“Financial Aid Evolution: Change

Agents”

OASFAA Fall Conference 2015

Student Loan Repayment, Forgiveness and Teacher’s

Loan Benefits

OASFAA Conference Sponsor – Fall 2015

Thank you to Great Lakes Educational Loan Services,

Inc. for their sponsorship of the OASFAA 2015 Fall Conference!

“Financial Aid Evolution: Change Agents” OASFAA Fall Conference 2015

Bureau of Health Workforce Loan Repayment Programs NURSE Corps Loan Repayment Program

NURSE Corps Loan Repayment Program participants receive 60 percent of their total outstanding qualifying educational loan balance incurred while pursuing an education in nursing in exchange for a 2-year service commitment. Qualifying participants may receive an additional 25 percent of their original loan balance for a third year of service.

The full loan repayment award is taxable, however, taxes are deducted from the award.

www.hrsa.gov/loanscholarships/repayment/nursing

National Health Service Care (NHSC) Loan Repayment Program

Offers two levels of funding , based upon the need of the community in which the qualified health care providers work, as defined by Health Professional Shortage Area (HPSA) score: Up to $50,000 for 2-year, full-time or $25,000 for 2-year, half-time service commitment. With continued service, nurse practitioners may be able to pay off all of their qualified student loans.

The Loan Repayment award is not taxable

www.NHSC.hrsa.gov/loanrepayment

Source: www.hrsa.gov

Forgiveness Programs for Teachers

There are two types of loan forgiveness programs for teachers: Teacher Loan Forgiveness and Teacher Cancellation*

Teacher loan forgiveness for Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans

The Teacher Loan Forgiveness Program is intended to encourage individuals to enter and continue in the teaching profession. Under this program, if you teach full-time for five complete and consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications, you may be eligible for forgiveness of up to a combined total of $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans. If you have PLUS loans only, you are not eligible for this type of forgiveness.

You apply for teacher loan forgiveness after you have completed the five-year teaching requirement. 

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

*Some argue that technically it is 3 given the Teach Grant Program.

Forgiveness Programs for Teachers

Teacher Cancellation: If you have a loan from the Federal Perkins Loan Program you might be eligible for loan cancellation for full-time teaching at a low-income school, or for teaching in certain subject areas. You can also qualify for deferment for these qualifying teaching services. up to 100 percent of the loan may be canceled for teaching service, in the following increments:

15 percent canceled per year for the first and second years of service

20 percent canceled for the third and fourth years

30 percent canceled for the fifth year

To apply, you must request the appropriate forms from the office that administers the Federal Perkins Loan program at the school that holds your loan. You must also provide any documentation the school requests to show that you qualify for cancellation of your Perkins Loan. It is the school’s responsibility to determine whether you qualify, and the school’s decision cannot be appealed to the U.S. Department of Education.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Source: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Income-Driven Plans - Overview

Three main plans

• Income-Contingent Repayment Plan (ICR) – 1994

Direct Loan Program only

• Income-Based Repayment Plan (IBR) – 2009

Available in both the Direct Loan and FFEL Program

New terms and conditions for “new borrowers” on/after July 1, 2014

• Pay As You Earn Plan (PAYE) – 2012

Direct Loan Program only

For new borrowers in FY 2008 who receive new loans in or after FY 2012

Modeled on IBR, incorporating statutory IBR changes scheduled to take effect for new borrowers in 2014

Negotiated rulemaking in 2015

6Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

Coming in December, 2015: Revised Pay As You Earn (REPAYE) – 2015*

Direct Loan Program only

From the Department of Education press Release: Revised Pay As You Earn (REPAYE) Plan regulations responds to (the President’s 2014) directive by expanding repayment options to allow five million more Direct Loan borrowers to cap their monthly student loan payment amount at 10 percent of their annual income allocated per month, without regard to when the borrower first obtained their loans.

To learn more about Income-Driven Repayment Plans: www.StudentAid.gov/IDR

Income-Driven Plans – New for 2015

Source: U.S. Department of Education, Press Release, “…Final Regulations to Protect Students and Help Borrowers” October 27, 2015

Eligible Borrowers

8

Eligible DLICR

Debt-to-

income ratio*

Eligible DL/FF

ELIBR

Recent borrowe

rs

Debt-to-income ratio*

Eligible DL

PAYE

* = partial financial hardship

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

Eligible Loans

9

Loan Type ICR IBR PAYE

Sub. Stafford X X X

Unsub. Stafford X X X

Grad PLUS X X X

Parent PLUS

Consolidation (did not repay Parent PLUS)

X X X

Consolidation (repaid Parent PLUS)

X

Loan Program ICR IBR PAYE

Direct Loans X X X

FFELP X

Perkins Loans

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

Payment Amounts

10

Repayment Plan Payment based only on income

Payment based on loan debt

ICR 20% of discretionary income

12-year standard payment adjusted based on income

IBR 15% of discretionary income

10-year standard amount

PAYE / “new” IBR 10% of discretionary income

10-year standard amount

Each IDR plan has two formulas. Borrowers always pay the lesser of the two.

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

Interest Subsidy Benefit On subsidized loans, borrower receives subsidy for first 3 consecutive years on

IBR and Pay As You Earn during periods of negative amortization

Subsidy amount = difference between amount of interest that accrues on subsidized loans and payment amount toward subsidized loans

3-year clock doesn’t stop except for Economic Hardship Deferments11Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

Capitalization

12

ICR

Negative amortization

10% limit

Normal rules apply

IBR

Income-based Non-income

based payment

Leaving the plan

Normal rules suspended

PAYE

Income-based Non-income based payment

Leaving the plan

10% limit

Normal rules suspended

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

Month 0

Borrower applies: 2/14/201

4

Month 1

Borrower enters plan:

3/1/2014

Month 2

Borrower receives

educational notice

about plan:

3/2/2014

Month 9

Borrower receives request

to submit new

income document

ation: 11/26/201

4

Month 10Soft

deadline: 1/25/201

5

Month 11

Hard deadline*

: 2/4/2015

Month 12

Anniversary date:

3/1/2015

*If borrower submits documentation by hard deadline, payment amount will not change if loan servicer cannot process it before anniversary date.

Annual Life Cycle

13Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

Revised Pay As You Earn (REPAYE) is modeled on the existing Pay As You Earn repayment plan, and will be available to all Direct Loan student borrowers regardless of when the borrower took out the loans.

Will allow student borrowers cap their student loan payments at 10 percent of their monthly discretionary income.

Will forgive remaining debt after 20 years for those who only borrowed for undergraduate study and 25 years for those who borrowed for graduate study.

The REPAYE plan will also “provide a new interest subsidy benefit to prevent ballooning loan balances for those whose income-driven payments cannot keep up with accruing interest.”

Available to borrowers starting in December of this year.

REPAYE – What We Know

Source: HomeRoom (the official blog of the U.S. Department of Education), 10/27/15, and final unofficial rules 10/26/15.

Chart on Different IDR Plans

Source: IBRinfo, a service of the Project on Student Debt, http://www.ibrinfo.org/what.vp.html

a Borrowers may be able to consolidate their FFEL and Perkins loans into a Direct Consolidation Loan to repay them in REPAYE, PAYE, or ICR. Find out more about the pros and cons of consolidation athttp://StudentAid.gov/consolidation. 

b Borrowers have a “partial financial hardship” (PFH) if their calculated payment based on income and family size is less than what they would pay under the fixed 10-year repayment plan.

c For all of these plans, monthly payments can be as low as $0. For REPAYE, 2014 IBR, PAYE, and Original IBR, discretionary income is defined as the amount of adjusted gross income (AGI) above 150% of the poverty level for the borrower’s household size. For ICR, discretionary income is defined as the amount of AGI above 100% of the poverty level for the borrower’s household size. d Parent PLUS loans can be repaid in ICR if consolidated into a Direct Consolidation Loan.

Public Service Loan Forgiveness

16Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

Public Service Loan Forgiveness

Borrower must also be employed by a qualifying organization at the time that the borrower applies for and receives PSLF

According to the IRS, the forgiven amount is not treated as taxable income

17

120 qualifying payments

On Direct Loans

On qualifying repayment plans

While working at qualifying employer

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

PSLF – Qualifying Employment

18

1 •Any government organization

2 •501(c)(3) not-for-profit organization

3 •Other not-for-profit organizations providing specific qualifying services

Doesn’t matter what you do, it matters where you work.

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

PSLF – Qualifying Payments

19

Qualifying payments

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

PSLF – Qualifying Repayment Plan

Income-driven plans are most likely to leave a remaining balance for forgiveness after 120 qualifying payments

20

10-Year Standard

IBR

ICR

Pay As You Earn

Others >= 10-Year Standard

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

PSLF – Eligible Loans

PSLF is only for Direct Loans, but all Direct Loans qualify.

21

Direct Consolidation

Loan

Parent PLUS Loans

FFELP Loans

Perkins Loans

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

PSLF – Full-Time Employment

• Must be a full-time employee or work multiple part-time jobs that equal full time

• For borrowers at a not-for-profit organization hours spent on religious instruction, worship services, or proselytizing cannot be factored into meeting the full-time employee requirement

22

Employer’s definition

30 hours/wee

k

Full-time is the greater of:

Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

PSLF – Employment CertificationBorrowers who want confirmation that employment and payments qualify should submit the Employment Certification Form to FedLoan Servicing.

23Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF

PSLF FAQ’s

“Financial Aid Evolution: Change Agents” OASFAA Fall Conference 2015

The ED’s Questions & Answers document on PSLF was up to 20 pages as of November, 2014.

Best Practice: Suggestthat all students pursuingPSLF read this document.

Peace Corps and Americorps

Service in either of the Peace Corps or Americorps  is considered “qualifying employment” for the Department of Education's Public Service Loan Forgiveness program (PSLF). 

Volunteers are often trying to determine if an IDR/PSLF strategy is best, or if they should forbear during service.

Americorps Volunteers who have successfully completed a term of service in AmeriCorps or Silver Scholars are eligible to have the Trust pay as much as 100% of the interest that accrued on their qualified student loan during their service. The portion that the Trust will pay is determined by the type of service (full or part-time) and the length of your service period (www.nationalservice.gov)

https://studentaid.ed.gov/sa/sites/default/files/peace-corps-and-loan-repayment_1.pdf