Repayment, IBR, And PSLF
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Transcript of Repayment, IBR, And PSLF
7/27/2019 Repayment, IBR, And PSLF
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Educational Debt Management
Repayment and ForgivenessOptions
B.J RevillDirector of Financial Aid
Univ. of RochesterSchool of Medicine and Dentistry
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Agenda
Repayment Options
In-Depth Look at Income Based
Repayment (IBR)
In-Depth Look at Public Service LoanForgiveness (PSLF)
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Repayment Options
Once you enter repayment (after graceperiod), you may make payments throughany of the following repayment plans:
Standard Repayment
Graduated Repayment
Extended Repayment
Income-Contingent Repayment
Income-Based Repayment
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Repayment Options cont.
Standard Repayment: A fixed payment that remains the same during the
repayment period of 10 years for Stafford loans.
Consolidated loans are typically longer. $50/month minimum payment.
NOTE: Standard Repayment is the schedule your loanservicer will select for you unless you specifically
request another option. It's also the option that willallow you to pay the least amount of total interest.
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Repayment Options cont.
Graduated Repayment: A repayment plan that allows for smaller payments early
on (usually when your income is lower), and higher
payments in later years (when your income is likely tobe greater).
Payments usually increase every 2 years
10-year repayment period.
Minimum payment will never be less than the amount of interest that accrues between your payments.
Maximum payment under this plan will not exceed threetimes that of the Standard Repayment plan.
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Repayment Options cont.
Extended Repayment Borrowers with an outstanding loan balance of more
than $30,000 may extend their repayment term up to
25 years.
Actual repayment period depends on total federaleducational debt.
Will result in higher total interest repaid vs. Standard
Repayment
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Repayment Options cont.
Income-Contingent Repayment Payments are adjusted annually, based on borrower's
household income, family size, and total loan debt.
Not available for Parent PLUS loan payments Maximum 25-year repayment period.
Lesser of:
The amount you would pay if you repaid your loan in
12 years multiplied by an income percentage factorthat changes with your annual income or
20 percent of your monthly discretionary income .
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Repayment Options cont.
Income Based Repayment The IBR program loan payments are 15% of your
income that exceeds 150% of the federal poverty
guideline for your family size. Capped at the 10-year standard repayment amount
Adjusted annually, based on changes to your annual AGI and family size
Payments are usually lower than they are under otherplans
A borrower can choose to participate in this paymentplan for up to 25 years.
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Repayment Options cont.
Questions on Repayment Plans?
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Income Based Repayment
& Public Service
Loan Forgiveness
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College Cost Reduction and Access Act (CCRAA)
Signed into law on Sept. 27, 2007
Included:
Income Based Repayment (effective July 1,2009)
Public Service Loan Forgiveness (effective
Oct. 1, 2007)
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Income-Based Repayment
Can be used to repay: Federal Stafford Loans (Subsidized or Unsub.)
Federal GradPLUS Loans
Federal Consolidation Loans
Borrower must have “Partial Financial Hardship” (PFH) to enter the IBR plan. PFH is based on:
Household Adjusted Gross Income (AGI)
Household size HHS Federal Poverty Guidelines (www.hhs.gov)
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Income-Based Repayment cont.
Partial Financial Hardship Loan payments will be limited to 15 % of a borrower's “disposable
income” or 15 % of the amount that a borrower's (and spouse's if applicable) Adjusted Gross Income exceeds 150 % of the povertyline, divided by 12
Your annual loan paymentusing the “Standard 10- Year Fixed repayment
Plan”
“Standard-Standard” Amount
15% of your household’s “Disposable” Adjusted
Gross Income (AGI)
“Partial FinancialHardship” (PFH) amount
>
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Income-Based Repayment cont.
Household Adjusted Gross Income (AGI) Includes:
AGI of borrower
AGI of borrower’s spouse (if married) only if filling a joint
return. (Does not include spouse’s AGI if couple files separate federal income tax returns.)
Household Size
Includes:
Borrower Spouse (if married)
Dependent children in household (including an unborn child)
Other dependents living in the household (must receive atleast 50% of their support from borrower)
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Income-Based Repayment cont.
HHS Federal Poverty Guidelines (www.hhs.gov)
Persons in Family Poverty Guideline 150% Poverty
1 $11,170 $16,755
2 $15,130 $22,695
3 $19,090 $28,635
4 $23,050 $34,575
5 $27,010 $40,515
6 $30,970 $46,455
7 $34,930 $52,395
8 $38,890 $58,335
2012 Poverty Guidelines for the 48 Contiguous States
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Income-Based Repayment cont. Estimated Monthly Payment Comparison:
AGI Standard MonthlyPayment
IBR MonthlyPayment (estimate)
$45,000 $1,841 $353
$50,000 $1,841 $415
$55,000 $1,841 $478
$60,000 $1,841 $540
$65,000 $1,841 $603 Assumptions: Household Size = 1 Uses 2012 Federal Poverty Guidelines
Resides in Lower 48 Loan Debt at repayment = $160,000
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Income-Based Repayment cont.
Once in the IBR Plan, monthly payment is lesser of: Standard 10-year amortized amount OR ,
“Partial Financial Hardship” amount
Outstanding loan balance is forgiven after 25 years of repayment
Any interest due and not paid by the borrower shall bepaid by the Secretary for up to three years (Subsidized Loans only)
waived interest is taxable IBR repayment period can extend beyond 10 years
Monthly payment can be less than accrued interest allows for negative amortization!
Additional Details:
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Beware of Negative Amortization
Federal Stafford Loan Debt $100,000 $150,000 $200,000
Estimated Monthly Payment
(Standard 10-year plan)
$1,151 $1,726 $2,302
Interest paid in 1st month $567 $850 $1,133
Principal paid in 1st month $584 $876 $1,168
Resulting principal balance $99,416 $149,124 $198,832
IBR payment in 1st month* $415 $415 $415
Unpaid interest after 1st month $152 $435 $718
Resulting Principal balance $100,152 $150,435 $200,718
* Assumes a $50,000 AGI
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Income-Based Repayment cont.
Pros and Cons:Potential Pros
Lowest initial monthly
paymentPossible to exclude spouse’sincome
Dept. of Ed. will waive anyunpaid interest on subsidized
loans for up to 3 years
Loan cancellation after 25years of eligible payments
Potential Cons
Increased interest payments
(vs. standard 10-year plan)Negative amortization possible
May need to file separate taxreturns (if married)
Income and family size needto be verified annually
Monthly payments couldchange each year
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Public ServiceLoan Forgiveness Program
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Public Service Loan Forgiveness
Borrowers will qualify for loan forgiveness if: Have outstanding debt through the Direct Loan
Program, and
Worked full-time for a total of 120 months in aqualifying “public service” position (on or afterOct. 1st, 2007), and
Made 120 qualifying loan payments on FederalDirect Loans during periods of qualifying publicservice employment
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Public Service Loan Forgiveness cont.
Effective for qualifying loan payments made onor after Oct. 1, 2007.
Loans Eligible for forgiveness are: Federal Direct Stafford Loans
Federal Direct GradPLUS Loans
Federal Direct Consolidation Loans Any amounts cancelled in the program are not
taxable!
General Provisions:
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Public Service Loan Forgiveness cont.
Reconsolidation into Direct Loans
Borrowers wishing to take advantage of the
Public Service Loan Forgiveness Program willbe able to reconsolidate their existing FFELP(Federal student loans made through private lending agencies) Loans into the Federal
Direct Loan Program. Direct Loan Consolidation at:
www.loanconsolidation.ed.gov
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Public Service Loan Forgiveness cont.
Borrower must be working full-time in an
eligible public service position, AND Make qualifying payments using:
Income Contingent Repayment (ICR), or
Income Based Repayment (IBR), or Standard (10-year) Repayment plan
Qualifying Payment Requirements:
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Public Service Loan Forgiveness cont.
120 months do NOT have to be consecutive
Borrower must be working “full-time” in qualifying
public service position at time of forgiveness (Fulltime defined as an average of 30 hours/week).
Loan payments made on any loan prior to October1, 2007 do NOT count toward the 120-monthrequirement
Loan payments on non-eligible loans (e.g., FFELPloans, Federal Perkins Loans) do NOT count toward120-month requirement
Additional Eligibility Provisions:
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Public Service Loan Forgiveness cont.
In general, it’s full -time employment in:
A 501(c)(3) organization that is exempt fromtaxation under section 501(a) of the InternalRevenue Code of 1986, or
Government (federal, state, county, local, tribal,etc…) agency
Definition of “Public Service”
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Public Service Loan Forgiveness cont.
Federal student loan debt (at repayment) $227,439Estimated monthly payment - Standard Plan $2,617
Total interest paid (includes accrued interest prior to repayment) $154,085
Total amount repaid after 10 years $314,085
Example 1: ENTER REPAYMENT AFTER RESIDENCY• Loan Debt Borrowed = $160,000 • Opts for forbearance during residency (4 years)• Total at Repayment (including accrued interest) = $227,439
Standard Repayment Plan (10 years)
Extended Repayment Plan (25 years)Federal student loan debt (at repayment) $227,439
Estimated monthly payment - Extended Plan $1,579
Total Interest paid (includes accrued interest prior to repayment) $313,577
Total amount repaid after 25 years $473,577
bl
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Public Service Loan Forgiveness cont.
Example 2: IBR & PUBLIC SERVICE LOAN FORGIVENESS• Loan Debt Borrowed = $160,000• Loan Debt at Repayment = $182,850• Enters Income Based Repayment during Residency• Starting Salary = $50,000 (Residency)• Starting Salary = $200,000 (Post-Residency)
Estimated monthly payment: Year 1 $415
Estimated monthly payment: Year 2 $434
Estimated monthly payment: Year 3 $454
Estimated monthly payment: Year 4 $474
Estimated monthly payment: Year 5 - 10 $2,104
Total interest paid in IBR over 10 years $90,236
Total principal paid in IBR over 10 years $82,604
Total amount repaid over 10 years $172,840Total subsidized interest paid by Dept. of Ed. $4,027
Public Service Loan Forgiveness $124,621
Total amount forgiven after 10 years $128,648
Assumes a family size of 1 for entire time in repayment.
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Public Service Loan Forgiveness cont.
A few Points to Ponder:
Borrower is required to work full-time in a
qualified public service position for a minimumof 120 months.
Borrower must make qualifying monthly loanpayments during the entire 120 month periodof public service employment.
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Public Service Loan Forgiveness cont.
Pros and Cons
Potential Pros•May make it financiallypossible to pursue a public
service career
• A portion of loan debt may beforgiven
•Entitlement (not subject toappropriations)
Potential Cons •It is an “All or Nothing” benefit.Borrower must put in the full 10
years (120 months).
•Only Direct Loans can be forgiven
•Will there be any debt left after10 years of repayment to forgive?
•Will the program exist after 10years?
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Public Service Loan Forgiveness cont.
Consolidate any privately held federal loans youmay have into the Direct Loan Program. Can bedone at www.loanconsolidation.ed.gov
Select either the IBR or Income ContingentRepayment (ICR) plans
Start making payments Complete PSLF Employment Cert. form annually
Keep good records!
Steps to Participate:
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Public Service Loan Forgiveness cont.
Suggested that borrowers keep the following: Evidence they worked full-time in every month they
made a qualifying loan payment
Documentation that their position meets the “full-time” employment standard
Documentation that their employer is an eligibleemployer
Complete the PSLF Employment Cert. Form PSLF Employment Certification Form allows for
confirmation of employment eligibility by Dept. of Ed.
Record Keeping
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Questions?