Strategies for Paying the Spring Bill
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If you'll be looking to pay for college for the spring semester, we've compiled some tips to help you get started.
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Strategies for Paying the Spring Bill
- 1. 1 Celebrating 30 years of Excellence Planning, Saving & Paying for College Strategies to Pay the Spring Bill Family Webinar Series:
- 2. 2 MEFA’s mission has remained constant since we began in 1982 – to help make higher education more accessible and affordable for Massachusetts students and families. •Massachusetts Educational Financing Authority •Not-for-profit state authority that works to make higher education more accessible and affordable •Created in 1982 by the State Legislature •Helping families: o Plan: Extensive community outreach o Save: U.Fund® and U.Plan® college savings plans o Pay: Affordable fixed interest rate college loans for over 30 years About MEFA
- 3. 3 • Some financial aid is still available – File the FAFSA for federal aid – Some colleges may have financial aid available for the spring semester. Check with the college. – MA state financial aid deadline was May 1st • Check with the college to see if you can still enroll in the college’s payment plan • Able to apply for private loans If You Have Not Applied For Aid
- 4. 4 Calculating the Balance Due: Direct vs. Indirect Costs Direct Costs: Billed from the college: – Tuition – Fees – Room – Board/Meal Plan – Health Insurance Indirect Costs: Incidentals throughout enrollment: – Books – Transportation – Laptop – Personal expenses
- 5. 5 Celebrating 30 years of Excellence Planning, Saving & Paying for College Options to Pay the Balance Due
- 6. 6 • Student is the borrower – no credit check • Annual limits: $5,500 for freshman year • Fixed interest rate changes annually: 4.66% for 2014-15 • Two types: – Subsidized – Interest accrues after graduation – Unsubsidized – Interest accrues immediately • 1.072% (or 1.073% for new loans after 10/1/14) fee deducted from loan amount • Promissory Note & Entrance Counseling: StudentLoans.gov • No payments while in school • Several repayment options: StudentAid.gov MEFA recommends that students exhaust their federal student loan options before borrowing from other sources. 1. Start with Federal Student Loans
- 7. 7 2. Minimize Borrowing Balance Due for Spring Semester $10,000 Past Income (Savings) Student Savings -$500 Parent Savings -$2,500 Present Income (Current Wages) Parent Contribution to Payment Plan -$3,000 Future Income (Education Loans) Education Loan -$4,000 $0
- 8. 8 3. Affordability • Visit mefa.org/tools to access the Monthly Payment Calculator • Print your plan and call MEFA at 800.449.MEFA(6332) to discuss.
- 9. 9 4. Get Advice from Trusted Resources • Ask Questions • Look for Transparency • Utilize Free resources • Work with Financial Aid and Student Accounts if you need help
- 10. 10 MEFA Loan vs. Direct PLUS Loan MEFA Undergraduate Loan • Starting at 5.49% fixed interest rate • Available to MA residents attending college anywhere or any student attending college in MA • Family loan: student and parent or other credit-worthy borrower are co-borrowers and share responsibility • Credit-based • Multiple repayment options • Families can apply now Federal Direct Parent Loan (PLUS) • 7.21% fixed interest rate • Requires filing the FAFSA • Parent or custodial step-parent is borrower • Credit-based • Repayment begins 60 days after spring semester disbursement • Loans can be deferred until graduation; interest accrues
- 11. 11 Celebrating 30 years of Excellence Planning, Saving & Paying for College Understand the Fine Print
- 12. 12 Application and Solicitation Disclosure Statements •Required for private lenders such as MEFA •Can be found on lender websites and loan comparison tools •Things to consider: – Is it easy to find? – Do you know the rate before applying? – What are the fees? – Total Cost? Read the Fine Print
- 13. 13 Annual Percentage Rate (APR) • Total Cost of the Loan, including fees, repayment term, etc. • Quick way to compare loan options
- 14. 14 • Signs the loan agreement along with primary and/or student borrower • A co-borrower has equal responsibility on the loan agreement • Adding a co-borrower may increase chances for approval • Co-borrowers with good credit may help decrease rate • Co-borrower release options • Consider student’s major/career choice, employment rates and starting salary Co-Borrower
- 15. 15 • Several repayment options to choose from • Repayment term has a direct impact on Total Cost • Provides flexibility based on family’s affordable monthly payment Repayment Term
- 16. 16 • Advertised rate may not be the rate you receive! • Rate is based on credit score and credit criteria • Pricing is based on credit risk to the lender • May not know the rate before you apply Tiered Pricing
- 17. 17 • Fixed vs. Variable • Transparency • Cap on variable rate? • May be tied to repayment option chosen Interest Rate
- 18. 18
- 19. 19 Timing: Paying Your Bill • Bills for the Spring semester sent in Nov./Dec., due in Dec./Jan. – Includes direct costs only (tuition, fees, dorm, meal plans and health insurance) – Outside scholarships and financial aid will be deducted from the bill – Families who set up their payment plan and/or loans may see those amounts as a soft credit towards the bill as well • Work-study is not deducted from the bill • Apply for a MEFA Loan or other education loan before the billing due date • Set up payment plans according to the college or university’s schedule
- 20. 20 Questions to ask • Financial aid renewability criteria (financial, academic) • Treatment of outside scholarships Special Circumstances • Can I appeal my award? • Changes in family circumstances Information • Open House Orientation programs • Websites • In-person meeting or phone call Financial Aid Office as a Resource
- 21. 21 • Know your credit history • Borrow only what you need • Think in terms of total enrollment (4+ years) and total debt − Consider the post-graduation monthly repayment • Use a monthly payment option to minimize borrowing • Research options on college lender lists • Consider major/career choice, employment rates and starting salary • Find the best options to meet your family’s needs: − Fixed rates or variable rates − Repayment timeline − Primary borrower Be a Wise Borrower
- 22. 22 Questions? info@mefa.org (800) 449-MEFA (6332) mefa.org MEFA is your trusted advisor, helping to make your college goals a reality. Thank You!
Notas do Editor
- Introduce yourself as the presenter and thank the host institution. Give your background. Recognize other volunteers that are there to assist families. Mention that a copy of this presentation is posted on mefa.org/seniors.
- Introduce MEFA and let folks know that MEFA has a public service mission to help families navigate college financing Can get audience interaction by asking if anyone in the audience has heard of MEFA and in what context
- Remember, we know that there are many families that may not have applied for aid Can still apply for loans and Pell Grants even if it’s past the college’s deadline. Deadline for Massachusetts financial aid programs is May 1st. Borrow federal student loans first State Aid - May still be available - May 1st deadline Adams and Koplik Scholarships require you to file the FAFSA
- MEFA has a terrific tool, the College Cost Calculator, located on mefa.org/seniors, to help you determine direct costs. ***PULL UP THE CALCULATOR ONLINE and do an example here. You will be able to line up as many as six different colleges, list aid packages and calculate the balances due for direct costs. You can print your results. Click on graphic to show how the cost calculator works. Sample #’s to use: Private College A: Direct Costs-Tuition($34K), Fees($500), Room & Board ($13,300), Health Insurance ($1600 if not waived); Grants/Scholarships- Pell ($2,000), SEOG ($1,000), State Grant ($500), Institutional Grant ($20K), Outside Sch. ($2K); Loans- Sub $3,500, Unsub. $2,000; Savings- $1,000. Public College B: Direct Costs-Tuition($900; Zero w/ Adams Sch.), Fees($6K), Room & Board ($4800), Health Insurance ($1300 if not waived); Grants/Scholarships- Pell ($2,000), SEOG ($0), State Grant ($500), Institutional Grant ($0), Outside Sch. ($2K); Loans- Sub $3,500, Unsub. $2,000; Savings- $1,000.. One confusing aspect of college bills is understanding the difference between direct costs and indirect costs. DON’T FORGET TO WAIVE HEALTH INSURANCE IF ALREADY COVERED. Explain process to waive costs via Bursars office. ALSO, realize that many colleges now only e-bill, and that often students will need to grant rights to parents/others to view the bill due to FERPA. The financial aid office gives you an estimate of your indirect costs. If your student is living off campus, you will see an allowance for rent in there. If commuting, an estimate will be included for those expenses. Realize that these are not hard and fast figures and that your totals may vary. There are opportunities for saving here. Students can opt to rent books on some campuses, or may already own a laptop for example. They may have options for less expensive housing or smaller meal plans if they won’t be eating all their meals on campus.
- Introduce yourself as the presenter and thank the host institution. Give your background. Recognize other volunteers that are there to assist families. Mention that a copy of this presentation is posted on mefa.org/seniors.
- We want to discuss student loans with you. Federal options should ALWAYS be considered first. Go over details and limits for students College will instruct students on how to apply Student will need to complete entrance counseling and sign a promissory note Many repayment options for borrowers, including one that can be tailored to the student’s income. Forgiveness provisions for certain professions. See www.studentloans.gov for details. IF YOU HAVE NOT APPLIED FOR AID, it is still possible to go through the process and have your child take advantage of low-cost federal loans. File the FAFSA. Interest rates listed are for 2013-14 academic year loans. Rates are set annually to the 10 Year Treasury Note + 2.05% and will not exceed 8.25%. 2014-15 rates will be announced the first week of May What is reasonable student loan debt? College seniors who graduated in 2011 carried an average of $27,200 in student loan debt (finaid.org) $27,000 maximum 4-year eligibility = standard repayment of approximately $300/month for 10 years based on current 2013-14 rate. Freshman- $5,500; Sophomore- $6,500; Junior & Senior- $7,500; Mention additional Unsub. for PLUS denials as well. Federal Direct Loans Fees are deducted from loan amount: Fees for Direct Loans: 1.072% for Student DL and 4.288% for PLUS Two types: Subsidized & Unsubsidized – have the same interest rate *MEFA recommends that students exhaust their federal student loan options first. Can also mention possibility of NIL and Perkins and PLUS on award letters.
- Families decide the best plan to meet the balance due at the college based on their own personal finances. The options fall under three major categories: past, present and future income. Families don’t need to choose just one option (past, present or future income) to pay the balance due, and combination plans can save money in the long run. Encourage families to visits mefa.org/seniors to access a Monthly Payment Calculator, which allows families to build a monthly payment plan into their strategy in combination with a loan when considering which option is most affordable for their family Past Income: savings or other investment such as college saving plans Present Income: Explain payment plan, i.e., owe $1,000? pay $100 per month for 10 months. Better than ANY loan Future Income: borrowing loans. This will be in addition to student loans that are offered in the financial aid award. If families are considering financing any portion of the student’s education, they should take advantage of federal student loans first Families need to be thinking about a long-term plan when deciding what options to use. This includes the total number of years the student plans to be enrolled as well as multiple children who plan to attend college Colleges who use institutional methodology often expect the student to contribute from savings and/or summer work. Students are able to contribute to the payment plan along with the parents. For families who are not receiving aid, you can still use these same steps. You will not be able to subtract aid, but if you have outside scholarships be sure to subtract them from direct costs. NOTE that many private schools who use the PROFILE require a minimum contribution from student summer work of roughly $1800.
- Use Hyperlink in graphic to demonstrate live MEFA’s Monthly Payment Plan calculator to see how to combine a payment plan with a MEFA loan as well as calculate MEFA Loan payments. You can customize your plan to fit into your monthly budget. Families can also choose between a mix of payment plans and loans to minimize borrowing and maximize cash flow. FOUR WAYS TO PAY A $20,000 BALANCE DUE Most people will consider a monthly payment plan, loan, or combination of the two to cover the balance due, here are 3 examples: 1) Sign up for an interest-free monthly payment plan, divide payments over 10 months for nominal fee (around $65-80). This would be $2,000 per month for 10 months = $0,000 (pay no interest, use no savings – best way to finance if you can afford it). 2) Borrow the full $20,000. For example, a MEFA Undergraduate Loan with Immediate Repayment 5.99% while in school, with a 4% origination fee, would be a little more than $200/mth., about $234/month for 10 years (lower monthly payment but you pay more in the long run). 3) Customized combination plan: let’s say you can afford more than $250 per month (loan option) but not the full $2,000 per month (payment plan) you can use a combination plan based on your budget. If you determine that $700 is a reasonable monthly payment, you could do a combination plan to keep debt levels low: $570 per month in a monthly payment plant ($5,700 total) Approx. $130 per month in a MEFA Undergraduate Loan with Immediate Repayment ($14,300 at fixed rate of 6.29% while in school and 7.29% out of school and 4% disbursement fee) 4) No disposable income? Consider deferred loans
- MEFA UG Loan- Say Rate starting at 5.99% Benefits MA residents going in or out of state and students from across the U.S. attending a Massachusetts college or university Most states do not have this benefit No tiered pricing – all qualified borrowers receive the same rate MEFA’s sole purpose for over 30 years has been to provide low-cost college financing for students Provides stable and predictable monthly payments Many repayment options help families pick a loan that best fits their needs Reference the Be a Wise Borrower Loan Chart You can apply for a MEFA Loan beginning April 1st. The PLUS credit check only lasts 90 days, so you’ll need to late Spring/early Summer to apply. PLUS: 7.90% interest rate and 4.204% origination fee Even though the FAFSA is not required for a MEFA loan, families should still file to borrow their maximum under student loans Additional $4,000 (FR & SO) or $5,000 (JR & SR) per year in Unsub if the parent is denied a PLUS. Funds are sent directly to the school Apply for the whole year, not just one semester Can borrow the full COA minus Financial Aid Remember to multiply any annual borrowing by 4 years There are other options to pay for college – home equity loan, credit cards, borrowing from retirement funds – but be sure to understand all implications of using one of these methods before doing so
- Introduce yourself as the presenter and thank the host institution. Give your background. Recognize other volunteers that are there to assist families. Mention that a copy of this presentation is posted on mefa.org/seniors.
- Point out the timeline in the folder and point out: Bill arrival for both semesters Bill deadline for both semesters When to reapply for financial aid *Remind families to waive the health insurance if covered under a parent’s plan Work-study recipients should expect information from the college regarding employment late summer or at the start of the term Electronic bills – students have to give parents access – most schools are now using e-billing Loans – borrow the amount for the full year – money is sent to the school – describe the loan process Some families do use other resources to pay the bill, such as a home equity loan, a credit card or retirement. Families should be aware of all tax implications, fees and financial disadvantages to using these or any other resources.
- Tip sheet on questions to ask the financial aid office in the Tools & Resources section of www.mefa.org/seniors The college admitted you, so they want to help you find a way to afford it Ask what is required to renew the financial aid in future years Special circumstances: the financial aid office is willing to work with you and can be an advocate for your family This information may be found on the website or in the award letter guide that some colleges send Can work with your family in cases of: Job loss Divorce Unusual medical or other bills Other unusual circumstances (lump sum payments) Contact your financial aid counselor Will need documentation of situation Discuss steps if you have not applied for aid
- Acknowledge that most families in the audience will have to borrow in some capacity; College education is a good investment, much like a home - not expected to pay in one lump some Debt considerations: do not just sign on the dotted line. These are ideas to consider when deciding how much to borrow Factors to look at when choosing loans Many colleges put together a list of recommended lenders to help families with their parent loan research Refer to average loan debt stats when talking about the primary borrower and how much debt is reasonable for a student to absorb on his or her own. College seniors who graduated in 2011 carried an average of $27,200 in student loan debt (finaid.org). Factor in post-graduation monthly repayment Point to the Be a Wise Borrower sheet inserted into the folders