Strategies for Paying the Spring Bill

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Celebrating 30 years of ExcellencePlanning, Saving & Paying for College

Strategies to Pay the Spring BillFamily Webinar Series:

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MEFA’s mission has remained constant since we began in 1982 – to help make higher education more accessible and affordable for Massachusetts students and families.

•Massachusetts Educational Financing Authority•Not-for-profit state authority that works to make higher education more accessible and affordable•Created in 1982 by the State Legislature •Helping families:

o Plan: Extensive community outreacho Save: U.Fund® and U.Plan® college savings planso Pay: Affordable fixed interest rate college loans for over 30 years

About MEFA

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• Some financial aid is still available– File the FAFSA for federal aid– Some colleges may have financial aid available

for the spring semester. Check with the college. – MA state financial aid deadline was May 1st

• Check with the college to see if you can still enroll in the college’s payment plan

• Able to apply for private loans

If You Have Not Applied For Aid

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Calculating the Balance Due: Direct vs. Indirect CostsDirect Costs: Billed from the college:

– Tuition– Fees– Room– Board/Meal Plan– Health Insurance

Indirect Costs: Incidentals throughout enrollment:

– Books– Transportation– Laptop– Personal expenses

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Options to Pay the Balance Due

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• Student is the borrower – no credit check• Annual limits: $5,500 for freshman year• Fixed interest rate changes annually: 4.66% for 2014-15• Two types:

– Subsidized – Interest accrues after graduation– Unsubsidized – Interest accrues immediately

• 1.072% (or 1.073% for new loans after 10/1/14) fee deducted from loan amount• Promissory Note & Entrance Counseling: StudentLoans.gov• No payments while in school• Several repayment options: StudentAid.gov

MEFA recommends that students exhaust their federal student loan options before borrowing from other sources.

1. Start with Federal Student Loans

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2. Minimize BorrowingBalance Due for Spring

Semester $10,000

Past Income (Savings)Student Savings -$500Parent Savings -$2,500

Present Income (Current Wages)Parent Contribution to Payment

Plan -$3,000

Future Income (Education Loans)Education Loan -$4,000

$0

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3. Affordability

• Visit mefa.org/tools to access the Monthly Payment Calculator

• Print your plan and call MEFA at 800.449.MEFA(6332) to discuss.

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4. Get Advice from Trusted Resources

• Ask Questions• Look for

Transparency• Utilize Free

resources• Work with

Financial Aid and Student Accounts if you need help

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MEFA Loan vs. Direct PLUS LoanMEFA Undergraduate Loan• Starting at 5.49% fixed interest

rate• Available to MA residents

attending college anywhere or any student attending college in MA

• Family loan: student and parent or other credit-worthy borrower are co-borrowers and share responsibility

• Credit-based• Multiple repayment options• Families can apply now

Federal Direct Parent Loan (PLUS)

• 7.21% fixed interest rate• Requires filing the FAFSA• Parent or custodial step-parent is

borrower• Credit-based• Repayment begins 60 days after

spring semester disbursement• Loans can be deferred until

graduation; interest accrues

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Understand the Fine Print

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Application and Solicitation Disclosure Statements

•Required for private lenders such as MEFA•Can be found on lender websites and loan comparison tools•Things to consider:

– Is it easy to find?– Do you know the rate before applying?– What are the fees?– Total Cost?

Read the Fine Print

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Annual Percentage Rate (APR)

• Total Cost of the Loan, including fees, repayment term, etc.

• Quick way to compare loan options

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• Signs the loan agreement along with primary and/or student borrower

• A co-borrower has equal responsibility on the loan agreement• Adding a co-borrower may increase chances for approval• Co-borrowers with good credit may help decrease rate• Co-borrower release options• Consider student’s major/career choice, employment rates and

starting salary

Co-Borrower

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• Several repayment options to choose from • Repayment term has a direct impact on Total Cost• Provides flexibility based on family’s affordable monthly

payment

Repayment Term

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• Advertised rate may not be the rate you receive!• Rate is based on credit score and credit criteria• Pricing is based on credit risk to the lender• May not know the rate before you apply

Tiered Pricing

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• Fixed vs. Variable• Transparency• Cap on variable rate?• May be tied to repayment option chosen

Interest Rate

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Timing: Paying Your Bill• Bills for the Spring semester sent in Nov./Dec., due in Dec./Jan.

– Includes direct costs only (tuition, fees, dorm, meal plans and health insurance)

– Outside scholarships and financial aid will be deducted from the bill

– Families who set up their payment plan and/or loans may see those amounts as a soft credit towards the bill as well

• Work-study is not deducted from the bill

• Apply for a MEFA Loan or other education loan before the billing due date

• Set up payment plans according to the college or university’s schedule

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Questions to ask• Financial aid renewability criteria (financial, academic)• Treatment of outside scholarships

Special Circumstances• Can I appeal my award?• Changes in family circumstances

Information• Open House Orientation programs• Websites• In-person meeting or phone call

Financial Aid Office as a Resource

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• Know your credit history• Borrow only what you need• Think in terms of total enrollment (4+ years) and total debt

− Consider the post-graduation monthly repayment• Use a monthly payment option to minimize borrowing• Research options on college lender lists• Consider major/career choice, employment rates and starting

salary• Find the best options to meet your family’s needs:

− Fixed rates or variable rates− Repayment timeline− Primary borrower

Be a Wise Borrower

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Questions?

[email protected](800) 449-MEFA (6332)

mefa.org

MEFA is your trusted advisor, helping to make your college goals a reality.

Thank You!