A p r i l P r e s e n t e d B y :

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1 P r e s e n t e d B y : H e a t h e r H a m i l t o n, D i r e c t o r o f G r a d u a t e F i n a n c i a l A i d J e n n i f e r V a n B r e d e r o d e, A s s i s t a n t D i r e c t o r o f G r a d u a t e F i n a n c i a l A i d A p r i l

2 Federal regulations require federal loan borrowers to attend an exit interview session prior to leaving college To learn about your rights, responsibilities and repayment options as a federal loan borrower

3 Federal student loans may be the first loans you have ever borrowed which will establish your credit history Better debt Mortgage Federal Student loans Other debts High interest credit cards Car loans Interest Rates and Terms Amounts

4 A Federal loan is borrowed and used to fund your education Typically either fixed or variable with an interest rate cap and insured by the government Provides you with specific borrower rights and responsibilities different from other types of loans

5 Stafford/Direct Subsidized Unsubsidized Perkins/Nursing Graduate Plus

6 Subsidized Interest was paid by the government while you attended school at least half time & during the grace period Unsubsidized and Grad Plus Loans Interest was paid by you while in school or Interest was capitalized causing your loan principal to be larger than you originally borrowed

7 Interest on most loans accrues from date funds are disbursed until the loan is paid in full Capitalization is addition of unpaid accrued interest to the principal of a loan Less frequent the better Capitalization often occurs more frequently during forbearance Consider paying if you can

8 Funds are borrowed from the Department of Education 9 month grace period Interest rate fixed at 5% The lender is the school you attended i.e. Quinnipiac University The servicer is University Account Service (UAS) Loan forgiveness programs offered

9 For Graduate students only Required a credit check to qualify Interest rate is fixed at 8.5% or 7.9% (depending on lender) No automatic grace period (prior to July 1, 2008) Can receive grace period if requested in writing If loan was issued after July 1, 2008 check with lender regarding automatic grace period

10 Lender Entity which lent you the money Guarantor Entity which will pay back your lender in the event that you default Will contact you if you are not repaying the loan as scheduled Servicer Entity which you will pay Can be your original lender or a 3 rd party company who will bill you on behalf of your lender

11 Fixed rate loans -stays the same for life of loan 4.5% (Current Undergraduate Subsidized Rate) 6.8% (Current Unsubsidized and Graduate Student Rate) Variable rate loans (loans taken before 7/1/06) change every July 1 st and are capped at 8.25% In-school & grace period interest is lower Current rate for July 1, 2010-June 2011 (1.87%) Repayment interest is higher Current variable rate for July 1, June 2011: (2.47%)

12 This is the legal binding document that you signed before receiving your loans and by which: You agreed to repay your loans Contains any and all information specific to your loan Specifies your rights and responsibilities as a loan borrower You are entitled to have a copy of your MPN

13 The time given before you begin repaying your loan 6 months - Stafford /Direct 9 months - Perkins Generally the first payment is due days after your grace period unless you have consolidated Entitled to one grace for loans, if not consolidated

14 Receive a copy of your MPN Receive a disclosure statement Receive a grace period, (if applicable) Receive notice if your loan is sold and the name of the new holder Seek alternative repayment plan Apply for a deferment/forbearance To have your loans forgiven under certain circumstance Prepay your federal loan without penalty Receive proof of loans paid-in-full

15 Complete Exit Loan Counseling Know the name and contact information of your loan servicer Know how to contact them Notify them of changes in name, address, employment, etc. Make your monthly payments You promise to repay even if you: Are not satisfied with your education Don t complete program of study Unable to locate work after completing your program Don t receive payment coupons or reminders from your lender/servicer

16 You may prepay all or part of your loan(s) at any time without a penalty Option of requesting a shorter repayment schedule to pay your loans off earlier Any additional payments made above your required monthly payment reduces your outstanding balance, (as long as accrued interest and outstanding late charges are paid).

17 Standard Graduated Income- Sensitive (FFEL Only) Income-Contingent (DL Only) Extended Income-Based (IBR)

18 Options Payment Structure Maximum Payment Period Additional Features Standard Fixed 10 years - Highest initial payment - Lowest total interest - No negative amortization Graduated Tiered 10 years - Interest only payments initially - Payments increase incrementally - No negative amortization - Monthly payments can t be more than three times greater than any other payment ( 3 times rule ) Extended Fixed or tiered 25 years - Lowest initial payment without considering income - No negative amortization - To qualify in FFELP: - FFELP debt must be > $30,000 - New FFELP borrower 10/7/98 Income Sensitive Income Based (IBR) Adjusted annually based on: - Total gross income Adjusted annually based on: - Household AGI - Household size - Poverty guideline - State of residence 15 years - Subject to 3 times rule - No negative amortization 25 years - Payment is 15% of disposable income if experiencing partial financial hardship (PFH) - Eligibility/payment amount reevaluated annually DRAFT - Negative amortization allowed

19 Repayment Type Monthly Payment Maximum Payment Period Interest Paid Total Paid Additional Terms Standard $ years $6,165 $26,165 Automatically Enrolled Graduated $93.00 (1 st 2 yrs) $ remaining years Income Sensitive/ Contingent $ st year $ remaining years 10 years $7,099 $27,099-2 years of graduated payments -Remaining 8 years of payments at higher rate -Must elect it 10 years $6,726 $26,726-1 year of reduced payment -9 remaining years at higher payment -Must select and be approved Based 20,000 at 5.6% fixed interest rate (unless noted) Examples from

20 Repayment Type Monthly Payment Maximum Payment Period Interest Paid Total Paid Additional Terms Standard $ years $15,239 $55,329 Automatically Selected Extended $ years $43,289 $83,289 Elected based on debt Income Based (IBR) $ years $36,955 $76,955 -Not Married -Income $35, % increase income ea. Year -Max. payment $ Requires approval and paperwork Based $40,000 at 6.8% fixed interest rate Examples from

21 Newer repayment plan Available for Stafford, GradPLUS, Consolidation For students who pursue jobs with lower salaries or have high federal owing balances Caps monthly payments at percentage of borrower s discretionary income Adjusted annually based on: Household AGI & size Single or married and how tax returns are filed Poverty guidelines State of residence Payment is determined based on 15% of disposable income Sample calculators available to help determine qualifications

22 Potential Pros Lowest initial monthly loan payment Possible to exclude spouse s income ED will pay unpaid interest on Subsidized Stafford for up to 3 years Loan cancellation after making 25 years of eligible payments Entitlement Potential Cons Increased interest will accrue and may have negative amortization If married might need to file separate tax returns Unpaid interest will be capitalized at some point Annual income and family size verification required Monthly payments could change each year

23 Debt AGI $5,000 $20,848 $10,000 $25,451 $15,000 $30,055 $20,000 $34,658 $25,000 $39,261 $30,000 $43,864 $35,000 $48,467 $40,000 $53,071 $45,000 $57,674 $50,000 $62,277 $55,000 $66,880 $60,000 $71,484 Debt AGI $65,000 $76,087 $70,000 $80,690 $75,000 $85,293 $80,000 $89,896 $85,000 $94,500 $90,000 $99,103 $95,000 $103,706 $100,000 $108,309 $105,000 $112,912 $110,000 $117,516 $115,000 $122,119 $120,000 $126,722 $125,000 $131,325 Assumptions: - Interest rate = 6.8% - Household size of 1 residing in 48 contiguous states

24 Loan balance Monthly Payment Total Payments Interest 10 year $20,000 $ $27,619 $7, year $20,000 $ $29, $9, year $20,000 $ $31, $11, year $20,000 $ $36, $16, year $20,000 $ $41, $21, year $20,000 $ $46, $26,934.58

25 Undergraduate Loans Loan Amount Interest Rate Loan Term Monthly Payment Stafford Loan $21, % fixed 10 years $ Sample Private Alternative Loan $40, % variable 15 years $ Graduate Loans Loan Amount Interest Rate Loan Term Monthly Payment Stafford Loan $34, % fixed 10 years $ Sample Graduate PLUS Loan $23, % 10 years $ May 2010 Graduates Average Federal Stafford Undergraduate Loan Indebtedness $21,317 Average Federal Stafford Graduate Loan Indebtedness $34,577 Average Federal Graduate PLUS Loan Indebtedness $23,699

26 Review paperwork from lender to determine individual benefits Contingent benefits (lender/servicer specific) Interest rate reductions: Auto-debit (ex -.25% interest rate deduction) On-time payments Rebate Programs Automatic benefits Fees paid on behalf of student

27 Full or partial Volunteer work AmeriCorps Peace Corps Volunteers in Service to America (VISTA) Military Service (ex. Army National Guard) Teaching in High Need or Underserved Area Legal Area (ex. Public interest or Non-profit) Medical (ex. Health & Human Services, Hospitals, Private Healthcare Org) Public Service (ex. Federal government)

28 Loans may be discharged, cancelled or forgiven: Your Death You become totally or permanently disabled (and meet certain additional requirements) You are unable to complete your program of study due to the closing of your school Your school falsely certified your loan eligibility A loan was taken in your name falsely as a result of identity theft Your school failed to refund required loan funds to your lender on your behalf

29 Contact servicer regarding possible Adjustment of Repayment Plan Deferment Forbearance Cancellation Specific terms apply

30 Temporary and limiting suspension payments Variety of Reasons Economic Hardship Unemployment Military Deployment Enrollment in School Internship National Service Contact your Servicers about qualifications Federal government pays the interest on subsidized Stafford loans, Perkins loans and on the portion of a consolidation loan that paid off a subsidized Stafford loan

31 If you have temporary financial difficulty, such as recent unemployment, the economic hardship forbearance may provide some help Three-year limit for federal loans and you must reapply each year Interest may continue to accrue and be capitalized, causing your loan balance to grow Most borrower benefits are lost if this option is used Talk to your lender about the process

32 Delinquency Lender has not received payment by the stated due date Could lose benefits in repayment Default is the worst case scenario 270 days delinquent Don t let this happen to you!

33 Responsible for Attorney & Collection fees Affects credit score Garnished wages Tax refunds withheld Ineligible for financial aid

34 Can only consolidate Federal loans together (Stafford/Direct, Graduate PLUS, Perkins, PLUS (if parent) Provides ability to secure a fixed interest rate Interest rate based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest eighth of a percent and capped at 8.25% Allows to have one servicer to repay for loans being consolidated Ability to extend the repayment terms based on the level of debt consolidating (12-30 years) Need to apply for consolidation & no fees charged

35 Pros: Creates one loan at a fixed interest rate Reduce monthly payment Possibility of interest rate reduction, averages rates together Cons: Lengthens time of loan Could increase interest rate since averages rates Lose original borrower benefits Lose grace period (repayment begins within 45 days)

36 Subsidized Stafford Loan $17, % Unsubsidized Stafford Loan $18, % Total Consolidation $35,125 Term 20 years Consolidated Interest Rate 6.875% Monthly Payment $ Cumulative Payments $64,726 Total Interest $29,601

37 Make the most of your grace period Use this time to get your finances in order and create a budget (including your loan payments) Develop monthly budget including: Student Loan Payment Rent/mortgage Car payment Utility bills Food Clothing Insurance Entertainment For Budget templates:

38 Find list of all Federal loans you borrowed (includes those sold) Provides contact information on your loan holders Need FAFSA PIN to access information Access via web at Call or

39 Check your individual paperwork to determine your servicer Servicers of loans sold to the Department of Education Sallie Mae Nelnet Great Lakes Education Loan Services AES/PHEAA ACS Direct Loan servicing

40 Office of the Ombudsman U.S. Department of Education 4 th Floor UCP-3/MS First Street NE Washington, DC

41 Notify your Servicer that you are returning to school Generally won t accept deferments unless currently enrolled not okay if just registered File for In-School Deferment, if attending at least part-time (be sure to check with your school how they define part-time)

42 Student Loan Interest Deduction Hope Tax Credit Lifetime Learning Credit American Opportunity Credit Tuition and Fees Deduction

43 Free Annual Credit Report Credit Bureaus Trans Union or Experian or experian Equifax or

44 Thank you for coming and Best of luck after graduation! This presentation will be available on the QU undergraduate and graduate financial aid website after April 29, 2011