How to Improve your Student Loan Payment, A guide to the best ways to save on your student loans

Transcription

1 Welcome to today s webinar. I am really excited to pass this information on to you and think you will find it wildly beneficial. The title of our presentation is How to Improve your Student Loan Payment, A guide to the best ways to save on your student loans. Which is fairly self explanatory so let s dive right in. <Slide 2> So who is this for? I don t want you to waste any of your time so to give you the chance to exit now, let us talk about who this webinar is intended for. The first person it is intended for is those who can afford his or her payment but is able to afford a lower payment The second person this is for is people who can afford their payment but want to pay a little less and avoid paying the exorbitant interest that often times comes with student loans The third person is someone who has a bit more complicated situation such as they qualify for partial forgiveness and want to know how to lower their payment without screwing up that forgiveness. In this presentation there are no secrets on how to avoid paying your student loans or conspiracy theories that they don t want you to know about. This is a simple straight forward presentation of what options are out there to lower your payment and hopefully allow you to increase your student loan success. <Slide 3> So who I am then and why can I help you? Well because I ve helped tens of thousands like you before achieve student loan success. My name is Heath Hullihen and I have worked for a federal student loan company and now am a student loan coach. In both cases I have helped with things such as consolidation options, putting often a payment, forgiveness, etc. But what I love now is I m not stuck with only federal options and can help borrowers with their whole student loan picture just not bits and pieces. <Slide 4> So in order to find a person s solution, we must first identify their issue. While every person s problem is unique the overall student loan problem has a similar ring. In total there is in excess of 1.2 trillion dollar in student loan debt. This is causing people to experience problems with buying houses, making different career moves, etc. And as time is going on this problem is only getting worse. In 2012, 71% of students graduated with student loan debt and about 20%of 2012 graduates debt was private loans. This is particularly a problem because private debt that is received while in school is often times higher interest rates and they don t have the protections that are available to them by the government. These

2 protections can often times be important whenever you are first starting looking for employment <Slide 5> So what is the solution? Well while forbearances and deferments was an option that was always presented as a student loan counselor, it should be a last resort. This is because interest will often times continue to accrue and will cause your payments to raise over time. Simply put you can run but you can t hide. Student loans are not bankruptibly and interest that accrues during a deferment or forbearance will be added to your loan at the end of this time period. You can put yourself into a huge hole if you are not proactive. I would instead suggest you look at changing your plan. You have both federal and private options. You could look first at changing your repayment schedule. This option is only available to your federal loans. There are 3 choices if you do not want to be on a Level Repayment plan is the Graduated Repayment Plan, the Extended Plans, or a Plan Based on your income. The other option is loan consolidation that can be done either through a private company or government. If a government loan, private loans cannot be included, term is based on the loan debt, and it has a weighted interest rate. The last choice is to refinance your student loans which is to lower your payment by lowering your interest rate. There are not separate plans for this but they do have different terms available and interest rates are based on term and the borrower s financial situation. <Slide 6> While every situation is different, in order to understand your options, we need to have a sample to work off of. So meet our Sample Borrower. We are going to call him Chuck. Chuck has undergraduate loans of $27k at 5.5% interest and graduates loans of $57k at 6.75%. His family income is 65k with a family size of 3. He has a federal payment of $ and if he makes his exact monthly payment on the due date, he will pay $29, in interest over 10 years. <Slide 7> We are first going to look at the Graduate Repayment Plan. This plan goes up every two years approximately 20%. The good news though is it falls under what is called the 3x rule. With this rule, the highest payment cannot be more than 3x the amount of the lowest payment. This can lower the payment from the Level often times by around half. In fact with our Sample borrower, the payment would reduce from $ to $ However as previously stated this is just for 24 months and then must go up to still have it paid off in 10 years.

3 Because you are paying less during the beginning, you will pay more in interest over the life of our loan. In the example of our sample borrower, Chuck will pay almost $7,500 more in interest over the life of the loan. <Slide 8> Another option is to increase your term with Extended Plans. These plans run 25 years. However you must qualify by having $30,000 in FFELP Loans or Direct Loans. FFELP loans are older style loans that were originated by a bank whereas a Direct Loan is one that is originated straight from the federal government. For this type of loan, some loans may be eligible while others are not. For example, is you have 24k in FFELP but 30k in Direct Loans, you can extend the Direct Loans but not the FFELP. You can choose between the Level Payment or Graduated. Level Payments are the same payment the entire loan whereas a Graduated is a stair step plan. You will pay significantly more interest over the life of the loan due to this increased term. <Slide 9> The most popular of the Federal Loans in an Income Plan. It is not only popular among borrower s but it is a big push for the Department of Education as well. This is mainly to keep people out of deferments and forbearances which for sure is a good thing. However the main problem is it is based on your income and many people do not qualify, but it is definitely a piece worth investigating. Here are the basics. It is made up of three different types of programs, Income Based, Income Contingent, and the Pay As You Earn Repayment Schedules. Depending on the plan you have will either pay 10%, 15% or 20% of your adjusted gross income towards your student loans after it is adjusted for the poverty line. If you are Married Filing Jointly, you will include both you and your spouse s income. It also discharges after 20 or 25 years depending on the plan. However any discharge is taxable and often times the payment doesn t even cover accrued interest. This can cause an unpleasant tax bill for people the year after the discharge as we will discuss with our sample borrower later on in the process. <Slide 10> Another popular option is to consolidate your loan with federal consolidation. Over the years I learned that people often times do this because they think it is the right option without knowing anything about it. The length of your loan as seen here can range from 10 years to 30 years. Because our sample borrower has loan debt over $60,000, he would qualify for 30 years.

4 <Slide 11> One of the big misconceptions is consolidation will save you on interest. This is often times not the case as interest is based on a weighted interest rate. As a result you will either have very meniscal savings on daily interest, no savings, or in some cases even pay a little bit more. What you almost always do though is pay more over the life of your loan due to the increased term. In the example of our sample borrower, he paid $104, in interest over the life of a loan with only a balance of $84,000. Paying more in interest than you do in principal is not usually looked favorably upon by borrowers. While consolidation is often times a great answer, it is not a one size fits all conclusion and needs to be looked at carefully. <Slide 12> Next we will look at the final stage of our solutions category, refinancing your loan. What refinancing often times does is allow a borrower to lower his or her interest rate, pay less over the life of the loan, and lessen the payments as a result. Interest rates are a big point of contention current in regards to loans, led by Senator Elizabeth Warren. And while I m sure Senator Warren would want the federal protections that are lost with many refinances, it does offer a chance for borrowers to refinance to as low as 3.5% fixed and under 2% variable depending on the term they choose and their credit situation. Rather than offer different payment plans, refinancing is all level repayment with different interest rates and terms based on how long the borrower wants to pay for and their credit score, debt to income ratio, etc. And while Federal Deferments and Forbearances do not exist, many companies do offer short term forbearances for things such as job loss and some even offer job hunting assistance and training. <Slide 13> So who is refinancing good for? Typically it is good for people do not need the government protections or currently have private loans, that are already not eligible for these programs. Also if you can afford your payment and hate paying that much interest, lowering it can be a very attractive option. Finally since all the protections are based on income, if you are a high income earner, you may not benefit and may want to turn to private options instead. <Slide 14> But there is always another side to the coin and there are borrowers for whom refinancing is bad for. For example if you qualify for federal loan forgiveness, this option would be taken away for any amount you refinance. However as we will look at with our sample borrower,

5 Chuck, there are times where you can still take advantage of refinancing and federal forgiveness programs. Also if you have an unstable job history or are new to the workforce you should not refinance your federal loans and should instead let yourself have the luxury of the deferments, etc. However even in this case remember private loans are still fair game! Finally if you simply have too much cash laying around or are extra patriotic and love paying extra to the government, you may want to not refinance your loans to save. <Slide 15> So if you think refinancing your student loans might be a good choice, let s see how it may help you. To do so we are going go visit Chuck again. Real quick as a reminder, Chuck has a total of 84k in student loan debt, an income of 65k and a family size of 3. His regular payment on a Standard plan ins $ <Slide 16> So we are going to look at four scenario at times when refinancing may or may not help you. The first of which is if you can afford your payment. So in this example, Chuck can afford his payment of $ However he doesn t want to pay the $29, in interest. By refinancing to 4.75% rate that is currently being offered by one of the banks, he will save over $8,000 in interest and reduce his payment by over $ However if I was advising Chuck I d tell him to still pay his old payment save even more, but either way you have a great amount of savings! <Slide 17> But almost $1,000 is a lot of money and sometimes you can t afford that. So Chuck decides to get on the Extended Level Payment of $560 for 25 years. Unless Chuck needs the federal protection refinancing will be an even better option for him. This is because he can refinance to 20 years, which is the max for most private companies, and save over $29,000 over the life of the loan on interest while paying less than $19 more a month than the extended. This is due to the reduced interest and payment term! If Chuck is able to pay it off in 15 years by paying $ a month at 5.25% interest, he will realize a savings of over $46,000 dollars in interest compared to the Extended Level Plan. Though not as significant if you pay the extra on the Extended Plan you will also see some level of savings which is why it is always important to pay more if you can! <Slide 18> Forgiveness is where it gets a little bit dicey as you don t want to leave any free money on the table. However there may be a solution as I eluded to earlier.

6 First off unless it is his intention to just pay off the loan as quickly as possible, if Chuck qualifies for Public Service Loan Forgiveness, it would be more beneficial to not apply for refinancing. This is because any forgiveness after 10 years for PSLF is not taxable. However let s say instead Chuck is a teacher at a low income school and qualifies for Teacher Loan Forgiveness. This forgiveness only covers between $5,000 and $17,500 depending on his subject area. If Chuck doesn t need government protection he can simply not include the forgiveness amount in the refinance loan, let it be forgiven down the road and realize the interest savings from refinancing the remainder of his loan. This is a win win in such a situation. <Slide 19> The last scenario we will look at is will you save more money doing the Income Plan and taking advantage of the loan discharge or refinancing. Obviously all situations are different but for Chuck, it may make the most sense to go with refinancing. Here is why. If he is on the traditional IBR, he will have nothing left to forgive after 25 years according to the calculations on studentloans.gov but will pay in total $148,000 over the life of his loan. If he is on the Pay As You Earn, studentloans.gov states that Chuck will pay $138,000 on his loan in total and have $45,177 forgiven If he refinances for 20 years at 5.5% interest, he will pay just under $139,000 in total on his loans. This is less than the IBR but slightly more than the Pay As You Earn. However the forgiveness is taxable and will cost Chuck an extra 24,000 on his taxes the following year. This means that in total, Chuck will have paid over $160,000 as a result of being on the Pay As You Earn. While every situation is different, in Chuck s case it would have made more sense to refinance. A good place to decide what is best is to talk to a financial planner along with your local tax expert. <Slide 20> So now we know the benefits and detriments of refinancing. If you are 100% sure it isn t for you, I d probably just exit now as there isn t much benefit on the remaining sections, but may want to check out studentloaninsider.org/pricing for my other products that may benefit you. If you are totally sure it is for you, hang on because we are going to cover my 3 favorite companies to work with. If you aren t sure hang around and there will be help for you at the end as well!

7 So assuming you ve decided this is a good choice for you, the question is who should you choose. There are many many choices but I have chosed 3 based on interest rates, term offered and additional features. The three will be looking at is Darien Rowayton Bank, Sofi, and Commonbond. <Slide 21> The first one we are going to look at is my personal favorite, DRB Bank. How I discovered them is why they are my favorite. They solve a common problem that many people face as they allow you to refinance a Parent PLUS loan out a parent s name and into a child s name as long as the child is eligible for a loan. This is something as a federal counselor I told people for years couldn t be done and I m glad you finally can! Some other great points about DRB is they usually have equal to or the lowest rates that are available. So if you are looking simply to save the most money, they are often times your go to. In addition there is no limit on how much you can borrow, they allow you to refinance undergrad and graduate loans, and they have the lowest minimum of $5,000. Also recently DRB added a forbearance for up to 3 months at a time and a year total for financial hardship. However there are down sides to this company as well. First off in many cases depending on your income and debt to income ratio you may need a cosigner. Infact if you have an income less than 50,000 a cosigner is typically requested (though not always). In addition, you have to have graduated or have an offer to begin employment to qualify. Also DRB had complaints about both efficiency and service but have seemed to taken steps to both streamline service and improve their turnaround time. In fact, on a personal note, I spoke with an individual for over an hour asking all my questions and received a tremendous level of service. <Slide 22> The next company we are looking at is Sofi. Outside of the traditional big banks such as Wells Fargo, Sofi is probably one of the more well known names in student loan refinancing. They have a lot of features that I love. For example they offer a forbearance for job loss and will even give you job training. They have an entrepreneurship program where you can get a forbearance for up to 6 months while you start a business. Similar to DRB, you can finance both undergraduate and graduate loans. However unlike DRB, depending of your school of attendance you may qualify for an MBA loan to help fund you while in school. The final positive point that is unique to Sofi is they give an incentive for you to sign up through the affiliate program. If you sign up with Sofi through an affiliate link and qualify as a new borrower, you will receive $100. The negative points are that loans are not available in every state such as Nevada for fixed loans and Minnesota and Tennessee for variable rates. Also unlike DRB you are not able to

8 refinance Parent PLUS loans into child s names though on their website they indicate this may change by the end of the year. <Slide 23> The third company I d like to review is Commonbond. While they make my top 3 spotlight, they are my least favorite of the 3 companies. This is because of the restrictive nature. For example you can t finance over $220,000 and you can only refinance if you were a part of certain programs at certain schools. The good news though is if you do qualify, you can get loans while you are in school. Also you are able to have your loans stopped if you go back to school in addition to Forbearance for hardship. While this is only available to graduate students, it plays as a great second option especially if you aren t sure if you are able to qualify for one of the others or like the socially conscious aspects that Commonbond presents over the others. While not my favorite, I must say it is still a very viable option that is worth looking at. <Slide 24> I have given you a ton of information and I appreciate the time you have taken to listen to everything. You may have noticed that it may seem like every option has an exception and often times these exceptions have exceptions. And if this confuses you I understand and want to take a moment to explain how I can help you. If you have a basic question just send me a quick to studentloaninsider@gmail.com and I d be glad to help you out. But if you need a little more help I specialize in clearing up issues for borrowers. In addition to specific bundles, I also offer three services where I assist borrowers one on one from a full analysis or just helping you know which payment option is best for you. <Slide 25> And that is the option I want to highlight. I know sometimes you just need a little bit of assistance knowing what payment plan is right for you so here is what I am offering: I will speak with you for 30 minutes about your student loan situation to decide what plan is right for you This evaluation will look at your career, long and short term goals I will let you know if you are doing what you should be, should change all your loans to a certain plan, if refinancing is right for you, or a combination of both Unlimited follow-up access with me! This means if you have any follow up inquiries, I am there for you! My full analysis is $199 and this payment plan analysis is priced at $49. However I really do appreciate you taking the time to learn more from me today so I want to give you a special offer. <Slide 26>

9 I am taking over 60% off and offering you this analysis package for only $19. If you are interested simply scroll down and click the Buy Now Button at the bottom of the page. However you don t have to pay anything at all. If you know for sure you want to refinance your loans, simply scroll down and click on the the logo of the company you d wish to refinance with. If you don t remember from my presentation, I have listed all the pros and cons below each logo. In addition you will find beside this webinar the script I have written for today s presentation so if you didn t take notes you ll have word for word the presentation I have given you! If you need to come back here simply bookmark this page or visit studentloaninsider.org/paymentwebinar But before we go, I have one additional offer for you.use the link I give you by clicking on the logos below or the Find Out More button at the bottom of the pros and cons list. Then if you are approved me your approval letter to studentloaninsider@gmail.com. Once I receive a notice from the company that it was approved and you used my link, I will send you a special gift. This is usually a month after you are approved! As I ll be mailing it be sure and include your address so I can get you your gift! Again thank you for your time today watching this webinar. I look forward to helping you with any questions you may have. Have a great day and here is to achieving student loan success!