Student Loan BakeryFinancial Aid PLP

Financial Aid Office

KNOW YOUR LOANS• My Financial Aid Portal Access• Federal Loans v. Private Loans• Federal Loan Servicers• Federal Loan Terms and Conditions• Repayment Options

– Standard, Graduated, Extended, ICR, IBR

• Public Service Loan Forgiveness• Loan Consolidation• Payments

Student Financial Aid PortalAccess through “Student Records Login”

Or https://finaid.wmitchell.edu/NetPartnerStudent/Logon.aspx

Value: Real-time information on budgets, current aid awards, online acceptance of financial aid awards, date of aid disbursements

Federal v. Private Loans

v.• Federal Loans

–Originated and Serviced by Federal Government• Loans before 2010 may be serviced under FFEL Program and

not the Direct Loan Program

***important for repayment and consolidation***–Fixed Interest Rates, for loans after 2006

• Private Loans–Guaranteed by Private Banks or Credit Unions–Loan Terms and Conditions: Determined by Lender, all different!–Cannot be included in loan forgiveness, special repayment programs, or discharged after death or permanent disability

Loan Servicers: Federal Loans– Direct Loans William D. Ford Direct Loan Program (ACS)

• Phone number: 1-800-848-0979• Website: www.myedaccount.com

– Fed Loan Servicing (PHEA)• Phone number: 1-188-699-2908• Website: www.myfedloan.org

– Great Lakes• Phone number: 1-800-236-4300• Website: www.mygreatlakes.org

– NelNet Education Planning and Financing• 1-888-486-4722• Website: www.nelnet.com

– SallieMae Department of Education Loan Services• Phone number: 1-800-722-1300• Website: www.salliemae.com

*** To Retrieve Information on Your Loan Servicer: www.nslds.ed.gov ***

Federal Direct Loan Terms and Conditions

• Annual Maximum: $20,500• Lifetime Maximum: $138,500

– Includes Undergraduate Studies– Effective July 2, 2012: Graduate students are not eligible for

new subsidized loans• Subsidized Loans: Interest paid by Federal Govt. while student is

enrolled at least half-time• Unsubsidized Loans: Interest accrues on loan while student is

enrolled at least half-time• Interest Rate: Fixed 6.8%• Loan Origination Fee: 1%

– Loan Request: $1000, Funds Received for $990• Grace Period: 6 months

– begins once the student graduates, withdraws, or drops below half-time enrollment

Direct Grad PLUS Loans Terms and Conditions

• Annual Maximum: Cost of Attendance minus all other aid • Other Aid: Scholarships, Perkins loans, Federal Direct Loans, and Work-

Study• Lifetime Maximum: None- subject to credit approval

• If denied: request credit report from www.annualcreditreport.com• Required: to fix credit problem and appeal credit decision or co-signer

• Interest Rate: Fixed 7.9%• Loan Origination Fees: 4%

• Loan Request : $1000, Funds Received by Student: $960• No interest subsidy, interest accrues immediately• Grace Period: None, but student requests a loan deferment

• Loan deferment: ends after student graduates, withdraws, or drops below half-time enrollment

• Student may request an additional 6 month deferment if disbursed on or after July 1st, 2008

Repayment Plan Options

• Standard Repayment (sliced bread)

• Graduated Repayment: (sloped sliced bread)

• Extended Repayment: (baguette)

– Fixed or Graduated• Income Contingent Repayment (ICR)

(unsliced artisan bread)

• Income-Based Repayment (IBR) (unsliced bread)

Standard Repayment Plan

• Payment Amount: fixed, set by loan balance• Minimum Payment: $50• Repayment Term: 10 years (plus deferments and forbearances)

• The good: • 10 years of loan payments• Least amount in interest paid • Ideal: high income v. loan balance

• The bad:• Highest payment amount

Graduated Repayment Plan• Payment Amount: set by loan balance, increases with time• Minimum Payment: Interest accrued between payments• Maximum Payment: >3x the minimum payment• Repayment Term: 10 years (plus deferments and forbearances)• The good:

• 10 years of loan payments

• Less interest than other alternative

repayment options

• Ideal: • high income v. loan balance• income increases with time

• The bad:• Higher interest costs than standard

Extended Repayment Plan• Required: >$30,000 in Direct Loan debt• Repayment Term: up to 25 years (plus deferments and forbearances)

• Two payment options:1. Fixed

• Similar to standard payment• Pay same amount each month

2. Graduated• Similar to graduated repayment plan• Payments start lower and increase every 2 years

• The good: • More affordable payments with longer term• Ideal:

• medium income v. loan balance• income increases with time

• The bad:• Higher interest costs (longer the term, the more interest)

Income Contingent Repayment Plan (ICR)

• Not available for: – Parent Plus loans– Consolidation loans used to repay Parent Plus loans– Why to bring up: if you take loans out for your children

• Minimum Payment: calculated annually, based on AGI, family size, and loan balance– Lesser of:

• 20% of monthly discretionary income (based on AGI, family size, state’s income poverty level) OR

• Value of: payments based on a 12 year repayment term multiplied by income percentage factor determined by annual income

– If payments < accrued interest each month, the unpaid interest is capitalized once a year

• Capitalization will not exceed 10% of original loan amount• Interest will continue to accrue, limit on compounding

• Repayment Term: up to 25 years (plus deferments and forbearances)• Discharge: any unpaid balance after 25 years

Income-Contingent Repayment Plan (ICR)• The good:

• Limits loan payments to manageable payment amounts• Discharge: 25 years of payments OR 10 years for Public Service• Interest capitalization cap

• Increases flexibility to move to different repayment program• Ideal:

• low income v. loan balance• The bad:

• Higher costs if no discharge• Discharged loan balance may be taxable• Spousal income is included in calculations

***You will need to consolidate loans to DL if you have FFEL loans***

Income-Based Repayment Plan (IBR)• Available for: all Stafford, Graduate PLUS, Consolidation loans (DL or FFEL)

– Not available for: defaulted loans, Parent Plus loans, or consolidated Parent Plus loans

• Minimum Payment: – calculated annually, documentation submitted annually– Set at 15% of discretionary income (AGI & family size)– Requires “partial financial hardship”

• IBR payment > standard repayment – While payments are capped at the 10-year standard repayment, payments are

made for 25 years – If payments do not cover accrued interest, the federal government will pay interest

on subsidized loans up to 3 years– Borrower is responsible for ALL accrued interest on unsubsidized loans– ALL interest will be capitalized if IBR is left or there is no partial financial hardship

• Repayment Term: up to 25 years (plus deferments and forbearances)

• Discharge: any unpaid balance after 25 years or 10 years for public service

Income-Based Repayment Plan (IBR)• The good:

– Likely to be lowest payment– Ability to discharge loans after 25 years of payments– 10-year public service loan forgiveness program– Ideal:

• low income v. loan balance and public service work

– Spouse student loans can be included in calculation• The bad:

• Possibility of increased interest payments• No capitalization cap on interest• Documentation is submitted annually to servicer• Discharged value may be taxable• Spousal income is used in calculation

Public Service Loan Forgiveness Program

• What: Discharge of Direct Loans– DL Loans including Grad Plus loans– Perkins loans, must be consolidated with DL– Rehabilitated defaulted loans – No FFEL loans: consolidate FFEL loans with DL

• When: After 120 qualifying monthly payments– Qualifying payments need not be consecutive

• Qualifying payments: made while employed FT by a public service organization– Qualifying employment need not be consecutive– Excluded: time spent in deferment or forbearance– Included: when calculated payment is zero

• Pair with: IBR; ICR; Standard Repayment Plan; any other Direct Loan repayment plan

• Waived balance is not currently taxable

Public Service Loan Forgiveness Program

• Required: FT public service job with PSLF eligible employer• PSLF eligible employers:

• Public sector employers• Federal, state, local, or tribal agency or entity

• Private non-profit employers that is 501(c)(3)• Except: partisan political organizations, labor unions, • Except: organizations engaged in religious activities

• If your job duties are related to religious instruction, worship services, or any form of proselytizing

• So: individuals working at religiously-affiliated non-profit organizations who perform at least 30 hours of non-religious activities are eligible for PSLF

• Private employer: if it is non-profit, is not an excluded group, and provides one or more public services

• Examples: military, law enforcement, public interest, early childhood, public health, education

Consolidation

www.loanconsolidation.ed.gov

-Use: Centralize loans to 1 payment when there is multiple servicers or loan programs (DL and FFEL)-Loans: Stafford loans, Plus loans, Perkins Loans, SLS loans, old consolidation loans

- PLUS loans: Graduate or Parent, if borrower is parent- Downside: loss of borrower benefits

- Perkins loans: loss of interest subsidy in deferments, loss of cancellation benefits, decreased grace period

- Principle rebates, interest rate discounts

Monthly Payment Plan Example

Interest Rate:

6.8%

Loan Amount:

$165,000

Adjusted Gross Income (AGI):

$75,000

Marital Status:

Single

Family size: 1

State of Residence:

Continental U.S.

Calculator Inputs: Calculator Outputs:Repayment Plan Type

Term in Years

Initial Monthly Payment

Total Payment (Interest + Principal)

Standard 10 $1,898.83 $227,859.60

Extended -fixed -graduated

2525

$1,145.22$935.00

$343,566.00$372,141.74

Graduated 10 $1,303.79 $240,166.70

Income Contingent

15 $1,068.50 $280,156.14

Income Based

25 $735 *depends on interest accrual and capitalization

Interest Payments in SchoolYear Loan

BalanceInterest Rate

Accrued Interest

Monthly Payment of Interest

New Loan Balance, cumulative

1L $20,500 6.8% $1,161 ~$96.75 $21,661

2L $20,500 6.8% $2,556 ~$213.00 $44,717

3L $20, 500 6.8% $3,950 ~$329.17 $69,167

Totals: $61,500 $7,667

Impact on Payments, Standard 10 year repayment plan:

Loan Balance Payment Amount Total Cost

$61,500 $707.74 $84,924

$69,167 $795.98 $95,517

Reminders• Live large now, live small later

– Set realistic budgets, live like a student– Returning funds to the lender:

• All funds returned within 120 days of disbursement, by the student or the school, have all interest and fees forgiven

• Ideal: overestimated needs for aid

• Student loans are not dischargeable in bankruptcy

• Questions: Contact the Financial Aid office, even after you graduate!

Helpful Websites

www.studentaid.ed.gov www.finaid.orgwww.nslds.ed.govwww.askheatherjarvis.comwww.annualcreditreport.comIBR Website & Calculatorhttp://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jspwww.ibrinfo.org

Repayment Plans & Calculatorhttp://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp

Questions?