Part 7 (1/2)

Deferments/Forbearance/Cancellations Under certain circ.u.mstances you may be able to defer, or postpone, the payments of your Federal Stafford Loan. Deferments are not automatic; you must apply for them. You can also request forbearance in situations that aren't covered by normal deferments. Forbearance means the lender agrees to grant you a temporary suspension of payments, reduced payments, or an extension of the time for your payments. As a final option, you can get a portion of your loans canceled under special circ.u.mstances. Read your promissory note for details of all of these provisions. They should also have been covered in your entrance and exit interviews.

William D. Ford Federal Direct Loan Program The Ford Federal Direct Loan Program was authorized by the U.S. Congress in 1993. In this program, the federal government is the lender. Individual schools, rather than banks or other financial inst.i.tutions, originate the loans. This program includes two types of loans: the Federal Direct Stafford Loan and the Federal Direct Unsubsidized Stafford Loan.

The eligibility criteria, borrowing limits, interest rate, fees, grace period, and deferment and cancellation provisions for this program are the same as for the Federal Stafford Loan Program, covered above. The Federal Direct Loan Program has different application procedures and repayment options for students.

Application Procedures The FAFSA and the other required doc.u.ments that were discussed earlier must be completed. Usually, the Federal Direct Loan will be offered as part of your financial aid package. Once you accept the loan as part of the package, the financial aid officer creates a Loan Origination Record and electronically transmits it to the federal servicer for approval. The approval is transmitted back to the school, and the school produces a promissory note for you to sign. Once the promissory note is signed, the school can disburse the first semester portion of the loan (minus fees) to your student account. Any funds remaining after any unpaid balance you have with the university will be refunded to you. The entire process, from the point of loan certification to disburs.e.m.e.nt of the check, can take as little as a week to complete.

Repayment Most of the conditions of repayment are the same as for the Federal Stafford Loan Program. Although the same standard repayment plan (fixed payment for up to ten years) is offered in both programs, students who partic.i.p.ate in the Federal Direct Loan Program have three additional repayment options: the extended repayment plan, the income contingent repayment plan, and the graduated repayment plan.

Option 1: Extended RepaymentSimilar to the standard repayment plan, it allows the student to repay a fixed amount over a period longer than ten years.Option 2: Income Contingent RepaymentStudents pay a percentage of their salary no matter how much they've borrowed. If they have large debts, this option requires many more years of repayment than the standard ten years. As their salaries increase, so do their loan repayments. The drawback to this option is that the longer they stay in repayment, the more interest they pay on the loan. Indeed, if their payment does not cover the current interest due, unpaid interest is capitalized, increasing the amount of princ.i.p.al they owe.Option 3: Graduated RepaymentThis allows students to opt for lower payments at the beginning of the repayment cycle when their salaries are lower. The payments automatically increase as the years progress. The repayment term remains ten years, but the payments are more manageable in the beginning.

No matter which repayment option you select, the plan will be explained in the promissory note you sign. Repayments will be made to a federal loan servicer contracted by the U.S. Department of Education.

Federal Perkins Student Loan In addition to the Federal Stafford Student Loan Program and the William D. Ford Federal Direct Student Loan Program, there is another federal student loan program that merits your consideration. The Federal Perkins Student Loan Program is administered by colleges and universities. It is made possible through a combination of resources: an annual allocation from the U.S. Department of Education, a contribution from the partic.i.p.ating inst.i.tution, and repayments by previous borrowers. You may have taken advantage of this program under its previous name, the National Direct Student Loan (NDSL) Program. This program, one of the first federal financial aid programs, was inst.i.tuted more than 30 years ago.

Eligibility The college or university determines eligibility for Federal Perkins Loans based on your financial need (calculated through the FAFSA/SAR) and the availability of funds. Besides demonstrating financial need, you have to be enrolled at least half time, and maintain satisfactory progress towards a degree. Keep in mind that Federal Perkins Loans are reserved for the neediest students.

Borrowing Limits Federal policy allows the maximum annual loan of $5,000 per graduate student. Actually, though, many schools lack the funds to allocate this much to any one student. A graduate student may borrow up to a c.u.mulative total of $30,000, including all outstanding undergraduate and graduate Federal Perkins Loans.

Interest Rate The terms are very good. The annual interest rate is currently 5 percent. Interest does not accrue while the borrower remains enrolled at least half time.

Fees Another perk of the Federal Perkins Loan: no fees.

Application Procedures Usually, you're automatically considered for this loan when you apply for financial aid. If you've been offered and have accepted a Federal Perkins Loan, you'll sign a promissory note for each semester of the loan. The promissory note lists the amount of the loan and states your rights and responsibilities as a borrower. When the signed note is received, either you will be credited for one semester's portion of the loan, or a check will be cut for you directly.

Deferments You can defer payments of your Federal Perkins Loan while you are enrolled until you graduate or drop below half time. This deferment is not automatic; you must request the deferment forms from either your school or the billing agency to which you're repaying the loan.

Grace Period A Federal Perkins Loan has a six-month grace period after a student graduates or drops below half-time attendance. During this period, no repayment is required and no interest accrues. If you borrowed under the NDSL Program, you may have a different grace period. You need to check with the school that granted you the loan to find out what the specific grace period for your loan is.

Repayment Borrowers under the Federal Perkins Loan program repay the school, although there may be an intermediary. Many schools contract with outside agencies for billing and collection. Repayment may extend up to ten years, beginning six months (your grace period) after you cease to be enrolled at least half time. The amount of the monthly payment and the maximum number of months allowed for repayment is based on the total amount borrowed. The federal government has set the minimum monthly payment at $40. Under some special circ.u.mstances, borrowers may make arrangements to repay a lower amount or to extend the repayment period. There is no prepayment penalty.

Cancellations The entirety of your Federal Perkins Loans and/or NDSLs will be canceled if you become permanently disabled or die. Check your promissory note. Your loan may have additional cancellation provisions. Also, if you have ”old” Federal Perkins Loans or NDSLs, there may be some different conditions depending on when the original loan was made. Check with your previous school for any special circ.u.mstances.

Federal Loan Consolidation Federal Loan Consolidation allows students with substantial debt to combine several federal loans into one larger loan with a longer repayment schedule. The new loan has an interest rate based on the weighted average of the rates of the consolidated loans. Students who borrowed under the Federal Stafford Loan (or the earlier Guaranteed Student Loan), the Federal Perkins Loan (or the earlier National Direct Student Loan), the Federal Supplemental Loan for Students, the Auxiliary Loan to a.s.sist Students (ALAS), and the Health Professions Student Loan Program can consolidate all these loans into one new loan.

To qualify for federal loan consolidation, you must be in your grace period or in repayment of your loans, and not be delinquent by more than 90 days. Apply to one of the lenders of your current loans. They'll negotiate to purchase your other loans from the lenders who hold them so your loans will be consolidated. If none of your lenders offers federal loan consolidation, you can go to another lender who does. Arrange to have that lender purchase your loans.

You have the option of consolidating all or only part of your loans. Often, students consolidate their higher interest loans, but keep their Federal Perkins Loans separate since the interest rate is so low. No fees are charged to partic.i.p.ate in this program.

Private Loan Programs Many M.B.A. students find that scholars.h.i.+p funds and the federal loan programs are not adequate to meet their expenses in an M.B.A. program. Over the last few years, several private loan programs have emerged to fill the gap.

As the economic environment changes, new loan private programs are added and some older programs are discontinued. Check with the individual programs for their current provisions.

The TERI Supplemental Loan Program This is a private educational loan program designed to help students make up the difference between their cost of education and their grants or loans. Approval is based on the credit-worthiness of the applicant.

Business Access This is a private loan program sponsored by The Access Group. Business Access offers private and federal loan funds up to the cost of attendance to students attending graduate business schools accredited by the American a.s.sembly of Collegiate Schools of Business. Although the rates and terms are subject to change, the current annual interest rate on these loans is the 91-day Treasury Bill rate plus 3 percent, and there is no origination fee. There is a loan minimum of $500, and students can take up to 20 years to repay. Visit their website at panies award scholars.h.i.+ps directly to students. There are various free scholars.h.i.+p search databases on the web which you can use to identify scholars.h.i.+p sources that you can pursue. This kind of research could turn up one or two small grants to help offset the cost of your M.B.A.

The most comprehensive scholars.h.i.+p search is FastWeb, the Internet's first, largest and fastest free scholars.h.i.+p search service. You can even submit a preliminary application to some of the scholars.h.i.+ps listed here directly via the web through FastWeb's E-Scholars.h.i.+ps Program () .

Some other free scholars.h.i.+p databases that you may want to investigate are: * Sallie Mae's Online Scholars.h.i.+p Service offers free access to the College Aid Sources for Higher Education (CASHE) database, which lists private sector awards from 3,600 sponsors.* The College Board's Fund Finder scholars.h.i.+p database, also known as ExPAN Scholars.h.i.+p Search, lists scholars.h.i.+ps and other types of financial aid programs from 3,300 national, state, public and private sources.* CollegeNET MACH25 is a free web version of the Wintergreen/Orchard House Scholars.h.i.+p Finder database. The database lists awards from 1,570 sponsors.* SRN Express is a free Web version of the Scholars.h.i.+p Resource Network (SRN) database. The SRN database focuses on private-sector, non-need-based aid, and includes information about awards from more than 1,500 organizations.

All these scholars.h.i.+p databases can be accessed on the Internet through pany does not reimburse educational expenses, check whether they offer employee loans. Often, you can obtain funds from your firm (especially if they are a financial inst.i.tution and/or have a good credit rating) at more favorable rates than you would obtain as an individual borrower.

Before cas.h.i.+ng in your 401(k), mortgaging your home, or borrowing from credit cards, try asking a spouse or parent to lend you the money. If you are not able to finance your M.B.A., perhaps you should consider a cheaper means of obtaining the degree, such as an online degree or a shorter and less expensive route.

A last thought: If your company refuses to a.s.sist you in your endeavor to obtain an M.B.A., consider changing jobs. When you interview, be clear that you are looking for a firm that supports its employees in their academic pursuits and improvements.

For additional information regarding the financial aid process and products available, refer to Appendix A where we have listed some useful websites.

PART FIVE.

The Part-Time Experience

CHAPTER 14.

Opening-Night Jitters.

You've progressed a long way down the road to B-school. You've learned how to gain admission to a program that fits your needs. You've explored how to find the money to pay for your education. But you may still have many questions. What's business school really like? Will my investment be worth it? Of course, your own answers to these questions lie in the future. In the meantime, however, we can show you how people who have been down the road to a part-time M.B.A.

For many of you, the first day of your M.B.A. program will be the first day in quite a while since you've set foot in a cla.s.sroom. To help alleviate any anxiety you may be feeling about this big step, this section contains valuable advice for your school days, from the first to the last day and beyond.

THE FIRST DAY OF CLa.s.s.

The strongest memory from my first day of cla.s.ses at Fordham University was the sense of urgency and antic.i.p.ation prior to walking into the cla.s.sroom. I'm not sure exactly what I was expecting-all eyes to turn on me? What I received upon the entrance to the cla.s.sroom was the busy faces of about 30 students, most of whom were reading their Wall Street Journal Wall Street Journals or updating their Palm Pilots with the notes from the day's meetings. Did I expect to find a long-lost friend? Or maybe just hoping to find another eager first-day student?

It's a little like dating. You find things when you least expect them; don't push too hard. Yes, I was disappointed at first that other students were not a bit more friendly and interested in learning about the people who were going through the same process. But if you stop to think about it, everyone is there with a similar purpose: to learn, not to make best friends. Try to remember that for many students, the five-minute break before the start of cla.s.s may be the only time during the day when your neighbor, sitting in the seat next to you, can have a few minutes alone, without the phones ringing, the baby crying, and that all-important client complaining. So relax, enjoy your first day, and know that before long you will be well entrenched in the day-to-day business of part-time student life.