Sue O’Flaherty | Dec. 2014 U.S. Department of Education Student Loan Servicing Summit...
-
Upload
linette-taylor -
Category
Documents
-
view
216 -
download
0
Transcript of Sue O’Flaherty | Dec. 2014 U.S. Department of Education Student Loan Servicing Summit...
Sue O’Flaherty | Dec. 2014
U.S. Department of Education
Student Loan Servicing Summit
Income-Driven Repayment
IDR Topics
• Overview of IDR
• Application Processing
• Borrower Awareness
• Review of ‘Billy Borrower’
• Discussion
Repayment Plan Usage
• $133B of the $436B Direct Loan portfolio in repayment is in an IDR plan (30.4%).• As expected based on the relatively “better” benefits of the IBR and PAYE repayment plans, the increase in IDR
usage is driven by increased participation in the IBR and PAYE repayment plans.• IBR portfolio has increased from $51B (2013 Q3) to $101B (15 Sep 14).• PAYE portfolio has increased from $1.3B (2013 Q3) to $11.8B (15 Sep 14).• Level 10-year (standard) as a percentage of total DL portfolio has been trending downward.
3
Income-Driven Plans - Overview
• Three main plans• Income-Contingent Repayment Plan (ICR) – 1994
• Direct Loan Program only
• Income-Based Repayment Plan (IBR) – 2009• Available in both the Direct Loan and FFEL Program• New terms and conditions for “new borrowers” on/after July 1, 2014
• Pay As You Earn Plan (PAYE) – 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• Negotiated rulemaking in 2015
44
Loan Forgiveness
6
Qualifying repayment includes:• Repayment under an income-
driven plan• Repayment 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
Applying: Reasons & Plan Selection
7
Direct Loans FFEL Program Loans
IBR □ □
Pay As You Earn □ Not Available
ICR □ Not Available
Place me on plan with lowest
payment
□Only IBR will be considered for FFEL
Program Loans
Applying: Income Documentation
10
If borrower is married and files a joint tax return, also need ADOI of spouse.
*If borrower submits documentation by hard deadline, payment amount will not change if loan servicer cannot process it before anniversary date.
Annual Life Cycle
12
Billy Borrower
• Billy Borrower:• Is single with no dependents and lives in Georgia• Has an AGI of $35,000 that rises at 5% per year and • Has $50,000 in Direct Loan debt ($23,000 of which is subsidized),
all of which has a 4.66% interest rate• Billy is not a new borrower on/after July 1, 2014
• Note: The repayment estimator projects the poverty guidelines and the income percentage factors uses a fixed 3.3%. Beginning mid- December, it will use the Congressional Budget Office’s (CBO) estimates of future inflation. The comparisons on the next few slides uses the CBO estimates.
16
Billy - All IDR Plans
17
Year IBR ICR PAYE1 $219 $373 $1462 $237 $378 $1583 $256 $383 $1714 $275 $388 $1835 $296 $393 $1976 $317 $398 $2117 $339 $403 $2268 $363 $408 $2429 $388 $414 $259
10 $414 $419 $27611 $442 $425 $29512 $472 $431 $31413 $503 $437 $33514 $522 $443 $35715 $522 $449 $38016 $522 - $40417 $522 - $43018 - - $45719 - - $48620 - - $51621 - - -22 - - -23 - - -24 - - -25 - - -
Billy Borrower – Comparison
ICR IBR PAYE
Initial Payment $373 $219 $146
Final Payment $449 $522 $516
Time 14 yrs., 2 mos. 16 yrs., 7 mos. 20 years
Total Paid $69,004 $76,391 $72,529
Forgiveness $0 $0 $17,816
18
Standard Extended
Payment $522 $333
Time in Repayment 10 years 25 years
Total Paid $62,647 $99,743