How To Get Rid Of Student Loans And Debt

Transcription

1 Statistics on Student Loans / Debt Generation Debt: Erasing Student Loans and Debt Guy Kendall-Freas NEA Member Benefits OH/KY/WV Regional Office 1217 Monterey Dr Mansfield, OH Gkendall-freas@neambcom Only 16% of borrowers (graduates) were debt free after completing a bachelors degree 51% had a debt of $10,000 or more 39% paying on debt deferred 4 years later Student-loan balances rose 16% to an average of $14,379 The average student loan balance at graduation is now $29,000 Nationally, outstanding student loan debt exceeds $12 trillion and predictions are it will get worse as tuition continues to outpace inflation Impacts the economy of the borrower as well as the Nation Results of student loan and debt 22% have taken a job they otherwise wouldn't have because they needed more money to pay off studentloan debt 29% have put off or chosen not to pursue more education because they have so much debt already 26% have put off buying a home 11% have put off marrying 14% have put off having children 19% have moved back with parents to cut costs The 2010 Census found that more than 25% of 18- to 34-year-olds had moved back in with family (hence the name Boomerang Generation ) Skyrocketing Tuition The average price of college has grown much faster than the rate of inflation an average of 6% a year over the past decade Average annual tuition/room & board cost at public four-year colleges and universities today is $22,826 - up 444% from 1993 Average private college annual tuition/room & board cost today $44,750 - up 322% from

2 Declining Student Grants Though total federal student aid has grown, so has the proportion of people in college In 2013, 684% of high school graduates enrolled in college In 1983, only 52% did (only 46% in 1973) As a result, student grants cover only about 33% of the costs of a public four-year college today, compared with nearly 80% in the mid- 1980s and only 14% of costs at a private fouryear college Suze Orman says, Remember, this debt was for a truly necessary and worthwhile cause: your education A college education gives you nearly double the earning potential of a high school degree High school degree is estimated to translate into $12 million in lifetime earnings A bachelor s degree is estimated to translate into $21 million in lifetime earnings Collect a master s degree and it is estimated to translate into $25 million in lifetime earnings IT WAS WORTH IT in the LONG RUN The Money Book for the Young, Fabulous, and Broke by Suze Orman What loans are we talking about? As with all things financial, student loans are highly personal Thus, you will want to contact your lender to ensure that you are meeting the terms of your loan For the purpose of this presentation: Federal or Stafford Loans Federal Perkins Loans The good news: Depending on your loan type, current teaching assignment, and length of time teaching, YOU may be eligible for a cancellation and/or deferment for teaching in the public school system Definitions: Subsidized loans: the federal government covered the interest payments for you while you were in school Grace period: six months after graduating before having to pay back student loans Deferment: you get to delay payment until a later date (still have to pay it) Your loan will not accrue any interest Forbearance: try for this if you are denied a deferment It is up to the lender to grant the request, however, interest on the loan will continue to accrue For both the deferment and forbearance, you will need to contact the lender to find out if you qualify 2

3 INTEREST RATE ALERT!!!! INTEREST RATE ALERT!!!! Interest rates change each July 1 based on the going rate for a Treasury bill index, thus your payments may increase or decrease Current rate for Stafford is 386% for loans disbursed between July 2013 and July 2014 For loans disbursed after July 1, 2014, the rate is 466% (up 5% from a year ago) Current rate for Stafford (graduate/professional) is 541% for loans disbursed between July 2013 and July 2014 For loans disbursed after July 1, 2014, the rate is 621% (There are no subsidized loans for Graduate and Professional studies) Interest rates change each July 1 based on the going rate for a Treasury bill index, thus your payments may increase or decrease Current rate for a Parent Plus Loan is 641% for loans disbursed between July 2013 and July 2014 For loans disbursed after July 1, 2014, the rate is 721% (up 5% from a year ago) Additionally, there is now an origination fee of 1073% for Stafford Loans and a whopping 4292% for Parent Plus Loans! Current rate for Perkins is 5% with no origination fee cumulatively Annual max for subsidized (undergrad) loan is $8,500 Annual max for unsubsidized (undergrad) loan is $12,500 Annual max for Perkins is $5,500 cumulatively For those in a Graduate Program: Annual max for Direct loan is $20,500 Annual max for Perkins is $8,000 3

4 cumulatively The cumulative max which can be borrowed by a dependent undergrad student is $31,000 The cumulative max which can be borrowed by an independent undergrad student is $57,500 cumulatively The cumulative max which can be borrowed by a dependent undergrad student is $31,000 The cumulative max which can be borrowed by an independent undergrad student is $57,500 cumulatively The annual max for graduate/professional students is $20,500 and the cumulative max is $138,500! The annual max for a medical student is $40,500 and the cumulative max is $224,000!! There are more repayment options, including: Pay As You Earn through which borrowers pay 10% of their discretionary income to borrowers of loans before 2007 and those who have not borrowed since 2011 Borrowers cannot be in default Repayment for 10 years if employed in public sector or notfor-profits and 20 years if employed in private sector Remaining balance is then forgiven if borrower has made timely, regular payments Offers long and short term benefits EX Borrower earning $50k/yr with loan balance of $40K at 68% normally pays $460/mo Under Pay As You Earn, monthly payments would be no more than $416/mo 4

5 So where do I start to see if my loan can be forgiven? Locate your paperwork: National Student Clearinghouse loan locator: wwwstudentclearinghouseorg Click on Students & Alumni National Student Loan Data System: * Stafford Loan General Requirements: Receive a Stafford Loan through the Federal Family Education Loan (FFEL) Program You have been employed for at least five consecutive years in an elementary or secondary school designated as a low-income school You are not in default on the loan for which you are seeking forgiveness You have not received a benefit for the same teaching service through the AmeriCorps Program You received the loan for which you are requesting forgiveness before the end of your fifth year of qualifying teaching * Stafford Loan How do I find out if my school is designated as a low-income school? Call FED-AID wwwstudentaidedgov Repaying Cancellation and Deferment Options For Teachers Cancellation for Stafford Loans SchoolSearchjsp State Year School Name Location (or School District) Search DO THIS FOR FIVE CONSECUTIVE YEARS TO SEE IF YOUR SCHOOL QUALIFIES Forgiveness Amount * Stafford Loan You may receive up to $17,500 in loan forgiveness if you are: Highly qualified full-time mathematics or science teacher in a secondary school Highly qualified special education teacher You may receive up to $5,000 in loan forgiveness if: Your five years of qualifying teaching service began after October 30,2004 and you were: A full time elementary teacher who demonstrated knowledge and teaching skills in reading, writing, mathematics, and other areas of the elementary school curriculum A full time secondary teacher who taught in a subject area relevant to your academic major Your first five years of qualifying service began on or after October 30, 2004 and you were a highly qualified full time elementary or secondary school teacher 5

6 How do I apply for Loan Forgiveness? * Stafford Loan Must complete a Teacher Loan Forgiveness Application and return it to the holder(s) of the loan(s) for which you are requesting forgiveness The Administrator where you performed your qualifying teaching service must certify on the application that your teaching service met the requirements for loan forgiveness for all five years Form available on-line: EN0502Attach2pdf * Perkins You qualify for cancellation: if you have served full time in a public or nonprofit elementary or secondary school system as a: teacher in a school serving students from lowincome families; or special-education teacher, including teachers of infants, toddlers, children, or youth with disabilities; or teacher in the fields of mathematics, science, foreign languages, or 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 Teaching in a Low-Income School May be granted only if you taught in an eligible school as determined by the state education agency oolsearchjsp State Year School Name Location (or School District) Search DO THIS FOR FIVE CONSECUTIVE YEARS TO SEE IF YOUR SCHOOL QUALIFIES IF YOU HAVE QUESTIONS ABOUT THE INCLUSION OR OMISSION OF A PARTICULAR SCHOOL, THEY SHOULD BE DIRECTED TO THE STATE EDUCATION AGENCY CONTACT, NOT THE US DEPARTMENT OF EDUCATION * Perkins Teaching in a designated subject shortage area Each year the state education agency determines any subject shortage areas in the elementary and secondary schools within the state Listing of state teacher shortage areas: 6

7 : * Perkins How do I apply for teacher cancellation? Request the paperwork from the office that administers the Federal Perkins Loan program at the school that holds your loan You must also provide any documentation the school requests to show that you qualify for cancellation Cancellation amounts for years of service If a borrower is eligible for teacher cancellation under any of the categories listed above, up to 100 percent of the loan may be canceled 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 Each amount canceled per year includes the interest that accrued during the year Should I consolidate? This varies from person to person based on your individual loan and what works best for your personal financial situation Advantages: Get around the stress of July 1 when the interest rate changes If you consolidate during your grace period you may qualify for a lower fixed interest rate Disadvantages: You may not be eligible for deferment or forbearance Consolidation is a one time deal, not like a mortgage where you can refinance often ***YOU MAY JEOPARDIZE YOUR ABILITY TO APPLY FOR COMPLETE FORGIVENESS IF YOU ARE A TEACHER*** Should I consolidate? I just got married, and both my spouse and I have student loans Should we pay them separately or consolidate all of our debt? Hope for the best, plan for the worst Death or divorce Source: Suze Orman, The Money Book for the Young, Fabulous, and Broke pg (Actual example of a married couple, both of whom are teachers) Student Loan Interest Deduction A maximum above-the-line deduction of up to $2,500 for interest paid is provided to taxpayers on qualified education loans The deduction is phased out for taxpayers with a modified AGI between $60,000 and $75,000 ($125,000 and $155,000 for joint filers) The deduction is available even if the taxpayer does not itemize deductions 7

8 So how can NEA Member Benefits help me? Web-site: wwwneambcom o Hundreds of consumer articles, resources, calculators, and advice o Information about the many programs and services available exclusively to members and their families o NEA Smart Option Student Loan o NEA/NFCC partnership o NEA Academy o And so much more!!! So how can NEA Member Benefits help me? NEA Member Service Center o o Monday - Friday, 8 am to 8 pm ( Saturday, 9 am to 1 pm ) ET So how can NEA Member Benefits help me? NEA Member Assistance Program o NEA s many great business partners can provide relief for members impacted by layoff, natural disasters, etc Teachers-teacherscom Professional Resources Thank you for attending this session BUT Don t leave until after door prizes are drawn If you have questions you d like answered off-line, please write them on the back of your door prize form 8

9 Student Loan Forgiveness Last year, outstanding Federal Student Loans were consolidated into the William D Ford Federal Direct Program, also known as the Obama Student Loan Forgiveness program, where every consolidated loan has forgiveness attached at the end of the term At the end of your consolidated loans term, any unpaid balance will be forgiven by the Department of Education There are a variety of repayment options in the Obama Student Loan consolidation program, and provisions which allow for early forgiveness or principal reduction on your consolidated loan Teacher Loan Forgiveness The Teacher Loan Forgiveness program is probably the most beneficial of all the loan forgiveness plans available as teachers not only qualify for early forgiveness, but principal reduction as well Teachers can be eligible for $5,000 to $17,500 in principal reduction on their loans under certain circumstances in the Teacher Loan Forgiveness program The idea behind this principal reduction was to encourage young graduates to enter into a career of teaching, and also to continue that career Teachers also qualify for complete loan forgiveness after 10 years of repaying their loans Public Service Loan Forgiveness You may qualify for public service loan forgiveness if you work full-time in a public service job After making 120 payments under certain repayment plans while working full time in a public service position, the balance of your Federal Student Loan would be completely forgiven Total and Permanent Disability Discharge A borrower may qualify for Total and Permanent Disability Discharge on their Federal Student Loans if they are unable to engage in any substantial gainful activity because of a physical or mental impairment