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