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LOAN REPAYMENT STRATEGIES Exploring the Federal Student Loan Repayment Plans Module 3 Jeffrey Hanson Education Services Tulane University 2 Federal Loan Repayment Plans You have options!! Loan Repayment Plans 3 You have a CHOICE of repayment plans when repaying the following federal student loans: Direct/FFEL Subsidized Loans (Stafford) Direct/FFEL Unsubsidized Loans (Stafford) Direct/FFEL Grad PLUS Loans Direct/FFEL Consolidation Loans Loan Repayment Plans Payments Based on DEBT 4 Plans Payment Structure Maximum Payment Period Standard (default plan) Fixed payments (do not change) 10 years Graduated Payments increase in graduated steps every 2 years 10 years Extended (fixed) Fixed payments (do not change) 25 years Extended (graduated) Payments increase in graduated steps every 2 years 25 years Monthly payment must at least equal the accrued interest each month Must have more than $30,000 in Direct Loans to use EXTENDED repayment options Loan Repayment Plans Payment Based on INCOME 5 Plans Payment based on: Balance forgiven after: Income Based Repayment (IBR) for 10% of “Discretionary Income” NEW Borrowers 20 years Pay As You Earn (PAYE) 10% of “Discretionary Income” 20 years Income Based Repayment (IBR) 15% of “Discretionary Income” 25 years Income Contingent Repayment (ICR) 20% of “Discretionary Income” 25 years Monthly payments can be less than accrued interest each month Payments can be adjusted up or down based on how your income increases or decreases Estimate Your Monthly Payment “Repayment Estimator” at: StudentLoans.gov 6 To “log in,” enter: FSA ID* •Password • *ED has switched from using a PIN to a new FSA ID and password – you can create your new FSA ID and password when you sign in to StudentLoans.gov Estimate Your Monthly Payment “Repayment Estimator” at: StudentLoans.gov 7 Click on: “Repayment Estimator” to use the calculator Sample Payment Estimates Federal Student Loan Debt = $100,000 (Weighted average interest rate = 6.6%) Household AGI = $35,000 (Household Size = 1; State = LA) (Estimates calculated using “Repayment Estimator” at: StudentLoans.gov) 8 Sample Payment Estimates Federal Student Loan Debt = $100,000 (Weighted average interest rate = 6.6%) Household AGI = $35,000 (Household Size = 1; State = LA) (Estimates calculated using “Repayment Estimator” at: StudentLoans.gov) 9 Choosing Your Federal Student Loan Payment Plan 10 Why? When? 30 days prior to start of repayment How? Your loans will be put on the Standard (10-year fixed) Plan if you fail to notify servicer of desired plan Notify your loan servicer (e.g., online or by phone) Apply for an income-driven plan at: StudentLoans.gov What if you need to change plans? Contact your loan servicer Direct Loan payment tips … 11 SINGLE statement billing—one monthly payment Pay by: Check or money order Online payment “Auto-Pay” (contact loan servicer to apply) Saves time Saves money -- interest rate reduced by 0.25% Loan Prepayment 12 No penalty for prepayments Contact your loan servicer before you make a prepayment Ask what steps are needed to submit prepayments Advise servicer you want to “prepay” the loan rather than “advance the due date” Target prepayment at loan(s) with highest interest rate For more information … 13 Contact your loan servicer(s) Online resources: Federal student loans: StudentAid.gov Federal loan repayment: StudentLoans.gov “Repayment Estimator” available at: StudentLoans.gov Opportunities to learn more … 14 Check out all the loan repayment modules: Understanding the Unique Nature of Federal Student Loans Developing Your Student Loan Repayment Timeline Planning for Student Loan Repayment Choosing Your Student Loan Payment Plan Understanding the IncomeDriven Repayment Plans Understanding Student Loan Consolidation Estimating Your Monthly Student Loan Payments Public Service Loan Forgiveness Taking Stock of Your Student Loan Portfolio BE STRATEGIC: Take Charge of Loan Repayment! Jeffrey Hanson Education Services Tulane University