Financial Literacy Test 2
if you are going to borrow money
do it responsibly
private student loans are for ___________
education
figure out if the school your going to is right for you
educationally and financially
Considers credit history for ___________ loan
private
Often allows borrowing up to cost of attendance less financial aid received for __________ loan
private
Requires applying directly with bank or credit union for _____________ loan
private
cosigner may help increase chances of approval for _________ loans
private
the new repayment plan will...
provide benefits for both current and future borrowers who sign up for it. the benefits will come at a cost to the government
Rule 8 cut costs
reduce expenses by living at home, sharing living costs with roommates, avoiding car ownership, buying used textbooks, and utilizing education tax benefits to lower the overall cost of education
credit report
statement of credit activities you have done over the years. It has information about your credit activity and current credit situation such as loan paying history and the status of your credit amounts
fixed rates
stays the same, giving you predictable monthly payments
private loans
they give varied interest rates
one rule to live by is
to try to limit your total amount of student loans to a small percentage of what your expected annual salary may be from the 1st job you get after college
Private student loans can help you pay for college after
you've explored scholarship, grants, and federal student loans
by affordable I mean
your monthly payments will be about 8-15% of your future gross monthly income. that is equilvalent to the rule of thumb, that total student loan debt should be less than your annual starting salary in your field. Please keep your student loan debt in sync with income after graduation
if you apply for financial aid
your school will likely include student loans as part of your financial aid package
student aid report SAR
your student aid report is a paper or electronic document that gives you basic information about your eligibility for federal student aid as well as listing your answers to the questions on your FAFSA
Private student loans offer different repayment plans
Options that allow you to make interest only or fixed payments while you're in school. These in-school payments could lower your total student loan cost.
a good place to start is to
calculate what your monthly payments would be for different loan amounts
credit scores are generated by
credit bureaus
student's eligibility
eligibility for certain awards is determined by the information on the application. It is not up to the student to decide his/her eligibility
Private student loans offer flexibility
since they can be taken out by a student, parent, or credit worthy individual
student loans are legal agreements
so be sure you understand what you are getting into
federal loans
subsidized interest rates
the financial impact of student loans
the average student loan borrower graduates with substantial debt, which can affect their ability to achieve other financial goals such as buying a car, a house, or starting a family
in 2018 national financial capability survey reports that the majority of student loan holders 51% say
they did not try to estimate monthly payments when obtaining their most recent student loans
Personal loans can be used for ______
things like consolidating credit card debt, making home improvements, or paying for a wedding
Student's dependency status
this basically refers to the student as depend or independent. it is a decision made for the individuals by the government, based on certain criteria.
Loan forgiveness program
this includes the cancellation of all or some portion of your remaining federal student loans balance. If your loan is forgiven, you are no longer responsible for repaying that remaining portion of the loan
loan servicer
this is the company that collects payments, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a federal student loan on behalf of a lender
expected family contribution EFC
this is the number that's used to determine your eligibility for federal student financial aid. This number results from the financial information you provide in your FAFSA. Your EFC is reported to you on your SAR
cost of attendance COA
this is the total amount it will cost for you to go to school- usually stated as a yearly figure. COA includes tuition and fees; room and board, and allowances for books, supplies, transportation, loan fees, and dependent care. It also includes miscellaneous and personal expenses, including an allowance for the rental or purchase of a personal computer; costs related to a disability; and reasonable costs for eligible study-abroad program
Consolidation
this means the process of combining one or more loans into a single new loan. A student who borrows a loan each semester is considered to have borrowed 8 different loans in a 4 year period of attendance
extended repayment
this plan is available to borrowers with more than 30,000 in federal student loans
Graduated repayment
this plan is for borrowers who expect their incomes to rise over time
defaulting
this refers to a failure to repay a loan according to the terms agreed to in the promissory not. For most federal student loans, you will default if you have not made a payment in more than 270 days. You may experience serious legal consequences if you default
repayment plan
this refers to the various structured method to pay back student loans. Most popular are the standard payment plan and the income based payment plan. A student has to apply and qualify for certain plans to be considered
biggest myths about financial aid
You have to make a certain income to qualify Assets, saved $, parents own a home, so you won't get as much financial aid
enticing rate
a rate that is very low at the beginning and then is going to increase over time
Things to remember about graduated repayment
all federal loan borrowers are eligible. Payments start off low and increase every 2 years. You will pay more interest over time than under the standard repayment plan
Things to remember about standard repayment
all federal loan borrowers are eligible. This generally results in the highest monthly payment but the lowest cost over the life of the loan
if you think you need to borrow both federal and private loans
always submit your FAFSA first
estimated monthly payment under save plan
amounts will be calculated based on a borrower's income and family size, and payments can be as low as $0
Rule 1:Borrow Wisely
calculate your total debt for all years of school and ensure it's not more than your expected first year's salary. This rule helps you manage your debt and avoid financial struggles.
SAVE student loan repaymetn plan
can lower your bill. Once the plan is fully phased in, next year, some people will see their monthly bills cut in half and remaining debt cancelled after making at least 10 years of payments
credit bureau
collects and researches individual credit info and sells it to creditors for a fee, so they can make decisions about granting loans
Rule 5: Maximize federal loans before private loans
consider private loans only after maximizing federal loan options. Be cautious about variable interest rates and ensure you understand the terms and potential repayment difficulties
common credit score
defy credit score
income driven repayment plans (different plans)
payment term: pay as you earn
standard repayment
payments are the same each month. All federal borrowers are automatically enrolled in this plan.
if you need to take out loans, you should take out loans in the following order
1. Direct subsidized loans 2. Direct unsubsidized loans 3. Plus loans 4. Private loans
federal student loans provide additional flexibility in several areas than private student loans
Borrowers don't need a credit check to be considered (except for the federal plus loans for parents and graduate students) Some federal student loans offer income-driven repayment plans, where the rate of repayment is based on the borrower's salary after college Federal student loans allow the borrower to change their repayment plan even after they've taken out the loan.
things to remember about extended repayment
if you extend the term of your loan, you will pay substantially more interest over time, but your payments will be significantly smaller
payment term for extended repayment
up to 25 years
payment term for graduated repayment
10 years (up to 30 years for consolidation loans)
payment term for a standard repayment
120 months (10 years, or up to 30 years for consolidation loans)
direct plus loans
2 types: grad plus loans- for graduate and professional students Parent plus loans- loans that can be issued to a student's parents
credit score
300-850, assessment of risk, and it is a picture of how credit worthy you are. Is a number that is based on information from your credit report. The number represents the likelihood that a consumer will repay a loan
Who qualifies for SAVE
Borrowers must have federally held student loans to qualify for the SAVE repayment plan. These include direct subsidized, unsubsidized and consolidated loans, as well as Plus loans made to graduate students Parents who took out federal plus loan to help their child pay for college are not eligible for the new repayment plan Private student loans don't qualify for the new SAVE repayment plan or any other federal repayment plan People who are already enrolled in the REPAYE repayment plan will be automatically switched to the SAVE plan
if you have federal student loans, there are several repayment plans that may be available to you.
Contact your servicer to discuss repayment plans and learn more about how to apply and enroll in a different repayment plan
the majority of student loans are due
immediately or 6 months after you graduate
federal student loan
Figure out what you are getting Be responsible Accept only the loans you need Do research Figure out if the school your going to is right for you Location is important Get an idea of your future job salary Sign a promisory note- keep a copy for yourself Keep in touch with your loan servicer Studentaid.gov- if you have any questions
Many private student lenders have alternate payment programs for borrower who might not be able to make a full payment
Graduated repayment- a plan where your payments start out lower and gradually increase overtime Extended repayment: a plan where you pay less each month but extend the life of your loan over a longer period of time Private student loans don't qualify for the SAVE program
most important items you should understand when taking out a loan for college
Is this a federal or private student loan Who is the servicer Is there a cosigner on the loan What is the interest rate Is the interest rate fixed or variable When are you required to make payments- while in school or after What is the penalty for late payments
8 tips for taking out student loans
Borrow Wisely Start looking for free money early Seek for more free money Choose federal loans first Maximize federal loans before private loans Public service loan forgiveness Plan your course load Cut costs Do not refinance student loans with a private lender. it would increase your costs
early child development professionals
did you know that the state of utah will pay for you to get your college degree
3 types of federal loans for college
direct subsidized loans, direct unsubsidized loans, and direct plus loans
Rule 7: plan your courseload
efficiently plan your courses to graduate on time, avoiding unnecessary expenses. Taking a heavier courseload and avoiding changing majors can save money (this latter, do only if absolutely necessary)
Rule 3: Seek for more free money
explore opportunities for grants and scholarships to reduce reliance on loans. Numerous resources and organizations offer scholarships, and starting the search early is crucial. Scholarship based on merit, heritage, research, etc
Borrowing limit determined by FAFSA for ___________ loan
federal
FAFSA required to apply for __________ loan
federal
Made to students based on financial need= ___________ loans
federal
allows change in repayment plan after borrowing = __________ loan
federal
2 types of student loans
federal and private
Rule 4: Choose federal loans first
federal student loans offer advantages like fixed interest rates, deferment options, and no need for a cosigner. It's recommended to utilize federal loans before considering private loans
To apply for federal student loans
first fill out FAFSA
some private student loans allow you to track your credit health
for free with quarterly FICO credit scores
Rule 6: public service loan forgiveness
if you plan to pursue a career in public service, taking on more debt than your first years salary may be justified. Public service loan forgiveness programs offer debt relief for those working in government or non profit roles. There are also some other loans for teachers or police officers or Human development major offering childcare, may have additional help to pay while you're going to school
things to remember about income driven repayment plans
if you repay your loan under a income driven repayment plan, you may be eligible for loan forgiveness after 20-25 years of qualifying payments, or even as few as 10 years, if you work in public service, income driven repayment plans cap your monthly payments at certain percentage of your discretionary income. Your monthly payment may change as your income or family size changes. You must re-certify your income and family size each year- submit paperwork to stay enrolled in your income driven repayment plan
all student loans
include terms and conditions
taking the time to thoughtfully plan can help you make...
informed borrowing decisions that set you up for a more manageable financial future
they usually offer the choice of a fixed or variable
interest rate
dependent student
is a student who does not meet any of the criteria for an independent student
Student loan
is a type of loan designed to help students pay for post-secondary education costs such as tuition, books, supplies, and living expenses
independent student
is one of the following: at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, and orphan, a ward of the court, someone with legal dependents other than a spouse, an emancipated minor or someone who is homeless or at risk of becoming homeless
the net price
is what you actually end up paying to attend that school- typically the net price is lower than the sticker price due to financial aid you receive in scholarships
promissory note
legal instrument, in which one party promises in writing to pay a specified sum of money to the other
if you need to have student debt
make sure your student loan debt will be affordable once you graduate
variable rates
may go up or down due to an increase or decrease ot the loan's index
grants
money that you don't have to pay back
once you graduate
no more than 15% of your payments towards student loan debt should exceed 15% of your income
Rule 2: Start looking for free money early
too often students wait too late to start figuring out how to pay for college, and by then they've missed half the deadlines that year alone. If you are working, ask your employer if they offer scholarships. Look all year long for opportunities
Private student loans
unlike federal student loans, there is no set standard repayment schedule for private loans Many give you 120 months to repay. However some loan terms have you repay over 25 years. Check the terms and conditions of your loan or contact your servicer to figure it out
sticker price
what is listed by most colleges and universities as the cost of tuition and fees
you can apply for private student loans...
when you need to, as long as you plan enough time for the lender to process your loan and disburse (send) money to the school
you have to pay them back plus interest
whether you graduate or not
grants, scholarships, and work study
will help but may not cover everything
just because you qualify for a student loan, doesn't mean ________
you have to take it
if you fail to repay a private student loan according to terms in the promissory note
you may face legal consequences
it is important to consider federal student loans before
you take out a private student loan because there are differences in interest rates, repayment options, and other features
