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 A nonprofit corporation, USA Funds® works to enhance postsecondary education preparedness, access and success by providing and supporting financial and other valued services.