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
Federal regulations require federal loan borrowers
to attend an “exit interview” session prior to leaving college
To learn about your rights, responsibilities and
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
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
Stafford/Direct
◦ Subsidized
◦ Unsubsidized
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 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
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
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
◦ 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 3rd party company who will bill you
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 1st 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
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
The time given before you begin repaying your loan ◦ 6 months - Stafford /Direct
◦ 9 months - Perkins
Generally the first payment is due 30-45 days after
your grace period unless you have consolidated
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
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
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
Standard Graduated
Income- Sensitive (FFEL Only) Income-Contingent (DL Only) Extended
DRAFT 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
Adjusted annually based on:
- Total gross income
15 years - Subject to “3 times rule” - No negative amortization Income Based (IBR) Adjusted annually based on: - Household AGI - Household size - Poverty guideline - State of residence
25 years - Payment is 15% of “disposable” income if experiencing “partial financial hardship” (PFH)
- Eligibility/payment amount re-evaluated annually
Based 20,000 at 5.6% fixed interest rate (unless noted)
Examples from www.salliemae.com
Repayment
Type Monthly Payment
Maximum Payment
Period
Interest
Paid Total Paid Additional Terms
Standard $218.00 10 years $6,165 $26,165 Automatically Enrolled Graduated $93.00 (1st 2 yrs) $259.00 remaining years
10 years $7,099 $27,099 -2 years of graduated payments -Remaining 8 years of payments at higher rate -Must elect it Income Sensitive/ Contingent $66.67 1st year $240.05 remaining years
10 years $6,726 $26,726 -1 year of reduced payment
-9 remaining years at higher payment
Based $40,000 at 6.8% fixed interest rate Examples from www.salliemae.com
Repayment
Type Monthly Payment
Maximum Payment
Period
Interest
Paid Total Paid Additional Terms
Standard $460.00 10 years $15,239 $55,329 Automatically Selected
Extended $278.00 25 years $43,289 $83,289 Elected based on debt
Income Based (IBR)
$234.00 19 years $36,955 $76,955 -Not Married
-Income $35,000 3.5% increase income ea. Year -Max. payment $460.00
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
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
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
Loan Amount Interest Rate Loan Term Monthly Payment
Stafford Loan $21,317 6.8% fixed 10 years $245.00
Sample Private
Alternative Loan
$40,000 9.0% variable 15 years $406.00
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
Undergraduate Loans
Loan Amount Interest Rate Loan Term Monthly
Payment
Stafford Loan $34,577 6.8% fixed 10 years $398.00
Sample Graduate
PLUS Loan
$23,699.00 8.5% 10 years $294.00
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
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)
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
Contact servicer regarding possible
Adjustment of Repayment Plan Deferment
Forbearance Cancellation
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
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
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
Responsible for Attorney & Collection fees Affects credit score
Garnished wages
Tax refunds withheld
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)
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
Subsidized Stafford Loan $17,125 6.8% Unsubsidized Stafford Loan $18,000 6.8% Total Consolidation $35,125
Term 20 years
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:
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 www.nslds.ed.gov
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
Office of the Ombudsman
U.S. Department of Education 4th Floor UCP-3/MS 5144
830 First Street NE
Washington, DC 20202-5144 1-877-557-2575
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
Student Loan Interest Deduction Hope Tax Credit
Lifetime Learning Credit
Free Annual Credit Report www.annualcreditreport.com Credit Bureaus
Trans Union www.transunion.com or 1-800-888-4213
Experian www.experian.com or 1-888-experian
Thank you for coming
and
Best of luck after graduation!
