Income-Based Repayment IBR

1. Income-Based Repayment (IBR) Understanding the New Federal Student Loan Repayment Options

2. Presented by: Jeffrey E. Hanson, Ph.D. Director-Borrower Education Services Access Group

3. New Hope for Loan Repayment Income-Based Repayment (IBR) plan Loan Forgiveness for Public Service Employees program Other loan forgiveness programs Agenda Slide (new slide) At the end of this presentation you should have a general understanding of the newly signed into law Income-Based Repayment Program, loan forgiveness for public service and the loan forgiveness programs that were signed into law in the Higher Education Reauthorization Act of 2008. Agenda Slide (new slide) At the end of this presentation you should have a general understanding of the newly signed into law Income-Based Repayment Program, loan forgiveness for public service and the loan forgiveness programs that were signed into law in the Higher Education Reauthorization Act of 2008.

4. Income-Based Repayment(IBR) Income-Based Repayment is a new repayment plan for both FFELP and Direct borrowers For those of you who are not familiar, there are two loan programs in existence that essentially mirror each other. They are FFELP and DL. This is not a student decision it is a decision that is made at the institutional level. XXXX School is a DL or FFLEP school. For those of you who have undergraduate loans if you went to a DL school you did not pick a lender, you signed a promissory note and the money came to you through the school. For those of you who went to a FFEL school, you had the option to pick a lender and your funds were delivered to the school through the lender. Loans can be in either program and qualify for IBRIncome-Based Repayment is a new repayment plan for both FFELP and Direct borrowers For those of you who are not familiar, there are two loan programs in existence that essentially mirror each other. They are FFELP and DL. This is not a student decision it is a decision that is made at the institutional level. XXXX School is a DL or FFLEP school. For those of you who have undergraduate loans if you went to a DL school you did not pick a lender, you signed a promissory note and the money came to you through the school. For those of you who went to a FFEL school, you had the option to pick a lender and your funds were delivered to the school through the lender. Loans can be in either program and qualify for IBR

5. IBR � Who might qualify?Approx. Maximum AGI Needed to Qualify for IBR at Specified Debt (2009 Poverty Guidelines) This chart is a quick way for students to determine debt and income projections for eligibility This chart is a quick way for students to determine debt and income projections for eligibility

6. IBR � Who might qualify? Approx. Maximum AGI Needed to Qualify for IBR at Specified Debt (2009 Poverty Guidelines) Suggest having this be a hidden slide only shown if the audience would warrant it. Suggest having this be a hidden slide only shown if the audience would warrant it.

7. Income-Based Repayment (IBR) Available July 1, 2009 Can be used to repay: Federal Stafford Loans Federal Grad PLUS Loans (not available for repayment of Parent PLUS Loans) Federal Consolidation Loans (not available for repayment of Consolidation Loans that included payoff of a Parent PLUS) Must be have �Partial Financial Hardship� at time you select IBR Monthly payment is based on: Household AGI Household size HHS Poverty Guideline for state of residence

8. IBRPartial financial hardship exists when � Let�s try to break this down, for you number crunchers a numerical example is coming. To be experiencing partial financial hardship your payment calculated using the 10 year standard repayment plan must be greater than what your payment would be using 15% of your annual AGI above 150% of the poverty line for your family size. At this point we just want to understand the overriding concept. Later we will illustrate how this will actually play out. Additional Information for presenter: The �marriage penalty� was addressed through a technical amendment, but the borrower must file separately in order for his/her spouse�s income to be excluded from equation. Let�s try to break this down, for you number crunchers a numerical example is coming. To be experiencing partial financial hardship your payment calculated using the 10 year standard repayment plan must be greater than what your payment would be using 15% of your annual AGI above 150% of the poverty line for your family size. At this point we just want to understand the overriding concept. Later we will illustrate how this will actually play out. Additional Information for presenter: The �marriage penalty� was addressed through a technical amendment, but the borrower must file separately in order for his/her spouse�s income to be excluded from equation.

9. Portion of AGI Available for Loan Payment in IBR This slide is intended to help you understand visually what is said in words regarding the concept of �partial financial hardship�. In essence, we are trying to assess how much of your AGI should be available on an annual basis to repay federal student loan debt. Assume that your total AGI is represented by the sum of the RED, BLUE and GREEN areas. According to the IBR plan: 150% of the HHS poverty guideline is preserved annually for your basic living expenses and, thus, is unavailable for repaying your federal loan debt � that portion is represented by the area in RED The remainder of your AGI is represented by the areas in BLUE and GREEN Of that remaining AGI, 15% is considered to be available annually to repay your federal student loan debt � that portion is represented by the area in BLUE The area in GREEN is available for your other discretionary expensesThis slide is intended to help you understand visually what is said in words regarding the concept of �partial financial hardship�. In essence, we are trying to assess how much of your AGI should be available on an annual basis to repay federal student loan debt. Assume that your total AGI is represented by the sum of the RED, BLUE and GREEN areas. According to the IBR plan: 150% of the HHS poverty guideline is preserved annually for your basic living expenses and, thus, is unavailable for repaying your federal loan debt � that portion is represented by the area in RED The remainder of your AGI is represented by the areas in BLUE and GREEN Of that remaining AGI, 15% is considered to be available annually to repay your federal student loan debt � that portion is represented by the area in BLUE The area in GREEN is available for your other discretionary expenses

10. Income-Based RepaymentMore Details Monthly payment can be less than accrued interest (it allows for negative amortization) Unpaid interest that accrues on Subsidized Stafford debt will be subsidized for up to first 3 years in repayment using IBR Repayment period using IBR can extend beyond 10 years regardless of the amount of your eligible debt Any outstanding eligible loan balance is cancelled after 25 years of being �economically challenged�

11. IBR2009 HHS Poverty Guidelines

12. Sample IBR Calculation Using 2009 Poverty Guideline-$40,000 AGI Speakers notes have the specific numbers for the $60,000 example. If you are going to use one of the other columns you would need to replace the numbers from the slide above. Here is a numerical example. In order to simplify this lets focus on one example. Let�s focus on $60,000. With a debt of $60,000 the monthly calculation on a stand repayment plan would be $690, which is an annual payment of $8,280. Now lets take a look at how this would be calculated under IBR. We are making the assumption that the HH size is one, and this person is making $40,000 a year. As we explained earlier the poverty guideline for a household of 1 is $10,400 and 150% of that is $15,600. Thus we are left with $24,400. AGI less 150% of the poverty line. [pointing out wording in line 6] 15% of $24,400 is $3,660. That is the annual amount that you would have to pay for your loans under IBR. If Line 7, the annual amount under IBR is less than line 2 the annual amount calculated on a 10 yr plan you are experiencing financial hardship and therefore qualify for IBR. Your monthly payment based on this new calculation would be $305. Which is much less that $690. QUESTION: Why is it that the monthly payment stays the same for all debt levels? ANSWER - Monthly payment is a function of the 4 variables�AGI, household size, poverty guideline and state of residence�not debt. Debt is only used to determine eligibility for the program. These 4 variables will be reevaluated annually. ALTHOUGH THIS REPAYMENT PLAN WILL BENEFIT BORROWERS WITH HIGH DEBT AND LOW INCOME, IT IS LIKELY THAT ANY BORROWER WITH AN AGI THAT IS LESS THAN HIS/HER TOTAL ELIGIBLE STUDENT LOAN DEBT WILL QUALIFY FOR IBR AT LEAST IN THE FIRST YEAR(S) OF LOAN REPAYMENT. The last row of this chart shows the maximum amount one could earn and still qualify for IBR. Included in your handouts is a blank worksheet for you to calculate your own personal figures. Speakers notes have the specific numbers for the $60,000 example. If you are going to use one of the other columns you would need to replace the numbers from the slide above. Here is a numerical example. In order to simplify this lets focus on one example. Let�s focus on $60,000. With a debt of $60,000 the monthly calculation on a stand repayment plan would be $690, which is an annual payment of $8,280. Now lets take a look at how this would be calculated under IBR. We are making the assumption that the HH size is one, and this person is making $40,000 a year. As we explained earlier the poverty guideline for a household of 1 is $10,400 and 150% of that is $15,600. Thus we are left with $24,400. AGI less 150% of the poverty line. [pointing out wording in line 6] 15% of $24,400 is $3,660. That is the annual amount that you would have to pay for your loans under IBR. If Line 7, the annual amount under IBR is less than line 2 the annual amount calculated on a 10 yr plan you are experiencing financial hardship and therefore qualify for IBR. Your monthly payment based on this new calculation would be $305. Which is much less that $690. QUESTION: Why is it that the monthly payment stays the same for all debt levels? ANSWER - Monthly payment is a function of the 4 variables�AGI, household size, poverty guideline and state of residence�not debt. Debt is only used to determine eligibility for the program. These 4 variables will be reevaluated annually. ALTHOUGH THIS REPAYMENT PLAN WILL BENEFIT BORROWERS WITH HIGH DEBT AND LOW INCOME, IT IS LIKELY THAT ANY BORROWER WITH AN AGI THAT IS LESS THAN HIS/HER TOTAL ELIGIBLE STUDENT LOAN DEBT WILL QUALIFY FOR IBR AT LEAST IN THE FIRST YEAR(S) OF LOAN REPAYMENT. The last row of this chart shows the maximum amount one could earn and still qualify for IBR. Included in your handouts is a blank worksheet for you to calculate your own personal figures.

13. Beware of Negative AmortizationAGI = $40,000 Now let�s talk about negative amortization that we have mentioned a few times before, this slide illustrates it. In the previous example, based on the $60,000 debt, we said that the monthly payment based on a 10 yr plan would be $690. For any of you who are familiar with amortization tables you know that when you make a payment every month some goes to principal and some goes to interest. In this example, of the $690: $340 would go to interest and $350 would go to principal. Therefore at the end of the month your new outstanding balance would be $59,650. If you are paying under IBR where the calculated payment is $305 month you are not even paying enough to pay off the interest that accrued this month and you are certainly not making any payment toward principal. So at the end of the month you have $35 of unpaid interest and your balance is still $60,000 so you haven�t made a dent in repaying your principal. Remember, that we said earlier interest will be paid for the first three years. Remember that is only the subsidized portion of the interest. The maximum amount you can borrow each year is $20,500. Of which only $8,500 is subsidized, therefore you will be responsible for more than half the interest unless your loans are forgiven. Take out the finaid chart, turn to page 3 and look at payment number 60. this much int (get from Jenn) Please note the minimum AGI needed to eliminate negative amortization. Based on the concept of �partial financial hardship,� if a borrower qualifies for IBR, then the IBR monthly payment must be the maximum amount the borrower can afford to pay each month. If they were paying more this amount, one might wonder how could they afford to pay a higher amount, perhaps using credit cards or other financing means which would cost them more than $35/month If debt is higher, the potential for negative amortization is greater at any given level of AGI using IBR because the IBR monthly payment is unaffected by the level of debt In other words, it would take longer for borrowers with higher debt levels to reach a point where they�re not experiencing negative amortization based on a given level of AGI. IBR is likely to be a very popular repayment program if documentation isn�t excessive.Now let�s talk about negative amortization that we have mentioned a few times before, this slide illustrates it. In the previous example, based on the $60,000 debt, we said that the monthly payment based on a 10 yr plan would be $690. For any of you who are familiar with amortization tables you know that when you make a payment every month some goes to principal and some goes to interest. In this example, of the $690: $340 would go to interest and $350 would go to principal. Therefore at the end of the month your new outstanding balance would be $59,650. If you are paying under IBR where the calculated payment is $305 month you are not even paying enough to pay off the interest that accrued this month and you are certainly not making any payment toward principal. So at the end of the month you have $35 of unpaid interest and your balance is still $60,000 so you haven�t made a dent in repaying your principal. Remember, that we said earlier interest will be paid for the first three years. Remember that is only the subsidized portion of the interest. The maximum amount you can borrow each year is $20,500. Of which only $8,500 is subsidized, therefore you will be responsible for more than half the interest unless your loans are forgiven. Take out the finaid chart, turn to page 3 and look at payment number 60. this much int (get from Jenn) Please note the minimum AGI needed to eliminate negative amortization. Based on the concept of �partial financial hardship,� if a borrower qualifies for IBR, then the IBR monthly payment must be the maximum amount the borrower can afford to pay each month. If they were paying more this amount, one might wonder how could they afford to pay a higher amount, perhaps using credit cards or other financing means which would cost them more than $35/month If debt is higher, the potential for negative amortization is greater at any given level of AGI using IBR because the IBR monthly payment is unaffected by the level of debt In other words, it would take longer for borrowers with higher debt levels to reach a point where they�re not experiencing negative amortization based on a given level of AGI. IBR is likely to be a very popular repayment program if documentation isn�t excessive.

14. IBRLoan Cancellation After 25 Years Any outstanding eligible FFEL or Direct loan balance (other than PLUS) is cancelled after 25 years. To qualify, you must have been �economically challenged� during ALL of the 25 year repayment period. To be �economically challenged,� you must have used IBR during a portion of the repayment period, AND when not using IBR you: Made monthly loan payments using Income Contingent Repayment (ICR), or Made monthly payments at least equal to the amount required using the Standard 10-Year Repayment Plan, or Were in an Economic Hardship deferment. Any loan amount that is cancelled may be taxable in the calendar year in which it is cancelled. As I mentioned earlier, loan cancellation is an entitlement � it is NOT subject to congressional budget appropriations I know many of you are planning to take advantage of public service loan forgiveness, which we�re going to be discussing very shortly. However, I want to point out that those of you who will be taking lower paying jobs that do not qualify for public service loan forgiveness may still qualify for some relief on your loan debt. If you have a loan balance left over after 25 years of repayment, the balance will be forgiven IF you are �economically challenged� throughout your repayment. Borrower likely will have to be in IBR for more than 15 years, however, to benefit from any loan cancellation. Once they leave IBR, they would have to make payments according to these guidelines in order to meet the requirements for loan cancellation after 25 years. As I mentioned earlier, loan cancellation is an entitlement � it is NOT subject to congressional budget appropriations I know many of you are planning to take advantage of public service loan forgiveness, which we�re going to be discussing very shortly. However, I want to point out that those of you who will be taking lower paying jobs that do not qualify for public service loan forgiveness may still qualify for some relief on your loan debt. If you have a loan balance left over after 25 years of repayment, the balance will be forgiven IF you are �economically challenged� throughout your repayment. Borrower likely will have to be in IBR for more than 15 years, however, to benefit from any loan cancellation. Once they leave IBR, they would have to make payments according to these guidelines in order to meet the requirements for loan cancellation after 25 years.

15. IBRA Few Things to Consider Can reduce minimum monthly payment Will increase total cost of debt Does not replace Income Sensitive or Income Contingent Repayment options Extended Repayment � is an option that avoids negative amortization and annual income verification While we realize choosing IBR may be a necessary choice in order to afford their basic monthly living expenses along with their monthly loan payment. Some things to consider are that Borrowers who select IBR will pay more over a longer period of time, increasing the amount of interest that accrues and must be paid. If you do not qualify for Public Interest Loan Forgiveness after 10 years, (which we will discuss next), they could end up paying much more on their loans than if they chose a shorter repayment program. The Extended Repayment Plan does not require annual review by the loan holder of the monthly payment amount or eligibility for the payment plan�this may make it easier for the borrower to manage than IBR IBR is not the only way to reduce monthly payments Borrowers need to analyze their options as I will illustrate on the next slide While we realize choosing IBR may be a necessary choice in order to afford their basic monthly living expenses along with their monthly loan payment. Some things to consider are that Borrowers who select IBR will pay more over a longer period of time, increasing the amount of interest that accrues and must be paid. If you do not qualify for Public Interest Loan Forgiveness after 10 years, (which we will discuss next), they could end up paying much more on their loans than if they chose a shorter repayment program. The Extended Repayment Plan does not require annual review by the loan holder of the monthly payment amount or eligibility for the payment plan�this may make it easier for the borrower to manage than IBR IBR is not the only way to reduce monthly payments Borrowers need to analyze their options as I will illustrate on the next slide

16. Extended Repayment vs. IBRAGI = $40,000 Here we are going to compare three repayment options. This chart can give you a better idea of the monthly payments required in the different repayment programs Let�s follow the $60,000 example again. Under standard the payment is $690, under extended $416 and under IBR $305. While at first glance the $305 may look enticing, remember this payment is based on AGI and could exceed the $416 payment before the 25 year repayment period is up. If however you choose extended repayment option to reduce monthly loan payment realize that this payment will not count toward the IBR loan cancellation benefit. Leaving the IBR program prior to the 25 yr cancellation benefit or the payoff, you could pay more in total interest in the long run due to any accrued interest that results from negative amortization. You can though, go from IBR to Standard Repayment and then go back to IBR Just because you �qualify� for IBR does not mean you should just assume that it�s the best plan for you. This concludes our explanation of IBR. Does anyone have questions before we move on to Public Service Loan Forgiveness? Additional information for speaker: No total payout is shown because it is very complicated � would need to be calculated using present value figures to account for the time value of money Here we are going to compare three repayment options. This chart can give you a better idea of the monthly payments required in the different repayment programs Let�s follow the $60,000 example again. Under standard the payment is $690, under extended $416 and under IBR $305. While at first glance the $305 may look enticing, remember this payment is based on AGI and could exceed the $416 payment before the 25 year repayment period is up. If however you choose extended repayment option to reduce monthly loan payment realize that this payment will not count toward the IBR loan cancellation benefit. Leaving the IBR program prior to the 25 yr cancellation benefit or the payoff, you could pay more in total interest in the long run due to any accrued interest that results from negative amortization. You can though, go from IBR to Standard Repayment and then go back to IBR Just because you �qualify� for IBR does not mean you should just assume that it�s the best plan for you. This concludes our explanation of IBR. Does anyone have questions before we move on to Public Service Loan Forgiveness? Additional information for speaker: No total payout is shown because it is very complicated � would need to be calculated using present value figures to account for the time value of money

17. IBRPros and Cons Potential Pros Lowest initial monthly loan payment Possible to exclude spouse�s income ED will pay unpaid interest on subsidized Stafford for up to 3 yrs Loan cancellation after 25 years of eligible payments Entitlement Potential Cons Increased interest will accrue and may have negative amortization If married might need to file separate tax returns Unpaid interest will be capitalized at some point Annual income and family size verification required Monthly payments could change each year Suggested new slide. Throughout this presentation we have discussed each of these IBR pros and cons. Here is in a format for you to be able to evaluation your personal situation and analyze each of the pros and cons and make an educated decision regarding the repayment plan that you choose. Remember, IBR is an entitlement program. Selecting this option will result in the lowest monthly payment possible. However on the flip side this could result in additional costs due to the negative amortization. It is possible to exclude you spouses income but you will need to file a separate tax return in order to do so. The ED will pay interest accruing on the subsidized loans for up to 3 years. And finally remember that you would have to qualify and participate in IBR for a minimum of 15 years to receive any cancellation benefits.Suggested new slide. Throughout this presentation we have discussed each of these IBR pros and cons. Here is in a format for you to be able to evaluation your personal situation and analyze each of the pros and cons and make an educated decision regarding the repayment plan that you choose. Remember, IBR is an entitlement program. Selecting this option will result in the lowest monthly payment possible. However on the flip side this could result in additional costs due to the negative amortization. It is possible to exclude you spouses income but you will need to file a separate tax return in order to do so. The ED will pay interest accruing on the subsidized loans for up to 3 years. And finally remember that you would have to qualify and participate in IBR for a minimum of 15 years to receive any cancellation benefits.

18. Loan Forgiveness forPublic Service Employees Finally�the moment most of you have been waiting for�we�re going to talk about Forgiveness for Public Service Employees Unlike IBR where your loans can be in either the FFEL or DL program, your loans MUST be in the DL program in order to qualify for Public Service Loan ForgivenessFinally�the moment most of you have been waiting for�we�re going to talk about Forgiveness for Public Service Employees Unlike IBR where your loans can be in either the FFEL or DL program, your loans MUST be in the DL program in order to qualify for Public Service Loan Forgiveness

19. Public Service Loan ForgivenessNew Direct Loan Forgiveness Program Your Federal Direct Loans are not in default You�ve worked full-time for a total of 120 months in a qualifying public service position on or after October 1, 2007 You�ve made 120 qualifying loan payments on Federal Direct Loans during period of qualifying public service employment Balance of interest and principal due on any eligible Federal Direct Loans will be cancelled by U.S. Department of Education if you meet the following three conditions: Your Federal Direct Loans are not in default You have worked full-time for a total of 120 months in a qualifying public service position on or after October 1, 2007 You have made 120 qualifying loan payments on Federal Direct Loans during the period of qualifying public service employment I want to point out two key phrases � which will be explained in the upcoming slides. Qualifying public service employment, and Qualifying monthly loan payments As mentioned earlier, this program is an entitlement � as is the loan cancellation provision in IBR . It is not subject to budget appropriations This is the most comprehensive of any federal loan forgiveness program to date Unlike IBR, this program is specifically designed for borrowers with low income and high debt working full-time in qualifying public service employment Who by career choice, have low income As you will see, this is an �all or nothing� benefit Important to note that per the statute, payments prior to October 1, 2007 are not considered �qualifying monthly loan payments.� In other words, they do not count toward the 120 total needed to earn loan forgiveness in this program. This is not a retroactive benefit The 120 months do NOT have to be consecutive Balance of interest and principal due on any eligible Federal Direct Loans will be cancelled by U.S. Department of Education if you meet the following three conditions: Your Federal Direct Loans are not in default You have worked full-time for a total of 120 months in a qualifying public service position on or after October 1, 2007 You have made 120 qualifying loan payments on Federal Direct Loans during the period of qualifying public service employment I want to point out two key phrases � which will be explained in the upcoming slides. Qualifying public service employment, and Qualifying monthly loan payments As mentioned earlier, this program is an entitlement � as is the loan cancellation provision in IBR . It is not subject to budget appropriations This is the most comprehensive of any federal loan forgiveness program to date Unlike IBR, this program is specifically designed for borrowers with low income and high debt working full-time in qualifying public service employment Who by career choice, have low income As you will see, this is an �all or nothing� benefit Important to note that per the statute, payments prior to October 1, 2007 are not considered �qualifying monthly loan payments.� In other words, they do not count toward the 120 total needed to earn loan forgiveness in this program. This is not a retroactive benefit The 120 months do NOT have to be consecutive

20. Public Service Loan ForgivenessGeneral Provisions Effective for qualifying monthly Direct Loan payments made on or after October 1, 2007 Loans eligible for forgiveness are limited to: Federal Direct Stafford Loans Federal Direct PLUS Loans Federal Direct Consolidation Loans Any amount cancelled in this program will NOT be taxable in the calendar year it is cancelled Public Service Loan Forgiveness became effective on October 1, 2007 The loans that are eligible for loan forgiveness are listed on the slide There is no distinction between GPLUS and PLUS, as there is for IBR Included in your handouts in the letter from the Department of the Treasury stating any amount cancelled will not be cancelled. This was clarified by virtue of this letter on September 19, 2008. If asked � Why isn�t this program available in both DL and FFEL The CCRAA was a budget reconciliation bill It saved money but allows for spending in other areas Reduced subsidies to lenders but increased Pell and allowed for this forgiveness program It is our understanding from statements made by ED that federal budget scoring rules made it too costly for Congress to make this program available to FFEL borrowers Assumption is that the DL program is less expensive Public Service Loan Forgiveness became effective on October 1, 2007 The loans that are eligible for loan forgiveness are listed on the slide There is no distinction between GPLUS and PLUS, as there is for IBR Included in your handouts in the letter from the Department of the Treasury stating any amount cancelled will not be cancelled. This was clarified by virtue of this letter on September 19, 2008. If asked � Why isn�t this program available in both DL and FFEL The CCRAA was a budget reconciliation bill It saved money but allows for spending in other areas Reduced subsidies to lenders but increased Pell and allowed for this forgiveness program It is our understanding from statements made by ED that federal budget scoring rules made it too costly for Congress to make this program available to FFEL borrowers Assumption is that the DL program is less expensive

21. Public Service Loan ForgivenessReconsolidation in Direct Allows you to reconsolidate any existing FFELP Federal Consolidation Loan (FCL) in the Federal Direct Loan Program to take advantage of the new public service loan forgiveness program For those of you who have all or some of your loans in the FFEL program, you may still participate in this program by consolidating your loans into the Direct Loan program. Effective July 1, 2008, whether or not you have already consolidated your loans in FFEL, you can consolidate (or re-consolidate) into the DL program in order to be eligible for this program. DL borrowers can begin making qualifying payments today � as of 10/1/07 FFEL borrowers can also make qualifying payments once they consolidate into DL Define �re-consolidation� These new provisions supersede previous rules which require that a borrower be in preclaims or in default before they can consolidate only FFEL loans into DL If a borrower has already consolidated all FFEL loans, they typically would not be permitted to consolidate into DL. This new provision allows them to do so on/after 7/1/08 It is unlikely that there be any oversight to ensure that borrowers are reconsolidating for the purpose of taking advantage of the loan forgiveness program? For those of you who have all or some of your loans in the FFEL program, you may still participate in this program by consolidating your loans into the Direct Loan program. Effective July 1, 2008, whether or not you have already consolidated your loans in FFEL, you can consolidate (or re-consolidate) into the DL program in order to be eligible for this program. DL borrowers can begin making qualifying payments today � as of 10/1/07 FFEL borrowers can also make qualifying payments once they consolidate into DL Define �re-consolidation� These new provisions supersede previous rules which require that a borrower be in preclaims or in default before they can consolidate only FFEL loans into DL If a borrower has already consolidated all FFEL loans, they typically would not be permitted to consolidate into DL. This new provision allows them to do so on/after 7/1/08 It is unlikely that there be any oversight to ensure that borrowers are reconsolidating for the purpose of taking advantage of the loan forgiveness program?

22. Public Service Loan ForgivenessQualifying Payment Requirements You must be working full-time in an eligible public service position, AND Make qualifying payments using: Income Contingent Repayment, or Income Based Repayment, or Standard 10-year Fixed Repayment plan, or Other plan, but monthly payment must be at least equal to amount required using Standard 10-year Fixed Repayment plan You must be working in a full-time eligible public service position. In your handouts we have included a list of the public service positions that were listed in the law. Making monthly loan payments for 120 months on the eligible Federal Direct Loan(s) that are: Based on the Income Contingent Repayment (ICR) plan or the new IBR plan, or Not less than the monthly amount calculated using Standard Repayment based on a 10-year repayment period Let me provide you with a further explanation of last bullet: DL will place borrowers into the maximum loan repayment term for which they�re eligible This payment plan may result in payments less that 10-year standard repayment, which will NOT be considered qualifying payments for forgiveness Students will have to request a shorter payment plan, or ask that 10-year payment be calculated so they can make that payment amount. The amount your paying regardless of the repayment plan you�re on needs to be equal to 10-year repayment plan. You can be on a longer plan as long as you�re making payments >/= to 10 year plan amount. Economic Hardship Deferment does not count as a qualifying payment as it does for IBR forgiveness QUESTION: What if your required payment is $0? This is being discussed in Negotiated Rulemaking because $0 payment counts for ICR but may not for Public Service forgiveness because there has to be 120 actual payments ED argues that is should not count, negotiators argue that it should. Historically, very few borrowers take advantage of loan cancellation through ICR (DL) because they end up paying off the loan before the end of 25 years.You must be working in a full-time eligible public service position. In your handouts we have included a list of the public service positions that were listed in the law. Making monthly loan payments for 120 months on the eligible Federal Direct Loan(s) that are: Based on the Income Contingent Repayment (ICR) plan or the new IBR plan, or Not less than the monthly amount calculated using Standard Repayment based on a 10-year repayment period Let me provide you with a further explanation of last bullet: DL will place borrowers into the maximum loan repayment term for which they�re eligible This payment plan may result in payments less that 10-year standard repayment, which will NOT be considered qualifying payments for forgiveness Students will have to request a shorter payment plan, or ask that 10-year payment be calculated so they can make that payment amount. The amount your paying regardless of the repayment plan you�re on needs to be equal to 10-year repayment plan. You can be on a longer plan as long as you�re making payments >/= to 10 year plan amount. Economic Hardship Deferment does not count as a qualifying payment as it does for IBR forgiveness QUESTION: What if your required payment is $0? This is being discussed in Negotiated Rulemaking because $0 payment counts for ICR but may not for Public Service forgiveness because there has to be 120 actual payments ED argues that is should not count, negotiators argue that it should. Historically, very few borrowers take advantage of loan cancellation through ICR (DL) because they end up paying off the loan before the end of 25 years.

23. Public Service Loan ForgivenessAdditional Eligibility Provisions 120 months do NOT have to be consecutive You must be working full-time in qualifying public service position at time of forgiveness Loan payments made on any loan prior to October 1, 2007 do NOT count toward the 120-month requirement Loan payments on non-eligible loans (e.g., FFELP loans, Federal Perkins Loans) do NOT count toward 120-month requirement It�s ok to read this slide in a conversational way � speak to it without actually reading it word for word Your 120 qualifying months do NOT have to be consecutive You must be working in qualifying public service position, which are listed on the next few slides, during the 120 months and at time of loan forgiveness Loan payments made prior to October 1, 2007 do NOT count toward the 120-month requirement The program is not retroactive Loan payments on non-eligible loans (e.g., FFELP loans, Federal Perkins Loans) do NOT count toward the 120-month requirement Perkins loans can be consolidated and then included in the forgiveness THIS IS A PROGRAM FOR A PERSON INTENDING TO MAKE THEIR CAREER IN PUBLIC SERVICE! It�s ok to read this slide in a conversational way � speak to it without actually reading it word for word Your 120 qualifying months do NOT have to be consecutive You must be working in qualifying public service position, which are listed on the next few slides, during the 120 months and at time of loan forgiveness Loan payments made prior to October 1, 2007 do NOT count toward the 120-month requirement The program is not retroactive Loan payments on non-eligible loans (e.g., FFELP loans, Federal Perkins Loans) do NOT count toward the 120-month requirement Perkins loans can be consolidated and then included in the forgiveness THIS IS A PROGRAM FOR A PERSON INTENDING TO MAKE THEIR CAREER IN PUBLIC SERVICE!

24. Public Service Loan ForgivenessDefinition of �Public Service� In general, it�s full-time employment in: A 501(c)(3) organization that is exempt from taxation under section 501(a) of the Internal Revenue Code of 1986, or Government (federal, state, local, tribal) agency Suggest removing this slide and including as handout. Suggest removing this slide and including as handout.

25. Public Service Loan ForgivenessSample Benefit Scenario (AGI = $40,000) This example is for a typical law student working in public service using the 2008 poverty guidelines Subsidized Stafford = 3 years @ $8,500/year = $25,500 Unsubsidized Stafford = 3 years @$10,000/year = $30,000 + $4,500 accrued interest = $34,500 Total Stafford debt = $60,000 In order to perform calculation we had to make some assumptions AGI will increase at 3% Poverty Guideline will increase at 3% CPI will increase at 3% This calculation was performed using the Mark Kantrowitz�s calculator from www.finaid.org/calculators Takes into consideration the time value of money The $58,140 is NOT taxable income If a borrower leaves the program prior to 10 years, it is likely that he/she will owe nearly as much as when he/she started repayment, if not more, due to the initial accrued interest due to negative amortization in the first few years of repayment and minimal reduction in the original loan principal. REQUEST UPDATED EXAMPLE FROM JEFF Updated to be more conversationalThis example is for a typical law student working in public service using the 2008 poverty guidelines Subsidized Stafford = 3 years @ $8,500/year = $25,500 Unsubsidized Stafford = 3 years @$10,000/year = $30,000 + $4,500 accrued interest = $34,500 Total Stafford debt = $60,000 In order to perform calculation we had to make some assumptions AGI will increase at 3% Poverty Guideline will increase at 3% CPI will increase at 3% This calculation was performed using the Mark Kantrowitz�s calculator from www.finaid.org/calculators Takes into consideration the time value of money The $58,140 is NOT taxable income If a borrower leaves the program prior to 10 years, it is likely that he/she will owe nearly as much as when he/she started repayment, if not more, due to the initial accrued interest due to negative amortization in the first few years of repayment and minimal reduction in the original loan principal. REQUEST UPDATED EXAMPLE FROM JEFF Updated to be more conversational

26. Public Service Loan ForgivenessSample Benefit Scenario (AGI = $40,000) This example is for a typical law student working in public service using the 2008 poverty guidelines Subsidized Stafford = 3 years @ $8,500/year = $25,500 Unsubsidized Stafford = 3 years @$10,000/year = $30,000 + $4,500 accrued interest = $34,500 Total Stafford debt = $60,000 In order to perform calculation we had to make some assumptions AGI will increase at 3% Poverty Guideline will increase at 3% CPI will increase at 3% This calculation was performed using the Mark Kantrowitz�s calculator from www.finaid.org/calculators Takes into consideration the time value of money Right now the $58,140 is NOT taxable income If a borrower leaves the program prior to 10 years, it is likely that he/she will owe nearly as much as when he/she started repayment, if not more, due to the initial accrued interest due to negative amortization in the first few years of repayment and minimal reduction in the original loan principal. REQUEST UPDATED EXAMPLE FROM JEFF Updated to be more conversationalThis example is for a typical law student working in public service using the 2008 poverty guidelines Subsidized Stafford = 3 years @ $8,500/year = $25,500 Unsubsidized Stafford = 3 years @$10,000/year = $30,000 + $4,500 accrued interest = $34,500 Total Stafford debt = $60,000 In order to perform calculation we had to make some assumptions AGI will increase at 3% Poverty Guideline will increase at 3% CPI will increase at 3% This calculation was performed using the Mark Kantrowitz�s calculator from www.finaid.org/calculators Takes into consideration the time value of money Right now the $58,140 is NOT taxable income If a borrower leaves the program prior to 10 years, it is likely that he/she will owe nearly as much as when he/she started repayment, if not more, due to the initial accrued interest due to negative amortization in the first few years of repayment and minimal reduction in the original loan principal. REQUEST UPDATED EXAMPLE FROM JEFF Updated to be more conversational

27. Public Service Loan ForgivenessSample Benefit Scenario (AGI = $40,000) This example is for a typical law student working in public service using the 2008 poverty guidelines Subsidized Stafford = 3 years @ $8,500/year = $25,500 Unsubsidized Stafford = 3 years @$10,000/year = $30,000 + $4,500 accrued interest = $34,500 Total Stafford debt = $60,000 In order to perform calculation we had to make some assumptions AGI will increase at 3% Poverty Guideline will increase at 3% CPI will increase at 3% This calculation was performed using the Mark Kantrowitz�s calculator from www.finaid.org/calculators Takes into consideration the time value of money Right now the $58,140 is NOT taxable income If a borrower leaves the program prior to 10 years, it is likely that he/she will owe nearly as much as when he/she started repayment, if not more, due to the initial accrued interest due to negative amortization in the first few years of repayment and minimal reduction in the original loan principal. REQUEST UPDATED EXAMPLE FROM JEFF Updated to be more conversationalThis example is for a typical law student working in public service using the 2008 poverty guidelines Subsidized Stafford = 3 years @ $8,500/year = $25,500 Unsubsidized Stafford = 3 years @$10,000/year = $30,000 + $4,500 accrued interest = $34,500 Total Stafford debt = $60,000 In order to perform calculation we had to make some assumptions AGI will increase at 3% Poverty Guideline will increase at 3% CPI will increase at 3% This calculation was performed using the Mark Kantrowitz�s calculator from www.finaid.org/calculators Takes into consideration the time value of money Right now the $58,140 is NOT taxable income If a borrower leaves the program prior to 10 years, it is likely that he/she will owe nearly as much as when he/she started repayment, if not more, due to the initial accrued interest due to negative amortization in the first few years of repayment and minimal reduction in the original loan principal. REQUEST UPDATED EXAMPLE FROM JEFF Updated to be more conversational

28. Public Service Loan ForgivenessPoints to Ponder You�re required to work full-time in a qualifying public service position for at least 10 years You must make qualifying monthly loan payments during the entire 10 year period of public service employment Value added benefits of FFEL vs. DL This forgiveness program can be very helpful to those who plan to make a career of public service and who have high federal student loan debt relative to their income however, Do you know where will you be in 10 years and what you�ll be doing? I don�t! How do you know your life isn�t going to necessitate that you cant work in our dream job? How do you know that your idea of your dream job isn�t going to change? Will the borrower be able to make �qualifying� payments throughout the entire 10-year period? This is an �all or nothing� benefit. In other words, There is no partial benefit for putting in a few years of eligible public service employment. You must work for 120 months in qualifying public service employment AND be making qualifying payments each of those 120 months to get any benefit from this program. Based on the information on this slide, you may not ultimately qualify for loan forgiveness. Therefore, one of the concerns is that students will not focus enough on reducing their borrowing and will be left with larger debt loans after graduation. Value added benefits of DL vs. FFEL Money saving borrower benefits/payment incentives on your existing FFELP loans? Positive customer service experience with your current FFELP loan holder/servicer? Other value-added services offered by your current loan holder/servicer? This forgiveness program can be very helpful to those who plan to make a career of public service and who have high federal student loan debt relative to their income however, Do you know where will you be in 10 years and what you�ll be doing? I don�t! How do you know your life isn�t going to necessitate that you cant work in our dream job? How do you know that your idea of your dream job isn�t going to change? Will the borrower be able to make �qualifying� payments throughout the entire 10-year period? This is an �all or nothing� benefit. In other words, There is no partial benefit for putting in a few years of eligible public service employment. You must work for 120 months in qualifying public service employment AND be making qualifying payments each of those 120 months to get any benefit from this program. Based on the information on this slide, you may not ultimately qualify for loan forgiveness. Therefore, one of the concerns is that students will not focus enough on reducing their borrowing and will be left with larger debt loans after graduation. Value added benefits of DL vs. FFEL Money saving borrower benefits/payment incentives on your existing FFELP loans? Positive customer service experience with your current FFELP loan holder/servicer? Other value-added services offered by your current loan holder/servicer?

29. Additional Federal Loan Forgiveness Programs The Higher Education Opportunity Act of 2008 (PL. 110-315) created four new federal student loan forgiveness and repayment programs John R. Justice Prosecutors and Defenders Incentive Act Legal Assistance Loan Repayment Program Loan forgiveness for service in areas of national need Perkins Loan cancellation for public service including federal public defenders Programs are subject to budget appropriation Suggest this and the next 3 slides are removed and replaced with the following 3 slides.Suggest this and the next 3 slides are removed and replaced with the following 3 slides.

30. Public Service Loan Forgiveness Pros and Cons Potential Pros May make it possible financially for you to pursue public service career Portion of your debt may be forgiven Entitlement Potential Cons �All or nothing� benefit; must put in full 10 years Only Direct Loans can be forgiven�you�ll need to consolidate FFEL loans into Direct Loan Program to be eligible Will you have debt left to forgive? No confirmation that employment qualifies Suggested new slide. Throughout this presentation we have discussed each of these IBR pros and cons. Here is in a format for you to be able to evaluation your personal situation and analyze each of the pros and cons and make an educated decision regarding the repayment plan that you choose. Remember, IBR is an entitlement program. Selecting this option will result in the lowest monthly payment possible. However on the flip side this could result in additional costs due to the negative amortization. It is possible to exclude you spouses income but you will need to file a separate tax return in order to do so. The ED will pay interest accruing on the subsidized loans for up to 3 years. And finally remember that you would have to qualify and participate in IBR for a minimum of 15 years to receive any cancellation benefits.Suggested new slide. Throughout this presentation we have discussed each of these IBR pros and cons. Here is in a format for you to be able to evaluation your personal situation and analyze each of the pros and cons and make an educated decision regarding the repayment plan that you choose. Remember, IBR is an entitlement program. Selecting this option will result in the lowest monthly payment possible. However on the flip side this could result in additional costs due to the negative amortization. It is possible to exclude you spouses income but you will need to file a separate tax return in order to do so. The ED will pay interest accruing on the subsidized loans for up to 3 years. And finally remember that you would have to qualify and participate in IBR for a minimum of 15 years to receive any cancellation benefits.

31. A Few Final Comments ...

32. Federal Loan Repayment PlansFive Options Standard (Fixed) Repayment Graduated Repayment Extended Repayment Income-Sensitive Repayment (FFELP) or Income Contingent Repayment (FDLP) Income-Based Repayment (available 7/1/2009) Lenders are required to provide Standard (fixed), Graduated, Extended, and Income Sensitive Payment plans for Federal Stafford/PLUS Loans. They also will be required to offer Income-Based Repayment beginning July 1, 2009. Payment plan information will be sent by loan holder/servicer 45-60 days prior to the end of grace period on a Federal Stafford Loan and immediately upon final disbursement of a Federal PLUS Loan Standard (fixed) payment plan with a 10-year repayment period is assigned by loan holder/servicer if borrower does not specify what plan they want by returning their repayment disclosure that they will receive near the end of their grace period - Standard repayment typically will cost you less in total interest paid because a greater percentage of the loan principal balance is being paid from the very beginning of repayment. - To change the repayment plan you have selected, contact your loan holder/servicer. The loan holder/servicer should be able to provide you with estimated financial calculations to help you determine which plan is best for you. - You also can use the loan repayment calculators on the Access Group Web site at AccessGroup.Org. Lenders are required to provide Standard (fixed), Graduated, Extended, and Income Sensitive Payment plans for Federal Stafford/PLUS Loans. They also will be required to offer Income-Based Repayment beginning July 1, 2009. Payment plan information will be sent by loan holder/servicer 45-60 days prior to the end of grace period on a Federal Stafford Loan and immediately upon final disbursement of a Federal PLUS Loan Standard (fixed) payment plan with a 10-year repayment period is assigned by loan holder/servicer if borrower does not specify what plan they want by returning their repayment disclosure that they will receive near the end of their grace period - Standard repayment typically will cost you less in total interest paid because a greater percentage of the loan principal balance is being paid from the very beginning of repayment. - To change the repayment plan you have selected, contact your loan holder/servicer. The loan holder/servicer should be able to provide you with estimated financial calculations to help you determine which plan is best for you. - You also can use the loan repayment calculators on the Access Group Web site at AccessGroup.Org.

33. For more information on IBR and Public Service Loan Forgiveness �Project on Student Debt� has created a special Website specifically about IBR at: IBRinfo.org Equal Justice Works has information about both programs at: EqualJusticeWorks.org Calculators are available at: FinAid.Org/calculators, IBRinfo.org A scholarly paper has been written by Philip G. Schrag that focuses on the evolution of the Public Service Loan Forgiveness Program: "Federal Student Loan Repayment Assistance for Public Interest Lawyers and other Employees of Governments and Nonprofit Organizations,� Hofstra Law Review, Vol. 36, Fall 2007

34. For further discussion,contact � Jeffrey E. Hanson, Ph.D. Director, Borrower Education Services Access Group P.O. Box 7430 Wilmington, DE 19803 (800) 282-1550, ext. 4196 jhanson@accessgroup.org

35. Thank You!