Putting The Puzzle Together

1. Parents Financial Aid Putting The Puzzle Together Consolidation Loans Robert Brooks, Director State Loan Division Tracy Ireland, Senior Manager Originations 2004 GSFC Annual Conference March 3 & 4, 2004

2. Students Topics of Interest • What is a Consolidation Loan • Borrower Eligibility • Loan Types Eligible for Consolidation • Application Process • Adding Subsequent Loans • Lender Verification Certification (LVC)

3. Colleges Topics of Interest • Interest Rates • Disbursements • Repayment Terms • Deferments and Forbearances • Delinquency

4. College What is a Consolidation Loan • Allows a borrower to combine one or more federal education loans into a new single FFEL or Direct Loan to facilitate repayment. • Consolidating lender purchases qualifying student loans from other lenders and combines them into a single loan.

5. Parents Benefits • No Processing Fees • No Early Repayment Penalties • Possible Lower Monthly Payments • Auto Debit Reduction

6. Benefits • Fixed Interest Rate • Based on weighted average • Will not exceed 8.25% • Varying Repayment Terms • Standard • Graduated • Income-Sensitive • Extended

7. Maximum Repayment Periods

8. Financial Aid Borrower Eligibility Specific To GSFC • Grace Or Repayment • Not In Default • At Least One Loan With Our Loan Division And Guaranteed By GHEAC • Minimum Outstanding Debt -- $7,500.00

9. College Borrower Eligibility (Not GSFC Specific) • Refund • Single Lender • Request from a Borrower with a Single Lender • Must Certify: • Unable to Obtain FCL from the Single Holder • Holder Declined to Provide Income-Sensitive Repayment Schedule

10. Students Eligible Loans • FFELP • FDLP • FISL • Perkins ** • HPSL • NSL • HEAL • Service Cancelable**

11. Financial Aid Application Process • Fees • Providing Information • Application • The Flow • MTE

12. Parents Application Process • Fees • Guarantee and Origination Fees • Administrative Fees • Limitation • Maximum

13. Students The Application • Borrower Must Complete Consolidation Loan Application and Promissory Note • Submit it to the consolidating lender.

14. College Subsequent Loans • Requirements • New Consolidation Loan After Existing Consolidation Loan was made. • Existing Consolidation and one other eligible loan • Adding Loans to Current Consolidation Loan • 180 Day Provision

15. Lender Verification Certification (LVC)

16. Completing The LVC • Must Be Completed By The Holder Of Each Loan To Be Consolidated. • An Authorized Official Of The Holder Must Sign And Return The LVC To The Consolidating Lender. • Holder Has 10 Business Days To Respond.

17. College Interest Rates • Applications received on or after 10.01.98 • Outstanding balance of all eligible loans to be considered in the consolidation are included in the weighted–average interest rate calculation.** • Rate is fixed. • Not to exceed 8.25%

18. Students Interest Rates

19. Outstanding loan balances are $3,500, $3,200and $5,500-for a total of $12,200. The current rate: 7%, 5%, and 9% respectively. $3,500x.07=$245 $3,200x.05=$160 $5,500x.09=$495 Calculating Interest Rates (Example) Multiply the outstanding balance of each loan to be consolidated by that loans current interest rate. For variable rate, use the rate at which it is currently accruing.

20. Parents Calculating Interest Rates(Example) • Calculating Interest Rates (Example) • Add the results of all calculations made. Then divide this sum by the outstanding balance of all loans being consolidated. • $245 + $160 + $495 = $900 • $900 / $12,200 = .07377 or 7.377% • 7.377% is rounded up to 7.5%

21. Students Disbursements • May disburse upon receiving the signed application and promissory note and completed LVC from holder(s) of all loans being consolidated. • Loan is considered disbursed on the date that the first transfer of funds from the consolidating lender to the holder occurs.

22. College Disbursements Holder of a paid in full consolidation loan must: • Notify the consolidating lender that the funds were received. • Provide certification that the underlying loan has been fully discharged • Report the payment to at least one appropriate national credit bureau. • Report to the loan’s guarantor that the loan has been paid in full by consolidation.

23. Parents Repayment • Loan enters repayment on the date the loan is disbursed. • Lender must establish a first payment due date that is not more than 60 days after the last disbursement is made. • Lender must consider borrower’s financial ability to repay the loan.

24. College Repayment • Lender must offer the choice of: • Standard repayment terms, • Graduated repayment terms, • Income-sensitive repayment terms, OR • If applicable, Extended repayment terms.

25. Students Deferments and Forbearances

26. A consolidation loan borrower may defer payment of principal during certain periods. College Deferment Types

27. Education-Related Deferments Other Deferment Types Unemployment Economic Hardship In School Deferment Temporary Total Disability Students Deferment Types

28. Parents Forbearances • FCL borrowers remain eligible for all types of forbearance. • Forbearance provisions for borrowers are the same as those for the Stafford, PLUS, and SLS borrowers.

29. College Delinquency, Default and Claim Filing • Due diligence, default, and claim filing requirements are identical to those applicable for other loans guaranteed by the guarantor.

30. Financial Aid GSFC Consolidation Program • GSFC Launched Its Consolidation Program In February 2004. • The Program Was Developed In Response To The Large Number Of Borrower Requests. • The Initial Response Has Been Very Positive.

31. Putting the Puzzle Together! Colleges Parents Students Financial Aid