L OAN R EPAYMENT S TRATEGIES CAFAA Conference 2012 Sarah Pingel

G OALS o Explain the federal student loan repayment plans o Demonstrate how Financial Aid Awareness Counseling can help students make informed decisions regarding their loans o Discuss Income Based Repayment and Public Service Loan Forgiveness o Briefly explain federal student loan consolidation

F INANCIAL A ID A WARENESS C OUNSELING Not required and doesn’t replace other counseling requirements Will merge a student’s actual loan data if they are signed in with their federal PIN A useful tool to use in forecasting loan repayment schedules.

D RAWBACKS TO UTILIZING AWARENESS COUNSELING : Does not account for capitalized interest when calculating repayment amounts, such as in-school deferment on unsub/PLUS or periods of forbearance. Only uses one interest rate, when in reality, students will have a combination of rates and loan types. If student logs in, will merge more accurate loan data automatically.

R EPAYMENT P LANS AND O PTIONS Standard 10-Year Repayment Graduated Repayment Extended Repayment Extended and Graduated Repayment Income-Based Repayment Income-Contingent Repayment (Direct Loans only) Example for each plan: $35,000 loan at a 6.8% interest rate

S TANDARD, 10- YEAR R EPAYMENT

G RADUATED R EPAYMENT

G RADATED R EPAYMENT

E XTENDED R EPAYMENT

E XTENDED /G RADUATED R EPAYMENT

I NCOME BASED /C ONTINGENT R EPAYMENT

IBR VS. ICR For a single student living in the contiguous US with no children Annual income of $30,000 $35,000 loan at 6.8% interest IBR payment would be $166 ICR payment would be $275

S UMMARY Initial Monthly Payment Total Repaid Standard, 10 Year$403$48,334 Graduated, 10 Year$277$50,944 Extended, 25 Year$243$72,878 Extended, Graduated, 25 Year $198$78,939 Income-Based Repayment* $166? Income-Contingent Repayment* $275? *assumes single, no children, $30,000 annual income living in contiguous U.S.

I NCOME B ASED R EPAYMENT Looks at a student’s income and household size to determine if the student demonstrates a financial hardship in making their payment Will look at a student and spouse together if income taxes are filed jointly Must re-qualify each year by turning in new tax return, pay stub, etc. Remaining debt forgiven after 25 years of on-time payments, 10 years if employed in a public service position

I NCOME B ASED R EPAYMENT

P UBLIC S ERVICE L OAN F ORGIVENESS Only works for Direct Loans, so students may need to consolidate first Must be working full-time with a federal, state, or local government agency, or for a 501(c)(3) non-profit organization Can fill out Employment Certification Form with FedLoan Servicing up to once per year, but not required

IBR, PSLF, AND S TUDENT L OAN R EFORM …

IBR AND PSLF GO HAND IN HAND ….

F EDERAL S TUDENT L OAN C ONSOLIDATION Direct Loans will repay all of a borrower’s loan and create 1 larger Direct Loan that the borrower will then repay Interest rate is determined as a weighted average of all of the student loans consolidated No fees or credit check required Can extend the repayment period up to 30 years if a student has enough debt Streamlines repayment for students with many loans Cannot consolidate private loans into a Direct Consolidation Loan

LOANCONSOLIDATION. ED. GOV Calculator available to forecast what a consolidation loan would look like. In this scenario, a grad student is consolidating several loan types….

G ENERATES LIST OF OPTIONS ….

Q UESTIONS ? Sarah Pingel Senior Graduate Financial Aid Advisor University of Denver