COLLEGE STUDENT LOANS RECONSTRUCTING SUCCESS THROUGH THE STUDENT LOAN PIPELINE

September 20, 2013

Patt McCafferty

BACKGROUND

$1 Trillion Aggregate outstanding student debt Student loans are the 2nd largest consumer liability,

mortgages #1 Student loans do not require credit checks or in-depth

credit analysis Average student loan debt for 2 year college is $13,289 Average student loan debt for 4 year college is $23,118 Aggregate loan limit (undergraduate)

Dependent students $31,000 Independent students $57,500

FEDERAL STUDENT LOAN PROGRAMS Two Federal Student Loan Programs

Subsidized – need based (23,000 aggregate limit for undergraduate) Unsubsidized – non need based

Both Require the FAFSA Both Require Loan Entrance Counseling Both Require a Master Promissory Note

Current interest rate 3.86 for new borrowers

Borrower repayment plans: Fortunately, there are several

NEW 150% RULE

150% Limit on Subsidized Loans Per the Moving Ahead for Progress in the 21st Century

Act, a new borrower on or after July 1, 2013 cannot receive subsidized loans for more than 150 percent of the published length of the borrower’s educational program.

The law also provides that a borrower who becomes ineligible for subsidized loans because of the 150 percent limit is ineligible for interest subsidy benefits on all subsidized loans first disbursed to that borrower on or after July 1, 2013.

IMPACT OF STUDENT LOANS

Current lifestyle: Multiple priorities. Societal pressures to “have” non-essentials. Unemployment, homelessness, loss of benefits.

Future lifestyle: Loan payments, rent/mortgage, utilities, phone, internet, car, health care, credit card debt

Future credit: student loans help build credit, but too much debt can prevent a person from qualifying for a car loan, a mortgage, etc

Potential employers are doing credit checks and students don’t realize this will happen

INFLUENCING STUDENT BORROWERS Loan Limits Packaging Philosophy Counseling Worksheets Forms Messaging Financial Literacy programs

LOAN LIMITS

ITCC is participating in a ED Experimental Site Initiative.

Reducing annual loan limits for independent students $9500 to $7500 $10500 to $8500

Tuition and fees for 12 credits at Ivy Tech is $1383. Books around $500. Around $2000 for a semester. Many students do not go full time, yet borrow the maximum loan allowed.

MAKING THE PART-TIME STUDENT POINTSemester # credit hours $ borrowed

Fall 6 $3750

Spring 6 $3750

Summer 3 0

Fall 6 $3750

Spring 6 $3750

Summer 3 0

Fall 6 $4750

Spring 6 $4750

Summer 0

Fall 6 $4750

Spring 6 $4750

Summer 4 $0

TOTAL AMOUNT BORROWED FOR 60 CREDIT HOUR AS DEGREE: $33,000

Total Tuition and Fees for 60 credits @ $8000

STUDENT LOAN “PACKAGING”

Automated Packaging (Awarding) Subsidized Loan Eligibility Only, as an OFFER Only to students in Good Standing and Previous Borrowers

Manual Packaging (Awarding) Students complete a Direct Loan Request Form New borrowers or those on Academic Progress of Warning or

Probation Any student wanting to borrow “Unsubsidized” loan

THE DIRECT LOAN REQUEST FORM(SEE HANDOUT) Student has to consciously complete form and follow a

set of three instructions Loan Entrance Counseling Complete the Master Promissory Note Retrieve loan history from National Student Loan Data System and

report on the request form and attach a print out. Student must indicate a loan amount that they would like to have

offered Student must write in the amount they have already borrowed

www.nslds.ed.gov

NATIONAL STUDENT LOAN DATA SYSTEM Two levels of impact

Student learns where s/he can go to get current information about their own student loan history

Gives them “in-time” data and sometimes encourages them to borrow less

Used in face to face counseling Ask “do you know how much you’ve already borrowed?” “Do you know

how much your monthly payments will be?” “How much do you really need to borrow?’

www.nslds.ed.gov

LOAN COUNSELING

Federal requirement for on-line counseling www.studentloans.gov

Differences in default rates between ITCC Gary and Bloomington Biggest difference, anecdotally, was the personal counseling Gary

gave to every student Bloomington implemented counseling to each student requesting a

DL Request Form from our front desk

COUNSELING- POINT OF CONTACT Address the cost of attendance Review how much aid the student has to meet direct

costs Discuss the ways other expenses are being met Determine if student needs to borrow Encourage to borrow the least amount possible Review repayment and how much monthly payments are Compare loan borrowing to other borrowing

Handouts and role plays

FINANCIAL LITERACY CAMPAIGN

What does it really mean? Quick announcements Messaging to students Web based tools Workshops and events

Meaningful one/one counseling

PRACTICAL APPLICATION

Counseling in action Completing the Worksheet Web tools and what is availble

DISCUSSION, QUESTIONS, CONCERNS ?

Patt McCafferty

Director of Financial Aid

Ivy Tech Community College Bloomington

812-330-6010

pmccaffe@ivytech.edu