Resources for Student Loan Borrowers

Resources for Student Loan Borrowers

The Institute for College Access & Success (TICAS) has put together tools and advice for students and borrowers impacted by the Coronavirus. They have compiled a list of what you need to know about your student loans during the COVID-19 pandemic, including: 

  • The basics of student loans during COVID 
  • Are your loans covered by new benefits?
  • What happens if your loans are in a grace period?
  • Late payments
  • What happens if your loan is in default?
  • What happens if your federal loans aren’t covered by COVID protections?
  • Options if you have private students loans

Visit their page Resources for Student Loan Borrowers for more information. 

This resource was provided by TICAS

Get Educated: How to Fill Out the FAFSA

Get Educated: How to Fill Out the FAFSA

Happy October 1st! FAFSA opens October 1st, 2020, and closes March 2nd, 2021.

The FAFSA application process can be confusing and a bit scary, but it is important that you fill it out as soon as possible! Many families have suffered economically during the coronavirus pandemic and may have to take extra steps to qualify for maximum help. 

Please make sure you apply as early as possible! Many families have suffered economically during the coronavirus pandemic and may have to take extra steps to qualify for maximum help. 

According to a New York Times article, “completing the form early is always a good idea in order to meet varying deadlines for scholarships. But this year, college students or prospective applicants who have been affected by the pandemic may need to submit extra documents to their colleges.

The more you know about the FAFSA application process, the more you can help others. 

Download our easy-to-follow guide that clearly explains the FAFSA process and answers the most common questions from low-income students and parents.

Guide provided by:

Form Your Future and National College Access Network

Student Loans 101: An Intro Guide to Student Loans

Student Loans 101: An Intro Guide to Student Loans

Paying for college can seem intimidating, but after calculating your net price, you’ll get a better sense of your education’s affordability. Though you may receive grants, scholarships, and other money you do not have to pay back, you may have to take out loans to pay for school.

What exactly is a loan?

Simply put, a loan is money that is borrowed. Unlike your grants and other aid, you will eventually have to repay your loan. That said, there are varying types of loans that have different terms and conditions. This article will cover the most common types of college loans. 

Federal subsidized loan

After reviewing your FAFSA application, your school may offer you a subsidized loan if they deem you high-need. The amount they offer you will depend on the rest of your financial aid package. They will never offer you a subsidized loan that exceeds the cost of your school’s attendance.

With a subsidized loan, you are not required to pay interest while you are a student (half time or more). After you graduate, you have six months until you are required to begin paying. This loan is offered by the federal government. 

Federal Unsubsidized loan

Regardless of your financial need, your school will offer you an unsubsidized loan. The amount they will offer you will depend on the rest of your financial aid package. 

With an unsubsidized loan, you are required to begin paying interest as soon as you take out the loan. If you do not want to pay the interest immediately, you may defer your payments (postpone them). Deferring your payments, however, will add the interest due to your capital (the original amount of money you borrowed). Read more on interest and capital below.

Federal vs Private loans

Despite the complexity of federal loans, they are both better options than a private loan from a bank or other financial institution. Federal loans have lower interest rates than banks, meaning that in the long run, you will pay less back. Some of the federal loans perks include:

  • Terms and conditions set by law. Conversely, private lenders can change their terms and conditions whenever they want.
  • Fixed interest rates. This means you won’t be subjected to a higher interest rate because of the market or your credit score. Private lenders can change their interest rates as they see fit. With lower interest rates, you pay less in the long run!
  • Loan forgiveness programs. Your federal debt may be forgiven if you work in certain public service sectors. 

CA Dream Loan Program
If you are an undocumented student in California, you are not eligible for federal student loans. However, California has the CA Dream Loan Program available to undergraduate and graduate students attending the CSU and UC. 

Your school’s financial aid office will offer you the loan based on your Dream Act application. The maximum loan is $4,000 a year. You are not required to pay interest while you are in school and have six months to start paying your loan off. The terms and agreements are almost identical to the federal subsidized loan. 

Read more about the difference between government (state and federal)  and private loans here. We at Let’s Go to College CA, highly encourage you to use government loans over private loans; we believe the terms and conditions are better than private loans. 

Principal and Interest Rate

What is a principal?

In finance, the principal is the amount of money that you owe. If you take out a $1,000 loan, your principal is simply $1,000.

What is interest?

Interest is the cost of borrowing money. A financial institution will charge you a percentage of the capital, that you have to pay back on their terms. You can pay the interest monthly, yearly, or however often required. 

People often think that when you pay interest, you are paying off your loan. This is incorrect. You are simply paying the financial institution for the privilege of having the capital.

Let’s say you take out a $1,000 loan. The interest rate (the percentage of the capital) is 10%. This means that monthly, you are paying the financial institution $100. Even though you are paying $100 every month, your capital, the $1000 you originally borrowed, is still $1000. Again, this is because you have only been paying interest.

The only way to decrease the capital is to pay extra money in addition to the interest. If your capital is $1000 and your interest rate is 10%, then you may want to pay $150. That way, $100 goes towards interest and $50 towards your capital. Then, your capital is $950. This means that your interest payment is now $95. Remember, interest is simply a percentage of the capital you owe. 

Please note that with unsubsidized loans, your deferred interest becomes part of your capital. Let’s say you took out a $1000 loan. You differ your 10% interest rates for a whole year (12 months), meaning you did not pay $1200 worth of interest. This amount gets added to your capital, so instead of owing $1000, you now owe $2200. This is how student debt accumulates significantly!

Check out these Youtube videos for more explanation on capital and interest rates. 

Check out this US News Report article on college financial literacy. It includes links and brief explanations on budgeting, living on your own, filing taxes, and more. 

Vocabulary Summary

Here is a quick rundown of the terms mentioned above!

Federal Subsidized – a loan that does not charge interest until six months after you have graduate college given by the federal government.

Federal Unsubsidized – a loan that charges interest as soon as you take the loan out given by the federal government.

Private loan – a loan that charges interest as soon as you take it out, given by a private lender like a bank, credit union, or other financial institution.

Capital – the amount of money that you owe.

Interest – a percentage of the capital that you are charged for the privilege of the loan

Please know that Let’s Go to College CA is student-led and student-centered. We understand the burden of student debt and will constantly advocate for better affordability. Please check back soon for more information on paying back loans, loan forgiveness, and more.

Understanding Your Financial Aid Package

Understanding Your Financial Aid Package

A financial aid award letter indicates how much financial support a college/university is able to provide a student for the upcoming year.

After a college/university admits a student, you will receive a financial aid award letter that outlines how much will cost and what kind of financial aid you will receive including school, state, and federal aid. Each year you will receive a financial aid package. Your financial aid package each year may or may not change depending on various circumstances.

Check your mail or your student portal to find your award package. 

1. Find out your EFC and how much grant aid you were awarded

Your package will include information about your:

Estimated Family Contribution (EFC) 

This amount is calculated based on the information submitted on your financial aid application. Your EFC is not an actual that you have to pay but it is an estimate of how much your family should reasonably be able to contribute towards your college expenses. EFC takes into account income, assets, number of people in the household, and number of people attending college for the year.

Grant Aid

Type of aid that does not have to be repaid. Examples include grants and scholarships.

Self Help 

Type of aid that must be repaid or earned through work. Examples include loans and work study.

2. Find out the net price

 

Cost of Attendance: full price colleges/universities list in their brochures and on their websites. To find out your net price, look at the cost of attendance subtract grant aid you were awarded in your aid fin aid package. The net price is the amount you or your family will pay out of pocket. If you or your family cannot cover your net price, you can find employment, additional scholarships or get federal loans to offset the net cost.

3. Focus on your net price

Knowing your net price gives you the best estimate of what you pay for a particular school and makes comparing college easier. In addition, you can use your net price each year to make financial plans for the school year.

Adapted from a training provided by Families In Schools