Transcript Student Loan Repayment

Student Loan Repayment
An overview of options
Repayment
• Your students may have a variety of student
loans. The three types of loans you will
encounter most often will be:
– Private Student Loans
– Perkins Loans
– Federal Student Loans
Each kind of loan has different repayment options.
Private Loans
• Issued by a private lender to the student.
• Repayment terms are set by the promissory
note.
• Very few options for deferment and
forbearance, loan discharge or loan
forgiveness.
• Not discharged by bankruptcy.
• Cannot be consolidated with Federal or
Perkins loans.
Perkins Loans
• First payment due nine months after student
graduates or leaves school.
• Standard repayment term is ten years.
• Can be consolidated with Federal Student Loans,
but may lose interest rate and some forgiveness
benefits.
• Eligible for deferments and forbearances, loan
discharge and cancellation options. (See FSA
Handbook at:
http://ifap.ed.gov/fsahandbook/attachments/12
13FSAHbkVol6Ch4.pdf for more details.)
Federal Student Loans
A Brief History
• Federal Student Loans became available with
the passage of The Higher Education Act of
1965.
• The amount that a student may borrow, and
their options for repaying, deferring,
forbearing, and discharging their loans are set
in federal statute.
Federal Student Loans
• Since July 1, 2010 all Federal Student Loans
have been issued by the William D. Ford Direct
Loan Program (FDLP).
– No private capital involved in the process.
– Funds issued directly by the Department of
Education.
– Accounts worked by Department of Education
approved servicers.
Loan Servicers
• The Department of Education uses four main
servicers for their loans
– PHEAA http://www.myfedloan.org/
– Nelnet http://www.nelnet.com/home.aspx
– Great Lakes https://www.mygreatlakes.org/
– Sallie Mae https://www.salliemae.com/
– Previous Servicer ACS https://www.acseducation.com/CS/Jsp/general/home.jsp
Federal Student Loan Limits
• Dependent Students
$31,000.00
– Excluding students whose parents cannot borrow
PLUS Loans.
– Only $23,000.00 may be subsidized loans.
• A Subsidized Student Loan is a loan for which the
Department of Education has agreed to pay the interest
that accrues while the student is in school, in their six
month grace period, or during a deferment period.
Federal Student Loan Limits
• Independent Students
$57,500.00
– This limit also applies to Dependent Students
whose parents cannot borrow Plus Loans.
– Only $23,000.00 may be subsidized loans.
• An Independent Student is one that is:
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Over 24 years old (as of January 1 of the calendar year)
Married
In the military
A parent
An orphan, or was a dependent or ward of the court
Federal Student Loan Limits
• Graduate Students
$138,500
– Only $65,500.00 may be subsidized student loans.
– Graduate Students may apply for Graduate Plus
Loans
• Have a fixed 8.5 percent interest rate
• Are unsubsidized loans
• Repayment begins 60 days after loan is fully disbursed,
but may be deferred while the student is in school at
least half time
• Grace period does not apply.
Federal Student Loans
• First payment is due six months after the
student graduates, leaves school, or is
enrolled less than half time.
• Standard repayment term is ten years.
• Repayment term may be extended for up to
thirty years by consolidation.
• Qualifies for deferments, forbearances, and
loan discharge and forgiveness options.
Federal Student Loans
• Repayment Options
– Standard Repayment Term is a ten year term.
– Large balances can extend a repayment term for
up to 30 years. The longer the repayment term,
the more interest that accrues on the debt.
– May also qualify for repayment plans based on
income, such as Income Based Repayment (IBR),
and in some cases Income Contingent (ICR) or the
Pay As You Earn plan.
Income Based Repayment
• Allows students to make monthly payments that
are fifteen percent of their discretionary
household income. Can never be more than the
amount the student would pay under the
standard ten year repayment plan.
• Payment amount is recalculated each year based
on income and family size. (Student needs to
reapply every year.)
• Payments count toward Public Service Loan
Forgiveness.
Income Contingent Repayment
• Similar to Income Based Repayment Plan.
Monthly payment amounts are based on
household income, family size, and loan
amount.
• As with IBR, any balance left owing at the end
of 25 years is forgiven.
• Only available under the Direct Loan Program.
Pay as You Earn
• Must be a new borrower as of October 1,
2007, and must have received a disbursement
of a Direct Loan on or after October 1, 2011.
• Must have a financial hardship, if the student
qualifies payments are ten percent of
discretionary income.
• Payment change as income increases. Any
amount left owing after 20 years is forgiven.
Consolidation
• Is consolidation a good idea for the student?
– Does the student have more than one servicer?
• If they do, they may want to consolidate to put all of
their loans in one place so that they may keep track of
them.
• If they have Perkins Loans, they will lose their 5%
interest rate, and will lose their Perkins forgiveness
options for that loan.
Student Loan Forgiveness
• Public Service Loan Forgiveness:
– Only available for Direct Loans.
– Allows borrowers who work full time at a
qualifying public service organization and who
have made 120 on-time, full, scheduled monthly
payments to have any balance left owing after 120
payments forgiven.
Qualifying Payments
• Can be based on IBR and ICR monthly
payment amounts.
• Does not have to be a fully amortized
payment unless the borrower has remained
on a standard repayment plan.
• “On Time” means received no later than
fifteen days from the due date.
Qualifying Employers
• “Any employment with a federal, state, or local
government agency, entity, or organization or a
non-profit organization that has been designated
as tax-exempt by the IRS under section 501(c)(3)
of the Internal Revenue Code”.
• The type or nature of employment with the
organization does not matter for PSLF, nor does
the type of service the organization offers.
Other Information
• The borrower must be employed at a qualifying
employer for the entire 120 month payment period.
• The borrower can change employment between
qualifying employers during the 120 month period.
• Borrowers can fill out a certification each year and
submit it to the Department of Education, or they can
wait and submit one form when the 120 payments
have been completed. The form can be found at:
http://www.studentaid.ed.gov/sites/default/files/ECF_
PSLF.pdf.
Federal Employers
• Section 5379 of Title 5 USC authorizes federal
agencies to establish a program under which
they may repay Federally-made, insured, or
guaranteed student loans as an incentive to
recruit or retain highly qualified personnel.
• In return, the employee must sign a service
agreement to remain in the service of the
agency for at least three years.
Teacher Loan Forgiveness
• Up to $5,000 in loan forgiveness if the chief
administrative officer of the school they are
employed at certifies that they were:
– A full time elementary teacher who demonstrated
knowledge and teaching skills in reading, writing,
math, and other areas of the elementary school
curriculum
– A full time secondary teacher who taught in a
subject area that was relevant to their major.
Teacher Loan Forgiveness
• Up to $17,500 in loan forgiveness if the chief
administrative officer of the school certifies
that:
– The teacher is a highly qualified full-time math or
science teacher in an eligible secondary school
– The teacher is a highly qualified special education
teacher whose primary responsibility was to
provide special education to children with
disabilities.
Requirements
• Must teach for five complete and consecutive
years.
• The school must meet one of these
requirements:
– Be a Title I School
– Have been selected by the Department of
Education based on their determination that at
least 30% of the schools children qualify for
services provided by Title I
Additional Requirements
– The school may be listed in the Annual Directory
of Designated Low-Income Schools for Teacher
Cancellation Benefits.
– All elementary and secondary schools operated by
the Bureau of Indian Education (BIE) or operated
on Indian reservations by Indian tribal groups
under contract with BIE qualify as schools serving
low-income students even is they are not listed in
the annual directory listed above.
Quality Educator Loan Forgiveness
• Offered by the State of Montana
– Forgiveness of up to $3,000.00 a year for up to
four years.
– Must be a full time educator with a valid license.
– May teach in a Montana school district, an
educational co-op, the Montana School for the
Deaf and Blind, the Montana Youth Challenge
Program, or a state youth correctional facility.
Quality Educator Loan Assistance
• The school must be considered an impacted
school. (Determined by the Office of Public
Instruction.)
– Rural
– High percentage of economically disadvantaged
students.
– Have been determined to have a challenge in
closing the achievement gap.
– May be in an area impacted by critical educator
shortages.
Deferment and Forbearance
• Once the student is out of school and grace
has expired they are going to be required to
begin making payments. Their payment
amount will initially be based on the standard
ten year repayment term.
• If they cannot afford to make the payment,
they may seek to qualify for another
repayment plan, or they may request a
deferment or a forbearance.
Deferments
• Temporarily postpone monthly payments if
you meet specific requirements.
– If the loan is a subsidized loan, The Department of
Education will pay any interest that accrues on the
loan while it is in deferment.
– The two most commonly used deferments are the
Unemployment Deferment (up to three years),
and the Economic Hardship Deferment (up to
three years).
Forbearance
• Forbearance of student loan payments is not
an entitlement. The specific requirements for
a forbearance may vary from servicer to
servicer, and are at their discretion.
• Interest that accrues during a forbearance is
not paid by The Department of Education, and
is capped when the forbearance ends.
• May increase monthly payment amount and
total balance due.
Loan Discharge
• Federal Student Loans and Perkins Loans may
be discharged completely due to certain other
circumstances.
– If a student or borrower passes away, their loans
will be forgiven. Their family is not responsible for
repayment of the loan.
– If a borrower becomes totally and permanently
disabled (as defined by the Department of
Education) their loan may be discharged.
Federal Student Loans
• Have no statute of limitations.
• Are typically not discharged in bankruptcy.
• Are considered to be in technical default when
they are 270 days or more past due.
– The penalties for default are severe:
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Collection costs are added at 24%
Wages are garnished at 15%
State and Federal Tax refunds are taken or “offset”
SSI and SSDI benefits are garnished
Default
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Who defaults?
National 2-Year default rate for 2011 is 10.0%
National 3-Year default rate for 2010 is 14.7%
Overall MUS 2-Year default rate is 8.23.
FFELP VS. PUT/DL Rates 2 Year
School Name
2011 2 YR
MGSLP Rate
PUT/DL Rate
Helena College
12.39%
3.81%
14.99%
Great Falls College
11.24%
3.81%
14.46%
Miles Community College
13.02%
4.29%
18.03%
7.71%
1.43%
10.57%
Dawson
11.32%
0.00%
16.44%
Western
9.12%
3.25%
13.98%
MT Tech
11.20%
3.43%
15.42%
Flathead Valley CC
15.42%
7.61%
17.15%
Northern
8.82%
9.03%
8.71%
MSU Bozeman
4.21%
1.02%
6.28%
University of Montana
8.34%
2.07%
12.15%
MUS TOTALS
8.23%
2.36%
11.42%
MSU Billings
FFELP VS. PUT/DL 3 Year
School Name
2010 3 YR
MGSLP Rate
Rate
Helena College
13.96%
7.14%
23.81%
Great Falls College
11.86%
5.46%
22.12%
Miles Community College
12.57%
10.14%
20.00%
MSU Billings
11.79%
7.29%
17.68%
Dawson
12.94%
12.00%
14.29%
Western
13.01%
5.29%
27.27%
MT Tech
9.43%
4.38%
15.57%
Flathead Valley CC
19.37%
12.24%
28.39%
Northern
13.04%
8.33%
18.82%
MSU Bozeman
5.79%
3.41%
10.61%
University of Montana
8.77%
5.33%
15.13%
MUS Totals
9.17%
5.56%
15.80%
What do students need
• To be aware of their options for loan
forgiveness and income based repayment
plans before they leave school.
• Understand who their servicer is and how to
contact them as soon as the loan is disbursed.
• Be aware of the financial impact of not
receiving their degree.
What can students do now?
• Identify how much they owe in student loans,
and who is servicing them.
• Set up an online account with their servicer.
This will allow them to contact their servicer
regarding their in school status, changes in
contact information, or to request a
deferment or a forbearance.
• Check NSLDS periodically for servicer changes.
Consider making payments now
• Payments made while in school on a
subsidized loan go directly to the principal due
on the loan.
• Payments made on an unsubsidized loan go to
interest first, and help decrease the amount of
interest that is capitalized on the loan.
• Make extra payments on the loan.
Contact Information
• If you have any questions, you may contact us
any time.
– Cheryl Poelman-Allen: [email protected]
– 406-444-0390
– Caitlin Kemnitz:
[email protected]
– 406-444-0383