Senior Loan Exit Interview Class of 2012

Senior Loan Exit Interview Class of 2012
Repayment Strategies for Managing Your Student Loans Sponsored by ADEA AFASA Spring 2012

* Source: ADEA 2011 Survey of Dental School Seniors
Educational debt* 88.8% had student loan debt $180,557 mean debt indebted graduates $157,525 (graduates of public schools) $218,695 (graduates of private schools) 22.7% had no debt or debt less than $80,000 29.4% had debt of $250,000 or higher Dental school graduates known for timely and responsible repayment Use this slide at your discretion, perhaps as a way to compare the debt of your graduating class with the national average. Please remember this is for the Class of 2011, so any comparison to your graduating class will be a year off. Please remind your upcoming graduates that their colleagues before them have set a strong precedent for responsible repayment. This message is being shared with incoming students as well. * Source: ADEA 2011 Survey of Dental School Seniors

Common sense approach Career goals and repayment objectives
What you borrowed and when your loans come due Repayment options, including consolidation and service programs Rights and Responsibilities, resources, and working with your loan servicers These are the four suggested steps to cover during the presentation to seniors and all the required and suggested information should fall into these categories. You will note that each of the four categories is highlighted in red during the PP presentation to let students know what topic you are on.

What you borrowed and when your loans come due Repayment options, including consolidation and service programs Rights and Responsibilities, resources, and working with your loan servicers The red highlight simply lets your students know what topic you are about to cover.

career goals Immediate practice or additional work
Private or group practice Postdoctoral work or residency and length of programs Career changes Before developing a repayment strategy, it is important that borrowers take a good look at their career goals and plans. It is also important to remind them that these may change over the course of their career.

repayment objectives Protect income, maximize cash flow
Minimize adverse impact of interest accrual and capitalization Service to community, military, HPSA Simplicity and convenience Other Once career goals are evaluated, remind your students that they should take stock of their approach to repayment. Some will want (or need) to protect their income and either not pay or minimize student loan payments. This is likely to be someone with consumer obligations (credit card debt, car payment, mortgage, family obligations) and this borrower is likely to be interested in postponing payments or minimizing them. Some will want to get after it (aggressive repayment) and thus minimize the adverse impact of interest accrual and capitalization. Some may be motivated by service, especially when they understand there are loan repayment programs tied to such, and the Public Service Loan Forgiveness (PSLF) program that may help. More than a few graduates want all their loans in one place, regardless of whether they intend to start paying or intend to postpone payments, and these borrowers are likely interested in consolidation.

terms you should know National Student Loan Data System
Direct Loans and FFELP Loans Subsidized and unsubsidized loans Interest accrual and capitalization Any discussion of repayment strategy (which is what the Senior Loan Exit Interview is really all about) will be easier if your graduates understand these key terms. The slides which follow address each of these in more detail.

NSLDS National Student Loan Data System www.NSLDS.ed.gov
Cumulative running total of Title IV loans Information on loan servicers May be updated weekly, not but real time Only Stafford, Grad PLUS, Federal Consolidation, Perkins Loans on NSLDS Remind borrowers what is on NSLDS and what is not (Title VII, institutional, and private loans are not on NSLDS). In addition, remind them that interest rates and account numbers are also not on NSLDS (and this information will be needed should they consolidate; their NSLDS record will help). Remind borrowers that if they click on the number to the left of each loan they will find a back page with additional information, including loan servicer information.

direct and ffelp loans Direct Loans FFELP Loans
Stafford, Grad PLUS, Consolidation “directly from federal government” (no outside private lender) FFELP Loans Stafford, Grad PLUS, Consolidation from a private lender* No new FFELP loans as of academic year Depending on when your school entered the Direct Loan Program, you can tell your borrowers how many years worth of Direct Loans they have. Remember that even if your school has been in the Direct Loan Program for the past 4 or more years, you may have some students who had FFELP loans undergrad or post baccalaureate programs or perhaps they transferred in with FFELP loans. Please remind borrowers that FFELP loans are NOT private loans, they are simply federal loans from a private lender. You may want to remind them that Direct Loans will be stated as such on NSLDS (some FFELP loans are referenced as FFELP on NSLDS, others are not). * FFELP Loans are NOT private loans, they are federal loans from a private lender

* Some portions may be subsidized, some unsubsidized
sub and unsub loans Subsidized loans interest free during school, Grace, Deferment Sub Stafford, Perkins, HPSL, LDS, Federal Consolidation* Borrower responsible for all accrued and unpaid interest on unsubsidized loans Unsubsidized Stafford, Grad PLUS, private loans, Federal Consolidation* Self-explanatory slide. You might remind borrowers that in all likelihood, the majority of their student loan debt is unsubsidized. * Some portions may be subsidized, some unsubsidized

* Disbursed on or after July 1, 2006 ** DL and FFELP respectively
interest rates Stafford Loans at 6.8% fixed* Grad PLUS at 7.9% and 8.5% fixed** Perkins, HPSL, LDS at 5% fixed Consolidation at weighted rate rounded up and fixed for life of loan Private loans tend to have variable rates Rate on institutional loans varies by institution Self-explanatory slide. Consider mentioning that borrowers thinking of an aggressive repayment strategy (paying more than the required amount of their selected repayment plan or making voluntary payments) should consider targeting the extra amount on their most expensive loan. This also applies for borrowers who postpone payments but make voluntary payments whenever they can. You are simply helping ensure they get the best bang for their buck. * Disbursed on or after July 1, ** DL and FFELP respectively

capitalization Process whereby accrued and unpaid interest is added back to principal In general, occurs At repayment At “status” change For borrowers in IBR, when PFH no longer demonstrated and when borrower opts out of IBR plan They can actually track this on NSLDS and on their loan servicer’s Web site. Status change means moving from deferment to forbearance, forbearance to repayment, and so forth.

* Reported on NSLDS at www.NSLDS.ed.gov
your portfolio Federal Stafford* Federal Grad PLUS* Federal Perkins* Federal Consolidation* Health Professions Student Loan Loans for Disadvantaged Students Institutional Private Depending on your school and your students’ portfolios, you can consider highlighting those loans where most of the borrowing occurs (likely Stafford and Grad PLUS). * Reported on NSLDS at

grace periods Period of time when you are not required to pay your loans Grace periods are “loan specific” Length depends on loan Once used, do not get again Grace periods start at Graduation or drop below half time enrollment status This is a good place to remind them that not all loans have Grace periods and that they may have already used up a Grace period. Loans that may be coming due immediately include: Stafford Loans whose Grace period was already used, Grad PLUS disbursed prior to July 1, 2008, and Federal Consolidation Loans. Please do NOT refer to Grad PLUS Loans disbursed on or after July 1, 2008 as having Grace periods. Grad PLUS Loans do NOT have Grace periods, but those disbursed on or after July 1, 2008 have what operates like a Grace period but is called a “6 Month Post-Enrollment Deferment”.

Federal stafford loans
Subsidized and unsubsidized 6.8% fixed interest rate* 6 month Grace period Deferment and Forbearance options Multiple repayment options Eligible for consolidation Self-explanatory slide. May only need to use if borrowers have questions about Stafford Loans. * Disbursed on or after July 1, 2006

* Direct Grad PLUS and FFELP Grad PLUS respectively
Federal grad plus Unsubsidized 7.9% and 8.5% fixed interest rate* No Grace periods 6 Month “Post Enrollment Deferment” if disbursed on or after July 1, 2008 Deferment and Forbearance options Multiple repayment options Eligible for consolidation Self-explanatory slide. May only need to use if borrowers have questions about Grad PLUS Loans. * Direct Grad PLUS and FFELP Grad PLUS respectively

* 6 month Post Deferment Grace also available
Federal perkins loans Subsidized 5% fixed interest rate 9 month Grace period* Deferment and Forbearance options 10 year Standard level repayment Eligible for consolidation Self-explanatory slide. May only need to use if borrowers have questions about Perkins Loans. Your borrowers may still have Perkins Loans, even if your school does not participate in the program or does but the borrower did not qualify. Please remind borrowers that for budgeting purposes, these loans will be coming due 3 months later than many of their other loans. You might also remind them who the loan servicer is for these loans (who your school contracts with and where to go online for information and any separate Exit Counseling your loan servicer may require). * 6 month Post Deferment Grace also available

federal consolidation
Subsidized and unsubsidized Weighted rate, fixed for life of loan No Grace period Deferment and Forbearance options Multiple repayment options Direct Loans only option for federal loans You may have consolidation loan prior to dental school (will show on NSLDS) This can be used as a setup slide to the consolidation slides later in the presentation. Good chance to remind borrowers who already have a consolidation loan that these will come due right after school since they have no Grace period. NSLDS will usually show SUB Consolidation and UNSUB Consolidation (so the interest subsidy can be tracked separately in the event the borrower qualifies for a deferment), but remind borrowers it is still just one loan.

HPSL and LDS Subsidized 5% fixed interest rate 12 month Grace period
Deferment and Forbearance options In general, 10 year Standard level repayment Eligible for consolidation Not on NSLDS Self-explanatory slide. May only need to use if borrowers have questions about Health Professions Student Loans and Loans for Disadvantaged Students. Updated Student Financial Aid Guidelines (SFAG) from HRSA are now available. Remind borrowers HPSL and LDS do not show on NSLDS. Remind borrowers who the loan servicer is for HPSL and LDS.

institutional loans Subsidized or unsubsidized
Check interest rate with school Check Grace period with school Check Deferment and Forbearance options with school Check repayment options with school Not eligible for federal consolidation Not on NSLDS Self-explanatory slide. May only need to use if borrowers have questions about any institutional loans you have. Remind borrowers these loans do not show on NSLDS. Remind borrowers who the loan servicer is for your institutional loans.

private loans Unsubsidized Usually variable rates
Limited repayment options Limited Deferment and Forbearance options Fee may required to postpone Not available for forgiveness or repayment under IBR Not on NSLDS Self-explanatory slide. May only need to use if borrowers have questions about private loans. Remember they may have private loans prior to matriculating at your dental school. Remind borrowers to confirm repayment terms, especially postponement options if their strategy is to postpone payments. Questions borrowers should ask about their private loans include: a) what is the interest rate, is it fixed or variable (probably the latter), when is it reset, what is the index (Prime or LIBOR), how often is it reset, b) when does interest capitalize, c) what are postponement options and is there a fee to postpone payments, d) what are repayment options, e) are there discounts for ACH, f) can additional payments be targeted on principal.

What you borrowed and when your loans come due Repayment options, including consolidation and service programs Rights and Responsibilities, resources, and working with your loan servicers The red highlight simply lets your students know what topic you are about to cover. Reference the Repayment Primer from ADEA that may help.

options at repayment Start active repayment
Select repayment option based on career goals and repayment objectives and start actively repaying your loans Postpone payments Deferment or Forbearance Consider starting simple with this slide, as in general, regardless of the loan type, there are two options when loans come due: start paying or postpone payments. This all goes back to repayment objectives covered earlier.

Select repayment option based on career goals and repayment objectives and start actively repaying your loans Postpone payments Deferment or Forbearance The red highlight simply lets your students know what topic you are about to cover. You start with repayment (NOT postponement) because you do not want to lead with a discussion about how NOT to pay, rather you want to lead with the assumption your graduates WANT to find a plan that works.

* Except on consolidation loan, which only has one rate
repayment reminders Notification prior to loans coming due No penalty for aggressive repayment Payments to interest before principal You remain in “Good Standing” during periods of Deferment and Forbearance Voluntary and additional payments may be targeted on most expensive loan* Self-explanatory slide. Strongly suggest this slide be used at some point in your presentation/workshop. * Except on consolidation loan, which only has one rate

* Stafford, Grad PLUS, Federal Consolidation
Repayment options* Standard Graduated Income “related” Income Based Repayment (IBR) Extended This slide simply frames the options they will have provided to them when their loan servicer(s) notified them their loans are coming due. Due to popularity of IBR, it is indented here, but remember that other income related plans exist. * Stafford, Grad PLUS, Federal Consolidation

standard (level) Same payment each month
10 years for unconsolidated loans Up to 30 years for consolidation loans You get Standard if you do not choose Possibly part of repayment strategy for dental school graduate with steady income moving right into practice Important to highlight who might actually use Standard 10 year repayment. While data is not available, you can say that ADEA believes that more than a few dental school graduates select Standard 10 year and repay in less than 10 years.

graduated Payments start lower and increase by designated amounts at designated times Total repayment higher if loan held to term Possibly part of repayment strategy for dental school graduate with steady income moving right into practice who has other short term financial obligations to address Important to highlight who might actually use Graduated 10 year repayment. Some loan servicers offer interest only versions of this plan, which extends repayment. Make a point that both amount and timing of increases is set (no surprises), will show in Disclosure Statement.

income “related” Payments tied to income
Payments subject to change each year Multiple types Income Sensitive, Income Contingent, Income Based Income Based Repayment (IBR) usually results in lowest monthly payment Possibly part of strategy for dental school graduate with unstable income Suggestion is not to get into the weeds of ISR and ICR, as a) ISR is rarely used and b) ICR usually results in a higher payment than IBR (there are exceptions, but in general, someone wanting to pay based on income will fare better with IBR in terms of a lower payment, assuming they qualify).

extended Payments spread out for extended period, up to 25-30 years
Total repayment higher if loan held to term Possibly part of repayment strategy for dental school graduate with relatively high debt and moderate income or graduate who needs to show a lower debt-to-income (DTI) ratio when applying for a mortgage or other financing Important to highlight who might actually use Extended repayment. 25 years is for unconsolidated loans. Up to 30 years for consolidation loans.

income based repayment
Designed for highly indebted borrowers with low to moderate incomes Stafford, Grad PLUS, Federal Consolidation You do not have to consolidate to repay under IBR Possibly part of repayment strategy for dental school graduate entering residency who wants to start making payments Separate IBR slide due to relatively high interest in this plan, though more than a few dental school graduates may not qualify (if they enter practice immediately, or they may qualify but their IBR payment may be relatively high). Important to highlight who might be interested in IBR as part of their repayment strategy.

Advantages to IBR More manageable payments
Considered “eligible” payment for PSLF* Help with interest on subsidized loans** Self-explanatory. Third bullet refers to the fact that negative amortization not allowed with IBR. * Public Service Loan Forgiveness ** Should IBR payment not cover interest on subsidized portion of loans, government will pick up the difference for 3 straight years)

disAdvantages to IBR May make minimal dent in balance
Borrower must renew eligibility for lower IBR payments on annual basis Married borrowers may feel a pinch Spousal income counted for married borrowers filing a joint return Self-explanatory slide. Eligible educational debt of spouse will be considered in determining IBR eligibility for married borrowers filing joint returns.

repayment at $162,000* Standard (10 year) Graduated Extended (25 year)
$2,119 per month $254,267 total repayment Graduated $1,043 for 24 months then $2,492 for 96 months** $264,272 total repayment Extended (25 year) $1,278 per month $383,385 total repayment See assumptions at bottom of slide. * Maximum Stafford Loan at 6.8%, 6 month Grace, no benefits, no prepayment ** Example only, loan servicers have discretion as to timing of increased payments

grad plus repayment at $18,557
Standard (10 year) $269 per month $32,257 total repayment Extended (25 year) $168 per month $55,702 total repayment Only need to show Grad PLUS if included in your average indebtedness, but you need to show YOUR school’s figures. This figure is taken from the mean debt of the Class of 2011 of $180,557 less $162,000 Stafford. * Two years of FFELP Grad PLUS at 8.5% and two years Direct Grad PLUS at 7.9%; 6 Month “Post-Enrollment” Deferment on all Grad PLUS Loans

What you borrowed and when your loans come due Repayment options, including consolidation and service programs Rights and Responsibilities, resources, and working with your loan servicers The red highlight simply lets your students know what topic you are about to cover. You can say you mentioned consolidation earlier, if you did use the slide on consolidation earlier in the presentation.

* Reported on NSLDS at www.NSLDS.ed.gov
consolidation Paying off or “refinancing” multiple loans with one new loan Loans you are consolidating are gone Not the same thing as “combined” billing Direct Loans only option for federal loans Minimal options for private loan consolidation No need to reinvent the wheel, consider having the Consolidation Primer from ADEA (released earlier in February 2012) for your graduates. Consider mentioning that due to the Department of Education’s conversion initiative (moving ED owned loans under one servicer), borrowers may have FFELP loans previously sold to ED (called PUT loans) and Direct Loans (obviously owned by ED) under one loan servicer. This allows the servicer to provide one billing statement for borrowers but that is NOT the same thing as consolidation (and PUT loans are NOT Direct Loans). * Reported on NSLDS at

* Only Direct Loans are eligible for Public Service Loan Forgiveness
possible advantages Simplicity and convenience Converts non-Direct Loans into Direct Loans (may help maximize PSLF* eligibility) May extend repayment term See previous slide regarding simplicity and convenience. Remind borrowers of downside of extending repayment (should loan be held to term). * Only Direct Loans are eligible for Public Service Loan Forgiveness

possible disadvantages
Partially negates aggressive repayment strategy Lengthy and may be cumbersome Loss of Grace periods if consolidate too early Usually higher rate Perkins, HPSL, LDS lose interest subsidy First bullet is extremely important, especially use of the word “partially”. Borrowers may always repay a federal loan (including consolidation) early without penalty, but once they consolidate, they cannot target extra money on their most expensive loan (assuming they consolidated everything). Should a borrower ask, you cannot have two outstanding consolidation loans/applications at the same time. Someone who wanted to consolidate Stafford and Grad PLUS separately can do so, but they would have to wait a) for the first consolidation loan to go through and then b) 180 days (window period for adding loans) before submitting other application (meanwhile other loans must be kept in Good Standing). Be sure borrowers understand they are not locking in a LOW rate (unless they consolidate only Stafford Loans taken out prior to July 1, 2006).

special direct Consolidation loan
New program announced in fall of 2011 Designed to ensure one loan servicer and to provide additional savings Limited window period of eligibility* Borrowers will be notified if eligible See the Special Direct Consolidation Loan Q&A provided by NCHELP (National Council of Higher Education Loan Programs) and SLSA (Student Loan Servicing Alliance) at * January 2012 through June 2012

service commitment programs
Public Service Loan Forgiveness Armed Forces Repayment Programs Faculty Loan Repayment Program Federal Student Loan Repayment Program Indian Health Service National Health Service Corps National Institutes of Health Web sites are available in Chapter 4 of the ADEA Official Guide to Dental Schools. Explain the difference between a forgiveness program (balance is forgiven if certain conditions are met) as compared with a repayment program (some payment is made against a borrower’s loans in exchange for service).

service commitment programs
Public Service Loan Forgiveness Armed Forces Repayment Programs Faculty Loan Repayment Program Federal Student Loan Repayment Program Indian Health Service National Health Service Corps National Institutes of Health The red highlight simply lets your students know what topic you are about to cover. You are covering this because there seems to be so much interest in PSLF.

public service loan forgiveness
Designed to provide help for borrowers who are committed to public service Forgives remaining balance after designated period of time if certain conditions are met Only Stafford, Grad PLUS, Consolidation Loans through Direct Loan program qualify Remind borrowers that PSLF has NOTHING to do with their being in dentistry, as PSLF is for any borrower meeting the requirements for PSLF.

PSLF eligibility requirements
Only Direct Loans quality Borrower must make 120 “eligible” payments (only payments made under ICR, IBR, and Standard 10 year qualify) Borrower must be working in eligible public service position each time an eligible payment is made on eligible loans Self-explanatory slide. Eligible is highlighted in red to drive home the three requirements.

PSLF update Information available at New Employment Certification form available to help track employment FedLoan Servicing designated loan servicer for PSLF program Respectful suggestion that you read the Dear Borrower letter on the Web site prior to any discussion about PSLF. VERY IMPORTANT POINT: Per the Department of Education, if a borrower submits the Employment Certification form, their loans will be moved to FedLoan Servicing, regardless of where they were previously. This is all the more reason to stress the importance of keeping address information current.

Select repayment option based on career goals and repayment objectives and start actively repaying your loans Postpone payments Deferment or Forbearance The red highlight simply lets your students know what topic you are about to cover. The recent slides talked about the option of paying on student loans when they come due. This section discussed how to postpone payments.

deferment Subsidized loans interest free to borrower
Must meet statutory requirements Borrower remains in “Good Standing” In-School Deferment only available to graduates enrolled at least half time in postdoctoral or residency program (Registrar must certify enrollment) Check promissory note for Deferment options on non-federal loans Consider referring borrowers to their loan servicer for detailed information on deferments. Please note bullet 4, recently confirmed by ADEA. Deferment helps protect credit, but unlikely to improve or build credit.

Forbearance Interest accrues on all loans
Servicers have some discretion Borrower remains in “Good Standing” Mandatory Internship Residency Forbearance available for dental residents Administrative (also called Verbal) Forbearance may be available Often used when shorter period of time needed for Forbearance Forbearance helps protect credit, but unlikely to improve or build credit. Borrowers should find out if there is a fee to forbear private loans.

borrower rights Written explanation of loan obligations
Explanation of default and consequences Copy of MPN and return when paid in full Disclosure statement prior to repayment Be notified when your loan is sold Federal subsidy, if eligible Forgiveness and discharge, if eligible May request Forbearance, if needed Prepay without penalty Self-explanatory, but note there are a number of items referenced here which should at least be mentioned in a Senior Loan Exit Interview.

borrower responsibilities
Attend Exit Interview before you graduate Repay loan according to schedule Notify loan servicer regarding: Anything impacting ability to repay Change in status, including graduation date Change in name and contact information Change in enrollment Self-explanatory, but note there are a number of items referenced here which should at least be mentioned in a Senior Loan Exit Interview. Consider placing emphasis on notifying loan servicers of new address and/or contact information and important of such, especially if loan servicer(s) are trying to reach borrower.

resources School’s Financial Aid Office Loan servicer Web sites
Direct Loans at Information on Stafford, Grad PLUS, Federal Consolidation, and Perkins Loans Information on Income Based Repayment, including calculator and important links Self-explanatory.

resources www.loanconsolidation.ed.gov
Online application, forms, and FAQs Information on temporary Special Direct Consolidation Loan Program Information on Public Service Loan Forgiveness program and Employment Certification form Self-explanatory.

resources www.irs.gov/publications/p970
Tax benefits for education, including information on Student Loan Interest Deduction Self-explanatory, and required for Senior Loan Exit Interviews.

loan servicer Organization lender contracts with to work with you in repayment Listed on NSLDS for Stafford, Grad PLUS, Federal Consolidation, Perkins Loan servicers required to notify you if they are servicing your loans Multiple loans servicers results in a “Split Portfolio” or “Split Servicing” Regardless of your time allotment for the presentation/workshop, try and work this slide in. Reference the Servicing Primer from ADEA.

working with loan servicers
Always document calls and correspondence Confirm receipt of applications and related documents Ask about anecdotal comments on file Speak with supervisor if needed Bullet three simply means borrowers might consider asking if the person they are talking to is taking notes of the conversation, as they might be needed later.

working with loan servicers
Semantics are important Confirm all actions referenced by servicer Open and read your mail Have NSLDS record handy if possible Semantics are HUGE when talking with a servicer (example: borrowers may call and say they have a private loan, thinking their FFELP loan is a private loan, something addressed earlier: this can send the discussion down the wrong path from the outset)

United States Department of Education
ombudsman office United States Department of Education Federal Student Aid Self-explanatory and required for Senior Loan Exit Interviews.

summary and to do list Self assessment (career plans and repayment objectives) Loan inventory and decision points Choose options that work for you Keep in touch with loans servicers and keep contact information current Maintain high standard of repayment for dental school alumni Always close with a summary of some kind. Once again, please place emphasis on the high standard of responsible repayment dental school graduates are currently known for.

Questions? Perhaps none by now, you blew them away!

American Dental Education Association (ADEA)
congratulations Best Wishes from the American Dental Education Association (ADEA)

Senior Loan Exit Interview Class of 2012

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