1. Loan Repayment Presentation Office of Student Financial Services August 2010

2. 2 Purpose and Objectives Start planning NOW – repayment is complicated! Become aware of the tools and resources available to you. Review all your options. Plan ahead! Take action, manage your future!

3. 3 Today’s Presentation Topics 1. Rights and Responsibilities 2. What Follows Graduation? 3. What’s the Best Repayment Strategy? 4. Stay Out of Trouble! 5. Key Resources and Contacts 6. Evaluation

4. 4 Rights and Responsibilities Master Promissory Note – 22 Topics –Loans Types –Loan Limits –Grace Periods –Interest Rates/Payments –Repayment Plans –Default –Deferments & Forbearance www.usafunds.org/forms/stafford_mpn.pdf

5. 5 Loan Types ─Subsidized –Unsubsidized –Consolidation –Institutional –Private Interest Capitalization Rights and Responsibilities

6. 6 What do You Owe? To Whom Do You Owe It? NSLDS www.nslds.ed.govwww.nslds.ed.gov USA Funds “Loan Review” –https://loanreview.usafunds.org/login.aspx?schoolId=00165701https://loanreview.usafunds.org/login.aspx?schoolId=00165701 Institutional Loans – Midwestern University –www.ecsi.netwww.ecsi.net Private Loans – Who is Your Lender?

7. 7 Rights and Responsibilities Who are the players? –Lenders –Guarantors –Servicers –Secondary Markets –US Department of Education (ED)

8. 8 What Follows Graduation? Grace Periods Deferments Forbearance Organize your records Start your planning – get in touch

9. 9 What Follows Graduation? LOAN TYPE GRACE PERIOD Stafford 6 months Perkins 9 months Grad PLUS 6 months Consolidation 0 months Private 6-9 months (varies by lender)

10. 10 What Follows Graduation? Six Major Types of Deferments –At least half-time enrollment as a student in a degree or certificate program at an eligible institution –Enrollment in an eligible graduate fellowship program –Enrollment in an approved rehabilitation training program

11. 11 What Follows Graduation? Six Major Types of Deferments –Seeking to find (and unable to find) full- time employment (up to three years) –Experiencing economic hardship (up to three years) –Serving on active duty in the military

12. 12 What Follows Graduation? Forbearance Use only if ineligible for deferment or have exhausted deferment time limitUse only if ineligible for deferment or have exhausted deferment time limit Temporary allowance of no payments or lower payments to avoid delinquency and defaultTemporary allowance of no payments or lower payments to avoid delinquency and default Interest accrues and capitalizes on all loan typesInterest accrues and capitalizes on all loan types Granted 12 months at a timeGranted 12 months at a time Delaying repayment adds to the overall cost!Delaying repayment adds to the overall cost!

13. 13 What Follows Graduation? Mandatory Forbearance Lenders are required to grant forbearance to certain borrowers whose monthly federal education loan payments equal 20% of their monthly incomewhose monthly federal education loan payments equal 20% of their monthly income who are participating in AmeriCorpswho are participating in AmeriCorps who are a part of a military mobilizationwho are a part of a military mobilization Contact your lender for more information on the mandatory forbearance benefit.

14. 14 What Follows Graduation? Discretionary Forbearance Borrower must be experiencing financial hardship Borrower must receive authorization from the lender or loan servicer

15. 15 What’s the Best Repayment Strategy? Actively research repayment options – you are in charge! Organize your records

16. 16 What’s the Best Repayment Strategy? For Federal Stafford and Grad PLUS Loans –Standard –Graduated –Extended –Income-Sensitive (FFEL) or Income-Contingent (DL) –Income-Based

17. 17 What’s the Best Repayment Strategy? For Private Loans –Repayment plans may vary by lender and loan program May be similar to plans available on federal loansMay be similar to plans available on federal loans –Variable rates may affect monthly payment amount –Consult your lender

18. 18 What’s the Best Repayment Strategy? 1. Standard Repayment Plan –Level monthly payments over 10 year period –Higher monthly payments –Up to 10 years to repay –Most commonly selected plan Advantage: Typically yields the lowest overall loan cost Considerations: Higher payment (compared to other plans); may be more difficult to manage if starting income is low

19. 19 What’s the Best Repayment Strategy? 2. Graduated Repayment Plan –Monthly payments adjusted at one or more pre-defined intervals –Payment must cover accruing interest –Number of intervals and frequency of adjustments can vary by lender –Up to 10 years to repay Advantage: Provides a low initial monthly payment and offers predicable payment increases; good for borrowers with increasing income potential Considerations: Lower up-front payments may cause somewhat higher interest costs

20. 20 What’s the Best Repayment Strategy? 3. Extended Repayment Plan –Available to FFELP borrowers who have accumulated more than $30,000 in Stafford Loans on or after October 7,1998 –Repayment term can be “extended” up to 25 years –Can be standard or graduated Advantage: Provides a lower monthly payment for the entire repayment term Considerations: Longer repayment term typically results in higher overall interest cost

21. 21 What’s the Best Repayment Strategy? 4A. Income Sensitive Repayment Plan (FFELP only) –Based on your total monthly gross income –Must cover at least monthly accruing interest –Up to 10 years to repay (may be extended to 15 years) 4B. Income Contingent Repayment Plan (Direct Loans only) –Based on family size, household AGI, and total loan amount –Balance forgiven after 25 years of payments Forgiven amount taxable under current lawForgiven amount taxable under current law Advantage: Provides a flexible monthly payment associated with income Considerations: Longer repayment term typically results in higher overall interest costs

22. 22 What’s the Best Repayment Strategy? 5. Income-Based Repayment Plan (IBR) You can use Income-Based Repayment (IBR) to repay Federal Stafford, Grad PLUS and Consolidation Loans if you have aYou can use Income-Based Repayment (IBR) to repay Federal Stafford, Grad PLUS and Consolidation Loans if you have a “partial financial hardship” (PFH) Amount due is lesser of:Amount due is lesser of: –Amount required using 10-year Standard Plan, OR –Amount required using IBR Monthly payment is based on:Monthly payment is based on: –Family AGI –Family size –HHS Poverty Guideline for state of residence

23. 23 What’s the Best Repayment Strategy? 5. Income-Based Repayment Plan (IBR) (Continued): Allows you to make a reduced payment not more than 15% of your income that exceeds 150% of poverty levelAllows you to make a reduced payment not more than 15% of your income that exceeds 150% of poverty level Monthly payment can be less than accrued interest (it allows for negative amortization)Monthly payment can be less than accrued interest (it allows for negative amortization) Unpaid interest that accrues on Subsidized Stafford debt will be subsidized for up to 3 years during IBRUnpaid interest that accrues on Subsidized Stafford debt will be subsidized for up to 3 years during IBR

24. 24 What’s the Best Repayment Strategy? 5.Income-Based Repayment Plan (IBR) (Continued): Any outstanding eligible FFEL or Direct loan balance (other than Parent PLUS) is forgiven after 25 yearsAny outstanding eligible FFEL or Direct loan balance (other than Parent PLUS) is forgiven after 25 years Any loan amount that is cancelled may be taxable in the calendar year in which it is cancelledAny loan amount that is cancelled may be taxable in the calendar year in which it is cancelled New IBR provisions proposed in the President’s FY2010-11 budgetNew IBR provisions proposed in the President’s FY2010-11 budget Website Information: http://www.ibrinfo.orgWebsite Information: http://www.ibrinfo.orghttp://www.ibrinfo.org : www.salliemae.com – Repaying Student Loans : www.salliemae.com – Repaying Student Loanswww.salliemae.com

25. 25 What’s the Best Repayment Strategy? Federal Loan Consolidation Options –Positives: Combine eligible loans into one new loan Extend repayment term Lower monthly payments –Negatives Longer repayment timeframe, more interest Potential loss of some benefits –For more information: www.loanconsolidation.ed.gov

26. 26 What’s the Best Repayment Strategy? Comparison of Repayment Plans Average Loan Indebtedness $100,000 Repayment Plans Interest Rate No. of Payments Initial Payment / Long-term Payment Total Repayment Amount Standard6.8%120$1,151$138,096 Graduated (2 year interest- only) 6.8%120$567/$1,353$143,530 Income Sensitive 6.8%120$1,600/$1,082$136,036 Income-Based - $40,000 in Year 1 with 3.5% increase in salary each year 6.8%300$87/$301$52,816 Extended6.8%300$694$208,222 Consolidation - Extended 6.875%300$699$209,648

27. 27 What’s the Best Repayment Strategy? Comparison of Repayment Plans Average Loan Indebtedness $150,000 Repayment Plans Interest Rate No. of Payments Initial Payment / Long-term Payment Total Repayment Amount Standard6.8%120$1,726$207,145 Graduated (2 year interest- only) 6.8%120 $850 / $2,030 $215,295 Income Sensitive 6.8%132 $850 / $1,726 $217,345 Income-Based - $42,000 in Year 1 with 3.5% increase in salary each year 6.8%300 $112 /$358 $64,501 Extended6.8%300$1,041$312,332 Consolidation - Extended 6.875%300$1,048$314,471

28. 28 What’s the Best Repayment Strategy? Comparison of Repayment Plans Average Loan Indebtedness $200,000 Repayment Plans Interest Rate No. of Payments Initial Payment / Long-term Payment Total Repayment Amount Standard6.8%120$2,302$276,193 Graduated (2 year interest- only) 6.8%120 $1,133 / $2,707 $287,060 Income Sensitive 6.8%132 $2,400 / $2,286 $275,741 Income-Based - $60,000 in Year 1 with 3.5% increase in salary each year 6.8%300 $337 /$872 $169,665 Extended6.8%300$1,388$416,443 Consolidation - Extended 6.875%300$1,398$419,295

29. 29 What’s the Best Repayment Strategy? Public Service Loan Forgiveness This is a new program for federal student loan borrowers who work in certain kinds of jobs: –Are employed by any nonprofit, tax-exempt 501 (c)(3) organization; –Are employed by the federal government, a state government (this includes the military and public schools and colleges); or –Serve in a full-time AmeriCorps or Peace Corps position.

30. 30 What’s the Best Repayment Strategy? Public Service Loan Forgiveness Federal loans must be consolidated into the Federal Direct Loan Program Debt remaining after 10 years of eligible employment and qualifying loan payments is forgiven Only payments made after October 1, 2007 count towards the 10 years (120 monthly payments, not necessarily consecutive)

31. 31 Stay Out of Trouble! Work with your lender or servicer Communicate – keep good records! –Who, what, when, where, how much? Don’t default – the consequences are severe!

32. 32 Stay Out of Trouble! Customer Service Contact Strategies Plan your call in advance, have notes as to the issues to be discussed Be businesslike and polite Check and confirm what has been agreed to Monitor your mail/email for follow up

33. 33 Stay Out of Trouble! Consequences of Default are Severe! Adverse credit reporting Loss of eligibility for flexible repayment options Professional licenses can be withdrawn or denied Income tax refunds withheld Interest continues to build up Legal action Debt collection including fees and fines

34. 34 Key Resources and Contacts Consider a financial advisor – what to look for: –A good listener – “good chemistry” –Willing to be interviewed for the job –Excellent references –Has appropriate professional certifications (CFP) –Fee based, not commission based Ask questions!

35. 35 Check out the NEW Alumni Website! Loan Types Loan Postponement Options Loan Repayment Information Glossary of Terms FAQ’s Forms to download On-line Resources Calculators NSLDS Contact Information www.midwestern.edu/x749.xml Key Resources and Contacts

36. 36 Key Resources and Contacts You are not alone in this! –Office of Student Financial Services 623.572.3321 azfinaid@midwestern.edu –MWU Institutional Loans 866.729.2698 www.midwestern.edu/programs_and_admission/financial_aid/ins titutional_loan_repayment.html –Alumni Website – financial aid information www.midwestern.edu/x749.xml

37. 37 Evaluation Student Financial Services Exit Survey http://mwunet.midwestern.edu/administrative /OIREA/Survey/fs/fsexit.htm “The more you do in your life today, the better it will be tomorrow!”