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Loan Repayment Handout USS

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Loan Repayment Handout USS Powered By Docstoc
					Understanding Your Options
Who s
Who’s Who in the Student Loan World
    School: The financial aid office of the school you attend. This office develops
     your financial aid package and provides financial information and support.
     Your school is still a resource even after graduation.

    Lender: The bank or Federal government (Direct Loans) that provides the
     money for your loan.

    Guarantor: A non-profit organization that works with the Department of
     Education, lenders, servicers, and universities to ensure student loan
     borrowers successfully repay their loans.

    Servicer: An organization that acts as a liaison on behalf of your lender to
     collect payments on your student loan as well as administer customer service.

 Important!
  If your address, name, Social Security number, enrollment status, or, most
   importantly, your ability to repay your loan changes, CONTACT YOUR
   SERVICER IMMEDIATELY!
   Visit www.nslds.ed.gov to view a list of all your federal
    student loans.
    st dent loans

   To access your account, select “Financial Aid Review” on the
    home page and enter your Social Security number, the first
    h              d            S i lS     i        b    h fi
    two letters of your last name, your date of birth, and your
    personal identification number (PIN).

   If you forgot your PIN, wish to change it, or have to apply for
    a new one, visit www.pin.ed.gov.

   NSLDS is the best resource for information on all the federal
    student loans you have borrowed.
◦ Subsidized Stafford Loan:
  • Based on a borrower’s need.
  • Interest is paid by the government while you are in school, during your grace period,
    I t    ti     id b th            t hil           i    h l d i                    i d
    and during deferments.
◦ Unsubsidized Stafford Loan:
  • Available regardless of a borrower’s demonstrated financial need.
  • Interest accrues whether you are in school, in your grace period, or in deferment, and
    you are responsible for paying it.
  • 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.
◦ Graduate PLUS Loan:
  • Available regardless of a borrower’s demonstrated financial need.
  • Interest accrues whether you are in school, in your grace period, or in deferment, and
                      ibl for
    you are responsible f paying ii  it.
  • 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.
• All Stafford loans disbursed between July 1, 1994, and June 30, 2006,
                                    pp
 continue to have a variable rate capped at 8.25.
• All Stafford Unsubsidized loans disbursed after July 1, 2006, have a
 fixed interest rate of 6.8 percent.
                                                     1, 2006,
• All Stafford Subsidized loans disbursed after July 1 2006 and before
 July 1, 2009, have a fixed interest rate of 6.0 percent.
• For Stafford Subsidized loans disbursed after July 1, 2009, and before
 July 1, 2010, the interest rate will be fixed at 5.6 percent.


• All Stafford loans for Graduate students disbursed after July 1, 2006
                                                           J y ,
 have a fixed interest rate of 6.8 percent.
• All Graduate PLUS loans have a fixed rate of 7.9 percent (FFEL = 8.5
 percent).
 percent)
   With certain subsidized loans, the U.S. Department of
    Education pays the interest that accrues on these loans
        e the student s enrolled     east a t e and during
    while t e stude t is e o ed at least half-time a d du g
    periods of deferment.

   However, with subsidized loans in forbearance,
         b idi d loans or PLUS Loans, th b
    unsubsidized l              L                     is
                                         the borrower i
    responsible for paying interest as it accrues on these
    loans.

   When the interest is not paid, it is capitalized or added to
    the principal balance, which increases the outstanding
    principal amount due on this loan.

   Interest that is capitalized and added to the original
    amount of the loan subsequently accrues interest, adding
                      p
    an additional expense to the loan.
Loans may have origination fees deducted from the total amount
disbursed to the school:
      • 2.5 percent on loans first disbursed on or after July 1, 2007 and
        before July 1, 2008.
        2.0       t    loans fi t disbursed on or after J l 1 2008 and
      • 2 0 percent on l     first di b   d        ft July 1,        d
        before July 1, 2009
      • 1.5 percent on loans first disbursed on or after July 1, 2009 and
        before July 1, 2010.
      • 4.0 percent for Graduate PLUS loans.
   Direct Stafford and Graduate PLUS loans include a repayment incentive:
         1.5 percent for loans first disbursed on or after July 1, 2000 and before July 1,
          2009.

         1.0 percent for loans first disbursed on or after July 1, 2009 and before July 1,
          2010.

                                        15                    incentive.
          All Graduate PLUS loans have a 1.5 percent repayment incentive

   The repayment incentive is rebated to you at the time of disbursement.


   To maintain this rebate, you must make your first 12 payments on time
    excluding any periods of deferment or forbearance.


   As an incentive to use the EDA (electronic debit account) repayment method,
    the Direct Loan Program is offering a quarter point (.25%) reduction in your
                                periods                     1, 1999.
    interest rate for repayment periods, effective November 1 1999
   Grace periods begin the day a student withdraws, graduates,
    or drops below half-time enrollment.
             belo half time enrollment

   Payments are not required during grace periods.

   Stafford Loans have a 6-month grace period.

   Perkins Loans have a 9-month grace period.

   Graduate PLUS loans do not have a grace period
                                            period.
   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 subsidized Stafford Loan for a specified period;
    however, interest on unsubsidized loans will be added to your
    principal balance when your deferment ends.

                                    conditions
    If you meet any of the following conditions, you may qualify for a
    deferment:
       Economic hardship
       Unemployment
       Full time
        Full-time enrollment in school
       Graduate fellowship
       Rehabilitation training
       Military (for loans disbursed on or after July 1, 2001)

   Contact your servicer 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.
    t       fd f       t
   Forbearance is similar to deferment because it’s a temporary
    postponement to your repayment schedule—usually from 6
    months to 12 months in length.

   During forbearance, interest accrues on both subsidized and
    unsubsidized loans and you must repay it eventually.

   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
     li ibilit      i     t    d to    l
    eligibility requirements and t apply.
•   Loans must be repaid in full even if you:
        Do not finish school.
        Are not satisfied with your school or program.
        Do not find a job after graduation.
•   You are required to pay your loan—even if you don’t receive a bill—so
    make sure your servicer has your current contact information.


•   You may change your repayment plan once per year (or once you
    qualify for Income-Based Repayment).


•   You can always prepay your federal student loans with no penalty.
                y p p yy                                     p     y


•   If you’re having trouble repaying, call your servicer.
   Standard: You generally pay a fixed amount each month for up to 10 years. Your
    payment must be at least $50 a month.

   Graduated: Make lower payments—as low as the interest accruing on your loan—
    for up to 4 years, lowering your initial payments by as much as 40 percent.
    Payments then increase (usually every 2 years) so the loan is still repaid in 10
    years.

   Extended: Extend your monthly payments for up to 25 years, either paying the
    same amount each month or gradually paying more over time. If you have more
    than $30,000 in outstanding student loans (aggregate totals are separate for FFEL
    and Direct).

   Income-Contingent: Your monthly payment is based on your income (including
    spouse), your family size, and the total amount of your Direct Loans. Borrowers
    have 25 years to repay, the unpaid portion will be forgiven. However, you may
    have to pay income tax on the amount that is forgiven.

   Income-Based: Your required monthly payment amount will be based on your
    income during any period when you have a partial financial hardship. Your
    payment may be adjusted annually. The payment period may exceed 10 years.

                                                          Another option:
                                                          Consolidation
Standard Repayment
    Minimum monthly payment is $50.


    Monthly payment will typically be more than $50 to ensure
     your loan is repaid within 10 years.


    Keeps finance charges to minimum.


    Most cost-effective repayment option—you pay the least
     interest.
Graduated Repayment
    Make lower payments at the beginning of repayment. The
     minimum payment must cover the interest that accrues
     between payments.

    Although your monthly payment will gradually increase, no
     single payment under this plan will be more than three times
     greater than any other payment.

    Payments usually increase every 2 years.

    A good alternative if you anticipate your income will increase in
     the future.

              p y              0y
     Maximum repayment term is 10 years.
Extended Repayment
    For borrowers with more than $30,000 in loan debt.

    Payment amounts can be either fixed or graduated.

    Extends your repayment term.

    Maximum repayment term is 25 years.

    Minimum monthly payment is $50.

    More expensive because extending your term increases the
     time you pay interest.

    Available to borrowers whose oldest loan was
     originated on or after October 7, 1998.
                         Term           Initial Monthly        Total Payments
Repayment Plan
                     (in     )
                     ( Months)                  y
                                             Payments      (Interest+Principal)
                                                           (               p )



Standard                  120                $ 575.40              $ 69,048.00



Extended
                          300                $ 347.04             $ 104,112.00
Fixed
                          300                  283.33
                                             $ 283 33               112,770.22
                                                                  $ 112 770 22
Graduated


Graduated
                          120                $ 395.09              $ 72,777.79
                                                                       ,
(see Note 1 below)


                          Note 1: This is an estimated monthly repayment amount for
                          the first two years of the term and total loan p y
                                        y                                payment. The
                          monthly repayment amount will generally increase every
                          two years, based on the gradation factor in the graduated
                          repayment rules.
Income-
Income-Contingent Repayment
    Your monthly payment is based on your income (including spouse),
     your family size, and the total amount of your Direct Loans. Borrowers
     have 25 years to repay, the unpaid portion will be forgiven. However,
             have to pay income tax on the amount that is forgiven.
     you may h             i              h           h i f      i

    Under the ICR plan you will pay each month the lesser of:
     ◦ the amount you would pay if you repaid your loan in 12 years multiplied by an
       income percentage factor that varies with your annual income, or
     ◦ 20% of your monthly discretionary income*.


    Payments may not cover accrued i t
     P       t         t            d interest. A      d interest will b
                                             t Accrued i t      t ill be
     capitalized once each year. However, capitalization will not exceed 10
     percent of the original amount you owed when you entered repayment.


    Available for Graduate PLUS borrowers as of July 1, 2009.

                    *Monthly discretionary income equals your AGI minus the poverty level for your state of residence and family size,
                    di id d b 12 F th current poverty l
                    divided by 12. For the      t            l
                                                      t level, see th P
                                                                   the Poverty Guidelines Ch t which i i
                                                                            t G id li     Chart, hi h is issued annually b th U S
                                                                                                                 d      ll by the U.S.
                    Department of Health and Human Services.
                     Term                Initial Monthly                             Total Payments
Repayment Plan
                     (in Months)         Payments                                    (Interest+Principal)


Standard                           120                       $ 575.40                                     $ 69,048.00

Extended
Fixed                              300                       $ 347.04                                  $ 104,112.00
Graduated                          300                       $ 283.33                                  $ 112,770.22

Graduated
                                   120                       $ 395.09                                     $ 72,777.79
(see Note 1 below)

Income Contingent
                                   289                       $ 236.17                                  $ 110,196.56
(see Note 2 below)
                                              Note 1: This is an estimated monthly repayment amount for the first two years
                                                                         p y                y p y
                                              of the term and total loan payment. The monthly repayment amount will
                                              generally increase every two years, based on the gradation factor in the
                                              graduated repayment rules.

                                              Note 2: This is an estimated repayment amount for the first year and total loan payment,
                                              based on the information you provided (Income of $25,000). This repayment amount will be
                                              recalculated annually and is subject to change based on the poverty guidelines for your
                                              family size as determined by the U.S. Dept of Health & Human Services. This plan has a
                                              maximum term of 25 years.
Income-
Income-Based Repayment
    It is designed to make repaying education loans easier for students who
     intend to pursue jobs with lower salaries, such as careers in public service.

    IBR caps the monthly payments at a percentage of the borrower's
     discretionary income, which is based on the borrower's income and family
     size, not the total amount borrowed.

    The monthly payment amount is adjusted annually, based on changes in
     annual income and family size.

    Under this l the       i d     thl         t ill be based on your
     U d thi plan th required monthly payment will b b        d
     income during any period when you have a partial financial hardship.

    Maximum repayment period is 10 years.
               p y     p            y

    If you meet certain requirements over a specified period of time, you may
     qualify for cancellation of any outstanding balance of your loans.
For more information
about IBR visit:
www.studentaid.ed.gov
www.ibrinfo.org
www.finaid.org
Payments are calculated using the fixed interest rate of 6.8 percent for Stafford Loans first disbursed on or after July 1, 2006.
aFor a FFEL borrower, the requirement is that the borrower (1) must have had no outstanding balance on a FFEL Program loan as of Oct. 7, 1998, or on the date the borrower

obtained a FFEL Program loan on or after that date, and (2) must have more than $30,000 in outstanding FFEL Program loans. For a Direct Loan borrower, the requirement
is that the borrower (1) must have had no outstanding balance on a Direct Loan Program loan as of Oct. 7, 1998, or on the date the borrower obtained a Direct Loan Program
loan on or after that date, and (2) must have more than $30,000 in outstanding Direct Loan Program loans. The amounts were rounded to the nearest dollar and were
calculated based on a 25-year repayment plan.
                                                                                    bThis is an estimated monthly repayment amount for the first two years of the term and total

                                                                                    loan payment. The monthly repayment amount will generally increase every two years,
                                                                                    based on this plan.
                                                                                    cAssumes a 5 percent annual growth (Census Bureau) and were calculated using the

                                                                                    formula requirements in effect during 2006.
                                                                                    dHOH is Head of Household. Assumes a family size of two.
   You may combine all your federal student loans into one new
    loan.
    loan

   Your new maximum repayment term is based on the total loan
    amount and can be 10–30 years.
                            y

   Interest rates are fixed and are calculated by taking the
    weighted average of the original loans and rounding up to the
                 percent.
    nearest 1/8 percent

   This option may lower your monthly payments; however, if
    you extend your term, you will pay more in interest.

   Offers many pros and cons—research all your options
    before committing.
Consolidation: Interest Calculation

    Consolidation loan interest rates are calculated by taking the
     weighted average of the interest rates on your original loans
     and rounding up to nearest 1/8 percent (with the highest rate
     being 8.25 percent).


$8,500    x 7 percent = $595

$10,000 x 5 percent = $500          $1860 ÷ $27,000 = 6.888 (0.0688)
                                    6.888 percent rounded to nearest
$8,500    x 9 percent = $765        1/8 percent (0 125) = 7 0 percent
                                                (0.125) 7.0
$27,000           $1860
Consolidation: Maximum Repayment Terms
    Amount Borrowed     Repayment Term
    Less than $7,499    10 years
    $7,500 – $9,999     12 years
    $10,000 $19,999
     $10 000 – $19 999   15 years
    $20,000 – $39,999   20 years
    $40 000 – $59 999
     $40,000 $59,999     25 years
    More than $60,000   30 years
Consolidation
    In order to be eligible for a consolidation loan, borrowers
     must:

      Be in their grace period or repayment status.
             y         y                                    pp
      Certify that they do not have another consolidation application
       pending.
      Not owe grant or loan refunds.

    You can apply with any lender offering consolidation loans,
     even if all your loans are with a different lender.

        l        ld        d
     www.loanconsolidation.ed.gov
Loans Eligible for Consolidation

    Federal Family Educational Loan Program (FFELP) Loans
                                   g    ( )
     William D. Ford Direct Loan Program (DL) Loans
    Subsidized Stafford Loans
    Unsubsidized Stafford Loans
    PLUS Loans
    Perkins Loans
                                     (HPSL),
     Health Professions Student Loans (HPSL) including Loans
     for Disadvantaged Students (LDS)
    Nursing Student Loans (NSL)
    Health Education Assistance Loans (HEAL)
    Federally Insured Student Loan (FISL)
Loans That ARE NOT Eligible for Consolidation
    Defaulted loans (unless satisfactory repayment
     arrangements are made)
    Credit card debt
    State or private loans not guaranteed by the federal
     government
    Primary Care Loans
    Law A
     L          Loans
         Access L
    Medical Assist Loans
    PLATO Loans
Advantages of Consolidation
    You will have to make only one monthly loan payment.

    There will be a single contact for all your customer service

     needs.

    Your monthly payment amount will be lower.

    You’ll receive a longer repayment term—up to 30 years.
     You ll
Disadvantages of Consolidation

    More interest will accrue on and be added to your loan as a
     result of the longer payment period.

    You will lose benefits tied to your original loans. For
           p ,                         q       g
     example, Perkins loans have unique forgiveness benefits
     that you would lose if you consolidate.

    Co so dat o cou d affect:
     Consolidation could a ect
          Your eligibility for deferments, discharges, and forgiveness.
          Your interest subsidy.


    If you consolidate during your grace period, you will lose
     the remaining grace period on your Stafford Loans.
     q    y
Delinquency and Default
    Delinquency:
             g         p y              y
     ◦ Failing to make payments when they are due.

     ◦ Even 1 day late can be considered delinquent.

     ◦ Paying late may adversely affect your credit.

     ◦ Late payments may also result in additional fees.

     ◦ Could eventually lead to default.

    Default:
     D f lt
     ◦ Failing to make a payment on your loan for 270 days.

     ◦ Adversely affects your credit.
        d e se y a ects you c ed t

     ◦ Adds 18 percent or more in collection costs to your loan balance.
Consequences of Default

    While a default is on your credit report, it may greatly affect
                                                   employment,
     your ability to rent an apartment or obtain employment car
     loans, mortgages, credit cards, etc.

    Other negative effects of default can include:
     ◦ Up to 15 percent of your wages being garnished.
     ◦ Your federal and state income tax refunds being seized.
            gy     professional license(s).
     ◦ Losing your p                   ( )
     ◦ Legal action, including civil claims, liens, etc., being taken against you.
     ◦ Losing your eligibility for federal student aid and other benefit programs.
Loans may be discharged/cancelled for the following
reasons:

◦ Death


◦ Total and permanent disability


  Closed school
◦ Cl   d h l


◦ False loan certification


◦ School failed to repay a refund
   Loans may be forgiven in part. Some common reasons
    include:

    ◦   Americorps: visit www.americorps.org for more information
    ◦   Military personnel through Department of Defense
    ◦   Teacher Loan F
        T    h L           i
                       Forgiveness
    ◦   Full-time child care provider
    ◦   Public Service Loan Forgiveness
    ◦   Loan Forgiveness for Service in Areas of National Need




   Contact your servicer, or visit www.studentaid.ed.gov, f
    C                i         i i         d    id d       for
    more information
   Deduction for student loan interest

   Hope Credit

     f
    Lifetime Learning Credit

   Employer education assistance

   Tuition and fees deduction

IRS Publication 970: Tax Benefits for Education
   Pay your bills on time—1 day late can make a difference.

   Don’t max out your credit cards—aim to carry balances no more
            p          your available credit.
    than 25 percent of y

   Keeping older accounts open and active can increase your credit
    history and debt-to-available credit ratio, but don’t open numerous
    credit cards as a short-term way to increase your credit score.

   Establishing good credit now will benefit you later.

   Review your credit report frequently and correct mistakes.

   Consumer reporting agencies must offer you one free report per
    year:
       q
     ◦Equifax              www.equifax.com
                                q
     ◦Experian             www.experian.com
     ◦TransUnion           www.transunion.com

   Visit www.annualcreditreport.com for copies of all three.
  U.S. Department of Education
           Ombudsman
830 First Street N.E., Fourth Floor
    Washington, D.C. 20202
          877.557.2575
          877 557 2575
       www.fsahelp.ed.gov
                 LRAP
Supporting Tufts Graduates
Employed in Public Service
     i    it   id           th t h l   l t d T ft
A university-wide program that helps selected Tufts
graduates working in public service pay a portion of
their annual education loan bills.
             graduates with undergraduate, g
    All Tufts g                   g       , graduate
    or professional degrees.

   Repaying educational loans incurred for the
    purpose of attending Tufts as certified by the
    Financial Aid Office at Tufts or be in a grace
    Fi     i l    Offi    t T ft     b i
    period.

   Employed full time by a non-profit (501c3 or
    equivalent) or public sector organization.
http://lrap.tufts.edu
http://lrap tufts edu
lrap@ase.tufts.edu
lrap@ase tufts edu

     617-627-4440

				
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