Financial Aid
Eileen Doyle Crane, Utah Valley University
Stephen Brown, Fordham University
Introduction
Financial aid world is highly developed industry
Rules and regulations are set by Congress and the U.S. Department of Education
Schools have their own policies Many are different; many change as needed Need-based aid versus Merit-based aid Negotiation
Topics of DiscussionFederal Aid
FAFSA Direct Student Loans, subsidized and unsubsidized Perkins Loans Work Study Income-based Repayment Loan Forgiveness
Private Educational LendersLoan LimitsCredit IssuesCost of Attendance (COA)Disbursement of FundsDebt LoadSalary DataRepayment Issues and ImpactsScholarships and GrantsLoan Repayment Assistance Programs (LRAP)
Be Creative!
FAFSAFree Application for Federal Student Aid
Basic federal need analysis document
Available on the Web www.fafsa.gov
FREE – No cost to student
All graduate & professional students are independent Parental info not required for federal aid May be required for high-cost private schools
Complete student (and spouse) section ASAP after January 1st
FAFSA
1st Step: Apply for a PIN online www.pin.ed.gov/ Collect income, tax, asset information Calculate federal taxes early A PIN number will be emailed to you; save it in a safe place
Specify up to 10 schools; check correct codes
Student Aid Report (SAR) data will be posted on your FAFSA account; check for accuracy; correct as needed
If applying to more than ten law schools, add new schools above the ten initial listed after your SAR posted
Federal Aid Programs Federal Direct Stafford Loans: Subsidized and
Unsubsidized
Federal Direct Grad Plus Loan Program
Federal Perkins Loans
Federal Work Study
Federal Loan Consolidation
Federal Stafford Loans
Total of $20,500 per year
Interest rate fixed at 6.8%
6-Month grace period after enrollment ends
1/2% origination/ 0% guarantee fees
If you fail to make first 12 payments on time, origination fee goes up to 1%
Stafford Loans
SubsidizedTaxpayers pays interest while student in schoolMaximum of $8,500 per year
UnsubsidizedInterest accrues while student in schoolMaximum of $20,500 less Subsidized Stafford
Perkins LoansFederally guaranteed
Campus Based May not be offered by all schools
5% fixed interest
9-month grace period
Maximum $6,000 annually
Federal Work StudyCampus-based program
Some law schools do not offer this in the first year of law school
Hourly wage for work
Need-based program
On campus or off campus sites
Minimum wage or higher
Cost of Attendance
Each law school prepares a budget for single students
Budget includes: tuition and fees, books, room and board, transportation, insurance, child care (some, not all), and personal needs
Financial aid administrators may alter budget for unusual situations
Creating a relationship with FA administrators to understand your particular situation is always good; they are happy to meet with students
Federal Grad Plus LoansAll loan programs are built on the back of the Stafford Loans—up $20,500 available per year
Grad Plus Loans--difference between COA and the portion of the $20,500; no cap on borrowing
Loans will only be given up to COA; if you need more money, it must come from other sourcesTerms: 7.9% interest 2 ½ % origination fee Interest accrues while student in school Absence of bad credit required
Absence of Bad Credit
No account currently 90 days past-due
Any account included in this
No write-offs, charge-offs, bankruptcies, or foreclosures allowed
More detail: www.studentloans.ed.gov
Private LoansSchools are required to encourage students to borrow through federal program
Credit- based
Signature- no collateral
Market rate interest - no cap
Variable interest rate
Guarantee fees
Co-Signor options/requirements
Capitalization may be monthly, quarterly
Pay monthly in order to avoid capitalization
Credit
Is an important issue in law school finance for public and private schools
If your credit is bad, you may not be able to borrow GradPlus or private loans
If you need GradPlus or private loans for graduate school and have bad credit
You may not be able to attend!!
Nationally, 15-20% rejection rate for bad credit
Likely to increase!
Credit IssuesConsumer Debt
Credit Bureaus and what they do You are entitled to one free credit report per year; get it early
in case there are issues to address
Credit Scoring
If possible, consider borrowing only for tuition, fees, and books
Credit Reporting Agencies
Experian www.experian.com
Trans Union www.transunion.com
Equifax www.equifax.com Annual credit report www.annualcreditreport.com
Disbursement of Funds
Two times per year at beginning of semester after schools subtract tuition
You receive the money AFTER you have moved to graduate school
Must live within COA and loan amounts
Graduate Student Borrowing
Graduate Education
Debt All Education Debt
Graduate & Professional Degrees
% Borrowing Cumulative Debt % Borrowing Cumulative Debt
Total 60.1% $37,067 70.1% $42,406
Master’s 58.4% $26,895 69.3% $32,858
Doctoral 51.0% $49,007 58.3% $53,405
Professional 86.5% $82,688 88.4% $93,134
MBA 53.0% $35,525 63.6% $41,687
MSW 76.5% $37,136 81.0% $37,029
PhD 40.0% $36,917 46.8% $41,540
EdD 53.4% $49,050 65.7% $47,725
Law 87.7% $70,933 89.7% $80,754
Medicine 95.0% $113,661 95.0% $125,819
http://www.finaid.org/loans/
Physician Salary Data
Type of Practice
Lowest
Reported
Mean
Reported
Highest
Reported
Family Practice
$128,000 $204,000 $299,000
Internal Medicine
$154,000 $176,000 $245,000
Cardiologist $268,000 $403,000 $811,000
General Surgeon
$226,000 $291,000 $520,000
http://www.studentdoc.com/salaries.html
Legal Salary DataMedian Hourly Mean Hourly Mean Annual
$51.97 $57.40 $119,390
Hourly Wage
10% 25% 50% 75% 90%$24.32 $33.61 $49.26 >$70 >$70
Annual Wage
10% 25% 50% 75% 90%$50,580 $69,910 $102,470 >$145,600 >$145,600
Department of Labor, Bureau of Labor Statistics www.bls.gov
Average MBA Starting Salaries by School
Ranking Business School
Applicants Accepted
Median Total
Pay Package
1 Harvard 15% 130,000
2 Stanford 10% 130,00
3 Penn 19% 145,000
4 MIT 20% 113,500
5 Northwestern 24% 133,000
6 Chicago NA 136,000
7 Dartmouth 20% 109,000
8 UC Berkeley 17% 118,000
9 Columbia 17% 144,000
10 NYU 20% 128,000
11 Michigan 28% 104,000
12 Duke 37% 114,000
13 Virginia 41% 121,000
14 Cornell 36% 117,000
15 Yale 22% 115,00
http://www.admissionsconsultants.com/mba/compensation.asp
Repayment DetailsRepayment begins 6 months after graduation
Equation-- $12 X $1,000 (6.8%/7.9% interest) = Payment
Current average indebtedness– Law $ 100,000 Medicine $ 139, 517 Business $ 35,525
Repayment for $100K= $144,000; Monthly payment $1200
Ten-year standard (can go to 20 or IBR) repayment time frame
No penalties for early payoff
Repayment ImpactsDebt #1 impact on job choice
Lifestyle choices: before, during, & after law school
2006 Study: 55% of graduates in repayment report feeling burdened by their debt,
especially law graduates
Up from 50% in 1997
54% report that they would have borrowed less had they known the extent of the burden
15% report that the benefits of borrowing were out-weighed by the burden of repayment
IBR
Repayment Impacts
How much will this really cost?
Can I afford it?
Repayment options/incentives
10-, 15-, 20-, 25-, and 30-year repayment plans may be available
Be careful of stretching it out: when you should be preparing for retirement, you may still be paying off your college debt AND you may have children in college
Debt Management Software
Access Group Advisor1-800-282-1550www.accessgroup.org
Nellie Mae EDvisor1-800-EDU-LOANwww.nelliemae.org
Scholarships Information
School Catalogues—Institutional scholarships
www.fastweb.com
www.finaid.org
LRAPLoan Repayment Assistance Programs
Awarded post-graduation
To grads who work in public interest jobs, as defined by their school
May be given as a grant or a loan
Loan may be forgiven, after certain number of years of working in job
____ programs nationally
Not available at all schools
Law School LRAP ProgramsPublic interest jobs
Equal Justice Works—former National Association of Public Interest Law
www.equaljusticeworks.org
High-cost schools pay all/part of loan payments for certain period
Limited funds and job descriptions
Be Creative!!If you’re paying on your own, and someone want to help you, let them pay one bill while you’re in school (phone, texts, rent, gas, travel, clothes, etc.)
Creative entertainment; Find free things to do!
Insurance is a MUST!! One medical event could lead to bankruptcy. Stay on parents’ plan, if possible.
Holiday presents: textbooks, phone cards, clothes, necessities
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