Student Loans 201: Repayment Options - PowerPoint Presentation

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Student Loans 201: Repayment Options
Student Loans 201: Repayment Options

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Revised 92013 Agenda Student Loans FFELP vs Direct Before July 1 st 2010 After July 1 st 2010 today Federal Family Education Loan Program FFELP Federal Direct Student Loans Higher interest rates on PLUS loans ID: 386951 Download Presentation

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Slide1

Student Loans 201: Repayment Options

Revised 9/2013Slide2

AgendaSlide3

Student Loans: FFELP vs. Direct

Before July 1

st

, 2010:

After July 1

st

, 2010 (today)

Federal

Family Education Loan Program (FFELP)

Federal Direct Student Loans:

Higher interest rates on PLUS loans

Different repayment options

Must be repaid, with interest

Origination fee

No co-signer required

Multiple payment options

Not discharged in bankruptcySlide4

Student Loans

Types of Student Loans

Perkins

Subsidized

Stafford

Unsubsidized Stafford

PLUS

Availability

Need

-Based

Need-Based

Everyone

Everyone

, Credit Check Required

Interest

5% fixed

3.86% fixed

3.86% fixed

6.41% fixed

Subsidized?

Yes

Yes (while in school)

No

No

$/year Maximum

$5,500 (undergrad)

$8,000 (graduate)

Varies depending on year

in school

Varies depending on year in school

Gap in Financial Aid

Total Maximum

$27,000

$23,000

$31,000 (undergrad)

$138,000 (grad)

Gap

for 4 years

Grace Period

9 months

6 months

6 months

None, repayment

immediate

Options

Loan Forgiveness o

r cancellation for certain careers

Unavailable for grad students. Interest

not subsidized during grace period

Loan Forgiveness available for certain careers

For parents and graduate students. Repayment begins immediately.Slide5

Student Loans: NSLDS

Retrieve your student loan data from the National Student Loan Data System.

nslds.ed.govSlide6

Student Loans: Servicers

LOAN SERVICER

What does a loan servicer do?

Keep your contact info up to date with your loan servicer and make sure to monitor communication so you don’t miss important updates about your loans.Slide7

Student Loans: Loan Servicer vs. Financial Aid Office

Who do I contact for what?Slide8

Student Loans: Servicers

The Dept of Ed may or may not assign you a loan servicer. It could also happen multiple times.

Remember that repayment can also be triggered if you stop going to school or drop below ½-time creditsSlide9

AgendaSlide10

Rights

Copies of your promissory notes

Loan disbursement notification

Loan disclosure statement

Repayment schedule

Grace period

Deferment or forbearance

Prepay without penalty

Notification if loan is sold or transferred (FFELP)

Consolidate loans

Notification when loan is paid in fullSlide11

Responsibilities

Pay back your loan in full

Stay informed about:

Loan balances

Payment amounts

Notify your loan servicer:

Name or contact info changes

Graduation, leaving school, transferring to another school or dropping below half-time enrollment

Trouble with loan paymentsSlide12

AgendaSlide13

Responsibilities: Repayment Terms

Repayment

The process of

paying back your loans or the period in which you pay back your loans.

Different options may be available to fit your situation.

Consolidation

Creates one large loan with a potentially longer term out of your smaller loans.

Deferment

Suspends repayment

for in-school periods, periods of military service, and economic hardship.

Forbearance

Suspends repayment

due to financial difficulty.

Discharge

Eliminates

any further repayment.

Forgiveness

Reduces

any remaining repayment.

Default

When you

fail to make payments on your loan as scheduled according to your promissory note. Slide14

Repayment: Overview

Plan

Standard

Graduated

Income-Contingent

Extended

Income-Based

Pay As You Earn

Income-Sensitive

Term

10-year

term

10-year term

Up

to 25-year term

Up

to 25-year term

Up to 25-year term

Up to 20-

year term

10+ year term

Minimum Payment

Minimum of at least $50/month

Interest

payments ($25 minimum), gradually increasing over time

Minimum of $5/month. Monthly

amount depends on family size, adjusted gross income, loan debt

Either fixed or graduated payments.

Payments

depend on family size, adjusted gross income, loan debt

Caps monthly payments at 10% of monthly income.

Payments between 4-25% of gross monthly income; minimum

payment must cover interest

Additional Info

“Cheapest” for borrowers

Later

payments cannot be more than 3x earlier payments

Borrower must reapply

each year

For borrowers with over $30000 in loans

Loans

must present “partial financial hardship”

For

those who were new borrowers as of 10/1/07 and received loans after 10/1/11.

Borrower must reapply annually.Slide15

Repayment: Overview

Plan

Standard

Graduated

Income-Contingent

Extended

Income-Based

Pay As You Earn

Income-Sensitive

Term

10-year

term

10-year term

Up

to 25-year term

Up

to 25-year term

Up to 25-year term

Up to 20-

year term

10+ year term

Minimum Payment

Minimum of at least $50/month

Interest

payments ($25 minimum), gradually increasing over time

Minimum of $5/month. Monthly

amount depends on family size, adjusted gross income, loan debt

Either fixed or graduated payments.

Payments

depend on family size, adjusted gross income, loan debt

Caps monthly payments at 10% of monthly income.

Payments between 4-25% of gross monthly income; minimum

payment must cover interest

Additional Info

“Cheapest” for borrowers

Later

payments cannot be more than 3x earlier payments

Borrower must reapply

each year

For borrowers with over $30000 in loans

Loans

must present “partial financial hardship”

For

those who were new borrowers as of 10/1/07 and received loans after 10/1/11.

Borrower must reapply annually.

DIRECT LOAN repayment optionsSlide16

Repayment: Overview

Plan

Standard

Graduated

Income-Contingent

Extended

Income-Based

Pay As You Earn

Income-Sensitive

Term

10-year

term

10-year term

Up

to 25-year term

Up

to 25-year term

Up to 25-year term

Up to 20-

year term

10+ year term

Minimum Payment

Minimum of at least $50/month

Interest

payments ($25 minimum), gradually increasing over time

Minimum of $5/month. Monthly

amount depends on family size, adjusted gross income, loan debt

Either fixed or graduated payments.

Payments

depend on family size, adjusted gross income, loan debt

Caps monthly payments at 10% of monthly income.

Payments between 4-25% of gross monthly income; minimum

payment must cover interest

Additional Info

“Cheapest” for borrowers

Later

payments cannot be more than 3x earlier payments

Borrower must reapply

each year

For borrowers with over $30000 in loans

Loans

must present “partial financial hardship”

For

those who were new borrowers as of 10/1/07 and received loans after 10/1/11.

Borrower must reapply annually.

FFEL repayment optionsSlide17

Repayment: $40,000 Loan

Plan

Standard

Graduated

Income-Contingent

Extended

Income-Based

Pay As

You Earn

Income-Sensitive

Monthly

Payment

$402.32

$224.79-$674.37

$305.35-$377.34

$208.05

$290.56-$402.32

$193.71--$332.53

$333.33 -- $438.09

Loan Term

10

years

10 years

12.6 years

25 years

11.9 years

18.8 years

10 years

Total

Paid

$48,278.93

$50,322.35

$50,933.73

$62,416.49

$50,449.49

$57,687.38

$48,799.30

Interest Paid

$8,278.93

$10,322.35

$10,933.73

$22,416.49

$10,449.49

$17,687.38

$8,799.30Slide18

Repayment: Standard

Fixed monthly payments

Minimum repayment amount of $50/month

Maximum 10-year repayment period

Borrower pays least interest

Loan Amount

$40,000

Term

10 years

120 months

Monthly Payment

$402.32

Total Paid

$48,278.93

** Assumes 3.86% interest rateSlide19

Repayment: Graduated

Payments increase over time

Minimum repayment amount of $25/month

Repayment period: 10-30 years

Loan term depends on amount borrowed

Loan Amount

$40,000

Term

10 years

120 months

Initial Monthly Payment

$224.79

Final Monthly Payment

$674.37

Total Paid

$50,322.35

** Assumes 3.86% interest rateSlide20

Repayment: Income-Contingent

Payments based on income, family size, loan debt

Reapply annually

Minimum repayment amount of $5/month

Loan balance discharged after 25 years

Parent PLUS and FFELP ineligible

Loan Amount

$40,000

Term

12.6 years

152 months

Initial Monthly Payment

$305.35

Final Monthly Payment

$377.34

Total Paid

$50,933.73Slide21

Repayment: Extended

Borrowers with over $30K in student loans

25-year maximum repayment term

Either fixed or graduated payments

Loan Amount

$40,000

Term

25 years

300 months

Monthly Payment

$208.05

Total Paid

$62,416.49

** Assumes 3.86% interest rateSlide22

Repayment: Income-Based

Payments based on income, family size, loan debt

Parent PLUS and Perkins ineligible

Borrower applies annually

Must repay all eligible loans under this plan

Loan balance discharged after 25 years

Loan Amount

$40,000

Term

11.9 years

143 months

Initial

Monthly Payment

$290.56

Final Monthly Payment

$402.32

Total Paid

$50,449.49Slide23

Repayment: Pay As You Earn

Available for those

considered “new borrowers” as of 10/1/07 and received a loan disbursement on or after 10/1/11

Payments capped at 10% of discretionary

monthly income

Borrower must have a partial financial hardship to qualify

Parent PLUS and Perkins ineligible

Borrower applies annually

Loan balance discharged after 20 years

Loan Amount

$40,000

Term

18.8 years

226 months

Initial Monthly Payment

$193.71

Final Monthly Payment

$332.53

Total Paid

$57,687.38Slide24

Repayment: Income-Sensitive

FFELP borrowers only

Payments between 4-25% of gross monthly income

Minimum payment must cover interest

Repayment period may be over 10 years

Borrower must reapply annually

Loan Amount

$40,000

Term

10 years

120 months

Monthly Payment

$333.33

(3

years)

Monthly

Payment

$438.09

(7 years)

Total Paid

$48,799.30Slide25

Repayment: $40,000 Loan

Plan

Standard

Graduated

Income-Contingent

Extended

Income-Based

Pay As

You Earn

Income-Sensitive

Monthly

Payment

$402.32

$224.79-$674.37

$305.35-$377.34

$208.05

$290.56-$402.32

$193.71--$332.53

$333.33 -- $438.09

Loan Term

10

years

10 years

12.6 years

25 years

11.9 years

18.8 years

10 years

Total

Paid

$48,278.93

$50,322.35

$50,933.73

$62,416.49

$50,449.49

$57,687.38

$48,799.30

Interest Paid

$8,278.93

$10,322.35

$10,933.73

$22,416.49

$10,449.49

$17,687.38

$8,799.30Slide26

Repayment: Pick a Plan

Contact your servicer to get information on available repayment plans.

Use repayment calculators to see what you might have to pay with each plan.

Compare the planes to determine which plan fits you best.

Which plan do I pick?

You can switch plans if you need to!Slide27

Repayment: Consolidation

Direct (current)

Consolidates all federal student loans into one big loan

Interest rate the “weighted average” of all loans

Same repayment options as Federal Direct

May reduce monthly payments

Consolidating PLUS loans negates eligibility for income-based repayment plans

Consolidation may lower monthly loan payments.Slide28

Repayment: Student Loan Interest Deduction

Up to $2500 of student loan interest

Considered an “adjustment” on federal taxes

Can claim only if you

Are not a dependent

Filing status is not married filing separatelySlide29

AgendaSlide30

Contingency: Delinquency & Default

Default

Being delinquent for 9 months

Entire loan balance may be demanded

Wages and tax refunds can be garnished

Will have to pay late fees and collection costs

Negatively affects credit rating for 7 years

Denied future financial aid

Delinquency

Being late making payments or missing payments

Begins the first day after the payment is missed

May negatively affect borrower’s credit rating

Allows the lender to charge interest on unpaid interest

Lender may charge late feesSlide31

Contingency: Options

Deferment

Postpones repayment. Interest subsidy resumes on subsidized

portion. Requested by the borrower while in school, on active military duty, or experiencing temporary financial difficulties.

Forbearance

Postpones repayment due to economic hardship. Interest

accrues. Requested by the borrower.

Forgiveness

Portions of your debt are erased (forgiven) if the borrower fulfills certain conditions.

Discharge

Eliminates any further repayment

under very limited conditions.Slide32

Contingency: Deferment Programs

** Unlimited duration while continuing to serve on active duty. Extended periods of deferment are available to borrowers after demobilization.

Type of Deferment*

Time Limit

In-school

at least half-time

Unlimited

Graduate fellowship program

Unlimited

Disability

rehabilitation training

Unlimited

Military service

Unlimited**

Unemployment

Up to three years

Economic hardship

Up to three years

Post-Active Duty Student

13 monthsSlide33

Contingency: Unlimited Deferment Options

Type of Deferment

In-School

Graduate Fellowship Program

Rehabilitation Training

Military Service

Period

Unlimited

Unlimited

Unlimited

Unlimited

Conditions

Enrolled at least half-time;

undergraduate

or graduate student

In

graduate fellowship program of at least six months

In training

program licensed or approved by state officials

Called to active duty during war,

military operations, or

natl

emergency

Requirements

Program

must require periodic reports from fellow; program official must certify program dates

Requires substantial commitment (cannot work full-time);

specifies end date

Granted on

borrower’s request

Other

Continues during summer; extended

through anticipated graduation date

Can be used for course of study

at foreign university

Borrower can be receiving or scheduled to receive services

Limits

on Direct Loan interest accrual; deferment can be extended for up to 30 days after returnSlide34

Contingency: Limited Deferment Options

Type of Deferment

Unemployment

Economic Hardship

Post-Active Duty Student

Period

6 months to 3

years

Up to three years

13 months

Conditions

Unemployed or employed less than full-time (30 hours/week); granted six months at a time

Receiving state or federal public assistance benefits

OR income at 150% poverty line; a Peace Corps volunteer; monthly payments equal to or larger than 20% of monthly income

For students who are called to active duty while in school or six months post-graduation

Requirements

Receiving unemployment benefits or registered with employment agency;

ends once employed full-time or after three years

Granted

one year at a time

Granted for 13

months after return from active duty;

Expires on return to school OR after 13 monthsSlide35

Contingency: Forbearance

Temporary reduction or suspension of payments

Unpaid interest capitalized

Mandatory

National Service

Applying for loan forgiveness

Teaching in areas that qualify you for loan forgiveness

Payments at or over 20% of monthly income

Up to three years

TO DO:

Contact your loan servicer about your deferment or forbearance eligibility.

Follow your servicer’s instructions to apply for deferment or forbearance.

Make scheduled payments until your deferment/forbearance status is confirmed.Slide36

Contingency: Forgiveness

Program

Condition

Teacher

Up

to

$5,000 in

Stafford Loans after five consecutive years teaching in elementary or secondary school serving low-income families.

Up to $17,500 in

Stafford Loans

after five consecutive years in a school serving low-income families as a highly qualified full-time secondary school math or science teacher or as a highly qualified special education teacher.

National Service

$5550 scholarship or loan forgiveness per 12-month AmeriCorps term.

70% of Perkins

loan cancelled for Peace Corps service.

Perkins Loan Cancellation

Up to 100% of loan cancelled for five years of employment

in specific positions, including teaching in low-income schools, nursing, and law enforcement.

Public Service

After

120 on-time qualified monthly payments while employed by the federal or state government, or by a 501c3 nonprofit. Loan must be in repayment status.

Amount forgiven is not taxable.

Income

-Based, Income-Contingent or Pay As You Earn

After 25

years of making on-time payments in these programs any remaining balance will be forgiven.

Amount forgiven is taxable

under current law. Does not apply to loans currently in default status. For Pay As You Earn, the balance is forgiven after 20 years.Slide37

Contingency: Forgiveness

Borrowers must repay their loans using a qualified repayment plan

Standard

Income-contingent

Income-based

Pay As You Earn

The Standard Consolidation Plan is NOT an eligible repayment plan for ANY type of loan forgiveness

Borrowers who consolidate their loans must request an income-driven repayment plan for those loansSlide38

Contingency: Discharge

Disability

Inability

to earn sufficient income due to illness or injury expected to continue indefinitely or result in death. Has a three-year conditional period.

Death

Loan

cancelled if family member or representative provides original or certified copy of death certificate to lender

School Closure

Student unable

to complete program due to closure.

False Certification

Identity

theft OR school falsifies eligibility on loan application.Slide39

Contingency: In Delinquency

SO NOW WHAT?

Contact the servicer

Work out a payment schedule with the servicer

Ask servicer for a statement showing when payments were made

Direct Loans: contact the Student Loan Ombudsman

FFELP: contact your guarantorSlide40

Contingency: In Default

Consolidation

Borrower eligible for new loans, grants, deferments

No longer listed as in default on credit records, but default will remain on credit history for seven years

Can choose income-based or income-contingent repayment

Rehabilitation

Have to make nine on-time payments in ten months

Loan moved from default status after 9 months

Default moved off credit record

Eligible for new loans and grantsSlide41

Summary

You have many different tools and repayment options

Pick a repayment plan that works for your budget

Ask for help if you need it

Know your borrower rights and responsibilities

Stay in contact with your loan servicerSlide42

Resources

Studentaid.gov – Federal Student Aid Website

Student Loan Ombudsman

FAFSA

Types of Aid

Loans

Repayment Plans

Finaid.org

Studentloanborrowerassistance.org

IRS.gov

Your loan servicerSlide43

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