NYPIRG PresentsNYPIRG Presents

Student Loans:Student Loans:A Student Empowerment Series Workshop A Student Empowerment Series Workshop

Student directed not-for-profit advocacy organization

Six issue-based campaigns◦ Among other things, NYPIRG chapter is a resource

which provides workshops addressing civic action, organizing, leadership, financial literacy, student housing/tenants rights and student loans

NYPIRG is…NYPIRG is…

Provide student loan debt history Review student loan types Explore payment plans Discuss options when money gets tight Identify loan forgiveness programs Discuss federal student loan legislation Free money? Free money!!

ObjectivesObjectives

Student loan debt is topping $1 trillion.

37 million Americans hold outstanding student loan debt◦2.7 million of those debt holders are New Yorkers

Nationally, the average amount of student loan debt for the Class of 2011 was $26,600. ◦New York graduates carrying student loan debt had an average debt of $27,310.

On this campus the average student graduating with debt owes…

Student Loan Debt HistoryStudent Loan Debt History

Among all bachelor's degree recipients, median debt was:◦ $7,960 at public four-year institutions◦ $17,040 at private not-for-profit four-year

institutions◦ 31,190 at for-profit institutions.

Pell Grant recipients are much more likely to borrow and to borrow higher sums

24,800 NYS borrowers defaulted on their student loans or were more than nine months delinquent on their payments between 2009 and 2012.

Recent federal student loan interest rate debates have brought more attention to the issue.

Student Loan Debt History, contStudent Loan Debt History, cont’’dd

Some students had to change lenders Investors are buying less loans Lenders are offering fewer “deals” Some colleges are switching from the

Federal Family Education Loan Program (FFELP) to the Federal Direct Student Loan Program (FDSLP)

Private loans are harder to get

How the Credit Crisis How the Credit Crisis isis Affecting Affecting Student LoansStudent Loans

Students can still get federal loans, regardless of their financial need

Interest rates and terms on all federal loans remain the same once you take them out

How the Credit Crisis How the Credit Crisis is is notnot Affecting Student Affecting Student

LoansLoans

Perkins LoanStafford Loan

PLUS LoanPrivate Loans

Types of Student LoansTypes of Student Loans

No credit check Loans for students with “exceptional need” For undergraduate and graduate students College acts as the lender Must submit FAFSA (Free Application for

Federal Student Aid) and complete a Perkings promissory note

Subsidized Loan forgiveness for certain occupations

Perkins Loan: BasicsPerkins Loan: Basics

5% interest rate No fees 10-year repayment period 9-month grace period

Perkins Loan: TermsPerkins Loan: Terms

Annual Perkins Loan Borrowing Limits

Undergrads Grads

$5,500 per year $8,000 per year

Aggregate Perkins Loan Borrowing Limits

UndergraduatesGraduate including

undergraduate loans

$27,500 $60,000

No credit check No income requirement For undergrad, grad/professional, med

students Subsidized and/or unsubsidized Borrow directly from federal government Must submit FAFSA Loan forgiveness for certain occupations

Stafford Loan: BasicsStafford Loan: Basics

Academic Year Subsidized Rates Unsubsidized Rates Graduate Rates

2011-12 3.40% 6.80% 6.80%

2012-13 3.40% 6.80% 6.80%

2013-14* 3.86% 3.86% 5.41%

Current Stafford Loan interest rates in effect from 07/01/2013 to 06/30/2014 

*These rates have been updated to reflect the new student loan interest rate legislation that went into effect on August 9, 2013.

Stafford Loan Interest Stafford Loan Interest RatesRates

Interest rates this year are 3.86% 1% origination fee 10 years repayment period 6-month grace period

Stafford Loan: TermsStafford Loan: Terms

For parents and grad/professional students

Requires credit check Unsubsidized Borrow directly from U.S. Department of

Education Must submit a FASFA form, promissory

note and grads much complete counseling

PLUS Loan: BasicsPLUS Loan: Basics

PLUS Loan: TermsPLUS Loan: Terms Fixed 6.41% interest rate 4.2% fees Max loan amount is cost of attendance minus

other financial aid received Repayment begins 60 days after disbursement

◦ Can make interest only payments◦ Grad borrowers can defer while in school,

but must start paying back as soon as they leave (no grace period)

◦ Parents can defer while child is in school◦ Parents get a 6-month grace period

Offered by banks and other private lenders Not secured by the federal government May be more expensive, higher interest Subject to credit approval Often need a cosigner Marketed aggressively Harder to get in current economy

*Avoid private loans if you can

Private Loan: BasicsPrivate Loan: Basics

Private student loans tend to have worse terms than federally secured student loans

Federal Loans Private Loans

Interest Rates

Fixed RatesPerkins 5%Stafford 3.86%PLUS 6.41%

Variable RatesUp to 16.5%

FeesPerkins 0%Stafford 1%PLUS 4%

Often 6% or higher

Payment PlansStandard 10 year, extended, graduated, income-based

Vary from 10 to 30 years

Forgiveness Options

Many None

Deferment and Forbearance options

Standardized and established in federal law

Vary by lender and decided by the lender

Look it up in the National Student Loan Data System

Website: www.nslds.ed.gov Ask the financial aid office

Which loans do you have?Which loans do you have?

ConsolidationPayment Plans

DiscountsRecent Student Loan Debt-Relief

Managing Student Loan DebtManaging Student Loan Debt

Consolidation BasicsConsolidation Basics

Refinancing several student loans you have to pay off together.

Previous interest rates get averaged for new repayment rates.

*Federal Direct Loan Consolidation program www.loanconsolidation.ed.gov

What are Special Direct Consolidation Loans?

Who is eligible for a Special Direct Consolidation Loan?

What federal student loans are eligible for the Special Direct Consolidation Loan program?

Special Direct Consolidation LoansSpecial Direct Consolidation LoansOnly offered between January to June 2012Only offered between January to June 2012

Benefits◦ Interest rate reduction◦ Repayment term will not be changed◦ Credit for previous IBR Payments◦ Eligibility for loan forgiveness under the Public

Service Loan Forgiveness (PSLF) Program

Special Direct Consolidation LoansSpecial Direct Consolidation Loans

Traditional Direct Consolidation Loan

Special Direct Consolidation Loan

Repayment Term The repayment term for the loan starts over, giving students longer to repay their loan. A longer repayment term may result in lower monthly payments but will ultimately increase the amount the borrower will pay over the life of the loan since more interest will accrue during a longer repayment period.

Each loan that is consolidated retains its original repayment term. As a result, borrowers will pay less interest over the life of the loan than they would under the traditional consolidation program.

Interest Rate A fixed rate based on the weighted average of the interest rates of the loans being consolidated- rounded up to the nearest one-eighth of 1%, not to exceed 8.25%.

A fixed rate (not to exceed 8.25%) after applying the 0.25% interest rate reduction to the FFEL loans being consolidated.

Electronic Debit Benefit

Eligible for a 0.25% interest rate reduction if the loan is repaid through the Department’s automatic debit system.

Eligible for an additional 0.25% interest rate reduction if the loan is repaid through the Department’s automatic debit system.

How are Special Direct Consolidation Loans How are Special Direct Consolidation Loans different than traditional Direct different than traditional Direct

Consolidation Loans? Consolidation Loans?

ConsolidationBenefits

ConsolidationDrawbacks

Single monthly payment Pay more over the life of the loan

Often a smaller payment May cut short your grace period

Access to alternate payment plansPerkins borrowers lose some benefits

Borrowers with pre-2006 loans can switch from variable to fixed interest

FFELP Stafford or PLUS borrowers may lose “discounts”

FFELP PLUS borrowers save .25% interest

Resets the clock to apply for deferment and forbearance

Payment PlansPayment PlansStandard

GraduatedExtended

Payments Based on Income

Comparing Payment Plans

Payments Term Pro Con

Standard

Fixed payments, no less than $50

10 yearsLowest overall cost

Big monthly bill

Graduated

Start small, increases every 2 years

10 yearsVery affordableat start

Last payments are much larger than Standard plan

Extended

Fixed or graduated

25 yearsSmaller payments

Highest overall cost

Income Sensitive For FFELP borrowers Pay fixed percentage of monthly income Reapply every year Length of loan is 10 years

Income Based For FDLP and FFELP borrowers More generous formula determines monthly payments Enroll once Remaining balance forgiven after 25 years

Income Contingent For FDLP borrowers Formula determines monthly payments Enroll once Remaining balance forgiven after 25 years

Payment Plans Based on IncomePayment Plans Based on Income

What is income-based repayment? What federal student loans are eligible

to be repaid under an IBR plan? Who is eligible for IBR? How do borrowers apply for IBR?

Income-Based Repayment PlanIncome-Based Repayment Plan

What are the benefits of IBR?◦ Pay as you earn ◦ Interest payment benefit ◦ 25-year cancellation ◦ 10-year public service loan forgiveness

Income-Based Repayment PlanIncome-Based Repayment Plan

Comparing Payment Plan Costs for a $35,000 Loan at 6.0%

Plan TermInitial Monthly

Payment

Total Cost of Loan (Interest + Payments)

Standard – 10 years $ 388.57 $ 46,628.40

Graduated – 10 years $ 263.25 $ 48,882.37

Extended Fixed – 30 yearsGraduated -30 years

$ 225.51$ 175.00

$ 67,653.00$ 73,601.05

Income Contingent(Initial salary of $25,000) – 18 years*

$ 243.33 $ 57,903.45

Obama's Student Loan Debt-Relief Plan◦ Caps loan payment at 10% (from 15%) starting

July 12’◦ Forgives balances after 20 years (from 25 years)

Benefits◦ Pay as you earn and interest payment benefit◦ 20-Year balance forgiveness◦ 10-Year public service forgiveness

What it doesn’t cover◦ Anyone who took out loans before 2008 (who

won’t be taking out more loans starting now).◦ Purely private loans and defaulted loans◦ You may pay more interest

Recent Student Loan Debt-Recent Student Loan Debt-ReliefRelief

Stay Out of DefaultDeferment

ForbearanceOther Ways to Avoid Default

Income-Based Repayment Plan

When Student Loan DebtWhen Student Loan DebtSeems UnmanageableSeems Unmanageable

Delinquency Fall behind on payments Calls and notices from

lender Late fees Lender reports missed

payments to credit bureaus

Default 9 months of missed

payments Entire loan becomes due Lender uses “aggressive”

collections methods

Delinquency and DefaultDelinquency and Default

Collection agencies Lawsuits Paychecks may be garnished Income tax refunds seized Ineligible for state and federal aid Credit damaged Filing for bankruptcy will not effect a

loan in default

Effects of DefaultingEffects of Defaulting

Temporary break from payments for:◦ Enrolled college students◦ Unemployed borrowers◦ Borrowers facing economic hardship ◦ Peace Corps enrollees◦ Active military personnel

No interest accrues on subsidized loans

DefermentDeferment

For borrowers who don't qualify for a deferment but need a break

Lasts up to 12 months Renewed for up to 3 years You pay the interest

ForbearanceForbearance

Borrow as little as possible Income Based Payment Plans Get help making a budget

Other Ways to Avoid DefaultOther Ways to Avoid Default

Forgive all or part of your student loan Encourage high-needs or public-service

work Perkins loan has many such opportunities For detailed information go to:

http://www.finaid.org/loans/publicservice.phtml

Loan Forgiveness ProgramsLoan Forgiveness Programs

Student Loan Forgiveness Programs

Field Loan Benefit

Child Care Provider Stafford

20% forgiven after each of 1st & 2nd year, 30% after each of 3rd and 4th year

Law Enforcement or Corrections Officer

Perkins 100% forgiven

Nurse or Medical Technician

Perkins 100% forgiven

Teacher Level IStafford, Federal Consolidated Loans

Up to $5,000

NYS Licensed Social Worker

Stafford, Federal Consolidated Loans

$26,000

Public Service CareersFDLP Stafford, PLUS, Federal Consolidated Loans

100% Forgiven

Federal Student Aid, an office of the U.S. Department of Education, ensures that all eligible individuals can benefit from federally funded financial assistance for education beyond high school.

Tuition Assistance Program◦ A New York State funded grant program that helps pay the tuition of eligible full-

time and part-time students. If you receive a TAP award, the money comes directly to the college for payment of your tuition.

New York State Higher Education Services Corporation◦ http://www.hesc.com/content.nsf

Foundation Center◦ www.foundationcenter.org◦ CUNY CAPS (Counseling Assistantship Program)◦ http://www.cuny.edu/employment/student-jobs/jobs/counsel-assist-prog.html

SUNY Assistantships◦ Student receives a stipend and/or tuition scholarship; each SUNY school varies,

reach out to Financial Aid Office

Free Money? Free Money? Think Aid/Grants/Work Study FirstThink Aid/Grants/Work Study First

For Info & Research www.studentdebtalert.org www.projectonstudentdebt.org http://college-insight.org http://edlabor.house.gov http://studentaid.ed.gov/

PORTALSWebApp/students/english/specialconsolidation.jsp

http://studentaid.ed.gov/students/publications/student_guide/2010-2011/english/typesofFSA_loans_2.htm

http://www.theatlantic.com/business/archive/2011/10/who-qualifies-for-obamas-10-student-loan-payment-cap/247470/

http://www.csmonitor.com/USA/Politics/2011/1025/Obama-s-student-loan-debt-relief-plan-too-good-to-be-true

For Help with Your Loans

www.collegefinancecenter.org

www.studentaid.ed.gov www.finaid.org www.mappingyourfuture.org www.obudsman.ed.gov www.oag.state.ny.us www.nslds.ed.gov http://www.finaid.org/loans/

forgiveness.phtml

ResourcesResources