Student Loan Repayment
Andrea Morgan, Gary Moore, and Melissa Greenslade
Program Coordinators
University of Arkansas
Office of Financial Aid
Student Loans
 Average student loan debt for graduating seniors from public
schools = $20,200
 25% of students borrow $30,500 or more
 10% of students borrow $39,300 or more
 Student loan repayment shouldn’t exceed more than 10-15%
of your expected monthly income
Loan Terms - Definitions
 Interest Rate: the percentage of a sum of money charged for its use
 Federal Loans disbursed after July 1, 2006 have fixed interest rates
 Means that the interest rate will stay the same for the life of the loan
 Federal Loan interest rates are changed every July 1st. The change is
announced the preceding May
 Grace Period: the period of time after graduation (or you drop below
half-time enrollment) before you have to start making payments on your
loans
Loan Terms - Definitions, cont.
 Deferment: allows students to temporarily postpone making payments
on their loans
 Government pays interest during deferment on subsidized loans, the student
is responsible for interest on unsubsidized loans
 Eligibility for deferment:
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Half-time enrolled at postsecondary school
Taking part in an approved graduate fellowship or rehabilitation program
Unable to find full-time employment
Qualified for economic hardship
On active duty during war or other military operation
Member of the National Guard or other reserve component
 Forbearance: a temporary postponement or reduction of payments for
a period of time because you are experiencing financial difficulty
 Interest accrues on both subsidized and unsubsidized loans during
forbearance
 Both can be granted in intervals of up to 12 months at a time for up to 3
years
Loan Terms- Definitions, cont.
 Delinquency: a loan is considered delinquent when one payment is missed
 Delinquent loans are reported on a borrower’s (and co-signer’s) credit report
when they are 60 days delinquent
 Default: technical default occurs when a borrower does not make a
payment for 270 days on Stafford, PLUS, or consolidation loans
 Direct Loans (loans after July 1, 2010) – the loan is referred to Debt Management
Collection System and is considered in default once the borrower is 360 days
delinquent
 FFELP Loans (loans before July 1, 2010) – the lender files the claim up to 60 days
after technical default
 Consequences of default:
-- Damaged credit rating for at least 7 years
-- Collection fees assessed on defaulted loans
-- Inability to receive additional financial aid
-- Federal tax refund revoked
-- Wages garnished
 Can resolve a defaulted student loan by making satisfactory arrangement with
servicer, consolidating the defaulted loan, rehabilitating the defaulted loan (9 full
payments in 10 months), paying the loan in full, or receiving a discharge on the
defaulted loan
Loan Terms - Definitions, cont.
 Discharge: the release of the borrower from all or a
portion of a loan obligation
 FFELP and Direct loans may be discharged for:
 Total and permanent disability
 Death
 False certification by the school
 False certification due to Identity Theft
 Closed school
 Parents and Spouses of September 11th victims
 You may NOT normally have a student loan discharged due to
bankruptcy
Types of Student Loans
 Federal Loans
 Direct Loans
 Subsidized
 Unsubsidized
 Federal Family Education Loan Program (FFELP)
 Subsidized
 Unsubsidized
 Perkins Loans
 PLUS Loans
 Parent PLUS
 Graduate PLUS
 Alternative (Private) Loans
FFELP vs. Direct Loans
 FFELP (Federal Family Education Loan Program)
 Federal Loans prior to July 1, 2010
 Loans were borrowed from private lenders
 Direct Loans
 Federal Loans after July 1, 2010
 Loans are borrowed directly from the government
 These loans may be subsidized or unsubsidized
Subsidized Loans
 Need-based loan where the government pays the interest while
you are enrolled at least half-time, during the grace period (not
for loans taken after 7/1/12), and during deferments
 Interest rates for July1, 2011-June 30, 2012
 Undergraduates: 3.4%
 Graduates: 6.8% **no more sub loans for graduates as of 7/1/12
 Grace Period: you have 6 months from the last date of attendance
in school or from when you drop below half-time before
repayment begins
 Repayment Terms:
 10 years in Standard, Graduated, and Income-Sensitive (for FFELP
loans only) repayment plans
 Up to 25 years for Income-Based, Extended, and Income Contingent
(for direct loans only) repayment plans
Unsubsidized Loans
 Non-need-based loan where the student is responsible for paying
interest on the loan. Interest begins to accrue starting at the date
of the first disbursement
 Interest rate for July1, 2011-June 30, 2012:
 Undergraduates and Graduates: 6.8% fixed
 Grace Period: you have 6 months from the last date of attendance
in school or from when you drop below half-time before
repayment begins
 Repayment Terms:
 10 years for standard, graduated, and income-sensitive (FFELP loans
only) repayment plans
 Up to 25 years for income-based, extended, and income-contingent
(direct loans only) repayment plans
Perkins Loans
 Need-based loan where the government pays the interest
while you are enrolled at least half-time, during the grace
period, and during deferments
 Interest Rate for July1, 2011-June 30, 2012:
 5% Fixed
 Grace Period: repayment begins 9 months after your last
date of attendance in school or after you drop below halftime enrollment
 Repayment Term
 Typically up to 10 years
PLUS Loans
 PLUS loans are credit-based loans that are given to parents or
graduate students through the federal government. Interest
begins to accrue from date of disbursement
 Interest Rate July1, 2011-June 30, 2012:
 7.9% fixed
 There is no grace period on these loans
 There may be in-school deferment or 6 month post-graduation
deferment available
 Repayment Terms:
 Parent borrowers
 10 years for standard, graduated, and income-sensitive plans
 Up to 25 years for extended plans
 Graduate Student borrowers
 10 years for standard, graduated, and income-sensitive plans
 Up to 25 years for contingent, extended, and income-based plans
Alternative (Private) Loans
 Credit based loans through a private lender
 Terms will vary by lender and loan
 Interest rate is based on the borrower’s credit rating
 There is no interest subsidy, the borrower is responsible for
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repaying all interest on the loan
Origination fees may be higher than federal loans
There may be limited deferment or forbearance options
Most offer flexible payment plans (15-25 years to repay)
These loans may or may not have a grace period
These loans cannot be consolidated into a Federal Consolidation
Loan
Federal Consolidation Loans
 Allow borrowers to combine their federal loans into a single loan and to
have a single monthly payment
 Available to those who are in repayment or grace period
 If you consolidate while still in school, you may still have multiple servicers if
you continue to borrow and you will lose the 6 month grace period
 Advantages:
 May give borrowers a lower monthly payment
 Single monthly payment to one servicer
 Disadvantages:
 Interest rate may increase slightly when the weighted average of the
consolidated loans in rounded to the nearest eighth percent (capped at 8.25%)
 May pay more in accrued interest
 May lose some benefits like cancellation or loan forgiveness
 A consolidated Perkins Loan loses the interest subsidy and some cancellation
options
Need Information About YOUR Loans?
 NSLDS (National Student Loan Data System)
 www.nslds.ed.gov
 US Department of Education central database for student aid
 Contains information about all federal student loans, federal
grants, and student enrollment
 Used to determine student eligibility for federal aid, monitor
aggregate totals, and track changes to student’s financial history
 Students can use this database to track loans
 Can access with your SSN, DOB, first 2 letters of last name, and a PIN
 Parents can also look up their PLUS loan info on NSLDS
Federal Loan
Repayment Plan Options
 Standard
 Graduated
 Extended
 Income-Sensitive
 Income-Contingent
 Income-Based
Standard Repayment
 Equal monthly payments of at least $50 for up to 10 years
 Example:
 $25,000 loan (at 6.8% for 10 years)
 Monthly payment = $287
 Total interest paid = $9,524
 Total paid (principle + interest) = $34,524
Graduated Repayment
 Monthly payments start lower and gradually increase over time for
up to 10 years; will pay more in interest than Standard
 Example:
 $25,000 loan (6.8% for 10 years)
 Monthly payments:
 Years 1-2 = $198
 Years 3-4 = $240
 Years 5-6 = $292
 Years 7-8 = $255
 Years 9-10 = $432
 Total interest paid = $11,389
 Total paid (principle + interest) = $36,389
Extended Repayment
 Monthly payments are fixed or gradually increase over 25 years
for loan debt that exceeds $30,000 in direct or FFELP loans
 Example:
 $30,000 (6.8% for 25 years)
 Monthly payment = $208
 Total interest paid = $32,466
 Total paid (principle + interest) = $62, 466
Income-Sensitive Repayment
 Monthly payments are based on income and total loan
amount for up to 10 years; for FFELP loans only
 Must reapply for this type of repayment plan yearly
 Example:
 $25,000 loan; gross monthly income of $3000
 Monthly payment = $120 for year 1
 Monthly payment = $313 for years 2-10
 Total interest paid = $10,293
 Total paid (principle + interest) = $35, 293
Income-Contingent Repayment (ICR)
 Monthly payments are based on income and family size for up to 25
years and any remaining amount is discharged; for Direct loans only
 Must reapply for this type of payment plan yearly
 Example:
 $25,000 loan
 Monthly payment
 $218 initial payment
 $249 remaining payments
 Total interest paid = $14,421
 Total paid = $39,421
 Borrower is responsible for paying any taxes on the amount
discharged
Income-Based Repayment (IBR)
 Payment won’t exceed 15% of disposable income; designed to help
borrowers with unmanageable payments relative to their income
 Eligibility is based on AGI (Adjusted Gross Income), family size, and
loan debt
 Must reapply for this type of repayment plan yearly
 Loan balance forgiven after 25 years and 300 eligible payments have
been made
 Example:
 $25,000 loan
 Monthly payments
 First year payment = $247
 Maximum monthly payment = $288
 Total interest paid = $10, 546
 Total paid (principle + interest) = $35,546
Loan Forgiveness
 Public Service Loan Forgiveness
 Teacher Loan Forgiveness
 Federal Employee Loan Forgiveness
Public Service Loan Forgiveness
 Borrower’s who work for a public service employer may be eligible to have
a portion of their direct loan debt forgiven after 120 qualifying monthly
payments are made after October 1, 2007
 Public Service Organization
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Federal, state, local or tribal government agency/organization
Public child or family service agency
Non-profit organization under section 501(c)(3)
A tribal college or university
A private organization that provides public services
 Qualifications:
 Cannot be in default
 Must be employed full time (30 hours/week)
 Must make 120 qualified payments
 These payments do not have to be consecutive, but must be separate, on-time, and
full monthly payments
 Payments must be made under IBR, ICR, or standard repayment plans
Loan Forgiveness for Teachers
 Borrowers who teach in an elementary or secondary school that is
designated as low-income may be eligible to have a portion of their
Stafford loan debt forgiven
 Qualifications:
 Teach full-time for at least 5 consecutive years at a low-income school
 Cannot be in default
 Must be a “highly qualified” teacher
 Obtained full state certification; bachelor’s degree; and demonstrate subject
knowledge and teaching skills in reading, writing, math, or other basic
elementary curriculum (for elementary teachers) or high level of
competency in the subject area taught (for secondary teachers)
 Up to $5000 in forgiveness for teachers who meet the qualifications
on or after October 30, 2004
 Up to $17,500 in forgiveness for “highly qualified” mathematics or
science teacher in a secondary school or for “highly qualified” special
education teachers in an elementary or secondary school
Federal Employee Loan Forgiveness
 Permits federal agencies to repay federal student loans as a
recruitment or retention incentive for candidates or current
employees of the federal agency
What to Expect From Your Loan Servicer
 A repayment disclosure notice
 Outlines the terms of the loan
borrowed
 Provides repayment options
available
 Establishes the first payment
due date
Your Responsibilities
 Stay on top of your loans
 Inform each servicer of changes to your name, address, or
telephone number
 Discuss options with your servicer before failing to make a
payment
 Remember that you can change your repayment plan and due date
(at least 1x annually)
 If you have difficulty making payments, remember deferment and
forbearance
Additional Help
 Federal Student Aid on the Web
 Studentaid.ed.gov or studentloans.gov or nslds.ed.gov
 http://blog.simpletuition.com/
 http://www.paybacksmarter.com/
 Student Loan Help for Arkansas
 Facebook Page
 Phone: 855-275-1200
 Email: studentloanhelp@aasfaa.net
 Help navigating through the acronyms, rhetoric, and terms that
are part of the federal student loan system
 Student loan repayment plans and calculators
 Help if you find yourself facing default
Thank You!
 Please complete and submit your evaluation forms
 PowerPoint presentation and handouts will be posted on our
website
 Contact Information:
 Office of Financial Aid; Andrea, Gary, and Melissa
 Campus location: 114 Silas Hunt Hall
 Phone: 479-575-3806
 Fax: 479-575-7790
 Website: http://finaid.uark.edu/
 And find us on Facebook at University of Arkansas Financial Aid!