Student loan Overview

Agenda 1 Student loan types 2 Income-driven Repayment Plan 3 Public Service Loan Forgiveness Program 4 Identify options for federal loans 5 Opportunities to engage prospects

Student loan types

Student loan types Federal loans Private loans Category Sub Category Income-Driven Repayment plan Public Service Loan Forgiveness Federal loans Direct Loans Direct Subsidized Loans More options Eligible Direct Unsubsidized Loans Direct PLUS Loans Direct Consolidation Loans Federal Family Education Loan (FFEL) FFEL Subsidized Loans Less options Eligible only after consolidate to Direct Loan FFEL Unsubsidized Loans FFEL PLUS Loans FFEL Consolidation Loans Other Perkins Loans Primary Care Loans (PCL) Loans for Disadvantaged Students (LDS) Private loans   Private/Institution Loans N/A

Income-driven repayment plan

Income-driven repayment plan What is an Income-driven repayment plan? An income-driven repayment plan is a repayment plan that sets the monthly student loan payment at an amount that is intended to be affordable based on his/her income and family size. Income-driven repayment plan type Loan Forgiveness Income-Based Repayment Plan (IBR) Pay As You Earn Repayment Plan (PAYE) Revised Pay As You Earn Repayment Plan (REPAYE) Income-Contingent Repayment Plan (ICR) Income-driven repayment plan usually results in lower payment. Remaining balance is forgiven at the end of the term Balance forgiven is a taxable income

Income-driven repayment plan Monthly payment Terms IBR Min (10% of discretionary income, 10yr standard repayment plan amount) after 7/1/14 Min (15% of discretionary income, 10yr standard repayment plan amount) before 7/1/14 20 25 PAYE Min (10% of discretionary income, 10yr standard repayment plan amount) REPAYE 10% of discretionary income 20 for under; 25 for graduate ICR Min (20% of discretionary income, 12 yr payment) Discretionary income = AGI – 150% of annual poverty guideline amount for your family size at your residence state. An individual has a Partial Financial Hardship (PFH) when the income-driven repayment amount is lower than 10 year standard repayment amount.

Comparison of income-driven repayment plan Key differences Need a Partial Financial Hardship Can use Married File Separately to lower payment? Payment % Has a Payment Cap? IBR Yes 15%* PAYE 10% REPAYE No Interest cost differences Interest Benefit Interest capitalization IBR Subsidized loan:100% of unpaid interest for the first 3 years. Once payments exceeds Standard Repayment, 100% accrued interest capitalized. PAYE Once payments exceeds Standard Repayment, Accrued interest up to 10% of original loan amount capitalized. REPAYE Subsidized loan:100% of unpaid interest for the first 3 years & 50% for all remaining years. Unsubsidzed loans: 50% for all years. When you leave plan *Only new borrowers after 7/2014 can use 10% for IBR.

Public Service Loan Forgiveness (PSLF)

To be eligible for Public Service Loan Forgiveness Employment Work for public service organization Full-time employment (30 hours per week) Loan Direct Loans Other Federal loans that are consolidated to Direct Loans Payment Plan Income Driven Repayment plan: ICR, IBR, PAYE, REPAYE 10Yr Standard Repayment plan Payments 120 on-time, full, scheduled, monthly payments Remaining balance at the end of 120 payments is forgiven. 120 payments “clock” will restart at consolidation. Balance forgiven is not taxable. Note, this is different than loan forgiveness from income-driven repayment plan.

Options for Federal loans

Understanding the options is the first important step Not all Federal loans are eligible for a income-driven repayment plan. Variation in income-driven repayment plan based on date of net borrowers. Not all Federal loans are eligible for Public Service Loan Forgiveness.

Limited income-driven payment plan for FFEL loans Limited income-driven payment plan for FFEL loans. No PSLF option for Perkins or FFEL loans Consolidation to direct loan enables more Income-driven payment options and PSLF

Opportunities to engage young prospects

Planning opportunities for prospect with Federal loans Income-driven repayment plan & PSLF Best to minimize payments Work for public service organization Prefer lower payments Work for private sectors Prefer payoff faster

Planning opportunities for prospect with Federal loans Take advantage of married filed separately PAYE Income-driven repayment plan & PSLF Best to minimize payments Lower interest cost (potentially higher payment) REPAYE Work for public service organization Prefer a payment cap PAYE Other IBR Income-driven repayment plan Forgiveness based on repayment plan Prefer lower payments b Work for private sectors Refinance to a private loan w/ lower rate Snowball approach w/ other debts Prefer payoff faster

Take Aways Student loan represents great opportunities to attract Gen X/Y prospect and provide values to Gen X/Y client. Important three steps Important first step is to understand what type of loan prospect has Then, identify options available Lastly, create a plan to meet client’s need RightCapital will launch student loan module to help you to analyze client’s student loan situation and compare options. Stay tuned. More student loan webinar with numerical examples. Stay tuned.