Exit Counseling

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					Stafford and Graduate/
  Professional PLUS
 Loan Exit Counseling
    Today’s Agenda

       Reviewing loan types, interest rates and who holds your
        loans.
       Understanding repayment options, loan terms and
        programs that can help you manage your repayment.
       Tailoring a plan that makes sense for you.
       Managing your money.




2
    Your Education Finances

       Know the different types of debts:
        – Federal student loans, private education loans.
        – Credit cards.
        – School student account.
       Keep records of debts.
       Understand your debts.
        –   Amount you owe.
        –   Types of loans.
        –   Servicer(s) contact information.
        –   Interest rates and loan fees.
        –   Repayment timing and options.
       Manage your money.
       Ask for help.
3
    Types of Student Loans

       Federal loans:
        – FFEL or Direct Loan Programs.
            Stafford.
            Parent PLUS/ Grad PLUS.
            Consolidation.
        – Other federal loans.
            Perkins.
            Health-related programs.
       Non-federal education loans:
        – Also known as “private” or “alternative” loans.




4
    Your Promise

       When you signed your Master Promissory Note
        you promised to repay your loan, even if you:
        – Don’t complete your program of study or didn’t complete it within
          the regular time for program completion.
        – Are unable to locate employment after completing your program.
        – Are dissatisfied with or don’t receive the services purchased from
          the school.
        – Don’t receive payment coupons or reminders.




5
    Your Promise

                      Master Promissory Note:
                       – Legally binding document.
                       – Specifies your rights and
                         responsibilities.
                       – Must be signed in order to
                         receive loan funds.
                      Borrower’s Rights and
                       Responsibilities Statement.




6
    Your Promise

       Need specific information?
        – Your student loan partners:
            School.
            Lender, guarantor and loan servicer.
            U.S. Department of Education:
        – Master Promissory Note.
        – Borrower’s Rights and Responsibilities Statement.
        – Notice of Guarantee and Disclosure.
        – School records.
        – National Student Loan Data System: www.nslds.ed.gov.



7
    Your Loan Terms

                              Interest Rates
                   Undergraduate
                                                  Graduate Borrowers
                     Borrowers
    First
                    Sub       Unsub      Sub/Unsub    FFELP Grad     DL Grad
Disbursement
                  Stafford    Stafford    Stafford      PLUS          PLUS
7/1/11-6/30/12     3.4%       6.8%         6.8%           n/a            7.9%
7/1/10-6/30/11     4.5%       6.8%         6.8%           n/a            7.9%
7/1/09-6/30/10     5.6%       6.8%         6.8%          8.5%            7.9%
7/1/08-6/30/09     6.0%       6.8%         6.8%          8.5%            7.9%
7/1/06-6/30/08     6.8%       6.8%         6.8%          8.5%            7.9%
                  Variable rate not to            Variable rate not to
Prior to 7/1/06
                    exceed 8.25%.                    exceed 9%.

8
Your Loan Terms

       Origination Fees.
       Default Fees.
       Current Fees:
        – Stafford Loans: 1 percent.
        – Grad PLUS: 4 percent.
       Rebates.




9
 Your Loan Terms
 Your Loan Terms

    Stafford loan grace period:
     – Stafford loan provides one six-month period after borrower ceases
       to be enrolled at least half time during which no payment is
       expected.
     – Interest subsidy applies.
     – First loan payment due within 30-45 days after grace period ends.
     – No penalty for early repayment.
    Grad PLUS loan post-enrollment deferment period.
     – Payment of principal begins six months after borrower ceases to
       be enrolled at least half time.
     – Renewable.



10
Your Promise - Stafford

    Sample monthly payments:
     –   Standard repayment option.
     –   Subsidized Stafford loan.
     –   6.8 percent fixed interest rate.
     –   No fees deducted.
     –   Ten-year repayment period after a six-month grace period.

          Loan Amount         Estimated Monthly          Total           Total Principal
          (Principal)              Payment             Interest           and Interest
          $ 3,500                     $50                $971               $4,471
          $10,000                     $115              $3,810              $13,810
          $19,000                     $219              $7,238              $26,238
          $23,000                     $265              $8,762              $31,762
         Source: www.usafunds.org/borrowers/resources/calculators.htm.

11
 Your Promise - Grad PLUS

    Sample monthly payments:
       –   Standard repayment option.
       –   Grad PLUS loan.
       –   7.9 percent fixed interest rate.
       –   No fees deducted.
       –   Ten-year repayment period after fully disbursed.

           Loan Amount            Estimated Monthly                    Total    Total Principal
            (Principal)                Payment                       Interest    and Interest
             $10,000                       $121                      $4,496        $14,496
             $20,000                       $242                      $8,992        $28,992

             $30,000                       $362                      $13,488       $43,488
     Source: www.usafunds.org/borrowers/resources/calculators.htm.
12
 Successful Repayment

                           Repayment plans.
                           Manageable payments.
                           Forgiveness and
                            cancellation.
                           Money management.
                           Debt management
                            strategies.




13
 Repayment Plans

    Standard.
    Graduated.
    Extended.
    Income-related plans:
     – Income-sensitive (FFEL only).
     – Income-contingent (DL only).
     – Income-based repayment.
    Consolidation.




14
 Repayment Plans

    Standard repayment.
     –   Most common option.
     –   Payments of equal, monthly installments.
     –   Repayment period cannot exceed 10 years.
     –   Minimum payment of $50, usually much more.
    Advantages and disadvantages.
     – Well suited for borrowers with balances less than $10,000 or
       with higher balances and higher income.
     – Least expensive option in terms of total interest paid.
     – Monthly payments may be too high for some borrowers.




15
 Repayment Plans

     Example of a Standard repayment schedule:

                        Stafford (6.8 percent)

     Loan Amount   Payment Amount           Number of Months
 $10,000               $115                       120
 $50,000               $575                       120


                       Grad PLUS (7.9 percent)

     Loan Amount   Payment Amount           Number of Months
 $10,000               $121                       120
 $50,000               $604                       120

16
 Repayment Plans

    Graduated repayment.
     – Tiered plan in which monthly payment amount changes during
       repayment term, increasing gradually.
     – Most are three- or four-tiered.
     – Repayment term cannot exceed 10 years.
     – Monthly payment amount must cover accruing interest, and no
       single payment can be more than three times amount of another.
    Advantages and disadvantages.
     – Combines low initial payments and predictable structures.
     – Interest cost will be more than standard repayment.
     – Lower payments result in higher interest costs.



17
 Repayment Plans – Stafford

    Example of a graduated repayment schedule:


               Graduated Repayment Plan (6.8 percent)
 Loan Amount      Payment Amount          Number of Months
 $10,000              $57                       24
                     $135                       96
 $50,000             $283                       24
                     $677                       96




18
 Repayment Plans – Grad PLUS

    Example of a graduated repayment schedule:


               Graduated Repayment Plan (7.9 percent)
 Loan Amount      Payment Amount          Number of Months
 $10,000             $66                         24
                    $141                         96
 $50,000            $329                         24
                    $704                         96




19
 Repayment Plans

    Extended repayment.
     – Up to a 25-year repayment term for eligible borrowers.
     – Available if you have more than $30,000 in FFEL or Direct student
       loan debt.
     – Length of repayment is tied to the amount borrowed.
    Advantages and disadvantages.
     – Provides a lower monthly payment for the entire repayment term.
     – Borrower must meet certain criteria.
     – Longer repayment term results is higher overall
       interest costs.
     – Most useful to borrowers who need long-term relief.



20
 Repayment Plans

    Example of a extended repayment schedule:

            Extended Repayment Plan - Stafford (6.8 percent)

     Loan Amount Payment Amount             Number of Months
 $35,000           $243                            300
 $50,000           $347                            300


           Extended Repayment Plan - Grad PLUS (7.9 percent)

     Loan Amount Payment Amount             Number of Months
 $35,000           $268                            300
 $50,000           $383                            300

21
 Repayment Plans

    Income-sensitive repayment.
     – Only available for FFELP loans.
     – Payment based on borrower’s income and recalculated annually.
     – Payments must cover accruing interest, and no payment can be
       more than three times amount of another.
     – Repayment term 10 years.
     – Up to five years of forbearance can be applied to offset effect of
       low income-sensitive payments.
    Advantages and disadvantages.
     – May appeal to borrowers with high balances and those who have
       other financial obligations, are in danger of default or with incomes
       that will be low initially.
     – Interest cost almost always is higher under this plan.
22
 Repayment Plans - Stafford

     Example of an income-sensitive repayment schedule:


               Income-Sensitive Repayment Plan (6.8 percent)
     Loan Amount        Income*   Payment Amount   Number of Months
 $20,000                $2,000     $113                  12
                                   $230                  120
 $50,000                $2,000     $283                  12
                                   $575                  120


 * Pretax monthly income.




23
 Repayment Plans - FFEL Grad PLUS

     Example of an income-sensitive repayment schedule:

               Income-Sensitive Repayment Plan (7.9 percent)
     Loan Amount        Income*   Payment Amount   Number of Months
 $20,000                $2,000      $132                 12
                                    $242                 120
 $50,000                $2,000      $329                 12
                                    $604                 120
 * Pretax monthly income.




24
 Repayment Plans

    Income-contingent repayment:
     – Only available for Direct Loans.
     – Payments based on adjusted gross income, family size, and
       loan amount.
     – Payment is adjusted annually.
     – Payments can be less than accruing interest.
     – Repayment term up to 25 years.
    Advantages and disadvantages.
     – Amounts unpaid after 25 years will be forgiven, although you
       currently would have to pay income taxes on the forgiven amount.
     – May appeal to borrowers with high balances and those who have
       other financial obligations, are in danger of default or with incomes
       that will be low initially.
25   – Interest cost almost always is higher under this plan.
 Repayment Plans

    Income-based repayment.
     – Standard payment amounts are capped based on income and
       family size.
     – Lowers payment amount if borrower’s standard loan payments
       exceed 15 percent of income above 150 percent of Poverty
       Guidelines.
    Advantages and disadvantages.
     – ED pays interest on subsidized Stafford loans for the first 36 months
       only if scheduled payment amount does not cover accruing interest.
     – Amounts unpaid after 25 years may be forgiven, although you
       currently would pay income taxes on the forgiven amount.
     – Borrower must meet certain criteria.
     – Borrower must reapply annually with AGI and family size
       information.
26
 Repayment Plans

    Loans eligible for income-based repayment
     include:
     – Stafford.
     – Grad PLUS.
     – Consolidation loans that do not include a Parent
       PLUS loan.
    Loans not eligible:
     – Parent PLUS loans.
     – Private loans.
     – Consolidation loans that include a Parent PLUS
       loan.



27
 Repayment Plans

    You must contact your
     loan servicer to apply.
    Calculator available at:
     www.ibrinfo.org.




28
    Repayment Plans
    Repayment Plans

            Total Loan Amount                                                             $50,000*
                                                            Initial         Long-term                        Total
                                                           Monthly           Monthly         Interest       Amount         Years in
                                                           Payment           Payment           Paid          Paid         Repayment

Standard                                                      $575             $575          $19,048        $69,048             10

Graduated (4 years interest-only)                             $283             $848          $24,631        $74,631             10

Extended (Standard)                                           $347             $347          $54,111        $104,111            25

Income-sensitive (1 year interest-only)                       $283             $575          $22,448        $72,448             11

Income-contingent                                             $236             $423          $69,703        $108,618            25

Income-based                                                  $109             $388          $62,181        $67,330             25

* Source: www.finaid.org loan repayment calculators. Examples assume Federal Stafford loans with the total loan amount due on the day
repayment begins, 6.8% fixed interest rate on non-consolidated loans, no borrower benefits, no pre-payments and no delinquent payments.
All payment calculations are estimates only. Your monthly payment schedule and total payment estimates will vary.
Income-sensitive repayment based on one year exception at $25,000 annual salary. Income-based repayment based on estimated AGI of
$25,000 and 4% annual growth; total forgiveness $16,350. Income-contingent repayment based on estimated AGI of $25,000 and 4%
annual growth; total forgiveness $13,037.

  29
 Repayment Options

    Use loan calculators to compare repayment options.
     – http://www.usafunds.org/borrowers/Pages/Resources.aspx.
    As a student loan borrower you may:
     – Prepay your student loans without penalty.
     – Use an accelerated repayment option resulting in less interest.
     – Change repayment plans to accommodate your situation.




30
 Method of Payment

    Options available:
     – Coupon books.
     – Online payments.
     – Auto-debit from bank account.




31
 Manageable Payments

    “What if I can’t make my payments?”
    Federal student loans have repayment options to assist
     borrowers who need help:
     – Loan consolidation.
     – Deferment.
     – Forbearance.




32
 Manageable Payments

    Consolidation:
     – A new loan that pays off existing loans and carries
       new terms.
     – Interest rate is a weighted average of the loans being
       consolidated up to the nearest 1/8th percent.
     – 10- to 30-year repayment term.
     – Only certain loans can be included.
     – Option to prepay or change repayment plans.
     – Borrower benefits differ among lenders.




33
 Manageable Payments

                 Advantages                         Disadvantages
        Combines several loans into          Increases interest charges
         one new loan.                         due to longer repayment
        One lower monthly payment.            period.
        Interest rate is fixed.              Reduced options for
        Interest subsidy still applies,       cancellation and forgiveness.
         but only to subsidized               May lose benefits.
         Stafford.                            May lose remainder of grace
        No fees or prepayment                 period.
         penalties.




34
 Manageable Payments



     Maximum Repayment Periods for Consolidation Loans

     Sum of Consolidation Loans and   Maximum Term
         Other Education Debt
              Under $7,500              10 years
           $7,500 - $9,999.99           12 years
          $10,000 - $19,999.99          15 years
          $20,000 - $29,999.99          20 years
          $40,000 - $59,999.99          25 years
            $60,000 or more             30 years



35
 Manageable Payments

                      Deferment:
                       – Payments postponed under certain
                         conditions.
                       – Interest subsidy applies to
                         subsidized Stafford loans.
                       – Length of time varies by type of
                         deferment.
                       – Application required (not
                         automatic).




36
 Manageable Payments

    Deferment options:
     –   Enrolled in school at least half time.
     –   Unemployed, but actively seeking full-time employment.
     –   Experiencing economic hardship.
     –   Studying full time in a graduate fellowship program.
     –   Receiving rehabilitation training services.
     –   Serving on active duty during a war or other military operation or
         national emergency.




37
 Manageable Payments

    In-school deferment.
     – Full-time/half-time study at institution eligible to participate in any
       Title IV program or operated by an agency of federal government.
     – No time limit.
     – Borrower eligibility based on any of following documentation:
         Deferment request and traditional documentation from borrower.
         New loan application indicating borrower’s eligibility for deferment.
         Student status information indicating borrower enrolled at least half
          time.
         Letter from school certifying dates and status of attendance.




38
 Manageable Payments

    Unemployment deferment.
     – Defined as period borrower is conscientiously seeking full-time
       employment in the United States.
     – Maximum of 36 months for new borrowers as of July 1, 1993.
     – Borrower must register at a public or private employment agency
       (if accessible, defined as within 50 miles of borrower’s home).
     – Must seek employment in any field.
     – Must be renewed every six months.
     – Does not have to run consecutively.
     – Full-time employment is at least 30 hours per week and is
       expected to last at least three months.
     – Must provide documentation with each deferment request of at
       least six attempts to secure employment.
        Not required for initial period of employment.
39
 Manageable Payments

    Economic-hardship deferment.
     – Three-year maximum.
     – Eligibility criteria (any one of the following):
         Granted an economic-hardship deferment under another Title IV
          student loan program.
         Receiving payment under federal or state public-assistance program:
               –   Aid to Families with Dependent Children.
               –   Supplemental Security Income.
               –   Food stamps.
               –   State general public assistance.




40
 Manageable Payments

    Economic-hardship deferment.
     – Eligibility criteria, continued (any one of the following):
         Is working full time and has a monthly income that does not exceed
          the greater of:
               – Minimum wage rate.
               – Amount equal to 150 percent of poverty guideline for the borrower’s
                 family size.
         Serving full time for at least one year in Peace Corps.




41
 Manageable Payments
 Manageable Payments

    Forbearance:
     – Temporarily postpone or reduce payments.
     – Extends the repayment period.
     – Typically granted for a period up to 12 months at a time, at the
       discretion of the lender or servicer.
     – Interest subsidy is not available.
     – Any unpaid interest that accrues will be capitalized, increasing
       the total balance due.




42
 Manageable Payments

    Forbearance may include any of following changes to
     repayment agreement:
     – Temporarily cease payment of principal and interest.
     – Temporarily cease payment of principal.
     – Arrange to make lower payments.
    At no time during a forbearance will government pay
     interest benefits, regardless of loan type.
     – Borrower responsible for all accruing interest.
    Generally used when borrower is willing but temporarily
     unable to make payments due to financial hardship.



43
 Manageable Payments

    Types of Forbearance:
     – Temporary total disability or total and permanent disability.
         Schools can help borrowers understand forms.
     – Discretionary:
         If borrower does not qualify for deferment and is willing but unable to
          make regular payments, forbearance may be granted at lender’s
          discretion for up to 12 months at a time.
     – Mandatory:
         An entitlement, unlike lender discretionary forbearance.
         Certain circumstances (for example, excessive debt levels, national
          service or internship/residence) that qualify borrower for mandatory
          forbearance.
         Lender may grant mandatory forbearance without first obtaining
          borrower’s written request.

44
 Student Loan Forgiveness and
 Cancellation

    Special repayment and
     forgiveness options for
     some borrowers:
     – Military benefits.
     – National and community
       service jobs.
     – Teacher loan forgiveness.
     – Public Service Loan
       Forgiveness.




45
 Student Loan Forgiveness and
 Cancellation

    Full cancellation:
     –   Death of borrower.
     –   School closure.
     –   False certification by school.
     –   Identity theft.
    Loan discharge:
     – Total and permanent
       disability.
     – Some limited bankruptcy
       scenarios.




46
 Tax Benefits

    There are a variety of tax credits, deductions and savings
     plans available to assist with the expense of higher
     education:
     – American Opportunity Credit, Hope and Lifetime Tax Credit.
     – College Tuition and Fees Deduction and Student Loan Interest
       Deduction.
    See www.irs.gov for more information.




47
 Consequences of Breaking Your Promise

                       Delinquency:
                        – Payment not made by the stated
                          due date.
                        – Late charges and fines may be
                          assessed.
                        – Negative mark on your credit record.




48
 Consequences of Breaking Your Promise

    “Default” means no loan payments for 270 consecutive
     days or more:
     – Lose eligibility for future federal financial aid.
     – Lose eligibility for flexible loan repayment options.
     – Adverse credit reports.
     – State-issued licenses can be withdrawn or denied.
     – Income tax refunds can be withheld.
     – Wages can be garnished.
     – Federal benefits may be confiscated.
     – Interest continues to accumulate.
     – Federal debt collection procedures, including fees and fines.
     – Legal action.
49
 Keep Copies of Everything

                          Start a file for your records:
                           – Student loan records in one place.
                           – Copies of written correspondence.
                           – Notes of conversations with lender
                             or servicer.
                           – Contact information.
                           – Copies of your MPN.
                           – Copies of repayment schedules.
                           – Copies of all other forms.




50
 Manage Your Money

    Identify your financial goals.
    Develop a realistic monthly
     budget.
    Pay your bills prior to the
     due date.
    Keep accurate and
     well-organized records.
    Save for the future.




51
 Manage Your Money
 Manage Your Money

    Find your spending leaks:
     –   Eating out.
     –   Entertainment and vacations.
     –   Gifts and holidays.
     –   Retail therapy.
     –   Invisible cash.


              $3 latte
         X     5 days
         $15 per week    X 50 weeks     = $750 per year!




52
 Manage Your Money
 Manage Your Money

                    Use spending stoppers:
                     – Leave credit cards at home.
                     – Write down cash purchases on
                       back of ATM receipt.
                     – Resist easy credit.
                     – Eat out less.




53
 Manage Your Debt

    Debt should work for you,
     not the other way around.
    Don’t take on unnecessary
     debt.
    Know what you owe.
    Develop a plan to get out
     of debt.




54
 Manage Your Debt
 Manage Your Debt

    Understand the debt pyramid:

                                High-interest credit cards.
                                Payday loans.
                  High          Debt past due or in collections.
                Cost/Stress
                                       Affordable car loans.
                Medium                 Manageable credit card balances.
               Cost/Stress             Home mortgages.

                   Low                        Student loans.
                Cost/Stress


55
 Manage Your Debt

    Determine highest priority
     debt.
    Once paid, increase
     payments on next highest
     priority.
    Avoid the minimum
     payment trap.
    Double up on payments.
    Resolve to stay out of
     debt.


56
 Manage Your Debt

    Review your credit report annually to ensure information
     is accurate.
    Request a free credit report every 12 months:
      – www.annualcreditreport.com.
      – (877) 322-8228.
      – Credit information is supplied by the three major reporting
        bureaus:
     Equifax                Experian                TransUnion
     www.equifax.com        www.experian.com        www.transunion.com
     (800) 685-1111         (888) 397-3742          (800) 888-4213
     P.O. Box 740241        P.O. Box 2002           P.O. Box 105281
     Atlanta, GA 30374      Allen, TX 75013         Atlanta, GA 30348

57
 WhatIfIf You Need Help?
 What You Need Help?

                       If you run into financial
                        difficulty and can’t make a
                        student loan payment,
                        contact:
                        –   Your lender or loan servicer.
                        –   U.S. Department of Education.
                        –   Your guarantor.
                        –   Your school.




58
 What If You Need Help?

 U.S. Department of Education Student Loan Ombudsman:
                     FSA Ombudsman
                     830 First Street, NE
                        Fourth Floor
              Washington, DC 20202-5144
                   Phone: (877) 557-2575
                    Fax: (202) 275-0549
           E-mail: fsaombudsmanoffice@ed.gov.
               www.ombudsman.ed.gov.


59
 Resources

    www.usafunds.org.                  www.truecareers.com.
    www.nslds.ed.gov.                  www.monster.com.
    www.federalstudentaid.ed.gov.      www.hotjobs.com.
    www.annualcreditreport.com.        www.rileyguide.com.
    www.ombudsman.ed.gov.              www.interviewcoach.com.
    www.usafunds.org/borrowers/        www.salary.com.
     Pages/Resources.aspx.




60
 Review

 Q: What legally binding document defines the terms of
    your loan?
 A: A Stafford or Grad PLUS loan Master Promissory Note.




61
 Review

 Q: Do you have to repay your Stafford loan or Grad PLUS
    loan if you don’t finish your program of study?
 A: Yes. By signing a Master Promissory Note, you are
    promising to repay your student loan even if you don’t
    finish your program, you are dissatisfied with your
    educational experience, or you cannot find a job.




62
 Review

 Q: When will repayment begin on your Stafford or Grad
    PLUS loan?
 A: After you no longer are enrolled at least half time in a
    degree program, you will have one six-month grace or
    post-enrollment deferment period before repayment
    begins. The first payment is due within 30-45 days after
    the repayment period starts.




63
 Review

 Q: Which of the following statements about defaulting on
    your student loan is NOT true?
    a. Default means no payment was made for 270 days.
    b. Default usually results in additional fees and fines.
    c. Defaulted loans are not reported to consumer
    reporting agencies.
    d. Defaulted loans must be returned to good standing in
       order to get future federal financial aid.
 A: (c) Defaulted student loans are reported to consumer
    reporting agencies, resulting in a severely damaged
    credit record.
64
 Review

 Q: List at least three ways to get student loan help if you
    need it.
 A: Your resources include:
     –   Your lender or loan servicer.
     –   Your guarantor.
     –   Your school.
     –   U.S. Department of Education Web site.
     –   Department of Education Ombudsman.




65
 Questions and Answers




66
          USA Funds® is the nation’s leading education-loan guarantor.
      A nonprofit corporation, USA Funds works to enhance postsecondary-
         education preparedness, access and success by providing and
                  supporting financial and other valued services.




A nonprofit corporation, USA Funds® works to enhance
postsecondary education preparedness, access and success
by providing and supporting financial and other valued services.

				
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