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									Student Loan Exit Counseling
Your Guide to Successful Repayment

© 2008 Iowa College Student Aid Commission

Why are we here?
o Rights and responsibilities o Help with successful loan repayment o Answer questions

© 2008 Iowa College Student Aid Commission

Congratulations!
o Graduating o New career o Further education o Challenges

© 2008 Iowa College Student Aid Commission

Facing New Opportunities
o New sources of income o New expenses o Student loan payments
o Meet financial obligations now o Fulfill your future goals

© 2008 Iowa College Student Aid Commission

Life After College
o Continuing your education
o In-school deferment o Half-time enrollment o Contact your loan holder

o Establish a budget

© 2008 Iowa College Student Aid Commission

What to Expect
o What part of financial aid must be repaid?
o Loans – must be repaid

o Scholarships & grants
o Gift aid – does not have to be repaid

© 2008 Iowa College Student Aid Commission

Don’t Monkey Around!
o Know your loans!
o o o o o o o Perkins Subsidized Stafford Unsubsidized Stafford Parent PLUS – parent obligation Grad PLUS Other institutional loans Private

© 2008 Iowa College Student Aid Commission

What to Expect
o Preparing for repayment
o New job o New location o Lifestyle decisions o Solid credit history o First payment o Loan holder o Date 1st payment is due o Select repayment plan

© 2008 Iowa College Student Aid Commission

What to Expect
o Grace period
o 6 continuous months o Begins day after leaving school o One grace period for each loan o Did you take a break? o Repayment schedule o Didn’t get one? o Contact loan holder o Update information

o Grad PLUS loans have a 6 month deferment
© 2008 Iowa College Student Aid Commission

Correspondence to Expect
o Possible new loan contact
o Notified in writing

o Terms & Conditions
o Remain unchanged

© 2008 Iowa College Student Aid Commission

Correspondence to Expect
o Repayment plan options o Repayment schedule & disclosure statement
o o o o o Total amount Interest rate Monthly payment amount Number of months Due date

o Total principal and interest

© 2008 Iowa College Student Aid Commission

Correspondence to Expect
o Borrower benefit plans vary by lender o Electronic payment options
o Auto withdrawals o On-time o Incentives

o Monthly statements
o Billing statement o Coupon book

© 2008 Iowa College Student Aid Commission

Who Do You Contact?
o Lender o Financial aid office

o On-line resources
o Iowa College Student Aid Commission

© 2008 Iowa College Student Aid Commission

Your Rights
o To pre-pay without penalty o To repay over a period of at least 5 years
o Standard repayment of 10 years

o To pay on a shorter schedule o Your choice of a repayment plan
o May request a change in repayment plans no more than once a year

© 2008 Iowa College Student Aid Commission

Your Rights
o To request deferment of your loan payments o To request a forbearance o Loan cancellation, if you meet certain criteria o To have any questions answered by your school, lender, guarantor or U.S. Dept of Ed
o Ombudsman’s office o www.ombudsman.ed.gov o 1-877-557-2575
© 2008 Iowa College Student Aid Commission

Your Responsibilities
o Notify your loan holder if you change any of the following:
o o o o o Name Address Phone number Social Security Number Enrollment status

© 2008 Iowa College Student Aid Commission

Your Responsibilities
o You must repay your loan whether or not you:
o Complete your program o Complete your program within the regular time allotted o Are satisfied with your education o Are unable to find employment

o Make on-time payments o Contact your loan holder if unable to make a scheduled payment
© 2008 Iowa College Student Aid Commission

Salary & Your Loans
o Don’t over-estimate your salary o How much can you afford?

o 8 percent rule

© 2008 Iowa College Student Aid Commission

Standard Repayment Plan
o o o o o Equal monthly payments 10 years $50 minimum Defaults to this plan Most favorable
o Least interest paid

© 2008 Iowa College Student Aid Commission

Graduated Repayment Plan
o Payment starts low o Increases gradually – usually every two years o 10 years o Pay more in interest

© 2008 Iowa College Student Aid Commission

Extended Repayment Plan
o o o o First borrowed on or after 10/07/98 Owe more than $30,000 Fixed or graduated payments Up to 25 years

© 2008 Iowa College Student Aid Commission

Income Sensitive Plan
o o o o o FFELP only Payment starts low Increase as income rises Percent of gross monthly income Provide income documentation annually

© 2008 Iowa College Student Aid Commission

Income Contingent Plan
o o o o Direct Loans only Adjusted each year Maximum repayment period is 25 years Based on:
o o o o AGI on U.S. income tax return Family size Interest rate Total Direct Loan debt

o Authorize IRS to provide DE income

© 2008 Iowa College Student Aid Commission

Income Based Plan
o FFELP and Direct o Annual amount due on your eligible loans must exceed 15% of your discretionary income as determined by the difference between your AGI and 150% of the federal poverty line for your family size o Available on July 1, 2009

© 2008 Iowa College Student Aid Commission

Pay More!
Loan Term: 10 Years Loan Term: 8 Years

Interest Rate:
Principal Balance: Monthly Payment: Total Payments:

6.8%
$12,000 $138.10 $16,572

Interest Rate:
Principal Balance: Monthly Payment: Total Payments:

6.8%
$12,000 $162.41 $15,591

Savings of 2 years PLUS $981! Paying only $24.31 more per month!
© 2008 Iowa College Student Aid Commission

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Consolidation
o Combines existing federal student loans
Single loan One monthly payment Must be in grace period or repayment Interest recalculated - weighted average No fees to consolidate Repayment term may increase from 10 to 30 years! o Lose grace period o o o o o o

o Cannot combine Federal & private loans
© 2008 Iowa College Student Aid Commission

Consolidation
o Primary benefits:
o Lower monthly payments o Payments to one loan holder o Borrower benefits vary by lender o Interest rate reduction o Automatic payments o On-time payments

© 2008 Iowa College Student Aid Commission

Consolidation
o Primary Disadvantages:
o o o o More interest Paying for longer time Forfeiture of 6-month grace period Possible loss of deferment, forgiveness or other benefits

© 2008 Iowa College Student Aid Commission

Consolidation
o Can loans be consolidated more than once?
o If not all loans were in original consolidation OR o Additional loans were borrowed before or after the original consolidation

© 2008 Iowa College Student Aid Commission

Budgeting
Income - Expenses Net Income

© 2008 Iowa College Student Aid Commission

Income vs. Expenses
o Get a roommate o Use public transportation o Telephone options o Is cable a must? o Shop with a list o Use coupons o Don’t shop when you’re hungry o Limit ATM usage o Don’t overdraw your bank account or credit card o Review your student loan repayment options

© 2008 Iowa College Student Aid Commission

Plan for Your Future
o Savings – pay yourself first
o 3 – 6 months income set aside

o Credit cards
o Limit their use

© 2008 Iowa College Student Aid Commission

Deferment
o Allows you to temporarily postpone payments for certain situations o Federal government pays the interest on subsidized loans only o Examples:
o o o o o o o In-school at least half time Unemployment Economic hardship Military service Active duty Rehabilitation training Grad PLUS borrowers after dropping below half time

© 2008 Iowa College Student Aid Commission

Forbearance
o Allows you to temporarily postpone payments or pay a lesser amount o Interest will continue to accrue on all loan types

© 2008 Iowa College Student Aid Commission

Cancellation & Repayment Programs
o Discharge and cancellation benefits are available for specific circumstances
o o o o o o o o o o o Total and permanent disability or death Full-time teacher in specific areas Full-time nursing in some areas Public service (Direct Loans only) Bankruptcy (in rare cases) Closed school Identity theft School falsely certifies eligibility or failed to return funds National need employment areas Civil legal assistance attorneys Prosecutors and public defenders

© 2008 Iowa College Student Aid Commission

Delinquency
o Late on a payment o Loan holder may:
o Charge a late fee o Revoke benefits o Report delinquency to national credit bureau

© 2008 Iowa College Student Aid Commission

Stay Current
o o o o o Have automatic withdrawals Do NOT ignore mail/calls from loan holder Report changes Discuss options as needed Communicate

© 2008 Iowa College Student Aid Commission

Default
o Consequences
o Collection costs up to 25% of outstanding balance o Wages garnished up to 15% o Income tax refunds, federal treasury payments and social security payments can be withheld o Damage to your credit rating o Loss of future federal and state aid eligibility!
© 2008 Iowa College Student Aid Commission

Default
o More consequences
o Loss of certain licenses o Loss of deferment, forbearance and repayment eligibility o Demand for immediate repayment o Referral to a collection agency o Possible civil suit to force payment o Official academic transcripts may be withheld by your school

© 2008 Iowa College Student Aid Commission

Avoid Default!!!!
o o o o Borrow responsibly Set a budget Communicate with your loan holder Contact loan holder at first sign of trouble

© 2008 Iowa College Student Aid Commission

Consequences of High Credit Card Debt
o Loss of job opportunities
o Employers check credit o High debt/Poor payment history

o Higher interest rates
o Low credit score = high financial risk o Higher rates for car loans/credit cards

o Inability to get a mortgage

© 2008 Iowa College Student Aid Commission

Paying the Minimum
o Suppose: o Credit card balance = $2,000 o Interest rate (APR) = 15% o Minimum payment = 2% of balance How long would it take to pay off the debt? o Answer: o 264 months – that’s 22 years o Total interest paid = $2,789.78 o This assumes you STOP using credit cards! It will take longer if you don’t stop!
Calculator available at www.bankrate.com

© 2008 Iowa College Student Aid Commission

Tax Benefits - Deductions
o Tuition and Fees Deduction
o Reduces the amount of your taxable income o Up to $4,000 for tuition and other related expenses o Undergraduate or graduate study

o Student Loan Interest Deduction
o Reduces the amount of your taxable income o Up to $2,500 of interest you pay on student loans

© 2008 Iowa College Student Aid Commission

Tax Benefits - Credits
o Hope Scholarship Tax Credit
o Reduces the amount of income tax you pay o Up to $1,650 for tuition and other related expenses o First two years of undergraduate study

o Lifetime Learning Tax Credit
o Reduces the amount of income tax you pay o Up to $2,000 for tuition and other related expenses o Undergraduate or graduate study

o IRS Publication 970
o www.irs.gov
© 2008 Iowa College Student Aid Commission

Tracking your Student Loans

www.nslds.ed.gov
© 2008 Iowa College Student Aid Commission

MappingYourFuture.org

© 2008 Iowa College Student Aid Commission

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© 2008 Iowa College Student Aid Commission

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Federal Student Aid Ombudsman
o o o o Free resource of US Department of Education 1st step – work with your loan holder 2nd step – work with your guarantor (if applicable) 3rd step – contact FSA Ombudsman o Resolve disputes or problems o After working through normal channels o Review your complaint o Help work with company involved

© 2008 Iowa College Student Aid Commission

Ombudsman Contact Information
U.S. Department of Education FSA Ombudsman 830 First Street, NE Fourth Floor Washington, DC 20202-5144 http://ombudsman.ed.gov Phone: 1-877-557-2575 Fax: 1-202-275-0549

© 2008 Iowa College Student Aid Commission

Repayment Chart
o Page 36 of Exit Counseling guide
o Standard 10 year repayment term o Use amount closest to your loan total o Online payment calculators o IowaCollegeAid.gov

© 2008 Iowa College Student Aid Commission

It’s Payback Time
o Additional repayment and money management tips
o www.ItsPaybackTime.org

© 2008 Iowa College Student Aid Commission

Resources
o Page 34 Resume Writing Tips o Page 35 Interview Tips

© 2008 Iowa College Student Aid Commission

© 2008 Iowa College Student Aid Commission


								
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