ECON Quiz 1

For 2017-2018, what was the average expense for textbooks at public four year universities?

$1250

What is the maximum Pell award per year currently? Is there a time limit on receiving pell money?

$6095. Ex: if you are eligible for $2000 for the year, you will most likely get 1000 for each semester. May be eligible for additional$1000 in the summer "year round pell" but there is a 12 semester limit

For 2017-2018, what was the average expense for room and board at four year public universities? which of the two was a high cost at these universities: tuition and fees, or room and board? Have college expenses always been this way, or is this relatively new?

-Average expense at four year public universities (instate) for room and board: $10,800 -Room and board is more. It has not always been this way, this is relatively new. It used to be a cheaper option and easier years ago but not today.

What is the difference between a dependent student and an independent student? What is the maximum a dependent student can borrow his/her first year? Independent?

-Dependent students still rely on parents for many things, such as being included on FAFSA form. Can borrow $5500, no more than $3500 subsidized. -Independent students are generally 24 years old, married, has a child - unless an emancipated minor. Can borrow $9500 and $3500 in subsidized loans.

What is FAFSA? What does FAFSA stand for?

-Free application federal student aid -free application - deemed unnecessary for government to change -have to fill out the form every year you're in school in order to stay eligible for federal student aid -have to fill this out first - is the key to obtaining federal financial aid like grants, work-study, student loans, and some scholarships used to pay for college.

Using information from the Bureau of Labor Statistics for 2017, compare median earnings of college graduates to the other groups presented (full-time workers age 25 years and older). -Which groups had the highest earnings? -Which groups had earnings above the national median? -Which groups had earnings below the national median? -Which group had the lowest earnings? -qWhat was the median earnings level for all full-time workers for 2017?

-Group with the highest earnings were those with a doctorate -Groups with earnings above the median were bachelors degree and above -Groups below the national median were associates degree and below -Group with the lowest earnings were less than a high school diploma -Median earnings is $907

Pros and cons of federal student loans? (Government, DOE)

-Have to do FAFSA first because that gets you in the door. -Fixed rates -continual programs, it has been around since 1965 -No prepayment penalty (Positive) -Repayment options - different plans and alternatives -5.05% plus or less than 7% -forgiveness programs - if you do what they ask, at some point it will be forgiven

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 have many different loans, then you have many loan payments after graduating. Due in different places and can be hard to keep track of. -Consolidating them makes it easier to keep track of. One large loan payment each month. -If you pay them off individually, then you have to be methodical. -If you consolidate it is only one payment to worry about. You can also stretch them out.

What is the extended payment option? What would be the benefit to this option? How many years does the student have to repay this loan?

-If you need to make lower monthly payments over a longer period of time than under plans such as the standard repayment plan, extended repayment plan, may be right for you -do not want to default to this -extend to 25 years. -for example, $106.31 from project turns into $58.75 per month but in total it is going to be $17,625.21 and dramatically increases your loan, originally $10,000 -This is if you cannot pay it on time and you are not qualified for deferment

Pros and cons of Bank/private student loans?

-NO FAFSA - apply with the bank! -Fixed rate or variable. Must be careful looking at this -Could suspend or stop. Can be reconsidered depending on if education stops, situational, etc. -Could be a prepayment penalty - be careful -ONE repayment plan. If not paid there is finance fees! -Less or equal to 12% -no forgiveness

Using info from the Bureau of Labor Statistics for 2017, compare unemployment rates of college graduates to other groups presented (full time 25 years and older). -What was the national average unemployment rate for 2017? -Which groups had the highest unemployment rate? -Which employment rates were above (worse than) the national average? Below? (Better than? -WHat was the average unemployment rate for all workers?

-National average unemployment rate for 2017 is 3.6% -Groups with the highest unemployment rates were those with less than a high school diploma at 6.5% -Employment rates that were worse than the national average, or above were some college, high school, and less than a high school diploma. -Those with lower than the national average or better than it were associates, bachelors, masters, doctorate, professional -Average is 3.6%?

-What does the word "nominal" mean when discussing "nominal" earnings or "nominal" income? - -What does the word "real" mean when discussing "real" earnings or "real income?" -Which of the two (nominal or real) represents the dollar amount of the worker's actual wages, and which represents that worker's purchasing power? What is considered when determining "real" earnings?

-Nominal earnings mean that you get annual gross pay, monthly salary. It s weekly earnings. -Nominal is prices that exist at the time. It can differ over time -Real earnings mean you have purchasing power and more of it. -(REAL)What paycheck says vs. what you actually do with it. May get a raise after a few years but might not matter because of inflation -Real is the price adjusted with inflation

According to Liz Weston, what is the "old-school" rule regarding higher education? What was the "bubble-economy" rule? "new" rule?

-Old school rule is that not everyone needs a college degree to get ahead. There are plenty of good-paying, secure jobs for people with high school diplomas. -Bubble economy rule is to get the best education you can, regardless of the cost. Student lenders will give you as much money as you need. -New rules is when you need at least a two-year degree to get ahead, but limit how much you borrow for any education.

According to College Board's Trends in College pricing, how fast did in state college tuition and fees rise from 2016-2017 to 2017-2018 at four year public universities? private universities? in-district students at public two year colleges? how do these three sets of increases compare to the CPI increase for the same time period?

-Public four year in-state is 3.1% -Private - 3.6% -Public two year - 2.9% -percent change is larger than CPI. Every level of education is more top heavy.

Compare tuition and fees for the academic year of 2017-2018 at public four year universities to those of private universities, and to those of public two year colleges.

-Public four year: $9970 -Private four year: $34740 -Public out of state four year: $25620 -Public two year: $3570

What traits are necessary for a student to complete a college degree, and to graduate with good results? Why do employers look for potential employees who have earned a college degree?

-Responsibility -Turn in assignments on time -Care -Endurance -Time management skills -Working through school shows success along with these personal traits you've gotten in college

Describe each of the federal student loan repayment options for direct loans.

-Standard repayment option: Payments are a fixed amount that ensures your loans are paid off within 10 years -Graduated repayment option: Payments are lower at first and then increase, usually every two years, and are for an amount that will ensure your loans are paid off within 10 years -Extended payment option: Payments may be fixed or graduated, and will ensure that your loans are paid off within 25 years. -Revised pay as you earn repayment plan: Your monthly payments will be 10 percent of discretionary income. Payments are recalculated each year and are based on your updated income and family size, and must be updated every year. any outstanding payment will be forgiven after 20 years. -Pay as you earn repayment plan: Your monthly payments will be 10 percent of discretionary income, but never more than you would have paid under the 10-year Standard Repayment Plan. Same as revised -family is taken into account, forgiven after 20 years. -Income based repayment: Your monthly payments will be either 10 or 15 percent of discretionary income (depending on when you received your first loans), but never more than you would have paid under the 10-year Standard Repayment Plan. 20 or 25 year forgiveness. -Income contingent repayment plan: 20 percent of discretionary income, or the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income. 25 year forgiveness.

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 earnings? Which group has seen their earnings decline?

-The change in real earnings since 1979 has been more favorable for women than men at all levels of education. -Real earnings for women 25 and over have increased 25% -Even women with a high school diploma saw increase. Men has stayed essentially the same, only college graduates saw an increase in earnings. All other men categories saw decline -Women are playing "catch up"

What is deferment? What are the reasons why government student loans can be deferred? How long can loans be deferred in each case?

-deferment or forbearance allows you to temporarily stop making your federal student loan payments or to temporarily reduce the amount that you pay -if you are serving the military, your loans are automatically deferred 13 months -any kind of economic hardship can be up for review and have loans deferred. Unusual economic hardship. 3 years is the greatest amount of time they can be deferred -attending grad school will defer your loans too

Describe each of the 11 general characteristics of the Consumer Price Index.

1. Bureau of Labor Statistics -looks for prices and pay raises 2. Monthly survey 3. Since 1913 4. Consumer prices only 5. greater than 80,000 item list from gas to milk 6. Categorize by a market basket - visual 'cart' of things 7. 8 categories plus misc. 8. Based on urban consumers 9. 93% of the population is included 10. Private company. It is not run by a government and usually has two pay raises a year called "Annual adjustment" and a "merit raise" usually given after a year of work 11. Federal government - uses it for someone receiving social security with an adjustment once a year for how much money you receive. IRS also uses it

When was Sallie Mae Created?

1972 SLMA and Sallie Mae in 2004 (Private)

What was the twelve month inflation rate as of April 2018 as measured by the CPI?

2.5% - this is a lot in college terms

When did Sallie Mae become a private company? What happened to its federal charter when it became private?

2004. Private companies do not run GSE. It stands between government and student. It is the middle man.

What percent of students worked all year in college, and what was the percentage who did not work at all while in college?

24% of students do NOT work. 55% work year round.

From the study "How America Pays for College 2017? How did families pay for college last year? What were the major sources of funding? What were the percentages from parents, students, scholarships and grants, and relatives and friends ?

35% pays in scholarships and grants/ Parent borrowing is 8%, student borrowing is 19%, parent income is 23%, and student income and savings is 11% and 4% relatives and friends

How long is the payment grace period for both types of Direct loans?

6 months after graduation

What is a promissory note? What is the student promising to do? Do students still owe their student loans if they stop attending classes, don't pass classes, dont graduate, or dont get a job to their satisfaction? Explain.

A written promise to pay student loans and any fees and interest to the DOE.You have to pay even if you do not finish education, get a job, or pass class.

When can federal government student loans be forgiven? What types of occupations can lead to federal student loan forgiveness? How many years would someone have to pay on his/her loan to qualify for forgiveness?

Can be forgiven after making payments for 25 years, or 20 years if taken out after July 1 2014. Those with public service jobs can get forgiveness after 10 years. -Occupations include: government job, public health, police, fire, public education, military, social work in a public child or family service agency, public service for those with disabilities or elderly, public librarians, etc.

How did the Pell Grant program get its name? Who was Claiborne Pell? What was his position in government?

Claiborne Pell always advocated for the pell grant program. Good for non-vets. He was a senator.

Are there any associated fees with a plus loan? Explain.

Current interest rate is 7.6%. There is a loan fee on all Direct PLUS loans. The loan fee is a percentage of the loan amount proportionately deducted from each loan disbursement. The percentage varies depending on when the loan is first disbursed: currently 4.248%

According to Liz Weston, what should student see as the maximum they should borrow for their monthly payments on student loans? IN her opinion, how should students limit their monthly payments on student loans?

Expected first year gross salary at a private college. Monthly salary should be less than 10% loan payment. Cannot do this at a private college. Do not borrow more than expected to earn in the first year out of school in job. Easier to live cheaper fresh out out college, and to make a dent in the loans. Try to stretch out as long as possible. Lowest amount with extra payment whenever possible.

Describe PLUS student loans. Who can take out these loans?

Federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for college or career school. Parent can take it out for an undergraduate student. Help pay for education expenses not covered by other financial aid. U.S. department of education makes direct PLUS loans to eligible borrowers through schools participating in Direct Loan program.

What is the graduated repayment option? How do payments change as time goes on? Why would this option make sense? How often to payments change? How many years does the student have to repay this loan.

Graduated repayment plan starts with lower payments that increase every two years. - Payments are made up to 10 years. (Website says up to 30 too for consolidation). -Good for careers that pay raise as their salaries increase over years. -Not good for someone who is getting a regular salary job.

What is meant by a federal student loan program being "needs based"? what federal programs are needs based? which are not?

HAve to have a financial need for it. Pell grants are needs based, created by the HEA. Pell grants used to cover about 80% of college and fees, now it is oonly a portion.

What were the top three major concerns parents had about their students education? extreme worry

Loan rate increase (29%) Schools will raise tuition (29%) Scholarships and grants less available (24%)

What is a cost benefit analysis? Describe how a college student and his/her family are informally performing a cost-benefit analysis when he/she has decided to attend college.

Looking at the benefits and costs and a course of action in a given situation. It is important that the benefits outweigh the savings. Costs of a college degree are more important than going ot college. Parents are concerned with loan rates increasing (29%), schools raising tuition (also 29%) and scholarships/grants less available. (24%). Business and government always coming up with cost benefit analysis

Do government student loans have prepayment penalties?

NO

What is the standard repayment option? How many years does the student have to repay the loan?

Pay overall less over ten years but it is a larger payment per month. Ten year payment. $106 for $10,000. Start with this.

Would someone qualified for a forgiveness program want to pay additional each month, or pay just the minimum required? Why?

Pay the absolute minimum if available for forgiveness and save other money in savings. Debt will be forgiven in a public service job (example).

What is a government Sponsored Enterprise or a GSE?

Sallie Mae was set up as this. It was created by congress and created a federal charter or government issues. It is meant to be temporary, eventually independent of government and taxation. Congress believed that there was a public need for it. No profit incentive, that is why it was done.

Can a student attend college part-time and still receive a direct student loans?

School determines how much you need based on financial aid and attendance. Have to be in school at least half time.

What is meant by the phrase "marginally attached worker?" Which of our groups would feel marginally attached tot he workforce and to the economy? Describe this person's work experience and academic background.

Someone who would like to work, looked in the past 12 months, but not in the last 4 weeks. Low wages and not a bad work ethic, but just has never worked out for them. Not unemployed but not in the work force.

Do students or parents borrow more for college?

Students

Which of the two Direct Student loan programs is needs-based, and which is not?

Subsidized is needs based. Unsubsidized is not.

What is the current interest rate for both subsidized and unsubsidized direct loans? Are there any fees under either kind of direct loans?

Subsidized: No fees Unsubsidized: fees 5.055% interest rate

Explain the difference in how interest is handled in the two types of Direct loan programs. When is the student responsible for interest in each case?

Subsidized: US DOE pays interest. Take $40,000, owe $40,000. I think interest starts after grace period. Unsubsidized: pay directly after graduation

What law established the Pell program? Who was the president of the U.S. at this time? What did this president call his plan for the country?

The 1965 HEA by lyndon Johnson. Higher education act. This is how the federal government got involved in higher education. First signs of a needs based program.

Why does weston believe students should get federal student loans before private student loans?

They have the most flexible debt. Private can have hidden fees.

What does it mean when it is said that Sallie Mae "services" government student loans?

Those who don't qualify for grants. It is a loan servicer. Stands between the government and the student, it is a middle man. W

Will credit be checked when requesting a PLUS loan? Who is legally responsible for a PLUS loan if parents take out the loan? Does the student have any obligation to make payments on these loans?

Undergrad student doesn't have any responsibility to repay these loans. Parent is responsible even if it is on behalf of the student. Up until now, no one has looked at our credit for loans. Credit IS checked when looking at a PLUS loan. Government has the right to say no if you are not responsible with loans.

Why is the scholarships and grants contribution misleading?

While scholarships and grands were number one, contribution of students paying has been the highest that it ever has been, nearly equalling the amount of parents. Through a combination of income, savings, and borrowing, students covered 30 percent of costs in 2016-17, while parents covered 31 percent. Parent support of college is decreasing, so students are paying more. everyone has the same amount of scholarships and grants as everyone else.

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?

Yes. You have to prove that you need it financially. Fill out FAFSA first.

What is a merit raise?

given after a year of work

Can a student receive Pell money for more than one school at a time?

no

Can a student attend college part time and still receive a Pell Grant?

yes, but amount you get may be less. You must be a 50% student