2017 11-9 student loans for employers seminar

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Background in Student Loan Advocacy & Millennial Engagement

2017:

Co-Founded Savi to help student loan

borrowers

Aaron Smith

•Co-Founded Young Invincibles non-profit, now has 50+ Staff & 5 offices

•Developed initial student loan policies and advised the Department of Education and Congress on their implementation

Tobin Van Ostern

•Led student engagement for the Obama Campaign, growing to over 1,000 chapters

•Led creation of major student loan policies while at the Center for American Progress

•Provided advice to the White House, Department of Education, and Congress

2 Proprietary Information - BySavi

3

Agenda 1. Introductions

2. Student Loan Crisis

3. Federal Student Loan Benefits – Standard Repayment

– Graduated Repayment

– Income Based Repayment

– Public Service Loan Forgiveness

– Employer Role

4. Combining repayment programs

5. Other Notes – Refinancing Student Loans

– Servicers

– Federal Protections

– Frauds & Scams

– Legislation & Policy Changes

6. Savi’s Solution

Proprietary Information - BySavi


INTRODUCTIONS

41 MILLION BORROWERS $37,000 AVERAGE DEBT

5

1.4 Trillion Dollars of Debt

0

200

400

600

800

1,000

1,200

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total student loan balances by age group under 30 30-39 40-49 50-59 60+

31%

Billions of Dollars

19%

12%

5%

33%

Source: New York Fed Consumer Credit Panel / Equifax


• 59% of Millennials see a student loan benefit as the most appealing new employer benefit (Gallup)

• Over 25% of Millennial Employees say they will not stay with their employer due to their financial situation

• Student Loan Debt is not only a Millennial issue – Over 15% of student loan debt is held by people over age 50


Employees & Family Members with Debt

FEDERAL STUDENT LOAN BENEFITS



Standard Repayment • Fixed monthly payments of at least $50 for 10 years

– Monthly payments may be slightly higher than payments under other plans

• Student loans paid off in shortest time and with lowest total interest payments over life of the loan using this plan

• All loan types except Direct Consolidation Loans and FFEL Consolidation Loans qualify for 10 year repayment plan

– Length of repayment period for Direct Consolidation or FFEL Consolidation Loans depends on amount of total education loan indebtedness


Graduated Repayment • Low monthly payments that increase every 2 years as student loan

borrower’s expected income rises

– Borrower may still struggle with payments if income does not rise as expected

• Interest only payments for one year following separation or grace period

– Unconsolidated loans: Pay off student loan debt in 10 years

– Consolidated federal loans: Pay off student loan debt between 10 and 30 years

• All federal student loan borrowers are eligible

• Does not qualify for PSLF

• Requires borrowers to pay more over time using this plan than another option

Income-Based Repayment • Income-based repayment plans cap monthly payments based on your

income

• Based on family size and last year’s income

• Lengthens repayment, Requires annual re-certification

• Plans

– REPAYE

– PAYE

– IBR

– ICR

– NEW IBR



Income-Based Repayment Plans PLAN ELIGIBILITY MONTHLY PAYMENT DISCHARGE AFTER

REPAYE All Direct student loan borrowers.

No PFH requirement. 10% of discretionary income

20 years for undergraduate debt;

25 years for graduate debt

PAYE

Direct student loan borrowers who

took out their first loan after

9/30/07 and at least one loan

after 9/30/11, and have a PFH

10% of discretionary income, up to

the fixed 10-year payment amount 20 years

IBR All federal student loan borrowers

(Direct or FFEL) with a PFH



ICR All Direct Loan borrowers. No PFH

requirement

The lesser of: 20% of discretionary

income and 12-year repayment

amount x income percentage

factor

25 years

NEW IBR

Borrowers who take out their first

loan after 7/01/2014 and have a

PFH



Public Service Loan Forgiveness • Federal student loan debt forgiven after 120 payments (10 years) if

you work for: – Non-profit (501c3)

• Includes non-profit hospitals, colleges, etc.

– Federal, state or local government

• Includes teachers, police, firefighters, etc.

• Not required to be consecutive

• Eligible repayment plans include IBR, ICR, standard repayment or a combination of these plans – Extended repayment and graduated repayment do not count

• Eligible loans include all Federal Direct Loans – Borrowers in the FFEL program need to consolidate into Direct Loans to qualify



Application for Forgiveness Form

• Determines if applicant qualifies for PSLF

according to their employer

• Completed form sent to FedLoan Servicing – Or upload to MyFedLoan.org/FileUpload if FedLoan

Servicing is already the servicer


Annual Employment Certification Form

• Required to certify employment through employer

• Must be submitted periodically – If not submitted periodically, applicant required to

submit Employment Certification for both past and current employers while making required 120 qualifying monthly payments

• Completed form sent to FedLoan Servicing – Or upload to MyFedLoan.org/FileUpload if FedLoan

Servicing is already the servicer

COMBINING REPAYE & PSLF



Income-driven repayment plan

(bases your payment amount on

your income instead of how much

you owe)

REPAYE: Revised Pay As You Earn Plan

PSLF: Public Service Loan

Forgiveness Plan

$37,000

= $387/month

Repayment Plan:

- First Monthly Payment: $158

- Last Monthly Payment: $311

- Will have $25,003 forgiven in 10 years with PSLF

- Total payment of $27,570

Forgives the remaining balance of Direct

Loans after the individual has made 120

qualifying payments while employed by

a qualifying employer (no income

requirement)

Loan Example

Annual Income = $43,000

Loan Balance

* Family size = 1 dependent

OTHER NOTES



Refinancing Student Loans

• Private Student Loans

– May refinance at a lower rate to reduce monthly loan payments or amount of

interest owed over life of the loan

– Often offer a more risky variable interest rate as opposed to fixed rate on

federal loans

• Federal Student Loans

– Must forfeit eligibility for benefits such as income-driven repayment and loan

forgiveness

– Government-backed consolidation available


Servicers • 12 student loan servicers

• Consumers do not actively choose

their student loan servicers

– Servicer is sometimes the lender or owner of

loans

• Third party servicers collect payments

from private student loan borrowers – Borrowers often do not know whether they have

federal or private student loans


Federal Protections • Loan repayment protection programs help repay loans in times of

financial hardship

• Many borrowers unaware of categorical differences between federal and

private protections

– Federal: Income-based repayment, economic hardship deferment, forbearance

• No student loans can be discharged in bankruptcy

• Student loan complaints

– Find a list of complaints published monthly and annually through the CFPB

– File complaints with the Department of Education’s FSA Ombudsman Group

• Resolves disputes related to federal direct loans


Frauds & Scams • National crackdown targeting deceptive student loan debt

relief scams

– Headed by: U.S. Department of Education, U.S. Postal Inspection Service,

attorneys general, local law enforcement

• Federal Trade Commission and 11 states in federal-state

enforcement initiative

– 36 actions by the FTC and state attorneys general for fraud totaling more than

$95 million in illegal upfront fees

– Court orders in two pending cases against Student Aid Center and Strategic

Student Solutions


Legislation & Policy Changes

• Internal Revenue Code Section 127 amendment

– Business tax credit for employer contributions to employee student loan

repayment

• Bipartisan SIMPLE Act

– Would enroll delinquent borrowers into Income Driven Repayment plans

• Public Service Loan Forgiveness program elimination

– Would favor single Income-based Repayment program

WHAT IS SAVI?

“TurboTax for Student Loans”


Our Solution:


1. Determine the Best Repayment Plan

• Interactive personalized repayment wizard

•Proprietary algorithm will provide plan recommendations from a broad array of plans

•This will typically be an income-based plan that caps their payments at 10% of their MAGI

2. Enroll Borrowers

•And re-enroll them annually

•Automated push reminders

•Automatic capture of employer verification signatures

•Subsequent annual certifications pre-populate which improves our retention

Take the guesswork and paperwork out of a very

complex process to help borrowers make better

decisions

Co-Branded Website


Raffa.BySavi.com • FREE for Employees to Use

– Provided to employees and family members with

student loan debt

• Support Features – Live Chat

• Time-saving Tools – Automates HR paperwork


QUESTIONS? [email protected]


2017 11-9 student loans for employers seminar

Government & Nonprofit