Transcript Exit Counseling Presented by: Don Buehrer Why do I need to attend? • Federal regulations require schools to provide exit counseling for students: − Who.

Exit Counseling
Presented by:
Don Buehrer
Why do I need to attend?
• Federal regulations require schools to
provide exit counseling for students:
− Who have borrowed a Stafford and/or Grad
PLUS loan under the Federal Direct Loan
Program (Direct Loan) and/or the Federal
Family Education Loan Program (FFELP) and
− who are graduating, have withdrawn or have
dropped below half-time enrollment.
Promissory Note (MPN)
• An agreement to pay back loan(s)
• Details borrower rights and responsibilities
• Subsidized Loan
− Need-based loan. Government pays interest while
enrolled, during grace and deferments
• Unsubsidized Loan
− Non-need based. Borrower responsible for all interest
When repayment begins
• Stafford loans have a grace period; repayment
begins six months after student graduates,
withdraws, or drops below half-time enrollment.
• PLUS (GradPLUS) loans have a deferment
period; repayment begins six months after student
graduates, withdraws, or drops below half-time
enrollment.
− Direct Loan Servicing Center or lender will send
notification of your first payment due date during
your grace/deferment period.
Borrower responsibilities
• Borrowing money is a serious matter and all
loans must be paid back.
• Not receiving billing statement is not an
excuse for not making payments.
• Even if you did not complete your program,
didn't complete your program within the
regular time for program completion, are
dissatisfied with quality of education, or can’t
find a job, you must pay back the loan(s).
Consequences of default
• Loss of federal financial aid eligibility
• Withholding of federal income tax refunds
• Inability to renew professional license
(e.g., lawyer, doctor)
• Negative credit history (will affect credit
purchase of house, car, etc.)
Consequences of default
• Wage withholding
• May be sued
• Collection fees and attorney’s fees assessed
− Up to 33.3%
• Enforcement of delinquent debt
collection procedures
• Not dischargeable via Bankruptcy
Texas Tech University Health Sciences
Center
• During the past three years, 1,873 students
have entered repayment.
• Only 8 have defaulted
• 2.1% rate for these three years
• National default rate is 8.8%
Attachment A: Sample monthly
repayment amounts
Interest Rates
Loan
Amount
4%
5%
6%
7%
8%
9%
$1,000
$10.12
$10.61
$11.10
$11.61
$12.13
$12.67
$10,000
$101.25
$106.07
$111.02
$116.11
$121.33
$126.68
$20,000
$202.49
$212.13
$222.04
$232.22
$242.66
$253.35
$30,000
$303.74
$318.20
$333.06
$348.33
$363.98
$380.03
$40,000
$404.98
$424.26
$444.08
$464.43
$485.31
$506.70
$50,000
$506.23
$530.33
$555.10
$580.54
$606.64
$633.38
$60,000
$607.47
$636.39
$666.12
$696.65
$727.97
$760.05
Attachment A: Sample monthly
repayment amounts
Interest Rates
Loan
Amount
4%
5%
6%
7%
8%
9%
$70,000
$708.72
$742.46
$777.14
$812.76
$849.29
$80,000
$809.96
$848.52
$888.16
$928.87
$970.62 $1013.41
$90,000
$911.21
$954.50
$999.18 $1044.98 $1091.95
$100,000 $1012.45 $1060.66
$110,000
$1113.70
$1110.21
$886.73
$1140.08
$1161.08 $1213.28 $1266.76
$1166.72 $1221.23 $1277.19 $1334.60 $1393.43
$120,000 $1214.94 $1272.79 $1332.25 $1393.30 $1455.93
$1520.11
$130,000 $1316.19 $1378.85 $1443.27 $1509.41 $1577.26 $1646.79
Attachment A: Sample monthly
repayment amounts
Interest Rates
Loan
Amount
4%
5%
6%
7%
8%
9%
$140,000 $1417.43 $1484.92 $1554.29 $1625.52 $1698.59 $1773.46
$150,000 $1518.68 $1590.98 $1605.31 $1741.63 $1819.91 $1900.14
$160,000 $1619.92 $1697.05 $1776.33 $1857.74 $1941.24 $2026.81
$170,000 $1721.17 $1803.11
$1887.35 $1973.84 $2062.57 $2153.49
$180,000 $1822.41 $1909.18 $1998.37 $2089.95 $2183.90 $2280.16
$190,000 $1923.66 $2015.24 $2109.39 $2206.06 $2305.22 $2406.84
$200,000 $2024.90 $2121.31 $2220.41 $2322.17 $2426.55 $2533.52
Your repayment schedule
Stafford
PLUS
•
•
•
•
•
•
•
Loan Balance*
− $160,000
Anticipated Monthly Payment
− $ 1,841
No. of Payments =120
Interest Rate = 6.8%
Total Interest Paid
− $60,955
Total Amount Paid
− $220,955
•
•
•
•
•
Loan Balance*
− $ 7,654
Anticipated Monthly Payment
− $ 92.86
No. of Payments = 120
Interest Rate = 8.0%
Total Interest Paid
− $ 3,489.96
Total Amount Paid
− $ 11,143.96
*Loan balance is based on the school’s average indebtedness and
*Loan balance is based on the school’s average indebtedness and
payment is calculated using the Standard Repayment Plan
payment is calculated using the Standard Repayment Plan
Repayment plans
Offered under both FDLP & FFELP
www.studentaid.ed.gov
• Standard
• Graduated
• Extended
• Income-based
Specific to loan program
• Income-contingent (FDLP)
• Income-sensitive (FFELP)
Repayment plans
• For all repayment plans, student can:
− Prepay loans without penalty;
− Pay on a shorter schedule; and
− Change repayment plans once per year.
Standard Repayment Plan
• Lowest total loan cost
• Regular payments of both principal and
interest are due monthly, excluding periods
of deferment and forbearance
• Minimum monthly payment is $50
• 10-year repayment term
Graduated Repayment Plan
• Monthly payments are smaller at the start of
the repayment period and gradually increase
every two years
• 10-year repayment term
• Total amount paid in interest will be greater
than under the standard repayment plan
Extended Repayment Plan
• Lengthens repayment term up to 25 years
• Available to borrowers with more than
$30,000 in federal student loans
(per program)
• Total interest costs may be higher over life
of the loan, although monthly payment
amount may be lower
Income-Based Repayment Plan (IBR)
• Borrowers may qualify for lower monthly
payments as determined by adjusted gross
income, federal student loan debt, and family
size
• After 25 years (300 payments), remaining
balance and accrued interest may be forgiven
• Must reapply annually
• ibrinfo.org
Income Based Repayment
• Any Stafford, GradPLUS or Consolidation
Loan made under either FFELP or FDLP is
eligible for repayment under IBR, EXCEPT
loans that are currently in default, parent
PLUS Loans, or Consolidation loans that
repaid a parent PLUS Loan
Repayment Comparison
• The Income Based Repayment plan
example is calculated based on an annual
gross income of $30,000 and a family size of
one living in the USA. Monthly payment
amounts under the IBR plan may change
annually based on the borrower’s annual
gross income and family size. Any remaining
balance, including interest, is forgiven after
25 years of qualifying payments
Repayment Comparison ($45,000)
Standard
Graduated
Extended
Income
Based
Income
Sensitive
(FFEL
ONLY)
Income
Contingent
(DL ONLY)
Monthly
Payment
$518
Yrs 1-2
$356
Yrs 3-4
$432
Yrs 5-10
$647
$312
Min $172
Max $518
Yr 1 $100
Yrs 2-10
$582
Yr 1 $320
Max $400
Term
10 Years
10 years
25 years
25 years
10 years
17 years
Total
Interest
$17,143
$20,500
$48,701
$59,997
$19,061
$44,505
Total Paid
$62,143
$65,500
$93,701
$98,130
$64,061
$78,505
Income-Sensitive Repayment Plan
• Offered only to borrowers under the FFELP
• Monthly payment varies according to gross
•
•
•
•
monthly income
Monthly payment covers at least monthly
accruing interest
Must reapply annually
Total interest costs will be higher over the life
of your loan than with standard repayment
Maximum repayment period is 10 years
Repayment Comparison
• The Income Sensitive Repayment Plan is
calculated based on an annual gross income
of $30,000 and a family size of one living in
the USA. Total interest paid over the life of
the loan and the term will vary depending on
the percentage of income that the borrower
chooses to allocate each year to the loan
payment. Only offered for FFEL Loans
Repayment Comparison ($90,000)
Standard
Graduated
Extended
Income
Based
Income
Sensitive
(FFEL
ONLY)
Income
Contingent
(DL ONLY)
Monthly
Payment
$1,036
Yrs 1-2
$711
Yrs 3-4
$865
Yrs 5-10
$1,294.11
$625
Min $172
Max $548
Yr 1 $100
Yrs 2-10
$1,179
Yr 1 $320
Max $827
Term
10 years
10 years
25 years
25 years
10 years
25 years
Total
Interest
$34,286
$41,000
$97,398
$97,909
$38,580
$146,603
Total Paid
$124,286
$131,000
$187,398
$98,564
$128,580
$168,964
Income-Contingent Repayment Plan
• Offered only to borrowers under the Direct Loan
Program
• Monthly payment based on adjusted gross
income, family size, and total Direct Loan debt
• If payment does not cover interest accrued,
unpaid amount is capitalized annually.
• Maximum repayment period is 25 years and any
balance after 25 years (time spent in deferment
or forbearance does not count) is forgiven.
Repayment Comparison
• The Income Contingent Repayment plan
example is calculated based on an annual
gross income of $30,000 and a family size of
one living in the USA. This repayment
amount will be recalculated annually and is
subject to change, based on the poverty
guidelines per family size as determined by
the U.S. Department of Health & Human
Services. This plan has a maximum term of
25 years and is only offered for Direct Loans
Repayment Comparison ($135,000)
Standard
Graduated
Extended
Income
Based
Income
Sensitive
Income
Contingent
Monthly
Payment
$1,554
Yrs 1-2
$1,067
Yrs 3-4
$1,297
Yrs 5-10
$1,941
$937
Min $172
Max $548
Yr 1 $100
Yrs 2-10
$1,777
Yr 1 $320
Max $915
Term
10 years
10 years
25 years
25 years
10 years
25 years
Total
Interest
$51,430
$61,500
$146,100
$98,564
$58,099
$169,833
Total Paid
$186,430
$196,500
$281,100
$98.564
$193, 099
$170,905
Loan consolidation
• Option to combine federal education (not private loans)
loans
• Loans must be in grace or repayment status
• Original loans are paid in full
− New loan for the combined balances is issued with
new terms, including a new interest rate that is
fixed for the life of the loan
• www.loanconsolidation.ed.gov
Special Direct Loan Consolidation
Program
• Must have FFEL and DL
• Fixed rate (not to exceed 8.25%) after
applying a 0.25% interest rate reduction to
the FFEL loans being consolidated
• Each loan that is consolidated retains its
original repayment term.
• www.loanconsolidation.ed.gov
Consolidation — factors to consider
• Negatives
− Total interest paid may be greater
− May extend repayment period
− May lose benefits (e.g., grace period, loan
forgiveness, cancellation, deferment, or a
reduced interest rate)
Consolidation — factors to consider
• Positives
− May significantly lower monthly payments
− Simplifies repayment — one monthly payment
− No minimum or maximum loan amounts or
fees with Direct Loan consolidation
Consolidation tips
• Compare and weigh all options
• For more information on consolidating your
loans, and how to apply go to
− www.loanconsolidation.ed.gov
Split Loan Issues
• Loans owned and serviced by lenders
• Loans owned by DOE and serviced by federal
servicers
− Nelnet, Great Lakes, FedLoan Servicing, Sallie Mae,
and several non-profits
• Direct Loans
• www.nslds.ed.gov
Deferments and Forbearances
• No specific deferments for medical students
• No longer eligible for an Economic Hardship
deferment
• Most medical students select residency
forbearance or graduate fellowship deferment
• $160,000 loan at 6.8% interest generates
appx. $3,574 of interest in 120 days.
Deferments
• A deferment is a period of time when payment on a loan
is temporarily postponed.
• Interest payment
− Federal Government pays the interest during
deferments for subsidized loans and for the
underlying subsidized loans that were consolidated
− Borrower is responsible for the interest for
unsubsidized loans and GRAD and PLUS loans and
for the underlying unsubsidized loans that were
consolidated
Types of Deferments
• Enrolled at least half time in an eligible postsecondary
•
•
•
•
•
institution
Unemployed or experiencing economic hardship ( limited
to 3 years)
Military service, including the National Guard
Studying full time in a graduate fellowship program or an
approved disability rehabilitation program
www.studentaid.ed.gov
Continue to make your payments until you have been
notified by your servicer/lender that your deferment has
been granted.
Forbearance
• Forbearance is a temporary postponement or reduction
of payments for a period of time
− Personal problems such as poor health or economic
hardship
− Affected by circumstances such as a national
emergency, military mobilization or natural disaster
− Are servicing in a position that may, after a specified
period of service, qualify you for loan forgiveness,
partial repayment of your loan or a national service
educational award
Forbearance
• The borrower is responsible for the interest
that accrues during a forbearance.
• Recommendation
− Pay at least the interest as it accrues during
forbearance.
− Capitalization of interest
• Interest is added to the principal balance of the
loan…increases debt and has you paying interest
on interest
Mandatory Forbearance
• Medical or dental internship or residency
• Have student loan payments that are 20% or
more or your monthly income
• Have payments being made for you by the
Department of Defense
•
Loan Forgiveness
• Death
• Total and permanent disability
• Your school fails to pay a refund as required if you
withdraw
• You are unable to complete your program of study due
to school closure
• Your loan was falsely certified as a result of crime or
identity theft
• Your school falsely certified or fraudulently completed a
loan application in your name without your approval
Teacher Loan Forgiveness Program
• Teacher Loan Forgiveness Program
− All federal loans issued after October 1, 1998
− You teach as a highly qualified teacher in a
qualifying low-income school for 5
consecutive, complete academic years
− The loan for which you are seeking
forgiveness was made before the end of the
5th year of your qualifying teaching service
Public Service Loan Forgiveness
Program
• For FDLP borrowers ONLY
− Have made 120 monthly payments on the
eligible loan on or after October 1, 2007, while
servicing in a public service position, and
− Are employed in a public service position at
the time forgiveness is requested
− Additional criteria available at
www.studentaid.ed.gov
− 1-800-848-0979
Debt Management Strategies
• Make a budget
• Loan payments are a fixed cost like utilities and rent
• Be realistic about expected earnings for
your major
• Stick to one credit card. Keep in mind that credit cards
are loans!
• Contact the holder of your loan if you have trouble
making payments
− Change repayment plans if necessary
Debt Management Strategies
Needs
• Food
• Housing
• Utilities
• Clothes
• Transportation
• Child care
Wants
• Eating out
• Premium Cable TV
package
• Vacation
• Video games
• New car vs. used car
• New computer
Debt Management Strategies
• Define your goal
− How long do you want to be in debt
− How much do you want to save for retirement
• Distinguish wants from needs
• Stick with your plan and resist temptation of
unnecessary spending
• Sacrifice in the short-term for long-term
rewards
Accessing your loan information
• National Student Loan Data System (NSLDS)
− U.S. Department of Education's central
database for student aid
− NSLDS receives data from schools, guaranty
agencies, the Direct Loan program, and other
Department of Education programs
− www.nslds.ed.gov
− Need a PIN for access
Reminders
• Keep copies of all correspondence
• Keep the Direct Loan Servicing Center or
lender informed of status changes (e.g.,
address change or going to graduate school)
• Direct Loan borrowers
− www.dl.ed.gov
− 1-800-848-0979 or (TTY) 1-800-848-0983.
• FFELP borrowers
− Know your lender’s phone number
Problem resolution process
• Federal Student Aid Ombudsman of the
Department of Education
− Helps resolve disputes
− When you have done all you can do
yourself and haven’t been able to reach a
solution, the Ombudsman provides a process
and resources to assist you, the student.
− www.ombudsman.ed.gov
Contact Information
• www.studentaid.ed.gov
− Overview of loan repayment, deferment,
forbearance and forgiveness programs
• www.nslds.ed.gov
− Overview of all of your federal loans, including
amounts, interest rates, lender, servicer,
status