STUDENT LOAN REPAYMENT
WORKSHOP
Jeff Johnston, MBA
Sallie Mae
November, 2015
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Keep Good Records
►
Get all loan documents together: keep them on file!
– Promissory notes
– Disclosure statements
– Award Letters
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Exit interview information
Open and READ student loan mail
Bookmark loan servicer’s websites
Notify loan servicer(s) of name & address changes
Document calls to servicer: date/time of call & person
who handled the call
Keep important numbers available
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Education Financing Options
Options for Students:
►
►
Institutional Loans
Federal Loans:
– Direct Subsidized and Unsubsidized
– PLUS Loan for Graduate Students
►
Private/Alternative Loans
Options for Parents:
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►
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Federal PLUS Loans (undergraduate students only)
Cosign a Private/Alternative Loan
Parent Loans
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Private Loan Repayment
►
Private loans are almost always unsubsidized for the life
of the loan
TIP:
►
Repayment terms vary
►
Choice of repayment plans
may be available
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Residency and internship deferments may be available
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Forbearances may be available
– Consult your loan servicer
Refer to your
promissory note
and/or your servicer
to determine your
available options
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Identify Your Servicers
►
Federal and/or private loans may not all be with one servicer
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Buying and Selling of Students Loans:
– Original lender may have sold a student’s loan
– This means a student has a new loan “holder” and/or “servicer”
For example, a FFELP loan may have been sold to the
Department of Education (ED) who now holds the loan and is
having it serviced by one of is federal loan servicers such as:
•
•
•
•
Direct Loan Servicing Center (ACS)
Great Lakes
Nelnet
FedLoan Servicing (PHEAA)
– Borrowers must be notified if the service provider of loan
changes
– The terms of a federal loan, as specified in the promissory note,
will not change if sold or transferred to another servicer
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Finding Your Federal and Private Student Loans
Federal Student Loans
Private Student Loan
National Student Loan Data System
www.nslds.ed.gov
www.annualcreditreport.com
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Relative Costs of a Student Loan
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Subsidized vs Unsubsidized Loans
Subsidized Loans
Have no interest cost while student is in
school, in grace (if applicable), or in a
period of authorized deferment
EXAMPLES
► Direct Subsidized Loans*
► Consolidation Loans- portion of
underlying eligible subsidized
loans
► Some institutional loans (see
promissory note or aid office)
Unsubsidized Loans
Borrower is responsible for interest that
accrues from the time of disbursement
EXAMPLES
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►
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Direct Unsubsidized Loans
PLUS Loan for Graduate
Students
Consolidation Loansunsubsidized portion, which
includes the unsubsidized
Stafford loans plus any Perkins
Private Loans
*Effective July 1, 2012, Subsidized Stafford Loans are no longer available for graduate students.
Note: Consolidated Appropriations Act (Public Law 112-74) temporarily eliminated the interest subsidy during the 6-month grace
period on subsidized Stafford loans made from July 1, 2012 through June 30, 2014. The subsidy resumed for loans made on or
after July 1, 2014.
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Other Federal Loan Program Information
►
Maximum Eligibility Period: For first-time borrowers on
or after July 1, 2013, there is a limit on the maximum
period of time (measured in academic years) that a
student can receive Direct Subsidized Loans.
– Borrowers may not receive Direct Subsidized Loans for more
than 150 percent of the published length of their program. The
maximum eligibility period is based on the published length of
a student’s current program.
– This time limit does not apply to Direct Unsubsidized Loans or
Direct PLUS Loans
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Relative Costs of a Student Loan
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Interest Rate
– What the lender charges for the use of money
– The higher the interest rate, the more the loan will cost
overall
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Borrower Benefits/Repayment Incentives
– Interest rate reductions
– Credits to loan balance
– Some benefits and repayment incentives impose eligibility
requirements such as signing up for automatic debt or
making a certain number of on-time payments
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Understanding Fixed and Variable Interest Rates
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Fixed Interest Rates
– Interest rate is determined at time of loan approval and does not change
for the life of the loan
– The interest rate is based on credit worthiness as well as the market
rates
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Variable Interest Rates
– Interest rate is determined at time of loan approval and will fluctuate
over time
– The interest rate is based on two components: a market index that is
publicly available plus a credit-based margin (determined by lender)
Starting rate on a variable rate loan is usually lower
than the rate on a fixed rate loan.
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Loan Interest Rates
Loan type
Undergraduates
Graduate Students

Direct Subsidized Loans
2012-13
2013-14
2014-15
3.40%
3.86%
4.66%
N/A
N/A
N/A
2015-16
4.29%
N/A
Pre AY 13-14: 6.8%
AY 13-14: 3.86%
AY 14-15: 4.66%
AY 15-16: 4.29%
Pre AY 13-14: 6.8%
AY 13-14: 5.41%
AY 14-15: 6.21%
AY 15-16: 5.84%
Pre AY 13-14: 7.9%
AY 13-14: 6.41%
AY 14-15: 7.21%
AY 15-16: 6.84%
Direct Unsubsidized Loans*
Graduate PLUS Loans*
Consolidation Loan
Private Loans, Institutional Loans
---
Fixed rate based on weighted-average interest rate of
underlying loans rounded up to nearest one-eighth of a
percent (capped at 8.25% )
Many lenders offer both variable and fixed rate options.
Interest rates range from 2.25% – 12.99% .


Stafford loans disbursed
from 7/1/1998 to 6/30/2006
carry variable rates, which
are adjusted annually, each
July 1.
The variable rate for Stafford
loans during the 2015-16
academic year is 1.75% for
loans in an in-school, grace
or deferment period, 2.35%
for loans in repayment or
forbearance.
These rates apply to both
undergraduate and graduate
students.
Note: Rate for Grad PLUS loans
issued under the Federal Family
Education Loan Program is
8.50%
*Rates in effect for loans issued on or after July 1, 2006.
Source: http://studentaid.ed.gov/types/loans/interest-rates#what-are-the-interest-rates-of-federal-student-loans
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Impact of Interest Capitalization
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Interest Capitalization: The addition of unpaid
accrued interest to the principal balance of a loan.
This can significantly increase the total cost over
the life of the loan
– Examples:
• On a $50,000 loan, interest capitalized at the end of a 12
month deferment would be $2,180 with an interest rate of
4.29% with a loan term of 10 years. This will increase the
total loan cost by $539 over the life of the loan
• On a $100,000, the interest capitalized at the end of a 12
month deferment would be $4,360 with an interest rate of
4.29% with a loan term of 10 years. This will increase the
total loan cost by $1,079 over the life of the loan
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Understanding Grace Periods
Grace Period - period of time after a borrower graduates,
leaves school or drops to less than half-time
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Payments may not be required during this period
No application required
Loan specific, varies according to loan – once used completely, it’s
gone
– Direct Subsidized and Unsubsidized loans have a six-month grace
period
– Private and Institutional loans: check your promissory note
►
Unsubsidized federal loans continue to accrue interest during the
grace period
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Taking advantage of a grace period does not adversely impact credit
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Track Dates You Need to Take Action
Tip:
Action
Date*
This is one of the most
important items to
document. List the date
that you have to take
action on your loan. This
can either be the
graduation date or the
date your grace period
expires. This can be
confirmed by your
servicer(s).
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Paying Loans Off Early
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Borrowers can always prepay federal and private
student loans without penalty
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Be aware of the relative cost and make payments
towards unsubsidized loans while in school/during
deferments that have the highest rates and/or most
frequent capitalization. This should save more money
over time.
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Unless otherwise noted, loan payments typically are
applied first toward late fees, then interest, and finally
principal
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Delinquency & Default (Federal/Private Loans)
Delinquency & defaults on student loans can
adversely impact your credit history
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Delinquency
– Failure to make payment(s) when due
– Reported to credit bureaus; affects borrowers history
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Default
–
–
–
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Collection agencies may take over adding to cost
Lender can take legal action
School can withhold records
Federal defaults could include wage garnishment &
withholding of federal tax refunds
– Student loans are rarely discharged in bankruptcy
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Ways to Defer Payments
Direct Subsidized, Unsubsidized
and some private loans offer
grace periods
Federal Consolidation Loans
and Grad PLUS loans do not
have grace periods
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Grad PLUS loans issued on or after July 1, 2008, include a six-month postschool deferment that essentially aligns with the Stafford grace period
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Forbearance can also be used to temporarily postpone payment if necessary
for Consolidation loans and older Grad PLUS loans
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Borrower can postpone repayment on federal loans via a deferment or
forbearance
–
Borrower has to meet the qualifying conditions for a deferment or a forbearance
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Understanding Federal Loan Deferments
Deferment: period when a borrower who meets certain
criteria may postpone loan payments
Common Types
of Deferments:
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►
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Application may be required depending on deferment
type; recertification for subsequent deferment periods
may also be required
Federal student loan deferments are “borrower” specific,
meaning eligibility is attached to the borrower and there
is a max deferment time allotted for certain deferments
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In-School
Economic
Hardship
Unemployment
Military
Graduate
Fellowship
The government pays interest on a borrower’s behalf for
subsidized loans during authorized deferment periods
Note: Unsubsidized loans continue to accrue interest for which the borrower is responsible. Unless the
interest is paid by the borrower, it may be capitalized (added to your principal balance) at the of the
deferment period. To keep your total loan cost lower, you may want to consider paying all or some of
the interest that accrues during this time.
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Understanding Federal Loan Forbearance
Discretionary Forbearance: allows a borrower who cannot
make scheduled payments to temporarily delay
TIPS:
Be careful, the use of
or reduce the payments
►
Interest continues to accrue on subsidized and
unsubsidized loans during a forbearance period.
forbearance adds
expense!
Forbearances can help
you stay out of
delinquency and
default!
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Interest that accrues during the forbearance remains
the borrower’s responsibility.
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Unpaid interest may be capitalized at the end of the
forbearance depending on the loan type and when the loan was disbursed.
Additionally, there is a max forbearance time allotted.
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Capitalization of interest increases the amount to pay back, and will result in a
higher payment amount after the forbearance. To keep your total loan cost
lower, you may want to consider paying all or some of the interest that accrues
during this time.
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Federal Loan Repayment Plans
Repayment Plan
Eligible Loans
Monthly Payment &
Timeframe
Quick Comparison
Standard Repayment
Plan
• Direct Subsidized and
Unsubsidized Loans
• Subsidized and
Unsubsidized Federal
Stafford Loans
• All PLUS loans
• Payments are a fixed
amount of at least $50
per month.
• Up to 10 years
You'll pay less interest
for your loan over time
under this plan than
you would under other
plans.
Graduated Repayment
Plan
• Direct Subsidized and
Unsubsidized Loans
• Subsidized and
Unsubsidized Federal
Stafford Loans
• All PLUS loans
• Payments are lower
at first and then
increase, usually
every two years.
• Up to 10 years
You'll pay more for your
loan over time than
under the 10-year
standard plan.
Source: https://studentaid.ed.gov/sa/repay-loans/understand/plans
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Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Federal Loan Repayment Plans
Repayment Plan
Extended Repayment
Plan
Eligible Loans
• Direct Subsidized and
Unsubsidized Loans
• Subsidized and
Unsubsidized Federal
Stafford Loans
• all PLUS loans
Monthly Payment &
Timeframe
• Payments may be
fixed or graduated.
• Up to 25 years
Quick Comparison
• Your monthly
payments would be
lower than the 10year standard plan.
• If you are a:
• Direct Loan borrower,
you must have more
than $30,000 in
outstanding Direct
Loans.
• FFEL borrower, you
must have more than
$30,000 in outstanding
FFEL Program loans.
• For both programs,
you must also be a
"new borrower" as of
Oct. 7, 1998.
• You'll pay more for
your loan over time
than under the 10year standard plan.
Source: https://studentaid.ed.gov/sa/repay-loans/understand/plans
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Federal Loan Repayment Plans
Repayment Plan
Eligible Loans
Income Based Repayment
(IBR)
• Direct Subsidized and
Unsubsidized Loans
• Subsidized and
Unsubsidized Federal
Stafford Loans
• all PLUS loans made to
students
• Consolidation Loans
(Direct or FFEL) that do
not include Direct or
FFEL PLUS loans made
to parents
Monthly Payment &
Timeframe
• Maximum monthly
payments will be 15
percent of discretionary
income, the difference
between your AGI and
150 percent of the
poverty guideline for
your family size and
state of residence
• Payments change as
your income changes
• Up to 25 years
Source: https://studentaid.ed.gov/sa/repay-loans/understand/plans
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
Quick Comparison
• You must have a partial
financial hardship.
• Monthly payments will
be lower than payments
under the 10-year
standard plan.
• You'll pay more for your
loan over time than you
would under the 10-year
standard plan.
• If you have not repaid
your loan in full after
making the equivalent of
25 years of qualifying
monthly payments, any
outstanding balance on
your loan will be
forgiven.
• You may have to pay
income tax on any
amount that is forgiven.
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Federal Loan Repayment Plans
Repayment Plan
Eligible Loans
Monthly Payment &
Timeframe
Quick Comparison
Pay As You Earn Repayment
Plan (PAYE)
• Direct Subsidized and
Unsubsidized Loans
• Direct PLUS loans made to
students
• Direct Consolidation Loans
that do not include (Direct
or FFEL) PLUS loans
made to parents
• Maximum monthly
payments will be 10
percent of discretionary
income, the difference
between your adjusted
gross income and 150
percent of the poverty
guideline for your family
size and state of residence
• Your payments change as
your income changes
• Up to 20 years
• For new borrowers on or
after 10/1/2007, and must
have received a
disbursement of a Direct
Loan on or after 10/1/2011.
• You must have a partial
financial hardship.
• Monthly payments will be
lower than payments under
the 10-year standard plan.
• You'll pay more for your
loan over time than you
would under the 10-year
standard plan.
• If you have not repaid your
loan in full after you made
the equivalent of 20 years
of qualifying monthly
payments, any outstanding
balance on your loan will
be forgiven.
• You may have to pay
income tax on any amount
that is forgiven.
Source: https://studentaid.ed.gov/sa/repay-loans/understand/plans
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24
Federal Loan Repayment Plans
Repayment Plan
Eligible Loans
Monthly Payment &
Timeframe
Quick Comparison
Income Contingent
Repayment Plan
• Direct Subsidized and
Unsubsidized Loans
• Direct PLUS Loans
made to students
• Direct Consolidation
Loans
• Payments are
calculated each year
and are based on your
adjusted gross income,
family size, and the
total amount of your
Direct Loans.
• Your payments change
as your income
changes.
• Up to 25 years
• You'll pay more for your
loan over time than
under the 10-year
standard plan.
• If you do not repay your
loan after making the
equivalent of 25 years
of qualifying monthly
payments, the unpaid
portion will be forgiven.
• You may have to pay
income tax on the
amount that is forgiven.
Income Sensitive
Repayment Plan
• Subsidized and
Unsubsidized Federal
Stafford Loans
• FFEL PLUS Loans
• FFEL Consolidation
Loans
• Your monthly payment
is based on annual
income.
• Your payments change
as your income
changes.
• Up to 10 years
You'll pay more for your
loan over time than you
would under the 10-year
standard plan.
Source: https://studentaid.ed.gov/sa/repay-loans/understand/plans
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Quick Comparison of Income Driven Repayment Plans
Eligible Borrowers
Source: U.S. Department of Education
2014 FSA Training Conference for Financial Aid Professionals
ICR
Eligible
DL
IBR
Eligible
DL/FFEL
Debt-toincome
ratio*
Eligible DL
Debt-toincome
ratio*
PAYE
Recent
borrowers
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Quick Comparison of Income Driven Repayment Plans
Eligible Loans
Source: U.S. Department of Education
2014 FSA Training Conference for Financial Aid Professionals
Loan Type
ICR
IBR
PAYE
Sub. Stafford
X
X
X
Unsub. Stafford
X
X
X
Grad PLUS
X
X
X
Parent PLUS
Loan Program
Direct Loans
Consolidation (did not
repay Parent PLUS)
X
Consolidation (repaid
Parent PLUS)
X
X
X
FFELP
ICR
IBR
PAYE
X
X
X
X
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Quick Comparison of Income Driven Repayment Plans
Payment Amounts
Source: U.S. Department of Education
2014 FSA Training Conference for Financial Aid Professionals
Each IDR plan has two formulas. Borrowers always pay the lesser of the two.
Repayment Plan
Payment based
only on income
Payment based
on loan debt
ICR
20% of discretionary
income
12-year standard
payment adjusted
based on income
IBR
15% of discretionary
income
10-year standard
amount
PAYE / “new” IBR
10% of discretionary
income
10-year standard
amount
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Quick Comparison of Income Driven Repayment Plans
Interest Subsidy
Source: U.S. Department of Education
2014 FSA Training Conference for Financial Aid Professionals
►
On subsidized loans, borrower receives subsidy for first 3 consecutive
years on IBR and Pay As You Earn during periods of negative
amortization
►
Subsidy amount = difference between amount of interest that accrues
on subsidized loans and payment amount toward subsidized loans
3-year clock doesn’t stop except for Economic Hardship Deferments
►
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Federal Loan Repayment Comparison
Assumes $27,000 in undergraduate Direct Loans ($19,000 in subsidized and $8,000 in
unsubsidized loans) over a 4 year period. Assumes current interest rate of 4.29% for all loans,
annual income of $25,000 and household size of 1.
Source: https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action
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30
Federal Loan Forgiveness Program for Public Service Employees
►
Eligibility limited to Federal Direct Student Loan Program (FDLP) Loans
– FFELP Stafford, PLUS and Consolidation are not eligible
►
FFELP Borrowers may consolidate in the FDLP
►
Additionally, borrowers must have:
– Made 120 on-time monthly payments beginning after October 1, 2007 during
eligible public service employment.
– Payments must be made under one of the payment plans: Income Based, Pay
As You Earn, Income Contingent or any payment equivalent to the 10-year
standard payment amount.
– Worked full time in eligible public service employment for ten years after
October 1, 2007.
– At the time the remaining loan balance is forgiven, must be employed in an
eligible public service job.
Other loan forgiveness programs may also be available – do your research!
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PSLF Employment Certification Form
►
►
It will take you at least 10 years to make the 120 qualifying payments necessary to
receive PSLF. During this time you’ll want to track your periods of qualifying employment
The Employment Certification Form will allow you to get your employer’s certification of
employment while you are still employed
Learn More: http://studentaid.ed.gov/publicservice
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Know What You Owe
Put together a snapshot of what you owe
Student loans
$
Other loans:
• Credit card balance(s)
+$
• Automobile loan
+$
• Mortgage loan or rent
+$
Other money owed:
• Utilities, cable, internet
+$
• Phone
+$
TOTAL
$
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Student Loan Interest Deduction
►
Borrowers may be eligible to deduct student loan interest
►
Deduction may not exceed $2,500 per year
Voluntary payments of interest during school, deferment or forbearance may be eligible
for deduction
Interest paid on consolidation loans may be deducted
There are eligibility rules, including income limits
►
►
►
–
The limits for Federal Tax Year 2014 are shown in the table below:
Full Deduction
Partial Deduction
No Deduction
Single
Modified Adjusted Gross
Income Is </=
$60,001 to $79,999
$80,000 or more
Married
Modified Adjusted Gross
$130,001 to
$159,999
$160,000 or more
Filing jointly
$65,000
Income is </= $130,000
Source -http://www.irs.gov/publications/p970/ch04.html
NOTE: For information about your specific tax situation and any tax advice, please contact a tax professional
Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.
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Resources
►
School Financial Aid
►
Lender/servicer
►
Federal Student Aid Ombudsman
– U.S. Department of Education – FSA Ombudsman
–
http://www.ombudsman.ed.gov or 1-877-557-2575
►
Federal Loan Servicers:
Great Lakes: 800-236-4300 www.mygreatlakes.org
FedLoan Servicing: 800-699-2908 www.myfedloan.org
Nelnet: 888-486-4722 www.nelnet.com
Navient: 800-722-1300 www.navient.com
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Final Tips for Managing Your Loans and Finances
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Questions
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The information contained in this presentation is not
comprehensive, is subject to constant change, and therefore
should serve only as general, background information for further
investigation and study related to the subject matter and the
specific factual circumstances being considered of evaluated.
Nothing in this presentation constitutes or is designed to
constitute legal advise.
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Confidential and proprietary information © 2015 Sallie Mae Bank. All rights reserved.