benefits - repaying student loans · 2018. 8. 6. · - interest suspended on subsidized loans - can...
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RepayingStudent Loans
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Repaying Student Loans and Avoiding Default During Difficult Times
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What Type of Loans Do You Have?
Federal
Direct
• Stafford (unsubsidized and subsidized)
• PLUS
FFEL (no longer offered after June ‘10)
• Stafford (unsubsidized and subsidized)
• PLUS
Perkins
Loan taken out from a
financial institution
Private
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• Stafford: 6 months after graduation
• Perkins: 9 months after graduation
• PLUS: 60 days after funds disbursed
or 6 months after graduation
• Private: Talk to lender
When Do You Have to Start Repaying Your Loans?
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• Could be loan originator but loans
sometimes sold on secondary
market or a servicer is used
• If behind, may be with collection
agency, state guarantee agency,
or Dept. of Education
Who Should You Pay?
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If You Don't Know What Type You Have…
Visit the National
Student Loan
Database at
www.nslds.ed.gov
Call 800.433.3243 If a loan is not listed
in the NSLD, it is a
private loan
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• Standard (default)- Fixed payments, 10 year maximum
• Graduated- Payments start off lower then
increase, sometimes combinedwith Extended
• Extended- Up to 25 years, must owe
at least $30,000
Repayment Plans forFFEL and Direct Loans
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• Income-contingent (Direct only)
- Based on income, can be extended, forgiven after 25 years
• Income-sensitive (FFEL only)
- Based on income, 10 year maximum
• Income-based
- May be able to get lower payment than under other plans, can be extended, forgivenafter 25 years
Repayment Plans forFFEL and Direct Loans
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• Pay as You Earn Plan (PAYE)
-Must be a new borrower as of Oct 2007
-Must demonstrate a partial hardship
-Payments $0-10% of discretionary income, never higher than standard plan
• Revised Pay as You Earn Plan (REPAYE)
-Extends number of eligible borrowers
-Spouse’s income included
-Expands interest subsidy after 3 years
Repayment Plans forFFEL and Direct Loans
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Repayment Plans
No alternative
repayment plans for
Perkins, but school
can extend
repayment period
due to extenuating
circumstances
Remember, when you
have a lower payment,
you pay more interest
over the life of the loan
If affordable, pay extra –
no pre-payment penalty
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• Combining of existing loansinto one new loan
- Can combine all, some,
or even one loan
• Do not have to be current to consolidate
• Cannot add private loans to federal consolidation loan
• Can add federal loans to private consolidation loan butnot advisable
Consolidation
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• Can have federal student loans cancelled if:
- you die or experience permanent disability
- School falsely certified
- School closed
• Very Difficult to discharge in Bankruptcy
Cancellation /Forgiveness
12
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Public Service Loan Forgiveness
- Forgives remaining balance of Direct Loans after 120 qualifying payments have been made under certain payment plans
- Available for those employed full time by a public service organization
Teacher Loan Forgiveness
- Forgiveness of up to $17,500 on qualifying loans for teaching for 5 years in qualifying schools
Cancellation /Forgiveness
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• Deferment- Temporary suspension of payments
- Interest suspended on subsidized loans- Can get if enrolled in school, disabled,
unemployed, or in armed forces
• Forbearance- Temporary suspension of, or reductionin payments
- Interest still accrues- Can get if monthly payment high
or have unforeseen personal problem- Easier to get
If You Cannot Pay
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• In default if more than
270 days past due
• Possible consequences
of default- Tax refund interception
- Wage garnishment
- Ineligibility for deferment,
alternative repayment plans,
grants, and new student loans
- Credit report damage
If You Cannot Pay
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• No statute of limitations on collection
• For federal loans, have one-time right to get out of default with a reasonable and affordable repayment plan
- Loan rehabilitated after 9
on-time payments
- Default notation removed
from credit report
• Can also consolidate to get out of default
If You Cannot Pay
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Resources
www.studentaid.ed.gov www.consumerfinance.gov
Federal Loans Private Loans
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BALANCE is a financial education and counseling service. Services include money management counseling, debt repayment options, credit report review, and more.
Call toll-free 888.456.2227 or visit www.balancepro.org
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