Student Loan Repayment
The Perfect Storm
What is a loan?
 A loan is when you borrow money from someone
else, and must repay the money, usually with interest
 Purpose of a loan?
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Allows the borrower to get the money needed to purchase
something they would otherwise not be able to currently afford
Allows the lender to make money through interest
How do you get a student loan?
 Filling out FAFSA is always step one
 The Department of Education will determine if you
are eligible for a federal student loan, how much, and
what type
 Can also find private loans usually through banks
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Private loans may have higher interest rates, fewer payment
relief options, and less flexibility
Common Types of Student Loans
 Stafford: backed by US government, allows lower
interest rates than most private loans (subsidized
and unsubsidized)
 Perkins: backed by US government, need based
student loan, usually lower interest rates than a
Stafford loan, interest is subsidized by government
 PLUS: backed by US government, become due
immediately, usually taken out by a parent
 Private: loan from a bank or company, not from
government
The FAFSA of FAFSA
 FAFSA application: Step 1 in finding funds for college
 Assess you financial needs: decide how much money
to take out each year
 Find a job: this will help ensure your ability to pay
back the loans
 Start Repaying: decide on the appropriate repayment
plan and any qualifying relief options
 Act on time: make your monthly payments on time,
and act on relief options if you will not be able to make
the payment
Exempt from Bankruptcy
 Students Loans cannot be discharged in bankruptcy
 Have to pay back all student loans public and private
Student Loan Statistics
Historical Interest Rates
How much should I take out?
 VERY Important to figure out
Make It Rain..or
should you?
the loan amount you need
 Taking out excessive loans may
cause you to spend more than
necessary because you have the
available funds
 Taking out not enough loans could leave you without
enough money to pay for your education expenses
How much should I take out?
 Develop a budget
 Budgeting will allow you to easily visualize your financial
picture, and how much debt you can to take on
 Each year determine the difference between your annual
income and your annual expenses, any negative difference
is the amount of loans you need to take out
 Remember, student loans should only be considered after
an extensive search for grants, scholarships, monetary
support from family and friends, and (time permitting)
employment.
How much do I owe?
 To view the total amount of federal loans you have
borrowed and the interest incurred go to:
nslds.ed.gov
 To determine the total amount of private loans you
have borrowed contact your lender
Repayment Plans
 For most student loans the standard repayment
period is 10 years, meaning you must pay back the
entire loan within ten years
 Some relief programs allow you to extend this period
up to 25 or 30 years
 To calculate your repayment plan go to
niu.edu/financialcents
Grace Period
 Many student loans have grace periods, meaning you do not have to
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make any payments while in school and usually for several months
after graduation
PLUS Loans = No Grace Period
Stafford Loan Grace Period = 6 months after graduation
Perkins Loan Grace Period = 9 months after graduation
Private Loan Grace Period: Check with your lender, or terms of the
promissory note
 Subsidized Loans DON’T incur interest during the entire grace period
 All other loans DO incur interest during the entire grace period
Student Debt Relief
 Public Service Loan Forgiveness
 Income-Based Repayment
 Deferment
 Consolidation
 Speak with lender before missing payment, many
have payment relief options
Public Service Loan Forgiveness
 After 10 years, qualified Public Service employees are
given forgiveness on any unpaid student loans
 Eligibility:
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Only loans under Direct Loan Program (not FFEL)
May be able to consolidate other federal loans into a Direct
Consolidation Loan, making those loans eligible
No default (not behind on payments)
Must be employed full-time by a public service organization
when applying, for 120 months, and at the time of forgiveness
Public Service Loan Forgiveness
 Examples of qualifying public service jobs:
 Federal, state, or local government
 Public schools and universities
 Public child or family service agency
 Many non-profit organizations
 Military
 Emergency Management
 Law Enforcement
 Early childhood education
 Public Health
For a complete list visit the Federal Student Aid Website: studentaid.ed.gov
Income-Based Repayment
 Went into effect July 1, 2009
 Lowers monthly payment amount based on income
and family size (payment amount recalculated
annually)
 If monthly IBR payments do not cover monthly
interest accrued, government will pay that balance
for 3 years
 Loan is cancelled after 25 years
 10 Year Public Service Forgiveness eligible
Income-Based Repayment
 Eligibility:
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Loans under Direct Loan or FFEL, EXCEPT loans in
default, parent PLUS Loans, or consolidation loans that
repaid a parent PLUS Loan (basically all federal loans not made to parents)
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Partial Financial Hardship evidenced by:

Enough student loan debt relative to your income. It must take
more than 15 percent of whatever you earn above 150% of poverty
level to pay off your loans in 10 years.
Loan Deferment
 Student loan payments may be temporarily
suspended.
 These payment may be deferred for a variety of
reasons including, but not limited to:

Economic hardship, unemployment, military deployment,
enrollment in school, internship, Peace Corps volunteer, or
similar situations (for full list visit studentaid.ed.gov)
 Federal loans and most private loans are eligible for
deferment
 Only temporary, must still pay back loan
Loan Consolidation
Advantages
One lender means only one monthly payment
 Potential to decrease interest rate and monthly payment
 Potential to convert variable interest rates into fixed interest rates
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New repayment options
 Extended loan repayment period (can extend repayment period up to 30 years)
 Graduated loan repayment period (smaller payments at first, payments gradually
increase
 Income contingent (payments rise and fall with income)
Loan Consolidation
Disadvantages
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Extended repayment period
Pay more overall
May lose discharge benefits
Consolidating federal and private loans turns all your loans into a private loan
Lose payback benefits from current lenders (i.e. reduced interest rates for on-time
payments)
Salary Expectations
Making Payments
 Will be contacted by your lender before the end of
grace period informing you the amount, due date,
and where to send you first payment
 Payment periods vary between loans
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Stafford Loans: monthly payments
Perkins Loans: quarterly payments
Budgeting
 Create budget to account for the payment expense
 If payment cant be afforded here are your options:
 Cut back on spending, avoid luxuries, etc.
 Find additional income
 Relief options
 Change name and become a drifter
 Defaulting is not an option
Defaulting on Student Loans
Should I pay back my student loans early?
It Depends!
 Do you have other, higher interest loans?
 As a general rule, it makes sense to pay off the loan with the
highest interest rate first, but do not default on other loans
 Can you invest at a higher interest rate?
 Is the interest you can save by paying off your loan less that the
interest you can gain by making an investment?
Resources
 http://www.ibrinfo.org/what.vp.html
 http://www.loans.ucla.edu/howto/loanGrace.html
 http://loanconsolidation.ed.gov/index.html
 http://www.regis.edu/regis.asp?sctn=sr&p1=faid&p2=confaq#Q4
 http://www.ppcc.edu/current-students/financial-aid/student-
loans/advantagesdisadvantages-on-consolidation/