College Financing 101 An Educational Seminar – Powered by NASA FCU Presented by: Steve Wynne...

College Financing 101An Educational Seminar – Powered by NASA FCU

Presented by: Steve WynneAccount Executive – Client Relations and Education Presented by: Charles Hudson

• Introductions• Why the “Gap”? - Why the “Investment”?• How it all (should) begin!• Funding Options…FREE – CHEAP – GAP!!• Your NASA Federal Credit Union “Gap” Solution• Application Process Preview• Application…School Certification…Loan Cycle• Important Websites!!• Wrap-up and Q&A

2Credit Union Student Choice © 2014

Agenda


Why the “GAP”?


So, why “Invest” in College?

FAFSA(Free Application for Federal Student Aid)

Types of Aid Available

• Free Scholarships and Grants• Cheap Federal Direct Loans • Gap Federal Direct PLUS Loans• Gap Private Education Loans


How it all (should) begin!

Financial Aid Process


RECEIVE/ COMPARE

around May

COMPLETEas early

as January 1

PREPAREas early

as possible

Pull together Documents Tax returns W2’s etc.

Complete the FAFSA between January 1 and and June 30

NOTE: States and schools have their own unique deadlines

Review award letters and compare options:

Free Cheap Gap

• Award Letter• also referred to as a financial aid package, contains the cost of

attendance and any financial aid offered to the student by the school.

• Cost of Attendance (C.O.A.)• the cost set by the school to cover student expenses. Includes tuition,

fees, books, rent, food, misc. expenses, etc..

• Financial Aid• the offering of scholarships, grants, federal work study, and loans to

assist a student in meeting the cost of attendance.

• COA – EFC = Need – Offered Financial Aid = GAP!


Definitions

Source: The College Board, Trends in College Pricing 2013, Figure 1


College Enrollment and Costs

Cost of Attendance (COA)

TuitionSchool Fees

Housing/RentBooks Food

TransportationMisc Expenses


Where Does the Money Go?


Your Award Letter

• Definitions• Types of Financial Aid

Listed• Scholarships and Grants• Federal Work Study Program• Federal Perkins Loan • Federal Direct Loans • Federal Direct PLUS Loan


• Your Award Letter• How Much Do I Really Need• Appealing an Award Letter• Loan Options

The Award Letter


By Mail

By System

By Email

Award Letter types


Federal Loan – Subsidized $3,500 Federal Loan – Unsubsidized $2,000 School Grant $1,500 State Scholarship $1,000Federal Work-Study $2,000

Total Award $10,000Cost of Attendance $20,138Remaining Need $10,138

University of Success

Award Letter Example

Reasons to appeal:• Change in employment/income•Medical bills• Divorce• Disability/death• High consumer debt


Appealing your Award Letter

• Each school will have their own process and procedures. Visit the school’s website for specific instructions on how to appeal.• Submit a letter• Appointment with FAO• Telephone interview


Appealing your Award Letter


Award Letter Funding Options


FREE• Grants• Scholarships• Tuition Discounting

CHEAP • Federal Direct Loans

GAP

• Savings (Including 529 plans)• Home Equity / Credit Cards• Tuition Payment Plans• Federal PLUS Loans• Private Student Loans

Theme Options

Free, Cheap, and Gap

• Scholarships and Grants• Federal, State, Local

• Federal Work Study• Federal Perkins Loan• Federal Direct Loans

•Subsidized

•Unsubsidized

• Federal Direct PLUS Loans• Private/Alternative Student Loans


Types of Financial Aid

• Free money from the government, state, and/or institution• Does not have to be repaid • Grants may have an obligation associated with acceptance.

Failure to meet obligation may require grant to be repaid. • Awarded based on need or merit• Awarded for a variety of reasons: • Academics, sports, extra-curricular activities, etc.

Check with the Financial Aid Office for additional scholarships that may be available.


Scholarships and Grants

Verify• Are you willing to meet the requirements attached to receiving

this aid?

• Is the scholarship/grant renewable; not just made available for one year, but aid that will be carried over year after year?

• Compare award letters; different schools will award varying amounts of aid, compare the dollars award to make the right choice for student and family.


Scholarships and Grants

• Follow all instructions• Use Reference Letters• Highlight Any Community

Involvement and Charity Work• Include Job History• Essays = TEE: Time Energy

and Effort• Beware of scams!


Scholarship Tips

1. Only applying for private scholarships In every state, there are local scholarships that are awarded based

on the residency of a student. 41 of 50 states offer (CT, LA, ME, MI, MS, NE, NH, NM, WV)

2. Applying for too few scholarships

3. Not following instructions and other application mistakes

4. Not paying attention to deadlines

5. Looking for Scholarships for only a few weeks


Source: StudentScholarshipSearch.com

Top 5 Scholarship Mistakes

• Free money – kind of!

• First come – First serve – Financial Need

• Provides jobs to student with financial need

• Paid at least minimum wage

• Jobs are part time, usually on-campus

Didn’t receive Work Study?Check with the Financial Aid or Admissions Offices


Federal Work Study

• Loan is in the student’s name, made through the school’s financial aid office

• Awarded to students with exceptional financial need

• Maximum annual amount is $5,500

• Government pays interest while in school


• Fixed interest rate of 5%

• No origination fee

• Once in repayment, pay school directly

• Standard repayment term is 10 years

• Grace period is 9 months

Federal Perkins Loan

•William D. Ford Federal Direct Loan Program

• Loans are in the students name and funds come directly from the U.S. Department of Education

• Standard repayment term is 10 years with a 6 month grace period


Federal Direct Loans

Subsidized• Awarded to eligible students

based on financial need

• Government pays interest while in school

• Fixed interest rate of 4.66% plus 1.073% loan fee*

Unsubsidized• Awarded to all eligible

students, not based on need

• Students are responsible for interest, may defer

• Fixed interest rate of 4.66% plus 1.073% loan fee*


*First Disbursed between July 1, 2014 and June 30, 2015

Federal Direct Loans

• Often listed on Award Letter (but not “always”)

• Interest rate is fixed at 7.21%

• Bridges the gap between education costs and financial aid

• Credit based loan made to the biological, adoptive, or in some cases a step-parent of a dependent student for the purpose of meeting the cost of attendance.

• Origination fee of 4.292%


Federal Direct PLUS Loans

• Limit is the COA less any other Financial Aid

• Payments begin 60 days after first date of disbursement (can request deferment)

• No prepayment penalty

• Dependent students whose parent is denied may qualify for additional Federal Direct Loan limits


Federal Direct PLUS Loans

• Reports in the media of a widespread student debt crisis might be discouraging to someone considering financing a college education• In reality, instances of students

with excessive debt are rare:• 43.1% of students have $10K or less in

student loan debt• 4.2% of students have debt between

$75K and $150K• 1.2% have debt over $150K


Indebted Students, by Amount Owed

Federal Reserve Bank of New York statistics, as cited in The Myth of the Student Loan Crisis, Atlantic Magazine,

March 2013.

Student Indebtedness

Consider:•Fixed Costs

•Flexible Costs

•Other Income

•Appeals


How Much do you Really Need?


Tuition $7,000+School Fees $1,000

Total Fixed $8,000

Fixed Costs


Rent – ($400 X 10) $4,000Food – ($300 X 10 months) $3,000Books - ($100 X 10 books) $1,000Cell Phone - ($50 X 10 months) $500Transportation - (ex: Bus pass @ $25/mo x 10mos.) $250

Total Flexible $8,750

Flexible Costs


Fixed $8,000Flexible $8,750 Total Costs $16,750

Total Costs $16,750Total Award ($10,000)Remaining Need $6,750

Unmet Need

•Savings Account•Retirement Account•401K Plans•Home Equity Loans•Credit Cards•Tuition Payment Plans•Private Loan Options


Remaining Need


Your NASA FCU “Gap” Solution

• Line-of-credit structure–Apply once for an entire undergraduate career; borrowers

submit an online draw request for additional funds–No annual application – but we conduct and annual review–Minimum Draw: $1,000…Maximum: $75,000

• Rates and Fees for NASA Federal Credit Union


Underwriting Criteria

Applicant BOR FICO COB FICO Index Margin Floor Ceiling Late Fee Leeway NSF Fee GMI Min $ Max $ DTI Guaranty

BOR only

750+

n/a

LIBOR

3.690%

6.000% 18.00% 5.00% 15 days $20.00 $2,500 $1,000 $75,000 TBD Yes

730-749 3.790%

700-729 3.940%

660-699 4.430%

BOR + COB 0/620+

750+ 3.690%

730-749 3.790%

700-729 3.940%

660-699 4.430%

• Low Interest Rates (Based on LIBOR Index + Spread of 3.69% to 4.43%)

• Floor: 6%

• Ceiling: 18%

• No origination or prepayment fees

• 20-25 year repayment term

• Deferment/forbearance options available

• Graduated Repayment


Your NASA FCU “Gap” Solution

•Co-borrower recommended but not required•To qualify: student with a co-borrower

–Student • FICO = 0 or 620+

–Co-borrower • FICO = 660+• $2,500 gross monthly income• No student loans in default for last 7 years• No bankruptcy for last 5 years

• To qualify: student without a co-borrower–All of the above + 2 years of continuous work history


Will I need a Co-signer??

• Available for nearly 2,000 4-year, not-for-profit institutions participating in Title IV federal student aid programs

• No origination or prepayment fees• 0.25% rate discount for automatic repayment (ACH)• Flexible Repayment Options; 20 repayment term• Full deferment (maximum of 5 years + 6 month grace)• Interest only payments• Principal and Interest payments• Graduated repayment available


Details…Discounts…Repayment Options

Forbearance

• Bankruptcy

• Death

• Economic hardship

• Natural disaster

• Military mobilization

Flexible Repayment Options

• Full deferment (maximum 5 years + 6 month grace)

• Interest only

• Principal & Interest

• Graduated repayment available


“Safety Nets”…


Application Process “Preview”


To Apply Applicants Visit: www.nasafcu.studentchoice.org or call (800) 322.8816

NASA FCU Application Website

Documents needed for processing:

Proof of Income

Proof of NASA FCU Membership

Signed Agreement

Signed Application

Proof of Identity

All of the above required for student and co-borrower


What to Expect: Required Loan Documentation


Application…School Certification…Loan Cycle

Student requests money from lender

School certifies COA less other aid, enrollment status, good academic standing, etc. Provides

lender with disbursement dates.

School reimburses student for determined

variable costs

Loan Certification Process: between student, lender and school


Approved funds are disbursed on date requested by school divisible by number of disbursements.

Your Student Choice SolutionFrom $$ Request…to…$$ Disbursement!

Loan Certification Process: • Loan funds disbursed directly to school• Credit Union/borrower does not have control over:–When funds are disbursed to school–When funds are applied to account–When or how disbursement is made to student

Always Check Your Financial Aid Office Deadlines!


School Certification/Loan Funds Disbursements


The Loan Cycle…

NASA FCUCo-Branded Site

Application & Processing• Online via CU website or

dedicated toll-free call center• Credit Union secures

membership with borrower

Certification• Approved application sent to

school FAO for certification and requested disbursement dates

Disbursement• Funds disbursed directly to

the school…Disbursements requested in semester segments…School reimburses student.

Servicing• Loans serviced by UAS (Credit

Union has option to service loans in-house)

Lender of Record• The relationship is held at

NASA FCU

• Department of Education• https://studentaid.ed.gov/

• National Center for Education Statistics• http://nces.ed.gov/collegenavigator/

• FastWeb Scholarship Site• http://www.fastweb.com/

• College Board’s Net Price Calculator• http://netpricecalculator.collegeboard.org/

• National Association for College Admissions Counseling• http://www.nacacnet.org/Pages/default.aspx

NASA FCU• https://www.nasafcu.com/

Credit Union Student Choice• http://www.studentchoice.org/students/


Important Financial Aid Websites

https://studentaid.ed.gov/



http://nces.ed.gov/collegenavigator/

http://nces.ed.gov/collegenavigator/

http://www.fastweb.com/

http://www.fastweb.com/

http://netpricecalculator.collegeboard.org/

http://netpricecalculator.collegeboard.org/

http://www.nacacnet.org/Pages/default.aspx

http://www.nacacnet.org/Pages/default.aspx

https://www.nasafcu.com/

https://www.nasafcu.com/

http://www.studentchoice.org/students/

http://www.studentchoice.org/students/

Please contact us with any additional questions.Charlie Hudson

[email protected]

P: (301) 249-1800 Ext. 267

Center Blog: www.nasafcu/goddard


Thank you for Attending…!

mailto:[email protected]

http://www.nasafcu/goddard

College Financing 101 An Educational Seminar – Powered by NASA FCU Presented by: Steve Wynne...

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