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