Entrance & Exit Loan Counseling Agenda • Stafford Loans • Loan Sales • Graduate PLUS Loans • Keep in Contact with your Lender • Master Promissory Note • Obligation to Repay • Deferments & Forbearances • NSLDS Access • Delinquency & Default • Sample Repayment Amounts • Discharge & Forgiveness • Repayment Plans • Federal Consolidation Loans • Debt Management • Tax Benefits • Student Loan Ombudsman Stafford Loan Types Two Stafford loan types: • Subsidized – Accruing interest is paid by the federal government during in-school, grace, and deferment periods – You are responsible for paying accruing interest during repayment and forbearance • Unsubsidized – You are responsible for paying all accruing interest – You can choose to make interest payments or have the interest capitalized (added to the loan principal) upon entering repayment Maximum Stafford Annual Loan Amounts Grade Level Base Amount Additional Unsubsidized Amount 1st year undergraduate $3,500 $6,000 2nd year undergraduate $4,500 $6,000 3rd year & beyond undergraduate $5,500 $7,000 Graduate & Professional $8,500 $12,000 Stafford Loan Interest Rates • For Stafford loans first disbursed on or after July 1, 2006, the interest rate is a fixed 6.8% – Exception: Interest rate on subsidized Stafford loans for undergraduate students drops each year through 2011-2012 Loans First disbursed between Interest Rate July 1, 2006 and June 30, 2008 6.8% July 1, 2008 and June 30, 2009 6.0% July 1, 2009 and June 30, 2010 5.6% July 1, 2010 and June 30, 2011 4.5% July 1, 2011 and June 30, 2012 3.4% Stafford Loan Grace Period & Repayment • Upon graduation or otherwise dropping below a half-time enrollment status: – Loans will enter a 6-month grace period – First payment will be due within 60 days after the grace period ends – You will receive information from your lender(s) on repayment plan options, payment due dates, and payment amounts – Contact your lender(s) if you have questions about repayment Graduate PLUS Annual Loan Amount • The maximum Graduate PLUS amount you may borrow each year is the cost of education less other financial aid received • You cannot have adverse credit • Students are strongly encouraged to borrow the maximum available amount of Stafford loans before borrowing Graduate PLUS loans – Better interest rates Graduate PLUS Interest Rate • Graduate PLUS loan interest rate is fixed at 8.50% Graduate PLUS Repayment • Loan enters repayment when fully disbursed • First payment is due within 60 days after full disbursement • Repayment may be deferred while you are enrolled at least half-time • For loans first disbursed on or after July 1, 2008, your repayment will be deferred for 6 months after you are no longer enrolled at least half-time – Aligns Stafford and PLUS Loan repayment – Contact the lender or servicer to confirm that the deferment has been granted or to waive the deferment Master Promissory Note (MPN) • The MPN is a binding legal document – Your signature indicates your commitment to repay • Single-year MPN versus multiple-year MPN • Right to reduce the loan amount • Right to cancel a loan • Right to revoke an MPN • Read and retain all of the materials provided in the MPN package, including the Borrower’s Rights & Responsibilities Statement Obligation to Repay • You are obligated to repay the full amount of the loan plus interest and fees even if you: – Do not complete the program of study – Do not complete the program of study within the regular time for completion – Are unable to obtain employment – Are otherwise dissatisfied with or do not receive the education or other services you expected to receive from the school How Much Do I Owe? • If you are unable to answer this question, go to the National Student Loan Data System (NSLDS) – www.nslds.ed.gov/nslds_SA • NSLDS includes federal student loan records – Loan type & status – Outstanding balance & interest rate – Lender/servicer and guarantor information • Request a Personal Identification Number (PIN) – www.pin.ed.gov Sample Payment Amounts - Standard Stafford Loan Amount Estimated Payment Amount $3,500 $50.00 $5,000 $58.00 $7,500 $83.00 $10,500 $121.00 $15,000 $173.00 $40,000 $460.00 • These are examples only; contact your lender for payment amounts specific to your loans • Examples assume a fixed interest rate of 6.8% & a repayment term of 10 years • Examples do not include capitalized interest Sample Payment Amounts - Standard Stafford Loan Amount Estimated Payment Amount $60,000 $690.48 $70,000 $805.56 $80,000 $920.64 $90,000 $1,035.72 $100,000 $1,150.80 $110,000 $1,265.88 $120,000 $1,380.96 $130,000 $1,496.04 $140,000 $1,611.12 • These are examples only; contact your lender for payment amounts specific to your loans • Examples assume a fixed interest rate of 6.8% & a repayment term of 10 years • Examples do not include capitalized interest Sample Payment Amounts - Standard PLUS Loan Amount Estimated Payment Amount $5,000 $61.99 $10,000 $123.99 $20,000 $247.97 $30,000 $371.96 $40,000 $495.94 $50,000 $619.93 $60,000 $743.91 $70,000 $867.90 $80,000 $991.89 $90,000 $1,115.87 $100,000 $1,239.86 • These are examples only; contact your lender for payment amounts specific to your loans • Examples assume a fixed interest rate of 8.5% & a repayment term of 10 years • Examples do not include capitalized interest Repayment Plans • Repayment Plan Options: – Standard • Level monthly payments over a 10-year term – Graduated • Increasing monthly payments over a 10-year term – Extended • Payments made over a 25-year term on a standard or graduated schedule when FFELP debt is more than $30,000 Repayment Plans • Repayment Plan Options: – Income-sensitive • Payments based on your monthly gross income & adjusted annually – Income-based • Plan available to borrowers with a partial financial hardship Repayment Plans • Carefully consider which repayment plan you choose – Consider the monthly payments, the interest you will pay, and the total amount you will pay under the different plans • You have the option to: – Prepay your loan – Pay the loan off early – Change the repayment plan to another plan for which your are eligible Federal Consolidation Loan What happens & why consolidate? • Existing federal student loans are paid off to form a new single loan • Multiple payments made to multiple lenders become a single payment made to one lender • New terms & conditions • Fixed interest rate • Maximum repayment period may be extended up to 30 years based on total federal and private loan balance • Lower monthly payments but increased interest cost Federal Consolidation Loan • Why not consolidate? – You may lose benefits on the loans being consolidated • Example: cancellation benefits & interest subsidies – By extending the years of repayment, you may be increasing the total amount you have to pay in interest Eligible Loans • FFELP Subsidized Stafford, Unsubsidized Stafford, SLS & PLUS Loans • Direct Subsidized Stafford, Unsubsidized Stafford & PLUS Loans • Perkins Loans • HEAL • HPSL, including LDS Loans • NSL Loans • FISL Loans Consolidation Interest Rate • Lock in a fixed interest rate for life of the loan • Weighted average of the interest rates on the loans being consolidated rounded up to the nearest 1/8% • Maximum rate of 8.25% • If HEAL loans are included, the interest rate on the HEAL portion is different: – Variable rate based on the average 91-day Treasury bill plus 3% – Adjusted each year on July 1st – No maximum rate Consolidation Repayment Period Total Education Loan Balance Maximum Term Length Less than $7,500 10 years $7,500-$9,999 12 years $10,000-$19,999 15 years $20,000-$39,999 20 years $40,000-$59,999 25 years $60,000 & higher 30 years How Do I Consolidate? • Loans must be in a grace, repayment, deferment, or forbearance status to consolidate • Complete the Federal Consolidation Loan Application and Promissory Note • For more information go to www.loanconsolidation.ed.gov Choosing a Consolidation Lender • You may consolidate with any eligible lender • Know who you are working with…choose a reputable lender • Research the lender’s experience & commitment to a longterm customer relationship • Find out what organization will be servicing your loan • Find out if the lender will sell the loan soon after it is made • Compare incentives…which lender offers the best benefits? Loan Sales • Your loan may be sold to another lender • Your rights & responsibilities do not change Keep in Contact With Your Lender • You must notify your lender of changes to your: – Name or Social Security number – Address and/or telephone number • In addition, you must let your lender know if you: – Withdraw from school or drop below half-time – Transfer to a new school – Graduate – Change your employer or your employer’s address changes – Have any other change in status that affects your loan Deferment • If you are a “new” borrower on or after 7/1/93, you are entitled to defer repayment of your loan if you are: – Attending school at least half-time (no limit) – Engaged full-time in a graduate fellowship program (no limit) – Attending a rehabilitation training program (no limit) – Unemployed (3-year limit) – Experiencing an economic hardship (3-year limit) • Note: If you have loans made before 7/1/93, additional deferment options are available to you Deferment • You may defer repayment if you are: – Serving on active military or National Guard duty during a war, military operation, or national emergency • Interest that accrues during a deferment period on a subsidized loan is paid by the federal government • You must request and provide supporting documentation to qualify for deferment Forbearance • Your lender must forbear payments if you are: – Serving in a medical or dental internship or residency – Performing AmeriCorps service – Performing service that qualifies you for loan repayment by the Department of Defense – Performing qualifying teacher or child care loan forgiveness service – Having a monthly student loan debt burden equal to or exceeding 20% of your total monthly gross income Forbearance • Your lender may, but is not required to, forbear payments if you are – Experiencing a financial hardship – In poor health • You must request and provide supporting documentation to receive a forbearance • You are responsible for paying all interest that accrues during a forbearance period • Unpaid interest will be capitalized (added to the principal balance) Delinquency • Loan is delinquent if you fail to make a full payment by the due date • Lender may assess a late fee if payment not made within 15 days of the due date • You will receive telephone calls and letters from the lender advising of the past due amount • Delinquency will be reported to at least one national consumer reporting agency • Derogatory information on your credit report negatively impacts your ability for future borrowing Lender Incentives • Many lenders offer incentives for making timely payments – Example: Interest rate discounts • Missing a payment can result in the loss of an incentive • Consider making payments via auto-debit from your checking or savings account to ensure timely payments • Know your incentive! – How do you earn it? – How can you lose it? Default • If your loan becomes 270 days past due, you are in default! • The lender will demand the full loan amount be paid immediately • If you fail to pay the full loan amount – The guarantor will purchase the loan from the lender – Your credit report will be adversely affected – Legal action may be taken against you – Your wages may be garnished – Your federal or state tax refunds may be seized – Other federal or state payments may be lost Default – Your professional license may be lost – You will no longer be eligible for the federal student assistance programs – The default will be reported to all national consumer reporting agencies – Legal fees & collection charges may be assessed – You will no longer be eligible for deferments or forbearance Loan Discharge Your loan may be eligible for discharge if: • You become totally & permanently disabled • You die • Your school closes while you are still in attendance • Your school falsely certifies your eligibility • Your school fails to make a refund of a portion of the loan amount • You are a victim of identity theft Important note: Federal student loans are typically not dischargeable if you file bankruptcy. Loan Forgiveness Programs • You may qualify for loan forgiveness if you teach at a lowincome elementary or high school for at least 5 consecutive years • Other forgiveness options exist in the law but are currently not funded – Refer to the U.S. Department of Education publication titled, “Your Federal Student Loans: Learn the Basics and Manage Your Debt” for a complete list of discharge and forgiveness provisions for Perkins, Stafford, and PLUS loans Debt-Management Strategies • Keep track of how much you are borrowing • Make a budget and spend less while in school • Budgeting – You may be looking forward to buying a new car or a new house • Before making these purchases, you need to make a budget – Remember to include your student loan payment as a fixed monthly expense, just like your electric bill, rent, car payment, etc. Tax Benefits • Internal Revenue Service (IRS) tax credits – Hope Tax Credit • worth up to $1,650 per student • available for first- and second-year students enrolled at least half-time – Lifetime Learning Tax Credit • tax benefit equal to 20% of a family’s tuition expenses, up to $10,000 • Applies to undergraduate, graduate, and professional degree students and even for less than half-time study Satisfactory Academic Progress • School’s Policy – GPA requirements – Progression/completion rate – Appeals process Withdrawal Policies • School’s withdrawal policy • Return of Title IV • School’s tuition refund policy Student Loan Ombudsman If you have any concerns or disputes related to your student loan, it is very important that you immediately contact the servicer of your loan. If after working with your servicer, lender, and guaranty agency, you are still unable to resolve the dispute, you may contact the U.S. Department of Education's Office of the Ombudsman at: E-mail: [email protected] Online assistance: http://www.ombudsman.ed.gov Telephone: 1.877.557.2575 (toll-free) or 202.377.3800 Fax: 202.275.0549 Mail: U.S. Department of Education FSA Ombudsman 830 First Street, N.E. Washington, D.C. 20202-5144 Questions?