EXIT INTERVIEW FACT SHEET

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1 EXIT INTERVIEW FACT SHEET All students who have borrowed a Federal Direct/FFEL student loan are required by law to complete an Exit interview at this point of graduation or if they leave school, or drop below half-time enrollment. This process helps students to understand their rights and responsibilities with regard to their loan repayment. All Direct Stafford student loan borrowers were required to complete an entrance interview. This process was designed to help students understand their rights and responsibilities with regard to their loans. Some of the points mentioned in this process were: Student s received loans under a promissory note, binding legal documents that list the conditions under which the loan was borrowed and the terms under which the borrower agrees to repay the loan. A loan, unlike a grant is borrowed money that must be repaid. The loan must be repaid even if the student did not complete their educational program or did not complete the program within the regular completion time for their program or obtain employment after graduation. A Direct Stafford student loan can be repaid in whole or in part at any time without penalty. Student loan account balance and status information is reported to national credit bureaus on a regular basis therefore failing to repay the loan can damage ones credit rating. The consequences of defaulting on a federal student loan are severe and long lasting. Making Payments You need to make payments to your loan servicer. Each servicer has its own payment process, so check with your servicer if you aren t sure how or when to make a payment. You are responsible for staying in touch with your servicer and making your payments, even if you do not receive a bill. Loan Servicers The U.S. Department of Education (ED) uses several loan servicers to handle the billing and other services on loans for the William D. Ford Federal Direct Loan (Direct Loan) Program and for loans originally made under the Federal Family Education Loan (FFEL) Program but now owned by ED. Choosing a You have a choice of several repayment plans that are designed to meet your needs. The amount you pay and the length of time to repay your loans will vary depending on the repayment plan you choose. Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time. Contact your loan servicer if you would like to discuss repayment plan options or change your repayment plan. When does Loan repayment begin? Direct or FFEL Stafford - repayment begins after the six month grace period. Subsidized Loan- during the grace period, students don t have to pay any principal, and they won t be charged interest. loan- students don t have to pay any principal, but they will be charged interest. Remember, you can either pay the interest during this period or it will be capitalized (i.e. added to principal loan balance). Plus loans- Generally within 60 days after the loans have fully paid out to borrower. There is no grace period for these loans so interest starts to accrue as soon as the first disbursement is made. A student receiving a Grad Plus is eligible for an in school deferment as long as they are enrolled at least half time. For Direct, the U.S. Department of Education may offer alternative repayment plans to borrower who demonstrates that other available repayment plans are not adequate and cannot accommodate the borrower s exceptional circumstances. Students who do not choose a repayment plan will automatically be placed under the standard repayment plan.

2 Examples of Typical Direct and FFEL Stafford Loan Repayments These examples are provided by the Department of Education and can be found at and they also provide a repayment calculator at Repayment Plan Standard Overview of Direct Loan and FFEL Program s Eligible Monthly Payment and Time Frame Payments are a fixed amount of at least $50 per month. Up to 10 years Quick Comparison You'll pay less interest for your loan over time under this plan than you would under other plans. Graduated Payments are lower at first and then increase, usually every two years. Up to 10 years You'll pay more for your loan over time than under the 10-year standard plan. Extended 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 o Direct Loan borrower, you must have more than $30,000 in outstanding Direct. o FFEL borrower, you must have more than $30,000 in outstanding FFEL Program loans. For example, if you have $35,000 in outstanding FFEL Program loans, and $10,000 in Direct, you can use the extended repayment plan for your FFEL Program loans, but not for your Direct. For both programs, you must also be a "new borrower" as of Oct. 7, over time than under the 10-

3 year standard plan. Income-Based (IBR) made to students Consolidation (Direct or FFEL) that do not include Direct or FFEL PLUS loans made to parents Your maximum monthly payments will be 15 percent of discretionary income, the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size and state of residence (other conditions apply). You must have a partial financial hardship. Your monthly payments will be lower than payments under the 10-year standard plan. 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. You may have to pay income tax on any amount that is forgiven. Pay As You Earn Direct PLUS loans made to students Direct Consolidation that do not include (Direct or FFEL) PLUS loans made to parents Up to 25 years Your maximum monthly payments will be 10 percent of discretionary income, the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size and state of residence (other conditions apply). Up to 20 years You must be a new borrower on or after Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, You must have a partial financial hardship. Your monthly payments will be lower than payments under the 10-year standard plan. 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.

4 Income-Contingent Direct PLUS made to students Direct Consolidation Payments are calculated each year and are based on your adjusted gross income, family size, and the total amount of your Direct. over time than under the 10- year standard plan. If you do not repay your loan after making the equivalent of 25 years of qualifying monthly payments, the unpaid portion will be forgiven. You may have to pay income tax on the amount that is forgiven. Up to 25 years Income-Sensitive FFEL PLUS FFEL Consolidation Your monthly payment is based on annual income. Up to 10 years over time than you would under the 10-year standard plan. Each lender's formula for determining the monthly payment amount under this plan can vary.

5 What if student has problem making payments? Students who are having problems repaying their student loans should contact their loan servicer immediately. In certain cases students can qualify for a deferment, forbearance or other forms of payment relief. For FFEL, contact the lender or agency that holds your loan. For Direct, contact the Direct Loan Servicing Center at or by calling or The Department of Education provides extensive information on repayment relief at Deferment and forbearance offer a way for you to temporarily postpone or lower your loan payments while you re back in school, in the military, experiencing financial hardship, or in certain other situations What is Default and how does it affect a borrower? Loan borrowers who fail to make payments on their student loan in accordance with the terms of their promissory note are classified as being in default. The consequences of default include: Notification to National credit bureaus which will harm borrowers credit rating which in turn will make it hard to buy a car or house in the future Borrower ineligible for additional federal aid State and federal income tax refunds can be withheld and applied toward the amount owed. Wages can be garnished for loan payments Late fees and collection cost added to amount owed Borrower can be sued Default should be avoided at all cost but it occurs the Department of Education has publication called the Guide for Defaulted Borrowers available at Where can a borrower got to get their loan information? The U.S. Department of Education s National Student Loan Data System (NSLDS) provides borrowers access to information on all student loans and/or federal grant amounts, including information on loan status, outstanding balances, and disbursements. Go to Loan Consolidation The Higher Education Act (HEA) provides for a loan consolidation program under both the Federal Family Education Loan (FFEL) Programs and the Direct Loan Program. Consolidation enables you to combine federal education loans into one loan. This allows you to make one loan payment instead of several and in some cases it may result in a lower monthly payment. The interest rate may be lower than on one or more of the underlying loans. In addition, the amount of time to repay may be extended beyond what was available in the separate loan payments. FFEL Consolidation vs. Direct Consolidation Borrowers are encouraged to check with their existing loan holders or servicers to find out about consolidation options available to them. Some differences between programs may include: Minimum balances or numbers of loans required to apply. Types of loans that can be consolidated A prior account relationship may be required. Repayment incentive benefits to encourage good repayment behavior. The convenience of electronic debit, ensuring that monthly payments are made on time. Repayment plans offered, such as payments sensitive to a borrower s income, family size, and total education indebtedness. Prepayment of Consolidated According to borrowers may prepay all or part of the unpaid balance on any Direct Loan at any time, without an early repayment penalty. If a borrower makes a payment that exceeds the required monthly payment, the prepayment will be applied first to any charges or collections costs, then to outstanding interest, and last to principal. However, if a borrower s account has no outstanding interest, the repayment is applied entirely to principal. If the prepayment is twice the borrower s monthly payment, the next payment due date is advanced unless the borrower specific otherwise. The borrower will be notified of a revised due date. Students who take advantage of FFEL must contact their existing loan holders or servicers to inquire about prepayment options.

6 To Consolidate or Not? It is important to keep in mind that once you consolidate, your original loans have been paid off and no longer exist; therefore, consolidation loans cannot be unmade. You cannot change your mind. Please evaluate all options carefully. Visit for more information on consolidation and contact your loan holder and servicer as well. Loan Forgiveness- Discharge/Cancellation Under certain circumstances it may be possible to a student loan debt discharged/cancelled. These circumstances include: Death or total disability of borrower School closed before student completed program For FFEL and Direct Stafford only: student s school owes student s lender a refund, forged borrower s signature on a promissory note, or certified a loan for student even if the student did not have the ability to benefit from the coursework Borrowers works in a certain designated public service professions (i.e. teacher in a low-income school) Effective July 1, 2006, a false certification discharge was implemented allowing for a discharge if the borrower s loan was falsely certified as a result of an identity theft crime. To find out more information on loan discharge and cancellation students can contact their lender or loan servicer or visit The Student Loan Ombudsman s Office Federal student loan borrowers who need assistance to resolve loan disputes or problems from an impartial, independent viewpoint can contact the FSA Ombudsman at or (All information paraphrased from: U.S. Department of Education, Federal Student Aid, Funding Education Beyond High School: The Guide to Federal Student Aid , Washington, D.C., 2008)