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[00:00:00] Hello, my name is Stephanie Wells from MEFA, and I’m here today to talk to you about comparing college loan options. A little bit about MEFA. MEFA has been around for over 40 years. We are here as a trusted resource to help families planning, saving, and paying for college. All of our guidance and education is straightforward and transparent, as well as our programs and services.

Today we’re going to specifically talk about NIFA’s loan programs. In addition, we offer lots of great free education and resources such as calculators, blogs, videos, articles, and of course excellent custom service. And we’ve been working with colleges and universities across the nation for over 40 years, so we have great relationships with them to make sure that your loan process runs smoothly.

First, let’s start about [00:01:00] understanding basic loan terminology. Of course, the first thing we’ll wanna talk about is the interest rate. The interest rate is the most important number to look at when you’re comparing loan options because it, it is the amount that you will be charged for the lender’s use of borrowing their money.

Interest rates can come in two different varieties. Fixed and variable fixed rates will obviously stay the same for the life of the loan, which also means that your monthly payment won’t change. Variable rates can change with the market, which also means that your monthly payment could change from month to month.

Or even quarter to quarter. When comparing variable interest rates, it’s very important to make sure you understand if there’s a cap on that interest rate so that you know how high it will go or could go if the rates do climb. Now it’s important to know that [00:02:00] with education loans, particularly private loans such as loans like MEFA, that most interest rates are going to be tied to the strength of the applicant’s credit and based on the repayment option that you choose.

So let’s talk a little bit about the interest rates and just understand how the Mefa loan stacks up to some very common, uh, popular national lenders that you probably heard of. So you do wanna look at the full range of the interest rates, not just the lowest advertised. Rate me a’s rates start at a low 3.29%, and they range up to 8.89% depending on the repayment option that you choose.

Now, it’s important to know that most families and most borrowers don’t get the lowest interest rate based on their credit. Most folks fall in the middle range, depending on the lender and [00:03:00] the repayment option that they’re choosing. So you could see loans as high as 17, maybe even 18% depending on the loan option.

You know, it’s also good to know that the short of the repayment term will probably give you a lower interest rate as well. So you can see here on this chart, we have low starting rates, but if you look at the MEFA range, if you’re falling right in the middle, it’s gonna be a much lower rate than most of the other national lenders that you’re probably familiar with.

The annual O percentage rate is another great number to use when you’re comparing loan options. It’s basically representing the annual cost of the loan, which could include fees if there are fees on a loan. It is a great way to compare apples to oranges, particularly if you’re looking at fixed rates versus variable rates.[00:04:00]

The repayment term is very important to take note of because it’s going to have a direct impact on the cost of your loan. It’s obviously going to be the length of time that you have to repay that loan, and it can provide some flexibility for your family depending on what your monthly budget. So most lenders, such as MEFA, will offer a number of different repayment options to choose from, from immediate repayment, meaning you’re making payments while the student’s in school to interest only payments while they’re in school or even deferring payments when they graduate.

And it is important to know that the further you push off the loan repayment. The more it’s gonna cost you over determine that loan because you’re also delaying payments of maybe principal and interest, which can increase the total cost of the loan. However, for some families having a deferred loan option is.

Really [00:05:00] helpful for their budget, especially if they have multiple kids in college at the same time, and if they are having the student help pay those loans when they graduate college. So sometimes a deferred option can be the best option for a family, even if it is a little bit more expensive. The application and solicitation disclosure is a great resource for borrowers to look at to really look at the fine print.

An application solicitation disclosure is required by every private loan lender such as MEFA. It provides all the fine print details about that loan that you might not see advertised in an ad or front and center on a lender’s website. It’s going to include the estimated total cost of the loan for a $10,000 loan.

And I’ll show you some examples of some disclosure statements. You should easily be able to find the disclosure statement on a lender’s [00:06:00] website. It is required that every lender provide that disclosure statement, easy to find on their website, and the template for the disclosure statement should be the same from lender to lender as well.

You may also find disclosure statements on loan comparison tools such as ELM Select, where you’ll see MEFA listed as well. Some of the things to look for on these disclosure statements are the interest rate, you know, what is that range of interest rates, especially at that higher rate. Are there any fees attached to the loan in addition to or in lieu of an origination fee, and what will be the total cost of the loan?

So here you can see the MEFA disclosure statement, and you’ll easily be able to find this right on the loan page of the MEFA website. So you can see the range goes from 3.29% to 8.89 and that’s gonna depend on one of the five different repayment options [00:07:00] that we offer. Now you will see no fees are assessed with Amif loan, no late fees, origination fees, or any other sorts of fees.

And every lender is also required to disclose federal interest rates, as well as any other details attached to that loan program.

Now here you can see a snippet of the Mefa loan disclosure compared to another lender, lender B, we’ll call them. Now here you can see the $10,000 example. This is before you apply, so every lender has to have the $10,000 disclosure on their website, and if we look at a 15 year immediate repayment option through each of these lenders, you’ll see that MEFA, even if it adds it at its highest rate, is much cheaper than lender B at its highest rate of almost 19%.

[00:08:00] If we look at a deferred loan, which is a very common loan for families to look at and borrow, the Mefa loan for a $10,000 loan or deferred option is a little over 20,000, $21,000 if you make the minimum payment for the life of that loan. Again, it’s almost a worst case scenario at the highest rate, but then if you look at lender B, they’re same $10,000 loan because their rates are so much higher.

You’re looking at over $56,000 for that $10,000 loan. So that is a. Big difference in cost just by choosing one lender over the other. So with the Mefa loan, you can see you’ll save over $11,000 with that 15 year re immediate repayment loan and over $34,000. Then the deferred loan, that’s over three times the amount this borrower is taking out.

That is a lot of money for families to save. So really worth it to look at the low rates [00:09:00] that MEFA offers. Here we can see a couple of examples of other lenders fixed interest rate disclosures. Some things you’ll wanna look at, the range of interest rates. Again, don’t just look at that low, low teaser rates, since most people will not get that unless they have a credit score in the mid to high eight hundreds.

And you can see that highest rate of over 16%. You’ll also wanna look at fees again. I mentioned that the Mefa loan doesn’t have any fees, but with this lender, there are late payment fees and return check fees. Again, we already saw a couple of examples of the $10,000 disclosure at the lender’s highest rate.

Again, you can see very high total cost for that $10,000 loan with this particular lender. Then if you’re looking at a variable rate disclosure, you’ll see the range of interest rates as well, including any fees [00:10:00] that are assessed with this lender. They’re charging over a five per a 5%. Late fee or $5, whichever is less.

You’ll also see here, since it’s a variable rate loan, what the cap is on this loan. So the lender’s highest rate here is over 16%, but it won’t ever exceed 18%. And then also very important to notice with the variable rates, what is that variable rate attached to? What is it tied to? Could be L-I-B-O-R. In this example it’s the prime rate index, so you can see how much the lender’s adding to that rate to get to their, um, offered variable rate.

Some things that are really important for families to think about, particularly parents who might be co-signing with their children, is the rights and responsibilities of a co borrower. It’s important for folks to understand that anyone who signs on the loan, whether it’s the primary borrower or the student borrower, or a second co-signer, for [00:11:00] example, everyone has equal responsibility for that loan.

Now, sometimes adding one or even two co borrowers to the loan can increase your chances for approval and maybe even help you get a lower interest rate. For example, with MEFA, when you apply, we’re going to look at all the co borrowers and applicants on the loan to see who has the highest credit score so that we can offer you the lowest interest rate.

As I mentioned, those folks who have good credit will get a lower interest rate. Um. And if you have a little bit higher credit score, you might still get a good rate with any lender, but with MEFA, at least you know that even at the highest rates, it’s still gonna be lower than most loans out there in the industry.

Some loans also have a Cobar release option. For example, with MEFA, we have a deferred loan with a Cobar release, and many private lenders have that sort of [00:12:00] option as well. Now let’s talk about a few tips for borrowing wisely. MEFA is a lender, but we’re always educating families to, you know, borrow as a last resort and look at all your options before looking at borrowing.

So first you’ll wanna minimize borrowing by utilizing current savings and present income. So cash on hand, for example. Every family is gonna have to create a strategy that’s gonna work best for them, and MEFA can help you with that. We can help you make a plan. We can set up an appointment with you, give us a call.

I’ll share our email and phone number at the end of this recording. And here we can see an example of a combination strategy that’s very common. So in this example, we have a $20,000 balance due. If the family had saved the full 20,000, then great. They don’t need to borrow or use a payment plan. They can just pay that debt off to the school and one fell soup for that year.

But [00:13:00] most families haven’t saved all of what they need. So maybe the students able to save a little bit over the summer. And this example of parents have saved 16,000 and they’ve decided they’ll do 4,000 a year over four years. So spreading out their savings a little bit. Uh, and then you also would wanna look at current income in form of a payment plan.

Every college has a payment plan that you will hear about when you get your bill, and it should be on the college’s website as well. It’s a great way to spread out all or part of the cost over a period of usually five to 10 or 12 months in it’s interest free. So it’s a nice way to budget your budget, your money, versus writing a check each semester.

Then once you’ve looked at savings and current income in the form of a payment plan, if there’s any amount still due to the college, then you might be looking at borrowing. So in this example, if the family were to borrow the full 20,000, their payment might be about [00:14:00] $200 a month for a $20,000 loan.

However, this family can afford more than $200 a month. They’ve told me that they can afford $600 a month, so we’re gonna go with a $500. A month, 10 month payment plan for $5,000. In addition to our savings, we’ve cut our bill in half Before we’ve looked at Borrowing, family still needs to borrow the other half of $10,000 and that’s their a hundred dollars monthly payment for that loan, which brings us to our $600 affordable monthly payment in this example, and MEFA is happy to walk through those options with you.

Second, make sure that the student is borrowing their federal direct student loans first. Now, this is specifically about the federal direct student loan. We’re not talking here about the Federal Plus loan, which is a parent loan, which I’m gonna talk about in the next few slides. Really talking about the student loan that [00:15:00] is on a financial aid offer from the college.

The student and family do need to file the FAFSA to access this loan. And keep in mind, the student is the only borrower on this loan. They do not need a co-signer, and there is no credit check. You can see here the annual loan limits for freshman year on as a freshman, they can borrow up to $5,500. The current fixed interest rate for this current academic year of 25 26 is 6.39% fixed, and that does change each year on July 1st.

Now, some students may find that part of this loan is subsidized, meaning no interest is going to accrue until they leave school and the other portion of the loan. Or for some families, the entire loan could be unsubsidized, meaning interest is going to start accruing after the loan is dispersed. Now, students don’t have to make payments on interest in principle until they graduate.

But if they do have some [00:16:00] unsubsidized loans, it is a great idea to try and pay that interest while they’re in school. It’s a small amount, so when they graduate, they only have what they borrowed that they have to pay back. Now keep in mind, unfortunately, with the federal direct student loans, there is a small fee and that is deducted from the loan proceeds.

So a little over 1.05% is going be to be deducted. So you wanna plan for that when you’re paying your bill so that you know the full $5,500 is not gonna be credited to the bill. It’ll be $5,441 and 87 cents that will be credited to the student’s college account. Now the student will need to sign a master promissory note and do entrance counseling, which is a online program that the student can access through student aid.gov, which shows they understand their rights and responsibilities as a federal student loan borrower.

Again, no payments are due in school [00:17:00] while they’re in school, and they can also have a lot of different repayment options to choose from when they go into repayment. It is important to understand how college loans work because it is a little bit different from your basic consumer loans or consumer credit.

The college is actually gonna certify these loans to make sure that you’re not borrowing more than the school’s cost of attendance, minus your financial aid offer. That is the maximum amount you can borrow. Now, you don’t need to borrow that full amount. Um. Again, borrow only what you need. I often will encourage families to borrow just their build amount.

Since the cost of attendance could include miscellaneous expenses like transportation and books. Maybe the student can work over the summer to pay for some of those unbuild expenses so that if you do need to borrow your only focused on what you actually owe the college. You wanna estimate your monthly payment for that [00:18:00] annual loan.

It is an annual process. You are borrowing a different loan each year, but you do wanna project out if you’re borrowing for year one. How much is that monthly payment? And multiply it by four just to project what you might be paying at the end of four years of college if you do need to borrow each year.

You also wanna think about the student’s projected salary, if they’re expected to help pay off that loan with the parents, for example. Again, it’s an annual process. You apply for what you need each year and you should apply for the whole academic year at once if you do need it, rather than each semester because the college will split that loan 50 50 for you if you apply for the full year.

And just be reassured that interest won’t assess on any loans until money is actually sent to the college. So the college will split that loan up and tell the lender when to send the fall disbursement usually in August, [00:19:00] September, and when to send the spring disbursement, which is usually in January.

And then the lender will send the money directly to the college. If you’re borrowing for any UNBUILD expenses such as off-campus housing or transportation, just know that the money will go to the college directly. They will apply it to any build expenses at the school and give the family a refund for whatever’s left over to help pay for the some of those unbuild expenses.

Now let’s talk a little bit more about the Federal Parent Plus Loan that I mentioned and compare it to the Mefa loan. We get a lot of questions about how the Mefa loan and the plus loan compare, so let’s look at that in some detail. As you can see, the interest rates for the Mefa loan are lower than the Federal Plus loan.

There is no a PR disclosed for the plus loan, unfortunately, and there is over a 4.2% fee, which is gonna be deducted from the loan proceeds. So for a 10 or [00:20:00] $20,000 loan, which is a common loan amount, that can be a pretty hefty tag to add on to your loan. The student is not on the loan for the direct plus loan, but they are a co borrower, uh, on the MEFA loan.

So you can transfer responsibility with the Mefa loan or share responsibility there with the student if needed. Whereas the plus loan is only in the parent’s name. There are minimum credit standards for each loan. The minimum credit score for Mefa loan, for example, is six 70, whereas the Direct Plus loan can be a little bit easier to get, but again, the cost is higher on that plus loan versus the Mefa loan.

With the Mial loan, you have multiple repayment options to choose from, from 10 to 15 year repayments, as well as with the plus you. It starts at a 10 year loan, immediate repayment, but you can defer that loan when you go into repayment and consolidate it. To extend the repayment up to 25 years. With both of [00:21:00] these loans, student does need to be enrolled at least half time and there is death and disability.

Um, forgiveness benefits for each. Now, you don’t need to file the FAFSA to apply for a mefa loan, however, you do need to file it for a plus loan. With that said, we always encourage families to file that fafsa, see what you’re eligible for, and Federal state aid, the student is gonna need to file that FAFSA to get their federal student loan anyway, so it’s always a good idea to file that fafsa.

Now let’s compare the actual cost of a Mefa loan versus a plus loan. For a $20,000 balance due, let’s pretend that we are gonna borrow the full amount. So you can see with the plus loan, because they have that origination fee, if the family owes $20,000, they’re gonna have to add on in that origination fee so that the correct amount is credited to their bill at the school.

That’s assuming that they have enough room in their cost of [00:22:00] attendance for that fee. So let’s assume that $20,000 is sent to the school. You can see the interest rate with MEFA is a lot lower, and we’re looking at a five year weighted average, which could actually be as low as 3.29%, but we’ll use a more conservative number of 6.6899999999999995%, which is a five year average.

Still much lower than the plus loan to 8.94%. You can see the monthly payment is lower because the rate is so much lower. Interest in fees. Taking all of that into account with the Mefa loan, you’re gonna save over $4,000 for that $20,000 loan. So definitely a good idea to look at that Mefa loan if you’re comparing it with the plus loan or really any other loan in the marketplace.

So MEFA has a great resource for you. You can scan the QR code here to access our student loan payment calculator. It’s right on the MEFA website, [00:23:00] on our loan page, and I’ll show you real quick how it works. You just wanna put in the amount that you might be looking at to borrow. So let’s pretend we’re looking at $20,000, for example, and the student is a freshman, so we have four years before graduation.

And then we have excellent credit, so we’ll put exceptional for our credit standing, and your rate will be determined when you apply and you’ll see a chart similar to this with your exact rate. Per repayment option, as well as your exact monthly payment based on the amount you’re borrowing. So this is an example for a $20,000 loan.

You can see me. It’s five different repayment options, immediate repayment of principal and interest when the student is in school for 10 or 15 years. You could also do interest only while the student’s in school and have up to total of 15 years to pay that back, as well as deferred options, one with a co-signer release.

Now you can see [00:24:00] here the in-school payment for each option as well as the payment when the student gets out of school, which obviously if it’s a interest only a deferred payment, that payment’s gonna be higher when they graduate because you’re not making the full principal and interest payments when they’re in school.

Now I like to point out the total cost of the loan so that you know what you’re getting yourself into upfront before you even apply for that loan. As you can see me a’s rates starting at. 3.29% up to 7.49% if you have exceptional credit. And then if we have, let’s say, very good credit, we’ll recalculate here, since most families do fall in the middle.

You can see the interest rates adjust based on credit rating as well. So they’re gonna go up a little bit higher if your credit score is a little bit lower. And MEFA is happy to help you with this and walk you through the numbers. Share our screen in a Zoom meeting if you need to. It’s a [00:25:00] really great resource to help calculate your payments.

Run some numbers. I like to talk to families about just shaving off a few thousand dollars, the amount you owe, see how much that could save you. And really, even if it’s just a couple thousand dollars, you’re shaving off your loan balance, that can really, um, add up when interest is assessing. So we wanna make sure that everybody is aware of the timing.

For loans so that you’re not stuck right before the bill is due. Trying to figure out how you’re gonna pay for that semester. For fall semester bills, they are usually sent to the student, and again, they’re sent directly to the student either via email, mail, or maybe in the school. Student’s. School portal.

Those are gonna be sent sometime in June or July and be due about three to five weeks later in July or August, depending on the school. Now, this bill is going to include direct costs for tuition fees, and if the student is living on campus, [00:26:00] their food and housing. And any other direct costs, they may include health insurance, which you can waive if the student is already insured under your health plan.

And make sure you do waive that charge if you don’t need it, because it could be over $2,000 for insurance for the year and you don’t wanna make that payment if you are already covered for the student for the year. If the student is a freshman, their enrollment deposit should be deducted from that fall bill as any, as well as any other private scholarships that have been sent to the school in any financial aid.

If you’ve already set up your payment plan or even a Mefa loan, you may also see these amounts deducted from that fall bill. Keep in mind that work study is typically not deducted from the bill, the student would need to apply for a job on campus and earn that work study money through a biweekly paycheck through that job.

We always recommend that you apply for your ME loan. About two weeks [00:27:00] ahead of time, ahead of when the bill is due. You can apply at any time. Uh, but we recommend giving yourself a little cushion there, even though it is an instant credit decision. It only take you about 15 minutes to apply for a Mefa loan, and you’ll find out right away if you’re approved.

Now if you don’t need money for the fall semester, let’s say you have savings, so you don’t need to borrow, then great. You don’t have to apply right now for the spring semester. You can apply at any time during the academic year if you think you might need money for the spring, and you can always get that set up early.

Knowing that. Interest is not going to be assessed until monies are sent to the college. So it’s not gonna hurt you to apply early and be prepared and have your plan ready and set to go before you even get your bill. If you are thinking of using the school’s payment plan, get that set up sooner, the better so that you can get on the maximum turn plan and have your lowest, uh, monthly payment based on the school’s [00:28:00] payment plan.

Now Mefa loans, a little bit more detail. You can, um, scan this QR code to apply. Again, our rates range from 3.29% to 8.89. We can offer you different repayment options, no fees in an instant credit, in addition to low rates and guidance. MEFA is your resource for free. Guidance and education. We can set up a virtual one-on-one appointment with you.

You can get information from our podcast or on mefa.org to access any of our articles, videos, calculators that I just showed you, and we have lots of great recorded webinars that you can access on me a dog mefa.org as well. Again, connect with us on social where we’re always sharing great tips and information for families throughout the college enrollment process.

And please give us a call at eight four four nine mefa or email us [00:29:00] at college [email protected] if you need assistance throughout the process. Thank you and have a great day. We look forward to hearing from you.