LOAN REPAYMENT STRATEGIES Exploring the Federal Student Loan Repayment Plans Module 3 Tulane University Jeffrey Hanson Education Services

You have options!! Federal Loan Repayment Plans 2

Loan Repayment Plans You have a CHOICE of repayment plans when repaying the following federal student loans:  Direct/FFEL Subsidized Loans (Stafford)  Direct/FFEL Unsubsidized Loans (Stafford)  Direct/FFEL Grad PLUS Loans  Direct/FFEL Consolidation Loans 3

Loan Repayment Plans Payments Based on DEBT PlansPayment Structure Maximum Payment Period Standard (default plan) Fixed payments (do not change)10 years Graduated Payments increase in graduated steps every 2 years 10 years Extended (fixed) Fixed payments (do not change)25 years Extended (graduated) Payments increase in graduated steps every 2 years 25 years  Monthly payment must at least equal the accrued interest each month  Must have more than $30,000 in Direct Loans to use EXTENDED repayment options 4

Loan Repayment Plans Payment Based on INCOME PlansPayment based on: Balance forgiven after: Income Based Repayment (IBR) for NEW Borrowers 10% of “Discretionary Income” 20 years Pay As You Earn (PAYE) 10% of “Discretionary Income” 20 years Income Based Repayment (IBR) 15% of “Discretionary Income” 25 years Income Contingent Repayment (ICR) 20% of “Discretionary Income” 25 years  Monthly payments can be less than accrued interest each month  Payments can be adjusted up or down based on how your income increases or decreases 5

Estimate Your Monthly Payment “Repayment Estimator” at: StudentLoans.gov To “log in,” enter: FSA ID* Password *ED has switched from using a PIN to a new FSA ID and password – you can create your new FSA ID and password when you sign in to StudentLoans.gov 6

Estimate Your Monthly Payment “Repayment Estimator” at: StudentLoans.gov Click on: “Repayment Estimator” to use the calculator 7

Sample Payment Estimates Federal Student Loan Debt = $100,000 (Weighted average interest rate = 6.6%) Household AGI = $35,000 (Household Size = 1; State = LA) (Estimates calculated using “Repayment Estimator” at: StudentLoans.gov ) 8

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Choosing Your Federal Student Loan Payment Plan  Why?  Your loans will be put on the Standard (10-year fixed) Plan if you fail to notify servicer of desired plan  When?  30 days prior to start of repayment  How?  Notify your loan servicer (e.g., online or by phone)  Apply for an income-driven plan at: StudentLoans.gov  What if you need to change plans?  Contact your loan servicer 10

Direct Loan payment tips …  SINGLE statement billing—one monthly payment  Pay by:  Check or money order  Online payment  “Auto-Pay” (contact loan servicer to apply) Saves time Saves money -- interest rate reduced by 0.25% 11

Loan Prepayment  No penalty for prepayments  Contact your loan servicer before you make a prepayment  Ask what steps are needed to submit prepayments  Advise servicer you want to “ prepay ” the loan rather than “ advance the due date ”  Target prepayment at loan(s) with highest interest rate 12

For more information …  Contact your loan servicer(s)  Online resources:  Federal student loans: StudentAid.gov  Federal loan repayment: StudentLoans.gov  “Repayment Estimator” available at: StudentLoans.gov 13

Opportunities to learn more …  Understanding the Unique Nature of Federal Student Loans  Planning for Student Loan Repayment  Understanding the Income- Driven Repayment Plans  Estimating Your Monthly Student Loan Payments  Taking Stock of Your Student Loan Portfolio  Developing Your Student Loan Repayment Timeline  Choosing Your Student Loan Payment Plan  Understanding Student Loan Consolidation  Public Service Loan Forgiveness 14 Check out all the loan repayment modules:

BE STRATEGIC: Take Charge of Loan Repayment! Jeffrey Hanson Education Services Tulane University