Comparing Loan Options

Family Webinar Series:
Comparing Loan Options
Celebrating 30 years of Excellence
Planning, Saving & Paying for College
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Your Presenter Today
Stephanie Wells,
Director of Community
Outreach
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Stephanie joined MEFA in 2001 and
has over 20 years of experience in the
higher education financing industry.
As Director of Community Outreach
she is responsible for working with
colleges, high schools and community
based organizations to further MEFA’s
public mission of educating and
supporting families on the college
enrollment and financing process.
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Facts About MEFA
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 outreach
o Save: U.Fund® and U.Plan® college savings plans
o Pay: Affordable fixed interest rate college loans for over 30 years
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Understand the Fine Print
Celebrating 30 years of Excellence
Planning, Saving & Paying for College
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Read the Fine Print
Application and Solicitation Disclosure Statements
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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?
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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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Co-Borrower
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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
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Repayment Term
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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
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Tiered Pricing
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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
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Interest Rate
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Fixed vs. Variable
Transparency
Cap on variable rate?
May be tied to repayment option chosen
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Be A Wise Borrower
Celebrating 30 years of Excellence
Planning, Saving & Paying for College
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1. Start with Federal Student Loans
• Student is the borrower – no credit check
• Annual limits: $5,500 for freshman year
• Fixed interest rate changes annually: 4.29% for 2015-16
• Two types:
– Subsidized – Interest accrues after graduation
– Unsubsidized – Interest accrues immediately
• 1.073% 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.
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2. Minimize Borrowing
Balance Due
$20,000
Student Savings
-$1,000
Parent Savings
-$4,000
Past Income (Savings)
Present Income (Current Wages)
Parent Contribution to Payment Plan
-$3,000
Future Income (Education Loans)
Education Loan
-$12,000
$0
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3. Affordability
• Visit mefa.org 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
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Ask Questions
Look for Transparency
Utilize Free resources
Work with Financial Aid
and Student Accounts if
you need help
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2015-16 MEFA and PLUS Loan Comparison
MEFA Loan
Direct PLUS Loan
Interest rate
Starting at 4.99% fixed interest rate
6.84% fixed interest rate
(Re-set every July 1st)
Fee
4% origination fee added to loan
amount
4.292% origination fee deducted from
loan amount
Student co-borrower on loan?
Responsibility to repay
Yes
Student and parent or other creditworthy borrower are co-borrowers and
share responsibility
No
Parent or custodial step-parent is
borrower
Can responsibility be transferred?
Yes, family loan with shared
responsibility; Student Deferred option
with cosigner release
No
Credit Criteria
Minimum credit score based on
repayment option
Minimal Standards
Repayment Term
10-15 years
10 – 25 years
Repayment Options
Immediate Repayment, Interest-Only,
and Deferred
At least half-time
Immediate Repayment and Deferred
Consumer safeguards
Student Death & disability loan
forgiveness
Parent Death & disability loan
forgiveness
Requires filing of FAFSA
No
Yes
Enrollment status
At least half-time
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5. Timing: Paying Your Bill
• Bills for the fall semester sent in June/July, due in July/August
– Includes direct costs only (tuition, fees, dorm, meal plans and health
insurance*)
– Enrollment deposit, 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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Thank You!
Questions?
Stephanie Wells
swells@mefa.org
617-224-4809
MEFA is your trusted advisor,
helping to make your college goals a reality.
www.mefa.org
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