WHAT EVERY FINANCIAL EDUCATOR SHOULD KNOW ABOUT FEDERAL STUDENT LOANS

1. WHAT EVERY FINANCIAL EDUCATOR SHOULD KNOW ABOUT FEDERAL STUDENT LOANS U.S. Department of Education 2013

2. Financial Literacy • Resources - Applying & Paying for College • Comparison Shopping • Applying for Aid • Budgeting and Borrowing • Managing Debt • Loans and Repayment • Need to Know • Loans • Default • Servicing • Federal Loan Servicers • Servicing Issues and Challenges Agenda

3. Financial Literacy It all begins here!

4. College Scorecard • College Navigator • Financial Aid Shopping Sheet • Free Application for Federal Student Aid • Net Price Calculator • Financial Awareness Counseling Tool (FACT) • Entrance and Exit Counseling • Repayment Estimator

5. Comparison Shopping - College Scorecard Available at: http://collegecost.ed.gov/scorecard/

6. Comparison Shopping - College Navigator Available on: http://nces.ed.gov/collegenavigator/

7. Comparison Shopping - Financial Aid Shopping Sheet More information on the financial aid shopping sheet is available at http://collegecost.ed.gov/shopping_sheet.pdf

8. Apply for Aid - FAFSA Resources on this website are also available in Spanish. • Takes less than 30 minutes to complete online at www.fafsa.gov • Real-time help is available by phone at 1-800-4FED-AID , or via on-line chat • IRS Data Retrieval Tool pre-populates tax information: http://www.fafsa.ed.gov/help/irshlp8.htm • Determines families ability to contribute to cost of attendance 8

9. Budgeting and Borrowing - Net Price Calculator Available on: http://collegecost.ed.gov/ 9

10. Expenses Funds Budgeting and Borrowing: FACT Tool Financial Awareness Counseling Tool (FACT) direct link: https://studentloans.gov/myDirectLoan/financialAwarenessCounseling.action?execution=e1s1 10

11. Manage Debt - StudentLoans.gov

12. Manage Debt - Entrance and Exit Counseling NOTE: Exit Counseling does not include “Manage Your Spending While in School.” Available onstudentloans.gov 12

13. Manage Debt: Estimate Repayment Amount Repayment plans and loan payment calculators are available at: http://studentaid.ed.gov/repay-loans/understand/plans#estimator 13

14. Stay Informed - StudentAid.gov StudentAid.govis available for both desktop and mobile device browsing

15. Stay Informed - Social Media Facebook: facebook.com/FederalStudentAid Twitter: twitter.com/FAFSA YouTube: youtube.com/FederalStudentAid

16. Loans and Repayment What borrowers should know

17. Need to Know - Identify Loans • Federal Student Loans - The National Student Loan Data System (NSLDS) • Access NSLDS using your Federal Student Aid PIN at www.nslds.ed.gov • Private Loans: 3 key places • Credit Report • Financial Aid Office • Personal Records and Files LOAN

18. Need to Know - Loan Servicers (More to come…) • Collects payments on a loan • Responds to customer service inquiries • Performs other administrative tasks associated with maintaining a loan on behalf of a lender If unsure of who Federal Student Loan Servicer is, look it up on www.nslds.ed.gov

19. Need to Know - NSLDS – Student Data Summary

20. Need to Know - NSLDS – Loan Detail

21. Need to Know - My Student Aid -2014 Coming Attractions!

22. Loans - Federal Student Loan Programs

23. Loans – How Payments are Applied • First payment on: • $10,000 loan • Interest rate: 3.86% • Monthly payment amount: $100.58

24. Income-Driven • Level Loans – Repayment Plans – FFEL and DL • Pay As You Earn* • Graduated • Income-Contingent* • Extended* • Income-Based* • Standard * - Conditions apply

25. Loans - Interest – Simple Daily Interest • The “simple” in “simple daily interest” means that interest does not compound absent a specific reason • The “daily” in “simply daily interest” means that interest accrues every day • Let’s walk through the calculation to determine how much interest accrues in one day on a $10,000 loan with an interest rate of 3.86% (Interest Rate ÷ Days in Year) × Outstanding Principal Balance = Annual Interest (0.0386 ÷ 365) × $10,000 = $1.06

26. Loans - Repayment Plan Summary Billy Borrower has $35,000 in Direct Loan debt, which has an interest rate of 3.86%. His income is $30,000, he is single, and he lives in Indiana. His income increases at a rate of 5% per year.

27. Loans - Repayment Plan Summary If Billy consolidates all his federal student loans, the Standard Repayment Plan and Graduated Repayment Plan will have an extended repayment period.

28. Loans - Consolidation: LoanConsolidation.ed.gov • Interest rate is weighted average of consolidated loans • Interest rate is rounded to nearest higher 1/8 of 1%

29. Loans - Repayment Period for Consolidation Loans • For standard and graduated plans, based on total educational indebtedness • This includes: • Federal student loans that you consolidate • Federal student loans that you do not consolidate • Private student loans (that you cannot consolidate) • Private student loan debt considered toward repayment period cannot be more than amount of the consolidation loan To count private student loans toward repayment period, list them on consolidation application under the “Loans You Do Not Want to Consolidation” section.

30. Loans - Public Service Loan Forgiveness • 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 • StudentAid.gov/PublicService

31. Loans - Deferment & Forbearance Reasons

32. Default - What happens if you can’t afford your repayment? • Contact loan servicer to discuss options • Missing payments can have negative consequences If a loan becomes more than 270 days delinquent, the loan defaults leading to even more severe consequences

33. Default - Consequences of Default

34. Federal Loan Servicing Department role and responsibility

35. Servicing Landscape – “Define It” • Federal Loan Servicer • An entity that services Title IV loans owned by the Department of Education. These loans include, but are not limited to, William D. Ford Federal Direct Loan (Direct Loan) Program loans and Federal Family Education Loan (FFEL) Purchased Loans, more simply referred to as federally-owned loans. • “TIVAS” • An internal acronym used by FSA which stands for the Title IV Additional Servicers. In communications with schools, borrowers, and the financial aid community, FSA uses the term “federal loan servicers.” • Not-For-Profits (NFP) • Not-For-Profit awarded federal loan servicing contracts under the HCERA/SAFRA Not-For-Profit (NFP) Servicer Program solicitation.

36. Servicing Landscape – “Define It” Federally-Owned Loans William D. Ford Federal Direct Loan (Direct Loan) and FFELP Purchased Loans (PUT), held by the Department PUT Loans made under FFELP by lenders and subsequently purchased by ED Split Loan Servicing Borrowers who have more than one servicer of their Direct Loan and FFEL PUT (federally-owned loans)

37. Federal Loan Servicers – TIVAS • Origination and Disbursement System • Origination • Disbursement • Loan Allocation • Servicer Assignment • “Booked” Loan: occurs when the origination and disbursement system accepts an origination record; links p-note to the record and accepts actual disbursement. • The federal loan servicer is assigned upon “booking” of loan. * Direct Loan Servicing Center (ACS) Decommission

38. Federal Loan Servicers – NFP - Transfers • NFP Facts: • To seed the NFP servicers, we transferred Direct Loan borrower accounts that were assigned to the Direct Loan Servicing Center (ACS / Xerox). • When we transfer a student or parent borrower to a servicer, the new servicer will correspond with the borrower after the transferred loans have been fully loaded to the system. • As of April 2013 (due to the Sequestration), the implementation of additional NFP’s was placed on hold.

39. Federal Loan Servicers • All Federal Loan Servicers must comply with legislative and regulatory requirements. • Through the multi-servicer borrower-centric approach schools may experience different processes and procedures offered by the servicers. Schoolssee many; but Borrowers see ONE! • Together with our servicers, we work to serve borrowers and schools as efficiently as possible to: • Educate and inform borrowers of the tools and options available to assist in the management of their student loans • Offer multiple repayment options tailored to borrower preferences (i.e. online payments, ACH, check, etc.) • Provide self-service tools for borrowers and options to receive bills and/or correspondence electronically

40. Split Servicing • Borrowers with federally-owned loans serviced by more than one federal loan servicer. • Ongoing processes to resolve situations where a borrower’s federally-held loans are assigned to two or more federal servicers. • Federally-owned and commercial loans may still be split among servicers. • Consolidation sometimes viable option, but not in all circumstances. • .

41. Managing Change – Multi-Servicer Environment Requirement changes evolve from regulatory changes, policy updates, and new business decisions. • FedLoan (PHEAA) • MOHELA • Cornerstone • Aspire • Nelnet • ESA/Edfinancial • Granite State • OSLA • VSAC

42. Looking Back - Servicing Issues and Challenges Borrowers • Why did my loan get “sold” to a new servicer? • Loan status discrepancies • Payments made to prior servicer not applied timely • Confusion about repayment options • Application and documentation requirements • Selecting PAYE for new consolidations

43. Looking Back - Servicing Key Improvements Borrowers • Redesign of on-boarding communications • Coordination and collaboration with previous servicer • Extended call center hours for problem resolution • Experienced and dedicated resources to resolve data issues • Communicating with borrower in the way they choose • Targeted communications and options for recently transferred borrowers (to assist with delayed payment posting)

44. Looking Back - Servicing Key Improvements Borrowers • Increase Customer Awareness of IDR Plans • Implemented Electronic Income-Driven Application: • Can be used by borrowers with ED-held loans (Direct Loans or FFEL) • Can be used by borrowers with commercially held FFEL loans serviced by an entity that also services ED-held loans • On StudentLoan.gov • Retrieves the most recent tax information from two most recently completed tax years

45. Looking Back - Decisions to Standardize In order to provide the best service to our customers, our servicing contracts are structured to allow for servicer creativity and innovation. However, there are times when decisions are made to standardize our servicing processes. Why the need for consistency or standardization? • Standardization makes sense when differences in servicer processing cause different results to borrowers in the same circumstance. Examples: Decisions to Standardize • Forbearance Limits • Capitalization • Prepayments

46. Federal Loan Servicers

47. Contact Us There are several ways to contact the U.S. Department of Education to discuss one’s financial aid: • Online: StudentAid.gov • Telephone: 1-800-4-FED-AID • Email: StudentAid@ed.gov

48. Our Contact Information Elizabeth Coogan, Senior Advisor, Federal Student Aid Elizabeth.Coogan.@ed.gov 202-377-3825 Ian Foss, Program Specialist, Federal Student Aid Ian.Foss.@ed.gov 202-377-3681 Cynthia Battle, Program Manager, Federal Student Aid Cynthia.Battle@ed.gov 202-377-3261

49. Questions?