Federal Direct Loan Exit Counseling Spring 2016
What is Exit Counseling and Why are You Here? Exit counseling is a way for students to understand their rights and responsibilities. Must be completed if you withdraw, graduate, or drop below half-time attendance. Understand the agreement you entered when you borrowed your loans.
Objectives for Today s Session Review Student Loan Programs How many loans do I have and where are they? Repayment Plans What if I don t pay? Consequences of default When and how to get help from your servicers/lenders Tips to be successful and repay your loans.
Student Loan Programs
Student Loan Program William D. Ford Direct Loan (Direct Loan) Program Loans: Direct Subsidized Loans Direct Unsubsidized Loans Direct Graduate PLUS Loans (for graduate/professional students) You may also have borrowed loans at Beloit from these programs: Federal Perkins Loan Private Loans (Sallie Mae, Wells Fargo) Beloit College Loan
Loan Definitions Loan: The money borrowed from a lending institution or the Department that must be paid back. Grace Period: The six-month grace period after you graduate, leave school, or drop below half-time enrollment in which you are not required to make payments towards your loans (Perkins and Beloit Loans = nine-month grace Period). Have you used your grace period? Lender: The organization that made the loan initially for you which could be a bank, credit union, or the Department of Education.
Loan Definitions Loan Holder: This is the institution that holds your loan and promissory note and has the right to collect money from you. Loan Servicer: The company that maintains the loan for the lender. This organization will send bills, interest statements, disclosure statements, and any other necessary paperwork. National Student Loan Data System (NSLDS): The Department of Education s central location that contains information about your federal student loans.
Changing Relationships To this point most of your contact regarding your Federal Student Loans has been with Beloit College Now most of your questions will be directed to the lender or loan servicer.
Loan Definitions Deferment: A deferment is a period of time during which your lender will temporarily suspend your regular payments (and interest accrual on some loan types) Forbearance: If you are unable to make your scheduled payments, but do not meet the criteria to qualify for a deferment, the lender/loan holder may allow you to reduce or postpone the amount of your payment. Collection Agency: Company that will make all attempts and/or litigation to recover defaulted student loans.
Loan Definitions Master Promissory Note (MPN): MPN is the legal contract between you and the lender (Department of Education) Your promise to repay the loans even if you do not complete your education or are otherwise unhappy with the education you have received. Effective for loans from multiple years
Borrower Rights Loan obligation information Copy of Promissory Note Original Paid-in-Full Notice Interest rates/fees Loan balance Repayment schedule Notification of Loan Servicer
Borrower Rights Interest benefits Grace period Pre-payment without penalty Deferment while in school Request forbearance or deferment
Subsidized Vs. Unsubsidized Stafford Loans Subsidized Need-Based No interest is accruing while you are in school Unsubsidized Non Need-Based Interest begins accruing the day the loan is disbursed. The interest can be paid while you are going to school or capitalized NOTE: Repayment of principal for Subsidized and Unsubsidized Federal Stafford Loan(s) begin six months after you have either graduated, dropped below half time, or withdrew.
Different Loan = Different Terms Loan Type Interest Rate Grace Period Repayment Tern Perkins/ Beloit College Loan Subsidized Federal Stafford Loan Unsubsidized Federal Stafford Loan 5% 9 months 10 years 4.29% (varies) 6 months 10 years* 5.84% (varies) 6 months 10 years* Private Varies Varies Varies *Standard Repayment Plan. Other repayment plans are available.
My Loans Check out the National Student Loan Data System for students (NSLDS) www.nslds.ed.gov Check your loan records Check with your lender Check with the financial aid office Watch letters/emails from Loan Servicer, etc. Check your credit report www.annualcreditreport.com
National Student Loan Data System (NSLDS) www.nslds.ed.gov Need your FSA ID number to access your loans
Studentloans.gov Your Repayment Resource
Repayment Plans
Paying on Your Loan You have the option to prepay all or part of your federal student loans before your repayment begins (without penalty). Tip: make payments before they are due or pay a little more each month. Contact loan servicer to make sure extra payment is applied to principal balance. Paying extra each month can reduce total cost of loan over time.
Standard Repayment Equal monthly payments Payment term of 10 years Minimum payment of at least $50 per month All borrowers are eligible for this plan. You ll pay less over time than under other plans. Loan Amount Monthly Payment Total Interest Paid $10,000 $110.22 $3,226.19 $13,226.19 $15,000 $165.33 $4,839.29 $19,839.29 Total Paid (Loan Principal + Interest) An unsubsidized Stafford loan at 5.84% interest, with a 10-year amortized repayment plan
Other Repayment Options Graduated Repayment Plan Extended Repayment Plan Pay as You Earn Repayment Plan Income-Based Repayment Plan Income Contingent Repayment Plan
Graduated Repayment Plan Payments start out low and then will increase every two years Payment term of 10 years You will pay moreover time than on a Standard Repayment Plan Payment amounts under graduated plans vary from lender to lender. Your lender will determine the exact payments if you choose this plan. An unsubsidized Stafford loan at 6.8% interest, with a 10-year amortized repayment plan.
Graduated Repayment Plan Example Loan Amount Beginning Monthly Payment Ending Monthly Payment Total Interest Paid Total Paid (Loan Principal + Interest) $10,000 $55.11 $143.25 $6,186.02 $16,186.02 $15,000 $82.66 $214.87 $9,279.03 $24,279.03 An unsubsidized Stafford loan at 5.84% interest, with a 10-year amortized repayment plan.
Extended Repayment Plan Eligible if you have over $30,000 in federal student loan debt Repayment term may be as long as 25 years Minimum payment is at least $50 per month Monthly payments may be fixed or graduated Your monthly payments will be lower than under the 10-year Standard Plan or the Graduated Repayment Plan You ll pay more over time than under the 10- year Standard Plan
Extended Repayment Plan Example Loan Amount Beginning Monthly Payment Years in Repayment Total Interest Paid Total Paid (Loan Principal + Interest) $30,000 $208.22 25 $32,46.48 $62,466.48 An unsubsidized Stafford loan at 5.84% interest, with a 10-year amortized repayment plan.
Pay as You Earn Repayment Plan 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
Pay as You Earn Repayment Plan You must have a high debt relative to your income Your monthly payment will never be more than the 10-year Standard Plan amount You ll pay more over time than under the 10-year Standard Plan You may have to pay income tax on any amount that is forgiven Good option for those seeking Public Service Loan Forgiveness (PSLF)
Income-Based Repayment Plan Monthly payment is capped at an amount that is affordable based on your income and family size Must reapply each year Payment term is 10-25 years May qualify for cancellation for any outstanding balance on loans after 20-25 years
Income-Based Repayment Plan You must have a high debt relative to your income Your monthly payment will never be more than the 10-year Standard Plan amount You ll pay more over time than under the 10-year Standard Plan Good option for those seeking Public Service Loan Forgiveness (PSLF)
Income-Contingent Repayment Plan 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 Any outstanding balance will be forgiven if you haven't repaid your loan in full after 25 years
Income-Contingent Repayment 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)
Loan Consolidation One lender and one monthly payment Flexible repayment options Reduced monthly payments Fixed interest rate Subsidized, Unsubsidized, Graduate PLUS, and Perkins Loans are eligible for consolidation Private and Beloit College student loans cannot be included in Federal Loan Consolidation
Loan Forgiveness Opportunities Public Service Loan Forgiveness (PSLF) Borrowers who hold a public service job may be eligible to have a portion of their Direct Loan debt forgiven after making 120 payments Visit the following website for more information http://studentaid.ed.gov/repay-loans/forgivenesscancellation/charts/public-service Qualifying employment for the PSLF Program is not about the specific job that you do for your employer. Rather, it is about who your employer is. Employment with the following types of organizations qualifies for PSLF: Government organizations at any level (federal, state, local, or tribal) Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code Other types of not-for-profit organizations that provide certain types of qualifying public services Serving in a full-time AmeriCorps or Peace Corps position also counts as qualifying employment for the PSLF Program
Loan Forgiveness Opportunities Teacher Loan Forgiveness Borrowers who have been teaching full-time in a low-income elementary or secondary school or educational service agency for five consecutive years may have a portion of the subsidized or unsubsidized Federal Stafford Loans forgiven You may be able to have as much as $17,500 of your subsidized or unsubsidized loans forgiven
Loan Servicers Nelnet www.nelnet.com 1-888-486-4722 Great Lakes Educational Loan Services, Inc. www.mygreatlakes.org 1-800-236-4300 Navient (formerly Sallie Mae) www.navient.com 1-800-722-1300 FedLoan Servicing (PHEAA) www.myfedloan.org 1-800-699-2908
What will my payments be? Payments on Federal Direct Loans will be based on your actual Direct Loan debt level The minimum payment on your Federal Direct Loan will depend on payment plan
What will my payments be? Use the Department of Education s Repayment Estimator to estimate your loan payment amount https://studentloans.gov/mydirectloan/mobile/repayment/ repaymentestimator.action
Money-Saving Tips Sign up to make your monthly payment via automatic debit (ACH) instead of by check Pay on time Pay a little more each payment, to reduce the principal quicker
What If I don t Pay? The Consequences of Default
Consequences of Default Ineligible for future financial aid Difficulty in obtaining credit Seizure of tax refunds, wages and/or property Collection agency or other legal action Loss of deferment or monthly payment options Your entire loan balance will be due in full immediately You may not be able to obtain a professional licensure or get hired by an employer who performs credit checks
Debt Management Budget (monthly) Total Monthly Income Rent Student Loans $2400 $700 $220 Electric $60 Heat $100 Cable/Phone/Internet $120 Food $500 Entertainment $150 Credit Card Payment $100 Transportation (car payment, gas, insurance) $400 Savings $50 Total: $0 Your Educational Loan Payments should be considered fixed expense like rent and food!
When and How to Get Help!
Contact your Lender/Servicer Experience repayment difficulty Need a deferment or forbearance Update your contact information Update your employer information
Your Lender/Servicer Will Want to Help If you are experiencing repayment difficulties there are things your Lender or Servicer can do to help you out. Deferment Forbearance Change your repayment plan Loan cancellation
Be Successful and Repay Your Loans
Resolving a Dispute or Problem Contact your lender or servicer first If unable to resolve with your loan holder, contact the Federal Student Aid (FSA) Ombudsman for assistance. Phone number: (877) 557-2575 Studentaid.gov under Repay Your Loans
Borrower Responsibilities Complete Exit Loan Counseling at www.studentloans.gov Repay loans even if you Do not complete your education Are unhappy with the education you have received Can t find employment
Borrower Responsibilities Maintain contact with your lender/servicer Notify your lender/servicer any time you change your address Anytime you change your phone number Change your name Cannot make a payment Make monthly loan payments when the grace period has ended Notify your lender/servicer of anything that might change your eligibility for an existing forbearance or deferment.
Personal Data Information about your loans are given to the major credit reporting agencies. To avoid telemarketing and mass mailings based on that information consider registering with the National do not call registry at 1-888-382-1222 (TTY 1-866-290-4236) or https://www.donotcall.gov
Final Words Your student loan debt is an investment in your future that no one can take away from you. If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest. Benjamin Franklin
Questions?