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IBR Repayment Plans

VIEWS: 14 PAGES: 29

									IBR / Repayment Plans
Agenda


• IBR Overview
  – Eligibility
  – Benefits
  – How to Apply
• Other Repayment Plans
  –   Standard
  –   Graduated
  –   Extended (fixed or graduated)
  –   Income Contingent
  –   Income Sensitive
Income-Based Repayment Overview


• Designed to provide a payment that is based on a
  borrowers income, if they qualify by having a
  Partial Financial Hardship (PFH)
• Enacted as part of College Cost Reduction and
  Access Act (CCRAA)of 2007
• Became available on July 1, 2009
IBR Loan Eligibility


• Federal student loans eligible for the IBR plan
   – Direct or FFEL Stafford Loans
   – Direct or FFEL Student PLUS Loans
   – Direct or FFEL Consolidation Loans
• Loans not eligible for the IBR Plan
   – Loans that are currently in default
   – Parent PLUS Loans
   – Consolidation Loans that repaid parent PLUS Loans.
IBR Borrower Eligibility


• Borrowers whose federal student loan debt is
  high relative to their income and family size may
  qualify
• The loan servicer calculates if the borrower has a
  partial financial hardship using the following
  factors:
   – Income
   – Family size
   – State of residence
IBR Borrower Benefits


• Payments
   The monthly payment amount will be less than the amount required
   under a 10-year standard repayment plan and may be less than
   amounts calculated for other repayment plans
• Interest payment benefit
   If the monthly IBR payment amount does not cover the interest that
   accrues on the loans each month, the government will pay the unpaid
   accrued interest on the borrower’s Subsidized Stafford Loans (either
   Direct Loan or FFEL) for up to three consecutive years from the date
   they began repaying under IBR
IBR Borrower Benefits


• 25 year loan forgiveness
   If you repay under the IBR plan for 25 years and meet certain other
   requirements, any remaining balance will be cancelled
• 10 year Public Service Loan Forgiveness (PSLF)
   The borrower my qualify for loan forgiveness earlier than 25 years if
   they work full-time in public service and make on-time full monthly
   payments under IBR (or repayment plans listed below), these
   payments will count toward the 120 monthly payments that are
   required to receive loan forgiveness through PSLF
       • 10 year Standard Repayment Plan
       • Income Contingent Repayment (ICR) Plan
IBR Payment Amounts


The IBR-PFH payment amount is determined by the
Adjusted Gross Income (AGI) and family size.
• If the borrower is married and files a joint federal tax return, the
  AGI includes both spouse’s incomes together
• Annual IBR repayment amount is 15% of the difference between
  the borrower’s AGI and 150% of the Department of Health and
  Human Services Poverty Guideline for their family size and state
    – Divide this amount by 12 to get the monthly IBR payment amount
    – The IBR payment amount may be adjusted yearly based on income
      and family size but will never be more than what would be required
      to be paid under a 10 year Standard Plan
IBR Monthly Payment Chart

The following chart shows the maximum IBR monthly payment amounts for a
sample range of incomes and family sizes using the Poverty Guidelines that were in
effect as of January 20, 2011 for the 48 contiguous states and the District of
Columbia:
          Annual
        Income by
                           1          2          3          4          5          6          7          8
          Family
           Size
        $10,000     $0         $0         $0         $0         $0         $0         $0         $0

        $15,000     $0         $0         $0         $0         $0         $0         $0         $0

        $20,000     $46        $0         $0         $0         $0         $0         $0         $0

        $25,000     $108       $37        $0         $0         $0         $0         $0         $0

        $30,000     $171       $99        $28        $0         $0         $0         $0         $0

        $35,000     $233       $162       $90        $18        $0         $0         $0         $0

        $40,000     $296       $224       $153       $81        $9         $0         $0         $0

        $45,000     $358       $287       $215       $143       $72        $0         $0         $0

        $50,000     $421       $349       $278       $206       $134       $63        $0         $0

        $55,000     $483       $412       $340       $268       $197       $125       $54        $0

        $60,000     $546       $474       $403       $331       $259       $188       $116       $44

        $65,000     $608       $537       $465       $393       $322       $250       $179       $107

        $70,000     $671       $599       $528       $456       $384       $313       $241       $169
IBR - Examples

     Eligible Loan Debt - $31,000 (6.8% interest rate)             Income-Based       Standard
     Starting Adjusted Gross Income - $25,000 (Increasing 4%         Repayment       Repayment
     Annually)                                                      Plan (25 yrs.)      Plan
     Family Size = 1
                                        First Monthly Payment            $109.44         $356.75
                                   Maximum Monthly Payment               $356.75         $356.75
                                             Total Interest Paid      $40,956.78      $11,809.83
                                            Total Principal Paid      $25,842.71         $31,000
                                            Total Amount Paid         $66,799.49      $42,809.83
               Remaining Principal Balance and Unpaid Interest         $9,199.01              $0
                                        Total Loan Forgiveness         $9,199.01              $0


     Eligible Loan Debt - $75,000 (6.8% interest rate)             Income-Based       Standard
     Starting Adjusted Gross Income - $25,000 (Increasing 4%         Repayment       Repayment
     Annually)                                                      Plan (25 yrs.)      Plan
     Family Size = 1
                                        First Monthly Payment            $109.44         $863.10
                                   Maximum Monthly Payment               $388.25         $863.10
                                             Total Interest Paid      $67,330.04      $28,572.43
                                            Total Principal Paid              $0         $75,000
                                            Total Amount Paid         $67,330.04     $103,572.43
               Remaining Principal Balance and Unpaid Interest       $135,169.96              $0
                                        Total Loan Forgiveness       $135,169.96              $0
IBR – How to Apply


• Loans serviced by FedLoan Servicing
    1. Complete the Income-Based Repayment portion of the Repayment Plan
       Selection Form at MyFedLoan.org/forms.
        • Eligible to apply for IBR 60 days prior to repayment start date
        • Must submit documentation annually
        • Borrower is notified by FedLoan Servicing 90 days prior to renewal date
    2. Mail or fax all required forms / documentation:
        FedLoan Servicing
        P.O. Box 69184
        Harrisburg, PA 17106-9184
        Telephone: (800)699-2908
        Fax: (717)720-1628
• Contact the appropriate servicer for loans not serviced by
  FedLoan Servicing
IBR Common Denial Reasons


1.   1040 not signed
2.   No 1040 submitted
3.   Indeterminable Gross Monthly Income (GMI)
4.   No proof of income provided
5.   Borrower is in a deferment / forbearance
6.   Borrower is in their grace period
Leaving IBR


• The borrower may request to leave IBR if they have
  available term remaining in the Standard Repayment
  Plan (10 year standard or consolidation loan
  standard)
• Borrowers may request another repayment plan after
  being placed on Standard and paying one full
  monthly payment under the Standard plan
• Any unpaid interest is capitalized
Additional Repayment Options


•   Standard
•   Graduated
•   Extended (fixed or graduated)
•   Income Contingent
•   Income Sensitive
Repayment Options – Standard


• This is the plan the borrower will have when
  entering repayment, unless the borrower
  requests otherwise
• The payment will be a fixed (equal) amount each
  month
• Monthly payments will be at least $50
• 10 year repayment term (standard plan for
  Consolidation loans is 10 to 30 years based on
  balance)
Standard Repayment Example


    Eligible Loan Debt - $31,000 (6.8% interest rate)   Standard Repayment

    Months in Repayment                                                      120
    Monthly Payment                                                   $356.75
    Total Interest Payment                                            $11,810
    Total Loan Payment                                                $42,810



    Eligible Loan Debt - $75,000(6.8% interest rate)    Standard Repayment

    Months in Repayment                                                      120
    Monthly Payment                                                   $863.10
    Total Interest Payment                                            $28,572
    Total Loan Payment                                               $103,572
Repayment Options – Graduated


• Payments start low and generally increase every
  two years
• 10 year repayment term (Consolidation loans may
  have a term of 10 to 30 years based on balance)
• Monthly payment is never less than the amount of
  interest that accrues between payments
• No single payment will be more than three times
  greater than any other payment
Graduated Repayment Example

    Eligible Loan Debt - $31,000 (6.8% interest rate)          Graduated

    Months in Repayment                                                        120
    Monthly Payment                                     Years        Monthly
                                                                     Payment
                                                         1-2                $244.95
                                                         3-4                $297.80
                                                         5-6                $362.04
                                                         7-8                $440.15
                                                        9-10                $535.11

    Total Interest Payment                                          $14,122.23
    Total Loan Payment                                              $45,122.23


    Eligible Loan Debt - $75,000 (6.8% interest rate)          Graduated

    Months in Repayment                                                        120
    Monthly Payment                                     Years        Monthly
                                                                     Payment
                                                         1-2                 $592.63
                                                         3-4                 $720.49
                                                         5-6                 $875.93
                                                         7-9                $1064.90
                                                        9-10               $1,294.65

    Total Interest Payment                                          $34,166.68
    Total Loan Payment                                             $109,166.68
Repayment Options - Extended


• Will pay a fixed or graduated payment amount
• Repayment term not to exceed 25 years
• FFEL borrowers must have more than $30,000 in
  outstanding FFEL Program loans
• Direct borrower must have more than $30,000 in
  outstanding Direct Loans
Extended Repayment Example

   Eligible Loan Debt - $75,000 (6.8% interest rate)   Extended       Extended
                                                         Fixed        Graduated

   Months in Repayment                                      300                   300


   Monthly Payment                                      $520.55   Years     Monthly
                                                                            Payment
                                                                   1-2        $425.00
                                                                   3-4        $445.28
                                                                   5-6        $466.53
                                                                   7-8        $512.13
                                                                   9-10       $536.57
                                                                  11-12       $562.17
                                                                  12-14       $589.00
                                                                  15-16       $617.11
                                                                  17-18       $677.42
                                                                  19-20       $646.56
                                                                  21-22       $677.56
                                                                  23-24       $709.75
                                                                    25        $743.62
   Total Interest Payment                               $81,165            $94,155.34


   Total Loan Payment                                  $156,165           $169,155.34
Repayment Options – Income Contingent
(ICR)

• Available for Direct Loans only
• Each year the monthly payments are recalculated based on
     –   Adjusted gross income (AGI, plus spouse’s income if married)
     –   Family size
     –   Total amount of the borrower’s Direct Loans
•   Under ICR the annual payment amount is the lesser of:
     –   The amount the borrower would pay annually over 12 years multiplied by an income
         percentage factor that corresponds to the borrower’s AGI, OR
     –   20 percent of discretionary income
•   If payments are not large enough to cover the interest that accrues
    monthly, the unpaid interest is capitalized once each year
     –   The amount capitalized will not exceed 10 percent of original amount owed when the
         borrower entered repayment
     –   Interest will continue to accumulate but will not be capitalized
•   After 25 years, the remaining balance will be discharged
Repayment Options – Income Contingent

     Eligible Loan Debt - $31,000 (6.8% interest rate)                 Income         Standard
     Starting Adjusted Gross Income - $25,000 (Increasing 4%         Contingent      Repayment
     Annually)                                                       Repayment          Plan
     Family Size = 1                                                Plan (25 yrs.)
                                        First Monthly Payment             $229.54        $357.94
                                   Maximum Monthly Payment                $256.84        $357.94
                                             Total Interest Paid       $26,348.39     $11,953.20
                                            Total Principal Paid          $31,000        $31,000
                                            Total Amount Paid          $57,348.39     $42,953.20
               Remaining Principal Balance and Unpaid Interest                  $0            $0
                                          Total Loan Discharge                  $0            $0


     Eligible Loan Debt - $75,000 (6.8% interest rate)                 Income         Standard
     Starting Adjusted Gross Income - $25,000 (Increasing 4%         Contingent      Repayment
     Annually)                                                       Repayment           Pan
     Family Size = 1                                                Plan (25 yrs.)
                                        First Monthly Payment             $236.17        $865.99
                                   Maximum Monthly Payment                $634.17        $865.99
                                             Total Interest Paid      $116,509.73     $28,918.72
                                            Total Principal Paid          $11,324        $75,000
                                            Total Amount Paid         $127,833.73    $103,918.72
               Remaining Principal Balance and Unpaid Interest         $99,189.05             $0
                                          Total Loan Discharge         $99,189.05             $0

                     * FinAid.org calculator used in the examples
Income Contingent – How to Apply


• Loans serviced by FedLoan Servicing
    1. Complete the Income Contingent Repayment portion of the Repayment
       Plan Selection Form at MyFedLoan.org/forms. (Requires documentation
       annually.)
    2. Submit a copy of your most recent tax return (If married and spouse files
       separate federal income tax returns, documentation of spouses current
       income is required.)
    3. Mail or fax all required forms / documentation:
        FedLoan Servicing
        P.O. Box 69184
        Harrisburg, PA 17106-9184
        Telephone: (800)699-2908
        Fax: (717)720-1628
• Contact the appropriate servicer for loans not serviced by
  FedLoan Servicing
Repayment Options – Income Sensitive


• FFEL loans only
• Monthly payment is based on monthly gross
  income
• Must re-apply annually
• Available for 5 years (The borrower will repay
  remaining loan term under a Standard repayment
  plan unless another plan is selected.)
• Maximum repayment period is 10 years
Income Sensitive – How to Apply


• Loans serviced by FedLoan Servicing
    1. Complete the Income Sensitive Repayment Request Form at
       MyFedLoan.org/forms.
    2. Submit documentation of your most recent total gross income from all
       sources (pay stubs, etc.)
    3. Mail or fax all required forms / documentation:
        FedLoan Servicing
        P.O. Box 69184
        Harrisburg, PA 17106-9184
        Telephone: (800)699-2908
        Fax: (717)720-1628
• Contact the appropriate servicer for loans not serviced by
  FedLoan Servicing
Resources – Repayment Calculator
 Additional Resources


• Repayment options
   http://www.myfedloan.org/billing-payment/payment-plans/index.shtml

• Federal Student Aid (FSA) Repayment Information
   http://studentaid.ed.gov/PORTALSWebApp/students/english/repaying.jsp
Servicing Resources


                                       Contact Information for Borrowers       Contact Information for Schools
             Servicer
                                         Phone              Website           Phone               Website

 Direct Loan Servicing Center (ACS)   1-800-848-0979   myedaccount.com     1-888-877-7658     myedaccount.com

        FedLoan Servicing             1-800-699-2908    MyFedLoan.org      1-800-655-3813   MyFedLoan.org/schools

            Great Lakes               1-800-236-4300    mygreatlakes.org   1-888-686-6919     mygreatlakes.org

              Nelnet                  1-888-486-4722       nelnet.com      1-866-463-5638        nelnet.com

             Sallie Mae               1-800-722-1300     salliemae.com     1-888-272-4665   opennet.salliemae.com
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