student loans 201: repayment options
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Student Loans 201: Repayment Options. Revised 9/2013. Agenda. Student Loans: FFELP vs. Direct. Student Loans. Student Loans: NSLDS. Retrieve your student loan data from the National Student Loan Data System. nslds.ed.gov. Student Loans: Servicers. LOAN SERVICER. - PowerPoint PPT PresentationTRANSCRIPT
Student Loans 201: Repayment OptionsRevised 9/2013
Agenda
Review: Student Loan Basics
Rights and Responsibilities
Repayment Options
Contingency Options
Student Loans: FFELP vs. Direct
Before July 1st, 2010: After July 1st, 2010 (today)
Federal Family Education Loan Program (FFELP) Federal Direct Student Loans:
Higher interest rates on PLUS loans Different repayment options
Must be repaid, with interest Origination fee No co-signer required Multiple payment options Not discharged in bankruptcy
Student Loans
Types of Student Loans Perkins Subsidized Stafford Unsubsidized
Stafford PLUS
Availability Need-Based Need-Based Everyone Everyone, Credit Check Required
Interest 5% fixed 3.86% fixed 3.86% fixed 6.41% fixed
Subsidized? Yes Yes (while in school) No No
$/year Maximum
$5,500 (undergrad)$8,000 (graduate)
Varies depending on year in school
Varies depending on year in school
Gap in Financial Aid
Total Maximum $27,000 $23,000
$31,000 (undergrad)$138,000 (grad)
Gap for 4 years
Grace Period 9 months 6 months 6 months None, repayment immediate
OptionsLoan Forgiveness or cancellation for certain careers
Unavailable for grad students. Interest not subsidized during grace period
Loan Forgiveness available for certain careers
For parents and graduate students. Repayment begins immediately.
Student Loans: NSLDS
Retrieve your student loan data from the National Student Loan Data System.
nslds.ed.gov
Lists all loans
you’ve had
Indicates which
types of loan
Shows principal
and interest
amounts
Identifies loan
servicer
Student Loans: Servicers
LOAN SERVICER
What does a loan servicer do?
Billing
Repayment Options
Loan Consolidation
Keep your contact info up to date with your loan servicer and make sure to monitor communication so you don’t miss important updates about your loans.
Student Loans: Loan Servicer vs. Financial Aid Office
Who do I contact for what?
For loans disbursed in a past school year, contact yourLOAN SERVICER if you:
• Need help making a loan payment
• Change your name or contact info
• Have billing questions• Have questions about loan
terms, features or repayment options
• Graduate• Drop below half-time
enrollment• Stop going to school• Transfer to another school
For loans disbursed in the current or upcoming year,
contact yourFINANCIAL AID OFFICE if
you:• Have questions about loan
status• Want to cancel a loan
within 120 days of disbursement
• Have questions about loan disbursement amounts or timing
Sam takes out a Federal Direct Loan from the Dept of Ed
for college
Sam graduates from college
After the 6 month grace period, Sam enters repayment
with the Dept of Ed
The Dept of Ed transfers the loan servicing duties to
Nelnet (a loan servicer)
Nelnet now services Sam’s loan. Sam is
notified of the transfer.
Sam will now send payments ,
questions and updates to Nelnet.
Student Loans: Servicers
The Dept of Ed may or may not assign you a loan servicer. It could also happen multiple times.
Remember that repayment can also be triggered if you stop going to school or drop below ½-time credits
Agenda
Review: Student Loan Basics
Rights and Responsibilities
Repayment Options
Contingency Options
Rights
Copies of your promissory notes Loan disbursement notification Loan disclosure statement Repayment schedule Grace period Deferment or forbearance Prepay without penalty Notification if loan is sold or
transferred (FFELP) Consolidate loans Notification when loan is paid in
full
Responsibilities
Pay back your loan in full Stay informed about:
Loan balances Payment amounts
Notify your loan servicer: Name or contact info changes Graduation, leaving school,
transferring to another school or dropping below half-time enrollment
Trouble with loan payments
Agenda
Review: Student Loan Basics
Rights and Responsibilities
Repayment Options
Contingency Options
Responsibilities: Repayment Terms
RepaymentThe process of paying back your loans or the period in which you
pay back your loans. Different options may be available to fit your situation.
Consolidation Creates one large loan with a potentially longer term out of your smaller loans.
Deferment Suspends repayment for in-school periods, periods of military service, and economic hardship.
Forbearance Suspends repayment due to financial difficulty.
Discharge Eliminates any further repayment.
Forgiveness Reduces any remaining repayment.
Default When you fail to make payments on your loan as scheduled according to your promissory note.
Repayment: Overview
Plan Standard Graduated Income-Contingent
Extended Income-Based
Pay As You Earn
Income-Sensitive
Term 10-year term
10-year term
Up to 25-year term
Up to 25-year term
Up to 25-year term
Up to 20-year term
10+ year term
Minimum Payment
Minimum of at least $50/month
Interest payments ($25 minimum), gradually increasing over time
Minimum of $5/month. Monthly amount depends on family size, adjusted gross income, loan debt
Either fixed or graduated payments.
Payments depend on family size, adjusted gross income, loan debt
Caps monthly payments at 10% of monthly income.
Payments between 4-25% of gross monthly income; minimum payment must cover interest
Additional Info
“Cheapest” for borrowers
Later payments cannot be more than 3x earlier payments
Borrower must reapply each year
For borrowers with over $30000 in loans
Loans must present “partial financial hardship”
For those who were new borrowers as of 10/1/07 and received loans after 10/1/11.
Borrower must reapply annually.
Repayment: Overview
Plan Standard Graduated Income-Contingent
Extended Income-Based
Pay As You Earn
Income-Sensitive
Term 10-year term
10-year term
Up to 25-year term
Up to 25-year term
Up to 25-year term
Up to 20-year term
10+ year term
Minimum Payment
Minimum of at least $50/month
Interest payments ($25 minimum), gradually increasing over time
Minimum of $5/month. Monthly amount depends on family size, adjusted gross income, loan debt
Either fixed or graduated payments.
Payments depend on family size, adjusted gross income, loan debt
Caps monthly payments at 10% of monthly income.
Payments between 4-25% of gross monthly income; minimum payment must cover interest
Additional Info
“Cheapest” for borrowers
Later payments cannot be more than 3x earlier payments
Borrower must reapply each year
For borrowers with over $30000 in loans
Loans must present “partial financial hardship”
For those who were new borrowers as of 10/1/07 and received loans after 10/1/11.
Borrower must reapply annually.
DIRECT LOAN repayment options
Repayment: Overview
Plan Standard Graduated Income-Contingent
Extended Income-Based
Pay As You Earn
Income-Sensitive
Term 10-year term
10-year term
Up to 25-year term
Up to 25-year term
Up to 25-year term
Up to 20-year term
10+ year term
Minimum Payment
Minimum of at least $50/month
Interest payments ($25 minimum), gradually increasing over time
Minimum of $5/month. Monthly amount depends on family size, adjusted gross income, loan debt
Either fixed or graduated payments.
Payments depend on family size, adjusted gross income, loan debt
Caps monthly payments at 10% of monthly income.
Payments between 4-25% of gross monthly income; minimum payment must cover interest
Additional Info
“Cheapest” for borrowers
Later payments cannot be more than 3x earlier payments
Borrower must reapply each year
For borrowers with over $30000 in loans
Loans must present “partial financial hardship”
For those who were new borrowers as of 10/1/07 and received loans after 10/1/11.
Borrower must reapply annually.
FFEL repayment options
Repayment: $40,000 Loan
Plan Standard Graduated Income-Contingent
Extended Income-Based
Pay As You Earn
Income-Sensitive
Monthly Payment
$402.32 $224.79-$674.37
$305.35-$377.34
$208.05 $290.56-$402.32
$193.71--$332.53
$333.33 -- $438.09
Loan Term 10 years 10 years 12.6 years 25 years 11.9 years 18.8 years 10 years
Total Paid $48,278.93 $50,322.35 $50,933.73 $62,416.49 $50,449.49 $57,687.38 $48,799.30
Interest Paid
$8,278.93 $10,322.35 $10,933.73 $22,416.49 $10,449.49 $17,687.38 $8,799.30
Repayment: Standard
Fixed monthly payments
Minimum repayment amount of $50/month
Maximum 10-year repayment period
Borrower pays least interest
Loan Amount
$40,000
Term 10 years120 months
Monthly Payment
$402.32
Total Paid $48,278.93
** Assumes 3.86% interest rate
Repayment: Graduated
Payments increase over time
Minimum repayment amount of $25/month
Repayment period: 10-30 years
Loan term depends on amount borrowed
Loan Amount $40,000
Term 10 years120 months
Initial Monthly Payment
$224.79
Final Monthly Payment
$674.37
Total Paid $50,322.35** Assumes 3.86% interest rate
Repayment: Income-Contingent
Payments based on income, family size, loan debt
Reapply annually Minimum repayment
amount of $5/month Loan balance
discharged after 25 years
Parent PLUS and FFELP ineligible
Loan Amount $40,000
Term 12.6 years152 months
Initial Monthly Payment
$305.35
Final Monthly Payment
$377.34
Total Paid $50,933.73
Repayment: Extended
Borrowers with over $30K in student loans
25-year maximum repayment term
Either fixed or graduated payments
Loan Amount
$40,000
Term 25 years300 months
Monthly Payment
$208.05
Total Paid $62,416.49
** Assumes 3.86% interest rate
Repayment: Income-Based
Payments based on income, family size, loan debt
Parent PLUS and Perkins ineligible
Borrower applies annually Must repay all eligible
loans under this plan Loan balance discharged
after 25 years
Loan Amount $40,000
Term 11.9 years143 months
Initial Monthly Payment
$290.56
Final Monthly Payment
$402.32
Total Paid $50,449.49
Repayment: Pay As You Earn
Available for those considered “new borrowers” as of 10/1/07 and received a loan disbursement on or after 10/1/11
Payments capped at 10% of discretionary monthly income
Borrower must have a partial financial hardship to qualify
Parent PLUS and Perkins ineligible Borrower applies annually Loan balance discharged after 20
years
Loan Amount $40,000
Term 18.8 years226 months
Initial Monthly Payment
$193.71
Final Monthly Payment
$332.53
Total Paid $57,687.38
Repayment: Income-Sensitive
FFELP borrowers only Payments between 4-
25% of gross monthly income
Minimum payment must cover interest
Repayment period may be over 10 years
Borrower must reapply annually
Loan Amount $40,000
Term 10 years120 months
Monthly Payment
$333.33(3 years)
Monthly Payment
$438.09(7 years)
Total Paid $48,799.30
Repayment: $40,000 Loan
Plan Standard Graduated Income-Contingent
Extended Income-Based
Pay As You Earn
Income-Sensitive
Monthly Payment
$402.32 $224.79-$674.37
$305.35-$377.34
$208.05 $290.56-$402.32
$193.71--$332.53
$333.33 -- $438.09
Loan Term 10 years 10 years 12.6 years 25 years 11.9 years 18.8 years 10 years
Total Paid $48,278.93 $50,322.35 $50,933.73 $62,416.49 $50,449.49 $57,687.38 $48,799.30
Interest Paid
$8,278.93 $10,322.35 $10,933.73 $22,416.49 $10,449.49 $17,687.38 $8,799.30
Repayment: Pick a Plan
1. Contact your servicer to get information on available repayment plans.
2. Use repayment calculators to see what you might have to pay with each plan.
3. Compare the planes to determine which plan fits you best.
Which plan do I pick?
You can switch plans if you
need to!
Repayment: Consolidation
Direct (current) Consolidates all federal
student loans into one big loan
Interest rate the “weighted average” of all loans
Same repayment options as Federal Direct
May reduce monthly payments
Consolidating PLUS loans negates eligibility for income-based repayment plans
Consolidation may lower
monthly loan payments.
Repayment: Student Loan Interest Deduction
Up to $2500 of student loan interest
Considered an “adjustment” on federal taxes
Can claim only if you Are not a dependent Filing status is not
married filing separately
Agenda
Review: Student Loan Basics
Rights and Responsibilities
Repayment Options
Contingency Options
Contingency: Delinquency & Default
Default Being delinquent for 9 months Entire loan balance may be
demanded Wages and tax refunds can be
garnished Will have to pay late fees and
collection costs Negatively affects credit rating
for 7 years Denied future financial aid
Delinquency Being late making payments
or missing payments Begins the first day after the
payment is missed May negatively affect
borrower’s credit rating Allows the lender to charge
interest on unpaid interest Lender may charge late fees
Contingency: Options
DefermentPostpones repayment. Interest subsidy resumes on subsidized portion. Requested by the borrower while in school, on active military duty, or experiencing temporary financial difficulties.
Forbearance Postpones repayment due to economic hardship. Interest accrues. Requested by the borrower.
Forgiveness Portions of your debt are erased (forgiven) if the borrower fulfills certain conditions.
Discharge Eliminates any further repayment under very limited conditions.
Contingency: Deferment Programs
** Unlimited duration while continuing to serve on active duty. Extended periods of deferment are available to borrowers after demobilization.
Type of Deferment* Time Limit
In-school at least half-time Unlimited
Graduate fellowship program Unlimited
Disability rehabilitation training Unlimited
Military service Unlimited**
Unemployment Up to three years
Economic hardship Up to three years
Post-Active Duty Student 13 months
Contingency: Unlimited Deferment Options
Type of Deferment
In-School Graduate Fellowship Program
Rehabilitation Training
Military Service
Period Unlimited Unlimited Unlimited Unlimited
Conditions Enrolled at least half-time;undergraduate or graduate student
In graduate fellowship program of at least six months
In training program licensed or approved by state officials
Called to active duty during war, military operations, or natl emergency
Requirements Program must require periodic reports from fellow; program official must certify program dates
Requires substantial commitment (cannot work full-time); specifies end date
Granted on borrower’s request
Other Continues during summer; extended through anticipated graduation date
Can be used for course of study at foreign university
Borrower can be receiving or scheduled to receive services
Limits on Direct Loan interest accrual; deferment can be extended for up to 30 days after return
Contingency: Limited Deferment Options
Type of Deferment
Unemployment Economic Hardship Post-Active Duty Student
Period 6 months to 3 years Up to three years 13 months
Conditions Unemployed or employed less than full-time (30 hours/week); granted six months at a time
Receiving state or federal public assistance benefits OR income at 150% poverty line; a Peace Corps volunteer; monthly payments equal to or larger than 20% of monthly income
For students who are called to active duty while in school or six months post-graduation
Requirements Receiving unemployment benefits or registered with employment agency; ends once employed full-time or after three years
Granted one year at a time
Granted for 13 months after return from active duty; Expires on return to school OR after 13 months
Contingency: Forbearance
Temporary reduction or suspension of payments
Unpaid interest capitalized Mandatory
National Service Applying for loan forgiveness Teaching in areas that qualify
you for loan forgiveness Payments at or over 20% of
monthly income Up to three years
TO DO:
Contact your loan servicer about your deferment or forbearance eligibility.
Follow your servicer’s instructions to apply for deferment or forbearance.
Make scheduled payments until your deferment/forbearance status is confirmed.
Contingency: Forgiveness
Program Condition
Teacher
Up to $5,000 in Stafford Loans after five consecutive years teaching in elementary or secondary school serving low-income families.Up to $17,500 in Stafford Loans after five consecutive years in a school serving low-income families as a highly qualified full-time secondary school math or science teacher or as a highly qualified special education teacher.
National Service $5550 scholarship or loan forgiveness per 12-month AmeriCorps term.70% of Perkins loan cancelled for Peace Corps service.
Perkins Loan Cancellation
Up to 100% of loan cancelled for five years of employment in specific positions, including teaching in low-income schools, nursing, and law enforcement.
Public ServiceAfter 120 on-time qualified monthly payments while employed by the federal or state government, or by a 501c3 nonprofit. Loan must be in repayment status. Amount forgiven is not taxable.
Income-Based, Income-Contingent or Pay As You Earn
After 25 years of making on-time payments in these programs any remaining balance will be forgiven. Amount forgiven is taxable under current law. Does not apply to loans currently in default status. For Pay As You Earn, the balance is forgiven after 20 years.
Contingency: Forgiveness
Borrowers must repay their loans using a qualified repayment plan
Standard Income-contingent Income-based Pay As You Earn
The Standard Consolidation Plan is NOT an eligible repayment plan for ANY type of loan forgiveness
Borrowers who consolidate their loans must request an income-driven repayment plan for those loans
Contingency: Discharge
DisabilityInability to earn sufficient income due to illness or injury expected to continue indefinitely or result in death. Has a three-year conditional period.
DeathLoan cancelled if family member or representative provides original or certified copy of death certificate to lender
School Closure Student unable to complete program due to closure.
False Certification
Identity theft OR school falsifies eligibility on loan application.
Contingency: In Delinquency
SO NOW WHAT? Contact the servicer Work out a payment
schedule with the servicer Ask servicer for a
statement showing when payments were made
Direct Loans: contact the Student Loan Ombudsman
FFELP: contact your guarantor
Contingency: In Default
Consolidation Borrower eligible for
new loans, grants, deferments
No longer listed as in default on credit records, but default will remain on credit history for seven years
Can choose income-based or income-contingent repayment
Rehabilitation Have to make nine on-
time payments in ten months
Loan moved from default status after 9 months
Default moved off credit record
Eligible for new loans and grants
Summary
You have many different tools and repayment options
Pick a repayment plan that works for your budget Ask for help if you need it Know your borrower rights and responsibilities Stay in contact with your loan servicer
Resources
Studentaid.gov – Federal Student Aid Website Student Loan Ombudsman FAFSA Types of Aid Loans Repayment Plans
Finaid.org Studentloanborrowerassistance.org IRS.gov Your loan servicer
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