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Senior Updates

Senior Updates. Financial Aid Office. KNOW YOUR LOANS. NSLDS Access Federal Loan Servicers Repayment Options Standard, Graduated, Extended, ICR, IBR, PAYE Loan Forgiveness Programs Loan Consolidation Payments and Power Pay Exit Counseling Bar Loans. Federal v. Private Loans.

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Senior Updates

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  1. Senior Updates Financial Aid Office

  2. KNOW YOUR LOANS • NSLDS Access • Federal Loan Servicers • Repayment Options • Standard, Graduated, Extended, ICR, IBR, PAYE • Loan Forgiveness Programs • Loan Consolidation • Payments and Power Pay • Exit Counseling • Bar Loans

  3. Federal v. Private Loans Federal Loans • Originated and Serviced by Federal Government • Loans from before 2010 may be serviced under FFEL Program and not the Direct Loan Program ***important for repayment and consolidation*** • Fixed Interest Rates, for loans after 2006 Private Loans • Guaranteed by Private Banks or Credit Unions • Loan Terms and Conditions: Determined by Lender, all different! • Cannot be included in loan forgiveness, special repayment programs, or discharged after death or permanent disability

  4. NSLDS: Know Your Loans http://www.nslds.ed.gov/ • Determine: • loan balances • servicer name and contact info • Complete Exit Counseling

  5. Loan Servicers: Federal Loans • Direct Loans William D. Ford Direct Loan Program (ACS) • Phone number: 1-800-848-0979 • Website: www.myedaccount.com • Fed Loan Servicing (PHEA) • Phone number: 1-188-699-2908 • Website: www.myfedloan.org • Great Lakes • Phone number: 1-800-236-4300 • Website: www.mygreatlakes.org • NelNet Education Planning and Financing • 1-888-486-4722 • Website: www.nelnet.com • SallieMae Department of Education Loan Services • Phone number: 1-800-722-1300 • Website: www.salliemae.com *** To Retrieve Information on Your Loan Servicer: www.nslds.ed.gov ***

  6. Federal Direct Loan Terms and Conditions • Annual Maximum: $20,500 • Lifetime Maximum: $138,500 • Includes Undergraduate Studies • Effective July 2, 2012: Graduate students are not eligible for new subsidized loans • Subsidized Loans: Interest paid by Federal Govt. while student is enrolled at least half-time • Unsubsidized Loans: Interest accrues on loan while student is enrolled at least half-time • Interest Rate: Fixed 6.8% • Loan Origination Fee: 1% • Loan Request: $1000, Funds Received for $990 • Grace Period: 6 months • begins once the student graduates, withdraws, or drops below half-time enrollment

  7. Direct Grad PLUS Loans Terms and Conditions • Annual Maximum: Cost of Attendance minus all other aid • Other Aid: Scholarships, Perkins loans, Federal Direct Loans, and Work-Study • Lifetime Maximum: None- subject to credit approval • If denied: request credit report from www.annualcreditreport.com • Required: to fix credit problem and appeal credit decision or co-signer • Interest Rate: Fixed 7.9% • Loan Origination Fees: 4% • Loan Request : $1000, Funds Received by Student: $960 • No interest subsidy, interest accrues immediately • Grace Period: None, but student requests a loan deferment • Loan deferment: ends after student graduates, withdraws, or drops below half-time enrollment • Student may request an additional 6 month deferment if disbursed on or after July 1st, 2008

  8. Repayment Plan Options • Standard Repayment • Graduated Repayment • Extended Repayment • Fixed or Graduated • Income Contingent Repayment (ICR) • Income-Based Repayment (IBR) • Pay as You Earn (PAYE)

  9. Standard Repayment Plan • Payment Amount: fixed, set by loan balance • Minimum Payment: $50 • Repayment Term: 10 years (plus deferments and forbearances) • The good: • 10 years of loan payments • Least amount in interest paid • Ideal: high income v. loan balance • The bad: • Highest payment amount

  10. Graduated Repayment Plan • Payment Amount: set by loan balance, increases with time • Minimum Payment: Interest accrued between payments • Maximum Payment: >3x the minimum payment • Repayment Term: 10 years (plus deferments and forbearances) • The good: • 10 years of loan payments • Less interest than other alternative repayment options • Ideal: • high income v. loan balance • income increases with time • The bad: • Higher interest costs than standard

  11. Extended Repayment Plan • Required: >$30,000 in Direct Loan debt • Repayment Term: up to 25 years (plus deferments and forbearances) • Two payment options: • Fixed • Similar to standard payment • Pay same amount each month • Graduated • Similar to graduated repayment plan • Payments start lower and increase every 2 years • The good: • More affordable payments with longer term • Ideal: • medium income v. loan balance • income increases with time • The bad: • Higher interest costs (longer the term, the more interest)

  12. Income Contingent Repayment Plan (ICR) • Not available for: • Parent Plus loans • Consolidation loans used to repay Parent Plus loans • Why to bring up: if you take loans out for your children • Minimum Payment: calculated annually, based on AGI, family size, and loan balance • Lesser of: • 20% of monthly discretionary income (based on AGI, family size, state’s income poverty level) OR • Value of: payments based on a 12 year repayment term multiplied by income percentage factor determined by annual income • If payments < accrued interest each month, the unpaid interest is capitalized once a year • Capitalization will not exceed 10% of original loan amount • Interest will continue to accrue, limit on compounding • Repayment Term: up to 25 years (plus deferments and forbearances) • Discharge: any unpaid balance after 25 years

  13. Income-Contingent Repayment Plan (ICR) • The good: • Limits loan payments to manageable payment amounts • Discharge: 25 years of payments OR 10 years for Public Service • Interest capitalization cap • Increases flexibility to move to different repayment program • Ideal: • low income v. loan balance • The bad: • Higher costs if no discharge • Discharged loan balance may be taxable • Spousal income is included in calculations ***You will need to consolidate loans to DL if you have FFEL loans***

  14. Income-Based Repayment Plan (IBR) • Available for: all Stafford, Graduate PLUS, Consolidation loans (DL or FFEL) • Not available for: defaulted loans, Parent Plus loans, or consolidated Parent Plus loans • Minimum Payment: • calculated annually, documentation submitted annually • Set at 15% of discretionary income (AGI & family size) • Requires “partial financial hardship” • IBR payment > standard repayment • While payments are capped at the 10-year standard repayment, payments are made for 25 years • If payments do not cover accrued interest, the federal government will pay interest on subsidized loans up to 3 years • Borrower is responsible for ALL accrued interest on unsubsidized loans • ALL interest will be capitalized if IBR is left or there is no partial financial hardship • Repayment Term: up to 25 years (plus deferments and forbearances) • Discharge: any unpaid balance after 25 years or 10 years for public service

  15. Income-Based Repayment Plan (IBR) • The good: • Likely to be lowest payment • Ability to discharge loans after 25 years of payments • 10-year public service loan forgiveness program • Ideal: • low income v. loan balance and public service work • Spouse student loans can be included in calculation • The bad: • Possibility of increased interest payments • No capitalization cap on interest • Documentation is submitted annually to servicer • Discharged value may be taxable • Spousal income is used in calculation

  16. Pay as You Earn (PAYE) • Available for Direct Loans: all Stafford, Graduate PLUS, Consolidation loans • New Borrower Requirement: No loan balances prior to 10/01/2007 and need new loan after 10/01/2011 • Not available for: defaulted loans, (consolidated) Parent Plus loans, FFEL loans • Minimum Payment: • calculated annually, documentation submitted annually • Set at 10% of discretionary income (AGI & family size) • Requires “partial financial hardship” • PAYE payment < standard repayment • While payments are capped at the 10-year standard repayment, payments are made for 20 years • Limits on capitalized interest: no more than 10% of original loan balance • Interest capitalizes when there is no partial financial hardship • Repayment Term: up to 20 years (plus deferments and forbearances) • Discharge: any unpaid balance after 20 years or 10 years for public service

  17. PAYE, continued • The good: • Likely to be lowest payment • Ability to discharge loans after 20 years of payments • 10-year public service loan forgiveness program • Ideal: • low income v. loan balance and public service work • Spouse student loans can be included in calculation • The bad: • Only available for a limited number of borrowers • No loans before law school: eligible • Loans before law school: probably not eligible • Possibility of increased interest payments • Documentation is submitted annually to servicer • Discharged value may be taxable • Spousal income is used in calculation

  18. Monthly Payment Plan Example Calculator Inputs: Calculator Outputs:

  19. Joint Income Issues for Married Couples PAYE, ICR, and IBR: use combined income Test: file jointly or separately? • Is increased tax liability less than or greater than increased student loan payment • Determine by: • Calculate tax liability as joint & as separate • Calculate loan payment as joint & as separate • Compare annual costs

  20. Problems with Making Payments • What to do when you cannot make payments: • Step 1: Call your servicer! • Step 2: Request Income-Based Repayment and submit Alternative Income Documentation • Step 3: Ask for special deferment • Step 4: Ask for a hardship forbearance

  21. Deferments and Forbearances • Deferment: payments are temporarily delayed • Government pays interest on subsidized Stafford and Perkins loans • Interest accrues on unsubsidized Stafford and Grad Plus loans • Grounds: in-school half-time, unemployment (3 years), economic hardship, Peace Corps, or active duty in military • Forbearance: payments are suspended for up to 12 months • Interest accrues on all loans • Discretionary or Mandatory • Discretionary: financial hardship or illness • Mandatory: medical residency program, national service program, teaching service programs

  22. Public Service Loan Forgiveness Program • What: Discharge of Direct Loans • DL Loans including Grad Plus loans • Perkins loans, must be consolidated with DL • Rehabilitated defaulted loans • No FFEL loans: consolidate FFEL loans with DL • When: After 120 qualifying monthly payments • Qualifying payments need not be consecutive • Qualifying payments: made while employed FT by a public service organization • Qualifying employment need not be consecutive • Excluded: time spent in deferment or forbearance • Included: when calculated payment is zero • Pair with: IBR; ICR; Standard Repayment Plan; any other Direct Loan repayment plan • Waived balance is not currently taxable

  23. Public Service Loan Forgiveness Program • Required: FT public service job with PSLF eligible employer • PSLF eligible employers: • Public sector employers • Federal, state, local, or tribal agency or entity • Private non-profit employers that is 501(c)(3) • Except: partisan political organizations, labor unions, • Except: organizations engaged in religious activities • If your job duties are related to religious instruction, worship services, or any form of proselytizing • So: individuals working at religiously-affiliated non-profit organizations who perform at least 30 hours of non-religious activities are eligible for PSLF • Private employer: if it is non-profit, is not an excluded group, and provides one or more public services • Examples: military, law enforcement, public interest, early childhood, public health, education

  24. Consolidation www.loanconsolidation.ed.gov • Use: Centralize loans to 1 payment when there is multiple servicers or loan programs (DL and FFEL) • Necessary if aiming for loan forgiveness programs • Timing: • ~1 month before you enter repayment • Except: working in non-profit FT job: immediately *think about waiving grace period* • Loans: Stafford loans, Plus loans, Perkins Loans, SLS loans, old consolidation loans • PLUS loans: Graduate or Parent, if borrower is parent • Downside: loss of borrower benefits • Perkins loans: loss of interest subsidy in deferments, loss of cancellation benefits, decreased grace period • Principle rebates, interest rate discounts

  25. Power Pay/Debt-Snowball • Debt reduction strategy where extra payments are made to highest interest loan • Once 1 debt is paid off, that payment is moved to the next highest interest rate debt • Use with student loans strategically: • Likely debt with highest interest rate • If on IBR, consider: saving for retirement or pay other debt first

  26. Exit Counseling Why complete it? • Required for graduation and to receive diploma • Information includes rights and responsibilities as a student loan borrower • Provides useful tips and information to help manage loans

  27. Bar Study Loans Recommend: Check with Financial Aid Office to maximize federal aid package first • Private loans • used for: • bar prep courses • living expenses between graduation and bar exam • Subject to credit qualification • May require co-signer • Cannot be included in IBR calculations or loan forgiveness programs • More information, including list of potential lenders: http://web.wmitchell.edu/financial-aid/bar-study-loans/

  28. Helpful Websites www.studentaid.ed.gov www.finaid.org www.nslds.ed.gov www.askheatherjarvis.com www.annualcreditreport.com IBR Website & Calculator http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp www.ibrinfo.org Repayment Plans & Calculator http://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp

  29. Questions?

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