PHEAA: Student Loans 101

Drew Thomas  0:05  
Fast fact. Over the past 20 years, the average cost of a four-year college degree has more than doubled, with tuition inflation outpacing regular economic inflation by 41%. I'm Drew Thomas, and this is Bank Chats.

Drew Thomas  0:51  
So, let's set up, let's set up the topic for today, and I have no creative way of doing so, so.

Jeff Matevish  0:59  
The school season has just ended, so we are going into the summer, and kids are thinking about how am I going to pay for college, or parents are thinking about how am I going to pay for my kid's college. Yeah.

Drew Thomas  1:13  
Been there, done that. Bought 2 T-shirts one for myself and one for my daughter.

Jeff Matevish  1:19  
Yeah, my family was, was half and half, me and my mom went to the same school, my dad and my sister went to the same school, so we had some rivalry, but okay.

Drew Thomas  1:27  
You mean college?

Jeff Matevish  1:28  
College, yeah, okay, yeah.

Drew Thomas  1:29  
So, do you have one of those flags out front that has, like, the, you know, house divided, have you seen those? Yeah, I have seen the different colleges, yeah, that's yeah, so, so we have a special guest with us today that is going to help us work through some of this stuff, because honestly, you know, finding good opportunities for lending and good opportunities for financing as a student is not always the easiest thing in the world.

Jeff Matevish  1:52  
Yeah, and there's a lot of options out there. So, which one do you pick? Yeah.

Drew Thomas  1:55  
Right. So, what do you do? So, we have Leon Gagliardo, it's Gagliardo, right?

Leon Gagliardo  2:01  
Correct, correct.

Drew Thomas  2:02  
Okay, so Leon Gagliardo, he's an assistant vice president with the PA Forward and Keystone Student Loans. And how are you doing, Leon?

Leon Gagliardo  2:10  
Good, good, happy to be here.

Drew Thomas  2:12  
Yeah, we're really thrilled to have you here. Honestly, this is fantastic, and we're doing this obviously virtually, as you can tell. Jeff and I have our typical studio backgrounds, and Leon is on his, on his background here, but that's...

Jeff Matevish  2:26  
He's in the same state, but yeah.

Drew Thomas  2:28  
Same state, different county, yeah. Where are you right now, Leon? Let me ask you that.

Leon Gagliardo  2:32  
I'm actually in Carlisle, Pennsylvania.

Jeff Matevish  2:35  
Okay.

Drew Thomas  2:35  
Carlisle, okay. So, that's not that far away, that's like two and a half hours from us, something like that.

Jeff Matevish  2:39  
Yeah, something.

Drew Thomas  2:40  
Have you been to Johnstown?

Leon Gagliardo  2:42  
I have.

Drew Thomas  2:44  
What did you think?

Jeff Matevish  2:45  
Be honest.

Leon Gagliardo  2:46  
Am I going to get dropped from the podcast?

Drew Thomas  2:54  
You probably can't say anything that we don't say around here, so.

Leon Gagliardo  2:57  
It's a nice town, for sure.

Drew Thomas  3:00  
It is a nice time, it's very scenic. There's a lot of history around here, so yeah. So, you're welcome anytime you, you like, but through the miracle of technology, we're still able to do this today, which is fantastic. Sure, yeah. So, Jeff, why don't you go ahead and start, and let's, let's, let's just start a little bit with, I guess, I guess...

Jeff Matevish  3:18  
Let's start broad.

Drew Thomas  3:19  
Yeah, let's start broad. So, let's start with, you know, how do student loans work? Like, what do you, what do you, you know, what are you looking for as a student when you're looking for a student loan?

Leon Gagliardo  3:30  
Yeah, so basically, at a very high level, I mean, a student loan is used to finance, you know, post-secondary education, you know, so whether that's a college, whether that's, you know, technical school, proprietary school, any kind of post-secondary institution, so those funds can be used for tuition, you know, room and board, any kind of expenses related to education. There's basically two types of, broadly speaking, student loans. There's federal loans, you know, so you might hear about the Stafford loan, is probably the most common, the Parent Plus loan. Those are all kind of issued by the Department of Education.

Jeff Matevish  4:16  
Okay.

Leon Gagliardo  4:16  
And then, and then you have private student loans, you know. So, what we do is we always encourage families to look at federal funds first, you know, if there's a gap, so look at the Stafford loan first, and if there's a remaining balance, you know, then you can look at private student loans. Okay, so...

Jeff Matevish  4:35  
Is that generally, just because that's a different rate, or what would be the benefit to look for, look at federal before private?

Leon Gagliardo  4:42  
There are different, different benefits on the federal side. They tend to be, you know, their interest rates are good. If you're, you could also qualify for a subsidized federal loan, which is, which basically means that the government is paying for the interest, while the students attending school. Okay, okay. So, basically, the first step, you know, before you even start looking into any of this, is to complete the FAFSA, which is the Free Application for Student Aid.

Drew Thomas  5:15  
Yeah, for, yeah, Free Application for Federal Student Aid, right? Gotcha. I filled out many in my life. Yes, so the FAFSA, the FAFSA gives you access not only to potentially federal loans, like the Stafford loan, and so forth, but also potentially gives you access to grants and so forth too, right?

Leon Gagliardo  5:33  
Correct. Yeah, that's why it's so vital to complete that, you know, because you know, and before you even look at federal loans, you know, there's grants available, you know, so for example, there's PHEAA administrates, administers the Pennsylvania grant, which is available for Pennsylvania families.

Jeff Matevish  5:54  
That's usually income-based too, or what other factors usually go into determining whether you qualify for a grant or not?

Leon Gagliardo  6:03  
Yeah, it's primarily income based. There's, there's some other factors. I mean, there's, there's questions on, you know, it's the FAFSA is based on the tax returns, you know, for the family. And then, in addition to the after you do the FAFSA, there is a Pennsylvania, there's a PHEAA grant application that can be completed, and that can be done through the PHEAA website. Okay, and we work with, you know, FAFSA, so we get data from FAFSA that kind of allows us to get a lot of the information that we need to make that determination whether they would qualify for, for a loan or a grant.

Drew Thomas  6:42  
Okay, so, so, so you mentioned PHEAA. So, let's talk about that. Like, what, what exactly is PHEAA?

Leon Gagliardo  6:47  
Yeah, it's a great question. So, PHEAA stands for Pennsylvania Higher Education Assistance Agency, and basically our mission is really to provide affordable access to higher education. We do that through a variety of ways, you know. One is we contribute to the Pennsylvania State Grant Program. Two, we assist families with navigating through the financial aid process. We know that it's not an easy process, so we have, we have websites that families can utilize. There's an education planner, my smart borrowing. You can deal with it. Those are all websites that we kind of maintain as a service to students and families. We also provided low-cost financial solutions, you know, so PA Forward Student Loan Program and our Keystone Student Loan Program are two of those solutions that we do provide, and then we also look to educate students on financial literacy. PHEAA is a state agency, and, but we're somewhat unique in that you know we have different revenue sources, we have a servicing platform where we service loans for other lenders, and then there's other lines of business that help support our mission, so that and then what any additional revenue that we have goes into the Pennsylvania state grant program, so the goal is to be self-sufficient, you know, and generate these lines of revenue, and then that money ideally goes back into supporting Pennsylvania students and families.

Jeff Matevish  8:38  
It's like a revolving door. Yeah, that's cool.

Drew Thomas  8:40  
Yeah, I mean, definitely. So, so you said that you said that there's a couple of different options on loans, and we can kind of get into the differences here, I think, in a minute about the differences between, say, the PA Forward and the Keystone loan options, and so forth. But before we do that, about how many students in Pennsylvania are taking advantage of these, these kinds of loans. I mean, is it, is it pretty common that I would assume it's pretty common to need lending assistance when you're going to college, right? I mean, not everybody is independently wealthy or has parents that are willing to foot the entire bill.

Leon Gagliardo  9:14  
Yeah, yeah, yeah, there are certainly a lot of families that take advantage of private student lending, just to give you an idea, you know, PA Forward launched in 2019. Since 2019 we've originated about $840 million in student loans.

Jeff Matevish  9:33  
Wow.

Leon Gagliardo  9:34  
Yeah, and that equates to about 30, 30,000 families. One of the things we're really, yeah, so one of the things we're really proud about is, you know, because we are a not-for-profit agency, you know, our goal is to provide those loans at a really low cost, you know, so the average interest rate just for our portfolio right now is about 6.7%. When you look at other private lenders, you know, the national lenders, they tend to be, you know, closer to 10% or 11% so it's a pretty significant savings that we're able to pass along to families.

Jeff Matevish  10:16  
Now, is that those interest loan or interest rates, is that fixed, or does that vary from year to year for the student?

Leon Gagliardo  10:25  
Yeah, so, so we originate just fixed loans.

Jeff Matevish  10:28  
Okay.

Leon Gagliardo  10:28  
We view that as a good thing, because once the rate is set, you know that their payments are not going to change over the life of the loan. There are variable rate loans, you know, that other lenders provide, but those, those rates can fluctuate. So, if you're in a good interest rate environment, you know that loan, that rate could be a little bit lower, but then once the interest rate environment changes, you know, it's typically based on an index. Their, their payments could go up on a quarterly basis, so those could kind of get reset, you know, as interest rates are rising.

Drew Thomas  11:06  
Sure, yeah, I remember the good old days of low interest rates. I don't know how quickly those are going to come back around. You know, not, not that it has anything to do with specifically with student loans, but even, even home equity rates and things like that, you know, the days of the pandemic, when you were getting house rates at two and a half or 3% and there are a lot of people that, that still believe that they're going to hold out and wait to buy until those rates come back. I don't think that's ever coming back. I think, you know, right now, you know, when you take out a mortgage, you're probably between five and a half and 7% or so, so I mean, really, you know, six and six and a half, would you say 6.7% is that what you said?

Leon Gagliardo  11:49  
That's our average, yeah, for on average, yeah.

Drew Thomas  11:51  
So, really, I mean, that's, that's really not bad, especially when you start comparing that to taking out a loan, even a, even a personal loan, which is probably going to be higher than that, or assuming you could even get a personal loan for the amount that you would need for some schools, or, or even taking out, like a home equity loan, if you're a parent or a guardian trying to help your, your student through, you know, through school. I don't think you're going to find a better rate than that, you know, in general. So, so what is, so what is the difference between, you said since PA Forward started in 2019 is that what you said?

Leon Gagliardo  12:25  
Yes, in 2019.

Drew Thomas  12:26  
So, okay, so what's the difference between PA Forward and Keystone? I know that there are two different sort of categories of loan there.

Leon Gagliardo  12:33  
Sure, sure, yeah, that's a great question. So, in 2019 we launched PA Forward, that was really focused on Pennsylvania students and families. So, for PA Forward, if you're connected to Pennsylvania, you would get a PA Forward loan. So, when I say connected, either you're a Pennsylvania resident attending a school anywhere within the country, or you're in one of the surrounding states, let's say New York or New Jersey attending a Pennsylvania school, then you would qualify for a PA forward loan. One of the reasons that we had that requirement is we worked with the Department of Economic Development at the state level, and when we talked about developing this student loan program, we were, they gave us a tax exempt allocation, you know, so we can do a tax exempt bond, you know, that would actually keep those costs lower, you know, for students and families, as long as they're tied to Pennsylvania. Okay, a few, a few years later, you know, we had a lot of success with the program, but we felt like we really wanted to, you know, as a nonprofit, still kind of expand our reach to families that are outside of Pennsylvania, so we looked at kind of the neighboring states: New York, New Jersey, Ohio, Maryland, Delaware, West Virginia, and then Virginia, and we wanted to offer a competitive program in those states as well. So, we developed the brand Keystone Student Loans. We, the rates are a little bit different, they're slightly higher because they're not, we can't use that tax exempt allocation the same way we do for Pennsylvania students, so the rates are a little bit higher, so we established a different brand, and then we also felt like going outside of Pennsylvania, you know, PA Forward may not resonate with students and families outside of the state, so we came up with a new brand.

Drew Thomas  14:45  
Yeah, that totally makes sense to me.

Jeff Matevish  14:48  
We're, I mean, we're in Pennsylvania, but I mean, our listeners are not all from Pennsylvania. We hope so. Yeah, we are, are there other organizations like, like PHEAA, in other states that are doing this, do you know?

Leon Gagliardo  15:04  
There are, there are, okay, yeah, just a couple examples. I mean, the MEFA is a, is a state-based entity that's out of the state of Maine, or Massachusetts, rather. Indiana has a program that's kind of specialized for Indiana students, so similar to PHEAA. Alaska has an organization. There's, there's a few others. South Carolina does, but in our kind of immediate area, you know, PHEAA is somewhat unique. New Jersey does, New Jersey has a program as well. They have a state program.

Drew Thomas  15:46  
So, regardless, so, again, just to make sure that we're clear on this, or that I'm clear on this, I guess I should say, is that even if I obviously, if I'm a, if I'm a Pennsylvania resident and I'm applying to go to a Pennsylvania school, I qualify. If I am a resident of, or not necessarily qualify, I can apply. I can apply if I am a resident of one of the surrounding states that you, that PHEAA works with, and I'm attending a Pennsylvania school, I can apply. Is that right?

Leon Gagliardo  16:20  
That's right. Or okay.

Drew Thomas  16:22  
But if I'm a Pennsylvanian, so if I'm a Pennsylvania resident attending a school outside of Pennsylvania, can I apply?

Leon Gagliardo  16:23  
Yes, yes, okay.

Drew Thomas  16:29  
So, the only way that I cannot apply really is if I'm a resident of one of these other states and I'm attending a school outside of PA. Is that, is that fair?

Leon Gagliardo  16:39  
Actually, it would be so if you're a let's just use Massachusetts. If you're a Massachusetts resident, you would not be able to qualify for one of our programs, because you're outside of the eight states that we cover. So, we have, okay, versus.

Drew Thomas  16:55  
Keystone. Yeah, okay. So, even if, so even if I'm a New Jersey resident attending a New Jersey school, theoretically, I can apply?

Leon Gagliardo  17:03  
Yes, that would, that would fall under the Keystone Student Loan Program.

Drew Thomas  17:08  
Okay, so that's cool.

Leon Gagliardo  17:09  
The good news is the application, it's the, it's the same application for both programs. What we do is, we ask those kind of questions up front. Are you, are you a Pennsylvania resident? If you're not, goes to the next question. Are you attending a school in Pennsylvania? No. Or, you know, are you a New York resident attending a New York school? Yes. Okay. Now you're going to go to the Keystone application. I know it's a little confusing, but for the, for the customer, it's, it's pretty straightforward.

Jeff Matevish  17:38  
Yeah, it's easier. You're doing all the sorting, yeah, right, yeah, exactly right, yeah.

Drew Thomas  17:42  
So I, I, but I think that that's an important distinction, and I'm glad I asked, because I want you to know it's important that if somebody's watching or listening to this and they think, you know, you don't want people to say, like, oh, well, I'm a New York resident, I'm attending a New York school, so I don't need to listen to the rest of this, because it doesn't apply to me, actually, could, right, right, you know, and, yeah, so, so that's really awesome. And you know, I think that now, if I apply, you said there are, there are programs in other states now, they don't ever overlap, though, is what is what I'm probably hearing, right? So, if I'm in Maine or Indiana, though, you don't overlap on this on any states where I can apply to one and the other. Does that make sense?

Jeff Matevish  18:27  
New Jersey might have one.

Drew Thomas  18:28  
That's through New Jersey, might, yeah.

Jeff Matevish  18:31  
In those states.

Leon Gagliardo  18:32  
Yeah. If you're a New Jersey resident, there is the New Jersey program that you should probably look at first, but other than, I mean, there's, there's also the, there's not, you know, there's grants and there's loans, you know, some we have other organizations out there that, that have grants, you know, that if you're a resident of those states and you should look at the grant first, that you wouldn't, you know, there wouldn't be an overlap, but in general, I mean, a lot of the other state-based entities, you know, are focused on their, their particular state. Okay.

Jeff Matevish  18:55  
And we didn't mention this when we first mentioned grants. The difference between grant and loan, grant is basically free money to you, right? Well, there's no repayment, exactly, right? Okay. so, you want those for those first. Yeah, I know we mentioned that you want to go for those first, but we didn't mention why. Yeah.

Leon Gagliardo  19:17  
Yeah, that, that's your first line of attack for sure. Okay, you want to see if you qualify for a grant. I know we talked about how many families' kind of were impacted by, you know, our student loan program. We didn't really touch upon our grant program, so just to give you an idea, we, you know, we administer the Pennsylvania State Grant Program for the Commonwealth. That's our largest grant program that we offer, and we actually, there's an appropriation of about $400 million, you know, for, so for 2024-25 we dispersed about $400 million, which equates to over 100,000 families that we were able to, to help through the grant program. So, it's, yeah, it's a really big number, and it affects a lot of families throughout the state of Pennsylvania. Yeah, in addition to that, there's some other grant programs that we administer for the Commonwealth. You know, that's the largest, but there's also grants for military, there's grants for nurses, there's grant, there's a Grow PA grant program, that's, that's, that's recent that we rolled out, you know. So, if people that agree to work in Pennsylvania, they could qualify for a grant to go to school. There's also a teacher grant program, so one of the things that we're trying to help is teachers that are going through this, you know, teachers that are student teaching, you know, how can we support them, you know? So, can we give them a grant, you know, as a student teacher.

Jeff Matevish  21:11  
That's big right now, because, yeah, I mean Pennsylvania is hurting for teachers in certain areas, definitely.

Leon Gagliardo  21:16  
Yeah, yeah.

Drew Thomas  21:19  
What about, and I honestly don't know the answer to this, so I apologize if I'm, if I'm stepping on something that is a landmine of sorts, but what about, what about like trade programs, you know, things like, do you do anything, are there any kind of grants or loans that you guys work with for schools that teach more traditional trades rather than universities and colleges?

Leon Gagliardo  21:43  
Yeah, that's a good question. I know there's, there's a variety of programs that we administer. I'm certainly not an expert on the grant side, but there is a targeted industry program that we have out there, so they're, you know, industries that are kind of in need, you know, and there are grants that you know students can qualify for. Okay, yeah. And what I would recommend to listeners, I mean, pheaa.org you know, there's our website, so there's a whole list of, you know, grants that are out there that they can look at and see what they may qualify for.

Jeff Matevish  22:22  
Now, do you have to apply for those annually, or once you, once you receive grant money, you receive grant money for the, your entire, you know, college or university stay?

Leon Gagliardo  22:33  
Yeah, that's a great question. So, typically, like for the main grant program, you're going to apply that first year, and then typically you know we have your information, and we actually get a feed from the Department of Ed, you know, the FAFSA data each year, so we're able to kind of see how all things are remaining equal, you know, we'll give you the grant for the second year, third year, etc. So typically, you know, you apply once, you know, and you kind of, create your own username and password, then you can kind of go in and see the status for the next year if you qualify. Okay.

Drew Thomas  23:09  
But you do tend, you do have to still fill out the FAFSA every year, correct?

Leon Gagliardo  23:13  
Yes.

Drew Thomas  23:14  
That, that's still an annual thing that you have to do.

Leon Gagliardo  23:16  
That is, that is, yeah, that's critical that you do that every year.

Drew Thomas  23:21  
Okay, so what's the application process like? What is a typical application look like for if I'm a, if I'm a student or a parent that wants to, that wants to do this?

Leon Gagliardo  23:31  
Yeah, I mean, after that.

Drew Thomas  23:34  
Well, after I filled out the FAFSA, what would I do for PHEAA, for example? What would be my next step?

Leon Gagliardo  23:41  
Yeah, so after you complete the FAFSA, then you could go to the pheaa.org and there's a grant application out there. The good thing is, because we have a feed with, you know, that we get FAFSA data, there's not a ton of information that you need to supply, you know, because we're going to get a lot of information systematically, anyway. You know, so it's, it's basic demographic information, your name, you know, where you're going to school, those kinds of questions. So, it's not an overbearing process in any sense.

Drew Thomas  24:16  
Okay, but there is, but there is a process, though. I guess is my thing. It's, it's not like, oh, I filled out the FAFSA, so if I qualified for a PHEAA grant or a PHEAA loan, I would automatically know. I still do have to do something with you to start that process.

Jeff Matevish  24:32  
and if, sorry, go ahead.

Leon Gagliardo  24:35  
Yeah, it's a separate application on our side.

Jeff Matevish  24:40  
Now, if you were denied a grant or a loan for whatever reason for one year, are you automatically denied for the remainder of your schooling, or is that something you want to apply for annually as well?

Leon Gagliardo  24:56  
Yeah, no, that's not necessarily true. I mean, your financial situation could change, you know, so I don't think that happens a lot, but that could happen.

Drew Thomas  25:07  
Okay, so let's, let's assume that I, let's assume that I apply, let's assume that, you know, I've gotten all my paperwork in. What kind of a deadline are we looking at? Am I applying, am I applying, you know, nine months in advance, a year in advance? How long, like, if I, if I'm going to school this fall, for example, when should I, when should I have done my application? Yeah, so really, like, if I'm, I think that a lot of people, they, I know this was difficult for me whenever I was a high schooler, sort of getting students to think ahead at that age is always a little bit difficult, that far, you know, that I should be thinking about applying for these things when I'm a junior, per se, you know, maybe not so much a senior, right? So, what kind of timeframes are you looking at for application deadlines?

Leon Gagliardo  25:56  
Yeah, so basically the FAFSA opens up, and I'll say typically, because you know, over the last couple years, there's been kind of some changes, but the normal cycle now is, is October 1 is the earliest that you can submit your, your FAFSA, and so we, you know, for the grant application, we kind of mirror that, that, that cycle. So, October, as early as October for the next academic year, so that's, that's early, right? So, you're, you're till like 10 months before you're going to go to school, and then you have until May 1 is typically the deadline, you know, for our program, and then shortly thereafter May is when they'd be notified if they qualify for the grant.

Drew Thomas  26:45  
Now, here's a question that I don't know - a lot of people, I don't know, maybe people would ask, maybe they wouldn't, I don't know, but is there, is there, is there an advantage to applying early to these things, or is it really one of those things where you guys are collecting all the applications, and then you're not decisioning anything until the deadline, because I know there are a lot of procrastinating students out there, and you know, so you got to wonder, like, does applying early have a benefit?

Jeff Matevish  27:13  
That's a good question for grants too. Yeah, does grant money dry up if you wait? Yeah, right, right, right, yeah.

Leon Gagliardo  27:21  
That is a great question. I mean, I would say, in general, it's better to apply early, you know, because there are certain programs, you know, that, that you know, the Commonwealth allocates a certain amount of funding for us, so some of these kind of specialty programs, you know, so, for example, you know, maybe the teacher program, there's a limited number of funds, so we can't say, hey, there's, we're going to choose you this person over that person, if they kind of are a similar financial situation, so if there's a limited funding, then it's important that you apply early, you know, because it could be a first come, first serve situation. Okay, when you're, when you're talking on a broader level, like the FAFSA, that's not necessarily the same case, you know. It's, but yeah, it's a tough, that's a kind of a tough question. I think it's, it's usually better to, and I'm not going to say for sure, like it always matters, you know, whether you do it October 1 or.

Drew Thomas  28:28  
Yeah, well, I think that's a good, I honestly, it's probably a good best practice, just in most things in life, yeah, to not wait until the absolute deadline, you know. But I know there are definitely people out there that do that, you know. They look at a deadline on the website, and they think to themselves, oh, I have until May 1, I don't have to worry about that until April 29, you know.

Jeff Matevish  28:51  
But I mean, when you're dealing with that much money, you know, I don't know how people would, would procrastinate, but yeah.

Drew Thomas  28:57  
You haven't met Abby, okay, and, and I'm going to remind you of this in about 17 years or so.

Jeff Matevish  29:08  
I'm a new father, Leon. Yeah, so might be, uh, might be hitting up PHEAA in 17 years.

Leon Gagliardo  29:18  
529 plan is your first step right.

Jeff Matevish  29:21  
529, 529 plan, yep.

Drew Thomas  29:25  
Okay, so let's, let's talk about the downside to some of this, right? So, I, let's, let's assume that you know I've gotten through school, I've gotten my loans, I've worked with every everybody, I've gotten my grants, whatever, and my loans come due. How does, what does a repayment look like whenever you graduate? Is there some sort of, like, a is there some sort of a, sort of a grace period after you graduate where you get an opportunity to maybe like get a job and get your feet under you first before you have to start repaying the loans, or...

Jeff Matevish  29:53  
And oh, piggy off of that too. No, no, can you start repaying your loans ahead of time if, before you graduate from college? Is that beneficial?

Drew Thomas  30:01  
That's advantageous if you can do it.

Jeff Matevish  30:02  
If you can do it, yes, yes, yes. Is that, is there a benefit to doing that? Do you save any money?

Leon Gagliardo  30:09  
For sure. Yeah, yeah. So, let yeah, let me take a step back, and I'll talk about the, the application process, because depending on what option you choose is going to kind of dictate what your repayment schedule looks like. So, for the PA Forward and Keystone Student Loan Program, we offer four repayment options. So, it kind of goes to meet immediate repay, which is you're agreeing to make payments while this, the students in school, right, so you're going to, once the loan gets dispersed to the school, you know, within, you know, 30 to 60 days, you're going to start making monthly payments to the school, or monthly payments to us, to you. Yeah, yeah. So, the benefit...

Drew Thomas  30:57  
Well, not you specifically, like Leon isn't collecting the checks, but you know.

Leon Gagliardo  31:02  
Good clarification. Yeah, yeah, yeah. So, once to the advantage of doing that is, you know, for, for our loans, you know, we would give you a better interest rate for doing that, you know. So, if you're, if you're agreeing to make those payments immediately, then we're going to drop your interest rate a little bit. Now the next option you can choose is what we call an interest only, so that's kind of like the next, the next best option. That means that you're going to, whatever the interest is, you know, that's accruing each month, you're going to make that payment, so that could be, you know, $100 a month, $75 a month, whatever the case may be, and that will give you kind of the second best interest rate. And then there's what we have is kind of like an in between, there's a partial interest rate, which is $25 a month. So, you're saying, hey, I can pay a little bit while the students in school, I'm going to just agree to pay $25 so that rate would be a little bit lower. The more, the most common is typically the full deferral, so that means that you're not agreeing to make any payments until the student graduates, and then talking about grace period, there is a typically a six-month grace period for our programs. So, you wouldn't have to make those payments until the student graduates, or if they withdraw from school, they would, they'd be expected to make those payments sooner. So, it really depends on what option they choose, but regardless of what option you choose, you can always accelerate payments. You can always send us money early, you know, there's no prepayment penalty, you know, and that's just going to pay down, you know, the principal earlier, you know, so that you wouldn't have to, you know, go, go the full term. So, there's, there's different terms too, you know, there's on the private side, there's a little bit more flexibility, you know, federal loans are in general, they're 10-year terms. With private, you can choose a lower term, like a 5-year term. There's also a 10-year term, a 15-year term. Some of the loan programs go up to 20, and then that's another consideration when you're doing the application, if you choose a five year term, that's going to get you the best interest rate within that term, because you're paying it off sooner, so we'll give you a lower interest rate for that, so between the repayment option and the repayment term, that kind of can determine your final interest rate.

Drew Thomas  31:01  
Yeah. And I mean, that makes sense. I think that's true of most lending, you know, the longer, the longer that the lender is on the hook for that money, the longer it takes for the lender to get paid back, the higher they tend to make the interest rate, because there's more risk, right? There's, you know, there's risk of default and all that kind of stuff, which...

Jeff Matevish  33:00  
That brings up another question, what happens, we've talked about other loans on this show, I mean, what you know, you lose your job or your parents lose their job, you know, what happens if you are unable to make a payment for a month or n-number of months? What are the consequences? Is there a grace period?

Leon Gagliardo  33:13  
Yeah, so there is, yeah, there's certainly a grace period. I mean, if you miss a monthly payment or two, you or even three or four, you're not going to, we're not going to default the loan. We're certainly going to be reaching out, you know, to the borrower to see, you know, if we can get payment from them, and if we can't, you know, they have a hardship situation, we do have options for them, so we always try to work with the borrower. You know, so there's a financial hardship option where you know we can pause payments for, for up to a year. For example, there's kind of an alternative repayment plan where we can maybe reduce the payment for a period of time, so we're always trying to make sure that we're working with the student to make sure that you know we're accommodating, but we're still kind of not, not letting them kick the can down the street so much, where it's kind of snowballing, you know, we try to stay on top of it to make sure that they're, they don't put themselves in a bad situation.

Drew Thomas  33:35  
Yeah, I think that's, I mean, that's an important thing that I think, you know, and I know I've said this on this program before, I've said it in my personal life before, that a lot of times younger people, younger students, you know, in some ways, depending on, you know, whether you know whether you're going to a state school, a private school, a community college, or an Ivy League university, there are vastly different costs potentially involved in that, right, but in some cases, you know, you've got 17, 18, 19, year old students signing on the dotted line for a loan that is equivalent to buying a house with far less upfront knowledge as to what kind of repayment options that student is likely to have compared to whenever you buy a house, right. So, and some of these students, you know, they go to school with all the best intentions, but they end up graduating with a degree that is not necessarily conducive to repaying an Ivy League level loan, right? You know, if I went to Harvard and I graduated with a philosophy degree, I better be really, really good at thinking deep thoughts, or I'm not going to be able to repay these loans, right? So, so it's, I guess, I guess my point is that it's important for students to understand that these loans do get, they have to be repaid. It's, it's, it's not a matter of, you know, I, which again goes back to the whole grant thing, scholarships, if you can get grants, if you can get scholarships, do that first, but the reality is that not everybody gets to go to school for free, you know. And, and when you're taking out a loan, it sounds great upfront, because, hey, you know, like I think you said, you, your most common plan is no repayment whatsoever until after you graduate, right? So, you know, they get four years, potentially, of feeling like, oh, I have all this money rolling in, and I never have to pay a dime, but you will have to repay that eventually.

Jeff Matevish  37:26  
Do you require a co-signer for any of your loans?

Leon Gagliardo  37:29  
It's not required, but a lot, but we have a lot of co-signed loans, because you know, typically a student, you know, they're 17-18, years old, they, these are underwritten loans, so they're, you know, we are looking at a credit score, and they're kind of debt-to-income, and there's other factors that go into the underwriting process, but we usually encourage a co-signer, because, you know, as a student, you don't really have a credit score, or it's a light credit score, so most of our loans on the undergraduate side are, are co-signed, you know. Once, once we get to graduate loan programs or medical programs, you know, then they're not, we don't see as many co-signed loans, but the reality is, is, you know, typically mom, dad, grandma, grandpa, you know it helps to have them cosign to get them approved. You know, I think you know when we developed this program, I mean, the goal was to help people borrow responsibly, right? So, you know, we didn't want to make it where there's the underwriting is so loose that you know people are taking out more than they can afford to pay back, you know, so it's that balancing panic of just making sure that we're promoting responsible borrowing.

Drew Thomas  38:53  
Yeah, that totally makes sense. Just for, since you brought up the idea of like the cosigner, like, so if mom or dad sign to cosign a loan, and Billy, we're going to use hypothetical Billy, because Billy's always in trouble, just like Johnny. If Billy decides that he's not going to make his payments, are the parents then going to be approached and say, hey, listen, you know you co-signed, this is actually your responsibility to repay this if Billy doesn't. Is that true?

Leon Gagliardo  39:24  
That is true. Yeah, I mean, I mean, tactically, you know, they're both responsible for the loan, you know. So, we're going to be, you know, reaching out to the cosigner as well in those situations.

Drew Thomas  39:36  
Does, do you guys typically reach out to both the student and the cosigner at the same time, or do you, do you go for the student first, and then sort of go to the cosigner only if the student doesn't respond? How does, how does that kind of thing work? Because I know, like, with some, with some loans, like, if the student doesn't respond, like, again, some of these, some of these younger people, they're not always, they're not always opening the mail, they're not always opening their email.

Jeff Matevish  39:59  
Answering a phone call.

Drew Thomas  40:00  
Oh, yeah, answering a phone call is a big deal, like, if you know, so how does that typically work? Do you reach out to both?

Leon Gagliardo  40:05  
Yeah, and there's different, there's different strategies that we, we deploy, you know, because we're always looking at, you know, what, what's the most effective way to reach people at what time and what frequency, so that, that's always kind of a work in progress, but in general, I mean, we're going to reach out to the borrower first, and then shortly thereafter, if we're not getting a response, you know, we would reach out to the co-signer.

Drew Thomas  40:29  
Okay, that makes sense. Alright, so I think I've, I think I've kind of gotten to the end of the questions that I had pre-written down, but we've always asked a few in the middle there too. But is there anything that you can think of, Leon, that we didn't cover that you definitely want to make sure that people know about when it comes to PHEAA and the in the programs that you have?

Leon Gagliardo  40:50  
Yeah, yeah, no, I think there's a lot of great resources out there, you know, on pheaa.org. One of the things that we're, you know, we're excited about that we launched, I think it's the last, maybe a year and a half ago, we, we have a scholarship program, so for PA Forward and Keystone, we have a 25, $2,500 scholarship that students can apply for, so they can, you know, that, that period is not open just yet, I mean, it's, but, but they can, you know, when they're getting ready to go to school, they can apply for the scholarship, and you know, it's there's no, there's what we'd like to promote it as, it's a no essay, you know, a lot of scholarships require writing essays, this one is basically a random drawing, you know, so they can just, you know, apply for those, so that's a, another way to try to help you get through school.

Jeff Matevish  41:44  
There's no excuse to not try that one, right? Yeah, correct.

Leon Gagliardo  41:50  
Yeah, you know, we're doing a lot of financial education too. So, on our website, we have webinars on different topics, you know, how to apply for scholarships, how to complete the FAFSA, there's lots of great things that you know we're doing throughout the state of Pennsylvania to try to promote financial education and literacy.

Drew Thomas  42:12  
That, I think that's a big deal, because we read all the time about how, particularly younger people are, I don't want to say complaining. Complaining is a bad word, but sort of saying that they just don't receive a lot of financial education. They don't, we talk about all the time on the program, like, you know, people go through high school, they go even through college in some ways, and they go through all sorts of math and other kinds of classes, but they don't, they don't get a basic on how to manage your household budget, or how to make sure you know what, what things you need to loan, learn how to pay off, and how interest works.

Jeff Matevish  42:37  
How taxes work, how anything works, like, yeah, right.

Drew Thomas  42:54  
You know, the things that all of us have to deal with, for the most part, unless we're independently wealthy and have a trust fund handling it for us, you know, we all have to pay our taxes, we all have to do those things, and yet we don't always, we don't always talk about them. So, financial education literacy is a big deal, and I'm, it's good to know that, that, that you're, you're focused on that as well.

Leon Gagliardo  43:14  
Yeah, yeah, yeah. And one thing I'll say, too, is, you know, you know, we're partners with AmeriServ, I mean, basically, you know, we're competing against other private lenders, and these other private lenders are national lenders, and they have, you know, large marketing budgets, advertising budgets, you know, they have their name on the side of a stadium, you know, we don't have that luxury, and we're not-for-profit, so we don't have a lot of ways to market our program, other than, you know, word of mouth, working with schools, partnering with, you know, AmeriServ is another example. I mean, you know, you can get to our programs through your website, so we appreciate, you know, you working with us and helping us get the word out, because we are, you know, not-for-profit, and we don't have that huge marketing budget, and if we did, you know, we'd affect our interest rates. So, our goal is keeping the rates as low as possible.

Drew Thomas  44:09  
Yeah, I was just about to say, if you did have your name on the side of the stadium, I bet your interest rate average would be higher. And that's, you know, that's an important thing too, because I think a lot of people make decisions about, about lots of things that they, they do in life and buy in life based on brand. Yeah, you know, they've heard of this, they've heard of them, that, and so they automatically go to, and I'm not going to call anybody out, but they automatically go to certain organizations because they're well known, but that doesn't necessarily always make them the best choice in terms of their financial well-being. If that makes any sense, I mean, they're, you know, if they can go to school and the money comes from PHEAA, the school's going to accept that money just as easily as if they expect accepted from some other organization, but if the student ends up paying one or 2% Less in interest, that's a, that's a big deal over a course of a five or 10 year loan.

Jeff Matevish  45:03  
Oh, yeah, sure.

Drew Thomas  45:04  
You know, so, so, yeah, so obviously, you know, we're doing this, we're putting this out in June, summertime, so a lot of the deadlines for this upcoming year are most likely passed at this point for the, for the 26-27 school year, right. But if you're a junior in high school, or even if you're in college, and you're, you know, maybe your first year, so your mom and dad helped you out, you didn't really need so much, but now you're thinking maybe next year I'm going to need some loans, you know, some of this stuff is going to start opening up again here in a couple months, right? Is that, is that fair?

Leon Gagliardo  45:41  
Yeah. I mean, the, the well, just the student loan peak season is pretty much in June, July, and August, so that's, that's our busiest time of the year. About 60% of our applications throughout the entire year are kind of in a kind of a two-month time frame, so basically, you know, once students start getting their tuition bill, that's when we start seeing the kind of influx of, of applications for student loans. But, but you're right, you know, the grants and those kinds of things, you know, that is kind of past, you know, typically the May 1 time frame.

Drew Thomas  46:19  
Okay, but okay, so that's an important distinction, so but you can still theoretically, if you get your tuition bill, you could still apply for a loan pretty much anytime, is what you're saying.

Leon Gagliardo  46:29  
Absolutely, yeah.

Drew Thomas  46:31  
Okay, so yeah, definitely important.

Jeff Matevish  46:32  
FAFSA was the like, specific times and dates and stuff.

Drew Thomas  46:36  
Yeah, well, Jeff, you know, you got to drill things through my head.

Jeff Matevish  46:39  
I know there's, there's too many others, too many steps.

Leon Gagliardo  46:41  
Yeah, yeah. This stuff is, I mean, I'll tell you, I mean, I've worked for PHEAA for about 12 years, you know. But until you go through it, you know, with your own son or daughter, you know, it kind of all comes together when you have to go through it firsthand. And so, this. this is not easy stuff. There's a lot of steps, a lot of things to consider, you know, and that's why, you know, PHEAA, that's, that's why our mission is to try to educate people and, and let them know what their options are, and yeah, there's resources.

Drew Thomas  47:17  
Yeah, totally. So, I, we will definitely put, since you were kind enough to mention that we do partner, you know, AmeriServ does partner with PHEAA, we'll put the link to the, to our page in the description, but we'll also put, we'll also put links to pheaa.org and it's pheaa dot, is it org or edu?

Leon Gagliardo  47:34  
It's org.

Drew Thomas  47:35  
Probably org, yeah, I thought it was org, so you know, and any other, if you have any other links or anything you, you'd like to make sure we share, we can definitely put those in the description as well to make sure that people can, can reach them if they're listening to the show or watching the show, and just want to click the link in the description below. We can, we can handle that. Leon, thank you very much for your time today. It's been a pleasure talking with you, and I think, I think there's been a lot of really good information passed on here that hopefully people can take advantage of.

Leon Gagliardo  48:04  
Yeah, yeah. Thanks so much for having me. I really enjoyed the time today.

Drew Thomas  48:08  
Yeah, and you're welcome back anytime. You know, we can, we can do this every year if you want to.

Jeff Matevish  48:13  
Yeah, if you get new programs, we'd love to update everybody. Yeah.

Drew Thomas  48:16  
Yeah, absolutely.

Leon Gagliardo  48:18  
That'd be great.

Drew Thomas  48:19  
All right, hey, thanks. Take care.

Leon Gagliardo  48:21  
Thanks.

Jeff Matevish  48:29  
This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts, with the goal of helping to take some of the mystery out of financial and related topics, as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast, and any resources available for download from our website or other resources relating to Bank Chats, is not intended and should not be understood or interpreted to be financial advice. The hosts, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The hosts of Bank Chats are not attorneys, accountants, or financial advisors, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation.

Drew Thomas  49:31  
In 2026 students attending a four-year in-state public school can expect to pay approximately $24,000 per academic year when factoring in tuition, mandatory fees, room, board, books, transportation, and daily expenses. For a private school, that cost can balloon to over $60,000 per academic year, or nearly a quarter of a million dollars for a four-year degree. When seeking a post-secondary education, students should legitimately consider the debt they may incur before automatically going off to college and graduating with a degree that may not necessarily help them repay the loan. Moreover, nearly 1/3 of students who enroll in college fail to graduate at all within six years, but loans taken out for their education still need to be repaid. This is why organizations like PHEAA focus not only on providing loans, but also on helping students seek out grants and work-study programs, along with providing them with vital financial education opportunities. AmeriServ Presents Bank Chats is produced and distributed by AmeriServ Financial Incorporated. Music by SchneckMind, executive produced and co-hosted by Jeff Matevish. You can now subscribe to the podcast on YouTube or on your favorite podcast app. For now, I'm Drew Thomas, so long.