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
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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