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Federal Direct Exit Loan Counseling Student Financial Services Fall 2012.

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Presentation on theme: "Federal Direct Exit Loan Counseling Student Financial Services Fall 2012."— Presentation transcript:

1 Federal Direct Exit Loan Counseling Student Financial Services Fall 2012

2 What is Exit Counseling and Why are You Here?  Exit counseling is a way for students to understand their rights and responsibilities.  Must be completed if you withdraw, graduate, or drop below half-time attendance.  Understand the agreement you entered when you borrowed your loans.

3 Objectives for Today  Review Federal Direct Student Loans  How many loans do I have and where are they?  Repayment Plans  What if I don’t pay? Consequences of default  When and how to get help from your servicers/lenders  Be successful and repay your loans.

4 Review Federal Student Loan Programs

5 Federal Student Loan Programs  William D. Ford Direct Loan (Direct Loan) Program Loans:

6 Loan Definitions  Loan: The money borrowed from a lending institution or the Department that must be paid back.  Grace Period: The six-month grace period after you graduate, leave school, or drop below half-time enrollment in which you are not required to make payments towards your loans. Have you used your grace period?  Lender: The organization that made the loan initially for you which could be a bank, credit union, or the Department of Education.

7 Loan Definitions, Continued  Loan Holder: This is the institution that holds your loan and promissory note and has the right to collect money from you.  Loan Servicer: The company that maintains the loan for the lender. This organization will send bills, interest statements, disclosure statements, and any other necessary paperwork.  National Student Loan Data System (NSLDS): The Department of Education’s central location that contains information about your federal student loans.

8 Loan Definitions, Continued  Deferment: A deferment is a period of time during which your lender will temporarily suspend your regular payments.  Forbearance: If you are unable to make your scheduled payments, but do not meet the criteria to qualify for a deferment, the lender/loan holder may allow you to reduce the amount of your payment.  Collection Agency: Company that will make all attempts and/or litigation to recover defaulted student loans.

9 Loan Definitions, Continued  Master Promissory Note (MPN): MPN is the legal contract between you and the lender (Department of Education) Your promise to repay the loans even if you do not complete your education or are otherwise unhappy with the education you have received. Effective for loans from multiple years

10 Changing Relationships  To this point most of your contact regarding your Federal Student Loans has been with MSU (or a previous school).  Now most of your questions will be directed to the lender or loan servicer.

11 Subsidized Vs. Unsubsidized  Subsidized

12 Different Loan = Different Terms *Standard Repayment Plan. Other repayment plans are available.

13 My Loans  Check out the National Student Loan Data System for students (NSLDS)

14 National Student Loan Data System (NSLDS) 

15 Repayment Plans

16

17 Paying on Your Loan  You have the option to prepay all or part of your federal student loans before your repayment begins (without penalty).  Make payments before they are due or pay a little more each month.  Contact loan servicer to make sure extra payment is applied to principal balance.  Paying extra each month can reduce total cost of loan over time.

18 Standard Repayment  Equal monthly payments  Payment term of 10 years  Minimum payment of at least $50 per month 1 An unsubsidized Stafford loan at 6.8% interest, with a 10-year amortized repayment plan

19 Other Repayment Options  Graduated Repayment Plan  Extended Repayment Plan  Income-Based Repayment Plan  Income-Sensitive Repayment Plan  Income Contingent Repayment Plan

20 Graduated Repayment Plan  Payments start out low and then will increase every two years  Payment term of 10 years Loan Amount Beginning Monthly Payment Ending Monthly Payment 1 Total Interest Paid Total Paid 2 (Loan + Interest) $10,000$56.67$159.63$4,726.70$14, $30,000$170.00$478.88$14,179.62$44, Payment amounts under graduated plans vary from lender to lender. Your lender will determine the exact payments if you choose this plan. 2 An unsubsidized Stafford loan at 6.8% interest, with a 10-year amortized repayment plan.

21 Extended Repayment Plan  Eligible if you received loans after 10/7/1998 and have over $30,000 in federal student loan debt.  Repayment term may be as long as 25 years  Minimum payment is at least $50 per month  Monthly payments may be fixed or graduated 1 An unsubsidized Stafford loan at 6.8% interest, with a 25-year amortized repayment plan.

22 Income- Based Repayment Plan  Monthly payment is capped at an amount that is affordable based on your income and family size  Must reapply each year  Payment term is years  May qualify for cancellation for any outstanding balance on loans after 25 years

23 Income-Sensitive Repayment Plan  Repayment option available only to borrowers who have FFELP loans  Monthly payments are based on income and total loan amount  Repayment term is 10 years  Must reapply each year

24 Income-Contingent Repayment Plan  Repayment option available only to borrowers who have Federal Direct Loans  Monthly payments are based on income and family size  Repayment term is 25 years  Must reapply each year for this repayment plan  Unpaid portion may be discharged with possible tax liability

25 Loan Consolidation  One lender and one monthly payment  Flexible repayment options  Reduced monthly payments  Fixed interest rate  Subsidized, Unsubsidized, Graduate PLUS, and Perkins Loans are eligible for consolidation  Check with Lender for Private student loans

26 Loan Forgiveness Opportunities  Public Service Loan Forgiveness

27 Loan Servicers  Federal Loan Servicing (PHEAA)  Great Lakes Educational Loan Services Inc.  Nelnet  Sallie Mae  Department of Ed Student Loan Servicing (ACS) Note: For a complete list of loan servicers, refer to the list that was sent to you in the mail by Student Financial Services.

28 What will my payments be?  Payments on Federal Direct Loans will be based on your actual Direct Loan debt level  The minimum payment on your Federal Direct Loan will depend on payment plan

29 What will my payments be?  Repayment charts were included with your Exit mailing.  Loan history at MSU and other MnSCU schools is included.  Use a loan calculator to estimate what your loan payment will be by going to

30 Loan Repayment Examples

31 Money-Saving Tips  Sign up to make your monthly payment via automatic debit (ACH) instead of by check  Pay on time

32 Tax Benefits for Education  A tax credit reduced the amount of income tax you may have to pay.

33 What If I don’t Pay? The Consequences of Default

34 Consequences of Default  Ineligible for future financial aid  Difficulty in obtaining credit  Seizure of tax refunds, wages and/or property  Collection agency or other legal action  Loss of deferment or monthly payment options  Your entire loan balance will be due in full immediately  You may not be able to obtain a professional licensure or get hired by an employer who performs credit checks

35 Debt Management Budget (monthly) Total Monthly Income Rent Student Loans $2100 $700 $220 Electric$60 Heat$100 Cable/Phone/Internet$120 Food$500 Entertainment$150 Credit Card Payment$100 Transportation (car payment, gas, insurance) $400 Savings$50 Total:-$300 Your Educational Loan Payments should be considered fixed expense like rent and food!

36 When and How to Get Help!

37 Contact your Lender/Servicer  Experience repayment difficulty  Need a deferment or forbearance  Change employer or employer address

38 Your Lender/Servicer Will Want to Help  If you are experiencing repayment difficulties there are things your Lender or Servicer can do to help you out.

39 Veteran’s Options  Recent legislative changes have created new options for Veterans.  Contact your lender or servicer to find out more information on these options that may be available to you as a Veteran.

40 Be Successful and Repay Your Loans

41 Resolving a Dispute or Problem  Contact your lender or servicer first  If unable to resolve with your loan holder, contact the Federal Student Aid (FSA) Ombudsman for assistance.  Phone number: (877)  Studentaid.gov under “Repay Your Loans”

42 Borrower’s Rights and Responsibilities

43 Borrower Rights  Loan obligation information  Copy of Promissory Note  Original Paid-in-Full Notice  Interest rates/fees  Loan balance  Repayment schedule  Notification of Loan Servicer

44 Borrower Rights  Interest benefits  Grace period  Pre-payment without penalty  Deferment while in school  Request forbearance or deferment

45 Borrower Responsibilities  Complete Exit Loan Counseling at  Repay loans even if you

46 Borrower Responsibilities  Maintain contact with your lender/servicer

47 Personal Data  Information about your loans are given to the major credit reporting agencies.  To avoid telemarketing and mass mailings based on that information consider registering with the National do not call registry at < (TTY ) or

48 Final Words Your student loan debt is an investment in your future that no one can take away from you. “If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest.” Benjamin Franklin

49 Questions?


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