1. Student Loans: Before, During And After You Borrow

2. This presentation supplements –Required entrance counseling that must be completed before borrowing a Federal Title IV loan –Required exit counseling that Federal Title IV loan borrowers must complete. College Foundation, Inc. (CFI) appreciates the invitation from your school to assist your aid office in providing you information about student loans.

3. Student Loan Basics Loans have to be repaid! Borrow only what you need!! Interest –What you are charged for using someone else’s money Capitalization –The addition of unpaid interest to the principal balance. Then new interest is applied to the ENTIRE balance (principal plus capitalized interest)

4. Financial Aid Programs – Federal Perkins Loan 5% School gets money and awards at their discretion. Not all schools participate in program Maximum $5500 per year for undergraduates School may set lower maximum due to limited funding Repayment begins 9 months after no longer at least half-time

5. Financial Aid Programs Federal Subsidized Stafford Loan Self help and need-based Must be REPAID Must sign Master Promissory Note Must be at least half-time 4.29% - Can change each year No interest to the student while in school Repay 6 months after no longer half-time. Interest begins immediately.

6. Financial Aid Programs – Federal Subsidized Stafford Loan 1% Origination Fee 1 st year: $3500 per year 2 nd year: $4500 per year 3 rd year: $5500 per year 4 th year: $5500 per year Undergraduate cumulative limit is $23,000

7. Financial Aid Programs Federal Unsubsidized Stafford Loan Self help but is NOT need-based Must be REPAID Must sign Master Promissory Note Must be at least half-time 4.29% for all unsubsidized loans Interest accrues Fees and Repayment – same as Subsidized Loan

8. Financial Aid Programs – Federal Unsubsidized Stafford Loan Undergraduates:$2000 per year Independent undergraduates or FPLUS denials –1 st year: $4000 –2 nd year: $4000 –3 rd year: $5000 –4 th year: $5000 –Graduate/Professional: $22,500

9. Financial Aid Programs – Federal Loan for Graduate and Professional Students NOT need-based but student must file FAFSA Parent borrows on behalf of dependent undergraduate student (at least half-time) Must be REPAID Must sign Master Promissory Note 5.84% Fees –4% Origination Graduate/Professional students can also borrow PLUS (referred to as “Grad PLUS” – same interest rates as Parent PLUS)

10. Financial Aid Programs – Federal Parent Loan (PLUS) NOT need-based but student must file FAFSA Parent borrows on behalf of dependent undergraduate student (at least half-time) Must be REPAID Must sign Master Promissory Note 6.84% Fees –4.272% Origination Graduate/Professional students can also borrow PLUS if students has already borrowed maximum amount.

11. Financial Aid Programs – Federal Parent Loan (PLUS) Must not have adverse credit history Repayment begins 60 days after loan is disbursed Repayment can be deferred while student is enrolled at least half-time –Interest continues to accrue Maximum: Cost of Attendance minus Other Financial Aid

12. Loan Limits For Dependent Students Grade LevelSubsidized AmtUnsubsidized Amt Annual Limit 1 st Undergrad$3,500$2,000$5,500 2 nd Undergrad$4,500$2,000$6,500 3 rd & 4 th Undergrad $5,500$2,000$7,500 Aggregate limit for undergraduate dependent students is $31,000 with no more than $23,000 in Subsidized Loans. You cannot borrow more than your cost of attendance minus any other financial aid you'll get, so you may receive less than the annual maximum amounts.

13. Loan Limits - Independent Students and Dependent Students Whose Parents Are Denied PLUS Agg regate limit for undergraduate students is $57,500 with no more than $23,000 in Subsidized Loans. Aggregate limit for graduate/professional students is $138,500 with no more than $65,000 in Subsidized Loans Grade LevelSubsidized AmtUnsubsidized Amt Annual Limit 1 st Undergrad$3,500$6,000$9,500 2 nd Undergrad$4,500$6,000$10,500 3 rd & 4 th Undergrad $5,500$7,000$12,500 Graduate or Professional Not eligible$20,500

14. Families With FAFSA PIN Numbers The Federal Student Aid ID (FSA ID) replaces the Federal Student Aid PIN. If you already have a FAFSA PIN Number, you can link your information to your new FSA ID by entering your PIN while registering for your FSA ID. The FAFSA PIN Number is not required to create the FSA ID.

15. Create a FSA ID – Students and Parents

16. FSA ID Creation

17. Complete your Master Promissory Note Studentloans.gov

18. Your Master Promissory Note (MPN) Contains your Rights and Responsibilities Is a binding legal document that you signed You indicated your commitment to repay your loans by signing the MPN Your MPN may have been used for only one year at a time or as a multi-year note Your MPN expires after 10 years or if you declare bankruptcy or for other reasons – check with your lender Check with your loan servicer or your campus if you have questions about your MPN

19. Loan Disbursement Schools generally make one disbursement for each payment period. Examples of a payment period - a semester, or a summer term. If the loan covers only one payment period, the school may make two disbursements, one at the beginning of the period and one half-way through the period Schools may disburse on a different schedule for module- based programs, programs that are clock-hour based, on-line programs, etc. Check with the campus for details about loan disbursement.

20. Loan Disbursement Schools pay for direct costs (charged by the school, like tuition and fees, for example) first. Any loan funds in excess of direct costs are disbursed to the borrower. Schools use a variety of methods to disburse funds –Checks –Direct Deposit to student accounts –Debit cards Check with the campus for more information

21. You Have to Repay Your Loan Even If You did not complete your education You are not employed You did not find employment in your field of study You feel the education you received did not meet your expectations

22. Your Lender Can Sell Your Loan (Applies to FFEL) Your lender can sell your loan to another lender, a secondary market, or the U.S. Department of Education The original lender and new holder of your loan must notify you in writing if a sale occurs. Notification includes new holder’s –Name –Address –Telephone number Terms and conditions of your loan remain the same Note: FFEL program ended July 1, 2010

23. Basic Loan Terms Guaranty Agency or Guarantor (for FFEL) –State designated organization that administers education loans Lender (for FFEL) –A private, public or institutional entity which makes funds available to others to borrow –U.S. Department of Education is the lender for Federal Direct Loans Loan Servicer –A public or private entity that collects, monitors and reports loan payments

24. Student Loan Repayment Basics Grace Period –Time during which you do not have to make any loan payments. Deferment –Time during which loan payments are temporarily suspended Forbearance –Temporary change in loan payment due to some financial hardship you are experiencing. You may still have to pay the interest that is accumulating during this time.

25. Deferment Time period when repayment is temporarily suspended A deferment period may be granted for: –At least half-time enrollment at an eligible school –Graduate fellowship –Rehabilitation program –Unemployment –Economic hardship –Military Service These deferments apply to loans made on or after July 1, 1993. If you have a loan made before that date, check your promissory note.

26. Forbearance You are unable to make your scheduled payments but you do not qualify for a deferment Forbearance allows you to –Reduce the amount of your payment –Temporarily stop payments Most forbearance is discretionary – it is up to your lender to decide to grant forbearance.

27. Forbearance These conditions might qualify you for forbearance –Personal problems such as poor health or economic hardship –Being affected by circumstances such as a national or local emergency, military mobilization or natural disaster –Exhausting your eligibility for an internship deferment –Serving in a position that may qualify you for loan forgiveness, partial repayment of your loan or national service educational award

28. Forbearance You are still responsible for the interest that accrues during forbearance. –Try to pay it. Capitalized interest is added to the principal balance and increases your total outstanding debt and possibly your monthly payments

29. Repayment Begins – Direct Stafford Loan 6-month grace period Begins the day after you stop attending on at least a half-time basis Each loan has only one 6-month grace period. Your loan servicer advises you of your first payment due date during your grace period. You are responsible for beginning repayment of your loan on time even if your loan servicer’s communication fails to reach you.

30. Repayment Begins - PLUS PLUS loans enter repayment on the date the loan is fully disbursed For Grad PLUS, student has an in-school deferment while enrolled at least half-time. Parent borrowers can also request a deferment while student is enrolled at least half-time Post Enrollment Deferment begins the day after student drops below half-time enrollment. Interest is accruing the entire time.

31. Repayment Begins - PLUS Your loan servicer advises you of your first payment due date during your grace period. You are responsible for beginning repayment of your loan on time even if your loan servicer’s communication fails to reach you.

32. Repayment Tips Keep your loan records organized. Keep copies of everything related to your loan. Know how much your loan payments will be – your lender will send you a repayment schedule. Create a monthly budget. Direct Loan servicers will offer you the Standard Repayment Plan and will provide information about other repayment plans.

33. Repayment Options You always have the option to prepay your loan. You can always pay your loan on a shorter schedule. Repayment Schedules –Standard Repayment –Graduated Repayment –Income-Contingent Repayment (Direct Loan) –Income-Based Repayment –Pay as You Earn (PAYE) –Extended Repayment

34. Standard Repayment Schedule Minimum monthly payment is $50 – amount of monthly payment depends on how much borrowed; payment required may be higher than the minimum Maximum standard repayment period is 10 years

35. Graduated Repayment Schedule Begins with lower payments Payments increase over time More interest will accrue over the life of the loan Principal balance decreases at a slower rate

36. Income-Sensitive Repayment (FFEL only!) Adjusted payment amount based on gross income Payment cannot be lower than monthly interest amount Eligibility and payment amount verified annually More interest will accrue over the life of the loan Principal balance decreases at a slower rate

37. Income-Contingent Repayment (Federal Direct Loans only) Adjusted payment amount based on gross income Payment cannot be lower than monthly interest amount Eligibility and payment amount verified annually More interest will accrue over the life of the loan Principal balance decreases at a slower rate

38. Income-Based Repayment Available for payments made on or after July 1, 2009 Adjusted payment amount based on income and family size Payment will not exceed 15% of amount by which your adjusted gross income (AGI) exceeds 150% of poverty line (based on your family size)** If monthly payment amount is not enough to pay the accrued interest, the Department of Education will pay the remaining interest for a period of 3 years ** Will be 10% for new borrowers, effective 7/1/2014

39. Income-Based Repayment Eligibility is re-evaluated annually More interest may accrue over the life of the loan Principal balance decreases at a slower rate Any outstanding loan balance after 25 years will be forgiven –This changes to 20 years for new borrowers on July 1, 2014 Amount forgiven may be taxable

40. Extended Repayment Available to new borrowers on or after October 7, 1998 with balance of more than $30,000 Payment amounts can be fixed annually or graduated Maximum repayment term is 25 years More interest may accrue over the life of the loan Principal balance decreases at a slower rate

41. Income-Driven Plans - Overview Three main plans Income-Contingent Repayment Plan (ICR) – 1994 Direct Loan Program only More information available at StudentAid.gov/ICRStudentAid.gov/ICR Income-Based Repayment Plan (IBR) – 2009 Available in both the Direct Loan and FFEL Program More information available at StudentAid.gov/IBRStudentAid.gov/IBR Pay As You Earn Plan – 2012 Direct Loan Program only For new borrowers in FY 2008 who receive new loans in FY 2012 Modeled on IBR, incorporating statutory IBR changes scheduled to take effect for new borrowers in 2014 More information available at StudentAid.gov/PayAsYouEarnStudentAid.gov/PayAsYouEarn 41

42. Income-Driven Plans Eligible Borrowers ICR: Direct Loan borrowers with eligible loans IBR: Direct Loan and FFEL Program borrowers with eligible loans and Their payments would be lower on IBR relative to what would have been paid under the 10-year standard repayment plan (called “partial financial hardship”) Pay As You Earn: Direct Loan borrowers with eligible loans Must be a new borrower on/after 10/1/2007 who received new loan on/after 10/1/2011 and Their payments would be lower on Pay As You Earn relative to what would have been paid under the 10-year standard repayment plan (called “partial financial hardship”) 42

43. Income-Driven Plans Loan Forgiveness All three plans provide for forgiveness For ICR and IBR, remaining balance forgiven after 25 years of qualifying repayment For Pay As You Earn, remaining balance forgiven after 20 years of qualifying repayment For all three plans, qualifying repayment includes: Payments under an income-driven plan Payments under the 10-year standard repayment plan (or any other repayment plan with a payment amount at least equal to the 10-year standard plan amount) or Economic hardship deferment According to the IRS, the forgiven amount is considered taxable income 43

44. Trouble Paying? Contact your Direct Loan Servicer! –You may be able to reduce your monthly payments if you qualify for an alternate repayment schedule –You may be able to temporarily postpone your payments if you qualify for a deferment or if you qualify for a forbearance

45. Combining Loans You have multiple lenders You are making the minimum payment on multiple loans Consolidation means one monthly payment to one lender The only consolidation opportunity at this time is with the U.S. Department of Education’s Direct Loan program

46. Federal Consolidation Loan Benefits –Extended repayment of up to 30 years, based on your loan balance –One monthly payment –Can prepay or change repayment plans –Fixed interest rate

47. Federal Consolidation Loan Drawbacks –Extra interest over the life of the loan if you are in a longer repayment period –Loss of eligibility for certain deferment, forgiveness, cancellation and grace period benefits –Loss of borrower benefits you previously had

48. Loan Cancellation – Direct Stafford Loan Your death You become totally and permanently disabled Your school fails to pay a refund if you withdraw Your school closes and you are unable to complete your program of study as a result Your loan was falsely certified as a result of identity theft Your school falsely certified or fraudulently completed a loan application in your name without your approval

49. Loan Forgiveness Teacher Loan Forgiveness – Direct Stafford Loans –First loan was made on or after October 1, 1998 –You teach in a qualifying low-income school for 5 consecutive years

50. Loan Forgiveness Public Sector Employee Forgiveness – Direct Stafford & Direct Grad PLUS Loans –You made 120 monthly payments on eligible loans after October 1, 2007 –You are employed in a public-service job at the time of forgiveness and have been employed in a public- service job during the 120 month period

51. PSLF – Qualifying Payments Borrower must make 120 separate monthly payments. They: Do not need to be consecutive Must be for the full scheduled payment under the repayment plan Must be made within 15 days of the due date Multiple, partial payments during the borrower’s monthly billing cycle will qualify if they add up to equal the borrower’s monthly payment amount A borrower will not receive credit for more than one payment toward PSLF if the borrower makes a lump sum payment (e.g., makes a single payment equal to two or more full monthly payments) Exception for AmeriCorps and Peace Corps borrowers who make lump sum payments using education award or transition payment 51

52. PSLF – Qualifying Repayment Plan Each of the 120 payments must be made under a qualifying repayment plan Qualifying repayment plans: 10-year Standard Repayment Plan IBR, ICR, Pay As You Earn plans and Any other payment plan where the payment amount at least equals the 10-year Standard Repayment Plan amount Non-qualifying repayment plans include: Extended (Fixed or Graduated) Graduated and Consolidation Standard with term greater than 10-years Income-driven plans are most likely to leave a remaining balance for forgiveness after 120 qualifying payments 52

53. PSLF – Eligible Loans PSLF is only for Direct Loans All Direct Loans qualify Parent Direct PLUS Loans are eligible for PSLF, but cannot be repaid under income-driven plans Borrowers may consolidate parent PLUS Loans and repay under ICR FFEL Program and Perkins Loans do not qualify, but can be consolidated into a Direct Consolidation Loan Borrower consolidating Perkins Loans will lose Perkins-only cancellation benefits they may have otherwise been able to receive Payments made on loans that are later consolidated do not count toward 120 payments for PSLF. Borrower must make 120 qualifying payments on the Direct Consolidation Loan 53

54. PSLF – Qualifying Employment Each of the 120 payments must have been made during a period of qualifying employment Qualifying employment includes any job at: A government organization A not-for-profit, 501(c)(3) organization or Any other not-for-profit organization that is not a labor union or partisan political organization and that provides public services in the following categories: Emergency management, military service, public safety, law enforcement, public interest legal services, early childhood education, public service for individuals with disabilities, public health, public education, public library services, school library services, or other school- based services Borrower can work at multiple organizations while making the required120 payments 54

55. PSLF – Qualifying Employment Must be a full-time employee or work multiple part-time jobs that equal full time Full-time is whatever the employer considers full-time, but must be at least an annual average of 30 hours per week For borrowers with multiple employers, full time is an annual average of at least 30 hours per week Exception for employees under contract for at least eight months per year (e.g., teachers), full time is an average of at least 30 hours per week For borrowers working for a not-for-profit organization (501(c)(3) or otherwise) with job duties that include religious instruction, worship services, or proselytizing, the hours spent on those activities cannot be factored into meeting the full-time employee requirement 55

56. PSLF – Employment Certification Employment Certification Form is not an application for forgiveness Borrower must make 120 qualifying payments after October 1, 2007, so no borrowers can qualify until 2017 at the earliest PSLF Forgiveness Application will be developed and released prior to earliest date of eligibility for PSLF 56

57. PSLF – Employment Certification Common problems identified so far: FFEL-only borrower submitting the form Borrowers not providing employer identification number (EIN) Borrowers are not repaying under a qualifying repayment plan or are on a qualifying plan that will not lead to forgiveness. For example: Borrower is on the 10-year Standard, which qualifies, but will leave no remaining balance after 120 payments or Borrower is on Consolidation Standard, which does not qualify unless it has a repayment term of 10-years Borrowers work for a for-profit corporation Employers improperly certifying the type of organization 57

58. Loan Forgiveness – Direct Stafford Loan Service in Areas of National Need –For each school, academic or calendar year of full time employment in an area of national need that you complete on or after August 14, 2008 –Up to $2,000 of your outstanding loan balance will be forgiven –Maximum of $10,000 can be forgiven –Cannot receive forgiveness for more than 5 years of service This program is subject to federal funding and availability

59. Loan Repayment Programs Direct Stafford Loan These programs may help you repay your loan AmeriCorps service program –www.americorps.orgwww.americorps.org –800-942-2677 Service as an enlisted person in the National Guard or Reserve program –Contact your recruiter for more information

60. Use NSLDS National Student Loan Data System (NSLDS) Use NSLDS to monitor all of your federal student loan debt Use NSLDS to identify who is servicing your loan www.NSLDS.ed.gov 800-999-8219 You’ll need your federal student aid PIN to access. Any private or alternative loans you have borrowed will not be listed on NSLDS.

61. Use NSLDS Federal Direct Loan Servicers include –FedLoan Servicing (AES/PHEAA) –Great Lakes Educational Loan Services, Inc. –Nelnet –Sallie Mae –Additional not-for-profit loan servicers

62. Possible Tax Benefits You may be eligible to deduct up to $2500 of the student loan interest you paid Check with the IRS or your tax advisor Tax benefits can change on an annual basis Review IRS publication 970 “Tax Benefits for Education” More information available at www.irs.govwww.irs.gov

63. Delinquency and Default When you fail to make your payment on time, you are delinquent in meeting your obligation When you fail to make your payments for 270 days, you will be in default on your student loan There are serious consequences to defaulting on your student loan obligation

64. Consequences of Default Damaged credit rating Referral to a collection agency Collection costs are added to your debt Garnishment of your wages Federal or state tax refunds, Social Security benefits, etc. can be withheld Civil lawsuit filed against you (court costs and legal fees) Loss of deferment and forbearance entitlements Loss of repayment option flexibility Loss of eligibility for further financial aid Suspension of professional license

65. Resources Mappingyourfuture.org CFNC.org –CFNC resources are available to all students Ed.gov NSLDS.ed.gov

66. Studentloans.gov Complete Entrance and Exit counseling Sign Master Promissory Note Calculate payments in various payment plans Request income-driven repayment Consolidation Loan app Review your loan information by signing in