Student Loans Mary Anne Hunter College Access Team CO Dept. of Higher Education

Stafford Loans Subsidized Stafford Need-based Interest Rate = 3.40% ( ) Government pays interest while in school & during grace period Unsubsidized Stafford  Not need-based  Interest rate = 6.8%  Student pays interest/ accrues while in school & during grace period  Can pay quarterly or capitalize Low fixed interest rates – 1% loan fee 6 month grace period In student’s name No credit check/income verification

Federal Perkins Loans Awarded directly by college – not all participate Fixed interest rate of 5% Based on exceptional financial need 9 month grace period Award $ vary – up to $5,500 p/yr Repay college directly

Federal Parent Loan for Undergraduate Students PLUS Loans In parent name - for parents of undergrad. dependent students Fixed interest rate of 7.9% Credit check required – If denied, student is eligible for additional unsubsidized Stafford allowance Repayment begins 6 weeks after the loan is fully disbursed – or - parent may defer repayment: – while the student on whose behalf the parent borrowed the loan is enrolled on at least a half-time basis, and – for an additional six months after the student ceases to be enrolled at least half-time. $ = up to unmet need Fees - up to 4%

Private/Alternative Student Loans  Higher interest rates and variable (Prime/LIBOR)  Based on credit score & income = parents typically co-sign  Interest rate & fees determined by credit score  Less favorable repayment & deferment terms than Federal student loans  Use federal loans first  Consider PLUS/home equity loans  Talk to financial aid office first

Annual Loan Limits Stafford Loan – DEPENDENT STUDENT Dependent Students (whose parents were not denied a PLUS loan) Combined Base Limit for Subsidized and Unsubsidized Loans Additional Limit for Unsubsidized Loans Total Limit for Unsubsidized Loans (minus subsidized amounts) First-Year Undergraduate (Freshman) $3,500$2,000$5,500 Second-Year Undergraduate (Sophomore) $4,500$2,000$6,500 Third-Year and Beyond Undergraduate (Junior, Senior) $5,500$2,000$7,500 TOTAL/AGGREGATE LIMIT = $31,000

Annual Loan Limits Stafford Loan – INDEPENDENT STUDENT Independent Students Combined Base Limit for Subsidized and Unsubsidized Loans Additional Limit for Unsubsidized Loans Total Limit for Unsubsidized Loans (minus subsidized amounts) First-Year Undergraduate (Freshman) $3,500$6,000$9,500 Second-Year Undergraduate (Sophomore) $4,500$6,000$10,500 Third-Year and Beyond Undergraduate (Junior, Senior) $5,500$7,000$12,500 TOTAL/AGGREGATE LIMIT = $57,500

Examples of Monthly Payments Examples of Monthly Payments based on 6.8% with 10 year repayment period: $3,500 $50 per month $5,000$56 per month $7,000$78 per month $10,000$111 per month $15,000$167 per month $25,000$278 per month $45,000$500 per month

How much can I SAFELY Borrow? Student Loans Over Projected Earnings Calculator (SLOPE)

SLOPE Calculator Student Loans Over Projected Earnings

CAREER & SALARY $25,330/$44,830

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Loan Repayment Options Standard Repayment Fixed amount each month 10 year repayment period Higher monthly payments than other plans  least total interest paid Graduated Payments Start low - Increases every 2 yrs Up to yr repayment period Minimum payment = amount of accrued interest/$25 Results in more total interest paid Income Based Capped at affordable $ - % of discretionary income\fam size Up to 25 year repayment Possible balance cancellation Submit annual documentation Results in more total interest paid Extended Payments Smaller fixed monthly payments Up to year repayment Must have >$30,000 outstanding Results in more total interest paid

Loan Repayment Options Income-Contingent Federal Direct Loans only (Federal Direct Consolidation) Payments based on income – family size - total amount borrowed Adjusted each year as borrower's income changes. Up to 25 year repayment term At end of 25 years, any remaining balance will be discharged The write-off of remaining balance is taxable under current law Income Sensitive FFEL Loans only Payment set between 4%-25% of gross monthly income – must be ≥ accruing interest Up to 10 year repayment Apply annually – tax return/W-2’s Increases the size of the rest of the monthly payments to compensate Results in more total interest paid

Example Repayment Plans Repayment Plan Monthly Loan Payment Total Interest Total Payments Standard – 10 Years$288$9,524$34,524 Extended – 12 years$254$11,639$36,639 Extended – 15 years$222$14,946$39,946 Extended – 20 years$191$20,802$45,802 Extended – 25 years$174$27,054$52,054 Extended – 30 years$163$33,674$58,674 Assumes $25,000 unsubsidized Stafford loan at 6.8% interest and ignores balance- based setting of extended repayment term. From: Finaid.org

Save – Pay on time – Protect your Credit Rating DON’T BORROW MORE THAN YOU REALLY NEED Set up automatic direct debit from checking/savings account for monthly loan payments Many lenders offer discounts for auto-debit payments: – Federal loans offer a 0.25% interest rate reduction – Private student loans offer a 0.25% or 0.50% interest rate reduction Auto-debit eliminates missed/late payments = good repayment record Deduct up to $2500 of student loan interest payments from taxes – you can’t be claimed by parents From Fastweb.org

Postponing Repayment Deferment A temporary suspension of loan payments for specific situations (i.e. reenrollment in school, unemployment, economic hardship) Can receive a deferment for certain defined periods. You don’t have to pay interest on Subsidized Stafford Loans during deferment - Must pay interest on Unsbubsidized Must apply to loan servicer (the organization that handles your loan) Must continue to make payments until notified of deferment approval

Postponing Repayment Forbearance A temporary postponement or reduction of payments for a period of time because you are experiencing financial difficulty Can receive forbearance if not eligible for a deferment Interest continues to accrue (whether subsidized or unsubsidized) - you’re responsible for repaying it. Can be granted in intervals of up to 12 months at a time for up to 3 years Must apply to your loan servicer and continue making payments until notified your forbearance has been granted

Consequences of Default Reported to credit bureau (borrower & cosigner) Loan becomes immediately due in full Ineligible to receive state and/or federal financial aid Federal and state income tax refunds withheld (borrower & cosigner) Wages may be garnished Assigned to collection agency or federal government Borrower responsible for attorneys fees and collection costs Suspension of professional license or certificate

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Loan Forgiveness Programs

Federal Perkins Loan Teacher Cancellation Up to 100% cancellation (discharge) if served full -time in public or nonprofit elementary or secondary school system as a teacher: In a school serving students: from low-income families special-education teacher - infants, toddlers, children, or youth with disabilities In the fields of: mathematics Science foreign languages bilingual education or in any other field of expertise determined by a state education agency to have a shortage of qualified teachers in that state

Perkins Loan Cancellation Rates Up to 100 percent of the loan may be canceled, including the interest that accrued during the year, for teaching service, in the following increments: 15 percent canceled per year for the first and second years of service, 20 percent canceled for the third and fourth years, and 30 percent canceled for the fifth year

Stafford Loan Forgiveness Program for Teachers Teach full-time for five consecutive, complete academic years Certain elementary and secondary schools that serve low-income families and meet other qualifications May be eligible for forgiveness of up to a combined total of $17,500 in principal and interest on their FFEL and/or Direct Loan program loans Must have an outstanding balance on FFEL or Direct Loan Amount of forgiveness based on completion year and certification by Chief Administrator Officer of school

Public Service Loan Forgiveness (PSLF) Created to encourage individuals to enter and continue to work full-time in public service jobs You may qualify for forgiveness of the remaining balance due on your eligible federal student loans after you have made 120 payments on loans under certain repayment plans while employed full-time by certain public service employers Only for non-defaulted loans made under the Direct Loan Program Federal Family Education Loans (FFEL) may qualify for forgiveness if they are consolidated into a Direct Consolidation Loan

Eligible Public Service Jobs emergency management government (excluding time served as a member of Congress) military service public safety and law enforcement (police and fire) public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations) public education early childhood education (including licensed or regulated childcare, Head Start, and State-funded prekindergarten) social work in a public child or family service agency public services for individuals with disabilities or the elderly public interest legal services (including prosecutors public defenders and legal advocacy on behalf of low-income communities at a nonprofit organization) public librarians, school librarians and other school-based services, and employees of tax exempt 501(c)(3) organizations Full-time faculty at tribal colleges and universities; faculty teaching in high-need subject/shortage areas (including nurse faculty, foreign language faculty, and part- time faculty at community colleges)

Other Loan Forgiveness Programs The Nursing Education Loan Repayment Program helps alleviate the critical shortage of registered nurses currently experienced by certain types of non-profit health care facilities by helping nurses working at them to repay their student loans. In exchange for two years of service, participants receive 60 percent of their total qualifying nursing education loan balance The Federal Student Loan Repayment Program allows federal agencies to establish loan forgiveness programs to help recruit and retain agencies make payments directly to the loan holder - payments represent taxable income to the employees must agree to work for the agency for at least 3 years.

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