NYSFAAA 44
“On Track for Excellence”
10/11/12
Helping Borrowers
Understand Loan Repayment
Gina Soliz
Director of Financial Aid
Syracuse University College of Law
Today’s Topic
 How to educate prospective, current and graduating
students about budgeting & creating successful loan
repayment strategies
Today’s Topic
 Overview of repayment plans
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
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
Standard
Extended
Graduated
IBR
ICR-A
The lifecycle of a student’s
relationship with the FA Office
Graduates
Current
Students
Prospective
Students
•How to finance
higher education
•Talking w/admits
•How to budget
•How to forecast
debt
•“Exit Interviews”
•6 months after
graduation
•Life changes
(2, 5, 10 years
out?)
Prospective Students
 Tours – appointment with Admissions and Financial
Aid
 Pre-Law Advisors – make sure they have the correct
information
 Visitor Days/Open Houses – everything is out in the
open
Current Students




One-on-one appointments
Videos/Testimonials
FA Focus Group
Workshops
 LMFAO
 Law students managing financial aid opportunities
LMFAO
Students: can you define any of the following acronyms?
IBR
PSLF
NSLDS
DL
FAFSA
OMG
LOL
LMFAO – Good Habits vs. Reality
 What We Know We
Should Do
 What We Actually Do
 Get 8 hours of sleep each
night
 Sleep for a few hours or
fall asleep watching TV, or
reading, or at our desk…
LMFAO – Good Habits vs. Reality
 What We Know We
Should Do
 Eat healthy food
 What We Actually Do
 Eat burgers and drink
beer
LMFAO – Good Habits vs. Reality
 What We Know We
Should Do
 Brew our own coffee at
home
 What We Actually Do
 Go out to a coffee shop
LMFAO – Good Habits vs. Reality
 What We Know We
Should Do
 Stick to a budget, live
within our means, save
money!
 What We Actually Do
 Spend what we have
(sometimes more than what we have!)
LMFAO – Good Habits vs. Reality
 What We Know We
Should Do
 Write out a “spending
plan” and stick to a
budget
 What We Actually Do
 Feel overwhelmed, lose
track of how we spend
our money
From LMFAO:
Why are you
here today?
• You want to understand the
jargon and acronyms.
• You taken out student loans
and want to know more about
them.
• You realize that what you
don’t know can hurt you!
• You could use some advice
regarding your finances.
• Free cookies!
From
LMFAO:
How Can You
Cut Back?
• Prioritize.
• Don’t buy
Starbucks!
• Cook at home.
Alumni
 New graduates
 Six months out
 Blasts from the past!
Do recent alumni contact the office or use the Financial
Aid Office as a resource after graduation? Do you hear
from graduates long after they have earned their degree?
The Basics
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
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
Servicers (who)
FFEL vs. DL (what)
NSLDS (where)
Timing of repayment (when)
Repayment options (how)
What: Federal Student Loans
 Federal Family Educational Loans (FFEL)
 Loans borrowed through a lender (ex. Citibank,
Wells Fargo, Chase, Access Group, Sallie Mae)
 Please note: The FFEL program ended 6/30/10
 Direct Loans (DL)
 Loans borrowed directly from the federal
government (studentloans.gov)
 All colleges and universities mandated
to use the DL program beginning 7/1/10
Where to find a summary:
www.nslds.ed.gov
Loans
Please click on the number in first column to see details
Type of Loan
Loan
Amount
Loan Date
Disbursed
Amount
Outstanding
Principal
Outstanding
Interest
1
DIRECT STAFFORD SUBSIDIZED
$8,500
08/15/2011
$8,500
$8,500
$0
2
DIRECT STAFFORD UNSUBSIDIZED
$12,000
08/15/2011
$12,000
$12,000
$340
3
DIRECT PLUS GRADUATE
$18,000
08/15/2011
$18,000
$18,000
$593
4
STAFFORD UNSUBSIDIZED
$12,000
08/07/2009
$12,000
$12,000
$1,632
5
FFEL PLUS GRADUATE
$15,000
08/07/2009
$15,000
$15,000
$2,550
Total STAFFORD/DIRECT
SUBSIDIZED
$17,000
$0
Total STAFFORD/DIRECT
UNSUBSIDIZED
$24,000
$1,972
Total FFEL/DIRECT GRADUATE
$33,000
$3,143
Total All Loans
$74,000
$5,115
www.nslds.ed.gov
 The name of each loan servicer and its contact
information will display under the loan details.
 Borrowers may have several different agencies
servicing each loan.
Servicer/Lender/Guaranty Agency Information
Contact Type
Contact
Current Guaranty Agency
DEPT OF ED/NELNET
121 S 13TH ST SUITE 201
LINCOLN NE 68508
888-486-4722
nelnetcustomersolutions@nelnet.com
Who is repaid: Servicers
 List of servicer websites, addresses, and phone
numbers on IFAP
http://www.ifap.ed.gov/ifap/helpContactInformationDetailedList.js
p?lsc=2
 ACS, Aspire, Corner Stone, EdFinancial, Granite State, PHEAA, Great Lakes,
MOHELA, NelNet, Sallie Mae, etc. etc.
When Does Repayment Begin?
 Federal Subsidized & Unsubsidized Loans
 Law school loans have 6-month grace period
following graduation
 Loans borrowed prior to law school have a 6-month
grace if they never entered into a prior repayment
status
 Federal Graduate PLUS Loan
 Loans borrowed after 7/1/08 have a
6 month Post Enrollment Deferment
How do I Successfully Repay?
 Standard Repayment on Federal Loans is 10 years
 Extended Repayment prolongs payments over 25
years (must have more than $30,000 in federal student
loan debt).
 Graduated Repayment – 10 years – payments start
low and increase in one or more increment over time.
Comparing Payment Plans
Loan Balance When Entering Repayment= $136,500
($25,500 Subsidized, $36,000 Unsubsidized, $25,000 FFELP Grad PLUS, $50,000 DL Grad PLUS)
Projected
Monthly
Payment
Projected
# of
Payments
Projected
Total Interest
Paid
Projected
Total Amt
Paid
Est. remaining
balance at end
of repayment
period
Standard
$1,621
120
$58,056
$194,556
$0
Extended
$1,010
300
$166,498
$302,998
$0
Graduated
$855 (24 months)
$1,896 (96 months)
120
$66,042
$202,542
$0
$416 (initial)
$1,001 (max)*
300
$200,493
$195,562
$190,131
$166 (initial)
$430 (max)*
300
$83,643
$83,643
$305,240
IBR *
(household size = 1,
hh AGI = $50,000)
IBR *
(household size = 1,
hh AGI = $30,000)
*assumes no change in hh size, 3.5% annual increase in yearly income, 3% increase in govt. poverty guideline
Repayment Plans (cont.)
 Income-Based Repayment caps the monthly payment
amount based on your income and family size.
 May offer the lowest monthly loan repayment
 All federal student loans are eligible for IBR (including Federal
Stafford and Federal Graduate PLUS loans)
 Borrowers in any employment type or situation may apply
IBR Can Be Confusing !!




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
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
Income-Based Repayment caps the monthly payment amount based on your income and family size –
capped at the Standard 10 year repayment amount.
After 25 years, borrowers may receive loan forgiveness (currently, the IRS views IBR loan forgiveness as a
taxable event)
Income Based Repayment (IBR) may offer borrowers the lowest monthly loan repayment
All federal student loans are eligible for payments under the IBR calculation (including Federal Stafford and
Federal Graduate PLUS loans). Parent PLUS Loans are not eligible (nor are Federal Consolidation Loans that
include a Parent PLUS).
Borrowers in any employment type or situation may apply
Borrower can choose to exclude spouse’s income (however, tax returns would be filed as ‘married filing
separately’)
Payments could change annually (annual income and family size verification is required)
Payments are applied to the interest first and principal last (negative amortization may occur)
Interest is capitalized when the borrower stops participating in IBR (this will occur if the borrower no longer
demonstrates partial financial hardship)
Income Based Repayment
AGI
Monthly
Payment
HH Size = 1
Monthly Payment
HH Size = 2
Monthly
Payment
HH Size = 3
$0
$0
$0
$0
$10,000
$0
$0
$0
$20,000
$41
$0
$0
$30,000
$166
$91
$17
$40,000
$291
$216
$142
$50,000
$416
$341
$267
$60,000
$541
$466
$392
$70,000
$666
$591
$517
$80,000
$791
$716
$642
Income Based Repayment (IBR) examples (based upon 2012 poverty guidelines)
assumes borrower resides in 48 contiguous states
IBR (continued)
 ADVANTAGES: You are paying based on what you earn, the
government will pay your unpaid accrued interest on your
Subsidized Loans for up to three consecutive years from the
date you began repaying your loan under IBR, 25 year
cancellation, Public Service Loan Forgiveness (if 10 years of
payments are made while working in a qualifying job).
 DISADVANTAGES: A borrower could pay more over the life of
the loan (usually, the more quickly you pay off a debt, the less
you pay overall), you may have to pay taxes on the amount that
is cancelled.
Federal Direct Unsubsidized Loan
Repayment Example
 An average law student borrows $61,500 in Federal
Direct Unsubsidized Loan ($20,500/year for 3 years)
 Assuming the borrower does not pay interest while
in-school, the debt upon graduation will be $68,100
 10 year standard monthly payment will be
$784/month
 25 year extended monthly payment will be
$473/month
Federal Direct Grad PLUS Example
 An average law student borrows $84,000 in Federal
Direct Unsubsidized Loan ($28,000/year for 3 years)
 Assuming the borrower does not pay interest while
in-school, the debt upon graduation will be $94,500
 10 year standard monthly payment will be
$1,142/month
 25 year extended monthly payment will be
$733/month
Grand Total $162,600
($20,500/yr Unsub and $28,000/yr Grad PLUS)
 10 year standard monthly payment = $1,926
 Total paid over 120 months is $231,031
 25 year extended monthly payment = $1,206
 Total paid over 300 months is $358,734
Direct Loan Repayment Examples
Interest Rate
10 year
repayment
plan
25 year
repayment
plan
Unsubsidized $68,100
6.80%
$784/month
$473/month
Graduate PLUS $94,500
7.90%
$1,142/month
$723/month
$1,926/month
$1,196/month
Interest Rate
10 year
repayment
plan
25 year
repayment
plan
Unsubsidized $68,100
6.80%
$784/month
$473/month
Graduate PLUS $67,500
7.90%
$815/month
$517/month
$1,599/month
$990/month
Total Loan
Debt
(Grad PLUS $28,000/yr)
TOTAL $162,600
Revised Debt
(Grad PLUS $20,000/yr)
TOTAL $135,600
Total monthly savings: $327/month
$206/month
Total saved over life of loan: over $39,000 nearly $62,000
How Can I Reduce My Borrowing?
Decrease your spending
Increase your “gift aid”
 Go to the Outside Scholarships section of our webpage
www.law.syr.edu/fa
From LMFAO:
If $20,000 were to
come to you
unexpectedly, what
would your first
impulse be?
• Shoe shopping
• Back pack around the world
• Pay down my student loans
• What is your money
personality?
From
LMFAO:
What is your
money
personality?
 Amasser: If you tend to be a money
amasser, you are happiest when you
have large amounts of money at
your disposal to spend, to save,
and/or to invest
 Avoider: If you tend to be a money
avoider, you probably have a hard
time balancing your checkbook,
paying your bills promptly, and doing
your taxes until the very last minute.
You may avoid making a budget or
keeping any kind of financial record.
You won't know how much money
you have, how much you owe, or
how much you spend
From
LMFAO:
What is your
money
personality?
 Hoarder: If you tend to be a
hoarder, you like to save money.
You also like to prioritize your
financial goals. You probably have
a budget and may enjoy the
processes of making up a budget
and reviewing it periodically
 Money Monk: If you are a money
monk, you think that money is
dirty, that it is bad, and that if you
have too much of it, it will corrupt
you. In general, you believe that
"money is the root of all evil."
From
LMFAO:
What is your
money
personality?
 Spender: If you are a spender,
you enjoy using your money to
buy yourself goods and services
for your immediate pleasure.
You probably get satisfaction
from spending money on gifts
for others. The odds are that
you have a hard time saving
money and prioritizing the
things you'd like in your life.
Successful Loan Repayment
 To be successful…
 develop a short-term plan now (an in-school budget)
and
 develop a long-term loan repayment plan (keeping in
mind career objectives and job market fluctuations)
Legal Job Market
 Employment prospects and salaries for new law graduates
have been affected by the economy.
 Class of 2010 graduates reported salary ranges from $32,000
(public interest law) to $160,000 (large firm practice).
 Average starting salary for all employment types was $67,400
Estimate Your Salary after Graduation
Student Loan
Payment
($162,600 debt)
Monthly
Disposable
Income
Annual Salary
$70,000
Monthly Salary
Net Monthly
Income
$70,000
$5,833
$3,908
$1,926
(10 year plan)
$1,982
$70,000
$5,833
$3,908
$1,196
(25 year plan)
$2,712
$70,000
$5,833
$3,908
$666
(IBR)
$3,242
Annual Salary
$30,000
Monthly Salary
Net Monthly
Income
$30,000
$2,500
$1,675
$1,926
(10 year plan)
-$251
$30,000
$2,500
$1,675
$1,196
(25 year plan)
$479
$30,000
$2,500
$1,675
$166
(IBR)
Student Loan
Payment
($162,600debt)
Monthly
Disposable
Income
$1,509
Borrowing Less = Repaying Less!
Think carefully about your future
financial and personal goals and
what you might have to give up
once you’re working in order to pay
back the debt you incurred as a
student.
Other Talking Points



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
Public Service Loan Forgiveness
Deferments & Forbearances
Mandatory Exit Counseling
Federal Direct Consolidation Loans
ICR-A
Loan Repayment Strategy
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Know how much is owed and to whom
Understand terms & conditions of your loans
Define your financial goals
Develop an affordable budget
Select a repayment plan
Be aware of loan forgiveness programs
Keep good financial records
Contact Me
Gina M. Soliz
Syracuse University College of Law
gmsoliz@law.syr.edu