Financing Options
We know that flight training is a major investment and have added some great programs that offer you the option to finance your training and personal expenses. Whether you are working towards a Private License or advancing into a career in aviation; one of these options can make the difference.
Deciding how much to borrow
Borrow only what you absolutely need to cover the cost of your education.
If you must borrow, accept only what's necessary to cover your training costs (tuition and fees, housing, meals, books, personal expenses, and transportation). Remember, when it's time to repay, you'll have other financial obligations as well - like rent, a car loan, and living expenses.
Financial professionals recommend that monthly student loan payments be no more than 10% of your monthly income (before taxes). The more you earn, then, the more you can borrow.
That's why it's important to calculate how much you'll be expected to repay on student loans each month and compare that amount to what you think you'll earn after graduation. Ask yourself these two basic questions:
- What percentage of my monthly income is the monthly loan payment likely to be?
- Can I make my loan payments, cover my living expenses, and start saving money?
Understanding the cost of borrowing
Interest
It seems simple: You borrow money; you pay it back. But the amount you have to repay is more than the amount you borrowed. Why? Because of interest.
Interest is what lenders charge for the use of their money and to cover their costs for servicing your loan until it's paid in full. The total interest you pay depends on:
- Loan amount
- Interest rate
- Time in repayment
Interest rates on private loans are variable and are based on the borrower's credit rating and/or that of a cosigner (if applicable).
Fees
You think you're borrowing just the right amount. But when the money arrives, you see it's less. What happened? Various fees, which vary by loan program and lender, have been deducted from your loan proceeds. You should learn about the fees associated with each loan to avoid any financial surprises.
Cosigning a loan
Private student loans are credit based. That means not only do they require an acceptable credit rating but, in many cases, the better the rating … the lower the interest rate.
It's important to realize, though, that cosigning a loan or asking someone to cosign one for you, makes another person just as accountable to repay that loan as the borrower.
This section will help you decide when it is to your advantage to consider a cosigner, provide a brief overview of cosigner rights and responsibilities, and direct you (or your parents) to the next step in cosigning a loan.
When to consider a cosigner
There are two instances in which a creditworthy cosigner is helpful:
As a result, if your cosigner has excellent credit (and you do not), you are likely to benefit from a loan with lower rates and fees.
Having a cosigner could save you a lot of money!
Cosigner rights and responsibilities
A cosigner is guaranteeing the debt. That means you (or your parents or spouse, if they are the cosigners) will have to repay the loan if the borrower does not. It's critical that you understand and want to accept this responsibility and that you are aware of the following:
Be sure you can afford to repay the loan. If you're asked to pay and you cannot, you may be subject to collections efforts and your credit rating could be damaged. Even if you're not asked to repay the debt, your liability for it may be included in computing your debt-to-income ratio and may prevent you from getting approval for other loans.
Under federal law, creditors are required to give you a notice that explains your obligations as a cosigner. In addition, make sure you get copies of all important papers, such as the loan contract and the Truth-in-Lending Disclosure Statement.
Receiving your loan proceeds
You've applied for the loan, it's been approved, and you've signed the promissory note.
What's next? Where is the money?
The money doesn't come directly to you. Rather, the proceeds are sent to Group 3, either by check or electronic funds transfer.
Then the school applies the funds to the outstanding balance on your school account, which typically includes your bill for enrollment fees, and any other school charges that you may have
Once those costs are paid, you'll receive any remaining proceeds to cover other expenses.
When is the money sent?
Funds will not be disbursed until you enroll and, even then, the money will not arrive all at once. Lenders send money in installments - called disbursements - based on academic periods.
The timing of disbursements will vary from school to school and by loan program. Under most federal loan programs, loan proceeds to first-year undergraduates who are also first-time borrowers can't be disbursed by lenders or credited to student accounts until 30 days after enrollment.
Check with Group 3's financial aid office to learn about the school's policy so you're not surprised.
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SLM Financial http://www.slmfinancial.com/ |
What aviation programs are eligible for the SLM Financial Loans®?
Private, Instrument, Commercial and any Flight Instructor ratings in Airplanes or Helicopters.
How much can I borrow?
Cost of education less financial aid received, up to the aggregate amount. Cost of education is generally the total of cost tuition, books, fees (cost of attendance) and may include other direct education expenses as determined by your school.
How can I apply for an SLM Financial Loan?
| Visit: | www.slmfinancial.com |
| Call: | 1-888-272-4665 |
| Website: | http://www.slmeducationloans.com/ |
If my Program is longer than one year, can I borrow the total cost of the program up front?
The SLM Loan may be used for loan periods of up to one year. To request additional funds for programs exceeding one year you can apply for additional funds by filling out a new application.
Are living expenses covered by my SLM Loan?
If living expenses are part of a student's budget, the school determines and administrates the formula used for establishing room and board as part of the cost of education for students enrolled in the institution. Up to 60% of the tuition amount is allowable for personal expenses, not to exceed $6,000. A portion of the tuition must be financed to be eligible to apply for expenses.
How is my SLM Loan disbursed, and when?
Disbursements are made to your school for amounts/dates determined by your school and usually are made at the beginning of your program and incrementally as you start new phases of your Pilot training program.
What is the interest rate and how is it determined?
Interest rates are variable (monthly) and are based on the Prime Rate plus a spread. Your interest rate spread is determined by your and your co-borrower's (if you use a co-borrower) credit history. The interest rates start at Prime +1% with fees as low as 2% for borrowers with excellent credit. Please visit www.slmfinancial.com for APR.
APR Assumptions:
- Prime Rate published in The Wall Street Journal as of July 7, 2006 is 8.25%.
- APR does not change.
- Minimum monthly payment is $30 for standard repayment.
- Minimum monthly payment is $10 for deferment repayment during the deferment period.
When do I begin repaying my loan?
Repayment begins 30 days after disbursement. With SLM's 15-year repayment option, you can keep your monthly payments low and affordable (see APR examples). You can also prepay your loan, either in part or in full, at any time to lower your total loan cost, with no prepayment penalty. Minimum monthly payment is $30.
During the deferment period, you will be required to pay only $10 per month. This $10 payment will be applied toward the interest that accrues on your account during the deferment period. Unpaid interest will be added to your loan amount (capitalized) at the end of the deferment period. You will then pay interest on a higher amount. Terms may vary by school. Deferment available for most programs.
This new deferment option lets you focus on your studies rather than your loan payment while you are attending school. And afterwards, you may still have up to 15 years to repay.
What is the repayment term for my loan?
10 yrs for aggregate debt less than $15,000
15 yrs for aggregate debt between $15,000 - $60,000
20 yrs for aggregate debt greater than $60,000
The repayment term is also subject to a $50 minimum monthly payment.
Am I eligible to apply?
If you have no credit or a poor credit history, you may still qualify for a loan by applying with a creditworthy co-borrower. That's because when you have a creditworthy co-borrower with a credit rating that is better than yours, it can lower your interest rates and fees.
Eligibility
You must be a U.S. citizen or permanent resident and have an established credit history.
Features
- The Career Training Loan has interest rates and fees that reward good credit.
- Repayment terms of up to 15 years are available.
- If you have less-than-ideal credit or no credit at all, you can still be eligible for the Career Training Loan by applying with a creditworthy cosigner.
- You may borrow for both tuition and other education-related expenses.
- You get the convenience of combined billing for all of your Sallie Mae-serviced loans.
- Creditworthy borrowers may request a cosigner release after making the first 24 consecutive, on-time monthly payments of principal and interest as initially scheduled.
- There is no prepayment penalty.
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MBNA America also offers flight training loans through a partnership with AOPA, the Aircraft Owners and Pilots Association. These loans are for shorter terms, with very competitive rates for individuals with strong credit. Find out more or apply online at www.aopa.org/info/flyfunds
Now you can apply for financing for your flight training, whether you are a student or working on your upgrade. The AOPA Flight Training Funds account can help you earn your wings!
- Predictable payments
- No annual fee
- No collateral needed
- Renewable source of cash
- Credit line up to $25,000
- Rates as low as 8.99% APR
- Support AOPA and general aviation
Call for more information: 888/628-7700 The AOPA Flight Training Funds account allows you the flexibility to structure your training to fit your needs. Select a Part 61 or Part 141 school. Use the account to pay for a rating or certificate program or just to get the additional hours you need to feel safe and comfortable in the aircraft. You can also use your account to pay for aircraft rental, instructor fees, books and supplies. Or anything else to make your training successful, the choice is yours, you control how and where you use your account.