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Be Wise Borrower

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					Be a Wise Borrower
    Think About TomorrowSM—a strategy for success
    What do you see when you think about tomorrow? Do you see yourself graduating from college,
    with a job in your chosen field? Do you envision being able to live comfortably and save for the
    future?
    For many people, this is the American dream and higher education is the first step. And each year
    for millions of students and their families, taking out loans to finance that education is the only
    way to make their dreams come true. Student loans can be an effective way to pay for college.
    Many offer low interest rates and flexible repayment options.
    But in order to be truly effective, student loans must be managed responsibly. After all,
    graduating from a higher education institution is only the beginning. To achieve your goals—
    both professional and financial—you need to successfully repay your loans and build healthy
    debt management habits.
    Know what you’re getting into before you borrow. Remember that student loans must be paid
    once you leave school. Find out which loan is right for you: compare eligibility requirements,
    loan limits, interest rates and repayment terms. Estimate what your monthly payment will be—is
    it realistic given your expected salary after school? And what happens if you can’t make your
    payments on time?
    You can find all of these answers in Be a Wise Borrower. Whether you’re already in college or just
    thinking about higher education, you are already taking steps to better your future. So start now
    to plan for your financial future as well. Think about tomorrow!



                    Lightening the “mammoth” loan
                    American Student Assistance is all about providing
                    you with the education and encouragement you
                    need to successfully manage your debt—whatever
2                   it takes to make repayment seem like less of a
                    mammoth undertaking.



    We are American Student Assistance®
    American Student Assistance is a federally funded nonprofit organization that helps students
    and families finance higher education and successfully manage student loan debt. We can help
    you keep your student loans in good standing throughout the repayment process. Our student
    loan counselors can answer questions about paying your student loan bill, what to do if you miss
    a payment, how to suspend or reduce your payments, and just about anything else related to
    your federal student loans. Call us at 800 999 9080 or visit us on the Web at www.amsa.com for
    repayment assistance and debt management strategies.
Understanding student loans
Most American students have to take out loans in
order to pay for college. Whether you’ve already filled
out applications for loans or you are planning to, it’s
important to know the basics of borrowing money.
                                                                Before you borrow
Loans are a promise
                                                                  Know the type of student
By taking out a loan, you promise to pay later money              loan programs available to
that you receive now. The original amount you borrow              you. There are several student
is called principal, and what you are charged to use the
                                                                  and parent loan programs
borrowed money is called interest.
                                                                  and you and your family may
Loans can provide help                                            want to borrow from several
For most students, borrowing money will help pay for              of them.
tuition, room and board and other education costs.                Know the interest rate and
Your school may recommend several different types of               other important features of
loans to help you pay for your education. In some cases,
                                                                  your loan program(s).
your parents may borrow on your behalf by taking
out a Parent Loan for Undergraduate Students (PLUS).              Know who is responsible
Loans are a resource you can use to help meet college             for paying the interest on
expenses, establish credit in your name and become                your loan. In some cases, the
financially responsible.                                           federal government will pay
Loans are a responsibility                                        the interest while you are in
                                                                  school.
Loans must be repaid whether you complete your
educational program or withdraw to pursue something               Know the total amount you
else. The amount you pay back depends on the amount               are able to borrow.
you borrowed. Most student loans are repaid on a
monthly basis once you are out of school (less than               Know what your
                                                                                                   3
half-time). If you do not repay the loan, it will go in to        approximate monthly
default. There are serious consequences for defaulting            payments will be for the loan
on student loans. Defaulting on a loan will affect your            program(s) you borrow from.
ability to get other credit, such as credit cards, car loans,
                                                                  Know how much will be
additional education loans, a mortgage, and other big
purchases. It will also negatively affect your credit report       deducted from the loan for
for up to seven years. Don’t borrow more than you think           fees and how much you will
you need.                                                         actually receive.
    Loan choices
    There are a variety of loan choices and repayment options available. Some require that you
    demonstrate financial need, while others don’t. Know all the rules before you borrow, or at least
    before repayment begins.



                                                Understanding your loan choices
                       Who can             Who is
                                                                        Loan limits                                 Repayment                       Interest
                       borrow              eligible
                    Undergraduate      Must be a          Undergraduate independents and               Begins six months after the student       Variable interest
                    or graduate        U.S. citizen       dependents may borrow $2,625 in their        graduates or drops enrollment to less     rate throughout
                    student enrolled   or eligible        first year; $3,500 in their second, $5,500    than half time. Federal government        the life of the
                    at least half      noncitizen. This   in their third, forth and fifth years; to a   subsidizes interest when borrower is in   loan.
     Subsibized




                    time in a degree   is a need-based    maximum total of $23,000.                    school or in deferment. Under certain
                    or certificate      loan.                                                           conditions, a borrower may request
                                                          Graduate students may borrow $8,500
                    program.                                                                           deferment of principal and interest.
                                                          per year to a maximum total of $65,500.
                                                                                                       Typical repayment is up to 10 years.
                                                                                                       Borrower has various repayment plans
                                                                                                       from which to choose. There are no
                                                                                                       prepayment penalties.
                    Undergraduate      Must be a          Undergraduate independent students           Begins six months after the student
                    or graduate        U.S. citizen       and dependent students whose parents         graduates or drops enrollment to less
                    student enrolled   or eligible        are denied the federal PLUS may borrow       than half time. May begin monthly
                    at least half      noncitizen. This   $4000 in their first and second years;        or quarterly payments of interest
                    time in a degree   is not a need-     $5000 in their third, fourth and fifth        when loan is fully disbursed, or allow
     Unsubsidized




                    or certificate      based loan.        years; to a maximum of $46,000.              interest to accrue during in-school
                    program.                                                                           period (capitalization). Under certain
                                                          Graduate students may borrow
                                                                                                       conditions, a borrower may request
                                                          $18,500 per year to a maximum total
4                                                                                                      deferment of principal and interest.
                                                          of $138,500.
                                                                                                       Typical repayment is up to 10 years.
                                                                                                       Borrower has various repayment plans
                                                                                                       from which to choose. There are no
                                                                                                       prepayment penalties.
                        Who can              Who is
                                                                          Loan limits                                  Repayment                       Interest
                        borrow               eligible
                     Borrowers with      Must have          Consolidation loans have no maximum           Repayment periods vary based on the       Interest is
                     more than one       Federal            limit. Some lenders do require a              amount consolidated. Under certain        calculated by
                     federal student     Stafford Loans      minimum balance for consolidation.            conditions, a borrower may request        taking the
                     loan who would      (subsidized                                                      deferment of principal and interest.      weighted
                     like to make        and/or                                                           Interest may accrue during a deferment    average of
                     single monthly      unsubsidized),                                                   period.                                   all interest
                     payments            Federal Direct                                                                                             rates being
                                                                                                          May extend loan repayment beyond
     Consolidation




                     and lock in a       Loans or Federal                                                                                           consolidated
                                                                                                          the standard 10 years in order to reduce
                     fixed interest       Perkins Loans.                                                                                             by a borrower,
                                                                                                          monthly payments (this will also
                     rate. Monthly                                                                                                                  rounded up to
                                                                                                          increase the amount of interest paid over
                     payments pay                                                                                                                   the nearest 1/8
                                                                                                          the life of the loan).
                     be reduced.                                                                                                                    percent.
                                                                                                          Borrower has various repayment plans
                                                                                                                                                    There is a fixed
                                                                                                          from which to choose.
                                                                                                                                                    interest rate
                                                                                                          No prepayment penalties.                  once loans are
                                                                                                                                                    consolidated.


                     Natural or          Must be a          May borrow up to the total cost of            Immediate repayment of principal and      Variable interest
                     adoptive            U.S. citizen       education at the student’s school, minus      interest when loan is disbursed. Under    rate throughout
                     parents or          or eligible        all other aid received. Total costs include   certain conditions, a borrower may        the life of the
                     stepparents (in     noncitizen. This   tuition and fees, room and board,             request deferment of principal and        loan.
                     some cases)         is not a need-     books and supplies, transportation and        interest. Interest may accrue during
                     of eligible         based loan.        miscellaneous expenses (as determined         deferment period.
     PLUS




                     dependent                              by school).
                                         Borrower’s                                                       Typical repayment is up to 10 years.
                     undergraduate
                                         credit must        No aggregate loan limit.
                     students                                                                             Borrower has various repayment plans
                                         be in good
                     enrolled at least                                                                    from which to choose.
                                         standing.
                     half time.                                                                           No prepayment penalties.
                                                                                                                                                                        5




How do I choose a lender?
Under the Federal Family Education Loan Program, banks or lending institutions actually fund your student
loan. While most loan terms, such as the interest rate and repayment programs, are federally mandated,
some lenders offer special incentives. For example, when you sign up for your payment to be automatically
debited from your bank account or when you make a certain amount of monthly payments on time, you
could be rewarded with a lower interest rate. While the choice of lender is always yours, often your school’s
financial aid office has a list of preferred lenders. These are lenders that offer their students the most
repayment benefits or a hassle-free loan process. Talk to your financial aid office to learn more.
    Repayment options
    You can’t make your student loan payments magically disappear, but you can make them easier
    to manage. As a federal student loan borrower, you can take advantage of a number of flexible
    repayment plans. A typical repayment plan assumes the loan principal plus interest, spread out
    over 10 years:
                       A typical repayment plan (assumes 6% interest rate)
      Amount borrowed        Number of payments            Monthly payment    Total to be repaid*
          $ 1,000                      22                       $ 50.00          $ 1,056.25
             2,000                     45                          50.00            2,237.03
             2,625                     62                          50.00            3,052.50
             3,000                     72                          50.00            3,575.69
             4,000                    103                          50.00            5,121.05
             5,000                    120                          55.51            6,661.24
             6,000                    120                          66.61            7,993.58
             7,000                    120                          77.71            9,325.92
             8,000                    120                          88.82           10,657.81
             9,000                    120                          99.92           11,990.15
            10,000                    120                         111.02           13,322.48
            11,000                    120                         122.12           14,654.82
            12,000                    120                         133.22           15,987.16
            13,000                    120                         144.33           17,319.05
            14,000                    120                         155.43           18,651.39
6           15,000                    120                         166.65           19,983.72
            16,000                    120                         177.63           21,316.06
            17,000                    120                         188.73           22,648.40
            18,000                    120                         199.84           23,980.29
            19,000                    120                         210.94           25,312.63
            20,000                    120                         222.04           26,644.97
            21,000                    120                         233.14           27,977.30
            22,000                    120                         244.25           29,309.20
            23,000                    120                         255.35           30,642.53
            25,000                    120                         277.55           33,306.21
                                       *Includes principal and interest.
But the standard repayment plan isn’t the only option             When do I begin repaying my
available. Depending on your unique situation, you can            loans?
choose from:                                                      Repayment of your student loan
    graduated repayment: You begin by paying interest-            begins six months after you
    only payments for up to four years. The remaining             graduate from school or drop below
    payments are higher than the standard monthly                 half-time. This six-month period is
    payments would have been to ensure that the loan is           called your grace period and it gives
    still paid in full within the 10-year period.                 you time to find a job and get on
    income sensitive repayment: You pick a monthly                your feet before your first monthly
    payment amount that equals between 4% and 25% of              payment is due.
    your gross monthly income. You are allowed to use this        Who will I make payments to?
    option for a total of five years, and it may extend your      In most cases, the company you
    repayment terms for up to 15 years.                           make your student loan payments
    consolidation: All of your student loans are paid off,        to is called a servicer. You will
    and one new loan made up of the total amount of               be given your servicer’s contact
    money you owe is created. You are usually given a term        information upon leaving school or
    of between 12 and 30 years, which could, in turn, lower       you can ask your financial aid office
    your overall monthly payment.                                 at any time.
    extended repayment: If you have more than $30,000
    in outstanding student loans, you may choose to
    extend your monthly payments for up to 25 years.

Postponing payment
Sometimes life doesn’t go as planned. If you are having trouble making your monthly payment,
you can arrange to postpone repayment for a period of time. This is called a deferment. The federal
government may pay the interest that accrues during the deferment, or you may be responsible. There
are many different types of deferments:
Unemployment                                          *Working Mother
In-School                                             *Peace Corps, Domestic and Tax Exempt
*Military or Public Health Services                   Organization Volunteer
*National Oceanic and Atmospheric Administration      Summer                                              7
Corps                                                 *Teacher Shortage or Targeted Teacher
Graduate Fellowship                                   Economic Hardship
Internship/Residency Training                         *Parental Leave
*Temporary Total Disability                           Rehabilitation Training

Similar to a deferment, a forbearance is a temporary adjustment to your repayment schedule. However,
where you have a right to a deferment as a federal loan borrower, forbearances are granted at the
lender’s discretion. Also, during a forbearance the interest accrues and is capitalized and you are
responsible for paying it. There are several different types of forbearances:
Hardship                                              Disaster
Internship or Residency                               Military Mobilization
Excessive Debt                                        National and Community Service

Contact your servicer for exact deferment/forbearance eligibility requirements and needed
documentation.
       Facts and figures

                       Occupational Demand—what you can expect

                   Number of jobs due to growth and replacement needs
                    by major occupational group, projected 2002 – 2012




8




    Expectations
    As you think about tomorrow and plan for your success, keep in mind your expected income once you
    graduate and begin managing your money and financial obligations. Consider your expected salary range as
    compared to your student loan payments.
                                                   Average annual college
                                                   costs 2004 – 2005
                                                   Four-year private           $20,082
                                                   Four-year public             $5,132
                                                   Two-year public              $2,076
                                                   Source: The College Board



          Salaries—what you can expect
                                                         Average
                    Profession
                                                      starting salary
computer engineering                                        53,117
chemical engineering                                        52,563
electrical engineering                                      49,926
mechanical engineering                                      49,088
computer science                                            48,656
industrial/manufacturing engineering                        48,283
information science                                         42,108
accounting                                                  42,045
construction science                                        41,103
management information systems/                             41,046
business data processing
civil engineering                                           40,596
                                                                                         9
economics/finance                                           40,484
logistics/materials management                              37,368
business administration                                     37,368
nursing                                                     37,253
marketing                                                   36,071
liberal arts majors*                                        30,153
elementary teacher education                                27,317
psychology                                                  25,032
          Source: National Association of Colleges and Employers
     Resources
     For more information about student loans, contact American Student Assistance at 800 999 9080
     or on the Web at www.amsa.com.

     Useful Web sites
         American Student Assistance                 www.amsa.com
         U.S. Dept. of Education & FAFSA Forms       www.fafsa.ed.gov
         The College Board                           www.mapping-your-future.org
         Scholarship Information                     www.fastweb.com
         College and Career Advice                   www.petersons.com
         Federal services for students               www.students.gov
         Career Information                          www.jobweb.org




10
11
100 Cambridge Street, Suite 1600   800.999.9080   www.amsa.com
Boston, MA 02114

				
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