loan repayment presentation

Loan RepaymentPresentation

Office of Student Financial Services

August 2010

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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!

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Today’s Presentation Topics

1. Rights and Responsibilities

2. What Follows Graduation?

3. What’s the Best Repayment Strategy?

4. Stay Out of Trouble!

5. Key Resources and Contacts

6. Evaluation

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Rights and Responsibilities

Master Promissory Note – 22 Topics

– Loans Types– Loan Limits– Grace Periods– Interest Rates/Payments– Repayment Plans– Default– Deferments & Forbearance

www.usafunds.org/forms/stafford_mpn.pdf

http://www.usafunds.org/forms/stafford_mpn.pdf

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• Loan Types

─ Subsidized

– Unsubsidized

– Consolidation

– Institutional

– Private

• Interest Capitalization


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

NSLDS www.nslds.ed.gov

USA Funds “Loan Review”

– https://loanreview.usafunds.org/login.aspx?schoolId=00165701

Institutional Loans – Midwestern University

– www.ecsi.net

Private Loans – Who is Your Lender?

http://www.nslds.ed.gov/

https://loanreview.usafunds.org/login.aspx?schoolId=00165701

http://www.ecsi.net/

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Who are the players?

– Lenders

– Guarantors

– Servicers

– Secondary Markets

– US Department of Education (ED)

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What Follows Graduation?

• Grace Periods

• Deferments

• Forbearance

• Organize your records

• Start your planning – get in touch

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LOAN TYPELOAN TYPE GRACE PERIODGRACE PERIOD

StaffordStafford 6 months6 months

PerkinsPerkins 9 months9 months

Grad PLUSGrad PLUS 6 months6 months

ConsolidationConsolidation 0 months0 months

PrivatePrivate 6-9 months (varies by lender)6-9 months (varies by lender)

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Six Major Types of DefermentsSix Major Types of Deferments

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

– Enrollment in an eligible graduate fellowship Enrollment in an eligible graduate fellowship programprogram

– Enrollment in an approved rehabilitation training Enrollment in an approved rehabilitation training programprogram

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Six Major Types of DefermentsSix Major Types of Deferments

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

– Experiencing economic hardship (up to Experiencing economic hardship (up to three years)three years)

– Serving on active duty in the militaryServing on active duty in the military

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ForbearanceForbearance

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

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

• Interest accrues and capitalizes on Interest accrues and capitalizes on allall loan types loan types

• Granted 12 months at a timeGranted 12 months at a time

• Delaying repayment adds to the overall cost!Delaying repayment adds to the overall cost!

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Mandatory ForbearanceMandatory ForbearanceLenders are required to grant forbearance to certain Lenders are required to grant forbearance to certain borrowersborrowers

• whose monthly federal education loan payments equal 20% whose monthly federal education loan payments equal 20% of their monthly incomeof their monthly income

• who are participating in AmeriCorpswho are participating in AmeriCorps

• who are a part of a military mobilizationwho are a part of a military mobilization

Contact your lender for more information on theContact your lender for more information on the

mandatory forbearance benefit.mandatory forbearance benefit.

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Discretionary Forbearance

Borrower must be experiencing financial hardship

Borrower must receive authorization from the

lender or loan servicer

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What’s the Best Repayment Strategy?

• Actively research repayment options – you are in charge!

• Organize your records

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For Federal Stafford and Grad PLUS LoansFor Federal Stafford and Grad PLUS Loans

– StandardStandard

– GraduatedGraduated

– ExtendedExtended

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

– Income-BasedIncome-Based

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For Private LoansFor Private Loans

– Repayment plans may vary by lender and Repayment plans may vary by lender and loan programloan program• May be similar to plans available on federal loansMay be similar to plans available on federal loans

– Variable rates may affect monthly payment Variable rates may affect monthly payment amountamount

– Consult your lenderConsult your lender

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1. Standard Repayment Plan1. Standard Repayment Plan– Level monthly payments over 10 year periodLevel monthly payments over 10 year period

– Higher monthly paymentsHigher monthly payments

– Up to 10 years to repayUp to 10 years to repay

– Most commonly selected planMost commonly selected plan

Advantage: Advantage: Typically yields the lowest overall loan costTypically yields the lowest overall loan cost

Considerations: Considerations: Higher payment (compared to other plans);Higher payment (compared to other plans);may be more difficult to manage if starting income is lowmay be more difficult to manage if starting income is low

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What’s the Best Repayment Strategy?2. Graduated Repayment Plan2. Graduated Repayment Plan

– Monthly payments adjusted at one or more pre-defined intervalsMonthly payments adjusted at one or more pre-defined intervals– Payment must cover accruing interestPayment must cover accruing interest– Number of intervals and frequency of adjustments can vary by Number of intervals and frequency of adjustments can vary by

lenderlender– Up to 10 years to repayUp to 10 years to repay

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

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

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3. Extended Repayment Plan3. Extended Repayment Plan

– Available to FFELP borrowers who have accumulated more than Available to FFELP borrowers who have accumulated more than $30,000 in Stafford Loans on or after October 7,1998$30,000 in Stafford Loans on or after October 7,1998

– Repayment term can be “extended” up to 25 yearsRepayment term can be “extended” up to 25 years– Can be standard or graduatedCan be standard or graduated

Advantage: Advantage: Provides a lower monthly payment for the entireProvides a lower monthly payment for the entirerepayment termrepayment term

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

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4A. Income Sensitive Repayment Plan (FFELP only)4A. Income Sensitive Repayment Plan (FFELP only) – Based on your total monthly gross incomeBased on your total monthly gross income

– Must cover at least monthly accruing interestMust cover at least monthly accruing interest

– Up to 10 years to repay (may be extended to 15 years)Up to 10 years to repay (may be extended to 15 years)

4B. Income Contingent Repayment Plan (Direct Loans only)4B. Income Contingent Repayment Plan (Direct Loans only)– Based on family size, household AGI, and total loan amountBased on family size, household AGI, and total loan amount

– Balance forgiven after 25 years of paymentsBalance forgiven after 25 years of payments

• Forgiven amount taxable under current lawForgiven amount taxable under current law

Advantage: Provides a flexible monthly payment associated with incomeAdvantage: Provides a flexible monthly payment associated with income

Considerations: Longer repayment term typically results in higher overallConsiderations: Longer repayment term typically results in higher overallinterest costsinterest costs

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5. Income-Based Repayment Plan (IBR) 5. Income-Based Repayment Plan (IBR)

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

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

• Monthly payment is based on:Monthly payment is based on:– Family AGIFamily AGI– Family sizeFamily size– HHS Poverty Guideline for state of residenceHHS Poverty Guideline for state of residence

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5. Income-Based Repayment Plan (IBR) 5. Income-Based Repayment Plan (IBR) (Continued):(Continued):

• Allows you to make a reduced payment not more than Allows you to make a reduced payment not more than 15% of your income that exceeds 150% of poverty level15% of your income that exceeds 150% of poverty level

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

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

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5.5. Income-Based Repayment Plan (IBR) (Continued):Income-Based Repayment Plan (IBR) (Continued):

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

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

• New IBR provisions proposed in the President’s FY2010-11 budgetNew IBR provisions proposed in the President’s FY2010-11 budget

• Website Information: Website Information: http://www.ibrinfo.org : : www.salliemae.com – Repaying Student

Loans

http://www.ibrinfo.org/

http://www.salliemae.com/

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Federal Loan Consolidation Options

– Positives:• Combine eligible loans into one new loan• Extend repayment term• Lower monthly payments

– Negatives• Longer repayment timeframe, more interest• Potential loss of some benefits

– For more information: www.loanconsolidation.ed.gov

http://www.loanconsolidation.ed.gov/

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What’s the Best Repayment Strategy?Comparison of Repayment PlansComparison of Repayment Plans Average Loan IndebtednessAverage Loan Indebtedness

$100,000$100,000

Repayment PlansRepayment Plans Interest Interest RateRate

No. of No. of PaymentsPayments

Initial Initial Payment / Payment / Long-term Long-term PaymentPayment

Total Total Repayment Repayment AmountAmount

StandardStandard 6.8%6.8% 120120 $1,151$1,151 $138,096$138,096

Graduated (2 year interest-Graduated (2 year interest-only)only)

6.8%6.8% 120120 $567/$1,353$567/$1,353 $143,530$143,530

Income SensitiveIncome Sensitive 6.8%6.8% 120120 $1,600/$1,082$1,600/$1,082 $136,036$136,036

Income-Based - $40,000 in Income-Based - $40,000 in Year 1 with 3.5% increase in Year 1 with 3.5% increase in salary each yearsalary each year

6.8%6.8% 300300 $87/$301$87/$301 $52,816$52,816

ExtendedExtended 6.8%6.8% 300300 $694$694 $208,222$208,222

Consolidation - ExtendedConsolidation - Extended 6.875%6.875% 300300 $699$699 $209,648$209,648

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What’s the Best Repayment Strategy?Comparison of Repayment PlansComparison of Repayment Plans Average Loan IndebtednessAverage Loan Indebtedness

$150,000$150,000







6.8%6.8% 120120 $850 / $2,030$850 / $2,030 $215,295$215,295

Income SensitiveIncome Sensitive 6.8%6.8% 132132 $850 / $1,726$850 / $1,726 $217,345$217,345

Income-Based - $42,000 in Income-Based - $42,000 in Year 1 with 3.5% increase Year 1 with 3.5% increase in salary each yearin salary each year

6.8%6.8% 300300 $112 /$358$112 /$358 $64,501$64,501

ExtendedExtended 6.8%6.8% 300300 $1,041$1,041 $312,332$312,332

Consolidation - ExtendedConsolidation - Extended 6.875%6.875% 300300 $1,048$1,048 $314,471$314,471

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Comparison of Repayment PlansComparison of Repayment Plans Average Loan IndebtednessAverage Loan Indebtedness

$200,000$200,000







6.8%6.8% 120120 $1,133 / $2,707$1,133 / $2,707 $287,060$287,060

Income SensitiveIncome Sensitive 6.8%6.8% 132132 $2,400 / $2,286$2,400 / $2,286 $275,741$275,741

Income-Based - $60,000 in Income-Based - $60,000 in Year 1 with 3.5% increase in Year 1 with 3.5% increase in salary each yearsalary each year

6.8%6.8% 300300 $337 /$872$337 /$872 $169,665$169,665

ExtendedExtended 6.8%6.8% 300300 $1,388$1,388 $416,443$416,443

Consolidation - ExtendedConsolidation - Extended 6.875%6.875% 300300 $1,398$1,398 $419,295$419,295

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Public Service Loan ForgivenessPublic Service Loan Forgiveness

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

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

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

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

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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)

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Stay Out of Trouble!

• Work with your lender or servicer

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

• Don’t default – the consequences are severe!

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Customer Service Contact Strategies

• Plan your call in advance, have notes as to the issues to be discussed

• Be businesslike and polite• Check and confirm what has been agreed to • Monitor your mail/email for follow up

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Consequences of Default are Severe!Adverse credit reporting

Loss of eligibility for flexible repayment options

Professional licenses can be withdrawn or denied

Income tax refunds withheld

Interest continues to build up

Legal action

Debt collection including fees and fines

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Key Resources and Contacts

Consider a financial advisor – what to look for:

– A good listener – “good chemistry”– Willing to be interviewed for the job– Excellent references– Has appropriate professional certifications (CFP)– Fee based, not commission based

Ask questions!

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Check out the NEW Alumni Website!Loan TypesLoan Postponement OptionsLoan Repayment InformationGlossary of TermsFAQ’sForms to downloadOn-line Resources

CalculatorsNSLDS

Contact Informationwww.midwestern.edu/x749.xml


http://www.midwestern.edu/x749.xml

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You are not alone in this!

– Office of Student Financial Services 623.572.3321 [email protected]

– MWU Institutional Loans866.729.2698

www.midwestern.edu/programs_and_admission/financial_aid/institutional_loan_repayment.html

– Alumni Website – financial aid informationwww.midwestern.edu/x749.xml

mailto:[email protected]

http://www.midwestern.edu/programs_and_admission/financial_aid/institutional_loan_repayment.html

http://www.midwestern.edu/programs_and_admission/financial_aid/institutional_loan_repayment.html

http://www.midwestern.edu/x749.xml

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Evaluation

Student Financial Services Exit Survey

http://mwunet.midwestern.edu/administrative/OIREA/Survey/fs/fsexit.htm

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



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