1. Student Loan Repayment
Financial Freedom
Student Loan Repayment

2. Presenter - Anthony Hoveln
Stacy Glidden – Director of Financial Aid
Karen Rie ck – Associate Director of Financial Aid
Krista Peace – Financial Aid Coordinator

3. Topics we’ll be covering
Types of loans
Grace period
Interest payments
Loan consolidation
Payment plans
Making Payments
Loan deferment and forbearance

4. Direct Loans

5. Direct loans are funds offered to students through the Federal Government.
Once a direct loan is disbursed it is no longer managed by the federal government and is serviced by a private entity.
Gordon Conwell does not service loans. The financial aid office facilitates the initial loan process, however, once a loan is disbursed it is handed off to a loan servicer who manages the repayment of said loan.

6. Perkins Loans

7. The Perkins loan is a school-based loan program for undergraduates and graduate students with exceptional financial need. Under this program, the school is the lender.
Federal funding is granted to Gordon Conwell to determine which students are eligible for a Perkins loan.
Campus Partners services all Gordon Conwell Perkins loans.

8. Remember!
Federal student loans are real loans, just like car loans or mortgages.
You must repay a student loan even if your financial circumstances become difficult. Your student loans cannot be canceled because you didn’t get the education or job you expected, or because you didn’t complete your education.
The only way you are not expected to repay your student loans is if you are unable to complete your education only because your school closed.

9. Invalid reasons not to pay your loans:
My degree didn’t work…
I didn’t finish my degree…
I dropped my classes after the add/drop period…

10. Grace Period

11. Grace Period
The grace period is a set period of time after you graduate, leave school, or drop below half-time enrollment before you must begin repayment on your loan.
The grace period gives you time to get financially settled and to select your repayment plan.
Note that for most loans interest will accrue during your grace period.
Direct loans = 6 months
Perkins loans = 9 months
PLUS loans have no grace period. They enter repayment once they are fully disbursed but may be eligible for a deferment. Contact your loan servicer for more information.

12. Circumstances that may change your grace period:
Active duty military—If you are called to active military duty for more than 30 days before the end of your grace period, you will receive the full six-month grace period when you return from active duty.
Returning to school before the end of your loan’s grace period—If you reenroll in school at least half-time before the end of your grace period, you will receive the full six-month grace period when you stop attending school or drop below half-time enrollment (other conditions apply).
Loan consolidation—If you consolidate your loans during your grace period, you will give up the remainder of your grace period and begin repayment after your Direct Consolidation goes into effect).  Your first bill will be due approximately two months after the Direct Consolidation goes into effect.

13. Interest Payments

14. Sub and Unsub Loans
Unsubsidized loans: Interest is accruing even when you are in school.
Subsidized loans: Interest is not accruing when you are in school, during your grace period, or in school deferment.
Current interest rate for a Direct Unsub Grad Loans is 6.21%
Current interest rate for a Grad Plus Loan is 7.21%
Interest rate for a Perkins Loan is set at 5.0%

15. Interest (Unsubsidized Loans)
Every time your status changes your interest is added to your overall balance, this process is called capitalization. (For example when you move from in grace period status to in repayment status)
Once your interest has capitalized you begin paying interest on the new overall loan amount.
Typically your loan will capitalize annually.

16. Loan Consolidation

17. Loan Consolidation
A Direct Consolidation Loan allows you to consolidate (combine) multiple federal education loans into one loan.
The result is a single monthly payment instead of multiple payments.
A Direct Consolidation Loan has a fixed interest rate for the life of the loan.
The fixed rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%.
There is no cap on the interest rate of a Direct Consolidation Loan.

18. Loan Consolidation Cont.
There are no application fees for a Direct Consolidation Loan, and you may prepay your loan at any time without penalty.
If you consolidate your loans during your grace period, you will give up the remainder of your grace period and begin repayment after your Direct Consolidation Loan goes into effect.
Your first bill will be due approximately two months after the Direct Consolidation Loan goes into effect.

19. How do I qualify for loan consolidation?
To qualify for a Direct Consolidation Loan, borrowers must consolidate at least one Direct Loan or Federal Family Education Loan (FFEL) that is in grace or repayment status
Repayment status includes loans that are in a deferment or forbearance period.
Loans that are in an in-school status cannot be included in a Direct Consolidation Loan, but borrowers may consolidate loans that are in an in-school deferment status.
Most defaulted education loans can be consolidated, if borrowers:
Make satisfactory repayment arrangements with their current loan holder(s) or Agree to repay their new consolidation loan under one of the income driven repayment plans.

20. What loans are eligible for Consolidation?
Direct Subsidized Loans
Supplemental Loans for Students (SLS)
Direct Unsubsidized Loans
Federal Perkins Loans
Subsidized Federal Stafford Loans Federal Nursing Loans
Unsubsidized Federal Stafford Loans Health Education Assistance Loans
Direct PLUS Loan Some existing consolidation loans
PLUS loans from the Federal Family
Education Loan (FFEL) Program

21. Ineligible loans for Consolidation?
Private education loans are not eligible for consolidation.
PLUS loans made to a parent cannot be combined with a dependent student’s loans through consolidation.

22. Repayment of consolidated loans
Repayment can begin 60 days after the loan is disbursed, or sooner. The loan servicer will let the borrower know when the first payment is due.
If any loan included in the consolidation is still in the grace period, the borrower can delay entering repayment on the new Direct Consolidation Loan until closer to the grace period end date. They will indicate this when applying, and the consolidation servicer will wait to process the application until the appropriate time.
It is better to consolidate after your grace period is over, otherwise you will lose your grace period and begin paying your loans soon after you consolidate.

23. Direct Loan Consolidation: Pros
One monthly payment.
Flexible repayment options.
Reduced monthly payments (Due to the longer repayment period under the consolidation standard and graduated repayment plans.)
No minimum or maximum loan amounts or fees.
May qualify for renewed deferment benefits (A consolidation loan is a new loan, with its own fresh set of deferments and forbearances.)
Potential loan forgiveness eligibility (Direct Loan Consolidation by itself does not provide any potential loan forgiveness benefit.)
Defaulted loans can be consolidated to regain Title IV eligibility (Must make satisfactory repayment arrangements or agree to repay under an income-driven plan.)

24. Direct Loan Consolidation: Cons
Consolidation generally does not save money.
Slightly higher interest rate.
Loss of the remainder of the grace period.(Repayment begins 60 days after consolidation loan is made.)
Loss of favorable benefits on Perkins loans such as subsidized interest
Some alternate repayment plans are available without consolidation.(Extended 25- year repayment is available without consolidating if you have $30,000 or more in debt with a single lender.)
Income-based repayment is available without consolidation.

25. Repayment Plans

26. Two out of five student loan borrowers – or 41% – are delinquent at some point in the first five years after entering repayment
The Institute of Higher Education Policy, March 2011
Borrowers cite unaffordable payments as the top reason for falling behind on loan payments
Great Lakes, Borrower Services May 2012

27. You have a choice of several repayment plans that are designed to meet your needs.
The amount you pay and the length of time to repay your loans will vary depending on the repayment plan you choose.

28. Standard Repayment Plan
Loans eligible for the standard repayment plan:
Direct Sub and Un-Sub Loans
Direct Consolidation Loans
FFEL Loans
Plus Loans
Payment plan will be based on a ten year repayment plan.
Using the standard repayment plan you will pay less in interest over time than other repayment plans.

29. Graduated Repayment Plan
Loans eligible for the standard repayment plan:
Direct Sub and Un-Sub Loans
Direct Consolidation Loans
FFEL Loans
Plus Loans
Payment plan will be based on a ten year repayment plan.
Payments are lower at first and then increase, usually every two years.
Using the graduated repayment plan you will pay more for your loan over time than under the standard repayment plan.

30. Extended Repayment Plan
Loans eligible for the standard repayment plan:
Direct Sub and Un-Sub Loans
Direct Consolidation Loans
FFEL Loans
Plus Loans
Payment plan will be based on a twenty five year repayment plan.
Payments may be fixed or graduated.
Direct Loan borrowers must have more than $30,000 in outstanding Direct Loans.
You must be a "new borrower" as of Oct. 7, 1998.

31. Extended Repayment Plan Cont.
Using the extended repayment plan your monthly payments would be lower than the ten year standard plan.
You'll pay more for your loan over time than under the ten year standard plan.

32. Income Based Repayment Plan (IBR)
Loans eligible for the IBR plan:
Direct Sub and Un-Sub Loans
Direct Consolidation Loans
FFEL Loans
Plus Loans
As of July 2014 the payment plan will be based on a twenty year repayment plan.
Any borrower using the IBR plan prior to July 1st 2014 will be making payments on a 25 year plan
Your maximum monthly payments will be 10 percent of discretionary income after July 1st and 15% prior to July 1st the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size and state of residence (other conditions apply).
Your payments change as your income changes.

33. Eligibility
Borrower must demonstrate a partial financial hardship (PFH)
PFH exists when the annual amount on the borrower’s eligible loans exceed 10% of the difference between the borrower’s AGI and 150% of the poverty guidelines based on borrower’s family size
Factors:
Adjusted Gross Income (AGI)
Poverty guidelines
Family size
Standard loan payment

36. Determining Eligibility
Family size = 1
$3,000 Monthly AGI
– $1, % of poverty line
$1,542
10% of $1,542 =
$154
If a borrower earns $36,000 a year; their monthly AGI would be $3, % of the monthly poverty guidelines is $1,458. Then you subtract $1,458 from $3,000 to get $1,542—which is the borrower’s discretionary income. 15% of that is $154.
If they owe $25,000 in federal loan debt, their standard monthly payment would be $288. If the amount calculated under IBR is less than the standard payment amount, then the borrower has demonstrated a partial financial hardship and qualifies for the lower IBR payment.
Standard payment = $288
Qualify =
Yes

37. Income Based Repayment Plan (IBR) Cont.
You must prove a partial financial hardship.
Your monthly payments will be lower than payments under the 10-year standard plan.
You'll pay more for your loan over time than you would under the 10-year standard plan.
Once you are able to make standard payments your loan will be recalculated according to the number of years remaining on your original 10 year repayment plan .
If you have not repaid your loan in full after making the equivalent of 20 or 25 years (depending on whether you entered the program before or after July 1st 2014)of qualifying monthly payments, any outstanding balance on your loan will be forgiven.
You may have to pay income tax on any amount that is forgiven.

38. IBR Terms – Interest Subsidy
If monthly payment amount is not enough to pay accrued interest
Interest will continue to accrue for unsub loans
Subsidized Loans
ED will not charge the remaining interest for two consecutive years
Interest subsidy eligibility period continues to elapse:
During deferment/forbearance, except during periods of economic hardship deferment
During periods when borrower doesn’t qualify for subsidy
If borrower switches from IBR to Pay As You Earn, or vice versa
If the borrower has subsidized Stafford loans and the monthly payment is so low that it does not cover the accrued interest, ED will not charge the remaining interest for three consecutive years for all of the interest that would otherwise accrue on those loans for up to three years. The borrower is responsible for paying the interest that accrues on the unsubsidized loans during this three-year period, however.
The 3-year interest subsidy “clock” CONTINUES to tick away…even during deferment/forbearance, EXCEPT during periods of economic hardship deferment. It also ticks away during periods when borrower doesn’t qualify for subsidy and/or if borrower switches from IBR to Pay As You Earn, or vice versa

39. IBR Terms – Interest Capitalization
Interest capitalizes when a borrower:
No longer has a PFH
Leaves IBR
Does not submit income documentation
Interest capitalizes when either the borrower no longer demonstrates a PFH or the borrower leaves IBR

40. Pay As You Earn repayment plan
Eligible Loans
Sub & unsubsidized
FFEL Loans
Direct Plus
Direct Consolidation
Your maximum monthly payments will be 10 percent of discretionary income, the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size and state of residence.
Your payments change as your income changes
Up to 20 years repayment
You may stay on the Pay as you Earn plan even after your income has gone up, however, your monthly payment will go up as well.

41. PAYE repayment plan Cont.
 You must be a new borrower on or after Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011.
You must have a partial financial hardship.
Your monthly payments will be lower than payments under the 10-year standard plan.
You'll pay more for your loan over time than you would under the 10-year standard plan.
If you have not repaid your loan in full after you made the equivalent of 20 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven.
You may have to pay income tax on any amount that is forgiven.

42. Eligibility
Borrower must demonstrate a partial financial hardship (PFH)
PFH exists when the annual amount on the borrower’s eligible loans exceed 10% of the difference between the borrower’s AGI and 150% of the poverty guidelines based on borrower’s family size
Factors:
Adjusted Gross Income (AGI)
Poverty guidelines
Family size
Standard loan payment

43. Pay As You Earn Terms – Interest Subsidy
If monthly payment amount is not enough to pay accrued interest
Interest will continue to accrue for unsubsidized loans
Subsidized Stafford:
ED will not charge the remaining interest for two consecutive years
Interest subsidy eligibility period continues to elapse:
During deferment/forbearance, except during periods of economic hardship deferment
During periods when borrower doesn’t qualify for subsidy
If borrower switches from Pay As You Earn to IBR, or vice versa
If the borrower has subsidized Stafford loans and their monthly payment does not cover the accrued interest, the Department of Education will not charge the remaining interest for three consecutive years. If the borrower has unsubsidized Stafford loans, then they are responsible for that interest. The interest will accrue, even if their payment is so low that is doesn’t cover it.
The 3-year interest subsidy “clock” per-se CONTINUES to tick away…even during deferment/forbearance. So let’s say the borrower receives the interest subsidy because their payment is so low that it doesn’t cover the interest. After one year, they go back to school and receive an in-school deferment and then resume repayment on their loan after one year. They will now only have one year of the interest subsidy remaining because the clocked continue ticking even while they were in an in-school deferment. The only exception is when a borrower qualifies and receives an economic hardship deferment. The clock also continues to elapse during periods when they don’t qualify for subsidy and/or if they switch from Pay As You Earn to IBR or vice versa.

44. Pay As You Earn Terms – Interest Capitalization
Interest capitalizes when a borrower:
No longer has a PFH
Limited to 10% of original principal at time borrower enters Pay As You Earn
After 10% cap is reached, interest continues to accrue, but is not capitalized while the borrower remains on Pay As You Earn
Leaves Pay As You Earn
Does not submit income documentation
Interest accrues on a borrower’s loans when they no longer have a partial financial hardship, however it is limited to 10% of the original amount at the time the borrower enters Pay As You Earn. After the 10% cap is reached, the interest continues to accrues but it’s not capitalized as long as they remain on Pay As You Earn.
However, if they voluntarily leave Pay As You Earn or do not submit income documentation, which we’ll discuss momentarily during the application process, interest capitalizes at that time.

45. Income Contingent Repayment Plan
Loans eligible for the standard repayment plan:
Direct Sub and Un-Sub Loans
FFEL Loans
Direct Consolidation Loans
Plus Loans
Payments are calculated each year and are based on your adjusted gross income, family size, and the total amount of your Direct Loans. Your payments change as your income changes.
Payments are the lesser of:
12-year standard repayment schedule multiplied by income percentage factor that varies (payment based on loan debt and income) – or –
20% of discretionary income (payment based only on income)

46. Income Contingent Repayment Plan Cont.
Your monthly payments will be lower than payments under the 10-year standard plan.
You'll pay more for your loan over time than you would under the 10-year standard plan.
If you do not repay your loan after making the equivalent of 25 years of qualifying monthly payments, the unpaid portion will be forgiven.
You may have to pay income tax on the amount that is forgiven.

47. Eligibility Borrowers do not have to demonstrate a PFH
Monthly payments are based on borrower’s income, family size, and Direct loan debt

48. ICR Terms – Interest Capitalization
Unpaid amount will capitalizes each year
Interest capitalizes only until principal balance is 10% or greater than original principal from when borrower entered repayment
Interest capitalizes at the end of deferment and forbearance
If the borrower’s payments aren’t large enough to cover the interest that has accumulated, the unpaid amount will be capitalized each year until the balance is 10% higher than their original loan balance when they entered repayment. Once this happens, interest continues to accrue but it’s not capitalized.
Interest also capitalizes at the end of a deferment or forbearance but it does not apply to the 10 percent capitalization rule.

49. ICR Terms – Loan Forgiveness
Remaining balance forgiven after 25 years of qualifying repayment, including any:
Payments made under ICR or another income-driven plan
Payments made under the standard repayment (or any other plan) that were not less than the standard plan
Periods of economic hardship deferment
Loan amount forgiven is taxable income
Similar to Pay As You Earn and IBR, ICR has a forgiveness provision. After 25 years of qualifying payment, the remaining balance is forgiven.
The 25 years includes time while the borrower was under Pay As You Earn, IBR and payments made under the standard repayment that was not less than the standard payment amount.
As like the other income-driven plans, loan amounts forgiven is considered taxable income.

50. How much will my monthly payment be?
Demo:

51. Making Payments

53. Making Payments Payments are made to your loan servicer.
Each servicer has its own payment process, so check with your servicer if you aren’t sure how or when to make a payment.
You are responsible for staying in touch with your servicer and making your payments, even if you do not receive a bill.

54. Finding your loan servicer

56. When in doubt call your loan servicer!
Use the NSLDS website to find your servicer
Create an online account with your servicer
You can talk with your servicer via web-chat on the account, it can be very helpful and save you your minutes and your sanity
Read all s from your servicer
Make sure that your servicer always has your most recent contact information – You are responsible for delinquency even if your servicer sends notices to the wrong address. It is your responsibility to keep your servicer updated.

57. Loan Deferment and Forbearance

58. What is Loan Deferment?
A deferment is a period during which repayment of the principal and interest of your loan is temporarily delayed.
During a deferment, you do not need to make payments.
The government does not pay the interest on your unsubsidized loans (or on any PLUS loans). You are responsible for paying the interest that accrues (accumulates) during the deferment period.

59. What is Loan Forbearance?
With forbearance, you may be able to stop making payments or reduce your monthly payment for up to 12 months.
If you can't make your scheduled loan payments, but don't qualify for a deferment, your loan servicer may be able to grant you a forbearance.
Interest will continue to accrue on your subsidized and unsubsidized loans (including all PLUS loans).
Two types of Forbearance:

60. 1. Discretionary Forbearance
For discretionary forbearances, your lender decides whether to grant forbearance or not.
You can request a discretionary forbearance for the following reasons: 
Financial hardship
Illness

61. 2. Mandatory forbearance
For mandatory forbearances, if you meet the eligibility criteria for the forbearance, your lender is required to grant the forbearance.
You can request a mandatory forbearance for the following reasons:
You are serving in a medical or dental internship or residency program, and you meet specific requirements.
The total amount you owe each month for all the student loans you received is 20 percent or more of your total monthly gross income (additional conditions apply).
 You are serving in a national service position for which you received a national service award.

62. Mandatory forbearance Cont.
You are performing teaching service that would qualify for teacher loan forgiveness.
You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.

63. Am I eligible for loan deferment or forbearance?
During a period of at least half-time enrollment in college or career school
During a period of study in an approved graduate fellowship program or in an approved rehabilitation training program for the disabled
During a period of unemployment or inability to find full-time employment (up to three years)
During a period of economic hardship (includes Peace Corps service) (Up to three years)
During a period of service qualifying for Perkins Loan (Direct loans do not apply)
During a period of active duty military service during a war, military operation, or national emergency

64. Am I eligible for loan deferment or forbearance?
During the 13 months following the conclusion of qualifying active duty military service, or until you return to enrollment on at least a half-time basis, whichever is earlier, if
you are a member of the National Guard or other reserve component of the U.S. armed forces and
you were called or ordered to active duty while enrolled at least half-time at an eligible school or within six months of having been enrolled at least half-time

65. How do I request a deferment?
Most deferments are not automatic, and you will likely need to submit an in school deferment form to your loan servicer (You will need to work with your schools registration office to complete your deferment form.
Perkins Loans: contact the school you were attending when you received your loan. For Gordon Conwell you will need to contact Campus Partners.

66. How do I request Forbearance?
Receiving loan forbearance is not automatic. 
You must apply by making a request to your loan servicer.
In some cases, you must provide documentation to support your request.
Interest will continue to be charged on all loan types, including subsidized loans.
If you don’t pay the interest on your loan during forbearance, it may be capitalized (added to your principal balance), and the amount you pay in the future will be higher.
You MUST continue making payments on your student loan until you have been notified that your request for deferment or forbearance has been granted. If you stop paying and your deferment or forbearance is not approved, you will become delinquent and you may default on your loan.

67. Do I have options besides deferment or forbearance?
Always contact your loan servicer immediately if you are having trouble making your student loan payment.
If you don’t qualify for deferment or forbearance, you may be able to change your repayment plan.
There may be a repayment plan that offers lower payments than you’re currently making.
Always communicate with your servicer, they don’t want you to be delinquent in your payments and will help you find solutions to your financial situation.

68. Helpful tips:
NEVER ignore delinquency notices from your loan servicer. 
If you don’t make your monthly loan payments, you will become delinquent on your student loan and risk going into default.
Contact your servicer immediately if you are having trouble making payments.
Do not assume that there is no solution for you. You can always work out a solution with your servicer.
If you have a dispute about your loan you may be able to resolve it by simply contacting your loan servicer and discussing the issue.