1 / 68

Helping Students Succeed in Repayment

Helping Students Succeed in Repayment. Objectives. Discuss repayment options available to students. Share how you can help prepare your students for repayment. Discuss the consequences of delinquency and default. Non income-driven. Income-driven. Income-Based

jean
Download Presentation

Helping Students Succeed in Repayment

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Helping Students Succeed in Repayment

  2. Objectives Discuss repayment options available to students Share how you can help prepare your students for repayment Discuss the consequences of delinquency and default

  3. Non income-driven Income-driven Income-Based Pay As You Earn Income-Contingent Income-Sensitive Repayment Plans • Standard • Graduated • Extended • Alternative

  4. Standard Repayment • Direct and FFELP loan borrowers • Equal monthly payments of at least $50 for up to 10 years • Borrowers will automatically be enrolled in the standard repayment plan Option for borrowers who want to repay loans in the shortest time with the lowest amount of interest accrued

  5. Standard Repayment 1An unsubsidized Stafford loan at 6.8% interest, with a 10-year amortized repayment plan.

  6. Graduated Repayment • Direct and FFELP loan borrowers • Monthly payments start lower and gradually increase over time for up to 10 years • The monthly payment will never be less than the amount of interest that accrues between payments Option for borrowers who have less cash flow early on, but expect that their incomewill increase steadily over time

  7. Graduated Repayment 1An unsubsidized Stafford loan at 6.8% interest, with a 10-year amortized repayment plan.

  8. Extended Repayment • Direct and FFELP loan borrowers • Payments that are fixed or gradually increase over 25 years for loan debt that exceeds $30,000 in Direct or FFELP loans • More interest is paid over the life of the loan Option for borrowers who have larger loan debt and need a lower monthly payment

  9. Extended Repayment 1An unsubsidized Stafford loan at 6.8% interest, with a 25-year amortized repayment plan.

  10. Alternative Repayment • Direct loan borrowers • Must demonstrate exceptional circumstances • Minimum monthly payment of $5 • Maximum 30-year repayment term Option for direct loan borrowers who cannot meet payment obligations with any of the other plans due to their exceptional circumstances

  11. Income-Based Repayment • Designed to help borrowers with unmanageable payments relative to income • Available for borrowers on or after July 1, 2009 Option for someone who is looking for the lowest possible monthly payment based on their income

  12. Income-Based Repayment • Direct and FFELP loan borrowers • Perkins loan eligible, if included in a FFELP or Direct Consolidation loan • Excludes Parent PLUS loan or Consolidation loan that repaid a Parent PLUS loan

  13. Partial Financial Hardship Defined • Borrowers must demonstrate a partial financial hardship (PFH) • PFH exists when the annual amount on the borrower’s eligible loans exceed 15% of the difference between the borrower’s AGI and 150% of the poverty guidelines based on borrower’s family size

  14. Partial Financial Hardship Defined • PFH factors: • Adjusted Gross Income (AGI) • Poverty guidelines • Family size • Standard loan payment

  15. Yes How IBR Works Family size = 1 $3,000 Monthly AGI – $1,437 150% of poverty line $1,563 15% of $1,563 = $234 Standard payment = $345 Qualify =

  16. Income-Based Repayment • Borrowers must reapply each year • At the end of 25 years of repayment any remaining balance may be forgiven • Any loan amount forgiven is taxable income • Payments count towards Public Service Loan Forgiveness

  17. Income-Based Repayment 1An unsubsidized Stafford loan at 6.8% interest, with a 25-year amortized repayment plan.

  18. IBR Changes For new Direct loan borrowers on or after July 1, 2014 • Cap monthly payment to 10% of discretionary income (as opposed to 15%) • Forgive remaining debt after 20 years of qualifying repayment (as opposed to 25 years)

  19. Pay As You Earn • Designed to help borrowers with unmanageable payments relative to income • Available for borrowers as of December 21, 2012 Option for someone who is looking for the lowest possible monthly payment based on their income

  20. Pay As You Earn • Direct borrowers • Perkins loan eligible, if included in a Direct Consolidation loan • Excludes Parent PLUS loan or Consolidation loan that repaid a Parent PLUS loan

  21. Who Qualifies for Pay As You Earn? Must meet the definition of a new borrower: • No outstanding DL or FFELP balance as of 10/1/07, or no outstanding balance on the date a borrower receives a new loan after 10/1/07; and • Receive a disbursement of a DL on/after 10/1/11 • Must receive a Direct Consolidation loan based on application received on/after 10/1/11, unless it repays a DL or FFELP loan that was outstanding as of 10/1/07

  22. Partial Financial Hardship Defined • Borrowers must demonstrate a partial financial hardship (PFH) • PFH exists when the annual amount on the borrower’s eligible loans exceeds 10% of the difference between the borrower’s AGI and 150% of the poverty guidelines based on borrower’s family size

  23. Partial Financial Hardship Defined • PFH factors: • Adjusted Gross Income (AGI) • Poverty guidelines • Family size • Standard loan payment

  24. Yes Determining Pay As You Earn Eligibility Family size = 1 $3,000 Monthly AGI – $1,437 150% of poverty line $1,563 10% of $1,563 = $156 Standard payment = $345 Qualify =

  25. Pay As You Earn • Borrowers must reapply each year • At the end of 20 years of repayment any remaining balance may be forgiven • Any loan amount forgiven is taxable income • Payments count towards Public Service Loan Forgiveness

  26. Pay As You Earn 1An unsubsidized Stafford loan at 6.8% interest, with a 25-year amortized repayment plan.

  27. Income-Contingent Repayment • Direct borrowers • Perkins loan eligible, if included in a Direct Consolidation loan • Excludes Parent PLUS loan or Consolidation loan that repaid a Parent PLUS loan (except a Direct Consolidation Loan that repaid a Parent PLUS loan after 7/1/06)

  28. Income-Contingent Repayment • Payments are based on income and family size Option for borrowers who need a reduced payment but may not be eligible for IBR or Pay As You Earn

  29. Income-Contingent Repayment • Borrowers must reapply each year • At the end of 25 years of repayment any remaining balance may be forgiven • Any loan amount forgiven is taxable income • Payments count towards Public Service Loan Forgiveness

  30. Income-Contingent Repayment 1Example assumes a gross monthly income of $3,000. 2 Example has a loan term of 170 months in repayment.

  31. Income-Sensitive Repayment • FFELP loan borrowers • Monthly payments are based on income and total loan amount • Repayment term is 10 years • Must reapply for this plan every year Option for borrowers who need their monthly payments to fluctuate with their income

  32. Income-Sensitive Repayment 1Example assumes a gross monthly income of $3,000. 2 Example has a loan term of 170 months in repayment.

  33. Counseling on Repayment • Borrowers pay the lowest amount of interest under the standard 10 year repayment • Borrowers can change their plan annually However, they should choose another payment plan if they have cash flow problems early on

  34. Direct Consolidation Loan

  35. Direct Consolidation Loans • Combining federal loans into a single loan • Existing loans are paid in full and replaced with a new loan • May give borrowers a lower monthly payment Option for borrowers with multiple servicers and who want to make one payment each month

  36. Direct Consolidation Loan • New interest rate, repayment schedule, and terms • Weighted average of underlying loans rounded up to the next 1/8th percent • Borrower must complete a Direct Consolidation Loan Application and Promissory Note • loanconsolidation.ed.gov

  37. Direct Consolidation Loan Borrower must be in grace period or repayment to consolidate – grace period may be lost Consolidation process takes 30–60 days Repayment begins approximately 60 days after consolidation process is completed Borrowers have 180 days to add to a Direct Consolidation loan once it’s been made

  38. Direct Consolidation Loan • Repayment options are available for Consolidation loans • Subsidized Stafford loans retain the interest subsidy during deferments • Perkins loans lose interest subsidy and some cancellation options • FFELP borrower’s benefits may be lost • Private loans may not be included in a Direct Consolidation loan

  39. Deferment

  40. Deferment Postponement of loan payments that a borrower is entitled to receive as long as he/she meets eligibility requirements Borrower’s eligibility depends on meetingspecific criteria, the loan type, and the datethe borrower received his/her first loan

  41. Deferment • In most cases, borrowers must request a deferment and provide documentation necessary to support eligibility—some deferments are automatic (e.g., in-school deferment)

  42. Deferment • Most deferments are borrower-specific • Time limits are enforced for each borrower The federal government pays the accruing interest on subsidized loans

  43. Deferment Criteria

  44. Forbearance

  45. Forbearance • Temporary postponement, reduction, or repayment extension of loan payments • Interest accrues on all loans during the forbearance • Offered at the discretion of the lender (except mandatory forbearance)

  46. Forbearance • Typically granted for up to 12-month intervals, but the loan servicer sets the maximum amount of forbearance time allowed • Borrower’s first payment is due no later than 60 days after the date the forbearance expires

  47. Forbearance • Four types of forbearance Mandatoryforbearance Administrativeforbearance Mandatoryadministrative forbearance Discretionaryforbearance

  48. Loan Forgiveness Programs

  49. Loan Forgiveness • Public Service Loan Forgiveness • Borrowers who hold a public service job may be eligible to have a portion of their Direct Loan debt forgiven after making 120 qualifying monthly payments beginning on or after October 1, 2007

  50. Loan Forgiveness • Teacher Loan Forgiveness • Borrowers who teach in an elementary or secondary school that is designated as low income may be eligible to have a portion of their Stafford loan debt forgiven

More Related