Chapter 7: Study Guide

What are the benefits of deferment?

And at least deferment does not affect your credit. "After all, if your lender approves it — and, in some cases, they have to — then you're mutually agreeing to temporarily suspend your payments

What can deferring a loan affect?

interest rates

What is a drawback of deferment?

interest will still accrue if the loans are unsubsidized. If no payments are made during the deferment, that interest will capitalize, or be added to the total amount of the loan

How can you look at your ROI for college?

look at total debt earned and the salary they will ean after graduating

What does ROI stand for?

return on investment

What to do if you are in risk of default?

stay in contact with your loan servicer and communicate your financial situation to them, especially if you feel that you can't make your loan payments.

How long does someone have before their loans default?

student loans have a long delinquency period before they default—270 days, or roughly nine months

What does current value of investment mean?

the proceeds obtained from the sale of the investment of interest

WHy is ROI for colleges important to know?

to know which school will bring you the best return on your money based on lifetime earnings

What is net cost of attendance?

what college will actually cost after you've claimed all of the federal, state, and institutional grant aid available to families in your income bracket

What does defaulting a loan do?

"acceleration" kicks in, meaning that the entire loan balance is due immediately. If this balance doesn't get paid off, the government can then withhold tax refunds or any federal benefits that the borrower receives. Debt collectors can also sue borrowers to win the right to seize their wages—and after such a trial, debtors are often charged with the collector's court fees.

What is the ROI of my preferred school?

$340,000

What is the average student debt interest rate?

5.8%

What is a master promissory note?

A Master Promissory Note (MPN) outlines the details of the loan. When you sign one, you agree with the lender to the terms and conditions of the loan itself, and the way it will be repaid.

What are the benefits of private loans?

A private student loan might offer a lower interest rate, depending upon your credit rating and income (or that of your co-signer). Some also offer higher borrowing limits and fixed interest rates. Private student loans do not require any demonstration of financial need.

What does a master promissory note include?

Amount of the loan Specifics of the interest rate and fees, including how it's calculated Terms of repayment Options for repayment, including federal repayment plans Conditions of the loan Borrower's full name and contact information Grace period option, if any References verifying the borrower's address and location, in case mail is deemed undeliverable

Why are master promissory notes important?

An MPN puts all of the pertinent information into one place, which allows both the borrower and the lender access to reference the specifics of the loan with ease.

Why is FAFSA important?

Completing this form is the only way to receive state and federal financial aid

What are the types of federal loans?

Direct Subsidized Loans (subsidized Stafford loans) Direct Unsubsidized Loans (unsubsidized Stafford loans) Perkins Loans Direct PLUS Loans

WHat is the most common types of federal loans?

Direct Subsidized and Direct Unsubsidized Loans (also known as Stafford Loans) are the most common type of federal student loans for undergrad and graduate students. They comprise over 70% of annual student loans issued. Direct PLUS Loans (also known as Grad PLUS and Parent PLUS) have higher interest rates and disbursement fees than Stafford Loans.

What are the qualifications of a direct unsubsidized loan?

Direct Unsubsidized Loans (also known as Unsubsidized Stafford Loans) are federal loans issued to both undergraduate and graduate students. Students are not required to demonstrate financial need to qualify for these types of student loans, and no credit history is required to qualify. Interest will begin accruing at the time of your loan disbursement.

What are the two types of student loans?

Federal loans and private loans

What is the average interest rate for unsubsidized loans?

Federal rates for unsubsidized graduate student loans and parent loans are higher — 6.08% and 7.08%, respectively.

When is taking out more loans reasonable?

For career paths where salary increases can be significant

What does FAFSA stand for?

Free Application for Federal Student Aid

How does credit affect interest rates?

If you have good credit, you may be able to refinance existing student loans to get a lower rate.

how do you fill out the FAFSA?

Step 1: Create Your FSA ID Step 2: Fill Out Your FAFSA Application Step 3: Fill Out Your Student Demographics Section Step 4: Select The Schools To Receive Your FAFSA Information Step 5: Answer The Dependency Status Question Step 6: Fill Out The Parental Demographics Section Step 7: Supply The Required Financial Information Step 8: Sign And Submit Your FAFSA

What are the qualifications of direct subsidized loans?

To qualify for a Direct Subsidized Loan (also known as a Subsidized Stafford Loan), you must be an undergraduate student and demonstrate financial need. No credit history is required to qualify for this type of federal student loan. With a Direct Subsidized Loan, you do not have to pay interest while you are still in school. The government assumes responsibility for the interest accrued in that time period.

What is potential debt?

What money you will have to take out that scholarships may not cover

How can you calculate ROI?

current value of investment - cost of investment / cost of investment