US STUDENT LOANS A Guide to Repaying Your Loans Managing

US STUDENT LOANS A Guide to Repaying Your Loans & Managing Your Money Produced by Student Funding Services, May 2008 An electronic version of this guide is available at: http://www.admin.ox.ac.uk/io/US Loans/usloanshom.shtml Contents Student Funding Services: contact details A ‘Who’s Who’ of Loan Contacts Federal Stafford Loans: information you should know before you begin repayment Grad PLUS and PLUS Loans: information you should know before you begin repayment Repayment and Repayment Plans Consolidation Loans Default and Delinquency Deferment and Forbearance Money Management Skills Lender Contact Details Budget Planner Worksheet 3 3 3 4 4 5 7 7 8 9 10 2 US Student Loans: A Guide to Repaying Your Loans and Managing Your Money Now that you are preparing to complete your studies at Oxford, you will need to plan for the repayment of your loan funds and look at the different options available to you. This guide is designed to inform you about loan repayment and money management, and will help you make the necessary arrangements in the near future. Although you will arrange repayment directly through your lender, guarantor or servicer, Student Funding Services at the University of Oxford are here to answer any questions you may have, and you are welcome to contact us at any point: Student Funding Services University Offices Wellington Square Oxford OX1 2JD Tel: +44 (0)1865 270146 or +44 (0)1865 270182 Fax: +44 (0)1865 270077 Email: jenny.carter@admin.ox.ac.uk or john-paul.roche@admin.ox.ac.uk Office hours are between 9.00am and 5.00pm, and you do not need to make an appointment. A ‘Who’s Who’ of Loan Contacts School – This is the University of Oxford, and Student Funding Services are responsible for dealing with all matters relating to your loans. If you have any questions relating to your loans, please contact us (details above), and not your college. Lender – The financial institution that provides the funds for your loan. Guarantor – A state or private, non-profit agency that administers the Federal Family Education Loan Program (FFELP) for the U.S. Department of Education and insures student loans for lenders. Servicer – A company that a lender hires to manage its student loan accounts, which may include processing loan applications and loan payments and providing customer service. Not all lenders use a servicer to administer loans – many handle this directly. Federal Stafford Loans: information you should know before you begin repayment Subsidized Stafford Loan This Type of loan is based on ‘need’ which is assessed from the information you submit in your Student Aid Report. Interest on the subsidized Stafford loan is paid by the government while you are in school, during your grace period, and during deferments. Unsubsidized Stafford Loan This loan is available regardless of demonstrated financial need and interest accrues whether you are in school, in your grace period, or in deferment. Interest may be deferred or you can pay it while you’re in school. Interest is capitalized at repayment, which means it is added to the principal when the loan enters repayment. The rate of interest for this loan has been 6.8% since July 2006, but you will need to check the rate for any unsubsidized Stafford loans you borrowed prior to this date. Fees You may have had to pay some fees associated with your Stafford loans: an origination fee of 1%, and a default fee of a further 1%. However, many of the major lenders have waived these fees in the past, so you may not have been charged. 3 Grace Period Stafford loans have a six-month grace period, which means that you will not begin repayment until six months following your last date of enrolment, or the day you withdraw from your studies. Grad PLUS and PLUS Loans: information you should know before you begin repayment PLUS loans are available to graduate students and parents of undergraduate students. To be approved, borrowers must not have adverse credit. If denied, borrowers can apply with an endorser/co-signer. There is a fixed interest rate of 8.5% on PLUS loans first disbursed on or after July 1, 2006, but you will need to check the rate for PLUS loans you borrowed prior to this date. Unpaid interest is capitalized, which means it is added to the principal. PLUS loans do not offer a grace period prior to repayment, but deferment and forbearance options are available. Repayment Do I have to repay my loans, or can the debt be cancelled at any stage? All your federal loans must be repaid in full, even if: (1) you don’t finish your course at the University; (2) you are not satisfied with the University, or your academic progress; (3) you do not find a job when you graduate. If you do not receive a loan bill from your lender or servicer, please contact them, as you are still required to repay your loan, even if you are not instructed to. There are certain exceptional circumstances when your loan may be cancelled permanently: (1) death; (2) total and permanent disability; (3) your school closed before you finished your course; (4) a loan was falsely certified under your name; (5) your school failed to repay a refund to your lender when it was supposed to do so. Loans may be ‘forgiven’ (i.e. repaid on your behalf) in part if you have been involved in or qualify for the following schemes: Americorps (please visit http://www.americorps.org/ for more information) Military personnel through the Department of Defense Teacher Loan Forgiveness Full-time childcare providers If you would like to make enquiries about your eligibility for these forgiveness schemes, please contact your lender directly. Repayment Plans There are several options available to you when you begin repayment of your loans: Standard Repayment Repay your loan over the standard maximum term of 10 years (120 months), with approximately the same payment amount throughout the entire period. Income Sensitive Repayment Choose a monthly payment amount that equals between 4 and 25 percent of your gross monthly income. Income-sensitive repayment is available for up to five years, and it may extend your total repayment term up to 15 years. Graduated Installment payments usually begin with interest only payments and increase incrementally. May increase repayment by 4 years. By choosing this option you can lower your initial monthly payments by as much as 40 percent. 4 Extended Extend your monthly payments for up to 25 years. If you have more than $30,000 in outstanding student loans, you may be eligible. How much will I have to make in loan repayments each month? Please see the chart below, which shows monthly repayment amounts for a standard repayment schedule*: Amount Borrowed $1,000 $3,000 $5,000 $7,000 $9,000 $11,000 $13,000 $15,000 $17,000 $19,000 $21,000 $23,000 $25,000 Number of Months 22 74 120 120 120 120 120 120 120 120 120 120 120 Monthly Payment $50 $50 $57.54 $80.56 $103.57 $126.59 $149.60 $172.62 $195.64 $218.65 $241.67 $264.68 $287.70 Total Amount Repaid $1,064.38 $3,676.73 $6,904.83 $9,666.55 $12,428.80 $15,190.52 $17,952.76 $20,714.49 $23,476.21 $26,238.45 $29,000.18 $31,762.42 $34,524.14 * Includes principal and interest. Assumes 6.8% interest rate. Online loan repayment calculators may prove useful for estimating your particular monthly repayments, and can be found at: Sallie Mae: http://www.salliemae.com/apps/SMCalcs/RCW/content/index.aspx FinAid: http://www.finaid.org/calculators/loanpayments.phtml Federal Student Aid (government website): http://www.ed.gov/offices/OSFAP/DirectLoan/RepayCalc/dlentry1.html An Alternative Option: Consolidation Loans Consolidating all your federal loans means that they will be combined into one new loan. Your new maximum repayment term is based on the total loan amount and can be 10 to 30 years. There is a fixed interest rate for consolidation loans, which is the weighted average of all loans, rounded up to nearest 1/8%. This option may lower your monthly payments, however if you extend your term, you will pay more in interest. Additionally, your guarantor may change when you consolidate. How much will I pay in interest rates if I take out a consolidation loan? The average interest rate of all your loans will be rounded up to the nearest 1/8th of a point and capped at 8.25%. The following example shows how this is calculated: 5 Interest Loan 1: $ 8,500 x 7% = $595 Loan 2: $10,000 x 5% = $500 Loan 3: $ 8,500 x 9% = $765 _____________________________ Total: $27,000 $1,860 $1860 ÷ $27,000 = 6.888 (.0688) 6.888% rounded to nearest 1/8% (.125) = 7.0% Interest rate for this consolidation loan will be 7% How long will it take me to repay a consolidation loan? Amount Borrowed $ 7,499 – Less $ 7,500 – $ 9,999 $10,000 – $19,999 $20,000 – $39,999 $40,000 – $59,999 More than $60,000 Repayment Term 10 years 12 years 15 years 20 years 25 years 30 years Am I eligible for a consolidation loan? Before you can consolidate your federal loans, you must be in a grace period or repayment status, you must certify that you do not have any other consolidation loan applications pending, and must not owe any grant or loan refunds. You can consolidate with any lender, even if your all your loans are with a different lender. You can consolidate the following loans: subsidized Stafford; unsubsidized Stafford; PLUS or Grad PLUS; William D Ford Direct Lending Loans (DL); Perkins Loans; Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students (LDS); Nursing Student Loans (NSL); Health Education Assistance Loans (HEAL); Federally Insured Student Loans (FISL). There are also some types of loan that cannot be consolidated: defaulted loans (unless satisfactory repayment arrangements have been made); credit card debt; state or private loans not guaranteed by the federal government; Primary Care Loans; Law Access Loans; Medical Assist Loans; PLATO Loans. Is consolidation the right option for me? You need to look at the advantages and disadvantages of a consolidation loan, before deciding if it’s the right option for you. Advantages of consolidation loans include: one monthly loan payment, as opposed to several different payments; one single contact for all customer service needs; a lower monthly payment amount; longer repayment terms than non-consolidated loans – up to 30 years to repay. There are some disadvantages, however: capitalized interest ; you will lose any benefits tied to underlying loans (e.g. 1/4% off interest rate for 48 on-time payments); taking out a consolidation loan This means the accrued interest that is added to the principal balance of a loan while you are not making payments, or your payments are insufficient to cover both the principal (original amount borrowed) and interest due. When this happens, you end up paying interest on interest, sometimes called "negative amortization." 1 1 6 could affect your eligibility for deferments, discharges and forgiveness, as well as your interest subsidy; if you choose a longer repayment period, you will have to repay more interest; you will lose any remaining grace period on Stafford loans, if you choose to consolidate during your grace period. Default and Delinquency What is the difference between ‘default’ and ‘delinquency’? You are considered a ‘delinquent’ borrower if you fail to make payments when due; or you pay one or more days later than due. A borrower in ‘default’ is one who continually fails to repay his or her loans (typically 270 days of non-payment). What will happen if I default on my loan repayments? Making loan repayments late, or not making them at all, will affect your credit rating. In turn, this will greatly affect your ability to obtain employment, car loans, mortgages, credit cards, rent an apartment etc. You may also find that your wages are garnished by 15%, your federal and state income tax refunds are seized, you lose any professional license you may have, you have legal action brought against you, and you lose eligibility for federal student aid and other benefit programs. Defaulting on loan payments will also add at least 18% in collection costs to your loan balance. Deferment and Forbearance What is ‘deferment’? Deferment allows you to postpone making payments on your federal student loans. If you’re approved for a deferment, the federal government will pay the interest on a federal subsidized Stafford Loan for a specified period; however, interest on unsubsidized loans is added to the principal. If you meet any of the following conditions, you may qualify for a deferment: Economic hardship Unemployment Full-time enrolment in school Summer Bridge Graduate fellowship Rehabilitation training Military (for loans disbursed on or after July 1, 2001) Contact your servicer or lender for specific information and to apply. If you borrowed any of your outstanding federal student loans before July 1, 1993, you may be eligible for additional types of deferments What is ‘forbearance’? Forbearance is similar to deferment because it is a temporary adjustment to your repayment schedule – usually from 6 months to 12 months in length. During forbearance, interest accrues on both subsidized and unsubsidized loans that you eventually must repay. There are several types of forbearances, including the following: Economic hardship Internship or residency Excessive debt Disaster Military mobilization National and community service Temporary disability Contact your loan servicer for exact forbearance eligibility requirements and to apply. 7 Money Management Skills How can I be a wise borrower in the future? 1. Consider your future salary when borrowing. Think about where you will be based for work, and research average salaries for that area. Useful websites include: http://us.thesalarycalculator.co.uk/ and http://www.salary.com/. 2. Use credit cards sparingly. Remember that a $5 latte could cost you $15 or more in credit repayments, depending how quickly you repay the balance. If you use your credit card, pay “on-time, in-full, as agreed”. 3. Learn how to budget now – track monthly income and expenses so that you have a good overview of all your costs. You can use the budget planner provided to you by Student Funding Services, which is also available to download from: http://www.amsa.com/bor/forms/ 4. Make sure that you don’t live beyond your means – live like a student today, so you won’t have to later. 5. Start a folder for all your loan information, and keep copies of everything – Master Promissory Notes, and all other loan correspondence, for example. 6. ALWAYS open mail from your lender, guarantor or servicer, and inform them if your name, address or telephone number changes. How do I manage my credit? 1. Pay your bills on time – one day late can make a difference. Even if you don’t receive a payment notice from your lender, you are still required to make repayments on time; make sure that you contact your lender, if you do not hear from them. 2. Don’t max out your credit cards or open numerous accounts – both can negatively affect your credit. 3. Remember that establishing good credit now will benefit you later. 4. Review your credit report frequently and correct mistakes. 5. Credit Report agencies offer one free report per year and you can request these reports from the following websites: http://www.equifax.com/; http://www.experian.com/ http://www.transunion.com/, and http://www.annualcreditreport.com/ for all three. Disputes and Unresolved Problems If you find yourself in dispute with your lender, servicer or guarantor over repayment issues, then you can contact the US Department of Education Ombudsman for help and advice. You should only resort to this option if you have consistently tried to resolve any disputes directly with your lender, but to no avail. US Department of Education Ombudsman 830 First Street NE, Fourth Floor, Washington, DC 20202 Tel: (877) 557 2575 Website: http://www.fsahelp.ed.gov/ You can also contact Student Funding Services for general advice, and we will assist as best we can with any problems that you may encounter. 8 Lender Contact Details (Correct as of May 2008) Organisation Phone Number Website Email Enquiry form available at: http://www.aessuccess.org/ contact/index.shtml AES 800-233-0557 http://www.aessuccess.org/ ASA (guaranty agency and servicer for Bank of 800.999.9080 America, Wachovia, Chase, and others) http://www.amsa.com/index.cfm loaninfo@amsa.com Citibank 800-967-2400 Enquiry form available at: http://studentloan.citibank.com/sl https://studentloan.citibank csite/fr_p_repay.htm .com/s/slcsite/fr_conta.htm ECMC Minnesota:888.221.EC MC (3262) Virginia:888.775.ECM http://www.ecmc.org/ C (3262) Oregon:888.323.ECMC (3262) Enquiry form available at: http://www.ecmc.org/main/ contact_us.html Graduate Leverage 877 552-9906 Enquiry form available at: http://www.graduateleverage.co http://www.graduateleverag m/ e.com/contactus.aspx Enquiry form available at: https://www.mygreatlakes. org/borrower/content/borro wer/contact_us.html contact@iefc.com Great Lakes (800) 236-4300 http://www.mygreatlakes.org/ IEFC (servicer for some ASA loans) (888) 296-4332 http://www.iefc.com/ NELA (Northwest Education 800.979.4441 Loan Association) RIHEAA (Rhode Island Higher Education Assistance (401) 736-1100 Authority) RISLA (Rhode Island Student Loan Authority) SAF (Student Assistance Foundation) http://www.nela.net/ loaninfo@nela.net http://www.riheaa.org/ info@riheaa.org 800-758-7562 http://www.risla.com/ Enquiry form available at: http://www.risla.com/Gener al/info.aspx N/A Enquiry form available at: http://www.salliemae.com/c ontent/customer/contact.as p Enquiry form available at: https://stuhelp.org/contact. php 800-852-2761 ext. 6657 http://www.safmt.org/ Sallie Mae (General) (888) 2-SALLIE (888http://www.salliemae.com/ 272-5543) Student Help Foundation 866 655 HELP (4357) http://stuhelp.org/index.php Student Loan Xpress (888) 272-2701. http://www.studentloanxpress.co customerservice@xlservicin m/ g.com Assistance request form available at: https://ombudsman.ed.gov/ OmbudsmanWebApp/do?act ion=getRequest US Department of Education Ombudsman 877 557 2575 http://www.fsahelp.ed.gov/ 7