Financing Your Education

Transcription

1 Financing Your Education What s what, what comes next, and how to do it. A WiseBorrower Guide

2 P.O. Box 7430 Wilmington, DE So, you re ready to pursue a graduate or professional degree. Congratulations! You ve made a decision that puts your dreams of a career in law, medicine, dentistry, or another professional field within reach. We know you re excited about this new phase in your life. But we also know you might be worried about how to pay for your education. Our goal at Access Group is to make your life as a prospective grad or professional student easier from a financial perspective. If one of your worries is how you re going to pay for school, we hope you know that financial aid is available for up to the full cost of attendance. An advanced degree is an important investment in yourself. You ll be putting in the time, the energy, the hard work (and yes, the money) now so that your future will be successful. How you finance your education will impact your financial future and the lifestyle you can afford once you graduate, so it s important to be well-informed about your options and to get your finances in order now. As a nonprofit organization specializing in graduate student loans, we ve helped thousands of students in your shoes. We re here to guide you through the financial aid process and help you organize your finances today so you ll be in better shape in the future. School is right around the corner. So let s get started. Best of luck in your studies, Access Group 1

3 Table of Contents How much will your education cost? 3 How do you get financial aid? 9 What types of financial aid are available? 17 How much should you borrow? 27 How do you get financially fit? 33 Online resources you should know 37 Crossword Puzzle: Test your financial IQ 38 Terms you should know 40 2

4 Erin, Future Attorney I HOPE I can afford to pay for law school. I KNOW help is out there to get the financial assistance I need. How much will your education cost? Expenses to consider Tapping your financial resources Cost of attendance 3

5 Think beyond tuition Before you focus on the types of financial aid you ll need, how much to borrow, or if you even need financial aid at all, you have to figure out the cost of your education. And we don t just mean tuition. You have to consider your living expenses during school as well. The FULL cost of attendance includes tuition and fees, books, supplies, and living expenses such as housing, food, insurance, and transportation. Think of non-loan options first Don t apply for loans if you don t have to. Explore existing personal resources to pay for your education first. Maybe you have savings or have parents or other family members who may want to contribute. You should have an honest discussion with your family about the cost of your education and how much they re willing to help you finance it. Your family may also include your spouse or partner. Talk with them about the impact that attending school will have on your daily lives, especially if you have children. Figure out your cost of attendance It goes without saying that the cost of getting an advanced degree depends on the school you choose. You ll want to contact the schools you re interested in to get the full cost of attendance. You can do this during your early school search process or any time before or after you apply for admission. Knowing your costs determines whether or not you ll have enough money to pay for your education, or if you ll need to seek assistance through the financial aid program offered by the school. The next section tells you exactly how to do that. 4

6 NOTES Your job is to go after your dreams. Ours is to help you get there. 5

7 NOTES Your job is to go after your dreams. Ours is to help you get there. 6

8 NOTES Your job is to go after your dreams. Ours is to help you get there. 7

9 NOTES Your job is to go after your dreams. Ours is to help you get there. 8

10 Holly, Future Doctor I HOPE I ace my school interviews. I KNOW asking the right questions will help me in applying for financial aid. How do you get financial aid? Financial aid in a nutshell Eligibility requirements Questions for the financial aid office Steps to receiving financial aid 9

11 Relax, we re here to help you figure it out Let s be honest, financial aid isn t the most interesting topic in the world. We promise we ll try to make it as simple as possible. It s important to know as much as you can because the decisions you make now will affect you during repayment later on down the road. Like we mentioned before, you should first consider your own personal resources to finance some of your education costs. Financial aid funds will help you pay your education expenses that you cannot cover. Some of those include tuition and fees, books and supplies, and basic living expenses. If you follow the steps we list here, you ll be ahead of the game in terms of getting money for school and preparing for what s next. #1: Determine if you re eligible for federal student aid Eligibility for federal student aid as a graduate or professional student is based on several requirements. To receive federal aid you must: Work toward a degree or certificate in an eligible program. Maintain satisfactory academic progress once in school (this is defined by the school). Be a U.S. citizen or eligible non-citizen. Have a valid Social Security number (unless you're from the Republic of the Marshall Islands, the Federated States of Micronesia, or the Republic of Palau). Be registered with the Selective Service, if required. Certify that you aren t in default on a federal student loan and don t owe money on a federal student grant. Certify that you ll use federal student aid only for educational purposes. What if you re not eligible for federal financial aid? No worries. Financial assistance still may be available from other sources. It s important that you contact the financial aid office at the school you want to attend as soon as possible to explore other funding options. #2: Learn the financial aid process at the schools you re considering Talk with the financial aid office they re your most important resource for information. College and university Web sites often include information about financial aid, as do Web sites established by government agencies and other organizations that assist students with the financing of their education. These include the U.S. Department of Education s student gateway at Studentaid.ed.gov, and FinAid.org, a free, comprehensive financial aid resource offering everything from calculators to scholarship listings. 10

12 We ve included a list of questions you should ask the financial aid office at each school you re considering. It s a good idea to write their answers on the blank pages in this guide. This way all of your information is in one place. What types of financial aid are available? What are the required application procedures and forms? How and where do I obtain the application forms? Are there any school-based grants or scholarships that I can apply for? What are the application deadlines? TIP: Mark down application deadlines on a calendar. Remember, schools have limited funds of their own for grants and scholarships (AKA free money ), so it s important not to miss deadlines! 11

13 #3: Complete your federal income tax return as soon as you can after January 1 We realize you re going to be a little preoccupied with holiday celebrations and bowl games, but it s important to complete your federal income tax return (if you re required to file one) right after the new year because you ll need this information to complete the FAFSA (Free Application for Federal Student Aid). You don t need to file the tax return until you are required to; just complete the information. Your school may ask to see a copy of your actual tax return, so be sure to keep a copy for your files. #4: Complete your free FAFSA online at fafsa.ed.gov Submitting the FAFSA form online is the first step to receiving federal financial aid. You should do this six to nine months prior to the start of school. For academic programs that start in August/September, most schools have deadlines in February or March to receive the FAFSA. Just make sure you mark Yes to the question asking if you ll be working on a master s or doctorate program (such as an MA, MBA, MD, JD, DDS, PhD, etc.) so you ll be considered financially independent by the federal government. After you ve completed the FAFSA and it has been processed, you will receive a Student Aid Report (SAR) by mail or . The SAR details the information you provided in your FAFSA. You should review it carefully to make sure there are no errors. On the SAR you ll also find your Expected Family Contribution (EFC), which is used to determine your federal student aid eligibility. The schools listed on your FAFSA will automatically receive this data. #5: Submit applications for other school-based financial aid In addition to the FAFSA, schools may require other financial aid applications for their school-based grant and/or scholarship programs, such as the Need Access application or other need analysis forms. Contact the schools you re considering to make sure you have all of the required materials and know the deadlines. 12

14 #6: Apply for scholarships (AKA free money ) Yes, this will take up your time. Yes, you ll have to fill out more forms. No, this isn t a step you should skip. Scholarships and grants are basically free money. In addition to the schools, a number of private groups and civic organizations award scholarships and grants to students who have demonstrated financial need and/or who meet other eligibility criteria. Ask the financial aid office if they have compiled a list of programs that have funded current and former students. You can also search Web sites like FastWeb.com and Scholarships.com. Just beware of organizations that charge a fee to provide scholarship information or facilitate application processes. #7: Review your financial aid award(s) Finally! After you submit all of the necessary financial aid documents and the financial aid office has completed its review, you ll receive a financial aid award notice/packet containing information about the aid you re eligible to receive. Review each award letter and compare the types and amount of aid at each school. Follow the instructions in the award letter and return it to the school of your choice before the deadline. TIP: Access Group s Financial Aid Award Analyzer is a really easy way to compare financial aid packages from each school. You can find it here: /AwardAnalyzer09 13

15 NOTES Your job is to go after your dreams. Ours is to help you get there. 14

16 NOTES Your job is to go after your dreams. Ours is to help you get there. 15

17 NOTES Your job is to go after your dreams. Ours is to help you get there. 16

18 Darrius, Future Dentist I HOPE I can balance school and family. I KNOW understanding financial aid is easier when I know my options. What types of financial aid are available? Grants and scholarships Federal Work-Study Student loans

19 Get smart about financial aid The three categories of student aid are: grants and scholarships, Federal Work-Study, and loans. Most financial aid for graduate and professional students comes from federal programs that are administered by the U.S. Department of Education or from the school you ll be attending. If you need to apply for student loans, keep in mind that federal loans are a better bet because they typically have lower interest rates, multiple repayment options, longer repayment periods, and other protections. Also, their credit requirements are less stringent than private loans. Grants and scholarships Grants and scholarships are funds you don t have to repay. Yay! But these funds are usually limited, so it s important to apply as soon as you can. There are two main sources of grant and scholarship funding: (1) the school you attend and (2) private/civic sources. Grants and scholarships from government sources (federal/state) are very limited for graduate and professional students. Ask the financial aid office at the schools you re considering about availability and apply as early as possible. The school you attend may award its own scholarship and/or grant assistance to students who meet certain eligibility requirements, such as a strong undergraduate academic record, demonstrated financial need, special career objectives and so on. We ve known more than a few students that received a scholarship and/or grant only to realize they had to reapply every year. The lesson here? Make sure you ask the following questions about any grant and/or scholarship you re offered: Will it be renewed automatically every year? If so, will it be renewed for the same amount or will the amount be adjusted? If the amount is adjusted, what are the criteria for making the adjustments? If the award is not renewed automatically, can I reapply for this or another grant or scholarship next year? Will my academic performance affect the amount of my award in subsequent years? Does this grant or award have a service component? Are there any special application procedures or deadlines I need to be aware of? 18

20 Federal Work-Study The Federal Work-Study (FWS) Program allows you to work part-time while you re in school to earn money for your education. Eligibility for FWS funding depends on the availability of FWS funds at the school you re attending, the policies of the school, when you apply for financial assistance and your level of financial need. Ask your financial aid office if they participate in this program because not all schools do. Even if you re not eligible for FWS jobs, you can still find work on your own. Consider the following questions when you explore FWS: How do I find an eligible job? Are my job choices restricted to certain positions? Does my program of study restrict the number of hours I can work? Are there jobs available that will give me the opportunity to gain useful career-related experience? Can I work off-campus or am I required to work at school? What options do I have to replace the FWS award with an alternative source of funding? Do I have to pay taxes on my FWS earnings? 19

21 Student loans 101 Get to know the four general types of education loans: Federal loans State-funded loans School-funded loans Private loans NOTE: Due to recent legislative changes, all Federal Stafford, Federal PLUS and Federal Consolidation Loans must be borrowed through the Federal Direct Loan Program (FDLP) beginning July 1, As of that date, they will no longer be available from the Federal Family Education Loan Program (FFELP). For more information, contact the financial aid office at the school you plan to attend. Federal loans The two primary federal loan programs available to graduate or professional students are: (1) Federal Stafford Loans, and (2) Federal PLUS Loans. Both loans have fees that will be deducted from your total loan amount. Check with your lender when you re ready to apply. Federal Stafford Loans Fixed interest rate of 6.8% No payments while you re in school, as long as you re enrolled at least half-time Repayment begins six months after you graduate or withdraw from your program of study 10 to 25 years to repay the loans (depending on total loan debt and the type of repayment plan you choose) No credit check required You can borrow up to a total of $20,500 per academic year; higher maximum available for medical, dental and select health professions programs Stafford Loans are available in two forms: subsidized and unsubsidized. Let s compare: The subsidized Stafford Loan is a need-based loan and has the interest paid by the federal government while you re in school, during the grace period following graduation or program withdrawal and during approved deferment periods. You can borrow up to $8,500 in subsidized Stafford Loans for each academic year. The unsubsidized Stafford Loan is not based on financial need and the interest is NOT paid by the federal government at any time. That means interest will begin to accrue as soon as the funds are disbursed to your school. You can either pay the interest as you go or allow it to accrue while in school, during the grace period, and during approved deferment and forbearance periods. The unpaid interest will be capitalized (added to the principal loan balance) when the loan enters repayment. 20

22 ---- P O P Q U I Z ---- Q: How is Financial Need determined for a subsidized Stafford Loan? A: Cost of Attendance - Expected Family Contribution Financial Need Expected Family Contribution is calculated from the financial and household information provided by you on the FAFSA. Federal PLUS Loans Federal PLUS Loans borrowed by graduate and professional students are commonly referred to as Grad PLUS Loans. Get these if you need to fill in the gap between the other financial aid you re receiving (including Stafford Loans) and your full cost of attendance as determined by your school. Fixed interest rate of 8.5% if borrowed under the Federal Family Education Loan Program, or 7.9% if borrowed through the Federal Direct Loan Program; check with the financial aid office about their program participation Loans are unsubsidized so interest will begin accruing at disbursement No payments while you re in school, as long as you re enrolled at least half-time 10 to 25 years to repay the loans (depending on total loan debt and the repayment plan you choose) Credit check required A few things to note about repayment: Grad PLUS loans go into repayment as soon as the funds are disbursed. However, they are automatically placed in an in-school deferment as long as you re enrolled in school at least half-time. They ll also be placed in a deferment status for the first six months after you graduate or if your enrollment status changes to less than half-time. You can waive the deferments, but keep in mind they re in place so that you can align the repayment start dates for your PLUS Loans with your Stafford Loans. 21

23 During any period of deferment or forbearance (meaning when you have permission from the loan holder to postpone payment), interest will accrue and be added to the principal loan balance (capitalized) at the end of the deferment or forbearance period. If you can, pay off the interest as it accrues so you won t get hit with a big lump sum at the end. Grad PLUS Loan credit criteria Unlike the Federal Stafford Loan, the Grad PLUS Loan has credit criteria that impact your ability to borrow. You can t have adverse credit based on the review of at least one credit report from a national consumer reporting agency. Lack of a credit history or insufficient credit history is NOT considered adverse credit. Current regulations define adverse credit as when at least one of the following apply: Currently 90 days or more delinquent on repayment of any debt Have had debt discharged in bankruptcy during the past five years Evidence of a default, foreclosure, tax lien, repossession, wage garnishment or write-off of a Title IV debt during the past five years So, what if you have adverse credit? You can still try to obtain a Grad PLUS Loan by providing a credit worthy endorser. Other federal loans may be offered to you based on availability of funds at the school you attend and/or your discipline of study. These include the Federal Perkins Loan, the Primary Care Loan, the Health Professions Student Loan and the Loan for Disadvantaged Students. The financial aid office can tell you about your eligibility for these loans. TIP: It s important to develop and maintain good credit and financial habits while you re in school. If your credit is less than stellar, talk to the financial aid office for advice and options. We show you how to get your finances in order starting on page

24 State & school-funded loans Some states and individual schools offer education loan programs. Eligibility for these loans may or may not be based on financial need. These loans may have limited amounts or they may be used as loans of last resort to assist students who have difficulty obtaining assistance from other sources. Check with the financial aid office at the schools you re considering for specific information on availability, terms and application process. Private loans Two important tips to remember here: Use federal loans first and ALWAYS borrow as little as possible! Private loans are typically used by students who don t qualify for federal student loans or when federal loans aren t available for expenses such as the post-enrollment bar exam, or to cover the cost of residency interviews. The financial aid office may have information about available private loans. Remember, you can t receive financial assistance, which includes these private loans for in-school periods, in excess of the cost of attendance determined by the financial aid office. How to apply for loans Usually the last step in the financial aid process is completing the loan application(s) and promissory note(s). The promissory note is the legally binding contract between you and your lender it can be a part of the loan application or a separate document. Your school will provide information in your award packet, along with application instructions. Loan funds can t be disbursed until you ve completed this step. FYI, funds are usually disbursed to the school and will arrive just prior to the start of each academic term. All you need is your driver s license, Social Security number, and two references to complete your federal loan application(s). If you have questions as you re filling out applications, just ask your financial aid office for clarification. 23

25 NOTES Your job is to go after your dreams. Ours is to help you get there. 24

26 NOTES Your job is to go after your dreams. Ours is to help you get there. 25

27 NOTES Your job is to go after your dreams. Ours is to help you get there. 26

28 Michael, Future Engineer I hope I can stick to a monthly spending plan. I know borrowing as little as I need means I have less to pay back after graduation. How much should you borrow? Eligibility vs. need Protecting your future income Factors that go into the amount you borrow 27

29 You might not need to borrow all you re eligible for It s important to estimate your budget or spending plan before you apply for any loans so you know how much you can contribute from your personal resources. Your plan should consider funding from grants or scholarships, as well as job earnings if you ll be working. The financial aid award you re offered is only a guideline. The cost of attendance provided by your school isn t what you NEED to spend. If possible, we recommend that you borrow less than the maximum amount because it will benefit you once you complete your program of study. Borrowing less = less to pay back You graduate, find the job of your dreams, then what happens? A few months down the road you have to start paying back your student loans. Remember, you ll be repaying those loans with your future income, and trust us, you ll have plenty of other uses for that income. If you live like an attorney a doctor a dentist or a business professional while you re in school, you ll likely be living like a student once you graduate! The key to reducing what you have to repay is minimizing your spending while in school. TIP: Access Group has all kinds of tools to help you calculate, create, and manage your budget. Check them out at /Calculators. Flexible repayment options Repayment already? No worries; you don t need to make any decisions about repayment now. Just know that there are five payment plans available for repaying your federal loans. They offer a lot of financial flexibility, and in fact, that s a big reason why you should borrow federal loans rather than private loans. The plans offer both fixed payment options, as well as options where your payment changes in increments over time or in relation to how your income changes. TIP: Learn more about the different repayment plans at. 28

30 The cost of your education really is up to you Pursuing an advanced degree is an important investment. It s one that will benefit you on many levels. But how much you spend getting your degree depends on the choices and decisions you make. For example, the cost of tuition depends on the school you choose. The cost of housing depends on where you choose to live and whether you live alone or with one or more roommates. Food costs depend on how/where/what you choose to eat, etc. Think carefully about your future financial and personal goals and what you might have to give up once you re working in order to pay back the debt you incurred as a student. 29

31 NOTES Your job is to go after your dreams. Ours is to help you get there. 30

32 NOTES Your job is to go after your dreams. Ours is to help you get there. 31

33 NOTES Your job is to go after your dreams. Ours is to help you get there. 32

34 I HOPE to do my best every day. I KNOW being smart about money will make a big difference today and in my future. How do you get financially fit? Planning your monthly spending Eliminating or lowering consumer debt Saving as much money as possible Knowing what s in your credit report Understanding the importance of good credit Organizing your financial records 33

35 Exercise good money management now, and you ll be thankful later Now you re more prepared about how much to borrow and how to do it wisely. As you begin to manage your student loans, you ll need to take a look at the big financial picture. Are you practicing good money management? It isn t hard to do. Really! Watching what you spend now and learning how to stay organized are habits you ll always carry with you. Follow these simple steps as best you can. They ll help you get in excellent financial shape. Plan and stick to a monthly budget The sooner you start making conscious decisions about how and on what you ll spend money, the sooner you ll be in control. Planning and sticking to a monthly budget will help you avoid piling on more debt, help you save money, and make it easier to afford the lifestyle you want after graduation. This is where our online budget calculators and worksheets will come in handy (/Calculators). Use them to plan both your in-school and out-of-school monthly budgets and to see where you might need to cut back on expenses. TIP: Smart ways to save while you re in school Live with a roommate. Save fancy restaurants for very special occasions. Shop at second-hand and discount stores. Go to matinees. Shop online for textbooks or buy used. Don t buy a new car - or better yet, use public transportation. Buy with cash, not credit. If you must use a credit card, don t charge more than you can repay when the bill comes. Pay the full amount due on your credit card bill(s) each month. 34

36 Pay down (or off) your debt before you start school Schools can t give financial aid to pay off your credit card or other consumer debts, like car loans. So try to remain debt-free, or pay down your debts as much as possible before you enroll. If you have significant debt that can t be paid down before school starts, talk to the financial aid office about your options. Note: You should be able to defer payments on any prior student loans you ve borrowed as an undergraduate student. Get into saving, and save as much as possible before school starts The more money you save, the less you ll have to borrow, and the less you ll have to pay back. Do you have a savings account? If not, open one now (go ahead, we ll wait). Your savings will help cover any expenses you incur before school starts, such as your application fee for admission tests (MCAT, LSAT, DAT), admission/application fees, relocation expenses, and security deposits for your apartment, utilities, etc. TIP: The goal is to earn as much interest as possible on your savings. But be aware that if you put your savings in a CD or money market account, you might be subject to a penalty for early withdrawal if you need the funds to pay for in-school expenses. Check your credit report at annualcreditreport.com The Grad PLUS Loan, along with most private loans, requires a credit check before an approval is issued on your application. Even if you re not applying for these loans, it s a good idea to take a look at your credit report to see if you re in good financial standing and that all of the information is correct. If you have credit problems, don t give up on your dreams. Talk to the financial aid office before applying for credit-based loans. They may have suggestions on how to resolve your issues and alternatives that might be available. The Fair and Accurate Credit Transactions (FACT) Act of 2003 gives you the right to obtain a free copy of your credit report once every 12 months from each of the three national consumer reporting agencies (Equifax, Experian and TransUnion). Go to annualcreditreport.com to get your free reports. You can find more information about credit at the Federal Trade Commission s Web site on ftc.gov, on myfico.com or on. 35

37 TIP: Let s say you spot an error in your report. Contact the agency reporting that error immediately because it can take several months to correct. Check your credit report at least six months before you plan to apply for a credit-based loan and take care of any late payments on your account(s) as soon as possible. Maintain good credit Why is having good credit important? It helps you obtain loans. Your credit history is a primary tool that credit grantors use to determine if they will lend you money, how much, and under what terms. The better your credit, the more likely you ll be able to get the financing you need at favorable terms. It helps to position you for financial freedom. A good credit history is essential if you plan on borrowing money to buy a home, finance a professional practice, or obtain optimal insurance rates. Your future employer may also require a review of your credit history as a measure of how responsible you are or have been in the past. Set up a record-keeping system What s your style? File cabinets? Three-ring binders? Online software? We hope it s not crumpled up papers under the bed. The fact is, having an organized, safe and secure record-keeping system helps you successfully manage your finances while you re in school and after graduation. Design your record-keeping system to fit your needs and personal style. And make sure it allows you to quickly find important financial documents when you need them. Just remember 3S s : Simple Make it easy to use; if it s too complicated or takes too much time to manage, you won t use it. Sustainable Make it a system you ll maintain over the long term. Secure Make it safe from loss or damage due to fire or theft. Consider investing in a small, fireproof box to store your important documents. Keep copies of all documents relating to your student financial aid and other financial activities, such as loan applications, promissory notes and lender correspondence. Keep copies of your income tax returns and all the documentation used to prepare those returns (both federal and state). Jot down key points from your conversations with your lender, servicer or financial aid office. Note the date of the conversation and the name of the person you spoke with. Use the blank pages in this guide if you like. 36

38 Online resources you should know Here is a list of useful and important Web sites mentioned throughout this guide Financial Aid: Studentaid.ed.gov FinAid.org FAFSA: Fafsa.ed.gov Scholarships: FastWeb.com Scholarships.com Student Loan Data: NSLDS.ed.gov Compare Financial Aid Awards: /AwardAnalyzer09 Budget Calculators: /Calculators Credit Reports: Annualcreditreport.com ftc.gov myfico.com 37

39 Test your financial IQ ACROSS 1. Free money schools, private, and civic groups offer 3. What you ll become after reading this guide 5. Most common form of financial aid for graduate and professional students 7. Helps pay for education expenses you can t cover 8. Acronym for program that provides employment funding for students demonstrating financial need 10. Federal loan with no credit check 11. Financially, what the government considers grad students to be 13. A financial resource, not a loan 15. Check this for free every 12 months 17. Borrow as as you need 18. Federal loan with required credit check (hint: all caps) 19. Dates not to miss 20. A federal financial aid eligibility requirement DOWN 2. Total cost to attend school 4. Type of funding, not a loan 6. Type of Stafford Loan, interest not paid by federal government 7. One of four types of education loans 9. Record-keeping system you maintain a long time (one of the S s ) 12. Type of Stafford Loan, interest paid by federal government 14. Free Application for Federal Student Aid 16. Free of troubles 21. Itemize your monthly expenses 38 DOWN 2. Cost Of Attendance 4. Grant 6. Unsubsidized 7. Federal 9. Sustainable 12. Subsidized 14. FAFSA 16. No Worries 21. Budget ACROSS 1. Scholarship 3. Wise Borrower 5. Loans 7. Financial Aid 8. FWS 10. Stafford 11. Independent 13. Family 15. Credit Report 17. Little 18. PLUS 19. Deadlines 20. US Citizen

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41 Terms you should know Accrued Interest Capitalization Consumer Reporting Agency Credit Report Deferment Interest that accrues on the loan and is payable by you or, in the case of subsidized Federal Stafford Loans, by the federal government, during in-school, grace, and deferment periods. Fees and accrued interest on a loan are added to the principal balance. Both then become part of the principal balance and begin to accrue interest. An agency that compiles, maintains, and distributes credit and personal information to creditors. This information may include your payment habits, number of credit accounts, the balance of those accounts, place of employment, length of employment, and records of credit transactions. Lenders check with consumer reporting agencies to learn whether a potential customer seeking a loan is likely to repay based on the way other obligations have been handled in the past. A summary of your credit history. It is maintained by an authorized consumer reporting agency and sent to potential creditors when requested. Credit reports include information such as current and recent addresses, employer information, payment performance, type of debt you have and the lending institution for each account, available credit, and current balances. A period during which the repayment of the principal amount of the loan is suspended as a result of your meeting one of the requirements established by law and/or contained in the promissory note. During this period, you may or may not have to pay interest on the loan. Endorser A signer in addition to the principal signer for Federal PLUS Loans for those borrowers who do not meet the minimum credit requirements. The endorser signs a promissory note and agrees to repay the loan in the event that you do not. FAFSA FDLP (Federal Direct Loan Program) Federal Perkins Loan Federal PLUS Loan The Free Application for Federal Student Aid is a form that all students must complete to apply for federal financial aid. This free application is produced, distributed, and processed by the U.S. Department of Education and is the only device used to determine your eligibility for federal funds. Stafford and PLUS loans that are available directly from the federal government rather than through a commercial lender. Only certain institutions participate in this program. A need-based federal loan for students, which is issued by a participating school. It is an unsubsidized federal education loan. Parents of undergraduate students can borrow the PLUS loan on behalf of their undergraduate child, while graduate and professional students can borrow it themselves. An amount up to the cost of attendance less any other financial aid can be borrowed in a given academic year. There are no aggregate borrowing limits in this program. 40

42 Federal Stafford Loan There are two types, subsidized and unsubsidized. Subsidized Stafford Loans are based on need, and the interest is paid by the federal government while you re in school, during the grace period, and during eligible deferment periods. Unsubsidized Stafford Loans are not based on need, and you re responsible for the interest. FFELP (Federal Family Education Loan Program) A loan program offering Stafford and PLUS loans financed by private lenders and guaranteed by the federal government. Forbearance An agreement to accept a temporary cessation of loan payments, smaller payments than were previously scheduled, or an extension of time for making payments. Forbearance may be given for circumstances not covered by deferment that adversely affect your ability to meet loan payment obligations, such as economic hardship. Grace Period Holder A period of time that begins when you graduate, leave school, or your enrollment status drops below half-time - whichever comes first - and ends when your first loan payment is due. Interest continues to be paid by the government on subsidized loans during the grace period. But interest accrues on unsubsidized loans. The lender, institution, or agency that originated the loan and holds its legal title, or a lender or secondary market that purchased the loan from the original holder. Interest A charge for the use of money. Interest is calculated as a percentage rate of the loan principal. The interest rate charged can be fixed, which means it does not change over the life of the loan, or the rate can be variable, in which case, it changes periodically. The variable rate may be tied to one of several indexes such as the Prime Rate, LIBOR, or U.S. Treasury Bills. Lender The bank, savings and loan, credit union, or other approved entity from which you borrow a loan. Need Access Need Access is a financial aid application tool offered by Access Group that gathers information from students to determine their eligibility for institutional financial aid. Please visit NeedAccess.Org for more information. Loan Fee A fee calculated as a percentage of the principal amount borrowed; it is deducted from each disbursement of the loan and remitted to the federal government to offset the costs of administering the federal student loan program. Principal Principal refers to the total amount borrowed plus any capitalized fees and interest. Promissory Note A legal document signed by you when obtaining a loan. It lists the conditions under which the loan is made and the terms under which you agree to repay the loan. You should keep copies of your promissory notes so you know what you agreed to for each loan. 41

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