Transcript Entrance Counseling Presentation, 2003-2004

Repaying Your Federal
Student Loans
Managing Your Loans
After Medical School
Spring 2008
© Copyright, 2008 by Access Group, Inc. All rights reserved.
Student loans are debt
that must be repaid.
But remember,
that debt has allowed you
to make a significant
INVESTMENT
in yourself!
A Question . . .
How have you been paying for your education?
Which of YOUR financial resources have you
been using to pay for your education?
• Savings and other assets
• Gifts from family and others
• In-school earnings
• Your future income
You need a sound “loan repayment strategy” if
you hope to spend your future income wisely!
To successfully manage loan
repayment . . .
• Know how much you have to repay and to whom
• Understand the terms and conditions of your loans,
your options in repayment, and your rights and
responsibilities as a borrower
• Consider a payment plan that will extend repayment or that is
based on your income if you need to reduce your monthly
loan payments
• Think twice before you consolidate
• Take advantage of loan forgiveness programs when you
qualify for them
• Develop an affordable budget plan to help you decide
what repayment plan is best for you

Repayment Realities
How much will you have to repay?
Who must you repay?
How much have you borrowed
and what will it cost to repay?
Your Student Loan Debt

Total Student Loan Debt*
$
Estimated Monthly Loan
Payment
$
*The “Total Student Loan Debt” should include both the
principal amount borrowed while in school AND any
accrued interest that was not paid while in school–that
accrued interest will be capitalized (added to the loan
principal) prior to the loans entering repayment
How much have you borrowed
and what will it cost to repay?
End of Grace
Average total
student loan borrowing
End of 3-Year End of 5-Year
Residency
Residency
$165,000
$165,000
$165,000
$23,400
$50,200
$68,000
Estimated approximate
total debt at repayment
$188,400
$215,200
$233,000
Estimated approximate
monthly loan payment
$2,170
$2,475
$2,680
Estimated approximate
capitalized interest– UFSL
Assumptions:
Subsidized Federal Stafford Loan (SFSL) = $34,000
• Standard (Equal) Repayment @ 6.8% for 10 years
Unsubsidized Federal Stafford Loan (UFSL) = $131,000
• Standard (Equal) Repayment @ 6.8% for 10 years
Sample Loan Repayment
6.8% Interest Rate
Total Debt
Monthly
Payment
Total Paid
8.5% Interest Rate
Monthly
Payment
Total Paid
$10,000
$115
$13,810
$124
$14,878
$60,000
$690
$82,858
$744
$89,270
$75,000
$863
$103,572
$930
$111,587
$100,000
$1,151
$138,096
$1,240
$148,783
$125,000
$1,439
$172,620
$1,550
$185,979
$150,000
$1,726
$207,145
$1,860
$223,174
$175,000
$2,014
$241,669
$2,170
$260,370
$200,000
$2,302
$276,193
$2,480
$297,566
Assumptions:
- 10-year repayment period
- No payment incentives
Who must you repay?
Develop a Detailed Listing of All Your Loans with the
Loan Holder/Servicer Information
Your must repay your current loan holder/servicer
Loan Type/
Account #
Stafford
PLUS
Loan Holder
Loan Servicer
Name:
Name:
Address:
Address:
Phone Number:
Phone Number:
Website:
Website:
Name:
Name:
Address:
Address:
Phone Number:
Phone Number:
Website:
Website:
Information about the current loan holder/servicer of your Title IV
federal student loans is stored in the NSLDS at: www.nslds.ed.gov
Loan Repayment Timeline Class of 2008
12/08
12/09
12/10
6/09
6/10
6/11
6/12
│
│
│
│
│
Check with your loan servicer about
Economic Hardship Deferment
MUST APPLY EACH YEAR
Federal Stafford Sub & Unsub
CONSOLIDATED LOANS
No Grace. Repayment Begins.
Apply for 6 month forbearance or
Economic Hardship Deferment
MUST APPLY EACH YEAR
GRADPLUS
No Grace. Repayment Begins.
Apply for 6 month forbearance or
Economic Hardship Deferment
MUST APPLY EACH YEAR
Access Alternative
ALTERNATIVE LOANS
(OTHER)
Institutional Loans
12/12
6/08
Federal Stafford Sub & Unsub
6
month
NEW BORROWER
grace
Not consolidated
Federal Perkins on or after
July 1, 1993
12/11
9 month
grace
9 month
grace
Check with the Student Loan Office
Economic Hardship Deferment
MUST APPLY EACH YEAR
12/13
6/13
│
6/14
│
Repayment or forbearance
Repayment or forbearance
Repayment or forbearance
6 month
grace
Repayment or
forbearance
4 Years Residency Forbearance
MUST APPLY EACH YEAR
4 Years Residency Forbearance/Deferment
Repayment or forbearance
Check your promissory note for details or ask your financial aid officer
Deferment
Temporary postponement of monthly loan payments
• Eligibility
• Defined by law and the terms of your promissory note
• Based on your earliest outstanding FFELP loan
• Interest subsidy for subsidized Stafford Loans
• You must request a deferment from the current
holder/servicer of your loan(s)
• You must provide required documentation
• Loan must be in good standing
Contact your current loan holder/servicer for more
information about deferment and/or to obtain the
appropriate deferment request form
Current Deferment Types
New FFELP borrowers as of 7/1/93 may be
eligible for the following deferments:
• In-school (at least half-time)
• Education-related
• Graduate fellowship program (full-time)
• Rehabilitation training program (full-time)
• Unemployment
• Economic hardship
• Military
Contact your current loan holder/servicer for information
about loan deferment eligibility if you first borrowed a
FFELP loan prior to 7/1/93
Deferment During Residency
FFELP Loans
Determine when you borrowed your 1st Stafford Loan
•
First-time borrower prior to July 1, 1993
• Eligible for two years Residency Deferment
•
First-time borrower on or after July 1, 1993
• May qualify for up to three years Economic
Hardship Deferment
• Apply near the end of your grace period
•
Holder/servicer should not defer loans until the
end of the GRACE period on your loans
Economic Hardship Deferment
FFELP Loans
• You must apply for the deferment with your
current loan holder/servicer on an annual
basis using the Economic Hardship Deferment
Request form (HRD)
• Eligibility is tied to your:
• Income
• Total federal student loan balance
• Loan interest rate(s)
Economic Hardship Deferment
First Year Medical Residency Salary by Region
Region
2007-2008
Mean Salary
Min. Federal Debt
Needed to Qualify*
(PGY1)
(approximate)
All Regions
$44,747
$74,900
Northeast
$46,631
$88,400
South
$42,751
$60,600
Midwest
$43,913
$68,900
West
$44,514
$73,200
Salary data from: “AAMC Survey of Housestaff Stipends, Benefits and Funding,”
Table 5 -- Autumn 2007 Report
* Calculated using information on Worksheet B of the Economic Hardship Deferment
Request Form including the 2008 HHS poverty guideline figure for a household size of
1 living in the contiguous 48 states or D.C., the new definition of economic hardship
created by the College Cost Reduction and Access Act (CCRAA), and an assumed
interest rate of 6.8% (rounded up to 7.0% for calculation)
Forbearance
Temporary postponement or reduction of monthly
payments, or extension of time for making payments
• You are responsible for all accrued interest
• Discretionary forbearances may be available
• You must request a forbearance from the current
holder/servicer of your loan(s)
• You must provide whatever documentation is
requested by your loan holder/servicer
• Mandatory forbearance may be available in certain
cases including during any periods of medical/dental
internship or residency
Mandatory Forbearance
During Medical/Dental Residency
• Temporary suspension of loan payments
• Interest accrues — can be capitalized annually
• Available during entire residency
• May qualify during GME fellowship
• Must be requested from loan holder/servicer
• Must be renewed on annual basis
Understanding Your Loans
A Repayment Reality . . .
Student loans must be repaid, even if you:
• never graduate
• don’t get a job
• don’t like quality of education you received
• never use the information you learned
• don’t receive a monthly statement or bill

Master Promissory Note (MPN)
The Promise You Made . . .
• Remember, the MPN is the legally binding agreement
between you and your lender of a Federal Stafford or a
Federal PLUS Loan
• You may have:
• used it as a ONE-TIME-ONLY application, and completed a new
MPN each year, OR
• used it as a SERIAL application and completed only one MPN
that covered all the Stafford/PLUS Loan funds you borrowed
while in this degree program
• Whichever case applies to you, you must repay all that
you borrowed along with all accrued interest and any
fees that are charged

Understanding Your Loans
What You Need to Know
• Partners in the process
• Interest rate and repayment terms
• Repayment plans
• Consolidation options
• Your rights and responsibilities
Partners in the Process
Federal Student Loans
Health Professions Students
• Lender / Loan Holder
• Servicer
• Secondary Market
• Guarantor
• U.S. Department of Education
• U.S. Department of Health and Human
Services (HHS)
Federal Stafford Loan
Interest Rate
Stafford Loans first disbursed prior to 7/1/06
Variable Rate (effective July 1, 2007 thru June 30, 2008)
• In-school, grace, and deferment periods
• 91-day T-Bill (4.92%) + 1.7% = 6.62%
• In-repayment and forbearance periods
• 91-day T-Bill (4.92%) + 2.3% = 7.22%
• Maximum rate = 8.25%
Stafford Loans first disbursed on/after 7/1/06
Fixed Rate

• All periods = 6.8%
Federal Stafford Loan
Repayment Terms- An Overview
• Repayment period begins following GRACE
period of 6 months
• Length of repayment period
• Depends on repayment plan chosen; ranges from 10-25 years
• Four repayment plans currently available
• Minimum monthly payment requirement
• $50
• Minimum payment may be larger due to amount owed and
maximum repayment period allowed
• No prepayment penalty

Federal PLUS Loan
Interest Rate and Repayment Terms
Fixed at 8.5% in FFELP
Interest Rate
Grace Period
(Fixed at 7.9% in Direct Loan Program)
(interest is not subsidized, it begins accruing
as soon as loan funds are disbursed)
None; repayment begins within 60
days after loan is fully disbursed
(deferments or forbearance may be available)
Repayment Plan
Four repayment plans
Repayment
Period
10 to 25 years
(depends on repayment plan chosen)
Minimum Monthly $50 (can be higher based on amount owed)
Payment
No prepayment penalty

Private Loans
Interest Rate and Repayment Terms
Typically variable – based on credit history,
Interest Rate
usually calculated using an index (LIBOR or
Prime) plus a spread/margin
Grace Period
6 to 12 months (depends on lender)
Repayment plan
Standard, Graduated, other(?)
Repayment
Period
10 to 30 years (depends on lender)
Minimum
Payment
Depends on lender
Federal Student Loan
Repayment Plans
Repayment Plans
Federal Family Education Loan Program (FFELP)
• Standard (Fixed) Repayment
• Graduated Repayment
• Extended Repayment
• Income-Sensitive Repayment
• Income-Based Repayment (effective 7/1/2009)
Choice of a repayment plan may depend on your
eligibility for that plan. Once you have chosen a plan, you
are allowed to change to a different plan provided you
qualify for that plan.

FFELP Repayment Plan:
Standard Repayment
• Monthly payment is fixed – the same minimum
payment is due each month (your monthly payment typically
changes only if your loan has a variable interest rate and that
interest rate changes)
• Maximum repayment period is 10 years on Federal
Stafford/Federal PLUS Loans
• Results in lowest amount of total interest paid
• Requires the highest initial monthly payment
Your loan holder/servicer will place you on this
repayment plan unless you choose one of the other
available repayment plans and notify your loan
holder/servicer of that choice
FFELP Repayment Plan:
Graduated Repayment
• Initial monthly payments cover only the interest that
has accrued since the previous billing period
• They increase in one or more increments over time so
that a portion of your monthly payment also reduces
your outstanding principal balance
• Maximum repayment period is 10 years on Federal
Stafford/Federal PLUS Loans
• Results in larger amount of total interest paid than with
the Standard Repayment Plan
• Lenders must offer at least one graduated repayment
plan; some lenders offer more than one graduated plan
FFELP Repayment Plan:
Extended Repayment
• Provides for fixed or graduated monthly loan payments
over a 25-year repayment period rather than 10 years
• Results in a lower monthly payment than with the
Standard Repayment Plan based on a 10-year
repayment period, but also results in a larger amount
of total interest paid
• Plan is available only to those borrowers who have no
outstanding balance on a FFELP loan made prior to
10/7/98
• Borrower also must have more than $30,000 in total
FFELP loan debt
Comparing Standard, Graduated and Extended
Repayment - $150,000 Stafford Loan Balance
Standard
Repayment
Options
Graduated
Repayment
Extended
Repayment
$850 (2 yrs)
Monthly
Payment
$1,726
$1,041
$2,030 (8 yrs)
Repayment
Period
10 years
10 years
25 years
TOTAL PAID
$207,145
$215,295
$312,332
Assumptions:
- 6.80% fixed interest rate
- No payment incentives
FFELP Repayment Plan:
Income-Sensitive Repayment
• Monthly payment is based on total gross monthly
income received from all sources and loan amount
• Payment must at least pay accrued interest charges
• Eligibility for plan and payment amount are reviewed
and adjusted annually in accordance with any change
to your income
• Maximum repayment period is 15 years on Federal
Stafford/Federal PLUS Loans
• Results in a lower monthly payment than with the
Standard Repayment Plan based on a 10-year
repayment period, but also results in a larger amount of
total interest paid
FFELP Repayment Plan:
Income-Based Repayment (IBR)
• Effective date:
• July 1, 2009
• Eligibility criteria:
• Available for repayment of FFEL/Direct Stafford,
Grad PLUS and Federal Consolidation Loans (FCL)
• Cannot be used to repay Parent PLUS Loans
• Cannot be used to repay FCL that included payoff of a Parent
PLUS Loan
• Must be experiencing “Partial Financial Hardship”
• Eligibility and minimum monthly payment must be
re-evaluated each year by your loan holder/servicer
Income-Based Repayment (IBR)
“Partial Financial Hardship”
You have “Partial Financial Hardship” when:
• Annual amount due on your total eligible federal
student loan debt in repayment
• When calculated using the Standard Repayment
Plan based on a 10-year repayment period
• Exceeds 15% of your household AGI (including
spouse’s income, if married, and filing joint federal
tax return) above 150% of the poverty line for your
family size
• If eligible, the IBR monthly payment is 1/12th of
15% of the AGI above 150% of the poverty line
Calculator available at: Finaid.Org/calculators
Income-Based Repayment (IBR)
A Simpler Explanation . . .
In essence, Congress is offering the following in
creating the Income Based Repayment plan:
• When considering IBR, the annual amount you can
pay on your total eligible federal student loan debt
is the lesser of:
• Amount due using the Standard Repayment Plan based
on a 10-year repayment period, OR
• 15% of your annual AGI (including spouse’s income, if
married, and filing joint federal tax return) that is above
150% of the poverty line for your family size
• Of course, you also have the option to choose one
of the other loan repayment plans for which you
qualify if IBR is not right for you
Income-Based Repayment (IBR)
2008 HHS Poverty Guidelines
Persons in Family
or Household
48 Contiguous
States and D.C.
Alaska
Hawaii
1
$10,400
$13,000
$11,960
2
14,000
17,500
16,100
3
17,600
22,000
20,240
4
21,200
26,500
24,380
5
24,800
31,000
28,520
6
28,400
35,500
32,660
7
32,000
40,000
36,800
8
35,600
44,500
40,940
For each additional
person, add
3,600
4,500
4,140
Source: Federal Register, Vol. 73, No. 15, January 23, 2008, pp. 3971-3972
Income-Based Repayment (IBR)
More Payment Provisions
• Monthly IBR payment can be less than the accrued
interest that billing period (i.e., it allows for negative
amortization)
• Secretary of ED is authorized to pay any unpaid interest
that accrues during IBR repayment on qualifying
subsidized Stafford debt for not more than 3 years (not
counting periods of Economic Hardship deferment)
• Unpaid interest and principal can be capitalized by your
loan holder when you stop using the IBR plan
• Repayment period using IBR can extend beyond 10
years regardless of the amount of your eligible debt, but
not beyond 25 years
Income-Based Repayment (IBR)
Loan Cancellation After 25 Years
• Any outstanding eligible FFEL or Direct loan balance (other than
PLUS) is cancelled after 25 years of being “economically
challenged”
• To be “economically challenged” you must have used IBR during a
portion of the repayment period AND you must meet at least one
of the following requirements during the 25-year period:
• Made reduced monthly payments under IBR
• Made monthly loan payments using Income Contingent Repayment
(ICR)
• Made monthly payments of not less than the monthly amount
calculated using Standard Repayment based on a 10-year repayment
period when you first used IBR
• Were in an Economic Hardship deferment
• Any loan amount that is cancelled may be taxable in the calendar
year it is cancelled
Income-Based Repayment (IBR)
Sample Calculation Using 2008 Poverty Guideline
Eligible federal student loan debt
Estimated monthly payment
$165,000
$1,899
[1]
Annual amount due ([1] × 12)
$22,788
[2]
Household size
Household AGI
Poverty line (in 2008) for household size
150% of poverty line (1.5 × [4])
AGI – 150% of poverty line ([3] – [5])
15% of calculated amount from (0.15 × [6])
1
$120,000
$10,400
$15,600
$104,400
(Standard plan @ 6.8% over 10 years)
$15,660
Eligible for Partial financial hardship – YES or NO
YES, if [7] is less than [2]
NO, if [7] is equal to or greater than [2]
YES
IBR monthly payment, if eligible ([7] ÷ 12)
$1,305
Maximum AGI permitted in this example to qualify for IBR
$167,519
[3]
[4]
[5]
[6]
[7]
Income-Based Repayment (IBR)
Beware of Negative Amortization
Eligible federal student loan debt
$165,000
Estimated monthly payment
$1,899
(Standard plan @ 6.8% over 10 years)
Interest paid in 1st month
$935
Loan principal paid in 1st month
$964
New principal balance after 1st payment
$164,036
Comparison with IBR payment, if eligible
IBR monthly payment in first month
$1,305
New principal balance after 1st payment
$164,630
Unpaid interest after 1st payment
$0
Maximum AGI resulting in negative amortization
AGI needed with IBR to pay accrued interest
$90,320
IBR monthly payment in first month
$934
Income-Based Repayment (IBR)
Approx. Maximum AGI Needed to Qualify for IBR at Specified Debt
Debt
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
$65,000
$70,000
Assumptions:
AGI
$38,616
$43,219
$47,822
$52,425
$57,028
$61,632
$66,235
$70,838
$75,441
$80,044
Debt
AGI
$75,000
$80,000
$85,000
$90,000
$95,000
$100,000
$105,000
$110,000
$115,000
$120,000
$125,000
$84,648
$89,251
$93,854
$98,457
$103,061
$107,664
$112,267
$116,870
$121,473
$126,077
$130,680
- Interest rate = 6.8%
- Household size of 1 residing in 48 contiguous states
- 2008 Poverty Guidelines
Income-Based Repayment (IBR)
Approx. Maximum AGI Needed to Qualify for IBR at Specified Debt
Debt
AGI
Debt
AGI
$130,000
$135,000
$140,000
$145,000
$150,000
$155,000
$160,000
$165,000
$170,000
$175,000
$135,283
$139,886
$144,489
$149,093
$153,696
$158,299
$162,902
$167,506
$172,109
$176,712
$180,000
$185,000
$190,000
$195,000
$200,000
$205,000
$210,000
$215,000
$220,000
$225,000
$181,315
$185,918
$190,522
$195,125
$199,728
$204,331
$208,934
$213,538
$218,141
$222,744
Assumptions:
- Interest rate = 6.8%
- Household size of 1 residing in 48 contiguous states
- 2008 Poverty Guidelines
Income-Based Repayment (IBR)
A Few Things to Consider
• Use of IBR can help make loan repayment more
manageable by reducing the minimum monthly
payment on your eligible federal student loans
• But, use of IBR will increase the total cost of your debt
since more total interest will accrue
• IBR does not replace the Income Sensitive Repayment
or Income Contingent Repayment options
• Extended Repayment also is an option to consider if
you need to reduce your monthly payment and you
want to avoid the possibility of negative amortization
and/or the need to have your IBR payment plan reevaluated each year by your loan holder/servicer
Income-Based Repayment (IBR)
Extended repayment as an alternative to IBR
Eligible federal student loan debt
Estimated monthly payment
(Standard plan @ 6.8% over 10 years)
Estimated monthly payment
(Extended plan with fixed payments @
6.8% over 25 years)
Interest paid in 1st month
Loan principal paid in 1st month
Estimated monthly payment
(IBR plan @ 6.8% over ? years)
Difference in first monthly payment between
Extended Repayment plan and IBR
$165,000
$1,899
$1,145
$935
$210
$1,305
$160
Federal Loan Consolidation
Consolidation is . . .
• Paying off one or more eligible federal
education loans by borrowing a new federal
education loan
• All federal student loans except the Primary
Care Loan (PCL) are eligible for federal loan
consolidation
Reasons to Consolidate
• To reduce your monthly loan payment
• Increases monthly cash flow
• To have single statement billing
• Increases convenience
• To take advantage of the fixed interest rate
structure of the Federal Consolidation Loan
(FCL) by consolidating your loans with variable
interest rates
• Can reduce long-term cost
Consolidation May Not Be Right
• If any of the following are true:
• You only have eligible federal student loans with FIXED
interest rates
• You qualify for Extended Repayment
• You qualify for on-time payment incentives on your Federal
Stafford/PLUS Loans
• Then, you might be better off financially by
NOT consolidating
• Your monthly payment could be less without consolidating
• The total interest cost of your student loan debt likely will be
less if you do not consolidate
Example #1
$40,000 Federal Stafford Loan (FSL)
Federal Stafford
Loan (FSL)
Loan Principal
Interest Rate
Length of
Repayment
Monthly
Payment
Total Paid
Extended
Repayment
Consolidation
of Stafford (FSL)
$40,000
$40,000
6.80%
6.875%
25 years
25 years
30 years
$277.63
$279.53
$262.77
$83,288.65 $83,859.02 $94,597.75
What if you get an 0.8% on-time payment interest
rate reduction on FSL?
Federal Stafford
Loan (FSL)
Extended
Repayment
Consolidation
of Stafford (FSL)
$40,000
$40,000
Interest Rate
6.00%*
6.875%
Length of
Repayment
25 years
25 years
30 years
Monthly
Payment
$257.72
$279.53
$262.77
Total Paid
$77,316.17 $83,859.02 $94,597.75
Loan Principal
*Assumes interest rate is reduced by 0.8% after you make your first
scheduled monthly loan payment on time; benefit continues as long as your
payments are received on time
Consolidation May Be Right
• If any of the following are true:
• You have eligible federal student loans with VARIABLE
interest rates
• You do NOT qualify for Extended Repayment
• You have multiple loan holders/servicers of your eligible
federal student loans and you want to be able to pay your
federal student loans with a single monthly payment
• Then, you may want to consider consolidation
• Timing of the consolidation loan still is an important issue if
loans with variable interest rates are being consolidated
When to Consolidate
Factors Related to All Federal Loans
• To be eligible, loans must be:
• Fully disbursed
• In grace or in repayment
• NO deadline for consolidating once loans are
eligible for consolidation
• Can request funding of FCL be delayed until
near the end of your Federal Stafford Loan
grace period
• Must provide Federal Stafford Loan Grace Period
End Date on your FCL application
When to Consolidate
Factors Related to Variable Rate Federal Loans
• Should be aware of trends in the 91-day
Treasury Bill used to set variable rate
• If increasing, consolidate before rate is reset on 7/1
• If decreasing, consolidate after rate is reset on 7/1
• Consolidate variable rate loans while in grace
or deferment
• Allows you to take advantage of lower interest rate
spread/margin
2007–2008 Variable Interest Rates
Federal Stafford Loans
With 2007–2008 91-day T-bill = 4.92%:
• In-school/grace/deferment variable interest rate =
4.92% + 1.7% = 6.62%
• Consolidation (FCL) fixed rate = 6.625%
• In-repayment/forbearance variable interest rate =
4.92% + 2.3% = 7.22%
• Consolidation (FCL) fixed rate = 7.25%
Recent 91-day T-bill Rate Trends
4.92%
Source: “Treasury Security Auction Results.” U.S. Department of the
Treasury, Bureau of the Public Debt, Washington, DC.
2.39%
What would be the 2008–2009 interest rates
if they were set as of 1/28/08?
Assuming 2008–2009 91-day T-bill = 2.39%:
• In-school/grace/deferment variable interest rate =
2.39% + 1.7% = 4.09%
• Consolidation (FCL) fixed rate = 4.125% (2.5% decrease from
2007-2008 fixed FCL rate)
• In-repayment/forbearance variable interest rate =
2.39% + 2.3% = 4.69%
• Consolidation (FCL) fixed rate = 4.75% (2.5% decrease from
2007-2008 fixed FCL rate)
• And note, 4.75% is 1.875% less than the consolidation rate of
6.625% that is based on the in-school variable rate for 2007-2008
Borrower Rights
Your Rights
You have the right to:
• Deferment, forbearance, discharge, loan
forgiveness, if eligible
• Loan prepayment without penalty
• Assistance from U.S. Department of Education
Ombudsman to resolve conflicts with loan
holders/servicers
• Possibility of federal income tax deduction for
student loan interest paid

Deferment
Temporary postponement of monthly loan payments
• Eligibility
• Defined by law and the terms of your promissory note
• Based on your earliest outstanding FFELP loan
• Interest subsidy for subsidized Stafford Loans
• You must request a deferment from the current
holder/servicer of your loan(s)
• You must provide required documentation
• Loan must be in good standing
Contact your current loan holder/servicer for more
information about deferment and/or to obtain the
appropriate deferment request form
Current Deferment Types
New FFELP borrowers as of 7/1/93 may be
eligible for the following deferments:
• In-school (at least half-time)
• Education-related
• Graduate fellowship program (full-time)
• Rehabilitation training program (full-time)
• Unemployment
• Economic hardship
• Military
Contact your current loan holder/servicer for information
about loan deferment eligibility if you first borrowed a
FFELP loan prior to 7/1/93
Deferment During Residency
FFELP Loans
Determine when you borrowed your 1st Stafford Loan
•
First-time borrower prior to July 1, 1993
• Eligible for two years Residency Deferment
•
First-time borrower on or after July 1, 1993
• May qualify for up to three years Economic
Hardship Deferment
• Apply near the end of your grace period
•
Holder/servicer should not defer loans until the
end of the GRACE period on your loans
Economic Hardship Deferment
FFELP Loans
• You must apply for the deferment with your
current loan holder/servicer on an annual
basis using the Economic Hardship Deferment
Request form (HRD)
• Eligibility is tied to your:
• Income
• Total federal student loan balance
• Loan interest rate(s)
Economic Hardship Deferment
First Year Medical Residency Salary by Region
Region
2007-2008
Mean Salary
Min. Federal Debt
Needed to Qualify*
(PGY1)
(approximate)
All Regions
$44,747
$74,900
Northeast
$46,631
$88,400
South
$42,751
$60,600
Midwest
$43,913
$68,900
West
$44,514
$73,200
Salary data from: “AAMC Survey of Housestaff Stipends, Benefits and Funding,”
Table 5 -- Autumn 2007 Report
* Calculated using information on Worksheet B of the Economic Hardship Deferment
Request Form including the 2008 HHS poverty guideline figure for a household size of
1 living in the contiguous 48 states or D.C., the new definition of economic hardship
created by the College Cost Reduction and Access Act (CCRAA), and an assumed
interest rate of 6.8% (rounded up to 7.0% for calculation)
Forbearance
Temporary postponement or reduction of monthly
payments, or extension of time for making payments
• You are responsible for all accrued interest
• Discretionary forbearances may be available
• You must request a forbearance from the current
holder/servicer of your loan(s)
• You must provide whatever documentation is
requested by your loan holder/servicer
• Mandatory forbearance may be available in certain
cases including during any periods of medical/dental
internship or residency
Mandatory Forbearance
During Medical/Dental Residency
• Temporary suspension of loan payments
• Interest accrues — can be capitalized annually
• Available during entire residency
• May qualify during GME fellowship
• Must be requested from loan holder/servicer
• Must be renewed on annual basis
Loan Discharge
• Loan discharge available due to:
• Death
• Total and permanent disability
• Documentation must be provided to the holder/servicer
of the loan(s)
• Partial discharge or loan forgiveness may be available
for certain types of employment (e.g., teaching in a
shortage area)
Contact the current holder/servicer of the loan(s) for
more information about loan discharge or to apply for a
discharge
Loan Prepayment
• You have the right to make prepayments on your federal
student loan(s) without penalty
• In other words, you can pay more than the minimum
amount required or make an extra payment at any time
• This will reduce the amount of interest you pay over the life of
repayment because you will save the interest that would have accrued
on the funds had you not made the prepayment
• When prepaying on a loan:
• Verify where your prepayment should be mailed and include a written
explanation as to how the prepayment is to be applied to your account
• Request that your prepayment be applied to principal, if permitted
• Prepayments should be targeted at your loans having the highest
interest rate
Public Service Loan Forgiveness
New Federal Loan Forgiveness Program
• The balance of interest and principal due on any of
your eligible Federal Direct Loans will be cancelled
by the U.S. Department of Education provided you
have met the following three conditions:
• Your Federal Direct Loans are not in default
• You have worked full-time for a total of 10 years (120
months) in a qualifying public service position on or after
October 1, 2007
• You have made 120 qualifying loan payments on your
Federal Direct Loans during the period of qualifying public
service employment
Public Service Loan Forgiveness
General Provisions
• Effective for qualifying monthly 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 loan amount that is cancelled may be
taxable in the calendar year in which it is
cancelled
Public Service Loan Forgiveness
Qualifying Payment Requirements
• You must be working in an eligible public
service position AND be making monthly loan
payments for 120 months on your eligible
Federal Direct Loan(s) as part of:
• Income Contingent Repayment (ICR) plan, or
• Income Based Repayment (IBR) plan, or
• Standard Repayment plan based on a 10-year
repayment schedule, or
• Repayment plan where the monthly amount paid
was not less than the monthly amount required
under Standard Repayment over a 10-year
repayment period.
Public Service Loan Forgiveness
Reconsolidation in Direct
• Effective date is July 1, 2008
• 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
Public Service Loan Forgiveness
Additional Eligibility Provisions
• Your 120 qualifying months do NOT have to be
consecutive
• You must be working in qualifying public service
position at time of loan forgiveness
• Loan payments made 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
the 120-month requirement
Public Service Loan Forgiveness
Definition of “Public Service”
As defined in P.L. 110-84
Full-time employment in:
• Emergency management
• Government
• Military service
• Public safety
• Law enforcement
• Public health
• Public education (including early childhood education)
• Social work in a public child or family service agency
• MORE . . .
Public Service Loan Forgiveness
Sample Benefit Scenario-$165,000 eligible debt
Eligible federal student loan debt
Estimated monthly payment-Standard Plan
Principal balance after 10 years
Total amount paid after 10 years
Comparison with IBR Plan
Assumed starting AGI in year 1
$165,000
$1,899
$0
$142,158
IBR monthly payment in 1st month (using 2007 HHS Guideline)
IBR monthly payment in 120th month (using 2007 HHS Guideline)
Assumed AGI in year 10
Total interest paid in IBR over 10 years
Total principal paid using IBR over 10 years
Total accrued interest forgiven after 10 years
Total principal forgiven after 10 years
$120,000
4%
3%
3%
$1,309
$1,885
$170,797
$85,160
$104,615
$0
$60,385
Total amount forgiven after 10 years
$60,385
Assumed Annual Growth Rate in AGI
Assumed Annual Increase in Poverty Guideline
Assumed Annual CPI
Public Service Loan Forgiveness
Questions You Should Consider
• Will you work full-time in a qualifying public service
position for at least 10 years?
• 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
• Will you be making qualifying loan payments during the
entire 10 year period of public service employment?
• What will you be giving up by consolidating your
FFELP loans in the Federal Direct Loan Program?
• Borrower benefits?
• Customer service experience with current FFELP lender?
• Other value-added services?
Public Service Loan Forgiveness
For more information . . .
• Public Law 110-84 – September 27, 2007
• Schrag, Philip G., "Federal Student Loan
Repayment Assistance for Public Interest
Lawyers and other Employees of Governments
and Nonprofit Organizations". Hofstra Law
Review, Vol. 36, Fall 2007.
• Equal Justice Works at: EqualJusticeWorks.org
• Calculator available at: Finaid.Org/calculators
U.S. Department of Education
Office of the Ombudsman
Serves as mediator between you & loan holder/servicer
to settle disputes that arise regarding your federal
student loan(s)
 Toll-free telephone
 877-557-2575
 Web site
 www.ombudsman.ed.gov

Federal Income Tax Deduction for
Student Loan Interest Paid in 2007
• Maximum 2007 deduction is smaller of:
• $2,500
• Student loan interest paid in 2007
• Deduction amount may be reduced based on:
• Filing status
• Modified Adjusted Gross Income (MAGI)
• MAGI Income guidelines for 2007
• $55,000 - $70,000 single, head of household
• $110,000 - $140,000 married, filing jointly
Source: IRS Publication 970, “Tax Benefits for Education” (For use in preparing 2007
returns). Chapter 4. Student Loan Interest Deduction, Tables 4-1 and 4-2
Federal Income Tax Deduction for
Student Loan Interest Paid in 2007
Single, head of household
Married, filing jointly
• Modified AGI not more than
$55,000
• Modified AGI not more than
$110,000
• Max. = $2,500
• Modified AGI more than
$55,000, but less than $70,000
• Max. = $0-$2,499
• Modified AGI is $70,000 or
more
• No deduction
• Max. = $2,500
• Modified AGI more than
$110,000, but less than
$140,000
• Max. = $0-$2,499
• Modified AGI is $140,000 or
more
• No deduction
Source: IRS Publication 970, “Tax Benefits for Education” (For use in preparing 2007
returns). Chapter 4. Student Loan Interest Deduction, Tables 4-1 and 4-2
Borrower Responsibilities
Your Responsibilities
You must:
• Repay all loans according to the terms of their
promissory note
• Participate in exit counseling and provide current
information regarding:
• Name, address, SSN, references, driver’s license
number/state of issue, expected permanent address,
address of next of kin, name and address of expected
employer (if known)
• Notify your loan holder/servicer of changes in the
above information

• Call your loan holder/servicer if you are unable to
make a loan payment by the due date
Avoid default!
Default occurs when:
• You do not repay a loan as agreed
• You fail to meet your other responsibilities
as stated in the promissory note

Consequences of Default
You will NOT achieve your financial goals
because of the following:
• U.S. Department of Education can declare that the
entire balance and accrued interest on your loan is
due immediately
• Wages can be garnished
• Eligibility for deferments will be lost
• Eligibility for federal student assistance will be lost
• Account can be turned over for collection
• More . . .

MORE Consequences of Default
• IRS can withhold federal/state income tax refunds
• Total debt can be increased by late fees, additional
accrued interest, court costs, collection fees,
attorney’s fees, and other costs
• Federal government can take legal action against you
• Credit rating can be damaged for at least seven years
• Eligibility to obtain/maintain professional license(s)
can be lost

Managing Your Loans
Payment Tips
• Make all payments on time
• Enhances your chance to qualify for any on-time
payment benefits that may be offered by your lender
• Helps you maintain or improve your credit record
• When paying more than is due:
• Verify where payment should be mailed
• Apply additional payment to principal, if permitted
• Include written explanation
• Confirm payment was applied as intended with loan
holder/servicer or by checking next billing statement
Managing Your Loans
Keeping Accurate Records
• Create master listing of all loans
• National Student Loan Data System (NSLDS)
• Arrange by loan holder/servicer and loan type
• Records to retain
• Applications
• Promissory notes
• Disclosure statements
• Correspondence/contact log
Loan Repayment Timeline Class of 2008
12/08
12/09
12/10
6/09
6/10
6/11
6/12
│
│
│
│
│
Check with your loan servicer about
Economic Hardship Deferment
MUST APPLY EACH YEAR
Federal Stafford Sub & Unsub
CONSOLIDATED LOANS
No Grace. Repayment Begins.
Apply for 6 month forbearance or
Economic Hardship Deferment
MUST APPLY EACH YEAR
GRADPLUS
No Grace. Repayment Begins.
Apply for 6 month forbearance or
Economic Hardship Deferment
MUST APPLY EACH YEAR
Access Alternative
ALTERNATIVE LOANS
(OTHER)
Institutional Loans
12/12
6/08
Federal Stafford Sub & Unsub
6
month
NEW BORROWER
grace
Not consolidated
Federal Perkins on or after
July 1, 1993
12/11
9 month
grace
9 month
grace
Check with the Student Loan Office
Economic Hardship Deferment
MUST APPLY EACH YEAR
12/13
6/13
│
6/14
│
Repayment or forbearance
Repayment or forbearance
Repayment or forbearance
6 month
grace
Repayment or
forbearance
4 Years Residency Forbearance
MUST APPLY EACH YEAR
4 Years Residency Forbearance/Deferment
Repayment or forbearance
Check your promissory note for details or ask your financial aid officer
U.S. Department of Education
National Student Loan Data System (NSLDS)
Information about your Title IV federal student
loans is stored in the NSLDS
 Toll-free telephone
 800 - 4FED - AID
 Web site
 nslds.ed.gov

Final Comments
When Choosing a Repayment Plan
Consider the following . . .
• If you want to pay the least amount of total interest
over the life of repayment
• Standard Repayment Plan with a 10-year repayment schedule will
result in the least amount of interest paid
• If you want the lowest possible monthly loan payment
• Income-Based Repayment likely will require the lowest monthly
payment for those who qualify, but it could result in negative
amortization and that will add to the total debt being repaid
• Extended Repayment over 25 years will result in a lower monthly
payment than Standard Repayment over 10 years without the
possibility of negative amortization
• And what if you want to maximize your financial net
worth in the long run?
Remember, to successfully manage
loan repayment . . .
• Know how much you have to repay and to whom
• Understand the terms and conditions of your loans,
your options in repayment, and your rights and
responsibilities as a borrower
• Consider a payment plan that will extend repayment or that
is based on your income if you need to reduce your monthly
loan payments
• Think twice before you consolidate
• Take advantage of loan forgiveness programs when you
qualify for them
• Develop an affordable budget plan to help you decide
what repayment plan is best for you
We are here to help you!
Access Group
800-282-1550
AccessGroup.Org
FederalConsolidation.Org