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Loan Repayment Presentation Office of Student Financial Services August 2010

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Loan Repayment Presentation. August 2010. Office of Student Financial Services. Purpose and Objectives. Start planning NOW – repayment is complicated! Become aware of the tools and resources available to you. Review all your options. Plan ahead! Take action, manage your future!. - PowerPoint PPT Presentation


  • Loan RepaymentPresentationOffice of Student Financial ServicesAugust 2010

  • Purpose and ObjectivesStart planning NOW repayment is complicated!

    Become aware of the tools and resources available to you.

    Review all your options. Plan ahead!

    Take action, manage your future!

  • Todays Presentation Topics1. Rights and Responsibilities

    2. What Follows Graduation?

    3. Whats the Best Repayment Strategy?

    4. Stay Out of Trouble!

    5. Key Resources and Contacts

    6. Evaluation

  • Rights and ResponsibilitiesMaster Promissory Note 22 Topics

    Loans TypesLoan LimitsGrace PeriodsInterest Rates/PaymentsRepayment PlansDefaultDeferments & Forbearance

  • Rights and ResponsibilitiesLoan Types






    Interest Capitalization

  • Rights and ResponsibilitiesWhat do You Owe? To Whom Do You Owe It?


    USA Funds Loan Review

    Institutional Loans Midwestern University

    Private Loans Who is Your Lender?

  • Rights and ResponsibilitiesWho are the players?




    Secondary Markets

    US Department of Education (ED)

  • What Follows Graduation?Grace Periods



    Organize your records

    Start your planning get in touch

  • What Follows Graduation?

  • What Follows Graduation?Six Major Types of Deferments

    At least half-time enrollment as a student in a degree or certificate program at an eligible institution

    Enrollment in an eligible graduate fellowship program

    Enrollment in an approved rehabilitation training program

  • What Follows Graduation?Six Major Types of Deferments

    Seeking to find (and unable to find) full-time employment (up to three years)

    Experiencing economic hardship (up to three years)

    Serving on active duty in the military

  • What Follows Graduation?Forbearance

    Use only if ineligible for deferment or have exhausted deferment time limit

    Temporary allowance of no payments or lower payments to avoid delinquency and default

    Interest accrues and capitalizes on all loan types Granted 12 months at a time Delaying repayment adds to the overall cost!

  • What Follows Graduation?Mandatory ForbearanceLenders are required to grant forbearance to certain borrowers

    whose monthly federal education loan payments equal 20% of their monthly incomewho are participating in AmeriCorpswho are a part of a military mobilization

    Contact your lender for more information on themandatory forbearance benefit.

  • What Follows Graduation?

    Discretionary Forbearance

    Borrower must be experiencing financial hardship

    Borrower must receive authorization from the lender or loan servicer

  • Whats the Best Repayment Strategy? Actively research repayment options you are in charge!Organize your records

  • Whats the Best Repayment Strategy?For Federal Stafford and Grad PLUS Loans




    Income-Sensitive (FFEL) or Income-Contingent (DL)


  • Whats the Best Repayment Strategy?For Private Loans

    Repayment plans may vary by lender and loan programMay be similar to plans available on federal loansVariable rates may affect monthly payment amountConsult your lender

  • Whats the Best Repayment Strategy?1. Standard Repayment PlanLevel monthly payments over 10 year periodHigher monthly paymentsUp to 10 years to repayMost commonly selected plan

    Advantage: Typically yields the lowest overall loan costConsiderations: Higher payment (compared to other plans);may be more difficult to manage if starting income is low

  • Whats the Best Repayment Strategy?2. Graduated Repayment Plan Monthly payments adjusted at one or more pre-defined intervalsPayment must cover accruing interestNumber of intervals and frequency of adjustments can vary by lenderUp to 10 years to repay

    Advantage: Provides a low initial monthly payment and offers predicable payment increases; good for borrowers with increasing income potential

    Considerations: Lower up-front payments may cause somewhat higher interest costs

  • Whats the Best Repayment Strategy?3. Extended Repayment Plan Available to FFELP borrowers who have accumulated more than $30,000 in Stafford Loans on or after October 7,1998Repayment term can be extended up to 25 yearsCan be standard or graduated

    Advantage: Provides a lower monthly payment for the entirerepayment term

    Considerations: Longer repayment term typically results in higher overall interest cost

  • Whats the Best Repayment Strategy?4A. Income Sensitive Repayment Plan (FFELP only) Based on your total monthly gross incomeMust cover at least monthly accruing interestUp to 10 years to repay (may be extended to 15 years)

    4B. Income Contingent Repayment Plan (Direct Loans only)Based on family size, household AGI, and total loan amountBalance forgiven after 25 years of paymentsForgiven amount taxable under current law

    Advantage: Provides a flexible monthly payment associated with income

    Considerations: Longer repayment term typically results in higher overallinterest costs

  • Whats the Best Repayment Strategy?5. Income-Based Repayment Plan (IBR)

    You can use Income-Based Repayment (IBR) to repay Federal Stafford, Grad PLUS and Consolidation Loans if you have a partial financial hardship (PFH)

    Amount due is lesser of:Amount required using 10-year Standard Plan, ORAmount required using IBR

    Monthly payment is based on:Family AGIFamily sizeHHS Poverty Guideline for state of residence

  • Whats the Best Repayment Strategy?5. Income-Based Repayment Plan (IBR) (Continued):

    Allows you to make a reduced payment not more than 15% of your income that exceeds 150% of poverty level

    Monthly payment can be less than accrued interest (it allows for negative amortization)

    Unpaid interest that accrues on Subsidized Stafford debt will be subsidized for up to 3 years during IBR

  • Whats the Best Repayment Strategy?Income-Based Repayment Plan (IBR) (Continued):

    Any outstanding eligible FFEL or Direct loan balance (other than Parent PLUS) is forgiven after 25 years

    Any loan amount that is cancelled may be taxable in the calendar year in which it is cancelled

    New IBR provisions proposed in the Presidents FY2010-11 budget

    Website Information: : Repaying Student Loans

  • Whats the Best Repayment Strategy?Federal Loan Consolidation Options

    Positives:Combine eligible loans into one new loanExtend repayment termLower monthly paymentsNegativesLonger repayment timeframe, more interestPotential loss of some benefitsFor more information:

  • Whats the Best Repayment Strategy?

  • Whats the Best Repayment Strategy?

  • Whats the Best Repayment Strategy?

  • Whats the Best Repayment Strategy?Public Service Loan Forgiveness

    This is a new program for federal student loan borrowers who work in certain kinds of jobs:

    Are employed by any nonprofit, tax-exempt 501 (c)(3) organization;

    Are employed by the federal government, a state government (this includes the military and public schools and colleges); or

    Serve in a full-time AmeriCorps or Peace Corps position.

  • Whats the Best Repayment Strategy?Public Service Loan Forgiveness

    Federal loans must be consolidated into the Federal Direct Loan Program

    Debt remaining after 10 years of eligible employment and qualifying loan payments is forgiven

    Only payments made after October 1, 2007 count towards the 10 years (120 monthly payments, not necessarily consecutive)

  • Stay Out of Trouble!Work with your lender or servicer

    Communicate keep good records!Who, what, when, where, how much?

    Dont default the consequences are severe!

  • Stay Out of Trouble!Customer Service Contact Strategies

    Plan your call in advance, have notes as to the issues to be discussedBe businesslike and politeCheck and confirm what has been agreed to Monitor your mail/email for follow up

  • Stay Out of Trouble!Consequences of Default are Severe!Adverse credit reportingLoss of eligibility for flexible repayment optionsProfessional licenses can be withdrawn or deniedIncome tax refunds withheldInterest continues to build upLegal actionDebt collection including fees and fines

  • Key Resources and ContactsConsider a financial advisor what to look for:

    A good listener good chemistryWilling to be interviewed for the jobExcellent referencesHas appropriate professional certifications (CFP)Fee based, not commission based

    Ask questions!

  • Key Resources and ContactsCheck out the NEW Alumni Website!Loan TypesLoan Postponement OptionsLoan Repayment InformationGlossary of TermsFAQsForms to downloadOn-line ResourcesCalculatorsNSLDSContact

  • Key Resources and ContactsYou are not alone in this!

    Office of Student Financial Services 623.572.3321 [email protected]

    MWU Institutional

    Alumni Website financial aid

  • Evaluation

    Student Financial Services Exit Survey

    The more you do in your life today, the better it will be tomorrow!

    Good morning (or afternoon): Welcome to our Loan Repayment Presentation for our August 2010 graduates. Im Tom Billard, Director of Student Financial Services and I will be your moderator for todays event. Joining me today is Karen Owens, the Assistant Director in our office. Karen, do you want to say hello?

    We in Student Financial Services are all about helping you, our graduates, make good, informed choices. Attending our 2010 webinar presentations have been students from a wide variety of academic programs these have included graduates in the Osteopathic Medicine program, Pharmacy, Nurse Anesthesia, Cardiovascular Science program as well as other programs in the College of Health Sciences. We welcome all of you and hope you find this Loan Repayment presentation helpful and thought provoking.

    Your academic programs have been varied in terms of focus and length; like your academic studies, you will find many complexities in the repayment of your loans. Successful repayment of your loans, like your academic programs, takes time, attention to detail and focus. With the completion of the USA Funds Grad Guide Exit Counseling, this presentation and the greatly enhanced resources on our Loan Repayment section of the Midwestern University Alumni website, you should be well prepared to determine the best repayment strategy for your particular situation.

    But before we get started with todays event, we have a few housekeeping items to attend to. Please note that:

    If you have questions about the presentation, you can send your question via the chat area thats on the right side of your screen, toward the center. Depending on time today, we will answer the question at the conclusion of the call or in a follow up email.You should have had a copy of the PowerPoint that was e-mailed to you to download and print as part of your sign in today. The printout is great for taking notes. Well send a follow up copy of the presentation for your future reference.

    Thanks again for joining us today lets begin the presentation. Just sit back and well change the slides for you.

    As the slide states, repayment of your various loans is and can be very complicated. By beginning to investigate all of your options before you get too far down the road to repayment, you can carefully and thoroughly review all of the alternatives and make good, informed choices. If you do nothing with your Stafford Loans for example, you will have a six month grace period and then be placed in a standard, 10 year repayment plan. One of the good features of most repayment plans is the option to change your mind and your plan the key to doing this, however, is to have a plan.

    While we will say several times today that this is a personal choice, a personal decision, we want you to be an informed consumer fully aware of your rights, responsibilities and obligations. We are assembling the resources and tools that you will need going forward. Unlike almost all other financial obligations that you maybe familiar with, such as car loans and mortgages, there are many features in the federal loan programs that allow for changing personal circumstances. These are your loans; we want you to effectively manage this important aspect of your financial balance sheet. In todays presentation, well cover the six topics listed on the slide. These are pretty self explanatory well focus on the key points and hopefully you will be equipped to navigate repayment once you are finished with the webinar.

    From our perspective, the heart of the presentation is in sections 2 through 5 its all about knowing what you owe and how you are going to repay it. We often have questions in the Student Financial Services Office about what happens after graduation well cover the key points in terms of grace periods, deferments and forbearances, organizing your records and starting your planning.

    A full review of the various repayment strategies is essential. Essentially there are five repayment plans for your Federal Family Educational Loan Program (commonly called FFELP) loans and Federal Direct loans. You may wish to consolidate your loans to simplify repayment as well; if so, you should consider the pros and cons of consolidation once it is accomplished, you can not undo it. You will need to contact the organization consolidating the loans and insure that the paperwork is in progress to insure that the consolidation is moving along. Its important, if you do this while in repayment, to make sure you are aware of the need to keep making payments while the process is underway.

    Next, for repayment, you will need to understand your obligations concerning Institutional Loans that you may have taken out during your time at Midwestern University. For our group today, these would be the Federal Perkins loans; these are serviced on behalf of Midwestern by an organization called ECSI. Fortunately, we have internal staff on the Downers Grove campus that work very, very closely with both our graduates with loans being serviced by ECSI. In almost every instance, they are able to cut through any red tape and get the job done.

    Finally, there are Private credit-based loans that you may have taken out. These would be through such lenders as Citibank, Wells Fargo and Sallie Mae. Their repayment terms and conditions are less flexible than loans that are federally guaranteed; make sure you understand your obligations in this area.

    While hopefully we havent scared you, as you can see, there are many players involved in the repayment of student loans. Understanding these complexities and knowing where to go to for advice can greatly simplify your life while you are getting on with your professional career. You should have the basic set of tools to do this at the end of this hour.

    Its really important to stay out of trouble! You have invested a tremendous amount of time, money and effort in achieving your dreams. Knowing whom to communicate with and how to reach them is absolutely critical. It is actually fairly easy if you are organized and keep good records. Well provide some practical tips to work effectively with lenders, servicers and others that you will deal with. Its important to realize that they are very interested in your success and will actively work with you to stay on track.

    While well talk more specifically about defaulting on your loans, it is something to steer clear of. Over the past 15 years or so, the federal government has really ramped up efforts to clamp down on defaults; while it is much less of a problem for medical professionals such as yourselves, it does on occasion occur. We have the tools and resources to keep you out of this morass it is NOT a good place to be. Naturally, staff at Midwestern University in both the Student Financial Services Office and Institutional Loans are ready to help you by explaining your options and assisting you with servicers and lenders. This is in everyones best interest!

    As I mentioned earlier, we have initiated major changes to our Alumni website; these modifications have encompassed changes that are required to provide the resources you will need. In order to keep it current, in many instances we will provide links to other resources in the student loan industry so that you will have access to the most current contact information, calculators, forms and repayment options among the many features well have. These changes are designed to get you to great resources with the least amount of searching around. We hope that this will be a valuable resource for all alumni.

    Finally, well ask for your evaluation of our services. Were trying to do things a little more creatively and really want and need your input! Thanks again for attending today we hope you will find this useful.

    Lets transition to a discussion of our first major topic, Rights and Responsibilities.

    Have you read your promissory note recently?

    That sounds like a dumb joke but many times we have great information resources right at our finger tips and we forget they are there! One of these is the Master Promissory Note or MPN, a form you signed either for the first time while at Midwestern University or at a prior institution. Many times these have been lost or misplaced over time just because you cant locate it doesnt relieve you from the obligations you incurred when you signed it. If you dont have it, this is a great opportunity to make a resolution to maintain all of your loan documents and correspondence. Well talk about some strategies to do that a little later in the presentation.

    As you can see, the Rights and Responsibilities section MPN covers 22 different topics the detail goes on for five pages. Some of the 22 topics are listed above; my intent in listing these is to have you pull this out and look at the document. When you need to know something about your loans, your Rights and Responsibilities, this is a great place to start. MPNs for the Federal Stafford loan program are the same for all lenders in the program; if you have a Federal Direct Loan, get a copy of that MPN as well they contain a wealth of information. Unfortunately, we are all guilty of not reading the fine print be it an auto loan application, a mortgage or a student loan. We are still bound by the terms we agreed to. If you cant locate your MPN, you can access the full note at the website listed on the slide.

    Lets do a quick review of the major types of loans and a very important factor in repayment, Interest Capitalization.

    Subsidized loans are those that the federal government pays the interest on while you are in-school, in-grace or on an approved deferment. Examples include:Subsidized Stafford Federal PerkinsPrimary Care Loans (PCLs)

    Unsubsidized loans are those federal loans on which you the borrower are responsible for interest as soon as they are disbursed. Examples include:Unsubsidized StaffordGrad PLUSConsolidation Loans

    Federal Consolidation loans occur when a borrower determines it is best to consolidate a number of underlying loans so that repayment is simplified. Due to changes in legislation several years ago, the only access today is through the Federal Direct Student Loan program. Consolidation is a major decision that requires a considerable degree of thought and study there are both advantages as well as disadvantages.

    Institutional loans are generally serviced by an outside entity that the college or university contracts with to handle servicing and collection activities. In the case of Midwestern University, as we discussed earlier, we work with ECSI to manage our portfolio of Federal Perkins, Primary Care Loans (PCLs) for medical students and the Dr. Lucas Loan program.

    Private or alternative loans are managed by external lenders and servicers. Major lenders that students at Midwestern have used include Sallie Mae, Citibank and Wells Fargo. As we have noted earlier, terms and conditions, interest rates, repayment options and features such as deferments may not be as favorable as with federally guaranteed loans. The critical thing to remember is that they maybe a major component of your student loan portfolio make sure you manage these just as well as you do the federal loans.

    Interest Capitalization is an important concept to understand. If you have a loan that does not require you to pay interest while you are in school, as an example, and the interest is unpaid at some point, the unpaid interest is added to the original principal amount. Heres a simple example: Lets assume you have a $10,000 loan at 7%; at the end of a one year deferment year, $700 of interest will have accrued. If you pay it, the principal balance remains $10,000; if you dont pay it, the new principal balance for the coming year is $10,700. Over time and on larger balances, this can really add up.

    Review your promissory note to determine how frequently your interest will be capitalized. Common points to capitalize interest are at the end of a grace period or at the end of a deferment; in general, the less frequently the better to lower your cost. If you can pay the interest at the end of a deferment or grace period, do so. You will avoid paying interest on interest!

    Now that we have discussed the various types of loans and capitalization, you should determine what you owe and to whom you owe it.You need to know lots of information about your loans before you can begin repayment. A smart consumer is an informed consumer!

    The key questions are - What do you owe and To whom do you owe it? We would recommend the use of a powerful tracking tool to monitor your borrowing and loans; the first step, however, it to assemble your complete portfolio of federal loans. To start the process, you should go the National Student Loan Data System (or NSLDS as it is commonly known) to access all your federal student loans. You will need your FAFSA PIN to get in make sure you have that before you start. Once in, you will find very current information on each and every loan to include contact information for the lender or servicer. Its important to remember that not all loans are captured on NSLDS examples of loans not included are your Federal Perkins institutional loans and Private Loans taken out with private lenders.

    When you have your complete portfolio of Federal loans, wed recommend utilizing a powerful loan tracking too - one good product that a lot of students use is the USA Funds Loan Review program. The product is free to use; the data you store on the system is secure. There are other tracking tools the key point is begin tracking your debt! We like the fact that you can import and include other loan data pretty easily. In addition to helping you track and monitor your loans, the other major feature of Loan Review that we really like is that it will allow you to model any one of the five repayment strategies under the federal programs. As you will see later in our presentation, having this information can be very useful when you are discussing options with your servicer.

    Finally, make sure you monitor your private or alternative loans. As we have noted earlier, the terms of private loans may not be as attractive as federal loans; one idea that you may want to consider is if you have extra money, should you pay off the private loans sooner than federal loans? Thats generally a good way to go as interest rates are usually higher with the private loans while repayment terms are better with federal loans.

    Lets review some of the key players in the student loan industry its important to know who these organizations are.These are the primary players in the student loan industry. Id like to briefly describe of role of each entity:

    Lenders are the organizations that have loaned you the money for your higher education; you are generally going to repay them unless they have sold your loans.

    Guarantors are state agencies (for example, the California Student Aid Commission) or private non-profit institutions (for example, USA Funds) that insure student loans for lenders. If a borrower defaults, they reimburse the lender for the outstanding principal and interest.

    Servicers are companies that administer loans for lenders. Typical functions include handling customer calls, billing, handling payments, processing deferments and forbearances and collections activities with delinquent borrowers. Sallie Mae and Great Lakes are both major national servicers. In many instances, they will be the primary organization you will be dealing with as you repay your loans.

    Secondary markets are organizations that buy portfolios of student loans from lenders; lenders then used the proceeds to recycle the funds and make new loans. With changes in legislation, the US Department of Education has become a major secondary market. Other secondary markets include Sallie Mae and NelNet.

    The US Department of Education plays multiple roles in the administration of federal student aid programs. In addition to being responsible for the administration of all programs, it acts as the guarantor, lender and secondary market for the Federal Direct Loan Program. After loans are disbursed, the Department of Education contracts with four main servicers (Sallie Mae, the National Student Loan Program (NSLP), Great Lakes and the Pennsylvania Higher Education Association (PHEAA) to handle customer service calls, repayment questions, deferments and forbearances and loan collections.

    After having covered a number of the basics, we want to discuss what you can expect after graduation. Karen, do you want to pick up from here please? One of the main things that students begin to ask about or question as they start getting close to graduating is what they need to do concerning their loans. So Ill summarize just a few things to get you started, and go over some of the things youll need to know before you actually enter into loan repayment.

    First is the Grace Period. The grace period deferment is generally just the period of time that you have before you go into repayment, and its also a good time review your loans and make your repayment plans.

    Deferments and forbearances are two other options offered with federal loans that can help you reduce your payments or defer repayment for a specified period of time.

    The organization of your loan records is critical, especially make sure by the time you graduate and before you enter repayment that you have a loan portfolio with names and contact information of your loan servicers, and document when your loans go into repayment, because theyre probably not all going to be on the same date. Keep in mind that if you ever want forbearance or deferment of your loans, youll need to know who your servicers are, because these requests have to be made with each servicer and for each loan type. So if your records are well organized, itll be that much easier when you need something from your lender or servicer.

    The GRACE period, again, is basically a deferment of your loans thats automatically granted to your eligible loans after you graduate or drop to less than half time. During your grace period, you dont have to make any payments, you wont accrue interest on your subsidized loans and your rates stay the same as when youre enrolled. So the first thing thats important to do after you graduate is get your most recent loan information together from the National Student Loan Data System which is the website that Tom spoke about earlier, so you know who the servicing agency is for each of your loans and when each loan goes into repayment. When you open the NSLDS website to your loan page, youll see a listing of all of your loans starting with a number one thru however many loans you have. Click on that actual number to the left of each loan type to pull up your lender or servicer contact information. You should document the date your loans will start in repayment, and then if youre not sure if any loan has a grace period or not, then call the servicer associated with that loan, because you cant apply for any other deferment if youre eligible for a grace period deferment. Taking a look at the chart, youll see that your Stafford loans have a six-month grace period; Perkins loans have a NINE month grace period, and Graduate PLUS loans currently have a six-month deferment period, but that wasnt available for any PLUS loans before July 1st, 2008. So any Graduate PLUS loan disbursements you received before July 1, 2008 dont have a deferment period and will go right into repayment so with those loans, you could see if you qualify for another deferment type. For instance, some students might qualify for an economic deferment if they start out in a very low-paying job. But if you dont qualify for any deferment and youre not ready to start repayment, you can always see if youre eligible for forbearance. Your consolidated loans generally dont have a grace period, and private loans, which you will not find listed in NSLDS, can vary as far as grace period goes. So read what you signed up for on your Master Promissory Note and contact your loan servicer to determine if you have a grace period and then find out what options you have as far as repayment goes.

    Theres other deferment types that may be granted under certain eligible circumstances. The 3 listed here dont always necessarily need to be applied for or even requested by you, but even if you do qualify, its your responsibility to make sure your loans are actually in a deferment status. If youre enrolled at least half time in a degree-seeking or certificate program OR in an eligible graduate fellowship program or an approved rehabilitation training program, you should be granted an in-school deferment. You really should check the NSLDS database to make sure your loans are in a deferred status. Sometimes enrollment statuses arent relayed to your lender timely, so your lender doesnt know youre in school and you might also have to do deferment paperwork with them. So any time youre not sure, you should call your loan servicer and theyre the ones who can properly verify your loan status with you.

    Now these three deferment types do have to be specifically requested in writing. Theres the military deferment for those of you in active duty. Theres the unemployment deferment that can be utilized for up to 3 years any time you find yourself unemployed or between jobs, and theres the economic hardship deferment for the jobs that might start out with extra low pay. You do have to be employed to qualify for economic hardship, and residency pay is generally too high for most students so many students will opt for a forbearance instead. Just remember that each students situation can be different as far as qualifying for hardship deferment some students have children and some dont and some have a lot of children. Theres just a lot of variables to consider than your current income, so its important that you know that these deferment options are available, and its also important that you know where you stand with all of your loans at the time you graduate as far as when you have to start repayment. So if you find yourself temporarily unemployed with no job scheduled in the near future, remember the unemployment deferment. A deferment will be good only for the specific loan servicer you made the request with, and it is possible that youll have more than one servicer, which you can find out when you access NSLDS. Youll need to apply through each loan servicer and for each of your loan types, like one deferment for your Stafford loans (thru each servicer if you have more than one) and one deferment for your Graduate PLUS loans, etc. This is why we stress that you educate yourself about your loans before graduate so youre aware of what you have, when you need to take action, and who you need to contact.

    Forbearance is another valuable option thats available for your federal loans-- you can request forbearance if youre not able to start paying them back right away. Before your grace period ends definitely BEFORE you go into repayment--make sure you tell your lender what repayment plan youve chosen. Forbearance of your loans allows you to reduce or eliminate your payments for a specified period of time -- your loans will accrue interest, and the interest can capitalize as much as quarterly during a forbearance. Remember that even if your loans are in forbearance, it would be huge benefit if you could make some sort of a payment if youre able to even a portion of your interest payment while youre in forbearance will keep your loans more manageable. Another thing you can do for your loans that dont have a grace period, you can bring all of them to the same due date by asking for a forbearance specifically for that purpose. It would just make things easier if all your loans are due on the same date.

    A Mandatory Forbearance is just that it is mandatory that the lender grants it to those borrowers who have monthly loan payments equal to 20% of their gross income, or anybody participating in AmeriCorps or part of a military mobilization.

    Most of our students going into medical residencies or dental internships will be granted forbearance just because of their higher debt load and their lower monthly income during that time. So if you do need a forbearance, you should call your loan servicer and make sure you give yourself enough time before your loans go into repayment. Just call your servicer (or servicers if you have more than one) and request a forbearance for all of your loans and then make sure youve completed all their required paperwork.

    A discretionary forbearance is up to the lenders discretion and its based on your circumstances. So depending on your personal situation or maybe hardship, maybe you got a little behind in your payments, if you need a loan forbearance, just communicate with your loan servicers and find out whats available to help you. Maybe youll be granted a forbearance for 3 months or you could get one for up to a year, just try to only use what you need, and then only request a forbearance if youre sure you wont qualify for a deferment. Just dont let your payments get behind before you decide to call to see whats available to help you, because theres usually some way theyll help you get you back on your feet and back on track.

    And now well turn to a very important part of this presentation with Tom, helping you determine your best repayment strategy ..

    You might have noticed a trend in this presentation we want to get you actively involved in determining how you are going to repay your student loans. Unlike other types of consumer loans such as car loans, credit cards or mortgages, YOU have a very important role in determining how you will handle repayment. If you do nothing, you will end up with a standard 10 year repayment plan. That might work well for you but with other expenses in your real life, getting married and so forth, planning really counts!

    The first step involves organizing your loans and information; some of the key items in this process are:Your lenders full name, address and email addressThe lenders phone and fax numbersThe type of loan, amount and due date for payments

    Make use of the research you have already done in tracking down your loans using a program like USA Funds Loan Review and the National Student Loan Data System (NSLDS) that was mentioned earlier.

    You will also need to track your contacts with your lenders and servicers the Alumni website, which well talk about later, has sometools from our business partners to enable you to track your loans; these are really good resources to keep you organized and on top of finances.For your federally guaranteed loans, there are five repayment plans that are available to you. Well review these briefly with a comparison of some of the key features and then compare monthly payments at three different debt levels. Again, our objective it to get you thinking about which option best meets your needs at this point in time in your life. A key point to remember is that unlike car loans or mortgages, you can usually change your plan as your income and personal situation change make sure you check with your lender or servicer to fully understand your options. Some programs can lock you in but there is a lot of flexibility. And remember, under the federal student loan programs, there is never a penalty for early or pre-payment.

    One final point Id like to make. Todays discussion is in relation to Federal Stafford and Graduate PLUS loans. You may also have Federal Perkins loans. Midwestern is responsible for collection on these through our Institutional Loan program; well have contact information for them later in todays presentation. Make sure you factor them into your budget as well.

    Repayment of Private loans is based on the language in those promissory notes. Since they are from individual lenders and not guaranteed by the federal government, they will vary from lender to lender. The important thing to do is to know who your lender is, how to contact them and how to arrange for repayment terms that will best meet your situation. As with federally guaranteed loans, these lenders want you to be successful and repay your loans they want to work with you.

    Now lets turn to a review of the five repayment plans for borrowers with federally guaranteed loans. The first option well look at is the most commonly selected plan and the one you will go into unless you are actively involved in the planning process.

    Discuss the slide.

    The next option is the Graduated Repayment Plan..Discuss the slide.

    The third options to consider is the Extended Repayment Plan......

    Discuss the slide.

    The fourth option has two names the correct name is based on the underlying federal Loan program, the FFELP (Federal Family Educational Loan Program) or the Direct Loan Program.Discuss the slide.

    The fifth and final repayment plan, the Income Based Repayment Plan or IBR as it is commonly referred to, is the first new repayment plan in more than an decade; it was effective July 1st, 2009. Lets take a look at the IBR..Discuss the slide.

    The Income-Based Repayment Plan or IBR at is commonly referred to is pretty complicated (it takes three slides to cover the highlights!) but it is very useful to students with large amounts of debt and lower beginning salaries such as medical residents..lets move to the next slide for some more details.Discuss the slide. Wed recommend that you check the IBR Option with your lender or servicer we think you will find it to be an option to consider in spite of the fact that it is fairly complicated and requires an annual analysis and re-setting of the monthly repayment amount. The web sites noted are very helpful to you in your initial research before you speak to your lender or servicer.

    One more point to mention briefly relates to the changes included in the new national health care legislation that was passed in late March. While we dont have all the details, IBR will be more affordable going forward beginning in July 2014 by reducing the payments to 10% of adjusted income versus 15% in the current program and by forgiving any remaining balance after 20 years versus 25 years. While this wont effect graduates for several years, we wanted you to be aware of them. Make sure you check out the IBR website for full details on the program.

    While it is not a repayment plan, we do want to make you aware of loan consolidation options too.

    Earlier we touched briefly on Federal Loan Consolidation as a strategy to consider in the repayment of your loans. Due to changes in federal legislation several years ago, the only viable player left in the loan consolidation market today is the federal direct consolidation program. Their website is noted on the slide for your future reference. Consolidation is a major step in that you take different kinds of loans and blend them into one new loan.

    Not all loans are eligible from todays discussion, for example, Institutional and Private loans would not qualify. You may wish to explore this in your grace period as part of your research.

    One point that you may want to explore further was part of the student loan changes included in the national health care bill that was signed into law on March 30th. For a one year period, July 1, 2010 to June 30, 2011, borrowers with both Federal Direct and FFEL Program loans or Federal Direct loans and FFEL loans sold to the Department of Education under the PUT program the past two years, can consolidate these loans regardless of whether the borrower has entered repayment. Again, the best thing to do is gather your information and call your lender or servicer to see if you qualify.

    The program has a number of advantages and disadvantages. On the positive side of the ledger, consolidation can:

    Lower monthly paymentsExtend repayment periodsSimplify repayment one payment to make each month versus multiple paymentsProvide a fixed interest ratesEliminate any prepayment penaltiesGive you the option to change repayment plans

    Some of the negatives include:Longer repayment periods resulting in higher interest chargesAs a consequence of blending multiple loans, the interest rate maybe higherBorrower benefits maybe reduced as a consequence of less competition for your businessConsolidation terms may have a negative impact on grace periods, deferments and loan forgiveness

    As you can see, this is a very significant decision one that requires a good deal of thought and analysis. The good news is that while consolidation works for many borrowers, it is not required and many students very effectively manage separate loans and repayment programs by using automatic bill pay or debits through their banks. You might review your options and then defer consolidating until some future time the decision is yours.

    Lets take a look at the financial and repayment implications of these five strategies plus consolidation. Karen will lead us through a number of examples Karen?Now that youve heard about standard repayment plans and consolidation, we have a few examples for you to make some comparisons.

    In this first example the student began with a $100,000 debt. As you can see, the monthly payments can vary significantly depending on which repayment option you choose, for instance youll pay $694 a month in the extended program instead of $1,151 a month in the standard program. Its important to note that the lower the monthly payment, the higher the interest and the more overall debt that has to be repaid. I mean, obviously, lower monthly payments can certainly help anybody staring out in a new job; just remember that as your income increases, try to mover over to the Standard Plans as soon as possible. Even with a $100,000 debt, this student would have to repay $70,000 more if he stayed solely in the Extended Plan the Standard Plan total of $138,096.

    The Standard repayment plan gives you up to 10-years to pay off your loans but you can go as long as 25 years to repay your loans on an extended plan if you need lower monthly payments. Just be aware of the interest accrual and capitalization. Take a look at the far right hand column under Total Repayment Amount on this $150,000 student loan debt. The difference is significant in overall debt when you pay your loan in 10 years, which shows $207K for Standard Repayment instead of $312K or the 25 Year Extended Repayment Plan.

    This last example shows $200,000 debt. Look at the total repayment amount in the Standard plan; its about $140,000 less than the extended plan. So theres nothing wrong with STARTING your repayments on an extended plan just to get on your feet, but once youre more established and are able to pay more, try to switch to the Standard Plan as soon as possible. You can always change plans if you need to, but the idea is to get your loans paid back with the least interest possible

    The Public Service Loan Forgiveness Program was set up to help those working in the public sector to help generate more employment in the lower paying, public positions. Theres a lot of details that havent yet been ironed out, but its definitely something that could benefit students committed to public service. Looking at the slide, you can see that the program covers many positions, including federal, state and local governments, tribal governments, non-profit tax-exempt organizations, the military and other public employment positions. Employment, for instance, at the American Red Cross, the US Navy or the Navaho Nation could qualify for Public Service Loan Forgiveness.

    In order to qualify for Public Service Loan Forgiveness, your federal loans have to be consolidated into a Direct Loan consolidation first - then youll need to make 120 monthly payments over a period of 10-years. After that, you can apply to have the remaining balance forgiven.

    A few things to keep in mind though, that its a good idea to verify with your lender that youre actually working for an organization that would qualify you for the loan forgiveness program. Just get some verification before you commit to 10 years working in a public position that youre hoping will cause your remaining loans to be forgiven. You will also need to be able to prove that you have 120 months of public employment - so keep detailed records of your employment history and payments over those 10 years. And then as some point if you end up getting an opportunity for a higher paying job in the private sector, make sure that higher-paying job is worth the balance you have on your loans if you switch jobs, because if you leave your public service position, youll have to pay your remaining debt. So just consider and weigh the odds before you leave your public position for a higher-paying job.

    With all the loan repayment, deferment and forbearance options available in the federal loan program, there really is no valid excuse to default. If you stay in touch and work with your loan servicer, youll find theres always other options over default, and there will be someone there to help you. As large as the student loan industry is, its not likely youd ever speak to the same person twice. So as long as you take notes, reference your calls and keep good records, you wont have to constantly repeat the reason for your call every time you need to talk to someone or return a call.

    I think everyone knows that when youre busy, stopping to call a lender or loan servicing center can be extremely frustrating. So we have a few tips that hopefully can make that process a little easier for you:FIRST, try not to call on Mondays. Call during off peak hours or later in the week because everyone seems to call on Mondays its a good day to avoid.Use a speaker phone so that you can move around and youre not tied to the phone in one place for any length of time. Review exactly what you want to accomplish before you call, and relay your request clearly to the representative. Remember to have a pen and paper close by so you can take notes on who you spoke with and reference information. Always be polite even if youre irritated or angry. I think everyone agrees its frustrating when you have to continuously repeat and confirm your name, address, phone number, social security number especially if youve been on hold for a while! Just keep in mind that these are requirements the Call Center Staff have in place in order to protect your identity- Try not to ask for a supervisor first thing, just for a supervisor if you cant get the resolution youre looking for. And finally make sure your notes confirm what you agreed to on the phone; document the name and ID of who you spoke with along with a reference number for the call. That way if you need to call back, you dont have to start all over.

    As Ive mentioned a few times, theres really no excuse to ever default on your student loans. Consequences are just too severe for defaults, and youll rarely ever hear that a Midwestern graduate ever defaulted. Besides, theres so many options available to keep borrowers out of trouble. And remember that Midwestern Staff that is here even after you graduate, so please dont ever ignore any issues; give your lender a call or give us a call so we can help you.

    As you move into repayment and begin your professional career, you may wish to consider hiring a financial advisor that can assist you with a wide array of financial services. The key to finding a good advisor is to meet with several and then make a selection. Several known factors to consider are listed on the slide. Given the fact that you will be sharing a great deal of personal financial information, it is very important that you can trust this individual implicitly.

    Midwesterns Alumni website has a wealth of information regarding many aspects of repaying your loans..We would encourage you go out to the Alumni website and check out the new focus on loan repayment and new content. Our objective is to provide to our graduates and students approaching graduation accurate, comprehensive and complete information to successfully navigate repayment. A representative sampling of topics is listed above; we encourage anyone with additional resources to notify us at >[email protected]