Post on 21-Jan-2016
“Financial Aid Evolution: Change
Agents”
OASFAA Fall Conference 2015
Student Loan Repayment, Forgiveness and Teacher’s
Loan Benefits
OASFAA Conference Sponsor – Fall 2015
Thank you to Great Lakes Educational Loan Services,
Inc. for their sponsorship of the OASFAA 2015 Fall Conference!
“Financial Aid Evolution: Change Agents” OASFAA Fall Conference 2015
Bureau of Health Workforce Loan Repayment Programs NURSE Corps Loan Repayment Program
NURSE Corps Loan Repayment Program participants receive 60 percent of their total outstanding qualifying educational loan balance incurred while pursuing an education in nursing in exchange for a 2-year service commitment. Qualifying participants may receive an additional 25 percent of their original loan balance for a third year of service.
The full loan repayment award is taxable, however, taxes are deducted from the award.
www.hrsa.gov/loanscholarships/repayment/nursing
National Health Service Care (NHSC) Loan Repayment Program
Offers two levels of funding , based upon the need of the community in which the qualified health care providers work, as defined by Health Professional Shortage Area (HPSA) score: Up to $50,000 for 2-year, full-time or $25,000 for 2-year, half-time service commitment. With continued service, nurse practitioners may be able to pay off all of their qualified student loans.
The Loan Repayment award is not taxable
www.NHSC.hrsa.gov/loanrepayment
Source: www.hrsa.gov
Forgiveness Programs for Teachers
There are two types of loan forgiveness programs for teachers: Teacher Loan Forgiveness and Teacher Cancellation*
Teacher loan forgiveness for Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans
The Teacher Loan Forgiveness Program is intended to encourage individuals to enter and continue in the teaching profession. Under this program, if you teach full-time for five complete and consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications, you may be eligible for forgiveness of up to a combined total of $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans. If you have PLUS loans only, you are not eligible for this type of forgiveness.
You apply for teacher loan forgiveness after you have completed the five-year teaching requirement.
https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher
*Some argue that technically it is 3 given the Teach Grant Program.
Forgiveness Programs for Teachers
Teacher Cancellation: If you have a loan from the Federal Perkins Loan Program you might be eligible for loan cancellation for full-time teaching at a low-income school, or for teaching in certain subject areas. You can also qualify for deferment for these qualifying teaching services. up to 100 percent of the loan may be canceled for teaching service, in the following increments:
15 percent canceled per year for the first and second years of service
20 percent canceled for the third and fourth years
30 percent canceled for the fifth year
To apply, you must request the appropriate forms from the office that administers the Federal Perkins Loan program at the school that holds your loan. You must also provide any documentation the school requests to show that you qualify for cancellation of your Perkins Loan. It is the school’s responsibility to determine whether you qualify, and the school’s decision cannot be appealed to the U.S. Department of Education.
https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher
Source: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher
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 or after FY 2012
Modeled on IBR, incorporating statutory IBR changes scheduled to take effect for new borrowers in 2014
Negotiated rulemaking in 2015
6Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
Coming in December, 2015: Revised Pay As You Earn (REPAYE) – 2015*
Direct Loan Program only
From the Department of Education press Release: Revised Pay As You Earn (REPAYE) Plan regulations responds to (the President’s 2014) directive by expanding repayment options to allow five million more Direct Loan borrowers to cap their monthly student loan payment amount at 10 percent of their annual income allocated per month, without regard to when the borrower first obtained their loans.
To learn more about Income-Driven Repayment Plans: www.StudentAid.gov/IDR
Income-Driven Plans – New for 2015
Source: U.S. Department of Education, Press Release, “…Final Regulations to Protect Students and Help Borrowers” October 27, 2015
Eligible Borrowers
8
Eligible DLICR
Debt-to-
income ratio*
Eligible DL/FF
ELIBR
Recent borrowe
rs
Debt-to-income ratio*
Eligible DL
PAYE
* = partial financial hardship
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
Eligible Loans
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Loan Type ICR IBR PAYE
Sub. Stafford X X X
Unsub. Stafford X X X
Grad PLUS X X X
Parent PLUS
Consolidation (did not repay Parent PLUS)
X X X
Consolidation (repaid Parent PLUS)
X
Loan Program ICR IBR PAYE
Direct Loans X X X
FFELP X
Perkins Loans
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
Payment Amounts
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Repayment Plan Payment based only on income
Payment based on loan debt
ICR 20% of discretionary income
12-year standard payment adjusted based on income
IBR 15% of discretionary income
10-year standard amount
PAYE / “new” IBR 10% of discretionary income
10-year standard amount
Each IDR plan has two formulas. Borrowers always pay the lesser of the two.
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
Interest Subsidy Benefit On subsidized loans, borrower receives subsidy for first 3 consecutive years on
IBR and Pay As You Earn during periods of negative amortization
Subsidy amount = difference between amount of interest that accrues on subsidized loans and payment amount toward subsidized loans
3-year clock doesn’t stop except for Economic Hardship Deferments11Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
Capitalization
12
ICR
Negative amortization
10% limit
Normal rules apply
IBR
Income-based Non-income
based payment
Leaving the plan
Normal rules suspended
PAYE
Income-based Non-income based payment
Leaving the plan
10% limit
Normal rules suspended
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
Month 0
Borrower applies: 2/14/201
4
Month 1
Borrower enters plan:
3/1/2014
Month 2
Borrower receives
educational notice
about plan:
3/2/2014
Month 9
Borrower receives request
to submit new
income document
ation: 11/26/201
4
Month 10Soft
deadline: 1/25/201
5
Month 11
Hard deadline*
: 2/4/2015
Month 12
Anniversary date:
3/1/2015
*If borrower submits documentation by hard deadline, payment amount will not change if loan servicer cannot process it before anniversary date.
Annual Life Cycle
13Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
Revised Pay As You Earn (REPAYE) is modeled on the existing Pay As You Earn repayment plan, and will be available to all Direct Loan student borrowers regardless of when the borrower took out the loans.
Will allow student borrowers cap their student loan payments at 10 percent of their monthly discretionary income.
Will forgive remaining debt after 20 years for those who only borrowed for undergraduate study and 25 years for those who borrowed for graduate study.
The REPAYE plan will also “provide a new interest subsidy benefit to prevent ballooning loan balances for those whose income-driven payments cannot keep up with accruing interest.”
Available to borrowers starting in December of this year.
REPAYE – What We Know
Source: HomeRoom (the official blog of the U.S. Department of Education), 10/27/15, and final unofficial rules 10/26/15.
Chart on Different IDR Plans
Source: IBRinfo, a service of the Project on Student Debt, http://www.ibrinfo.org/what.vp.html
a Borrowers may be able to consolidate their FFEL and Perkins loans into a Direct Consolidation Loan to repay them in REPAYE, PAYE, or ICR. Find out more about the pros and cons of consolidation athttp://StudentAid.gov/consolidation.
b Borrowers have a “partial financial hardship” (PFH) if their calculated payment based on income and family size is less than what they would pay under the fixed 10-year repayment plan.
c For all of these plans, monthly payments can be as low as $0. For REPAYE, 2014 IBR, PAYE, and Original IBR, discretionary income is defined as the amount of adjusted gross income (AGI) above 150% of the poverty level for the borrower’s household size. For ICR, discretionary income is defined as the amount of AGI above 100% of the poverty level for the borrower’s household size. d Parent PLUS loans can be repaid in ICR if consolidated into a Direct Consolidation Loan.
Public Service Loan Forgiveness
16Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
Public Service Loan Forgiveness
Borrower must also be employed by a qualifying organization at the time that the borrower applies for and receives PSLF
According to the IRS, the forgiven amount is not treated as taxable income
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120 qualifying payments
On Direct Loans
On qualifying repayment plans
While working at qualifying employer
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
PSLF – Qualifying Employment
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1 •Any government organization
2 •501(c)(3) not-for-profit organization
3 •Other not-for-profit organizations providing specific qualifying services
Doesn’t matter what you do, it matters where you work.
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
PSLF – Qualifying Payments
19
Qualifying payments
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
PSLF – Qualifying Repayment Plan
Income-driven plans are most likely to leave a remaining balance for forgiveness after 120 qualifying payments
20
10-Year Standard
IBR
ICR
Pay As You Earn
Others >= 10-Year Standard
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
PSLF – Eligible Loans
PSLF is only for Direct Loans, but all Direct Loans qualify.
21
Direct Consolidation
Loan
Parent PLUS Loans
FFELP Loans
Perkins Loans
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
PSLF – Full-Time Employment
• Must be a full-time employee or work multiple part-time jobs that equal full time
• For borrowers at a not-for-profit organization hours spent on religious instruction, worship services, or proselytizing cannot be factored into meeting the full-time employee requirement
22
Employer’s definition
30 hours/wee
k
Full-time is the greater of:
Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
PSLF – Employment CertificationBorrowers who want confirmation that employment and payments qualify should submit the Employment Certification Form to FedLoan Servicing.
23Source: 2014 FSA Conference, Session 28, Income Driver Repayment Plans and PSLF
PSLF FAQ’s
“Financial Aid Evolution: Change Agents” OASFAA Fall Conference 2015
The ED’s Questions & Answers document on PSLF was up to 20 pages as of November, 2014.
Best Practice: Suggestthat all students pursuingPSLF read this document.
Peace Corps and Americorps
Service in either of the Peace Corps or Americorps is considered “qualifying employment” for the Department of Education's Public Service Loan Forgiveness program (PSLF).
Volunteers are often trying to determine if an IDR/PSLF strategy is best, or if they should forbear during service.
Americorps Volunteers who have successfully completed a term of service in AmeriCorps or Silver Scholars are eligible to have the Trust pay as much as 100% of the interest that accrued on their qualified student loan during their service. The portion that the Trust will pay is determined by the type of service (full or part-time) and the length of your service period (www.nationalservice.gov)
https://studentaid.ed.gov/sa/sites/default/files/peace-corps-and-loan-repayment_1.pdf