Federal Student Loan Repayment Strategies

1. Federal Student Loan Repayment Strategies Presented by Jeff Johnston, MBA Senior Account Executive Sallie Mae OASFAA Supports 45 Years

2. Counseling Students on Federal Loans • Basicsof loan repayment • Federal Loan Repayment Plans • Public Service Loan Forgiveness • How can students determine what is the best fit for their unique circumstances? OASFAA Supports 45 Years

3. Basics of Loan Counseling – What to cover • Federal versus Private • Types of Federal: Perkins, Federal Stafford (FFELP, PUT, and Direct; Sub and Unsub), Parent PLUS and Graduate PLUS • Difference between lender and servicer • Role of Guarantor is for students that have FFELP loans. • Identify Cohort Management third party, if any.

4. Helpful Tips for Borrowers • Read your mail • Save important notices (i.e. change of servicer) • Use NSLDS to verify loan portfolio • Your credit report can help verify private loans. • Sign up for electronic communication • Know when first payment is due on loan level

5. Basics of Loan Counseling – What to cover • Important Definitions • Subsidized • Unsubsidized • Interest Rate • Variable versus Fixed • Capitalization • Prepayment Penalties

6. Federal Student Loan Repayment Plans • Before moving into payment plan explanations, many students are stressed and want to know how to delay repayment. • Grace • Deferment • In-School, Economic hardship, Unemployment, Military, Graduate fellowship • Forbearance • Medical and Dental Residency forbearance

7. Federal Student Loan Repayment Plans • Consequences of default • Delinquencies • Default • Both can have severe negative consequences on credit record • Wage Garnishment • Tax refund withholding • Student Loans rarely discharged in bankruptcy

8. Federal Student Loan Repayment Plans • Standard Repayment (10 years) • Graduated Repayment (10 years) • Extended Repayment ($>$30K per, 25 years) • Consolidation ($>$60K, 30 years) • Repayment plans based on income • Income-Contingent Repayment (ICR - DL Only) • Income Based Repayment (IBR) • Pay As You Earn (PAYE)

9. ICR – Income-Contingent Repayment • Direct Loans Only • All DL except Parent PLUS, except Parent PLUS Loans consolidated in DL prior to 7/1/2006 • Negative amortization is allowed • During periods of negative amortization, annually • Interest capitalizes only until principal balance is 10% greater than original principal from when borrower entered repayment • Up to 25 years to repay • Balance remaining after 25 years’ worth of payments can be forgiven

10. IBR – Income Based Repayment • Available to federal loan borrowers experiencing financial hardship • Borrower qualifies if annual monthly student loan payments exceed 15% of “discretionary income” • If eligible for IBR, borrower’s monthly payment will be determined by a formula that takes into account household size and adjusted gross income. Increases in income will impact the required monthly payment amount • Unpaid balance may be forgiven after 25 years of scheduled monthly payments

11. PAYE – Pay As You Earn • Available to new Direct loan borrowers (except Parent PLUS) experiencing financial hardship • No loan balance as of October 1, 2007, and Received a Direct loan on or after October 1, 2011 • Borrower qualifies if annual monthly student loan payments exceed 10% of “discretionary income” • Similar to IBR, borrower’s monthly payment will be determined by a formula that takes into account family size and adjusted gross income.  Increases in income will impact the required monthly payment amount • Unpaid balance may be forgiven after 20 years of qualifying repayment

12. Public Service Loan Forgiveness • 120 qualifying payments on Direct Loans while on qualified repayment plans while working at a qualified employer. • Borrower must also be employed by a qualifying organization at the time that the borrower applies for and receives PSLF • According to the IRS, the forgiven amount is not treated as taxable income Source: Slide 39, FSA Conference 213, “Pay As You Earn & Other Income-Driven Repayment Plans”

13. Public Service Loan Forgiveness • Qualified Repayment Plans • 10 year standard • ICR • IBR • Pay As You Earn • Others>= 10-Year Standard (Any other Direct Loan Repayment Plan, but only payments that are at least equal to the standard payment) Source: Slide 41, FSA Conference 213, “Pay As You Earn & Other Income-Driven Repayment Plans”

14. Public Service Loan Forgiveness • Qualifed employer. • Any government organization • 501(c)3 not-for-profit organization • Other not-for-profit organizations providing specific qualifying services • Does not matter what the borrower’s job duties are • Borrower can work at multiple organizations Source: Slide 43, FSA Conference 213, “Pay As You Earn & Other Income-Driven Repayment Plans”

15. IBR and PSLF FAQ’s • Federal Student Aid Public Service Loan Forgiveness Frequently Asked Questions • http://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness.pdf • Income-Based Repayment Program Questions and Answers • http://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness.pdf

16. PSLF Employment Certification Form • The Employment Certification Form will allow you to get your employer’s certification of employment while you are still employed • Track your periods of qualifying employment

17. New Repayment Estimator • Can be used by Federal borrowers before contacting loan servicer to discuss repayment plans, or you can use it to get an early look at which plans you may be eligible for and see estimates for how much you would pay monthly and overall. • You’ll need to sign in with your Federal Student Aid PIN because the estimates will be based on your loan information in the NSLDS. • https://studentloans.gov/myDirectLoan/repaymentEstimatorLoginRedirect.action

18. Repayment Estimator

19. Other Student Loan Calculators • Department of Education • http://studentaid.ed.gov/repay-loans/understand/plans/income-based/calculator • IBRinfo.org • http://www.ibrinfo.org/calculator.php • Loan Servicers

20. ED Calculator

21. ED Calculator

22. ED Calculator