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Finance Class

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Aveda Institute Portland

on 19 June 2013

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Transcript of Finance Class

Presented by Amanda and Courtney
Objectives
Basics Types of
Financial Aid

Helpful Websites
Most Federal Student Loans have a grace period, but repayment is a reality so let's talk about it!
Basics types of Financial Aid
Basics of Federal Financial Aid
Financial Aid at the Institute
Repayment
Borrow Smart
Reduce Your Loans
Credit Smarts
Resources
Repayment
Financial Wellness
Disbursements
Entrance
Counseling
Pell Grant
"free" funds for education
Does NOT have to be repaid
cost of borrowing
fixed during each award year.
rates are set by Congress and vary depending on type of loan & year
12-13 award year
sub: 3.4%
unsub: 6.8%
13-14 award year
sub: 6.8%
unsub: 6.8%
possible to have different loans at different interest rates
Basics of
Federal Financial Aid
Required by DOE to obtain Financial Aid
Explains "Rights & Responsibilities"
Master
Promissory Note
Required for any Federal Financial Aid
Useful websites:
fafsa.ed.gov
pin.ed.gov
Application good for 1 Award Year!
Award Year 12-13 (365 days, July 1-June 30)
Academic Year - 900 clock hours
Borrower Rights
"Right" to receive:
loan obligations
explanation of default & it's consequences
info. on interest rates, fees, balance owed, loan repayment schedule
contact info. of servicer
Borrower
Responsibilities
Exit Counseling
Pay back loan according to repayment schedule
notify lender:
change in student status
ability to repay loan
contact info.
legally binding contract
terms & conditions of loans
how & when the loan must be repaid
MPN is good for 10 years!
Interest Rates
1) scheduled loan date
2) completion of designated clock hours
3) within Satisfactory Academic Progress (SAP)
Disbursement
Qualifications
communication from Feds can be confusing and misleading
Released Does NOT
Mean Received
By law, the Institute has 3 days to issue Excess Funds (check disbursed to student)
Students will be notified via posting on Back Office door and through email.
Financial Aid Rep will be at the check in counter every Tuesday after 5PM.
Why this happens
incorrect borrower info. ex: SSN, DOB, name
system glitch/computer error
previous loans/over-awarded




What we do
check daily for rejects, file case with processor
establish the problem
work closely with DOE & processor to clear
re-award & look for ways to push loan through the system
Rejected Loans
www.studentaid.ed.gov





www.finaid.org




www.youcandealwithit.com
U.S. Department of Education Sites

Studentloans.gov



FAFSA.ed.gov




NSLDS.ed.gov
“The Higher Education Act of 1965, as amended, requires institutions of higher education to establish and apply standards of academic progress that must be met by all students in order to qualify and remain eligible for assistance from the Title IV student financial aid programs.”
Satisfactory Academic Progress
Satisfactory Academic Progress (SAP) - Student Catalog pg. 17-19
How do I pass Satisfactory Academic Progress?
Maintain AT LEAST an 80% in theory, competency and scheduled attendance for a given evaluation period.
How Often Are You Evaluated?
Cosmetology 450, 900, 1350, 1800, 2050, 2300 clocked (scheduled) hours
Hair Design 450, 900, 1300, 1700 clocked (scheduled) hours
Esthetics 300, 600 clocked (scheduled) hours
What happens if I fail SAP?
Placed on "warning". Must increase percentage before next evaluation period
What happens if I fail SAP, again?
Suspended and Ineligible for Title IV funding. Must petition!
Students must also complete his/her course of study within 125% times the normal time frame for completion.
Borrow Conservatively
Let's Calculate
Group A
Student: Katy
Program: Hair Design (1700hrs)
Attendance Percentage: 80%
Over-Contract Fees: $9.50/hr

How much will her over contact fees be?
Why is it important?
Credit Score
Depending on your credit score, lenders will determine what risk you pose to them.

According to financial theory, increased credit risk means that a risk premium must be added to the price at which money is borrowed. Basically, if you have a poor credit score, lenders will lend you money at a higher rate than the one paid by someone with a better credit score.
eligibility for future credit
insurance
employment
housing
interest rates on future loans
Effects of Your Credit Score
KNOW
go to www.annualcreditreport.com
call 1-877-322-8228
only authorized source for consumers to access their annual credit report online for free
sponsored by Equifax, Experian, and TransUnion
IMPROVE
Make your payments on time and in the correct amount!
Do not ignore past due bills
Avoid unsolicited credit cards (credit cards you receive in the the mail but didn't ask for)
Don't take on more debt than you can handle
Limit your number of credit applications
Good Credit Is Not Built Overnight! Positive long-term payment history helps your credit
Federal Grants
Scholarships
Federal Loans
Private Loans

Subsidized Loans
Unsubsidized Loans
Parent Plus Loans

Scholarships are gifts.
They don't need to be repaid.
There are thousands of them, offered by schools, employers, individuals, private companies, nonprofits, communities, religious groups, and professional and social organizations.
Apply for Federal Loans first but if your needs are not met, try private loans
Know the terms of the loan before you sign!
https://studentloans.gov/myDirectLoan/financialAwarenessCounselingLanding.action
Financial Awareness Counseling
What can I expect if I have Federal Financial Aid at Aveda Institute Portland?
What do Subsidized and Unsubsidized loans have in common?
- Both are LOANS that need to be repaid
- Both have interest rates
- Both have 6 Month Grace Period

How are these loans different?
- Subsidized Loan: Interest starts after you stop enrollment
- Unsubsidized Loan: Interest starts now AND interest is
capitalized
Group B
Student: John
Program: Cosmetology (2300hrs)
Attendance Percentage: 80%
Over-Contract Fees: $9.50/hr

How much will his over contact fees be?
What is it?
How do I check it?
How do I improve it?
It's designed to predict risk, specifically, the likelihood that you will become seriously delinquent on your credit obligations in the 24 months after scoring.

It ranges from
What is it comprised of?
Let's Calculate
Loan Amount: $16,000
Unsubsidized Loan Interest Rate: 6.8%
Program Length: 12 months
What is the total Interest accrued?
If you pay interest as it is charged:

Loan Amount: $16,000
Capitalized Interest: $ 0
Principal Balance to be Repaid: $16,000
Monthly Repayment: $ 184
Number of Payments: 120
Total Amount Repaid: $22,095
If you do not pay interest as it is charged:

Loan Amount: $16,000
Capitalized Interest: $ 1,088
Principal Balance to be Repaid: $17,088
Monthly Repayment: $ 197
Number of Payments: 120
Total Amount Repaid: $23,598
From the information in the credit report, the bureau determines a credit score based on five major factors:
BUILD
WHY?
WHAT?
Consider Your Starting Wage
Use Student Loans for Educational Expenses Only
So, I Think I Borrowed Too Much
High Federal Student Loan Debt
Avg Federal Student Loan Debt
Lower Federal Student Loan Debt
Do Not Borrow More Than You Need
Monthly Income:
$1,733 after taxes
Monthly Student Loan Payment:
$297
Monthly Loan Payment is
17%
of your income!
Each time you purchase anything, remember you are spending loan money and it will need to be repaid!
If the Answer is "NO!" put it down and walk away
Ask yourself, "Do I really want to pay interest on this?"
Quick Example:
New Television Cost:
$400
New Television Cost after Interest is applied for 10 Years:
$600
Was it
Worth it?
Step 1: Submit a student report, subject Finance Question

Step 2: Meet with the finance department and tell us what your goals and/or financial needs are

Step 3: We'll take care of the rest!
$11,000 is Taking Subsidized Loans Only
Monthly Repayment ~ $125 for 10 years
$16,000 is Covering Tuition Only
Monthly Repayment ~ $183 for 10 years
$26,000 is an Independent Taking Out The Max
Monthly Repayment ~ $297 for 10 years
$41,674,180,000 was used for Pell Grants nationwide in 2011. The Pell Grant program is completely funded by you and me and your family and your friends and...
We use quotes because it is not really free
What is
capitalization?
Interest can build during periods of in-school status, grace period, deferment, and/or forbearance
Unpaid interest is added to the principal balance of a loan
Interest is charged on that higher principal balance, increasing the overall cost of the loan
This causes your monthly payment amount to increase
How Does Gift Aid Affect Repayment?
I got an unexpected Pell Grant for $5,000...
Original Loan Amount: $26,000
Original Monthly Pmt: $297

Now I can reduce my loans...
New Loan Amount:$21,000
New Monthly Pmt: $242

I WILL SAVE...
$55/month OR put another way
$660/year OR put another way
$6,900 over 10 years
I got a $3,000 Scholarship...
Original Loan Amount: $16,000
Original Monthly Pmt: $183

Now I can reduce my loans...
New Loan Amount:$13,000
New Monthly Pmt: $149

I WILL SAVE...
$34/month OR put another way $403/year OR put another way
$4,100 over 10 years!
Questions?
Quick Example:
Total Student Loan Debt =
$26,000
Starting Salary =
$26,000
Student loan debt should be LESS than or equal to starting salary.
Full transcript