Index

Cover Story

President's Message

Retirement

Family Finance

Personal Finance

Estate Planning

Financial Planning

Consumer Tips

Save more on federal
student loans

If you have a Federal Parent Loan for Undergraduate Students (PLUS), you may qualify for a 1 percentage point rate reduction through Navy Federal’s Timely Rewards program. Earn another 1/4 percentage point discount when you elect automatic payments.

Students who pay their Federal Subsidized or Unsubsidized Stafford Student Loan installments on time for 24 months get a 2 percentage point rate reduction. Most other financial institutions reduce their rate after 48 months—so Navy Federal lets students save in half the time!
For more information on Timely Rewards, visit www.navyfcu.org.

Dollars for Scholars
College loans come in several flavors. Here's a rundown of the most popular ones.

eed money to help pay those hefty tuition bills for your college-bound teen? Don't despair. Most families, especially those with more than one child in college, require help to cover the rising costs of higher education. In fact, loans now represent 60% of all financial aid packages. Two of the most common sources of education loans are Federal Stafford Loans and Federal PLUS Loans (Parent Loan for Undergraduate Students).

Federal Stafford Loans
Stafford loans are available to full- and half-time undergraduate and graduate students who are U.S. citizens or permanent residents. The variable interest rate, with a cap of 8.25 %, adjusts annually on July 1 (this formula is scheduled to be reviewed in 2003). Currently the rate is 5.99%. Credit checks are not required. There are two types of Stafford Loans:

Federal Subsidized Stafford Student Loans are awarded to students based on financial need. This loan helps families meet the gap between the cost of college and what they can afford. To qualify, a student must meet a federal “needs” test.

The beauty of a subsidized Stafford loan is that the federal government pays the interest while students are enrolled in school and during the grace period before repayment begins. Students can borrow more money each year they are in school. Right now the cap is $2,625 for freshmen, $3,500 for sophomores, $5,500 for juniors and seniors and $8,500 for graduate students.

Federal Unsubsidized Stafford Student Loans are designed for families that don't meet the federal “needs” test but must borrow money to help pay for college expenses. Although borrowers are charged interest from the day the loan is disbursed until it's repaid in full- the government does not pay the interest on unsubsidized loans-students can defer interest payments until they graduate or leave school.

Students who declare themselves independent of their parents or guardians can borrow substantially more money than dependent children, capping at $6,625 for freshmen, $7,500 for sophomores, $10,500 for juniors and seniors and $18,500 for graduate students.

Federal PLUS Loans
PLUS is a low-interest federally guaranteed loan for creditworthy parents of undergraduate dependent students. Parents can borrow up to the annual cost of attending college minus any financial aid received. This loan requires a credit check. If you have an adverse credit rating, however, such as judgments or liens against you, you may still be able to get a PLUS, if you can provide proof of payment. There are no income restrictions on applying for a PLUS.

There is normally no deferment period. Repayment begins within 30 days after the final disbursement, but the payment period can extend to ten years. The variable interest rate, with a cap of 9%, adjusts annually on July 1 (this formula is scheduled to be reviewed in 2003). Currently the rate is 6.79%.

To learn about education loan options at Navy Federal, visit the Family Zone at www.navyfcu.org and click on “College Bound.”

What Does Your Child Know About Money?

ong before most children can add or subtract, they're exposed to the concept of money. Any four-year-old can tell you where their parents get money-the ATM, of course. However, understanding that parents must work for their money requires a more mature mind. Once kids learn that they can buy things they want with money-such as candy and toys-many begin collecting every nickel they can get their hands on.

That's why it's important to take an active role in raising your child's financial awareness about spending, saving, investing and charitable giving. Exposing children early on to the every-day realities of earning money and managing the family's budget can help shape how they feel about money throughout their lives. The key is to just keep it simple in the beginning and provide more details as you go along.

The box at right provides a brief outline of what children should know by three milestone stages-grades 4, 8 and 12. This checklist was based on recommendations made by the Jump$tart Coalition, a Washington, DC-based non-profit group that promotes financial literacy in children.
To find out more about how you can help your children become financially literate, go to the Jump$tart Web site at www.jumpstartcoalition.org.