Exit Counseling
Agenda
w Understand Your Commitment.
w 150 Percent Subsidized Loan Limit.
w Repayment.
– Repayment Plans.
– Consolidation.
w Repayment Relief.
w Consequences.
w Money Management.
w Tax Benefits.
w Getting Help.
w Questions and Answers.
2
Understand Your Commitment
w Read all communication,
forms and documents
carefully.
w Understand the terms of
your student loan.
w Manage your money.
w Ask for help.
3
Understand Your Commitment
National Student Loan Data System
www.nslds.ed.gov.
4
Understand Your Commitment
Loan Types
w Federal loans:
– Federal Family Education Loan Program or Direct Loan Program.
w Subsidized or unsubsidized loans.
w Grad PLUS loan.
w Consolidation loan.
– Other federal loans.
w Perkins loan.
w Health-related program loan.
w Nonfederal education loans:
– Also known as “private” or “alternative” loans.
5
Understand Your Commitment
Master Promissory Note
w Master Promissory Note:
– Must be signed in order to receive loan funds.
– Legally binding document.
– Specifies your rights and responsibilities.
w MPN multiyear feature:
–
–
–
–
Sign once.
You can “opt out” and sign a new MPN for each loan.
Some schools do not use this feature.
May expire in certain cases.
w Borrower’s Rights and Responsibilities Statement.
– Expect a “Plain Language Disclosure” for any subsequent loans.
6
Understand Your Commitment
Master Promissory Note
w You promise to repay your loan, even if you:
– Don’t complete your program of study at all 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 notifications from your
loan servicer.
7
Agenda
w Understand Your Commitment.
w 150 Percent Subsidized Loan Limit.
w Repayment.
– Repayment Plans.
– Consolidation.
w Repayment Relief.
w Consequences.
w Money Management.
w Tax Benefits.
w Getting Help.
w Questions and Answers.
8
150 Percent Subsidized Loan Limit
w Limits Direct Subsidized loans for “first-time borrowers.”
– Limited to 150 percent of published length of student’s current
educational program.
w Definition of first-time borrower:
– No outstanding principal balance as of July 1, 2013.
– Repaid all prior loans before July 1, 2013, before borrowing again.
9
150 Percent Subsidized Loan Limit
Effect on Borrowers
u
Affected borrowers who reach or exceed the 150
percent limit may experience:
Loss of subsidy
on future loans
– They no longer qualify for
Direct Subsidized loans
beyond 150 percent of the
program length, unless
entering a longer program.
10
Loss of subsidy
on prior loans
– They no longer qualify for
interest subsidy on previously
obtained loans as of the date
attendance begins after
reaching the limit.
– Once interest subsidy is lost, it
cannot be regained.
– Borrower becomes responsible
for interest that accrues.
– Unpaid interest is capitalized.
150 Percent Subsidized Loan Limit
Definitions
Maximum Eligibility
Period
Subsidized Usage
Period
Remaining Eligibility
Period
Program length
x 150 percent
= Maximum Eligibility Period
Days in loan period
Days in academic year
Maximum Eligibility Period
– Subsidized Loan Eligibility Used
= Remaining Eligibility Period
U.S. Department of Education calculates periods using
information reported by schools.
11
150 Percent Subsidized Loan Limit
Example: Losing Interest Subsidy
RepaymentComparison̶$4,000Balance
Mark
– Lost interest subsidy.
– Interest began accruing
on Direct Subsidized
loans, and also on Direct
Unsubsizided loan when
it was disbursed.
– Allowed interest
to capitalize.
12
Ashley
– Retained interest subsidy.
– Resulted in a loan payment
identical to Mark’s.
– But fewer payments, because
less interest charged.
150 Percent Subsidized Loan Limit
Example: Losing Interest Subsidy
Repayment Comparison
Mark
Ashley
$4,000
$4,000
$239.58
$0
$4,239.58
$4,000
Loan payment amount
$50 for 105 mos.
$50 for 98 mos.
Cumulative payments
$5,241.35
$4,875.74
Total interest paid
$1,241.35
$875.74
Total borrowed
Accrued interest (final nine months of program,
plus six-month grace period)
Outstanding balance at repayment
Loss of interest subsidy
cost Mark $365.
13
Agenda
w Understand Your Commitment.
w 150 Percent Subsidized Loan Limit.
w Repayment.
– Repayment Plans.
– Consolidation.
w Repayment Relief.
w Consequences.
w Money Management.
w Tax Benefits.
w Getting Help.
w Questions and Answers.
14
Repayment
Grace and Post-Enrollment Deferment Periods
Grace Period
Subsidized and
w Single six-month period in which no payment
Unsubsidized Loans
is expected.
w First loan payment due within 30-45 days after
grace period ends.
w Interest subsidy applies.
Post-Enrollment Deferment
Grad PLUS Loans
w Renewable six-month period after borrower
ceases to be enrolled at least half time.
No penalty for early repayment.
15
Repayment
Method of Payment
w Online payments.
w Auto-debit.
– 0.25 percent interest
rate reduction.
w Coupon books.
16
Repayment
Plans
w Use a loan calculator to compare repayment options:
– studentloans.gov.
w 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.
17
Repayment
Plans
w Standard.
w Graduated.
w Extended.
w Income-related plans:
–
–
–
–
–
18
Income-based repayment.
Income-sensitive (FFELP only).
Income-contingent (DL only).
Pay As You Earn (DL only).
Revised Pay As You Earn
(DL only).
Repayment
Plans
Standard Repayment
w Default repayment option.
w Payments of equal, monthly installments.
w Repayment period cannot exceed 10 years.
w Minimum payment of $50.
19
Repayment
Plans
Graduated Repayment
w Payments increase over time.
w Repayment term cannot exceed 10 years.
w Monthly payment amount:
– Must cover accruing interest.
– Will not have a single payment more than 3 times the amount
of another.
20
Repayment
Plans
Extended Repayment
w 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.
w Maximum repayment period of 25 years.
w Length of repayment is tied to the amount borrowed.
21
Repayment
Plans
Income-Based Repayment
w Partial financial hardship exists if annual payments
exceed discretionary income:
– Borrowers prior to July 1, 2014: 15 percent.
– New borrowers on or after July 1, 2014: 10 percent.
w Payment amount may be reduced or eliminated.
w Remaining amounts may be forgiven after:
– 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.
22
Repayment
Plans
Income-Sensitive Repayment – FFELP Loans
w Payments relate to FFELP borrower’s annual income.
w Repayment period may exceed 10 years, depending on
borrower’s income and amount borrowed.
w Borrowers must re-apply each year.
23
Repayment
Plans
Income-Contingent Repayment – Direct Loans
w Payments relate to DL borrower’s annual income and
family size.
w Minimum payment of $5.
w Any remaining balance due after 25 years will be forgiven.
w Borrowers must re-apply each year.
24
Repayment
Plans
Pay As You Earn
w Partial financial hardship exists if annual payments
exceed discretionary income by 10 percent.
– Consistent with “new borrowers” under IBR.
w Payment amount may be reduced or eliminated.
w Remaining amounts may be forgiven after 240 qualifying
payments over 20 years.
– Consistent with “new borrowers” under IBR.
25
Repayment
Plans
w
RevisedPay
PayAs
AsYou
You Earn
Earn
Revised
w Partial financial hardship exists if annual payments
exceed discretionary income by 10 percent. But partial
financial hardship is not required to enroll or remain in
the plan.
– Available for all Direct Loans regardless of when the loan
was obtained.
w Payment amount may be reduced or eliminated.
w Remaining amounts may be forgiven after 240 qualifying
payments over 20 years.
– But if the borrower has Direct Loans received for graduate or
professional study, loans may be forgiven after 300 payments
over 25 years.
26
Repayment Plans ̶ Comparison
Total Unsubsidized Loan Amount = $30,000. Interest Rate = 5.8%.
w Family size = 1. Adjusted gross income = $36,000.
First Monthly
Payment
Last Monthly
Payment
Total
Amount Paid
Months in
Repayment
Standard
$330
$330
$39,607
120
Graduated
$188
$565
$42,160
120
IBR
$227
$330
$42,246
140
ICR
$236
$281
$45,118
176
Pay As You
Earn
$152
$330
$49,512
194
Revised Pay
As You Earn
$152
$414
$49,334
188
Source:studentloans.gov.
27
Agenda
w Understand Your Commitment.
w 150 Percent Subsidized Loan Limit.
w Repayment.
– Repayment Plans.
– Consolidation.
w Repayment Relief.
w Consequences.
w Money Management.
w Tax Benefits.
w Getting Help.
w Questions and Answers.
28
Repayment
Consolidation
A new loan that pays off existing loans
and carries new terms.
w Eligible loans:
–
–
–
–
–
–
–
–
29
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.
Certain other education loans.
Repayment
Consolidation
Advantages
w Combines several loans into
w
w
w
w
30
one new loan.
One lower monthly payment.
Interest rate is fixed.
Interest subsidy still applies,
but only to subsidized loans.
No fees or prepayment
penalties.
Disadvantages
w Increases interest charges due
to longer repayment period.
w Reduced options for
cancellation and forgiveness.
w May lose benefits; varies
by lender.
w May lose remainder of
grace period.
Repayment
Consolidation: Maximum Repayment Periods
31
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
w 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.
32
Agenda
w Understand Your Commitment.
w 150 Percent Subsidized Loan Limit.
w Repayment.
– Repayment Plans.
– Consolidation.
w Repayment Relief.
w Consequences.
w Money Management.
w Tax Benefits.
w Getting Help.
w Questions and Answers.
33
Repayment Relief
Direct Loans have repayment options to assist borrowers
who need help:
w Deferment.
w Forbearance.
w Cancellation.
w Forgiveness.
34
Repayment Relief
Deferment
w Postpone repayment for borrowers who qualify.
w Entitlement for eligible borrowers.
w Suspend payment of principal and interest:
– Interest subsidy resumes.
– Interest accrues on unsubsidized portion.
w Some deferments must be updated at least annually.
w Can apply retroactively.
w Borrowers must request deferment.
w Once repayment resumes, first payment usually due
within 60 days.
35
Repayment Relief
Deferment Types
In-School
w Half-time enrollment.
w Time limit: none.
w Not working at least 30 hours per week in work
Unemployment
Economic
Hardship
36
that will last at least three moths.
w Actively seeking employment.
w Time limit: 36 months.
w Financial difficulty making loan payments.
w Time limit: 36 months.
Repayment Relief
Deferment Types
Rehabilitation
Training
Graduate
Fellowship
w Participating in a qualifying vocational or
health-related rehabilitation program.
w Time limit: none.
w Participation in a full-time graduate fellowship
for at least six months.
w Time limit: none.
w Serving on active duty for other than training
Military Service
Post Active-Duty
Student
37
purposes.
w Time limit: none.
w Students enrolled at least half time within six
months of activation.
w Time limit: 13 months.
Repayment Relief
Forbearance
w Generally granted at the discretion of the lender.
w Forbearance may include any of following changes to
repayment agreement:
–
–
–
–
No monthly payment.
Interest-only payments.
Lower payment.
Other arrangements.
w Can be applied retroactively for up to 12 months.
w Interest subsidy is not available.
– Any unpaid interest may be capitalized except where prohibited.
w Lender required to inform borrower of status, obligations
and associated costs.
38
Repayment Relief
Forbearance Types
w Lender believes borrower is willing but unable
Discretionary
Mandatory
Administrative
Mandatory
Administrative
39
to make payments.
w Time limit: up to 12 months.
w Internship/residency. w DoD repayment.
w National service.
w High debt.
w Loan forgiveness.
w Active duty.
w Overdue payments under certain
circumstances.
w Disaster, national emergency or military
mobilization.
w Processing periods.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
40
If the borrower dies, the
government discharges the
remaining loan amount.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
41
The government
discharges loans when a
student cannot complete a
program due to the school’s
closing.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
42
Loan discharge is available
if the school improperly
certified a loan for the
borrower.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
43
If the borrower can prove in
court that he or she was the
victim of identity theft, the
loan may be canceled.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
44
Available when the
borrower is unable to earn
sufficient income due to
illness or injury expected to
continue indefinitely or
result in death.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
45
If court finds that repayment
of student loan will cause
undue hardship to the
borrower, cancellation may
be available.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
46
Failure to receive a student
loan refund may qualify the
borrower for discharge of
all or a portion of the loan
amount disbursed.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
47
Forgiveness available for
up to $17,500, depending
on type of teaching
position.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
48
Discharge remaining debt
after 10 years of qualifying
payments.
Repayment Relief
Cancellation, Discharge and Forgiveness
Death of borrower.
School closure.
False certification.
Identity theft.
Total and permanent
disability.
w Limited bankruptcy.
w Unpaid refund.
w Teacher loan forgiveness.
w Public service loan
forgiveness.
w Completion of required
payments under incomedriven repayment.
w
w
w
w
w
49
After the borrower makes
all required payments over
the required time frame for
that income-driven plan, the
remaining balance of the
amount owed is forgiven.
Agenda
w Understand Your Commitment.
w 150 Percent Subsidized Loan Limit.
w Repayment.
– Repayment Plans.
– Consolidation.
w Repayment Relief.
w Consequences.
w Money Management.
w Tax Benefits.
w Getting Help.
w Questions and Answers.
50
Consequences
Delinquency
w Lender has not received payment
by the stated due date.
w Late charges may be assessed.
w Negative mark on your credit record.
51
Consequences
Default
No loan payments for 270 consecutive days or more
w Lose eligibility for future federal financial aid.
w Lose eligibility for flexible loan repayment options.
w Adverse credit reports.
w State-issued licenses can be withdrawn or denied.
w Income tax refunds can be withheld.
w Wages can be garnished.
w Federal benefit payments can be confiscated.
w Interest continues to accumulate.
w Federal debt collection procedures, including fees
and fines.
w Legal action.
52
Agenda
w Understand Your Commitment.
w 150 Percent Subsidized Loan Limit.
w Repayment.
– Repayment Plans.
– Consolidation.
w Repayment Relief.
w Consequences.
w Money Management.
w Tax Benefits.
w Getting Help.
w Questions and Answers.
53
Money Management
w Identify your financial goals.
w Develop a realistic
monthly budget.
w Know what you owe.
w Keep accurate and
well-organized records.
w Pay your bills prior to the
due date.
w Save for the future.
w Remember: There’s no penalty
for early repayment of your
student loans.
54
Money Management
What is the cost of paying the minimum?
Loan balance
$28,950
Loan balance
$28,950
Repayment term
10 years
Repayment term
10 years
$300
Regular payment
amount
$300
Regular payment
amount
Total loan cost
55
$36,304
Extra monthly
payment
$65.00
Total loan cost
$34,424
Interest Savings
$1,880
Reduction in term
2 years
Source:USAFunds financialliteracyandstudentsuccessprogram
Agenda
w Understand Your Commitment.
w 150 Percent Subsidized Loan Limit.
w Repayment.
– Repayment Plans.
– Consolidation.
w Repayment Relief.
w Consequences.
w Money Management.
w Tax Benefits.
w Getting Help.
w Questions and Answers.
56
Tax Benefits
w 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.
w See www.irs.gov for more information.
57
Getting Help
Difficult Situations
w If you cannot make a student loan payment:
– Your loan holder.
– Your school.
– Department of Education.
w If you have an unresolved issue:
– Department of Education
Ombudsman:
w Phone: (877) 557-2575.
w www.studentaid.gov/repay-loans/disputes/prepare .
58
Questions and Answers
59
Resources
w www.nslds.ed.gov.
w studentloans.gov.
w www.studentaid.gov/repay-loans/disputes/prepare.
60
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postsecondary education preparedness, access and success
by providing and supporting financial and other valued services.