Student Loans

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Student Loans & Financial Aid Options

Presentation

© 2020 Business Girl. All Rights Reserved.

Financial Aid Options

Financial aid is money
to help pay for college
or career school. Aid
can come from:
• U.S. federal

government

• State where you live
• College you attend
• Non-profit

organization

• Private organization

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Multiple Choice

What is the meaning of loan?

• money that an organization such as a bank lends and somebody borrows.

• an organization that provides various financial services.

• the money that you pay to be taught, especially in a college or university.

• an institution at the highest level of education where you can study for a degree or do research.

FAFSA

When you fill out the FAFSA which three types of aid are
you applying for?
• Grants—financial aid that doesn’t have to be repaid

(unless, for example, you withdraw from school and owe
a refund)

• Work-Study—a work program through which you earn

money to help you pay for education expenses

• Loans— borrowed money to pay for school, you must

repay your loans with interest

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Multiple Choice

What does the acronym FAFSA mean?

• Financial Application for Free Student Assistance

• Free Assistance for Fast Student Approval

• Free Application for Federal Student Aid

• Formal Application for Federal Student Assistance

Multiple Choice

The FAFSA becomes available starting...

• January 1

• March 2

• May 1

• October 1

Multiple Choice

Which one of these things do you NOT need to fill out the FAFSA?

• Birth certificate (or proof of U.S. citizenship)

• Tax information from parent(s)

• Parent and student FSA IDs

• Your Social Security Number

Federal Pell Grant

• A Federal Pell Grant,

unlike a loan, does
not have to be repaid.
– Awarded only to

undergraduate
students who have
not previously
earned a bachelor's
or a professional
degree
© 2020 Business Girl. All Rights Reserved.

Multiple Choice

Financial Aid is money that if given, paid and/or borrowed.

• True

• False

Multiple Choice

Financial aid is provided by which of the following to help pay for school?

• Federal Govenment

• State Government

• Colleges

• Private Parties

• All of the above

Multiple Choice

___________________ federal grant awarded based on financial need;  amount depends on a student's EFC and enrollment status, as well as the cost of attendance. 

• Self-help Aid

• Grant

• Supplemental Education Opportunity Grant

• Pell Grant

Scholarships

• Gifts that do NOT

have to be repaid

• Can come from a

variety of sources

• Each scholarship has

its own requirements

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Work Study Jobs

• Part-time employment

for undergraduate or
graduate students
with financial need

• Jobs typically relate to

civic education or the
field you are studying

• May be on or off

campus

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Student Loans

• If you apply for financial aid,

you may be offered loans as
part of your
school’s financial aid offer.

• If you decide to take out a

loan, make sure you
understand who is making
the loan and the terms and
conditions of the loan.

• Student loans can come

from the federal government
or from private sources such
as a bank or financial
institution.

• Borrow only what you

absolutely need to pay for
college.

© 2020 Business Girl. All Rights Reserved.

Federal Student Loans

• Take out loans from the

federal government first.
– Loans made by the

federal government
usually offer borrowers
lower interest rates
and have more flexible
repayment options
than loans from banks
or other private
sources.

– The interest rates do

not change during the
life of the loan.

© 2020 Business Girl. All Rights Reserved.

Types of Federal Student Loans

• Direct Subsidized Student

Loans: Loans backed by the
government, must have
financial need, and the
government will pay the
interest while you are in
school

• Direct Unsubsidized

Student Loans: Loans will
start accruing interest from
the time the loan is taken
out, NOT dependent on
financial need

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Multiple Choice

Student loans are .....

• like free money

• ore often forgiven

• must be paid back and almost never forgiven

• only need to be paid back if you have a job

Multiple Choice

You must begin paying back a student loan ...

• when you are ready to do so

• only when you find a job

• soon after you graduate

• none of the above

Multiple Choice

Which of the following statements is TRUE about the advantages of federal student loans compared to private student loans?

• Federal student loans generally offer higher interest rates which remain fixed over the term of the loan

• Federal student loans do not need to be repaid if the borrower runs into financial difficulty and goes bankrupt

• Federal student loans require a credit check

• Federal student loans offer more flexible repayment terms

Multiple Choice

The amount of student loan debt the average graduate has is....

• 3,500

• 10,000

• 20,000

• 37,500

Types of Federal Student Loans

• PLUS loans are federal loans

that graduate or professional
degree students and parents
of dependent undergraduate
students can use to help pay
education expenses.
– The U.S. Department of

Education is the lender.

– The borrower must not have

an adverse credit history.

– The maximum loan amount

is the student’s cost of
attendance (determined by
the school) minus any other
financial aid received.

© 2020 Business Girl. All Rights Reserved.

Private Student Loans

• Offered by banks,

credit unions, and
private, non-profit
lenders

• Typically have a

higher variable
interest rate and
fewer deferment
options
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Student Loans

• Remember, student loans

are real loans, just like car
loans or mortgages. You
must repay a student loan
even if your financial
circumstances become
difficult.

• Your student loans cannot

be canceled because you
didn’t get the education or
job you expected, or
because you didn’t
complete your education.

© 2020 Business Girl. All Rights Reserved.

Check Point

1.

What is the difference
between federal and
private student loans?

2.

Would you rather have a
grant or student loan?
Why?

3.

What eligibility
requirement exists for
the Federal Pell Grant?

4.

What advice would you
give to a high school
senior who is about to
take out student loan
debt?

© 2020 Business Girl. All Rights Reserved.

Student Loan Repayment

• Don’t Miss Payments

– One quarter to one third

of borrowers are late on
the very first payment on
their student loans

– Most student loans have a

six month grace period
before repayment begins
and students often move
after graduation, losing
track of bills

• Set up an automatic direct

debit from your checking
account to make the monthly
payments on your loans

© 2020 Business Girl. All Rights Reserved.

Student Loan Debt Growth

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Source: Landy, Benjamin. “Graph: Student Debt, the Trillion Dollar Threat to the American Middle
Class.” The Century Foundation, 29 Mar. 2012,
tcf.org/content/commentary/graph-student-debt-the-trillion-dollar-threat-to-the-american-middle-cla
ss/.

Repayment Terms

• Standard Repayment

(10 year term)

• Extended Repayment

(10 to 30 year term)

• Extending your term

will increase the total
cost of your loan

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Repayment Terms

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Repayment Plan
Monthly Loan

Payment

Total

Interest

Total

Payments

Standard – 10 Years

$288

$9,524

$34,524

Extended – 12 years

$254

$11,639

$36,639

Extended – 15 years

$222

$14,946

$39,946

Extended – 20 years

$191

$20,802

$45,802

Extended – 25 years

$174

$27,054

$52,054

Extended – 30 years

$163

$33,674

$58,674

Assumes $25,000 unsubsidized Stafford loan at 6.8% interest and ignores balance-based setting of extended
repayment term.

Source: “Repayment Plans.” Federal Student Aid, 7 Dec. 2017, studentaid.ed.gov/sa/repay-loans/understand/plans.

Repayment Options

• Income-Based

Repayment
– Payments based on

income, not amount owed

– Lower payment than

income-contingent
repayment and
income-sensitive
repayment

• Graduated Repayment

– Initially low payments are

increased every two years

• Either income-based or

extended repayment
yields the lowest payment
for most borrowers

© 2020 Business Girl. All Rights Reserved.

Repayment Strategies

• After you make the

required payments,
direct any extra money
toward accelerating
repayment of the most
expensive debt first

• The most expensive

debt is the debt with the
highest interest rate,
not the lowest monthly
payment, usually
private loans

© 2020 Business Girl. All Rights Reserved.

Student Loan Consolidation

• After graduation many

choose to consolidate
student loans
– Consolidate: get a new

student loan that pays off all
the existing student loans

• When you consolidate you

want a fixed interest rate
and lower payments than
you would have had with
separate loans

• You give up the option of

deferment or forbearance
when you consolidate and
your grace period ends

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Student Loan Forgiveness

• A program by the

federal government
to encourage young
people to consider
giving back to
society by
performing public
service
– Examples: Job

Corps

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Deferment and Forbearance

•Deferment
– A deferment is a period during

which repayment of
the principal and interest of
your loan is temporarily
delayed.

•Forbearance
– If you can't make your

scheduled loan payments, but
don't qualify for a deferment,
your loan servicer may be
able to grant you a
forbearance. With
forbearance, you may be able
to stop making payments or
reduce your monthly payment
for up to 12 months. Interest
will continue to accrue.

© 2020 Business Girl. All Rights Reserved.

Financial Difficulty

•Use a temporary suspension of
loan payments for short-term
financial difficulty
–Economic Hardship Deferment
(3 year limit)

–Forbearances (5 year limit)

•Change repayment plans for
longer-term financial difficulty
–Income-based repayment
reduces the monthly payment
based on your discretionary
income

–Extended repayment reduces
the monthly payment by
increasing the loan term to 12-30
years

–Both of these options increase
the cost of the loan

© 2020 Business Girl. All Rights Reserved.

Filing Bankruptcy

• Less than 1% of bankrupt

borrowers succeed in
getting student loans
discharged because of
the requirement to
demonstrate undue
hardship in an adversarial
proceeding
– Undue hardship is a

present and future inability
to repay the debt and
maintain a minimal
standard of living even
after exhausting options for
repayment relief and
cutting living costs

© 2020 Business Girl. All Rights Reserved.

Check Point

1.

What is the difference
between a deferment and
forbearance? If you had
the choice, which would
you rather have? Why?

2.

What happens if you
consolidate student loan
debt?

3.

What is one strategy for
repaying debt we
discussed?

4.

What is a grace period?
How does it apply to
student loans?
© 2020 Business Girl. All Rights Reserved.

Scenario 1

• Anna is a high school

senior who plans to go to
UT in the fall. Her parents
have saved up some
money for her college
education, but it will not
be enough to pay for her
tuition all four years. She
does not believe she will
qualify for need based
assistance. What advice
would you give Anna?

© 2020 Business Girl. All Rights Reserved.

Scenario 2

• Kara is a high school

senior who plans to go
to Arizona State
University in the fall.
Based on her parent’s
income she believes
she may qualify for
need-based assistance.
What type of financial
aid do you think Kara
may be qualified for?

© 2020 Business Girl. All Rights Reserved.

Scenario 3

• Kyle just graduated

from college and got his
first job, he has $50,000
in student loan debt and
is considering opening
up a retirement
account. He has a
disposable income of
$250/month, what
would you recommend
he do with this money?
Why?

© 2020 Business Girl. All Rights Reserved.

Sources

•Fry, Richard. “A Record One-in-Five Households Now Owe Student
Loan Debt.” Pew Research Center's Social & Demographic Trends
Project, 26 Sept. 2012,
www.pewsocialtrends.org/2012/09/26/a-record-one-in-five-househol
ds-now-owe-student-loan-debt/4/.

•Landy, Benjamin. “Graph: Student Debt, the Trillion Dollar Threat to
the American Middle Class.” The Century Foundation, 29 Mar. 2012,
tcf.org/content/commentary/graph-student-debt-the-trillion-dollar-thre
at-to-the-american-middle-class/.

•“Pay As You Go – A More Affordable Student Loan
Model.” Tuition.io, 1 Apr. 2013, www.tuition.io/tag/credit-card-debt/.

•“Repayment Plans.” Federal Student Aid, 7 Dec. 2017,
studentaid.ed.gov/sa/repay-loans/understand/plans.

•StudentLoans.gov, Federal Student Aid,
studentloans.gov/myDirectLoan/index.action.
© 2020 Business Girl. All Rights Reserved.

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