Exit Counseling
University of Notre Dame
Topics
 Understand Your Commitment
 Repayment
– Repayment Plans
– Consolidation
 Repayment Relief
 Consequences of Late Payments
 Money Management
 Tax Benefits
 Getting Help
Understand Your Commitment
 Read all communication,
forms, and documents related
to your student loans very
carefully.
 Regularly check
www.nslds.ed.gov to review
your federal student loan
information.
 Understand the terms of your
student loan.
 Manage your money by
developing a monthly budget.
 Contact your loan servicer if
you have questions about
your loan.
Understand Your Commitment
Loan Types
 Federal loans:
– Direct Loan (DL) Programs
 Subsidized or unsubsidized loans
 Grad PLUS loan
 Consolidation loan
– Federal Family Education Loan Program (FFELP)
 FFELP ended on June 30, 2010, so only loans borrowed on or
before that date may be FFELP loans.
 Subsidized or unsubsidized loans
 Grad PLUS loan
 Consolidation loan
– Other federal loans
 Perkins loan
 Health-related program loan
 Non-federal education loans:
– Also known as “private” or “alternative” loans
Understand Your Commitment
Master Promissory Note
 Master Promissory Note (MPN):
– Must be signed in order to receive loan funds
– Legally binding document
– Specifies your rights and responsibilities
 MPN multi-year feature:
– Sign once
– You can “opt out” and sign a new MPN for each federal student
loan
– Some schools do not use this feature
 Borrower’s Rights and Responsibilities Statement
– Expect a “Plain Language Disclosure” for any subsequent loans
Understand Your Commitment
Master Promissory Note
 When you signed the MPN, you promised to repay your
loan, even if you:
– don’t complete your program of study or within the regular time
frame for completion.
– are unable to locate employment after completing your program.
– are dissatisfied with or don’t receive services purchased from the
school.
– don’t receive payment coupons or repayment notifications from
your loan servicer.
Repayment
Grace and Post-Enrollment Deferment Periods
Grace Period
Subsidized and
 Single six-month period in which no payment is
Unsubsidized Loans
expected
 First loan payment due within 30-45 days after
grace period ends
 Subsidized loans disbursed prior to July 1,
2012 and after July 1, 2014 receive an interest
subsidy during the grace period
Post-Enrollment Deferment
Grad PLUS Loans
 Optional six-month grace period after borrower
ceases to be enrolled at least half time
No penalty for early repayment.
Repayment
Method of Payment
 Online payments
– Make payments online but the payment is manually scheduled each month
– Greater flexibility for payment date or sending extra funds
 Auto-debit
– May qualify for a 0.25 percent interest rate reduction when using this
payment method
– Predetermined amount of funding is extracted from your account each month
on a pre-set date
– Some may be less likely to miss a payment since it is pre-authorized for
withdrawal each month
 Coupon books
– No longer common
– Booklets contain a tear-off coupon to submit with payment each month
Repayment
Plans
 Use a loan calculator to compare repayment options:
– http://calculator.usafunds.org/
– https://studentloans.gov/myDirectLoan/mobile/repayment/rep
aymentEstimator.action
 As a student loan borrower you may:
– prepay your student loans without penalty.
– use an accelerated repayment option resulting in less interest.
– change repayment plans to accommodate your situation.
Repayment
Plans
 Standard
 Graduated
 Extended
 Income-related plans:
– Income-based repayment
– Income-sensitive (FFELP
only)
– Income-contingent (DL
only)
– Pay As You Earn (DL only)
Repayment
Plans
Standard Repayment
 Default repayment option
 If you do not contact your servicer and set up another repayment
plan, you will be expected to make payments under this option.
 Payments of equal monthly installments
 Repayment period cannot exceed 10 years
 Minimum payment of $50
Repayment
Plans
 Example of a standard repayment schedule:
Unsubsidized Loan (6.8 percent)
Loan Amount
Payment Amount
Number of Months
$25,000
$288
120
$50,000
$575
120
Grad PLUS Loan (7.9 percent)
Loan Amount
Payment Amount
Number of Months
$25,000
$302
120
$50,000
$604
120
Source: http://calculator.usafunds.org/
Repayment
Plans
Graduated Repayment
 Payments increase over time
 Repayment term cannot exceed 10 years
 Monthly payment amount:
– Must cover accruing interest
– Will not have a single payment more than three times the amount
of another
Repayment
Plans
 Example of a graduated repayment schedule:
Unsubsidized Loan (6.8 percent)
Loan Amount
Payment Amount
Number of Months
$25,000
$198
24 (Years 1 and 2)
$240
24 (Years 3 and 4)
$292
24 (Years 5 and 6)
$355
24 (Years 7 and 8)
$432
24 (Years 9 and 10)
Unsubsidized Loan (6.8 percent)
Loan Amount
Payment Amount
Number of Months
$50,000
$395
24 (Years 1 and 2)
$480
24 (Years 3 and 4)
$584
24 (Years 5 and 6)
$710
24 (Years 7 and 8)
$863
24 (Years 9 and 10)
Source: http://calculator.usafunds.org/
Repayment Plans
Graduated Repayment
 Example of a graduated repayment schedule:
Grad PLUS Loan (7.9 percent)
Loan Amount
Payment Amount
Number of Months
$50,000
$422
24 (Years 1 and 2)
$511
24 (Years 3 and 4)
$618
24 (Years 5 and 6)
$749
24 (Years 7 and 8)
$906
24 (Years 9 and 10)
Source: http://calculator.usafunds.org/
Repayment
Plans
Extended Repayment
 Borrowers with $30,000 or more in FFELP or DL student
loans.
– Totals from FFELP and DL may not be combined to equal
$30,000.
 Maximum repayment period of 25 years
 Length of repayment is tied to the amount borrowed
 Extends the repayment time without consolidating
Repayment
Plans
 Example of an extended repayment schedule:
Unsubsidized Loan (6.8 percent)
Loan Amount
Payment Amount
Number of Months
$35,000
$243
300
$50,000
$347
300
Grad PLUS Loan (7.9 percent)
Loan Amount
Payment Amount
Number of Months
$35,000
$268
300
$50,000
$383
300
Source: http://calculator.usafunds.org/
Repayment
Plans
Income-Based Repayment (IBR)
 Partial financial hardship exists if annual payments
exceed a specified percentage of discretionary income:
– Borrowers prior to July 1, 2014: 15 percent.
– New borrowers on or after July 1, 2014: 10 percent.
 Payment amount may be reduced or eliminated.
 Remaining amounts may be forgiven for:
– borrowers prior to July 1, 2014: 300 qualifying payments over 25
years.
– new borrowers on or after July 1, 2014: 240 qualifying payments
over 20 years.
Repayment
Plans
Income-Sensitive Repayment – FFELP Loans
 Payments relate to FFELP borrower’s annual income.
 Repayment period may exceed 10 years, depending on
borrower’s income and amount borrowed.
 Borrowers must re-apply each year.
 The last date to borrow loans under the FFEL program
was June 30, 2010.
Repayment
Plans
Income-Contingent Repayment (ICR) – Direct Loans
 Payments relate to federal direct loan borrower’s annual
income and family size.
 Minimum payment of $5.
 Any remaining balance due after 25 years will be forgiven.
 Borrowers must re-apply each year.
Repayment
Plans
Pay As You Earn
 Partial financial hardship exists if annual payments
exceed discretionary income by 10 percent.
– Consistent with “new borrowers” under Income-Based Repayment
(IBR).
 Payment amount may be reduced or eliminated.
 Remaining amounts may be forgiven after 240 qualifying
payments over 20 years.
– Consistent with “new borrowers” under IBR.
 Income verification and household size must be provided
to your servicer each year to determine eligibility.
Repayment
Sample Payment Amounts
 Sample payment amounts under the Income-Based
Repayment (IBR), Pay As You Earn, and Income-Contingent
(ICR) plans
 Assumptions:
– Borrower is single without dependents with an annual pre-tax income
of $40,000. The borrower lives in one of the 48 contiguous states.
The calculations are based off of maximum interest rate of 8.25%
 Payments may vary based on your interest rate, household
size, annual income, etc.
Source: https://studentaid.ed.gov/sites/default/files/income-driven-repayment.pdf
Repayment
Consolidation
A new loan that pays off existing loans
and carries new terms.
 Eligible loans:
–
–
–
–
–
–
–
FFELP and Direct Subsidized and Unsubsidized loans
FFELP and Direct PLUS loans
Consolidation loans
Federal Perkins loans
Federal Nursing Student Loans
Health Professions Student Loans
Health Education Assistance Loans
Repayment
Consolidation
Advantages
 May simplify repayment by
combining payments into
one bill
 May allow for a longer
repayment period
 May allow for lower monthly
payments
 Interest rates may be lower,
particularly for variable
interest rate loans
Disadvantages
 Lengthening the repayment




period usually means you
make more payments and pay
more in interest over time
May lose borrower benefits
associated with original loans
May lose grace period
associated with loans
Cannot reverse consolidation
once it is complete
Interest rate may be slightly
higher, particularly for fixed
interest rate loans
Repayment
Consolidation: Maximum Repayment Periods
Sum of Consolidation Loans and
Other Education Debt
Maximum Term
Less than $7,500
10 years
$7,500 - $9,999.99
12 years
$10,000 - $19,999.99
15 years
$20,000 - $29,999.99
20 years
$40,000 - $59,999.99
25 years
$60,000 or more
30 years
Repayment
Consolidation: Interest Rates
 Fixed interest rate based on loans being consolidated.
– Weighted average, rounded up to nearest one-eighth of one
percent
– No longer capped at 8.25 percent, for new applications filed on or
after July 1, 2013
17
Repayment Relief
Direct Loans have repayment options to assist borrowers
who need help:
 Deferment
 Forbearance
 Cancellation
 Forgiveness
Repayment Relief
Deferment
 Postpone repayment for borrowers who qualify
 Entitlement for eligible borrowers
 Suspend payment of principal and interest:
– Interest subsidy resumes for qualifying subsidized loans
– Interest accrues on unsubsidized portion
 Some deferments must be updated at least annually
 Can apply retroactively
 Borrowers must request deferment
 Once repayment resumes, first payment usually due
within 60 days
Repayment Relief
Deferment Types
In-School
 Half-time enrollment
 Time limit: none
 Not working at least 30 hours per week in work
Unemployment
Economic
Hardship
that will last at least three moths
 Actively seeking employment
 Time limit: 36 months
 Financial difficulty making loan payments
 Time limit: 36 months
Repayment Relief
Deferment Types
Rehabilitation
Training
Graduate
Fellowship
 Participating in a qualifying vocational or
health-related rehabilitation program
 Time limit: none
 Participation in a full-time graduate fellowship
for at least six months
 Time limit: none
 Serving on active duty for other than training
Military Service
Post Active-Duty
Student
purposes
 Time limit: none
 Students enrolled at least half-time within six
months of activation
 Time limit: 13 months
Repayment Relief
Forbearance
 Generally granted at the discretion of the lender
 Forbearance may include any of following changes to
repayment agreement:
–
–
–
–
No monthly payment
Interest-only payments
Lower payment
Other arrangements
 Can be applied retroactively for up to 12 months
 Interest subsidy is not available during a forbearance
period regardless of loan type
 Any unpaid interest may be capitalized
 Lender required to inform borrower of status, obligations,
and associated costs
Repayment Relief
Forbearance Types
 Servicer believes borrower is willing but
Discretionary
Mandatory
Administrative
Mandatory
Administrative
unable to make payments
 Time limit: up to 12 months
 Internship/Residency  DoD repayment
 National service
 High debt
 Loan forgiveness
 Active duty
 Overdue payments under certain
circumstances
 Disaster, national emergency, or military
mobilization
 Processing periods
Repayment Relief
Cancellation, Discharge, and Forgiveness
 Death of borrower
– If the borrower dies, the government discharges the remaining
loan amount.
 School closure
– The government discharges loans when a student cannot
complete a program due to the school closing.
 False certification
– At the time of loan certification, the borrower must have been
unable to meet the legal requirements for employment in his/her
state of residence in the occupation for which the program of
study was intended because of age, a physical or mental
condition, or criminal record.
 Identity theft
– If the borrower can prove in court that an identity thief obtained a
loan in the borrower’s name, the loan may be cancelled.
Repayment Relief
Cancellation, Discharge, and Forgiveness (continued)
 Total and permanent disability
– Available when the borrower is unable to earn sufficient income due to
illness or injury expected to continue indefinitely or result in death.
 Limited bankruptcy
– If a court finds that repayment of student loan will cause undue hardship
to the borrower, cancellation may be available.
 Unpaid refund
– Failure to receive a valid student loan refund check may qualify the
borrower for discharge.
 Teacher loan forgiveness
– Loan forgiveness available up to $17,500, depending on the type of
teaching position.
 Public service loan forgiveness
– Remaining loan balance may be discharged after 10 years of qualifying
payments.
Consequences
Delinquency versus Default
 Delinquency means:
– Lender has not received
payment by the stated due
date
– Late charges may be
assessed
– Negative mark on your credit
record
Delinque
ncy
Consequences
Default
Default refers to no loan payments being made for 270
consecutive days or more. Some consequences of
defaulting on a federal student loan include:
 Lose eligibility for future federal financial aid
 Lose eligibility for flexible loan repayment options
 Adverse credit reports
 State-issued licenses can be withdrawn or denied
 Income tax refunds can be withheld
 Wages can be garnished
 Federal benefit payments can be confiscated
 Interest continues to accumulate
 Federal debt collection procedures, including fees and
fines
 Legal action
Budgeting
 Identify your financial goals.
 Develop a realistic monthly
budget.
 Pay your bills prior to the
due date.
 Keep accurate and
well-organized records.
 Save for the future.
https://www.mint.com
Money Management
What would you do with $780?
Latte
Days per week
Weekly cost
$3.00
Loan balance
$20,000
5
Repayment term
10 years
$15.00
Regular payment
amount
$230.16
x
x 52
Extra monthly
payment
$65.00
x 12
Yearly cost
Cost over 10 years
Source: www.finaid.org
$780
$7,800
Yearly cost
$780
Savings over 10
years
$2,543.59
Reduction in term
2.8 years
Tax Benefits
 There are a variety of tax credits, deductions and
savings plans available to assist with higher education
expenses:
–
–
–
–
American Opportunity Tax Credit
Hope and Lifetime Tax Credit
College Tuition and Fees Deduction
Student Loan Interest Deduction
 See www.irs.gov for more information
Getting Help
Difficult Situations
 If you cannot make a student loan payment, contact your
loan holder/servicer.
 If you have an unresolved federal student loan issue:
– Department of Education
Ombudsman:
 Phone: (877) 557-2575
 E-mail: fsaombudsmanoffice@ed.gov
 https://studentaid.ed.gov/repay-loans/disputes/prepare/contact-
ombudsman
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by providing and supporting financial and other valued services.