EXIT LOAN COUNSELING
Things to Know Before you Go…..• Know your Loans • Repayment Options• Loan Consolidation• Deferment and Forbearance• Loan Forgiveness• Consequences of Default• Rights & Responsibilities• Tax Benefits
KNOW YOUR LOANS
Types of Loans
• Federal Direct Stafford Loan
• Federal Direct PLUS
Loan TermsStafford PLUS
Interest Rate 6.8%, Fixed 7.9%, Fixed
Interest Accrual while in School
Sub- NoUnsub - Yes Yes
Grace Period after Graduation 6 mo. 6 mo.
(available upon request)
Lender Private orUS Govt.
Private orUS Govt.
Where is my loan?
National Student Loan Data System
Who is my servicer?
What is my interest rate?
When will I need to start making payments?
How much do I owe?
www.NSLDS.ed.gov
www.NSLDS.ed.gov
Tracking Your Loans
REPAYMENT OPTIONS
Stafford and PLUS Repayment Plans• Standard
• Graduated
• Extended
• Income Based Repayment (IBR)
• Income Sensitive and Income Contingent
Standard
• Available for all Federal Loans• 10 year repayment schedule• Fixed payment amount
Advantage: Pay lowest amount of interest over the life of the loan.
Graduated• Available for all Direct, FFEL, and Federal Consolidation Loans
(w/out Parent PLUS)
• 10 year repayment
• Payment amount is lower in the earlier years of repayment and gradually increase over time.
• Payment amount is generally reset every two years.
• Minimum Payment = Interest.
Advantages: Loan payments increase as salary increases, and lower interest cost than Extended Repayment
Extended• Available for all Direct, FFELP, and Federal Consolidation Loans
(w/out parent PLUS)• Must have more than $30,000 in outstanding Direct or FFEL
Loans.• Up to 25 year repayment • Payments are fixed or graduated, and are not based on
income.• Minimum Payment = Interest
Advantage: Allows for a more gradual increase in loan payments than the Graduated Repayment Plan
Payment = $312
Interest = $48,000
Payment = $518
Interest = $17,000
Payment = $355 up to $767
Interest = $20,000
How my payment plan affects my payment and the interest I will pay….
Standard(10 Years)
Extended(25 Years)
Graduated(10 Years)
$45, 000 Loan @ 6.8% Interest
Income Contingent (ICR)
• Available for Direct loans only • 25 year repayment• Payment amounts are based on annual income, total
loan debt, and family size.• Monthly payment may be less than interest charged.
Advantage: Loan payments increase as salary increases, and allows for loan forgiveness after 25 years.
Income-Based Repayment (IBR)• Available for Direct Loans or Direct Consolidation Loans
(w/o PLUS)
• Loan payment limited to 15% of discretionary income
• After 25 years remaining balance is forgiven.
• Monthly payment maybe less than the interest charged.
• For subsidized Stafford loans, if your payment does not cover your monthly accrued interest, your interest will be subsidized for up to 3 years.
IBR Comparison
10 Yr. Standard Monthly Payment = $518
IBR Monthly Payment = $288
Borrower has loan debt of $45,0006.8% interest rate
Salary is $40,000/yrSingle with no dependents
Direct Loan Servicing
www.myedaccount.com
LOAN CONSOLIDATION
Federal Loan Consolidation
• Available for Stafford, Perkins and PLUS loans
• Pays off multiple loans with one new loan
• New loan carries new terms (interest rate is calculated using a weighted average)
• You may consolidate a defaulted loan
http://loanconsolidation.ed.gov
loanconsolidation.ed.gov
More on consolidation…
• May only consolidate once, allowed to add loans, but consolidation cannot be reversed
• Can be much more expensive due to longer repayment term
• ACS is the servicer for all Direct Consolidation loans
DEFERMENT AND FORBEARANCE
Deferment and Forbearance
What’s the same?Temporary suspension of regularly scheduled payment
What’s different?• Interest accrual • Forbearance is granted according to borrower’s
eligibility, and also at the lender’s discretion.• Deferment is granted according to borrower’s eligibility
as determined by federal regulation.
To Qualify….. Deferment
Military Service
In School (at least half-time)
Economic Hardship (3 yr. max)
Unemployment (3 yr. max)
Forbearance
Serving in AmeriCorps (receiving an education award)
During medical and dental internship or residency programs
Monthly student loan payments are 20 % or more than your total monthly gross income.
Discretionary
Unemployment Deferment
…be unemployed or working less than full-time
AND
Seeking, but unable to find, full-time employment in any field or at any salary or responsibility level, and registered with a public or
private employment agency (school placement offices and “temporary agencies do not qualify)
...be eligible for unemployment benefits
OR
To be eligible the borrower must…
Economic Hardship Deferment
To qualify, the borrower must meet one of the following criteria…
• Receiving an economic hardship deferment in the Federal Direct Loan or Federal Perkins Loan Program
• Receiving/received payments under a federal or state public assistance program
• Peace Corps volunteer• Working full-time and monthly income does not exceed
the larger of the federal minimum wage rate or 150% of the poverty guideline.
LOAN FORGIVENESS
Public Service Forgiveness - Direct Loans
• Available for Direct Loans only (Not FFELP)
• Work full time (at least 30 hours) for the government or a qualifying non-profit organization - 501(c) (3)
• Make 120 on time payments (does not need to be consecutive)
• Payments must be made under the IBR, ICR or 10 Yr. Standard repayment plans.
• Balance is forgiven
• Submit forms annually to the Department of Ed
Stafford & Plus - Additional Forgiveness
• Remaining balance after 25 years of qualifying payments.
• Taxable income to the borrower in the year the loan forgiveness occurs
Discharge• Total and Permanent Disability Discharge• Death
Student loans are usually not
dischargeable due to bankruptcy
CONSEQUENCES OF DEFAULT
The Perils of Default• 270 Days Past Due = Default
• You can’t walk away from making your payments.
• Consequences:• Wages and Federal and State tax refunds garnished• Additional costs to you (collection charges, late fees, etc.)• Professional licenses withheld• Loss of eligibility for future federal financial aid and loan
deferments• Full amount of loan comes due
Avoiding DefaultKeep good recordsOpen and Read your mail.Notify lenders/servicers of name/address
changesPrioritize your debts: pay off most expensive debt
firstTake advantage of deferment options if you qualify
YOUR RIGHTS & RESPONSIBILITIES
Your Rights A copy of your Promissory Note.
Repayment Disclosure Statement with detailed information about interest rates, fees, your balance, and repayment options.
Grace period and deferments (if you qualify)
Loan forgiveness under certain circumstances
Graduated or income-based repayment plan (if you qualify)
Prepayment without penalty
Notice if lender assigns or sells your loan
Questions answered
Your Responsibilities Repay your loan.
Make your payments on time even if you don’t receive a bill.
Notify your loan holder or servicer immediately of any change to your name, address, and other personal identification information.
Notify your lender if enrollment status changes.
Complete exit and entrance interviews.
Read and understand your loan documents.
Ask for help if you need it.
Resolving Disputes – Federal LoansFederal Student Aid Ombudsman’s Office
U.S. Department of EducationFSA Ombudsman
830 First Street, NE, Fourth FloorWashington, DC 20202-5144
[email protected]: 877-557-2575 (toll free)
What the Ombudsman Office can do:
Research your problem in an impartial and objective manner and will try to develop a fair solution
What the Ombudsman Office cannot do:
x Does not have the authority to impose a solution
TAX BENEFITS
Student Loans and Your Taxes
American Opportunity Credit
Lifetime Learning Credit
Student Loan Interest Deduction
Tuition & Fees Deduction
Questions
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