Money Matters
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Money Matters
- 1. MONEY MATTER$: STUDENT LOAN DEBT REDUCTION RESOURCES HMSV B180: Personal & Professional Development – Dr. Thomas, Spring 2015
- 2. Disclaimer Details contained in this presentation are for general information purposes only! Please consult with the following authorities for clarification about your personal accounts: USCB Financial Aid Office US Department of Education State Taxation Department US Internal Revenue Service Financial Institution (for private student loans)
- 3. Opening thoughts… Higher education is an investment… ROI (Return On Investment) depends on you… Student loan debt is real… Debt reduction options are available for some student loans…
- 4. Top 5 Tips… 1. Don’t ignore your loans! 2. Don’t panic. 3. Know your loan types. 4. KIT with your lender. 5. Pick the right repayment option for you…
- 5. Student Loan Forgiveness Programs Federal Volunteer Programs: AmeriCorps Peace Corps VISTA Other Federal Programs: Federal Agencies Public Service (PSLF) Teacher* Military*
- 6. Public Service Loan Forgiveness (PSLF) Best & brightest for public service Eligibility*: FT employment in sector 120 on-time payments while employed Direct Loan Program only Consolidation is an option Repayment plan type matters *See disclaimer on slide #2
- 7. Qualified Repayment Plans for PSLF Income-based plans (more paid on interest!): IBR (income-based- repayment, up to 15% of discretionary income, hardship required, max 25 years) PAYE (pay-as-you-earn, up to 10% of discretionary income, hardship required, max 20 years) ICR (income-contingent- repayment, max 25 years) 10 year standard*
- 8. Student Loan Forgiveness Programs Type of Forgiveness, Cancellation, or Discharge Direct Loans Federal Family Education Loan (FFEL) Program Loans Perkins Loans Closed School Discharge x x x Total and Permanent Disability Discharge X X X Death Discharge X X X Discharge in Bankruptcy (in rare cases) X X X False Certification of Student Eligibility or Unauthorized Payment Discharge X X Unpaid Refund Discharge X X Teacher Loan Forgiveness X X Public Service Loan Forgiveness X Perkins Loan Cancellation and Discharge (includes Teacher Cancellation) X
- 9. Other helpful charts… https://studentaid.ed.gov/repay- loans/forgiveness-cancellation/charts
- 10. Closing thoughts… What you make does not matter nearly as much as what you spend/save! Budget Budget. Budget! Graduate school? Fellowship!! Scholarships! Employer pay/reimbursement! Student loans = last, not first option!
- 11. Q&A What about Congress? T B A
- 12. Reference Websites http://ticas.org/content/posd/top-10-student-loan- tips-recent-graduates https://studentaid.ed.gov/repay- loans/understand/plans https://www.nslds.ed.gov/nslds_SA/ https://studentloans.gov/myDirectLoan/index.actio n http://www.finaid.org/loans/forgiveness.phtml https://studentaid.ed.gov/repay-loans/forgiveness- cancellation/public-service http://www.cnbc.com/id/102569948
Editor's Notes
- 40 million people across the United States who have monumental student debt, as reported by CNN. In fact, student loans have increased by 84% since the recession (from 2008 to 2014) and are the only type of consumer debt not decreasing, according to a study from Experian, which analyzed student loan trends from 2008 through 2014. The analysis also finds that in total, a staggering $1.2 trillion is bleeding students dry. Of all of the open student loan accounts, says Experian, 39% ($417 billion) are in deferment (the period during which payments are not obligatory) and 61% ($727 billion) are in repayment. Of the consumers who are currently in the repayment stage, their average payment is $279 per consumer.
- 1. Know Your Loans: It's important to keep track of the lender, balance, and repayment status for each of your student loans. These details determine your options for loan repayment and forgiveness. If you're not sure, ask your lender or visit www.nslds.ed.gov. You can log in and see the loan amounts, lender(s), and repayment status for all of your federal loans. If some of your loans aren't listed, they're probably private (non-federal) loans. For those, try to find a recent billing statement and/or the original paperwork that you signed. Contact your school if you can't locate any records. 2. Know Your Grace Period: Different loans have different grace periods. A grace period is how long you can wait after leaving school before you have to make your first payment. It's six months for federal Stafford loans, but nine months for federal Perkins loans. For federal PLUS loans, it depends on when they were issued (see details). The grace periods for private student loans vary, so consult your paperwork or contact your lender to find out. Don't miss your first payment! 3. Stay in Touch with Your Lender: Whenever you move or change your phone number or email address, tell your lender right away. If your lender needs to contact you and your information isn't current, it can end up costing you a bundle. Open and read every piece of mail - paper or electronic - that you receive about your student loans. If you're getting unwanted calls from your lender or a collection agency, don't stick your head in the sand - talk to your lender! Lenders are supposed to work with borrowers to resolve problems, and collection agencies have to follow certainrules. Ignoring bills or serious problems can lead to default, which has severe, long-term consequences (see tip 6 for more about default.) 4. Pick the Right Repayment Option: When your federal loans come due, your loan payments will automatically be based on a standard 10-year repayment plan. If the standard payment is going to be hard for you to cover, there are other options, and you can change plans down the line if you want or need to. Extending your repayment period beyond 10 years can lower your monthly payments, but you'll end up paying more interest - often a lot more - over the life of the loan. Some important options for student loan borrowers are income-driven repayment plans such as Income-Based Repayment and Pay As You Earn which cap your monthly payments at a reasonable percentage of your income each year, and forgive any debt remaining after no more than 25 years (depending on the plan) of affordable payments. Forgiveness may be available after just 10 years of these payments for borrowers in the public and nonprofit sectors (see tip 10 below). To find out more about Income-Based Repayment and related programs and how they might work for you, visit IBRinfo.org. Private loans are not eligible for IBR or the other federal loan payment plans, deferments, forbearances, or forgiveness programs. However, the lender may offer some type of forbearance, typically for a fee, or you may be able to make interest-only payments for some period of time. Read your original private loan paperwork carefully and then talk to the lender about what repayment options you may have. 5. Don't Panic: If you're having trouble making payments because of unemployment, health problems, or other unexpected financial challenges, remember that you have options for managing your federal student loans. There are legitimate ways to temporarily postpone your federal loan payments, such as deferments and forbearance. For example, an unemployment deferment might be the right choice for you if you're having trouble finding work right now. But beware: interest accrues on all types of loans during forbearances, and on some types of loans during deferment, increasing your total debt, so ask your lender about making interest-only payments if you can afford it. If you expect your income to be lower than you'd hoped for more than a few months, check out Income-Based Repayment. Your required payment in IBR can be as little as $0 when your income is very low. See tip 4 for more about IBR and other repayment options. 6. Stay out of Trouble! Ignoring your student loans has serious consequences that can last a lifetime. Not paying can lead to delinquency and default. For federal loans, default kicks in after nine months of non-payment. When you default, your total loan balance becomes due, your credit score is ruined, the total amount you owe increases dramatically, and the government can garnish your wages and seize your tax refunds if you default on a federal loan. For private loans, default can happen much more quickly and can put anyone who co-signed for your loan at risk as well. Talk to your lender right away if you're in danger of default. You can also find helpful information atstudentloanborrowerassistance.org. 7. Lower Your Principal If You Can: When you make a federal student loan payment, it covers any late fees first, then interest, and finally the principal. If you can afford to pay more than your required monthly payment - every time or now and then - you can lower your principal, which reduces the amount of interest you have to pay over the life of the loan. Include a written request to your lender to make sure that the extra amount is applied to your principal! Otherwise it will automatically be applied to future payments instead. Keep copies for your records and check back to be sure the overpayment was applied correctly. 8. Pay Off the Most Expensive Loans First: If you're considering paying off one or more of your loans ahead of schedule, or trying to reduce the principal, start with the one that has the highest interest rate. If you have private loans in addition to federal loans, start with your private loans, since they almost always have higher interest rates and lack the flexible repayment options and other protections of federal loans. 9. To Consolidate or Not to Consolidate: A consolidation loan combines multiple loans into one for a single monthly payment and one fixed interest rate. If this is appealing, here are some pros and cons to consider. You canconsolidate your federal student loans through the Direct Loan program, and this calculator can help you figure out what your interest rate would be. For private consolidation loans, shop around carefully for a low or fixed interest rate if you can find one, and read all the fine print. Never consolidate federal loans into a private student loan, or you'll lose all the repayment options and borrower benefits - like unemployment deferments and loan forgiveness programs - that come with federal loans! 10. Loan Forgiveness: There are various programs that will forgive all or some of your federal student loans if you work in certain fields or for certain types of employers. Public Service Loan Forgiveness is a federal program that forgives any student debt remaining after 10 years of qualifying payments for people in government, nonprofit, and other public service jobs. Find out more at IBRinfo.org. There are other federal loan forgiveness options available for teachers, nurses, AmeriCorps and PeaceCorps volunteers, and other professions, as well as some state, school, and private programs (see some examples).
- The PSLF Program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers. Qualifying employment is any employment with a federal, state, or local government agency, entity, or organization or a not-for-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). The type or nature of employment with the organization does not matter for PSLF purposes. Additionally, the type of services that these public service organizations provide does not matter for PSLF purposes. A private not-for-profit employer that is not a tax-exempt organization under Section 501(c)(3) of the IRC may be a qualifying public service organization if it provides certain specified public services. These services include emergency management, military service, public safety, or law enforcement services; public health services; public education or public library services; school library and other school-based services; public interest law services; early childhood education; public service for individuals with disabilities and the elderly. The organization must not be a labor union or a partisan political organization.
- Just a few examples – see link for specifics: https://studentaid.ed.gov/repay-loans/understand/plans IBR: Your maximum monthly payments will be 15 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 (other conditions apply). Your payments change as your income changes. Up to 25 years PAYE: Your 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 (other conditions apply). Your payments change as your income changes. Up to 20 years ICR: 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
- 40 million people across the United States who have monumental student debt, as reported by CNN. In fact, student loans have increased by 84% since the recession (from 2008 to 2014) and are the only type of consumer debt not decreasing, according to a study from Experian, which analyzed student loan trends from 2008 through 2014. The analysis also finds that in total, a staggering $1.2 trillion is bleeding students dry. Of all of the open student loan accounts, says Experian, 39% ($417 billion) are in deferment (the period during which payments are not obligatory) and 61% ($727 billion) are in repayment. Of the consumers who are currently in the repayment stage, their average payment is $279 per consumer.