Exit Counseling University of Notre Dame

Topics  Understand Your Commitment  Repayment –Repayment Plans –Consolidation  Repayment Relief  Consequences of Late Payments  Money Management  Tax Benefits  Getting Help

Understand Your Commitment  Read all communication, forms, and documents related to your student loans very carefully.  Regularly check to review your federal student loan information.  Understand the terms of your student loan.  Manage your money by developing a monthly budget.  Contact your loan servicer if you have questions about your loan.

Understand Your Commitment  Federal loans: –Direct Loan (DL) Programs  Subsidized or unsubsidized loans  Grad PLUS loan  Consolidation loan –Federal Family Education Loan Program (FFELP)  FFELP ended on June 30, 2010, so only loans borrowed on or before that date may be FFELP loans.  Subsidized or unsubsidized loans  Grad PLUS loan  Consolidation loan –Other federal loans  Perkins loan  Health-related program loan  Non-federal education loans: –Also known as “private” or “alternative” loans Loan Types

Understand Your Commitment  Master Promissory Note (MPN): –Must be signed in order to receive loan funds –Legally binding document –Specifies your rights and responsibilities  MPN multi-year feature: –Sign once –You can “opt out” and sign a new MPN for each federal student loan –Some schools do not use this feature  Borrower’s Rights and Responsibilities Statement –Expect a “Plain Language Disclosure” for any subsequent loans Master Promissory Note

Understand Your Commitment  When you signed the MPN, you promised to repay your loan, even if you: –don’t complete your program of study or within the regular time frame for completion. –are unable to locate employment after completing your program. –are dissatisfied with or don’t receive services purchased from the school. –don’t receive payment coupons or repayment notifications from your loan servicer. Master Promissory Note

Repayment Grace Period Subsidized and Unsubsidized Loans  Single six-month period in which no payment is expected Grace and Post-Enrollment Deferment Periods No penalty for early repayment. Post-Enrollment Deferment Grad PLUS Loans  Optional six-month grace period after borrower ceases to be enrolled at least half time  First loan payment due within days after grace period ends  Subsidized loans disbursed prior to July 1, 2012 and after July 1, 2014 receive an interest subsidy during the grace period

Repayment Method of Payment  Online payments –Make payments online but the payment is manually scheduled each month –Greater flexibility for payment date or sending extra funds  Auto-debit –May qualify for a 0.25 percent interest rate reduction when using this payment method –Predetermined amount of funding is extracted from your account each month on a pre-set date –Some may be less likely to miss a payment since it is pre-authorized for withdrawal each month  Coupon books –No longer common –Booklets contain a tear-off coupon to submit with payment each month

Repayment  Use a loan calculator to compare repayment options: – – aymentEstimator.actionhttps://studentloans.gov/myDirectLoan/mobile/repayment/rep aymentEstimator.action  As a student loan borrower you may: –prepay your student loans without penalty. –use an accelerated repayment option resulting in less interest. –change repayment plans to accommodate your situation. Plans

Repayment Plans  Standard  Graduated  Extended  Income-related plans: –Income-based repayment –Income-sensitive (FFELP only) –Income-contingent (DL only) –Pay As You Earn (DL only)

Repayment  Default repayment option  If you do not contact your servicer and set up another repayment plan, you will be expected to make payments under this option.  Payments of equal monthly installments  Repayment period cannot exceed 10 years  Minimum payment of $50 Plans Standard Repayment

Repayment  Example of a standard repayment schedule: Plans Unsubsidized Loan (6.8 percent) Loan AmountPayment AmountNumber of Months $25,000$ $50,000$ Grad PLUS Loan (7.9 percent) Loan AmountPayment AmountNumber of Months $25,000$ $50,000$ Source:

Repayment  Payments increase over time  Repayment term cannot exceed 10 years  Monthly payment amount: –Must cover accruing interest –Will not have a single payment more than three times the amount of another Plans Graduated Repayment

Repayment  Example of a graduated repayment schedule: Plans Unsubsidized Loan (6.8 percent) Loan AmountPayment AmountNumber of Months $25,000$19824 (Years 1 and 2) $24024 (Years 3 and 4) $29224 (Years 5 and 6) $35524 (Years 7 and 8) $43224 (Years 9 and 10) Source: Unsubsidized Loan (6.8 percent) Loan AmountPayment AmountNumber of Months $50,000$39524 (Years 1 and 2) $48024 (Years 3 and 4) $58424 (Years 5 and 6) $71024 (Years 7 and 8) $86324 (Years 9 and 10)

Repayment Plans  Example of a graduated repayment schedule: Graduated Repayment Grad PLUS Loan (7.9 percent) Loan AmountPayment AmountNumber of Months $50,000$ (Years 1 and 2) $ (Years 3 and 4) $ (Years 5 and 6) $ (Years 7 and 8) $ (Years 9 and 10) Source:

Repayment  Borrowers with $30,000 or more in FFELP or DL student loans. –Totals from FFELP and DL may not be combined to equal $30,000.  Maximum repayment period of 25 years  Length of repayment is tied to the amount borrowed  Extends the repayment time without consolidating Plans Extended Repayment

Repayment  Example of an extended repayment schedule: Plans Unsubsidized Loan (6.8 percent) Loan AmountPayment AmountNumber of Months $35,000$ $50,000$ Grad PLUS Loan (7.9 percent) Loan AmountPayment AmountNumber of Months $35,000$ $50,000$ Source:

Repayment  Partial financial hardship exists if annual payments exceed a specified percentage of discretionary income: –Borrowers prior to July 1, 2014: 15 percent. –New borrowers on or after July 1, 2014: 10 percent.  Payment amount may be reduced or eliminated.  Remaining amounts may be forgiven for: –borrowers prior to July 1, 2014: 300 qualifying payments over 25 years. –new borrowers on or after July 1, 2014: 240 qualifying payments over 20 years. Plans Income-Based Repayment (IBR)

Repayment  Payments relate to FFELP borrower’s annual income.  Repayment period may exceed 10 years, depending on borrower’s income and amount borrowed.  Borrowers must re-apply each year.  The last date to borrow loans under the FFEL program was June 30, Plans Income-Sensitive Repayment – FFELP Loans

Repayment  Payments relate to federal direct loan borrower’s annual income and family size.  Minimum payment of $5.  Any remaining balance due after 25 years will be forgiven.  Borrowers must re-apply each year. Plans Income-Contingent Repayment (ICR) – Direct Loans

Repayment  Partial financial hardship exists if annual payments exceed discretionary income by 10 percent. –Consistent with “new borrowers” under Income-Based Repayment (IBR).  Payment amount may be reduced or eliminated.  Remaining amounts may be forgiven after 240 qualifying payments over 20 years. –Consistent with “new borrowers” under IBR.  Income verification and household size must be provided to your servicer each year to determine eligibility. Plans Pay As You Earn

Repayment  Sample payment amounts under the Income-Based Repayment (IBR), Pay As You Earn, and Income-Contingent (ICR) plans  Assumptions: –Borrower is single without dependents with an annual pre-tax income of $40,000. The borrower lives in one of the 48 contiguous states. The calculations are based off of maximum interest rate of 8.25%  Payments may vary based on your interest rate, household size, annual income, etc. Sample Payment Amounts Source:

Repayment  Eligible loans: –FFELP and Direct Subsidized and Unsubsidized loans –FFELP and Direct PLUS loans –Consolidation loans –Federal Perkins loans –Federal Nursing Student Loans –Health Professions Student Loans –Health Education Assistance Loans Consolidation A new loan that pays off existing loans and carries new terms.

Repayment Consolidation AdvantagesDisadvantages  May simplify repayment by combining payments into one bill  May allow for a longer repayment period  May allow for lower monthly payments  Interest rates may be lower, particularly for variable interest rate loans  Lengthening the repayment period usually means you make more payments and pay more in interest over time  May lose borrower benefits associated with original loans  May lose grace period associated with loans  Cannot reverse consolidation once it is complete  Interest rate may be slightly higher, particularly for fixed interest rate loans

Repayment Sum of Consolidation Loans and Other Education Debt Maximum Term Less than $7,50010 years $7,500 - $9, years $10,000 - $19, years $20,000 - $29, years $40,000 - $59, years $60,000 or more30 years Consolidation: Maximum Repayment Periods

Repayment  Fixed interest rate based on loans being consolidated. –Weighted average, rounded up to nearest one-eighth of one percent –No longer capped at 8.25 percent, for new applications filed on or after July 1, 2013 Consolidation: Interest Rates 17

Repayment Relief  Deferment  Forbearance  Cancellation  Forgiveness Direct Loans have repayment options to assist borrowers who need help:

Repayment Relief  Postpone repayment for borrowers who qualify  Entitlement for eligible borrowers  Suspend payment of principal and interest: –Interest subsidy resumes for qualifying subsidized loans –Interest accrues on unsubsidized portion  Some deferments must be updated at least annually  Can apply retroactively  Borrowers must request deferment  Once repayment resumes, first payment usually due within 60 days Deferment

Repayment Relief Deferment Types  Half-time enrollment  Time limit: none In-School  Not working at least 30 hours per week in work that will last at least three moths  Actively seeking employment  Time limit: 36 months Unemployment  Financial difficulty making loan payments  Time limit: 36 months Economic Hardship

Repayment Relief Deferment Types  Participating in a qualifying vocational or health-related rehabilitation program  Time limit: none  Participation in a full-time graduate fellowship for at least six months  Time limit: none  Serving on active duty for other than training purposes  Time limit: none  Students enrolled at least half-time within six months of activation  Time limit: 13 months Rehabilitation Training Graduate Fellowship Military Service Post Active-Duty Student

Repayment Relief  Generally granted at the discretion of the lender  Forbearance may include any of following changes to repayment agreement: –No monthly payment –Interest-only payments –Lower payment –Other arrangements  Can be applied retroactively for up to 12 months  Interest subsidy is not available during a forbearance period regardless of loan type  Any unpaid interest may be capitalized  Lender required to inform borrower of status, obligations, and associated costs Forbearance

Repayment Relief Forbearance Types  Servicer believes borrower is willing but unable to make payments  Time limit: up to 12 months  Internship/Residency  National service  Loan forgiveness  DoD repayment  High debt  Active duty  Overdue payments under certain circumstances  Disaster, national emergency, or military mobilization  Processing periods Discretionary Mandatory Administrative Mandatory Administrative

Repayment Relief Cancellation, Discharge, and Forgiveness  Death of borrower –If the borrower dies, the government discharges the remaining loan amount.  School closure –The government discharges loans when a student cannot complete a program due to the school closing.  False certification –At the time of loan certification, the borrower must have been unable to meet the legal requirements for employment in his/her state of residence in the occupation for which the program of study was intended because of age, a physical or mental condition, or criminal record.  Identity theft –If the borrower can prove in court that an identity thief obtained a loan in the borrower’s name, the loan may be cancelled.

Repayment Relief Cancellation, Discharge, and Forgiveness (continued)  Total and permanent disability –Available when the borrower is unable to earn sufficient income due to illness or injury expected to continue indefinitely or result in death.  Limited bankruptcy –If a court finds that repayment of student loan will cause undue hardship to the borrower, cancellation may be available.  Unpaid refund –Failure to receive a valid student loan refund check may qualify the borrower for discharge.  Teacher loan forgiveness –Loan forgiveness available up to $17,500, depending on the type of teaching position.  Public service loan forgiveness –Remaining loan balance may be discharged after 10 years of qualifying payments.

Consequences Delinque ncy Delinquency versus Default  Delinquency means: –Lender has not received payment by the stated due date –Late charges may be assessed –Negative mark on your credit record

Consequences  Lose eligibility for future federal financial aid  Lose eligibility for flexible loan repayment options  Adverse credit reports  State-issued licenses can be withdrawn or denied  Income tax refunds can be withheld  Wages can be garnished  Federal benefit payments can be confiscated  Interest continues to accumulate  Federal debt collection procedures, including fees and fines  Legal action Default Default refers to no loan payments being made for 270 consecutive days or more. Some consequences of defaulting on a federal student loan include:

Budgeting  Identify your financial goals.  Develop a realistic monthly budget.  Pay your bills prior to the due date.  Keep accurate and well-organized records.  Save for the future.

Money Management Latte$3.00 Loan balance$20,000 What would you do with $780? Days per weekx 5 Weekly cost$15.00 x 52 Yearly cost$780 Cost over 10 years$7,800 Repayment term10 years Regular payment amount$ Extra monthly payment$65.00 x 12 Savings over 10 years $2, Reduction in term2.8 years Yearly cost$780 Source:

Tax Benefits  There are a variety of tax credits, deductions and savings plans available to assist with higher education expenses: –American Opportunity Tax Credit –Hope and Lifetime Tax Credit –College Tuition and Fees Deduction –Student Loan Interest Deduction  See for more informationwww.irs.gov

Getting Help  If you cannot make a student loan payment, contact your loan holder/servicer.  If you have an unresolved federal student loan issue: –Department of Education Ombudsman:  Phone: (877)   ombudsman ombudsman Difficult Situations

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