1. Repayment Plans: Income Driven plans vs
Repayment Plans: Income Driven plans vs. Traditional Plans Widener University

2. Agenda Income-Driven Repayment Plans Overview Other Repayment Plans
Income-Based Repayment Plan (IBR)
Income-Contingent Repayment Plan (ICR)
Pay As You Earn Plan (PAYE)
Revised Pay As You Earn Plan (REPAYE)
Applying for an Income Driven Plan
Other Repayment Plans
Standard
Graduated
Extended (fixed or graduated)
Public Service Loan Forgiveness
Direct Loan Consolidation
Resources
NEW!

3. Who Should Consider Income-Driven Repayment Plans?
Borrowers with high student loan payments
relative to income, such as:
Teachers with heavy debt loads against low salaries
Individuals who are experiencing financial difficulties but who may not qualify for other options such as deferment or forbearance
Recent graduates managing typical federal student loan debt in low-wage jobs or unpaid internships
Individuals pursuing lower paid social-service careers
Law graduates earning low salaries as public defenders
Medical residents earning typical resident salaries
Discussion Question:
Why do you think more borrowers are not on an Income Driven Repayment Plan?

4. Borrower Considerations
Pros
Cons
More manageable, lower monthly payment
Repayment period could be more than 10 years
Avoidance of delinquency and default
More interest could be paid over time
Remaining principal and interest is forgiven after 20 or 25 years of payments
Required annual submission of information on income and family size to prove continued eligibility for reduced payments
Possibility of Public Service Loan Forgiveness (after 10 years of qualifying payments)
Chat:
Ask borrowers to list any other pros/cons

5. Income-Based Repayment (IBR)
Under IBR, borrowers pay the lesser of:
15% of discretionary income or what they would have paid under the 10-year Standard repayment plan (Not a new borrower on/after 7/1/2014)
Discretionary income for this plan is the difference between the borrower’s Adjusted Gross Income (AGI) and 150 percent of the poverty guideline amount for his/her state of residence and family size.
Loan forgiveness
If the borrower makes 25 years of qualifying payments and meets certain other requirements, any remaining balance will be cancelled (20 years for new borrowers only on/after 7/1/2014)

6. IBR Payment Amounts
The IBR Partial Financial Hardship (PFH) payment amount is determined by the AGI and family size
If the borrower is married and files a joint federal tax return, the AGI includes both spouse’s incomes together
If the spouse has eligible student loan debt, this debt may also be taken into consideration when determining whether the borrower has a PFH
Annual IBR repayment amount is 15% of the difference between the borrower’s AGI and 150% of the Department of Health and Human Services Poverty Guideline for their family size and state
The IBR payment amount will be adjusted yearly based on income and family size but will never be more than what would be required to be paid under a 10-year Standard Plan based on the balance of the eligible loans when the borrower began repayment under the IBR plan

7. IBR Payment Amounts EXAMPLE:
Borrower’s AGI is $50,000 and they reside in 1 of the 48 contiguous states and a family size of 1.
Poverty guideline for this example is
$11,770 x 150% = $17,655
Then we subtract $17,655 from $50,000 = $32,345 which is the discretionary income
$32,345 x 15% = $4,851.75
and divide that figure by 12 = $404.31
Poll Question:
Does interest cap if a borrower leaves IBR for another IDR such as ICR of PAYE?
YES NO

8. Leaving IBR
If borrowers leave IBR and have unpaid interest, it will capitalize to principal, increasing principle balance
The borrower is placed into the Standard Plan based on the term remaining for their loan type
For example, Stafford/PLUS Loans will have 10 years minus the time in repayment. Consolidation Loans may have years minus the time in repayment.
Borrowers may request a reduced payment forbearance if they cannot afford the payment amount on the standard repayment plan.
Borrowers who leave IBR can come back if they demonstrate "partial financial hardship".

9. Pay As You Earn (PAYE) Who qualifies: Eligible Loans:
“New” borrowers who have a PFH
Has no outstanding balance on a Direct or FFELP loan as of 10/1/2007, or has no outstanding balance on a Direct or FFELP loan when he or she obtains a new loan on/after 10/1/2007
AND
Receives a disbursement of a Direct Subsidized or Unsubsidized Stafford, or Grad PLUS loan on or after 10/1/2011; or receives a Direct Consolidation Loan based on an application received on/after 10/1/2011
Eligible Loans:
Direct Loans except:
Defaulted loans
Parent PLUS loans
Consolidation loans that repaid Parent PLUS loans

10. Pay As You Earn Under Pay As You Earn, borrowers pay the lesser of:
10% of discretionary income or what they would have paid under the 10- year Standard repayment plan.
Discretionary income for this plan is the difference between the borrower’s AGI and 150 percent of the poverty guideline amount for his/her state of residence and family size.
For Pay As You Earn, the remaining balance is forgiven after 20 years of qualifying repayment
Pay As You Earn - Capitalization
•No longer qualifies for payments based on income (no longer has a partial financial hardship) or
•Leaves Pay As You Earn entirely
•Interest capitalizes only until principal balance is 10% greater than original principal amount when borrower entered plan

11. Revised Pay As You Earn (REPAYE)
Who Qualifies:
Any borrower with eligible federal student loans may make payments under this plan.
Eligible Loans:
Direct Subsidized/Unsubsidized Loans
Direct PLUS Loans made to graduate or professional students
Direct Consolidation Loans that did not repay any PLUS loans made to parents
These loan types are eligible if consolidated into a Direct Consolidation Loan
Subsidized/Unsubsidized Federal Loans from the FFEL program
FFEL PLUS Loans made to graduate or professional students
FFEL Consolidation Loans that did not repay any PLUS Loans made to parents
Federal Perkins Loans

12. Revised Pay As You Earn Payment Amounts Repayment Period
Generally 10% of discretionary income
There is no cap on the payment amount (may be higher than the 10-year Standard Repayment amount)
Repayment Period
20 years if all loans you are repaying under the plan were for undergraduate study
25 years if any loans you are repaying under the plan were for graduate or professional study

13. Income-Contingent Repayment (ICR)
Does not require borrower to show PFH for eligibility
Each year the monthly payments are recalculated based on:
AGI (spouse’s income will only be included if they file federal taxes jointly or are repaying under joint ICR
The Family size
Total amount of the borrower’s Direct Loans
Lesser one of the following:
12-year standard repayment schedule multiplied by income percentage factor, or
20 percent of discretionary income
Loan balance is discharged after 25 years

14. Interest Subsidy Benefits
9/20/2018
Interest Subsidy Benefits
ICR
No subsidy
IBR
Sub. Loans only
Only during negative amortization
Only for first 3 years under plan
100% of negative amortization
PAYE
REPAYE
For sub. loans
For first 3 years under plan
After 3 years, 50% of negative amortization
For unsub. loans
No time limit
50% of negative amortization

15. Interest Capitalization
While payment is income-based, normal rules are suspended
While normal rules suspended, only trigger is conversion to standard plan amount
Interest capitalizes when leaving the plan
IBR
Normal rules apply (upon expiration of deferment/forbearance)
Interest accruing due to negative amortization is capitalized annually
Capitalization of negative amortization interest is limited to 10% of balance
ICR
Capitalization caused by conversion is limited to 10% of balance
PAYE
Normal rules apply (upon expiration of deferment or forbearance)
REPAYE

16. Income-Driven Repayment Example - Tyler
Tyler completed college with a total of $50,000 in Direct Loan debt ($23,000 of which is unsubsidized). The interest rate on all of his loans is 6%. He is single with no dependents and has an adjusted gross income (AGI) of $35,000that rises at 5% per year. He lives in the state of Missouri and also has graduate school debt.
Assumptions:
Tyler qualifies for repayment under the Standard Repayment Plan, the Income-Based Repayment (IBR) Plan, the Pay As You Earn (PAYE) Repayment Plan, the Revised Pay As You Earn (REPAYE) Repayment Plan and the Income-Contingent Repayment (ICR) Plan.
Repayment under all of the following plans would take place as each plan exists under regulations effective December 1, 2015.

17. Payment Amounts StudentAid.gov/Repayment-Estimator16

18. Income-Driven Repayment Application
Borrowers may apply for an IDR on studentloans.gov or complete a paper application.
Can be used by borrowers with Direct Loans or FFEL Loans
Uses IRS Data Retrieval Tool that is used on the FAFSA
Retrieves the most recent tax information from two most recently completed tax years
If a borrower selects a specific repayment plan that they are not eligible for, the borrower will be placed on the lowest monthly payment amount IDR plan for which they are eligible.

19. Application Process: Electronic or Paper
9/20/2018
Application Process: Electronic or Paper
Select reason for submitting form
Select plan, if submitting form to initially apply
Provide information about spouse, if applicable
Certify family size
Determine what kind of income documentation to submit
Submit documentation of AGI or ADOI
ADOI = “alternative documentation of income;” not AGI.

20. Application Process: Spouses
Almost all married borrowers provide spouse’s income documentation
Only used by servicer when relevant
Exception for those who are
Separated; or
Cannot access spouse’s income
Repayment Plan
Married borrower filing jointly
Married borrower filing separately
ICR
Use joint AGI
Use borrower’s AGI
IBR
PAYE
REPAYE
Combine AGI of borrower and borrower’s spouse
REPAYE—If a borrower is separated or unable to reasonably access spouse’s income information:
The borrower’s spouse is not counted in family size
If the spouse has eligible loans, the spouse’s loans are not considered in the monthly payment amount adjustment

21. Consequences of Failing to Recertify
IBR
Interest capitalization
Stay in plan
Payment no longer income-based; 10-year standard amount
ICR
PAYE
REPAYE
Kicked out of plan
Loan re-amortized over lesser of 10 years or time to forgiveness

22. Standard & Graduated Repayment Plans
Standard Repayment
Assigned to borrowers automatically unless otherwise specified
Fixed (equal) payment amount each month, although it could vary due to interest rate changes on a variable rate loan
Monthly payments will be at least $50
10-year repayment term (Standard Repayment for Direct Consolidation loans is 10 to 30 years based on balance)
Graduated Repayment
Payments start low and generally increase every two years
10-year repayment term (Direct Consol. Loans may have a term of 10 to 30 years based on balance)
Monthly payment is never less than the amount of interest that accrues each month
No single payment will be more than three times greater than any other payment
Standard Repayment
Under this schedule, borrowers have 10 years to repay the total amount of their loan.
Loan amount is split into 120 equal payments (or 12 payments per year for 10 years).
Graduated Repayment
Graduated repayment lets borrowers pay just the interest on your loan for up to 4 years.
Some servicers will increase payments after 2 years.
Payments then gradually increase so the loan is repaid in the same amount of time (10 years) as it would be under standard repayment.
Graduated repayment can increase the total amount of interest paid. This means the loan may cost more than if it was repaid under standard repayment.

23. Extended Repayment Plan
Will pay a fixed or graduated payment amount
Repayment term not to exceed 25 years
FFEL borrowers must have more than $30,000 in outstanding FFEL Program loans (for new borrowers as of 10/07/1998)
Direct borrower must have more than $30,000 in outstanding Direct Loans (for new borrowers as of 10/07/1998)
Extended Repayment Plan
If oldest loan was disbursed on or after October 7, 1998, borrowers may be eligible.
More than $30,000 in loans exclusively in the Direct Loan (DL) program or the Federal Family Education Loan Program (FFELP).
Example: If borrower has $15,000 in DL loans and $15,000 in FFELP loans, they cannot be added together to reach the $30,000 minimum.
Extended repayment stretches the repayment period from 10 years to as long as 25 years.
This lowers payments, but it increases the total interest paid over the life of the loan.
Examples from studentaid.ed.gov calculators

24. Exit Counseling Repayment Plan Selection
In January, the Department began sharing the borrower’s repayment plan preference from Exit Counseling on with the federal loan servicers and Federal Family Education Loan (FFEL) Program lenders, lender servicers, and guaranty agencies.
Repayment plan selection will be considered by the servicer, and – if possible, applied to the borrower’s account.

25. StudentLoans.gov Repayment Plan Comparison Calculator
The Repayment Estimator on StudentLoans.gov takes a student’s current loan balance and shows what her monthly and total payments would be using various repayment plans.
Borrowers can use the repayment estimator tool during Exit Counseling or the Financial Awareness Counseling Tool.
Poll Question #2
What repayment plan calculator do you currently recommend to your students?
O FinAid calculators
O Department of Education calculators
O Servicer website
O NSLDS exit counseling
O Other

26. Repayment Schedule Estimators
Check out the Repayment Estimators available at FedLoan Servicing and StudentLoans.gov

27. Public Service Loan Forgiveness (PSLF) 10 years
The borrower may qualify for loan forgiveness earlier than 25 years (20 years if under Pay As You Earn) if they work full-time for a qualifying public service organization and make on-time full monthly payments under the repayment plans listed below. Payments made under these plans will count toward the 120 monthly payments that are required to receive loan forgiveness through PSLF.
10-year Standard Repayment Plan
Income Based Repayment (IBR) Plan
Income-Contingent Repayment (ICR) Plan
Pay As You Earn Plan
Any other repayment plan if the monthly payment amount is paid is not less than what would have been paid under the 10-year Standard repayment plan
For more information on PSLF, please refer to the PSLF Fact Sheet and Q&As:

28. Direct Loan Consolidation
Direct Loan consolidation allows borrowers to combine one or more existing student loans into a single new loan. Consolidation may be the right option for your borrower if:
If student loan debt is significant.
If borrower has more than one type of student loan.
Has trouble making the minimum monthly payments on multiple loans.
Pros
Cons
Lower monthly payments
Longer repayment schedule
Fixed interest rate
More interest to pay
One bill, one payment
Loss of loan incentives

29. Servicing Resources Servicer
Contact Information for Borrowers
Contact Information for Schools
Phone
Website
FedLoan Servicing
MyFedLoan.org
MyFedLoan.org/schools
Great Lakes
MyGreatLakes.org
Nelnet
Nelnet.com
Navient
Navient.com
NSLDS
NSLDS.gov
nsldsfap.ed.gov/nslds_FAP/

30. Additional Resources
Income-Driven Repayment Plans: Frequently Asked Questions
Repayment Schedule Estimator
Repayment Options
Repayment Calculators
Federal Student Aid (FSA) Repayment Information
Department of Health and Human Services Poverty Guidelines
Repayment Plan Preference Info Shared w/ Loan Servicers

31. This slide should be displayed at the end of the Power Point presentation.