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ILASFAA Illinois Association of Student Financial Aid

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   Loan Repayment
     More Options
 Nancy Calvert, Associate Dean,
   Southern Illinois School of
            Medicine
   Donna Sobie, M.Ed., Loyola
University Chicago Stritch School
           of Medicine
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           Loan Repayment

 Exit Counseling Requirements
 Communicating with students
 Income Based Repayment
 Loan Forgiveness
 Loan Repayment Programs
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 Exit Counseling Requirements
Must be offered before student drops to less
  than half-time
 Required for Stafford, Perkins, and Grad
  Plus
 Students withdrawing w/o notice must
  complete online exit or be mailed exit
  materials within 30 days
 Schools must maintain documentation of
  completed counseling
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  Exit Interview Requirements

 Offer debt management strategies during
  loan repayments
 Provide information on student loan
  ombudsperson’s office
 Discuss borrower tax benefits
 Provide details on eligibility requirements
  for forbearance and cancellation
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  Exit Counseling Requirements
 Explain repayment options, ability to prepay and
  change terms.
 Provide examples of monthly repayment amounts
  based on the borrower’s level of indebtedness or
  the average student indebtedness at the same
  school and in the same program
 Review repayment plans and compare
     ---Average Monthly payments
         ---Interest Cost
     ---Total payments for each plan
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        Exit Loan Requirements
 Discuss Loan Consolidation
 --interest costs, fee and repayment time
 --borrower benefits on underlying loans
 --prepayment and change repayment plans
 --difference in benefits between lenders

 Provide terms and conditions to obtain loan forgiveness
 or discharge
 --Provide copy of DOE publication on assistance
 programs

 Explain and review the terms of the Master Prom Note the
 borrower signed.
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       Exit Loan Requirements
 Collect updated information on borrower and provide to
  guarantor within 60 days
 --Name
 --Address
 --SS# and DL#
 --References
 --Expected Permanent Address
 --Name and Address of Family Member who will have
  knowledge of borrower’s location
 --Name and Address of expected employer
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        Communicating Exit
    Loan/Repayment Information
How do you communicate exit interview
information to your students?

 On-line Exits
 One-on-one
 Outside speakers
 Use current communication technology
 Games/Quizzes
 Involve the Student
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Understanding
 Your Loans
    Federal Student Loan Database
    National Student Loan Data System (NSLDS)

    Information about your Stafford, Grad PLUS, Federal
    Consolidation and Perkins Loans is stored in the NSLDS

    •   Toll-free telephone:
         800 - 4FED - AID
    •   Web site:
         www.nslds.ed.gov

    You can access NSLDS with
    your SSN, first 2 letters of
    your last name, birth date
    and Dept. of Educ. PIN


                   Who must you repay?
         Create a Detailed Listing of All Your Loans
Loan Type/
Account #
                          Loan Holder                      Loan Servicer
               Name:                            Name:
               Address:                         Address:
Stafford       Phone Number:                    Phone Number:
               Website:                         Website:
               Name:                            Name:
               Address:                         Address:
PLUS           Phone Number:                    Phone Number:
               Website:                         Website:
Information on current loan holder/servicer of Title IV federal student loans is
stored in the NSLDS at: www.nslds.ed.gov
                              Looking Ahead
         What happens after graduation?
                              Does loan have a
                              GRACE period?


         YES                                          NO
  (e.g., Stafford, Perkins)               (e.g., Grad PLUS, Consolidation)




   Repayment                              Repayment resumes
   begins after                             after graduation
  grace period:
• 6 months – Stafford
• 9 months – Perkins
                                     Start making                  Postpone
                                      payments                    repayment
          How much have you borrowed
          and what will it cost to repay?
                                                                    End of 3-Year   End of 5-Year
                                         End of Grace
                                                                     Residency       Residency
                                          12/1/2010
                                                                      7/1/2013        7/1/2015
Average total
student loan borrowing                       $168,800                 $168,800        $168,800
Estimated capitalized interest                 $24,100                  $53,700         $76,700
Estimated total debt at
repayment                                    $192,900                 $222,500        $245,500
Estimated monthly loan
payment - 10 yrs                                 $2,220                  $2,561          $2,825
Estimated monthly loan
payment - 25 yrs                                 $1,339                  $1,544          $1,704
Assumptions:        Subsidized Federal Stafford Loan (SFSL) = $34,000
                     Fixed monthly payments @ 6.8% interest rate
                    Unsubsidized Federal Stafford Loan (UFSL) = $134,800
                    Fixed monthly payments @ 6.8% interest rate
                                            Loan Repayment
•                                     How Far Will My Paycheck Go?
•   INCOME:
•     My annual salary/wages:                    $__________
•     My spouse’s salary/wages:                  $__________
•     Other income: _________________                        $__________
•     Total annual income: (sum of above)                    $__________
•     MONTHLY INCOME: (Total annual income /12)                                $__________ (1)
•   WHAT I HAVE TO PAY FOR:
•     Taxes: (assume 1/3 of Total monthly income)                     $__________
•     Employment benefits: (e.g., your share of medical insurance)             $__________
•     Malpractice insurance:                     $__________
•     My monthly student loan payment:                       $__________
•
•     My spouse’s monthly student loan payment:                      $__________
•
•     My total monthly credit card payment:                   $__________
•       (assume monthly payment is 3% of total credit card balance and include all
•        other personal debt payments)
•     My spouse’s total monthly credit card payment:                      $__________
•     TOTAL OF WHAT I HAVE TO PAY EACH MONTH: (sum of above)                       $__________ (2)
•   DISCRETIONARY MONTHLY INCOME:
•     Total monthly income: (from Box 1)                      $__________ (1)
•     Total monthly required payments: (from Box 2)                       $__________ (2)
•     TOTAL MONTHLY AVAILABLE FOR LIVING EXPENSES: [(1) - (2)]                     $__________ (3)
•   WHAT I WANT TO PAY FOR:
•     Housing: (e.g., rent, mortgage)                $__________
•     Utilities/telephone:              $__________
•     Food:                  $__________
•     Transportation: (e.g., car payments, parking fees, insurance, gas, upkeep)            $__________
•     Clothing:              $__________
•     Insurance: (e.g., home. life, medical, dental)                      $__________
•     Retirement investments: (10% of gross monthly income)                        $__________
•     Other personal expenses: (e.g., entertainment, vacations, pet/personal care)          $__________
•     TOTAL OF WHAT I WANT TO PAY EACH MONTH: (sum of above)                       $__________ (4)
•   THE AMOUNT OF MONEY I HAVE LEFT OVER EACH MONTH: [(3) - (4)]                            $__________
•
    How Far Will My Paycheck Go??
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             Repayment Plans
 Standard (Fixed) Repayment
 Graduated Repayment
 Extended Repayment
 Income-Sensitive Repayment
 Income-Based Repayment (available 7/1/2009)

  Choice of a repayment plan may depend on your
 eligibility for that plan. Once you choose a plan, you
 can change to a different plan once a year provided
 you qualify for that plan.
Comparison of Repayment Plans
                                          Maximum
                           Payment
     Options                              Payment              Additional Features
                           Structure
                                           Period
Standard           Fixed                   10 years   - Highest initial payment
                                                      - Lowest total interest
                                                      - No negative amortization
Graduated          Tiered                  10 years   - Interest only payments initially
                                                      - Payments increase incrementally
                                                      - No negative amortization
                                                      - Monthly payments can’t be more than
                                                      three times greater than any other
                                                      payment (“3 times rule”)
Extended           Fixed or tiered         25 years   - Lowest initial payment without
                                                      considering income
                                                      - No negative amortization
                                                      - To qualify in FFELP:
                                                         - FFELP debt must be > $30,000
                                                         - New FFELP borrower ≥ 10/7/98
                                                      - No negative amortization
Income Sensitive   Adjusted annually       15 years   - Subject to “3 times rule”
                   based on:                          - No negative amortization
                   - Total gross income               - Eligibility/payment amount re-
                                                      evaluated annually
Income Based       Adjusted annually       25 years   - Payment is 15% of “disposable”
                   based on:                          income if experiencing “partial financial
(IBR)              - Household AGI                    hardship” at time you request IBR
                   - Household size                   - Eligibility/payment amount re-
                   - Poverty guideline                evaluated annually
                   - State of residence               - Negative amortization allowed
       Comparing Payment Plans
       $192,900 Stafford Loan Balance
                 Standard            Graduated                Extended                 IBR            ISR
                                                          $1,339 (fixed)
                                    $1,093 (2 yrs)
  Monthly                                                          OR                 $391 (1st $1,093 (1st yr)
                  $2,220
  Payment                                                                                   yr)
                                    $2,611 (8 yrs) $1,093 (2 yrs)
                                                   $1,384 (23 yrs)
 Maximum
 Payment           10 yrs               10 yrs                  25 yrs                 n/a            n/a
  Period

                                                            $401,660 or
 Total Paid     $266,388              $276,870                                         n/a            n/a
                                                             $408,236

Assumptions:   - 6.80% fixed interest rate
                - No payment incentives
                - For IBR: - Household AGI = $47,500 in year 1
                              - 2009 Poverty Guideline for household size of 1 = $10,830
                - For ISR: - Household AGI = $47,500 in year 1, 4% of income used
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                             IBR
 Effective date:
       July 1, 2009
 Eligibility criteria:
   Available for repayment of FFEL/Direct
  Stafford, Grad Plus, and Federal
  Consolidation Loans (FCL)
    Cannot be used to repay Parent PLUS Loans
    Cannot be used to repay FCL that included payoff of a Parent PLUS
 loan
 You must have ―Partial Financial Hardship‖
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                          IBR
You are considered to have ―Partial Financial
 Hardship‖ when:
 ―The annual amount due on your total eligible federal
  student loan debt in repayment,
 When calculated using the Standard Repayment Plan
  based on a 10 year repayment period,
 Exceeds 15%of your household AGI above 150%of the
  poverty line for your family size (includes spouse’s
  income, if married, and filing joint federal tax return).
 If eligible, the IBR monthly payment is 1/12th of 15% of
  the AGI above 150% of the poverty line.‖
      Portion of AGI Available for Loan
               Payment in IBR
            ―Disposable‖




                                                 AGI available for
               Income




                                                 other expenses
Total AGI




                                                 AGI available for
                                                IBR loan payment
                                                 (15% of “disposable”)


                                                  AGI needed to
                                                cover basic needs
                                                 (150% of poverty line)

      Calculators are available at: MappingYourFuture.Org, IBRinfo.org
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Income Based Repayment (IBR)

                      Potential Pros
 Lowest initial monthly loan payment—Capitalizes
  payment as a % of disposable income—Intention is
  that no student loan will be more than 15% of
  disposable income.
 Possible to exclude spouse’s income
 If spouse has loans than the payment will still be
  15% of total disposable income. Amount of
  payment reflected in % each has of total.
                                        IBR
                            Pros and Cons

         Potential Pros                         Potential Cons
• Lowest initial monthly loan           • Increased interest will accrue and
  payment                                 may have negative amortization
                                        • If married might need to file
• Possible to exclude spouse’s
                                          separate tax returns
  income
                                        • Unpaid interest will be capitalized
• ED will pay unpaid interest on          at some point
  subsidized Stafford for up to 3 yrs
                                      • Annual income and family size
• Loan cancellation after 25 years of   verification required
  eligible payments
                                      • Monthly payments could change
                                        each year
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    Income Based Repayment
 ED will pay unpaid interest on subsidized
  Stafford for up to 3 years.
 Loan cancellation after 3 years of eligible
  payments
 Borrow can elect to remain in IBR even
  if/when no longer meeting hardship
  requirement
 Tax benefit for interest paid
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     Income Based Repayment
 Potential Cons
 Increased interest will accrue and may have
    negative amortization
   If married might need to file separate tax returns
   Unpaid interest will be capitalized at some point
   Annual income and family size verification
    required
   Monthly payments could change each year
             IBR—Who will qualify?
Approx. Maximum AGI Needed to Qualify for IBR
  at Specified Debt (2009 Poverty Guidelines)
DEBT        AGI       Debt       AGI
$ 5,000   $20,848    $65,000     $76,087
$10,000   $25,451    $70,000     $80,690
$15,000   $30,055    $75,000     $85,293
$20,000   $34,658    $80,000     $89,896
$25,000   $39,261    $85,000     $94,500
$30,000   $43,864    $90,000     $99,103
$35,000   $48,467    $95,000    $103,706
$40,000   $53,071   $100,000    $108,309
$45,000   $57,674   $105,000    $112,912
$50,000   $62,277   $110,000    $117,516
$55,000   $66,880   $115,000    $122,119
$60,000   $71,484   $120,000    $126,722
                    $125,000    $131,325
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               IBR
      More Payment Provisions
 IBR allows for negative amortization
 Unpaid interest that accrues on
  qualifying subsidized Stafford debt will
  be paid for up to 3 years
 Unpaid interest can be capitalized by
  your loan holder if you terminate IBR or
  no longer have PFH
 Repayment period using IBR can extend
  beyond 10 years
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                 IBR
       A Few Things to Consider
 Can reduce minimum monthly payment
 Will increase total cost of debt
 Does not replace Income Sensitive or
  Income Contingent Repayment options
 Extended Repayment- is an option that
  avoids negative amortization and annual
  income verification.
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                 IBR
   Loan Cancellation After 25 Years
 Any outstanding eligible FFEL or Direct loan balance (other
  than PLUS) is cancelled after 25 years.
 To qualify, you must have been “economically challenged”
  during ALL of the 25 year repayment period.
 To be “economically challenged,” you must have used IBR
  during a portion of the repayment period, AND when not using
  IBR you:
   Made monthly loan payments using Income Contingent
    Repayment (ICR), or
   Made monthly payments at least equal to the amount
    required using the Standard 10-Year Repayment Plan, or
   Were in an Economic Hardship deferment.
 Any loan amount that is cancelled may be taxable in the
  calendar year in which it is cancelled.
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       Loan Forgiveness Program

--Requirements:
 Must have all eligible loans with the Direct
    Loan Program
      *Stafford Subsidized and Unsubsidized
    *Grad Plus
    *Certain HHS Loans but the Department is
  unsure
     of which loans
    *Perkins not included unless consolidated
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            Loan Forgiveness
 Cannot be in default on any eligible loan.
 Must make 120 payments under the IBR/ICR and/or
  Standard Repayment Program beginning 10/07
 Payments do not need to be consecutive
 Must be employed full-time by a public service
  organization during the repayment period and at
  the time that they apply for forgiveness
 Designation of public service organization must be
  intact the entire 120 months
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             Loan Forgiveness
 Public Service Definition
  A federal, state, local or Tribal government organization,
   agency or entity.
  A public child or family service agency

  A non-profit organization under section 501(c)(3)of the
   IRS Code that is exempt from taxation under Section
   501(a) of the code
  A tribal college or university
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              Loan Forgiveness
 Public Service Organization—                 A private
  organization that provides public services such as
  Emergency management, military service, public safety,
  law enforcement, public interest law services, public
  childcare, public service for individuals with disabilities
  and the elderly, public health, public education, public
  library services, school library or other school-based
  services
 Is NOT a business organized for profit, a labor union,
  partisan political organization or religious organization
 Peace Corps and Americacorps also qualify
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          Loan Forgiveness
 Burden of proof is on borrower. No clear
  guidance on what proof must be kept.
 Program is not funded currently because
  initial qualifying borrowers won’t qualify
  until 2017.
 Value of forgiven loan is not taxable
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         Loan Repayment

Other Repayment Programs
 National Health Service Corp
 NIH
 State Loan Repayment Programs
 Hospital Loan Repayment Programs
 County Loan Repayment Programs
 AAMC Web Site
     Public Service Loan Forgiveness Pros
                               and Cons
          Potential Pros                       Potential Cons
• May make it possible financially   • “All or nothing” benefit; must put
  for you to pursue public service     in full 10 years
  career                             • Only Direct Loans can be
• Portion of your debt may be          forgiven—you’ll need to
  forgiven                             consolidate FFEL loans into Direct
• Entitlement                          Loan Program to be eligible
                                     • Will you have debt left to forgive?
                                     • No confirmation that employment
                                       qualifies

				
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