Shifting credit standards, loan fees, and interest rates have narrowed the differences between PLUS and Private Education Loans. There are significant benefits and drawbacks to each of these types of education financing options. For some students, a low variable-rate private loan may be the best financial decision for funding their education. For others, a PLUS Loan with flexible repayment options may be the most sensible. Understanding the nuances of these programs and the long-term outlook for paying back supplemental loan debt is key to advising students on where to turn to cover the gap not covered by a student’s financial aid package. Join us for a look at Federal and Private Student Loan options and how you can best answer the question “what now?” **This session will be presented at the annual conference for the Massachusetts Association of Student Financial Aid Administrators on November 7, 2013.

1. Show Me the Money
Best Practices in Advising Students on Federal &
Credit-Based Loans
ROSEMARY HILLIARD
& DAVID KELLY
GRADUATE & PROFESSIONAL CONCERNS COMMITTEE
MASFAA CONFERENCE
NOVEMBER 7, 2013

3. What Now?
TUSDM Award Letter 13-14
120000
100000
80000
60000
40000
20000
0
Gap
Stafford Loan
HPSL
Grant
Merit
Scholarship

4. Starting the Conversation
 Has the family maxed out more favorable loan
opportunities?
 Has the student (or their parent) taken a look at their
credit report?
 Has the student developed a realistic budget for
themselves?
 “If you live like a dentist while you’re in
school, then you’re going to have to live like a
dental student when you’re a dentist.” – Lori
Moore, Access Group

5. Funding the Gap
FEDERAL PLUS LOANS VS. PRIVATE
EDUCATION LOANS

6.  Grad & parent of undergrad.
FEDERAL
PLUS LOANS
•A federally-backed
supplemental education
loan.
 US Citizens, Permanent
Residents, & Eligible NonCitizens.
 COA less other financial aid
received.
 13-14 interest rate is 6.41%.
 Student must file a FAFSA and
meet federal financial aid
guidelines to apply for a PLUS
Loan.

7. PLUS Loans: The Good
 Consolidation available with other federal loans.
 Flexible repayment schedules:
Standard, Extended, Graduated, IBR, (Grad
PLUS), PAYE (Grad PLUS).
 Public Service Loan Forgiveness (Grad PLUS).
 ‘Easier’ credit check than some private loans =
possible ease of approval.
 Fixed interest rate for all applicants.

8. PLUS Loans: The Bad
 All applicants receive same interest rate regardless of
creditworthiness.
 Only remaining borrower benefit is interest rate
reduction for utilizing ACH.
 Rates now fluctuate (yearly, fixed for the life of the
loan) up to a 10.5% cap.
 High origination fees: currently 4.204%, will be
4.288% starting 12/1.

9. PRIVATE
EDUCATION
LOANS
 Student or student with a co
Education loans backed
by a private
company, such as a
bank or a credit union.



signer.
US Citizens, Permanent
Residents, Eligible NonCitizens, & Foreign Students.
COA less other financial aid
(unless lender sets
annual/aggregate caps).
13-14 interest rates between
2.25%-13.99% (anecdotal).
Students not required to meet
federal aid guidelines.

10. Private Loans: The Good
 Interest rates based on creditworthiness, typically




between 2.25% - 13.99%. Adding a co-signer may further
bring down the interest rate.
Often no origination/disbursement fees.
Lenders may offer discounts and borrower benefits, such
as interest rate reductions for participating in
ACH, making a certain number of on-time payments, and
a co-signer release option.
Students not required to complete the FAFSA or meet
federal aid requirements.
In most cases, lender/servicer will remain the same
through the life of the loan.

11. Interest Formula Pros & Cons
 Credit score
 Credit history (length, consistency re: payment)
 Default rate of school
 Income
 Program of study= future earning potential
 ???
 Does this mean only “worthy” applicants will
be approved?
 Check with individual lenders for more specific
criteria.

12. Private Loans: The Bad
 Less flexible repayment terms (typically 5-15
years, some offer a max of 20 years).
 Limited consolidation options  Cannot be included
in a Direct Consolidation Loan to receive federal loan
repayment benefits.
 In-school deferment options vary by lender.
 Variable interest rates may be more risky over time.

13. What Now?
PLUS
PRIVATE

14. IF……
PLUS
Poor Borrowing History….

15. IF…
PRIVATE
Excellent credit & high earning
potential…

16. IF…
PLUS
Enrolled in school for a long time…

17. IF…
PLUS
Low earning potential postgraduation…

18. IF…
PRIVATE
“Non-traditional” student…

19. What Now?
STRATEGIES FOR SUCCESSFUL COUNSELING

20. Strategies for Successful Counseling
 Max out favorable aid/scholarship opportunities.
 Live like a student!
 Financial circumstances post-graduation (BLS?)
 Default rate/success of graduates.
 Transparency.
 How are you presenting this information?

21. Thank You!
QUESTIONS? COMMENTS? CONCERNS?
ROSEMARY.HILLIARD@TUFTS.EDU
DAVEK@BU.EDU