Econ Exam (Unit 3)
What was the avg. total cost of a year of education last year? Has that number changed dramatically since the 2010-2011 academic year, or is that number fairly stable?
- $20,882 per year - remain stable for the past 4 years
What is the maximum Pell award per year?
- $5,730
What does the word "real" mean when discussing "real" earnings or "real" income? How do real earnings compare to a worker's paycheck?
- *purchasing power* -the income of an individual or group after taking into consideration the effects of inflation on purchasing power - if it costs you $2,000 more to purchase the same amount of goods and services this year compared to last year, and your annual income stayed the same, then your real income has actually decreased by $2,000
What % of families saw no parental contribution towards college expenses? What % of families saw no student contribution towards college expenses?
- 31% believe no parents should contribute - 30% believe students shouldn't contribute
What is the current interest rate on a Perkins loan? Are there any fees on a Perkins loan?
- 5% - No fees
Did most families believe paying for college is the parents' responsibility, the student's responsibility, or should the expense be shared?
- 61% joint responsibility
Describe the general features of the William D. Ford Federal Direct Loan Program. Who was Ford? What was his position in the federal government?
- Congressmen from Michigan (stafford program) - Subsidized (financial need) - Unsubsidized (no financial need) - Have to fill out FAFSA - 1/2 time student
What is deferment? What are the reasons why government student loans can be deferred? How long can loans be deferred in each case?
- Deferment: posponed - Unemployment inevitable?, laid-off?, active duty, financial hardships - 3 years/(as long as you're on active duty)
How long is the grace period for payments under the Perkins program? When does the student begin making payments?
- Different per loan/program - 9 months after graduation
What is FAFSA? What does FAFSA stand for?
- Free Application for Federal Student Aid - Determines financial need
What does it mean to say the Pell program is a needs-based program? Does a student need to show financial need to receive a Pell grant?
- Has to demonstrate financial need
Describe the general features of Perkins student loans. Can a student attend college part-time and still receive a Perkins loan? Explain.
- Have to fill out FAFSA - Show financial need - Have to be enrolled full/part time - $5,500
What law established the Pell program? Who was President of the U.S. at this time? What did this President call his plan for the country?
- Higher Education Act 1965 - Pres. Lyndon Johnson - Great Society: to assist those at the bottom of society
How can you be certain you are using the official FAFSA website, and not a spam site, or one that will charge you for something that should be free to use?
- Make sure it is the .gov website
Does a student need to show financial need to receive a Perkins loan?
- Needs to demonstrate exceptional financial need
Can a student receive Pell money for more than one school at a time?
- One school at a time
What are the pros and cons of private student loans? Of government student loans?
- Pros & cons of *private loans*: No FAFSA, fixed or variable rates, possible prepayment penalty, programs may end - Pros & cons of *gov. loans*: FAFSA, fixed rates, no prepayment penalties, on-going programs
How did the Pell grant program get its name? Who was Claiborne Pell? What was his position in government?
- Senator Claiborne Pell from Rhode Island
How long is the payment grace period for both types of Stafford loans?
- Subsidized is 6 month - Unsubsidized is 6 month
What is the current interest rate for both subsidized and unsubsidized direct loans? Are there any fees for either kind of Stafford loans? Explain.
- Subsidized: 4.66% - Unsubsidized: 4.66% - Yes, 1.073%
Where does the money come from for a Perkins loan?
- The org. that made the loan initially; the lender could be the borrower's school; a bank, credit union, or other lending institution; or the U.S. Department of Education
Can a student attend college part-time and still receive direct loans? Explain.
- Yes, at least 1/2 time
What is the standard repayment option? How many years does the student have to repay the loan?
- fixed amount each month until loans are paid in full - monthly payments will be at least $50 & you'll have up to 10 years - 120 payments
Why/when would a graduate want to consolidate his/her student loans? When would you NOT want to consolidate student loans? Is consolidation common? How does this consolidation benefit the graduate?
- if you consolidate student loans = want to keep finance simple - extends repayment period by combining federal student loans into one loan - possibly pay more interest since you will be making payments for a longer period of time
When it is said that Sallie Mae "services" government student loans, what does that mean?
- middle man
According to Liz Weston, what should students see as the maximum they should borrow for their undergrad degrees? Why does Weston believe students should get federal student loans before private student loans? How should students limit their monthly payments on student loans?
- monthly payments: total of that should be under 10% of gross monthly wages ($400 a month?)
What is the extended payment option? What would be the benefit to this option? How many years does the student have to repay the loan?
- must have more than $30,000 in direct loans debt - 25 years for repayment: fixed or graduated - smaller monthly payments;less than the standard plan -
What are the current interest rates for each government student loan program? According to our book, what are current private student loan interest rates?
- private: 10%-12%
(Liz Weston) Is student loan debt considered to be "good" debt, or "bad" debt? Why? Is student loan debt relatively less expensive than credit card debt, or relatively more expensive? Why? Which type of debt does Liz Weston call "toxic" debt?
- relatively less expensive than credit card debt (applying to future earnings) - make up more than what it took you to go to college - credit card debit is carried month to month
According to the College Board's Trends in College Pricing 2014, how fast did college tuition and fees rise last year at four year public universities? How fast did college tuition and fees rise at private universities? How fast did tuition and fees rise last year at public two year colleges? How do those increases compare to the CPI increase for the same time period?
-$560;2.9% *public* (lowest inc. of the three) -$1,464;3.7% *private* -$271;3.3% *two-year* -the inflation rate was .8%, so each institution increased pricing of tuition, fees, room and board
Using info from the Bureau of Labor Statistics, compare unemployment rates of college graduates to the other groups presented. Which groups had the lowest unemployment rates? Which group had the highest unemployment rate? Which groups had unemployment rates above the national average? Which groups had unemployment rates below the national avg.? What was the avg. unemployment rate for all workers?
-*doctoral: 2.2%* -professional 2.3% -master's: 3.4% -bachelor's: 4.0% -associate's: 5.4% -high school: 7.5% -*less than high school: 11%* -below national avg.: associates & above -above national avg.: high school, less than high school -avg. unemployment for all: 6.1%
Using info from the Bureau of Labor Statistics, compare median earnings of college graduates to the other groups presented. Which groups had the highest earnings? Which groups had earnings above the national average? Which groups had earnings below the national average? Which group had the lowest earnings? What was the median earnings level for all workers?
-*median earning of professional: $1,714* -median earning of doctoral: $1,623 -median earning of master's: $1,329 -median earning of bachelor's: $1,108 -median earning of associate's: $777 -median earning of high school: $651 -*median earning of less than high school: $472* -above national avg.: Bachelor's & above -below national avg.: Associate's & below -avg. for all workers: $827
When was Sallie Mae created? How many Americans have used Sallie Mae for college funding?
-1973 - Approx. 30 million
When did it become a private company? What happened to its federal charter when it became private?
-2004 - No direct gov. oversight - No expenditure - Federal charter was terminated
What is the Consumer Price Index? What are the general characteristics of the CPI? What was the inflation rate for 2014 as measured by the CPI?
-a measure that examines the weighted avg. of prices of a basket of consumer goods and services, such as transportation, food and medical care -CPI is one of the most frequently used statistics for identifying periods of inflation or deflation -2014 inflation rate: .8% - higher education is increasingly expensive - *1919 BLS, monthly survey based on urban consumer* -*87% of pop.* -*87 individual products/ 8 general categories* -*market basket*
What is a "cost-benefit" analysis? Describe how a college student and his/her family are informally performing a cost-benefit analysis when choosing to attend college.
-a systematic approach to est. the strengths and weaknesses of alternatives that satisfy transactions, activities or functional requirements for a business
What was the avg. expense for room and board at four year public universities? Which of the two was a higher cost at these universities: tuition and fees, or room and board? Have college expenses always been split this way, or is this relatively new?
-avg. public univ: $9,804 -room & board is more expensive -relatively new
Did student borrowing increase or decrease from the previous year?
-decreased by 3%
What personal traits does it take to complete a college degree? Why is it important to demonstrate these traits to a prospective employer for a career job?
-perseverance, work ethic, patience, drive, passion -it'll show that the individual is strong, independent, and motivated to hold a job
What is meant by the phrase "marginally attached worker"? Which of our groups would feel marginally attached to the workforce and to the economy? Describe this person's work experience and academic background.
-persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months, but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey
What is a Government Sponsored Enterprise, or a GSE?
-privately held corporations w/ public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy -members of these sectors include students, farmers and homeowners
According to the Bureau of Labor Statistics, how have real earnings changed since 1979 for groups with different levels of education? What group has seen its earnings increase? Which groups have seen little if any change in their earnings? Which group has seen its earnings decline?
-real median weekly earnings for college graduates have trended up over time -earnings increased: bachelor's degree -earnings decreased: less than a high school diploma -little change in earnings: associate's & high school graduates
From our study on "How America Pays for College 2014" how did families pay for college last year? What were the major sources of funding? What were the percentages of contributions from parents, students, grants & scholarships, and from friends/relatives?
-student borrowing 15% -parent borrowing 7% -*parent income & savings 30%* -*grant & scholarships* 31% -relatives & friends 4% -student income & savings 12%