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RESPONSIBLE EDUCATION repayment STRATEGIES

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Presentation on theme: "RESPONSIBLE EDUCATION repayment STRATEGIES"— Presentation transcript:

1 RESPONSIBLE EDUCATION repayment STRATEGIES
Presenter: Jeff Johnston, MBA Sallie Mae Date: November, 2017

2 Keep Good Records – A Student’s To Do List
Get all loan documents together: keep them on file! Promissory notes Disclosure statements Award Letters Exit interview information Open and READ student loan mail Bookmark loan servicer’s websites Notify loan servicer(s) of name & address changes Document calls to servicer: date/time of call & person who handled the call Keep important numbers available Consider using an interactive tracking/budging tool like Intuit’s Mint.com For the last bullet: Consider using a budgeting tool. There are many. For example, Mint.com has an interactive tracking/budgeting tool that allows you to make budgets and see how you are spending money and provides you with personalized tips to help you maximize your money every day. Mint is also mobile friendly so you can monitor your budget and spending while on the go.

3 Education Financing Options
Options for Students: Federal Loans: Perkins Loans Direct Subsidized and Unsubsidized PLUS Loan for Graduate Students Private/Alternative Loans Institutional Loans Options for Parents: Federal PLUS Loans (undergraduate students only) Cosign a Private/Alternative Loan Private Parent Loans Speaker Notes

4 Private Loan Repayment
Private loans are almost always unsubsidized for the life of the loan Repayment terms vary Choice of repayment options may be available Residency and internship deferments may be available Forbearances may be available Consult your loan servicer TIP: Refer to your promissory note and/or your servicer to determine your available options

5 Identify Your Servicers
Federal and/or private loans may not all be with one servicer Buying and Selling of Students Loans: Original lender may have sold a student’s loan This means a student has a new loan “holder” and/or “servicer” For example, a FFELP loan may have been sold to the Department of Education (ED) who now holds the loan and is having it serviced by one of is federal loan servicers such as: Great Lakes Navient Nelnet FedLoan Servicing (PHEAA) Borrowers must be notified if the service provider of loan changes The terms of a federal loan, as specified in the promissory note, will not change if sold or transferred to another servicer *** Federal rules require lenders to notify borrowers when there has been a change in servicer. A change in servicer can happen if a lender sells loans to another lender or simply when a lender decides to use a new servicer. Lenders often sell loans to another lender or a secondary market. In many cases, the servicing will remain with the current service provider. Loan sale and servicing change transactions are common, and rules are in place to protect borrowers. NO FFELP loans have been made in the past several years. While any FFELP loans made in past several years are likely to have been sold to the U.S. Department of Education. These loans are now serviced by four designated servicers.

6 Finding Your Federal and Private Student Loans
Federal Student Loans National Student Loan Data System Private Student Loans (reported to the consumer reporting agencies) Speaker Notes To locate any federal student loan you have (Stafford, Perkins, Grad PLUS or Consolidation loan ) go the National Student Loan Data System ( Students shouldn’t let the fact that they no longer remember their PIN numbers prevent them from accessing their records on NSLDS. There’s a special Web site to request a duplicate PIN—this means ask the Department of Education to remind you what the PIN is. Takes just a few minutes to make the request. Typically it takes just a few hours to get a response. To get duplicate FSA PIN, go to: To find private student loans – the best source is to request a copy of your credit report. You are able to get a FREE copy every 12 months – go to

7 Subsidized vs Unsubsidized Loans
Have no interest cost while student is in school, in grace (if applicable), or in a period of authorized deferment Unsubsidized Loans Borrower is responsible for interest that accrues from the time of disbursement EXAMPLES Direct Subsidized Loans* Consolidation Loans- portion of underlying eligible subsidized loans Some institutional loans (see promissory note or aid office) EXAMPLES Direct Unsubsidized Loans PLUS Loan for Graduate Students Consolidation Loans- unsubsidized portion, which includes the unsubsidized Stafford loans plus any Perkins Private Loans Speaker Notes Unsubsidized: Most private loans don’t offer any interest subsidy. Borrower is always responsible for paying the interest that accrues on an unsubsidized loan. Borrower is not responsible for paying interest on Unsubsidized loans during the in-school period or grace, or a post-school deferment. For loans with a grace period: Interest accrues through grace period and is capitalized (added to the loan's principal amount) at end of grace. Borrower can pay the interest at any time up until end of grace and avoid interest capitalization. *Effective July 1, 2012, Subsidized Stafford Loans are no longer available for graduate students. Note: Consolidated Appropriations Act (Public Law ) temporarily eliminated the interest subsidy during the 6-month grace period on subsidized Stafford loans made from July 1, 2012 through June 30, The subsidy resumed for loans made on or after July 1, 2014. Source: This information was gathered 1/2017 from:

8 Relative Cost of a Student Loan
Interest Rate The rate charged to borrow money The higher the interest rate, the higher the total loan cost Borrower Benefits/Repayment Incentives Interest rate reductions Credits to loan balance Some benefits and repayment incentives impose eligibility requirements such as signing up for automatic debt or making a certain number of on-time payments Speaker Notes

9 Understanding Fixed and Variable Interest Rates
Interest Rates: The rate charged to borrow money. An interest rate can be either “fixed” or “variable.” Fixed interest rate: An interest rate that stays the same for the life of the loan Set monthly payment amount Often a higher rate than a variable-rate loan Variable interest rate: An interest rate that may change due to an increase or decrease to the loan’s index. Index examples include LIBOR (London Interbank Offered Rate) or Prime Rate. Monthly payment amounts may change when the interest rate changes. A variable rate can go up, but it can also go down, depending on the economy. Variable rates usually start out lower than fixed rates. Which should you get? It depends on your financial situation and your personal preference. While there are no guarantees, over time interest rate indices have been stable. Speaker Notes When someone applies for a loan with a fixed interest rate, the rate they will receive is typically determined at the time of approval, and it does not change for the entire life of the loan. When lenders are determined price points for their fixed interest rate products, they base them on market rates available at that point in time. Private Lenders who offer credit-based pricing will offer a range of rates on their fixed rate product, based on creditworthiness. The better the applicant’s credit score (or that of the cosigner), the better their chances for a lower rate. The market rate, on the other hand, depends largely on the length of the loan and other features, and can vary based on market conditions. This means that lenders may change the fixed rates they offer to new applicants as market conditions change – consumers should review the lender’s current product offer before applying for a loan.

10 Loan Interest Rates Loan Type Undergraduate Graduate Rates
Direct Subsidized Loans* 3.40% N/A 3.86% 4.66% 4.29% 3.76% 4.45% Direct Unsubsidized Loans* Pre-AY 13-14: % AY 13-14: % AY 14-15: % AY 15-16: % AY 16-17: % AY 17-18: % AY 12-14: % AY 14-15: % AY 15-16: % AY 16-17: % AY 17-18: % Graduate PLUS Loans* --- Pre-AY 13-14: 7.9% AY 13-14: % AY 14-15: % AY 15-16: % AY 16-17: % AY 17-18: % Consolidation Loans* Fixed rate based on weighted-average interest rate of underlying loans rounded up to a nearest one-eighth of a percent (capped at 8.25%( Private Loans* Many lenders offer both variable and fixed rate options. Interest rates range from 3.00% to 12.99%. Speaker Notes: Interest rates, fees and borrower benefits based on a 9/13/17 review of national school-certified private loan programs offered by publicly-traded companies or subsidiaries thereof. Consolidation loan information can be found at * Federal student loan information was gathered September 2017 from. Rates, fees and availability of federal loan products are subject to change by the Federal Government. Check this web site for the most up-to-date information about federal loan products. * Based on an September13, 2017 review of competitors' loan programs and repayment features. 

11 Impact of Interest Capitalization
Interest Capitalization occurs when unpaid interest is added to the principal amount of a loan, increasing the principal amount outstanding Examples: On a $50,000 loan, interest capitalized at the end of a 12 month deferment would be $2,263 with an interest rate of 4.45% with a loan term of 10 years. This will increase the total loan cost by $582 over the life of the loan On a $100,000, the interest capitalized at the end of a 12 month deferment would be $4,525 with an interest rate of 4.45% with a loan term of 10 years. This will increase the total loan cost by $1,164 over the life of the loan Cost of Interest Capitalization Calculator Source: Information gathered on September

12 Understanding Grace/Separation Periods
Grace Period - period of time after a borrower graduates, leaves school or drops to less than half-time Payments may not be required during this period No application required Loan specific, varies according to loan – once used completely, it’s gone Direct Subsidized and Unsubsidized loans have a six-month grace period Private and Institutional loans: check your promissory note Unsubsidized federal loans continue to accrue interest during the grace/separation period Taking advantage of a grace period does not adversely impact credit

13 Track Dates You Need to Take Action
Tip: This is one of the most important items to document. List the date that you have to take action on your loan. This can either be the graduation date or the date your grace period expires. This can be confirmed by your servicer(s). Action Date*

14 Paying Off Loans Early Student borrowers can always prepay federal student loans without penalty Some private student loans can also be prepaid without penalty NOTE: student borrowers should check with their servicer Be aware of the relative cost After making the scheduled monthly payment, make additional payments towards private loans and/or unsubsidized federal loans that have the highest interest rates and/or most frequent capitalization to save money Loan payments are typically applied first toward fees, then interest, and finally principal – check your loan agreement for additional information

15 Delinquency & Default (Federal/Private Loans)
Delinquency & defaults on student loans can adversely impact your credit history Delinquency Failure to make payment(s) on time. Missing even one payment can make a loan delinquent. Reported to credit bureaus; affects borrowers credit history Default Failure to repay a loan Collection agencies may take over adding to cost Lender can take legal action School can withhold records Federal defaults could include wage garnishment & withholding of federal tax refunds Student loans may not be discharged in bankruptcy Speaker Notes Loan Delinquency is a failure to make loan payments when they are due. Extended delinquency can result in loan default. Loan Default is the failure to repay a loan according to the terms agreed to in the promissory note. A lender may take legal action to get the money back Defaulting on a loan can adversely affect credit for many years. Default on most federal loans occurs when a loan receives no payment for 270 days. The loan leaves repayment status and is due in full when the lender requests. New collection costs are added to the loan’s balance, and the loan becomes drastically more expensive than before, although you usually can reduce or eliminate these costs through negotiation or legal action.. There are other negative consequences resulting from a defaulted loan. A student who wishes to return to school cannot qualify for federal aid in the United States until satisfactory payment arrangements are made on the defaulted loan or the loan is rehabilitated, a process that can take as long as a full year of on-time payments. In addition, the IRS can take the borrower’s income tax refund until the defaulted loan is paid in full. This is a popular way of collecting on loan debt, and the Department of Education collects hundreds of millions of dollars this way. The government can also garnish wages as a way to recover money owed on a defaulted federal student loan. The United States Department of Education or a Student Loan Guarantor can garnish 15% of a defaulted borrower’s wages. The loan holder does not have to sue the borrower first. The borrower can object to the garnishment, but only under very specific circumstances, such as if his weekly income is less than 30 times the federal minimum wage. Defaulting on student loans can also end in a lawsuit. The government and private lenders can sue in order to collect on loans. There is no time limit on suing to collect on federal student loans, and the borrower can be sued indefinitely. Private student loans, in most cases, are subject to statute of limitations laws depending on the state. Generally qualified education loans are non-dischargeable in bankruptcy, unless a court determines that debt presents an undue hardship. Remember, to recognize the signs of financial problems and seek help so that you can avoid both delinquency and defaults.

16 Ways to Defer Payments Direct Subsidized, Unsubsidized and some private loans offer grace periods Federal Consolidation Loans and Grad PLUS loans do not have grace periods Grad PLUS loans issued on or after July 1, 2008, include a six-month post-school deferment that essentially aligns with the Stafford grace period Forbearance can also be used to temporarily postpone payment if necessary for Consolidation loans and older Grad PLUS loans Borrower can postpone repayment on federal loans via a deferment or forbearance Borrower has to meet the qualifying conditions for a deferment or a forbearance If loans have a grace period, you may not be asked to start making payments until the grace period is over

17 Common Types of Deferments:
Understanding Federal Loan Deferments Deferment: period when a borrower who meets certain criteria may postpone loan payments Application may be required depending on deferment type; recertification for subsequent deferment periods may also be required Federal student loan deferments are “borrower” specific, meaning eligibility is attached to the borrower and there is a max deferment time allotted for certain deferments The government pays interest on a borrower’s behalf for subsidized loans during authorized deferment periods Common Types of Deferments: In-School Economic Hardship Unemployment Military Graduate Fellowship Note: Unsubsidized loans continue to accrue interest for which the borrower is responsible. Unless the interest is paid by the borrower, it may be capitalized (added to your principal balance) at the of the deferment period. To keep your total loan cost lower, you may want to consider paying all or some of the interest that accrues during this time.

18 Understanding Federal Loan Forbearance
Discretionary Forbearance: allows a borrower who cannot make scheduled payments to temporarily delay or reduce the payments Interest continues to accrue on subsidized and unsubsidized loans during a forbearance period. Interest that accrues during the forbearance remains the borrower’s responsibility. Unpaid interest may be capitalized at the end of the forbearance depending on the loan type and when the loan was disbursed. Additionally, there is a max forbearance time allotted. TIPS: Be careful, the use of forbearance adds expense! Forbearances can help you stay out of delinquency and default! Capitalization of interest increases the amount to pay back, and will result in a higher payment amount after the forbearance. To keep your total loan cost lower, you may want to consider paying all or some of the interest that accrues during this time. Medical and dental school residents are eligible to receive a forbearance during their residency as long as the residency meets certain criteria such as being required for a degree, certificate, or licensing for professional practice or service. (Renewable on an annual basis in 12-month increments)

19 Monthly Payment & Timeframe
Federal Loan Repayment Plans Repayment Plan Eligible Loans Monthly Payment & Timeframe Quick Comparison Standard Repayment Plan Direct Subsidized and Unsubsidized Loans Subsidized and Unsubsidized Federal Stafford Loans All PLUS loans All Consolidation Loans (Direct or FFEL) Payments are a fixed amount of at least $50 per month. Up to 10 years (or 30 years for Consolidation Loans) You'll pay less interest for your loan over time under this plan than you would under other plans. Graduated Repayment Plan All Consolidation Loans (PLUS or FFEL) Payments are lower at first and then increase, usually every two years. You'll pay more for your loan over time than under the 10-year standard plan. Source: Information gathered 1/2017 from

20 Monthly Payment & Timeframe
Federal Loan Repayment Plans Repayment Plan Eligible Loans Monthly Payment & Timeframe Quick Comparison Extended Repayment Plan Direct Subsidized and Unsubsidized Loans Subsidized and Unsubsidized Federal Stafford Loans All PLUS loans All Consolidation Loans (Direct or FFEL) Payments may be fixed or graduated. Up to 25 years Your monthly payments would be lower than the 10-year standard plan. If you are a: Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans. FFEL borrower, you must have more than $30,000 in outstanding FFEL Program loans. For both programs, you must also be a "new borrower" as of Oct. 7, 1998. You'll pay more for your loan over time than under the 10-year standard plan. Source: Information gathered 1/2017 from

21 Federal Loan Repayment Plans
Eligible Loans Monthly Payment & Timeframe Quick Comparison Consolidation Direct Subsidized Loans Direct Unsubsidized Loans Subsidized Federal Stafford Loans Unsubsidized Federal Stafford Loans Direct PLUS Loans PLUS loans from FFELP Supplemental Loans for Students (SLS) Federal Perkins Loans Federal Nursing Loans Health Education Assistance Loans A PLUS loan made to the parent of a dependent student cannot be transferred to the student through consolidation. 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. The repayment term ranges from 10 to 30 years, depending on the amount of your consolidation loan, your other education loan debt, and the repayment plan you select. You'll pay more for your loan over time than under the 10-year standard plan. Source: Information gathered 1/2017 from

22 Monthly Payment & Timeframe
Federal Loan Repayment Plans Repayment Plan Eligible Loans Monthly Payment & Timeframe Quick Comparison Income Contingent Repayment Plan Direct Subsidized and Unsubsidized Loans Direct PLUS Loans made to students Direct Consolidation Loans Your monthly payment will be the lesser of  20 percent of discretionary income, or the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income. Payments are recalculated each year and are based on your updated income, family size, and the total amount of your Direct Loans. If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return or you choose to repay your Direct Loans jointly with your spouse. Any outstanding balance will be forgiven if you haven't repaid your loan in full after 25 years. Any Direct Loan borrower with an eligible loan type may choose this plan. Your monthly payment can be more than the 10-year Standard Plan amount. You may have to pay income tax on the amount that is forgiven. Good option for those seeking Public Service Loan Forgiveness (PSLF). Parent borrowers can access this plan by consolidating their Parent PLUS Loans into a Direct Consolidation Loan. Income Sensitive Repayment Plan Subsidized and Unsubsidized Federal Stafford Loans FFEL PLUS Loans FFEL Consolidation Loans Your monthly payment is based on annual income. Up to 15 years You’ll pay more over time than under the 10-year Standard Plan. The formula for determining the monthly payment amount can vary from lender to lender. Source: Information gathered 1/2017 from

23 Monthly Payment & Timeframe
Federal Loan Repayment Plans Repayment Plan Eligible Loans Monthly Payment & Timeframe Quick Comparison Income Based Repayment (IBR) Direct Subsidized and Unsubsidized Loans Subsidized and Unsubsidized Federal Stafford Loans All PLUS loans made to students Consolidation Loans (Direct or FFEL) that do not include Direct or FFEL PLUS loans made to parents Your monthly payments will be 10 or 15 percent of discretionary income. Payments are recalculated each year and are based on your updated income and family size. If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return. Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 or 25 years. You may have to pay income tax on any amount that is forgiven. You must have a partial financial hardship. 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 making the equivalent of 25 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven. Source: Information gathered 1/2017 from

24 Monthly Payment & Timeframe
Federal Loan Repayment Plans Repayment Plan Eligible Loans Monthly Payment & Timeframe Quick Comparison Pay As You Earn Repayment Plan (PAYE) Direct Subsidized and Unsubsidized Loans Direct PLUS loans made to students Direct Consolidation Loans that do not include (Direct or FFEL) PLUS loans made to parents Your maximum monthly payments will be 10 percent of discretionary income. Payments are recalculated each year and are based on your updated income and family size. If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return. Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years. For new borrowers on or after 10/1/2007, and must have received a disbursement of a Direct Loan on or after 10/1/2011. You must have a partial financial hardship. 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. Source: Information gathered 1/2017 from

25 Monthly Payment & Timeframe
Federal Loan Repayment Plans Repayment Plan Eligible Loans Monthly Payment & Timeframe Quick Comparison Revised Pay As You Earn Repayment Plan (REPAYE) Effective December 2015 Direct Subsidized and Unsubsidized Loans Direct PLUS loans made to students Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL) made to parents Your monthly payments will be 10 percent of discretionary income. Payments are recalculated each year and are based on your updated income and family size. If you're married, both your and your spouse’s income or loan debt will be considered, whether taxes are filed jointly or separately (with limited exceptions). Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 or 25 years. Any Direct Loan borrower with an eligible loan type may choose this plan. Your monthly payment can be more than the 10-year Standard Plan amount. You may have to pay income tax on any amount that is forgiven. Good option for those seeking Public Service Loan Forgiveness (PSLF) Source: Information gathered 1/2017 from

26 Federal Loan Repayment Comparison
Speaker Notes Undergraduate Student who borrowed max sub and $2000 in unsub per year (parent PLUS eligible) Assumes $25,000 of income for IBR calculation Projected Loan Forgiveness shows the outstanding balance of principal and interest at the end of the repayment period. Any outstanding principal and interest is forgiven at the end of the repayment period, and this forgiven balance is treated as taxable income by the Internal Revenue Service. Assumes $27,000 in undergraduate Direct Loans ($19,000 in subsidized and $8,000 in unsubsidized loans) over a 4 year period. Assumes current interest rate of 4.45% for all loans, annual income of $25,000 and household size of 1. Note: The DOE Calculator rounds interest rate up to 4.5% Source: Information verified 9/2017 from

27 Federal Loan Forgiveness Program for Public Service Employees
Eligibility limited to Federal Direct Student Loan Program (FDLP), Stafford PLUS and Consolidation FFELP Stafford, PLUS and Consolidation are not eligible FFELP Borrowers may consolidate in the FDLP Additionally, borrowers must have: Made 120 on-time monthly payments beginning after October 1, 2007 during eligible public service employment. Payments must be made under one of the payment plans: Income Based, Pay As You Earn, Income Contingent, REPAYE, or any payment equivalent to the 10-year standard payment amount. Worked full time in eligible public service employment for ten years after October 1, 2007. At the time the remaining loan balance is forgiven, must be employed in an eligible public service job. Other loan forgiveness programs may also be available – do your research! There will not be a balance left if a borrower has paid under standard repayment plan, which has 10-year term. Borrowers repaying under ICR or IBR may realize some forgiveness benefit. Depends on how long borrower has income low enough that monthly payment consistently runs less than the 10-year amortizing payment. Income of doctors after residency likely to significantly increase monthly payment amount, decreasing potential forgiveness benefit.

28 Federal Loan Forgiveness Program for Public Service Employees, cont.
To be eligible for PSLF, the 120 required payments must be made under one or more of the following Direct Loan Program repayment plans: Revised Pay As You Earn Repayment Plan (REPAYE Plan) Pay As You Earn Repayment Plan (PAYE Plan) Income-Based Repayment Plan (IBR Plan) Income-Contingent Repayment Plan (ICR Plan) 10-year Standard Repayment Plan Any other Direct Loan Program repayment plan; but only payments that are at least equal to the monthly payment amount that would have been required under the 10-year Standard Repayment Plan may be counted toward the required 120 payments There will not be a balance left if a borrower has paid under standard repayment plan, which has 10-year term. Borrowers repaying under ICR or IBR may realize some forgiveness benefit. Depends on how long borrower has income low enough that monthly payment consistently runs less than the 10-year amortizing payment. Income of doctors after residency likely to significantly increase monthly payment amount, decreasing potential forgiveness benefit.

29 Quick Comparison of Income Driven Federal Loan Repayment Plans
Eligible Loans Loan Type ICR IBR PAYE REPAYE Loan received as student X Loan received as parent Consolidation (no underlying parent loans) Consolidation (underlying parent loans) Loan Program ICR IBR PAYE REPAYE Direct Loans X FFELP Perkins Loans Source: December 2015 Department of Education FSA Presentation

30 Quick Comparison of Income Driven Federal Loan Repayment Plans
Most IDR plans have two formulas--for those that do, borrowers always pay the lesser of the two. Repayment Plan Payment based only on income Payment based on loan debt ICR 20% of discretionary income 12-year standard payment adjusted based on income IBR 15% of discretionary income 10-year standard amount PAYE / “new” IBR 10% of discretionary income REPAYE None Source: December 2015 Department of Education FSA Presentation

31 Quick Comparison of Income Driven Federal Loan Repayment Plans
Interest Subsidy Benefits ICR No subsidy IBR Sub. Loans only Only during negative amortization Only for first 3 years under plan 100% of negative amortization PAYE REPAYE For sub. loans For first 3 years under plan After 3 years, 50% of negative amortization For unsub. loans No time limit 50% of negative amortization Source: December 2015 Department of Education FSA Presentation

32 Quick Comparison of Income Driven Federal Loan Repayment Plans
Interest Capitalization (unpaid interest added to the loan’s principal amount) While payment is income-based, normal rules are suspended While normal rules suspended, only trigger is conversion to standard plan amount Interest capitalizes when leaving the plan IBR Normal rules apply (upon expiration of deferment/forbearance) Interest accruing due to negative amortization is capitalized annually Capitalization of negative amortization interest is limited to 10% of balance ICR Capitalization caused by conversion is limited to 10% of balance PAYE Normal rules apply (upon expiration of deferment or forbearance) REPAYE Source: December 2015 Department of Education FSA Presentation

33 Quick Comparison of Income Driven Federal Loan Repayment Plans
Loan Forgiveness 20 years is for undergraduate borrowers and 25 years is for graduate borrowers IRS: “it’s taxable” IBR: 25 years REPAYE: 20 or 25 years ICR: 25 years PAYE / “new” IBR: 20 years Generally, payments on an IDR plan, 10-year standard plan, or periods of economic hardship deferment count toward forgiveness Source: December 2015 Department of Education FSA Presentation

34 Know What You Owe Put together a snapshot of what you owe
Student loans $ Other loans: Credit card balance(s) +$ Automobile loan Mortgage loan or rent Other money owed: Utilities, cable, internet Phone TOTAL Speaker Notes You Can’t Manage What You Can’t Measure – you need to know what you owe. Start by getting a clear view of your existing debt. This includes student loans, credit card balances, car loans, and other expenses Walk thru developing the snapshot…. Though the total amount of your education debt may look high, the long-range view is reassuring. Your higher education means your earning potential is greater. **A good budget should include all recurring expenses (monthly bills such as cell phone, gas or other transportation expenses, and more) - a budget will only work if you account for all spending.

35 Final Tips for Managing Your Loans and Finances
Speaker Notes

36 Important Information
Federal student loan rate and fee information for is based on a May 13, 2016 Electronic Announcement and May 31, 2016 Dear Colleague Letter from Federal Student Aid, an office of the U.S. Department of Education. Other federal student loan information was gathered on January 24, 2017 from studentaid.ed.gov. Rates, fees and availability of federal loan products are subject to change by the Federal Government. Interest rates, fees, terms, and borrower benefits based on an January 13, 2017 review of national private loan programs offered by publicly-traded companies or subsidiaries thereof. Private loans that have variable rates may go up or down based on the changes of an underlying interest rate index.

37 The information contained in this presentation is not comprehensive, is subject to constant change, and therefore should serve only as general, background information for further investigation and study related to the subject matter and the specific factual circumstances being considered or evaluated.  Nothing in this presentation constitutes or is designed to constitute legal advice. (MKT /2017)


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