MoneyCounts: A Financial Literacy Series Student Loan Repayment Strategies Dr. Daad A. Rizk Financial Literacy Manager MoneyCounts: A Financial Literacy Series 128 H Outreach Building University Park PA 16802 dar39@psu.edu 814-863-0214

Learning Objectives Review the loan repayment process Choose your repayment plan To consolidate or not to consolidate? that is the question! Budgeting and saving tips to meet your loan repayment Strategy to protect your financial reputation 5725

Outstanding Student Debt ! 5725

Key Terms Terminology Loan Servicer – DOE designated agency to service your loan Total student loan debt amount – principle and interest Monthly payment – depends on your payment plan Interest rate – varies per loan Grace period – waiting period to start repayment Repayment Plan – various plans to choose from (7 plans) Consolidation – combining all loans into a NEW loan Deferment and forbearance – ways to help in difficult time Defaulting – not being able to pay your loan Loan forgiveness – must meet requirements for forgiveness

Exit Counseling Manage My Direct Loan [StudentLoans.gov] You can get to your exit counseling from different websites Penn State – e-Lion Studentloans.gov At the end of the exit counseling session, you will be asked for information that will be included as part of your federal student loan records. You must provide the following: Name, address, e-mail address, and phone number for: Your next of kin Two references who live in the US Your future employer (if known)

Where Do I Start? Penn State Student Aid Office Website Loan Debt [Penn State Office of Student Aid] Know Loan Servicer NSLDS National Student Loan Data System Student Access: National Student Loan Data System Manage My Direct Loan [StudentLoans.gov]

StudentLoans.gov

How much Do I Owe?

NSLDS - Loan Summary

Loan Servicer

When Do I Begin Repaying my Student Loans? 6 months after you leave college, graduate or drop below half-time enrollment (Grace Period) Your loan servicer or lender must provide you with a loan repayment schedule that states when your first payment is due, the number and frequency of payments, and the amount of each payment. It is your responsibility to update your contact information with your loan servicer

How much will I Need to Pay? Your bill will tell you how much to pay. Your payment (usually made monthly) depends on: The type of loan you received How much money you borrowed The interest rate on your loans The repayment plan you choose.

How Do I Make My Payment? National Student Loan Data System The U.S. Department of Education (ED) uses several loan servicers to handle the billing and other services on loans for the William D. Ford Federal Direct Loan (Direct Loan) Program and for loans that were made under the Federal Family Education Loan (FFEL) Program and that ED later purchased. You’ll tell your loan servicer which repayment plan you’d like to choose. National Student Loan Data System https://www.nslds.ed.gov/npas/index.htm

Repayment Plan? Standard Repayment Plan Graduated Repayment Plan Extended Repayment Plan Income-based Repayment Plan Pay As You Earn Repayment Plan Income Contingent Repayment Plan Income Sensitive Repayment Plan Repayment Plans [Office of Federal Student Aid]

Payment Estimator

Payment Comparison

Payment Plan - 1

Payment Plan – 2

Payment Plan – 3

Repayment Estimator Repayment Estimator [Office of Federal Student Aid] Helps you compare repayments under each repayment plan Helps you visualize length of time and total cost of each loan Note: this does not include “PRIVATE LOANS”

Payments (mail or online) There are several ways you can make your payments: Electronic payments (receive your loan statement electronically, make payments on line) Electronic Debiting (link the payment to your checking account) Send a paper check in the mail to loan servicer (avoid late payment)

What Happens if I Don’t Pay My Student Loan Back? Borrowers who default on their student loans are reported to credit bureaus Your credit rating and future borrowing ability will be negatively impacted Legal action can be taken to require payment through garnishment of wages and withholding of tax refunds Student Loans are NOT dischargeable through bankruptcy!

Consolidation, Deferment & Forbearance Consolidation is making all your loans into one, make one payment Subsidized, Unsubsidized, PLUS (Student, not parent) Do the math before you make the decision to consolidate or not to consolidate Deferment and Forbearance Gives you more time to get your financial hardship under control You have to apply and qualify!

Loan Forgiveness Program What is the Public Service Loan Forgiveness Program? In 2007, congress created this program to encourage individuals to enter and continue to work full-time in public service jobs Under this program, borrowers may qualify for forgiveness of the remaining balance due on their eligible federal student loans after they have made 120 payments on those loans under certain repayment plans while employed full time by certain public service employers. The cancellation of all or some portion of your remaining federal student loan balance. If your loan is forgiven, you are no longer responsible for repaying that remaining portion of the loan.

Strategy for Success Increase your emergency fund from 10% to 20% of your net income Start paying into the fund as soon as you start earning income (3 months payments) Pay off credit card debt before you enter student loan repayment Remain in touch with your servicer and notify them of any financial problems, do not default at any cost Depending on your income level, speed pay your student loans so you can free money for other future commitment

Quick Tip to estimate payment Loan Debt Repayment Chart Amount Borrowed Number of Payments Estimated Monthly Payments* Recommended Annual Salaries** $ 5,000 120 $55.51 $8,326.50 $10,000 $111.02 $16,653.00 $15,000 $166.53 $24,979.35 $20,000 $222.04 $33,306.00 $25,000 $277.55 $41,632.50 $30,000 $333.06 $49,959.00 $35,000 $388.57 $58,285.50 $40,000 $444.08 $66,612.00 $45,000 $499.59 $74,938.50 $50,000 $555.10 $83,265.00 $55,000 $610.61 $91,591.50 $60,000 $666.12 $99,918.00

Compare Payments, Interest and Total Paid Loan of $50,000 AGI $35,000 Repayment Plan Term (years) Monthly Payment Interest Paid Total Paid Standard 10 $575 $19,048 $69,048 Graduated Standard $395 (initial) $863 (final) $22,778 $72,778 Graduated Extended 25 $283 (initial) $496 (final) $62,770 $112,770 Extended $347 $54,112 $104,112 Income-Contingent 15.8 $403 (initial) $443 (final) $32,397 $82,397 Income-Based $234 (initial) $477 (final) $74,341 $104,812 ($21,722 forgiven)

Budgeting Tips Net Income 100% Saving 10% Debt Repayment 15% (instead of 10%) Housing & Utilities 30% Food 20% Car 10% All Other Expenses 15%

SFEC The Student Financial Education Center (SFEC) offers in-person financial education, from one student to another Peer-to-Peer Financial Education Walk in or make an appointment to talk with a Peer Educator Check Website for Walk-in Hours Location: 309 Paterno Library, in Schreyer Business Library Contact us at sfec@psu.edu

Resources – URL links National Student Loan Data System Allows borrowers to look up information about their Title IV federal student loans 800-433-3243800-433-3243 FREE www.nslds.ed.gov Federal Student Aid Information Center/Student Aid on the Web Provides information on federal student loans 800-433-3243800-433-3243 FREE www.studentaid.ed.gov Direct Loan Servicing Center Allows borrowers with Direct loans to make payments online and manage their account 800-848-0979800-848-0979 FREE www.dl.ed.gov Department of Education’s Default Resolution Group Provides information on defaulted student loans 800-621-3115800-621-3115 FREE www.ed.gov/offices/OSFAP/DCS/index Federal Direct Consolidation Loans Information Center Provides information on the Direct consolidation loan program 800-557-7392800-557-7392 FREE www.loanconsolidation.ed.gov

Not a good strategy!

Good Strategy! https://www.youtube.com/watch?v=JqbXQa05Z6c 5725

MoneyCounts: A Financial Literacy Series Thank You! Comments and Questions Dr. Daad A. Rizk Financial Literacy Manager MoneyCounts: A Financial Literacy Series 301 Outreach Building University Park PA 16802 dar39@psu.edu 814-863-0214