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SSW Presentation: Loan Repayment for Federal Loans 2015
- 1. Student Loan Repayment and other exciting activities after GRADUATION! 1
- 2. Agenda ■ Loan types & interest rate ■ The grace period ■ Repayment plans ■ Loan Forgiveness ■ Avoiding delinquency & default ■ Financial Planning 2
- 3. Key Players ■ Federal government www.studentaid.ed.gov ■ Lenders – of private loans ■ Direct Loan Servicers ■ NSLDS www.nslds.ed.gov ■ Credit Reporting www.annualcreditreport.com ♦ Experian ♦ Equifax ♦ TransUnion ■ Ombudsman http://studentaid.ed.gov/repay- loans/disputes 1.877.557.2575 3
- 4. Types of Loans ■ Federal Stafford Direct – Subsidized ■ Federal Stafford Direct – Unsubsidized ■ Alternative – Private lenders ■ Federal Graduate PLUS Loan 4
- 5. National Student Loan Data System ■ Central database for student aid records ♦ Track loans from disbursement to payoff ♦ Total student loan indebtedness ♦ Loan status & interest rate ♦ Loan Servicer information ♦ www.nslds.ed.gov 5
- 6. Stafford Loan Interest Rates Disbursed Stafford Subsidized Stafford Unsubsidized 7.1.2006 – 6.30.2008 6.8% 6.8% 7.1.2008 – 6.30.2009 6.0% 6.8% 7.1.2009 – 6.30.2010 5.6% 6.8% 7.1.2010 – 6.30.2011 4.5% 6.8% 7.1.2011 – 6.30.2012 3.4% 6.8% 7.1.2012 – 6.30.2013 3.4% 6.8% 7.1.2013 – 6.30.2014 n/a 5.41% 7.1.2014 – 6.30.2015 n/a 6.21% 6
- 7. The Grace Period ■ One-time grace period ♦ Begins after you graduate, leave school or drop below half time (caution if you took a break from school) ♦ Monthly payments begin after grace period ends ■ Direct Loans – 6 months ■ Perkins Loans – 9 months ■ Graduate PLUS Loans – 6 months (if disbursed after 7/1/2008) ■ Private Loans – Varies 7
- 8. Direct Loan Repayment Options ■ Standard Repayment ■ Graduated Repayment ■ Extended Repayment ■ Income-Contingent Repayment ■ Income-Based Repayment ■ Pay as You Earn Repayment Plan 8
- 9. Standard Repayment Chart ■ Fixed monthly payment ■ $50 minimum payment ■ 10-year repayment schedule Loan Amount Monthly Payment Total Paid* (Loan + Interest) $10,000 $115 $13,810 $50,000 $575 $69,048 *A subsidized Stafford loan repaid at 6.80 percent interest, assuming the standard repayment plan of 10 years. 9
- 10. Graduated Repayment Plan ■ Payment gradually increases over time ■ Payment must cover interest due ■ 10-year repayment schedule Loan Amount Beginning Monthly Payment Ending Monthly Payment Total Paid* (Loan + Interest) $10,000 $57 $135 $14,353 $50,000 $283 $677 $71,765 *A subsidized Stafford loan repaid at 6.80 percent interest, assuming the graduated repayment plan of 10 years. 10
- 11. Extended Repayment Plan ■ Loans greater than $30,000 ■ Standard or graduated repayment plans ■ Repayment term not to exceed 25 years Loan Amount Monthly Payment Years in Repayment Total Paid* (Loan + Interest $50,000 $347 25 $104,111 *A subsidized Stafford loan repaid at 6.80 percent interest, assuming an extended standard repayment plan of 25 years. 11
- 12. Income-Contingent Repayment Plan ■ Payment based on income, household size and state of residence (often 20% of income) ■ Forgiveness after 25 years (tax consequences) 12 Loan Amount Gross Monthly Income Family Size Monthly Payment Total Paid* (Loan + Interest) $10,000 $1,500 1 $63 $20,743 $50,000 $4,000 3 $495 $73,475 *A Stafford loan repaid at 6.80 percent interest based on borrower living in the continental U.S. This is an estimated repayment amount for the first year and total loan payment.
- 13. Income Based Repayment Plan ■ Based on “partial financial hardship” ■ Allows for negative amortization ■ Unpaid interest on subsidized loans is subsidized for three years ■ Unpaid interest and principle can be capitalized when IBR is terminated ■ Remaining loan forgiven after 25 years ♦ Tax consequences 13
- 14. Income Based Repayment Plan ■ Payment based on percentage of total income Loan Amount AGI* 150% of Poverty Line Disposable Income Current Monthly Payment* New Monthly Payment** $12,500 $25,000 $17,560 $7,440 $144 $94 $50,000 $25,000 $17,560 $7,440 $576 $94 *A subsidized Stafford loan repaid at 6.80 percent interest, assuming the standard repayment plan of 10 years. **Assumed AGI with one person in the household. See if you qualify at the following site: studentaid.ed.gov – select “repaying your loans” 14
- 15. Pay As You Earn Repayment Plan ■ Base on “partial financial hardship” ■ Maximum payment is 10% of discretionary income, the difference between your AGI and 150% of poverty. ■ Remaining loan forgiven after 20 years ♦ Tax consequences 15
- 16. Pay As You Earn Repayment Plan ■ Payment based on percentage of total income Loan Amount AGI* 150% of Poverty Line Disposable Income Current Monthly Payment* New Monthly Payment** $12,500 $25,000 $17,560 $7,440 $144 $62 $50,000 $25,000 $17,560 $7,440 $576 $62 *A subsidized Stafford loan repaid at 6.80 percent interest, assuming the standard repayment plan of 10 years. **Assumed AGI with one person in the household. See if you qualify at the following site: studentaid.ed.gov – select “repaying your loans” 16
- 17. Loan Consolidation ■ Combine loans into one single new loan ♦ You agree to new terms and conditions ■ One monthly payment ♦ Lower payment/longer repayment period ■ Payments begin at consolidation ■ Caution with Perkins Loans ■ Be informed ♦ www.studentloans.gov ♦ www.studentaid.ed.gov 17
- 18. Loan Forgiveness ■ Explore all options – do more research ■ Review Websites – regulations change! ■ Call to describe your individual situation ■ Call to confirm your understanding of their information ■ You are your own advocate 18
- 19. Loan Forgiveness ■ Work in public service profession ■ Volunteer work ■ Military service ■ Teach or practice medicine in certain communities – National Health Service Corps ■ Loan forgiveness resources ♦ www.studentaid.ed.gov ♦ www.nhsc.hrsa.gov/loanrepayment/ ♦ http://www.hesc.ny.gov/ 19
- 20. Public Service Loan Forgiveness (PSLF) ■ Full-time eligible public service job ■ Non-defaulted Direct Loans ♦ Other federal student loans consolidated into Direct Consolidation Loan ■ Payments beginning October 1, 2007 ♦ 120 qualifying payments ♦ IBR, ICR, PAYE and Standard Repayment plans ■ Forgiven amount not taxable 20
- 21. Apply for PSLF ■ Track your employment record! ♦ Clearly identify your employer(s) ♦ Position/title ♦ Supervisor’s name/telephone number ♦ Show employer meets the definition ♦ Dates of employment ♦ Full-time employee ■ Keep complete loan payment records 21
- 22. Loan Cancellation In extreme circumstances: ♦ Total and permanent disability ♦ Inability to complete course of study due to school closure ♦ False certification by school ♦ Death 22
- 23. Avoid Delinquency & Default ■ Pay on time ■ A payment received one day late is considered delinquent ■ Must pay, even if you don’t get a bill ■ Delinquent payments are reported to the credit bureaus ■ Always call your servicer for help 23
- 24. Deferment ■ Postponement of payments ♦ Not automatic ♦ You must apply & receive approval from lender ■ Primary reasons ♦ In-school ♦ Unemployment ♦ Economic hardship ♦ Military service 24
- 25. Forbearance ■ Temporary reduction or postponement of payments ■ Not automatic ♦ You must apply and receive approval from lender ■ Primary reasons ♦ Poor health ♦ Residency program ♦ Financial hardship ■ Interest will continue to accrue 25
- 26. Consequences of Default ■ Full amount of loan is due ♦ Including collection costs ■ Subject to federal and state offsets ♦ Wages and tax refund may be garnished ■ Credit will be tarnished ■ Loss of deferment and forbearance options ■ Loss of eligibility for future financial aid ■ May lose eligibility for certain federal or state jobs ■ May lose professional license 26
- 27. Your Rights ■ Receive a copy of your signed MPN ■ Receive a disclosure statement ■ Prepay all or part of your loan without penalty ■ Deferments & forbearance, if eligible ■ Written notice if your loan is sold ■ Proof of discharge after repaying loan in full 27
- 28. Your Responsibilities ■ Repay your loan(s) ■ Make on-time, monthly payments ■ Read correspondence from servicer ■ Notify servicer of changes within 10 days ♦ School & enrollment status ♦ Name, address & telephone number ■ Ask your servicer for help 28
- 29. Who to Pay ■ Check NSLDS to see what federal loans you have: www.nslds.ed.gov ■ Federal Direct Stafford Loans ♦ One of many Federal Loan Servicers ■ Federal Perkins Loans ♦ Servicer designated by college ■ Smith College Loans ♦ Campus Partners ■ Private Loans – The Lender 29
- 30. Financial Planning ♦ Develop good money strategies ♦ Create a post-SSW spending plan ♦ Keep copies of all documents in one place ♦ Compare salaries ♦ Compare repayment options ♦ Consider repaying loans early ♦ Find a roommate ♦ Do you really need a car? ♦ Find money saving tips on WFI website ♦ Reacquaint yourself with your parents (or your kids) 30
- 31. Executive Summary ■ Make sure Servicer(s) has good contact information for you. ■ Must make payments, even if you don’t get a bill ■ Make payments on time (consider automatic debit). ■ Contact Servicer if you need help. 31