Exit Counseling

Agenda  Understand Your Commitment.  150 Percent Subsidized Loan Limit.  Repayment. –Repayment Plans. –Consolidation.  Repayment Relief.  Consequences.  Money Management.  Tax Benefits.  Getting Help.  Questions and Answers.

Understand Your Commitment  Read all communication, forms and documents carefully.  Understand the terms of your student loan.  Manage your money.  Ask for help.

Understand Your Commitment National Student Loan Data System

Understand Your Commitment  Federal loans: –Federal Family Education Loan Program or Direct Loan Programs.  Subsidized or unsubsidized loans.  Grad PLUS loan.  Consolidation loan. –Other federal loans.  Perkins loan.  Health-related program loan.  Non-federal education loans: –Also known as “private” or “alternative” loans. Loan Types

Understand Your Commitment  Master Promissory Note: –Must be signed in order to receive loan funds. –Legally binding document. –Specifies your rights and responsibilities.  MPN multi-year feature: –Sign once. –You can “opt out” and sign a new MPN for each loan. –Some schools do not use this feature. –May expire in certain cases.  Borrower’s Rights and Responsibilities Statement. –Expect a “Plain Language Disclosure” for any subsequent loans. Master Promissory Note

Understand Your Commitment  You promise to repay your loan, even if you: –Don’t complete your program of study at all or within the regular time frame for completion. –Are unable to locate employment after completing your program. –Are dissatisfied with or don’t receive services purchased from the school. –Don’t receive payment coupons or notifications from your loan servicer. Master Promissory Note

Agenda  Understand Your Commitment.  150 Percent Subsidized Loan Limit.  Repayment. –Repayment Plans. –Consolidation.  Repayment Relief.  Consequences.  Money Management.  Tax Benefits.  Getting Help.  Questions and Answers.

150 Percent Subsidized Loan Limit  Limits Direct Subsidized loans for “first-time borrowers.” –Limited to 150 percent of published length of student’s current educational program.  Definition of first-time borrower: –No outstanding principal balance as of July 1, –Repaid all prior loans before July 1, 2013 before borrowing again.

150 Percent Subsidized Loan Limit Effect on Borrowers –They no longer qualify for Direct Subsidized loans beyond 150 percent of the program length, unless entering a longer program. –They no longer qualify for interest subsidy on previously obtained loans as of the date attendance begins after reaching the limit. –Once interest subsidy is lost, it cannot be regained. –Borrower becomes responsible for interest that accrues. –Unpaid interest is capitalized. Loss of subsidy on future loans Loss of subsidy on prior loans  Affected borrowers who reach or exceed the 150 percent limit may experience:

Remaining Eligibility Period Maximum Eligibility Period – Subsidized Loan Eligibility Used = Remaining Eligibility Period 150 Percent Subsidized Loan Limit Definitions 3 Maximum Eligibility Period Subsidized Usage Period Department of Education calculates periods using information reported by schools. Days in loan period Days in academic year Program length x 150 percent = Maximum Eligibility Period

MarkAshley Total borrowed$4,000 Accrued interest (final nine months of program, plus six-month grace period) $239.58$0 Outstanding balance at repayment$4,239.58$4,000 Loan payment amount$50 for 105 mos.$50 for 98 mos. Cumulative payments$5,241.35$4, Total interest paid$1,241.35$ MarkAshley Total borrowed$4,000 Accrued interest (final nine months of program, plus six-month grace period) $239.58$0 Outstanding balance at repayment$4,239.58$4,000 Loan payment amount$50 for 105 mos.$50 for 98 mos. Cumulative payments$5,241.35$4, Total interest paid$1,241.35$ MarkAshley Total borrowed$4,000 Accrued interest (final nine months of program, plus six-month grace period) $239.58$0 Outstanding balance at repayment$4,239.58$4,000 Loan payment amount$50 for 105 mos.$50 for 98 mos. Cumulative payments$5,241.35$4, Total interest paid$1,241.35$ MarkAshley Total borrowed$4,000 Accrued interest (final nine months of program, plus six-month grace period) $239.58$0 Outstanding balance at repayment$4,239.58$4,000 Loan payment amount$50 for 105 mos.$50 for 98 mos. Cumulative payments$5,241.35$4, Total interest paid$1,241.35$ MarkAshley Total borrowed$4,000 Accrued interest (final nine months of program, plus six-month grace period) $239.58$0 Outstanding balance at repayment$4,239.58$4,000 Loan payment amount$50 for 105 mos.$50 for 98 mos. Cumulative payments$5,241.35$4, Total interest paid$1,241.35$ MarkAshley Total borrowed$4,000 Accrued interest (final nine months of program, plus six-month grace period) $239.58$0 Outstanding balance at repayment$4,239.58$4,000 Loan payment amount$50 for 105 mos.$50 for 98 mos. Cumulative payments$5,241.35$4, Total interest paid$1,241.35$ MarkAshley Total borrowed$4,000 Accrued interest (final nine months of program, plus six-month grace period) $239.58$0 Outstanding balance at repayment$4,239.58$4,000 Loan payment amount$50 for 105 mos.$50 for 98 mos. Cumulative payments$5,241.35$4, Total interest paid$1,241.35$ Percent Subsidized Loan Limit Repayment Comparison Example: Losing Interest Subsidy 13 Loss of interest subsidy cost Mark $365.

Agenda  Understand Your Commitment.  150 Percent Subsidized Loan Limit.  Repayment. –Repayment Plans. –Consolidation.  Repayment Relief.  Consequences.  Money Management.  Tax Benefits.  Getting Help.  Questions and Answers.

Repayment Grace Period Subsidized and Unsubsidized Loans  Single six-month period in which no payment is expected. Grace and Post-Enrollment Deferment Periods No penalty for early repayment. Post-Enrollment Deferment Grad PLUS Loans  Renewable six-month period after borrower ceases to be enrolled at least half time.  First loan payment due within days after grace period ends.  Interest subsidy applies.

Repayment Method of Payment  Online payments.  Auto-debit. –0.25 percent interest rate reduction.  Coupon books.

Repayment  Use a loan calculator to compare repayment options: –calculator.usafunds.org.  As a student loan borrower you may: –Prepay your student loans without penalty. –Use an accelerated repayment option resulting in less interest. –Change repayment plans to accommodate your situation. Plans

Repayment Plans  Standard.  Graduated.  Extended.  Income-related plans: –Income-based repayment. –Income-sensitive (FFELP only). –Income-contingent (DL only). –Pay As You Earn (DL only).

Repayment  Default repayment option.  Payments of equal, monthly installments.  Repayment period cannot exceed 10 years.  Minimum payment of $50. Plans Standard Repayment

Repayment  Example of a standard repayment schedule: Plans Unsubsidized Loan (6.8 percent) Loan AmountPayment AmountNumber of Months $10,000$ $50,000$ Grad PLUS Loan (7.9 percent) Loan AmountPayment AmountNumber of Months $10,000$ $50,000$ Source:

Repayment  Payments increase over time.  Repayment term cannot exceed 10 years.  Monthly payment amount: –Must cover accruing interest. –Will not have a single payment more than three times the amount of another. Plans Graduated Repayment

Repayment  Example of a graduated repayment schedule: Plans Unsubsidized Loan (6.8 percent) Loan AmountPayment AmountNumber of Months $10,000$7924 $9624 $11724 $14224 $17324 Source:

Repayment  Example of a graduated repayment schedule: Plans Unsubsidized Loan (6.8 percent) Loan AmountPayment AmountNumber of Months $50,000$39524 $48024 $58424 $71024 $86324 Source:

Repayment  Example of a graduated repayment schedule: Plans Grad PLUS Loan (7.9 percent) Loan AmountPayment AmountNumber of Months $10,000$8424 $10224 $12424 $15024 $18124 Source:

Repayment Plans  Example of a graduated repayment schedule: Graduated Repayment Grad PLUS Loan (7.9 percent) Loan AmountPayment AmountNumber of Months $50,000$42224 $51124 $61824 $74924 $90624 Source:

Repayment  Borrowers with $30,000 or more in FFELP or DL student loans. –Totals from FFELP and DL may not be combined to equal $30,000.  Maximum repayment period of 25 years.  Length of repayment is tied to the amount borrowed. Plans Extended Repayment

Repayment  Example of an extended repayment schedule: Plans Unsubsidized Loan (6.8 percent) Loan AmountPayment AmountNumber of Months $35,000$ $50,000$ Grad PLUS Loan (7.9 percent) Loan AmountPayment AmountNumber of Months $35,000$ $50,000$ Source:

Repayment  Partial financial hardship exists if annual payments exceed discretionary income: –Borrowers prior to July 1, 2014: 15 percent. –New borrowers on or after July 1, 2014: 10 percent.  Payment amount may be reduced or eliminated.  Remaining amounts may be forgiven after: –Borrowers prior to July 1, 2014: 300 qualifying payments over 25 years. –New borrowers on or after July 1, 2014: 240 qualifying payments over 20 years. Plans Income-Based Repayment

Repayment  Example of an income-based repayment schedule: –Annual pretax adjusted gross income: $36,000. –Family size: 1 (single, no dependents). –Residence: continental U.S. –Increase in annual income: 2.5 percent. Plans Unsubsidized Loan (6.8 percent) Loan Amount Pretax Monthly Income Amount Payment Amount Number of Months Rem. Balance $30,000$3,000$231187$0 $50,000$3,000$231300$45,756 Source:

Repayment  Example of an income-based repayment schedule: –Annual pretax adjusted gross income: $36,000. –Family size: 1 (single, no dependents). –Residence: continental U.S. –Increase in annual income: 2.5 percent. Plans Grad PLUS Loan (7.9 percent) Loan Amount Pretax Monthly Income Amount Payment Amount Number of Months Rem. Balance $30,000$3,000$231212$0 $50,000$3,000$231300$60,031 Source:

Repayment  Payments relate to FFELP borrower’s annual income.  Repayment period may exceed 10 years, depending on borrower’s income and amount borrowed.  Borrowers must re-apply each year. Plans Income-Sensitive Repayment – FFELP Loans

Repayment  Example of an income-sensitive repayment schedule: –Annual pretax adjusted gross income: $24,000. –Residence: continental U.S. –Desired income percentage: 4 percent.  Assumes interest-only payment for first five years then standard repayment for the remaining term. Plans Unsubsidized Stafford (6.8 percent) Loan Amount Minimum Payment Maximum Payment Number of Months Rem. Balance $20,000$113$230180$0 $50,000$283$575180$0 Source: USA Funds finance department.

Repayment  Example of an income-sensitive repayment schedule: –Annual pretax adjusted gross income: $24,000. –Residence: continental U.S. –Desired income percentage: 4 percent.  Assumes interest-only payment for first five years then standard repayment for the remaining term. Plans Grad PLUS (8.5 percent) Loan Amount Minimum Payment Maximum Payment Number of Months Rem. Balance $20,000$142$248180$0 $50,000$354$620180$0 Source: USA Funds finance department.

Repayment  Payments relate to DL borrower’s annual income and family size.  Minimum payment of $5.  Any remaining balance due after 25 years will be forgiven.  Borrowers must re-apply each year. Plans Income-Contingent Repayment – Direct Loans

Repayment  Example of an income-contingent repayment schedule: –Annual pretax adjusted gross income: $30,000. –Family size: 1 (single, no dependents). –Residence: continental U.S. –Increase in annual income: 2.5 percent. Plans Unsubsidized Loan (6.8 percent) Loan Amount Pretax Monthly Income Amount Payment Amount Number of Months Rem. Balance $20,000$2,500$153250$0 $50,000$2,500$306300$725 Source:

Repayment  Example of an income-contingent repayment schedule: –Annual pretax adjusted gross income: $30,000. –Family size: 1 (single, no dependents). –Residence: continental U.S. –Increase in annual income: 2.5 percent. Plans Grad PLUS Loan (7.9 percent) Loan Amount Pretax Monthly Income Amount Payment Amount Number of Months Rem. Balance $20,000$2,500$162271$0 $50,000$2,500$306300$28,642 Source:

Repayment  Partial financial hardship exists if annual payments exceed discretionary income by 10 percent. –Consistent with “new borrowers” under IBR.  Payment amount may be reduced or eliminated.  Remaining amounts may be forgiven after 240 qualifying payments over 20 years. –Consistent with “new borrowers” under IBR. Plans Pay As You Earn

Repayment  Example of an Pay As You Earn repayment schedule: –Annual pretax adjusted gross income: $36,000. –Family size: 1 (single, no dependents). –Residence: continental U.S. –Increase in annual income: 2.5 percent. Plans Unsubsidized Loan (6.8 percent) Loan Amount Pretax Monthly Income Amount Payment Amount Number of Months Rem. Balance $30,000$3,000$154240$24,561 $50,000$3,000$154240$73,076 Source:

Repayment  Example of an Pay As You Earn repayment schedule: –Annual pretax adjusted gross income: $36,000. –Family size: 1 (single, no dependents). –Residence: continental U.S. –Increase in annual income: 2.5 percent. Plans Grad PLUS Loan (7.9 percent) Loan Amount Pretax Monthly Income Amount Payment Amount Number of Months Rem. Balance $30,000$3,000$271161$0 $50,000$3,000$271240$48,196 Source:

Repayment Plans  Total unsubsidized loan amount = $50,000. Comparison Initial Monthly Payment Highest Monthly Payment Interest Paid Total Amount Paid Years in Repayment Standard$575 $19,044$69,04810 Graduated$395$863$22,778$72,77810 Extended$347 $54,112$104,11125 IBR$154$224$44,924$ ICR$406$422$34,150$84,15017 ISR$283$575$36,048$86,04815 Pay As You Earn $154$224$44,924 20

Agenda  Understand Your Commitment.  150 Percent Subsidized Loan Limit.  Repayment. –Repayment Plans. –Consolidation.  Repayment Relief.  Consequences.  Money Management.  Tax Benefits.  Getting Help.  Questions and Answers.

Repayment  Eligible loans: –FFELP and Direct Subsidized and Unsubsidized loans. –FFELP and Direct PLUS loans. –Consolidation loans. –Federal Perkins loans. –Federal Nursing Student Loans. –Health Professions Student Loans. –Health Education Assistance Loans. –Certain other education loans. Consolidation A new loan that pays off existing loans and carries new terms.

Repayment Consolidation AdvantagesDisadvantages  Combines several loans into one new loan.  One lower monthly payment.  Interest rate is fixed.  Interest subsidy still applies, but only to subsidized loans.  No fees or prepayment penalties.  Increases interest charges due to longer repayment period.  Reduced options for cancellation and forgiveness.  May lose benefits; varies by lender.  May lose remainder of grace period.

Repayment Sum of Consolidation Loans and Other Education Debt Maximum Term Less than $7,50010 years $7,500 - $9, years $10,000 - $19, years $20,000 - $29, years $40,000 - $59, years $60,000 or more30 years Consolidation: Maximum Repayment Periods

Repayment  Fixed interest rate based on loans being consolidated. –Weighted average, rounded up to nearest one-eighth of one percent. –No longer capped at 8.25 percent, for new applications filed on or after July 1, Consolidation: Interest Rates 17

Agenda  Understand Your Commitment.  150 Percent Subsidized Loan Limit.  Repayment. –Repayment Plans. –Consolidation.  Repayment Relief.  Consequences.  Money Management.  Tax Benefits.  Getting Help.  Questions and Answers.

Repayment Relief  Deferment.  Forbearance.  Cancellation.  Forgiveness. Direct Loans have repayment options to assist borrowers who need help:

Repayment Relief  Postpone repayment for borrowers who qualify.  Entitlement for eligible borrowers.  Suspend payment of principal and interest: –Interest subsidy resumes. –Interest accrues on unsubsidized portion.  Some deferments must be updated at least annually.  Can apply retroactively.  Borrowers must request deferment.  Once repayment resumes, first payment usually due within 60 days. Deferment

Repayment Relief Deferment Types  Half-time enrollment.  Time limit: none. In-School  Not working at least 30 hours per week in work that will last at least three moths.  Actively seeking employment.  Time limit: 36 months. Unemployment  Financial difficulty making loan payments.  Time limit: 36 months. Economic Hardship

Repayment Relief Deferment Types  Participating in a qualifying vocational or health-related rehabilitation program.  Time limit: none.  Participation in a full-time graduate fellowship for at least six months.  Time limit: none.  Serving on active duty for other than training purposes.  Time limit: none.  Students enrolled at least half time within six months of activation.  Time limit: 13 months. Rehabilitation Training Graduate Fellowship Military Service Post Active-Duty Student

Repayment Relief  Generally granted at the discretion of the lender.  Forbearance may include any of following changes to repayment agreement: –No monthly payment. –Interest-only payments. –Lower payment. –Other arrangements.  Can be applied retroactively for up to 12 months.  Interest subsidy is not available. –Any unpaid interest may be capitalized.  Lender required to inform borrower of status, obligations and associated costs. Forbearance

Repayment Relief Forbearance Types  Lender believes borrower is willing but unable to make payments.  Time limit: up to 12 months.  Internship/Residency.  National service.  Loan forgiveness.  DoD repayment.  High debt.  Active duty.  Overdue payments under certain circumstances.  Disaster, national emergency or military mobilization.  Processing periods. Discretionary Mandatory Administrative Mandatory Administrative

Repayment Relief Cancellation, Discharge and Forgiveness  Death of borrower.  School closure.  False certification.  Identity theft.  Total and permanent disability.  Limited bankruptcy.  Unpaid refund.  Teacher loan forgiveness.  Public service loan forgiveness. If the borrower dies, the government discharges the remaining loan amount.

Repayment Relief Cancellation, Discharge and Forgiveness  Death of borrower.  School closure.  False certification.  Identity theft.  Total and permanent disability.  Limited bankruptcy.  Unpaid refund.  Teacher loan forgiveness.  Public service loan forgiveness. The government discharges loans when a student cannot complete a program due to the school closing.

Repayment Relief Cancellation, Discharge and Forgiveness  Death of borrower.  School closure.  False certification.  Identity theft.  Total and permanent disability.  Limited bankruptcy.  Unpaid refund.  Teacher loan forgiveness.  Public service loan forgiveness. Loan discharge is available if the school improperly certified a loan for the borrower.

Repayment Relief Cancellation, Discharge and Forgiveness  Death of borrower.  School closure.  False certification.  Identity theft.  Total and permanent disability.  Limited bankruptcy.  Unpaid refund.  Teacher loan forgiveness.  Public service loan forgiveness. If the borrower can prove in court that he or she was the victim of identity theft, the loan may be cancelled.

Repayment Relief Cancellation, Discharge and Forgiveness  Death of borrower.  School closure.  False certification.  Identity theft.  Total and permanent disability.  Limited bankruptcy.  Unpaid refund.  Teacher loan forgiveness.  Public service loan forgiveness. Available when the borrower is unable to earn sufficient income due to illness or injury expected to continue indefinitely or result in death.

Repayment Relief Cancellation, Discharge and Forgiveness  Death of borrower.  School closure.  False certification.  Identity theft.  Total and permanent disability.  Limited bankruptcy.  Unpaid refund.  Teacher loan forgiveness.  Public service loan forgiveness. If court finds that repayment of student loan will cause undue hardship to the borrower, cancellation may be available.

Repayment Relief Cancellation, Discharge and Forgiveness  Death of borrower.  School closure.  False certification.  Identity theft.  Total and permanent disability.  Limited bankruptcy.  Unpaid refund.  Teacher loan forgiveness.  Public service loan forgiveness. Failure to receive a student loan refund may qualify the borrower for discharge.

Repayment Relief Cancellation, Discharge and Forgiveness  Death of borrower.  School closure.  False certification.  Identity theft.  Total and permanent disability.  Limited bankruptcy.  Unpaid refund.  Teacher loan forgiveness.  Public service loan forgiveness. Forgiveness available for up to $17,500, depending on type of teaching position.

Repayment Relief Cancellation, Discharge and Forgiveness  Death of borrower.  School closure.  False certification.  Identity theft.  Total and permanent disability.  Limited bankruptcy.  Unpaid refund.  Teacher loan forgiveness.  Public service loan forgiveness. Discharge remaining debt after 10 years of qualifying payments.

Agenda  Understand Your Commitment.  150 Percent Subsidized Loan Limit.  Repayment. –Repayment Plans. –Consolidation.  Repayment Relief.  Consequences.  Money Management.  Tax Benefits.  Getting Help.  Questions and Answers.

Consequences Delinque ncy  Lender has not received payment by the stated due date.  Late charges may be assessed.  Negative mark on your credit record.

Consequences  Lose eligibility for future federal financial aid.  Lose eligibility for flexible loan repayment options.  Adverse credit reports.  State-issued licenses can be withdrawn or denied.  Income tax refunds can be withheld.  Wages can be garnished.  Federal benefit payments can be confiscated.  Interest continues to accumulate.  Federal debt collection procedures, including fees and fines.  Legal action. Default No loan payments for 270 consecutive days or more

Agenda  Understand Your Commitment.  150 Percent Subsidized Loan Limit.  Repayment. –Repayment Plans. –Consolidation.  Repayment Relief.  Consequences.  Money Management.  Tax Benefits.  Getting Help.  Questions and Answers.

Money Management  Identify your financial goals.  Develop a realistic monthly budget.  Pay your bills prior to the due date.  Keep accurate and well-organized records.  Save for the future.

Money Management Latte$3.00 Loan balance$20,000 What would you do with $780? Days per weekx 5 Weekly cost$15.00 x 52 Yearly cost$780 Cost over 10 years$7,800 Repayment term10 years Regular payment amount$ Extra monthly payment$65.00 x 52 Savings over 10 years $2, Reduction in term2.8 years Yearly cost$780 Source:

Agenda  Understand Your Commitment.  150 Percent Subsidized Loan Limit.  Repayment. –Repayment Plans. –Consolidation.  Repayment Relief.  Consequences.  Money Management.  Tax Benefits.  Getting Help.  Questions and Answers.

Tax Benefits  There are a variety of tax credits, deductions and savings plans available to assist with higher education expenses: –American Opportunity Tax Credit. –Hope and Lifetime Tax Credit. –College Tuition and Fees Deduction. –Student Loan Interest Deduction.  See for more information.

Getting Help  If you cannot make a student loan payment: –Your loan holder. –Your school. –Department of Education.  If you have an unresolved issue: –Department of Education Ombudsman:  Phone: (877)   Difficult Situations

Questions and Answers

Resources      

A nonprofit corporation, USA Funds ® works to enhance postsecondary education preparedness, access and success by providing and supporting financial and other valued services.