Presentation on theme: "EXIT LOAN COUNSELING. Things to Know Before you Go….. Know your Loans Repayment Options Loan Consolidation Deferment and Forbearance Loan Forgiveness."— Presentation transcript:
EXIT LOAN COUNSELING
Things to Know Before you Go….. Know your Loans Repayment Options Loan Consolidation Deferment and Forbearance Loan Forgiveness Consequences of Default Rights & Responsibilities Tax Benefits
KNOW YOUR LOANS
Types of Loans Federal Direct Stafford Loan Federal Direct PLUS
Where is my loan?
National Student Loan Data System Who is my servicer? What is my interest rate? When will I need to start making payments? How much do I owe?
Tracking Your Loans
Stafford and PLUS Repayment Plans Standard Graduated Extended Income Based Repayment (IBR) Income Sensitive and Income Contingent
Standard Available for all Federal Loans 10 year repayment schedule Fixed payment amount Advantage: Pay lowest amount of interest over the life of the loan.
Graduated Available for all Direct, FFEL, and Federal Consolidation Loans (w/out Parent PLUS) 10 year repayment Payment amount is lower in the earlier years of repayment and gradually increase over time. Payment amount is generally reset every two years. Minimum Payment = Interest. Advantages: Loan payments increase as salary increases, and lower interest cost than Extended Repayment
Extended Available for all Direct, FFELP, and Federal Consolidation Loans (w/out parent PLUS) Must have more than $30,000 in outstanding Direct or FFEL Loans. Up to 25 year repayment Payments are fixed or graduated, and are not based on income. Minimum Payment = Interest Advantage: Allows for a more gradual increase in loan payments than the Graduated Repayment Plan
How my payment plan affects my payment and the interest I will pay…. Standard (10 Years) Extended (25 Years) Graduated (10 Years) $45, % Interest
Income Contingent (ICR) Available for Direct loans only 25 year repayment Payment amounts are based on annual income, total loan debt, and family size. Monthly payment may be less than interest charged. Advantage: Loan payments increase as salary increases, and allows for loan forgiveness after 25 years.
Income-Based Repayment (IBR) Available for Direct Loans or Direct Consolidation Loans (w/o PLUS) Loan payment limited to 15% of discretionary income After 25 years remaining balance is forgiven. Monthly payment maybe less than the interest charged. For subsidized Stafford loans, if your payment does not cover your monthly accrued interest, your interest will be subsidized for up to 3 years.
IBR Comparison 10 Yr. Standard Monthly Payment = $518 IBR Monthly Payment = $288 Borrower has loan debt of $45, % interest rate Salary is $40,000/yr Single with no dependents
Direct Loan Servicing
Federal Loan Consolidation Available for Stafford, Perkins and PLUS loans Pays off multiple loans with one new loan New loan carries new terms (interest rate is calculated using a weighted average) You may consolidate a defaulted loan
More on consolidation… May only consolidate once, allowed to add loans, but consolidation cannot be reversed Can be much more expensive due to longer repayment term ACS is the servicer for all Direct Consolidation loans
DEFERMENT AND FORBEARANCE
Deferment and Forbearance What’s the same? Temporary suspension of regularly scheduled payment What’s different? Interest accrual Forbearance is granted according to borrower’s eligibility, and also at the lender’s discretion. Deferment is granted according to borrower’s eligibility as determined by federal regulation.
To Qualify….. Deferment Military Service In School (at least half- time) Economic Hardship (3 yr. max) Unemployment (3 yr. max) Forbearance Serving in AmeriCorps (receiving an education award) During medical and dental internship or residency programs Monthly student loan payments are 20 % or more than your total monthly gross income. Discretionary
Unemployment Deferment …be unemployed or working less than full-time AND Seeking, but unable to find, full-time employment in any field or at any salary or responsibility level, and registered with a public or private employment agency (school placement offices and “temporary agencies do not qualify) …be unemployed or working less than full-time AND Seeking, but unable to find, full-time employment in any field or at any salary or responsibility level, and registered with a public or private employment agency (school placement offices and “temporary agencies do not qualify)...be eligible for unemployment benefits OR To be eligible the borrower must…
Economic Hardship Deferment To qualify, the borrower must meet one of the following criteria… Receiving an economic hardship deferment in the Federal Direct Loan or Federal Perkins Loan Program Receiving/received payments under a federal or state public assistance program Peace Corps volunteer Working full-time and monthly income does not exceed the larger of the federal minimum wage rate or 150% of the poverty guideline.
Public Service Forgiveness - Direct Loans Available for Direct Loans only (Not FFELP) Work full time (at least 30 hours) for the government or a qualifying non-profit organization - 501(c) (3) Make 120 on time payments (does not need to be consecutive) Payments must be made under the IBR, ICR or 10 Yr. Standard repayment plans. Balance is forgiven Submit forms annually to the Department of Ed
Stafford & Plus - Additional Forgiveness Remaining balance after 25 years of qualifying payments. Taxable income to the borrower in the year the loan forgiveness occurs
Discharge Total and Permanent Disability Discharge Death Student loans are usually not dischargeable due to bankruptcy
CONSEQUENCES OF DEFAULT
The Perils of Default 270 Days Past Due = Default You can’t walk away from making your payments. Consequences: Wages and Federal and State tax refunds garnished Additional costs to you (collection charges, late fees, etc.) Professional licenses withheld Loss of eligibility for future federal financial aid and loan deferments Full amount of loan comes due
Avoiding Default Keep good records Open and Read your mail. Notify lenders/servicers of name/address changes Prioritize your debts: pay off most expensive debt first Take advantage of deferment options if you qualify
YOUR RIGHTS & RESPONSIBILITIES
Your Rights A copy of your Promissory Note. Repayment Disclosure Statement with detailed information about interest rates, fees, your balance, and repayment options. Grace period and deferments (if you qualify) Loan forgiveness under certain circumstances Graduated or income-based repayment plan (if you qualify) Prepayment without penalty Notice if lender assigns or sells your loan Questions answered
Your Responsibilities Repay your loan. Make your payments on time even if you don’t receive a bill. Notify your loan holder or servicer immediately of any change to your name, address, and other personal identification information. Notify your lender if enrollment status changes. Complete exit and entrance interviews. Read and understand your loan documents. Ask for help if you need it.
Resolving Disputes – Federal Loans Federal Student Aid Ombudsman’s Office U.S. Department of Education FSA Ombudsman 830 First Street, NE, Fourth Floor Washington, DC Ph: (toll free)
What the Ombudsman Office can do: Research your problem in an impartial and objective manner and will try to develop a fair solution What the Ombudsman Office cannot do: x Does not have the authority to impose a solution
Student Loans and Your Taxes American Opportunity Credit Lifetime Learning Credit Student Loan Interest Deduction Tuition & Fees Deduction
Contact Information Duke Student Loan Office Box statement)