Presented by Joshua R.I. Cohen Student Loan Basics Consumer Law 101

Copyright Joshua RI Cohen - The Student Loan Lawyer Topics Types of Student Loans: Federal and Private Roles of Different Companies Federal Student Loan Lifecycle Deferment and Forbearance Consequences of Default Administrative Discharges Fixing Default Repayment Options Loan Forgiveness

Copyright Joshua RI Cohen - The Student Loan Lawyer Types of Student Loans Federal – a loan guaranteed (insured) by the U.S Department of Education Private State – a loan offered by a State agency – Available to State residents or non-residents attending schools within the State

Copyright Joshua RI Cohen - The Student Loan Lawyer Private Student Loans Not guaranteed by U.S. Department of Education Many are insured Few if any payment options – pay or don’t pay Enforcement is the same as any other consumer debt – Must be sued before anything can happen – Bankruptcy usually not an option (Brunner Test)

Copyright Joshua RI Cohen - The Student Loan Lawyer Federal Student Loan Parties U.S. Department of Education – Oversees the industry – Lends money – Insures loans given by others (guarantors/banks) Guarantors – Lend money prior to July 1, 2010 – Insure loans given by banks – Service loans held by Dept. of Ed. – Examples: OSLA, ECMC

Copyright Joshua RI Cohen - The Student Loan Lawyer Federal Student Loan Parties Private Banks – Lent money prior to July 1, 2010 – Examples – Sallie Mae, Wells Fargo Servicers – Send statements and accept payments – Only work on loans in good standing Debt Collectors – Contact borrowers to secure payment – Only work on loans in default

Copyright Joshua RI Cohen - The Student Loan Lawyer Federal Student Loan Programs Federal Family Education Loan Program “FFEL(P)” Originator = Bank or Guarantor Bank is insured by Guarantor Guarantor is insured by Dept of Education No longer available as of July 1, 2010 William D. Ford Federal Direct Loan Program “Direct Loan” Originator = Dept of Education Only option since July 1, 2010

Copyright Joshua RI Cohen - The Student Loan Lawyer Types of Federal Student Loans Stafford – Subsidized – Unsubsidized PLUS – Credit matters – Parent or Graduate – Amount based on school’s budget Perkins – Originated by school – Paid to school

Copyright Joshua RI Cohen - The Student Loan Lawyer Stafford Loan Limits Subsidized MaxDependent MaxIndependent Max First Year $3,500$5,500$9,500 Second Year $4,500$6,500$10,500 Third and Subsequent $5,500$7,500$12,500 Undergrad Cumulative Max $23,000$31,000$57,500 Graduate $8,500*$20,500 Graduate Cumulative Max $65,000$138,000 *Subsidized loans were eliminated for graduate and professional loans beginning July 1, 2012.

Copyright Joshua RI Cohen - The Student Loan Lawyer Student Loan Lifecycle Funds disbursed - no payment due while enrolled 6 month grace period after separation from school Enter repayment – Pick a repayment plan, try to stay current Missed payments – Day 1 to 270 = Delinquent – After 270 days = Default Perkins default = Day 1 Cure loan Pick repayment plan, try to stay current

Copyright Joshua RI Cohen - The Student Loan Lawyer Deferments and Forbearance Delinquency < 270 days late < Default Deferment – In-school – Active Military Duty – Unemployment Forbearance – Discretionary – Mandatory

Copyright Joshua RI Cohen - The Student Loan Lawyer Consequences of Default Collection calls – Up to 25% collection fee!! Tax refund intercept Social security offset -- Includes SSDI, NOT SSI – 15% BUT must leave $750 Wage garnishment – No lawsuit required (administrative) – 15% of disposable pay Lawsuit

Copyright Joshua RI Cohen - The Student Loan Lawyer Federal Administrative Discharge Death of borrower or student (Parent PLUS) Total and Permanent Disability False Certification – Student never graduated HS, never received GED, and improper entrance exam – Student could not meet State min. job requirements – ID Theft Closed School Unpaid Refund

Copyright Joshua RI Cohen - The Student Loan Lawyer Fixing Default Settlement – By statute, collector can only offer 10% discount – Only Dept. of Ed. has authority to offer better deal Consolidation – Similar to mortgage refinance – Process takes days – Cannot do this if wage garnishment in place Rehabilitation – Cleans credit of default notation – 9 monthly payments required

Copyright Joshua RI Cohen - The Student Loan Lawyer Repayment Plans 10-year standard Extended, up to 25 years, based on balance Graduated Extended Graduated Income Contingent Repayment – ICR(P) – Based on income and loan balance Income Based Repayment – IBR – Based ONLY on income – Parent PLUS loans cannot use this

Copyright Joshua RI Cohen - The Student Loan Lawyer Repayment Examples Original Loan Amount $25,000$50,000$75,000$100,000150,000$200, Year Standard $246$492$738$984$1,476$1,968 ExtendedN/A$248$371$495$743$991 Extended Graduated N/A$142$213$283$425$567 Graduated$159$318$477$636$954$1,272 Assumes a 3.4% interest rate. Numbers for graduated plans are the introductory payments.

Copyright Joshua RI Cohen - The Student Loan Lawyer IBR Payment Chart Number in Household $25,000$50,000$75,000$100,000150,000$200,000 1$50$420$730$1,050$1,670$2,300 2$0$350$660$970$1,600$2,220 3$0$280$590$900$1,530$2,150 4$0$210$520$830$1,460$2,080 The numbers above represent the monthly total household payment due. For example, if a couple with no children has a total household income of $100,000, their monthly federal student loan payments would add up to $970. The portion each pays would be based on the ratio of their federal loan balances. Total Household Income

Copyright Joshua RI Cohen - The Student Loan Lawyer Public Service Loan Forgiveness Qualifying employer – Government – Fed, State, Local – Non-profit – 501(c)(3) (except Religious entities) 120 Qualifying payments – 10-year Standard, ICR, or IBR – Direct Loans only Applying for PSLF – New form to help track progress – Save stubs and proof of payments!

Copyright Joshua RI Cohen - The Student Loan Lawyer Teacher Forgiveness $17,500 – Full-time, five consecutive years, at an eligible area/school (rural/inner-city usually) – Math or science teacher in secondary school – Special education teacher in secondary or elementary $5,000 – Above criteria in other subjects Special forbearance during the five qualifying years

Copyright Joshua RI Cohen - The Student Loan Lawyer Helping Clients Identify the problem/goal – why is client coming to you? – Loan in default – Trying to avoid default – Needs assistance applying for discharge – Harassing collection calls – Bankruptcy information

Copyright Joshua RI Cohen - The Student Loan Lawyer Helping Clients Identify the type of loan – 99% of all federal loans are listed at the National Student Loan Data System (NSLDS) – Private loan information should be supplied by collection agency, servicer, or loan holder. Credit reports can also be helpful.

Copyright Joshua RI Cohen - The Student Loan Lawyer Helping Clients Identify status of loan – If in default, identify cure methods Rehabilitation v Consolidation – If delinquent, identify time until default and methods to avoid default Affordable repayment via IBR Forbearance and/or deferment if in temporary financial distress (and if IBR isn’t feasible).

Copyright Joshua RI Cohen - The Student Loan Lawyer Helping Clients Review all documents to clarify situation – Many debtors are unsure of what is going on – Debt collectors don’t always get story straight – Lender may hold federal and private loans Pay attention to the problem loan

Copyright Joshua RI Cohen - The Student Loan Lawyer Resources – Federal student loan database – free credit reports – free IBR information www2.ed.gov/offices/OSFAP/DirectLoan/calc.html – federal loan repayment calculator www2.ed.gov/offices/OSFAP/DirectLoan/calc.html – Dept. of Ed. problem solver/investigation unit – NCLC site – Joshua Cohen