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Classification: Internal Use
Managing Your Student
Loans 101Basic Understanding of the Repayment Process
March 30, 2019
Classification: Internal Use
Today’s Topics
• Student Loan Basics
• Repayment Options
• Consolidation and Refinancing
• Postponing Payments, Default, and
Discharge
• Student Aid Resources
Classification: Internal Use
Loan Basics
Classification: Internal Use
The Financial Aid Landscape
What are the sources of financial aid?
• Federal government
• State government
• Colleges and universities
• Private foundations
• Employers and private companies
• Professional and service organizations
Classification: Internal Use
Your Financial Aid History
• Gift Aid vs. Self-help Aid
• Federal Student Loans vs. Private Student
Loans
• Knowing your balance(s)!
How many of you know the total balance of
your student loans?
Classification: Internal Use
Identify Your Loans
Access NSLDS using your FSA ID at nslds.ed.gov
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Federal
National Student Loan Data System
(NSLDS)
Private
Credit Report
Financial Aid Office
Personal Records
Classification: Internal Use
Your Loan History
The National Student Loan Data System (NSLDS):
• Is a centralized national database
• Stores information on federal grants and loans (no
private student loans)
• Shows how much aid you've received
• Displays your current enrollment status
Access NSLDS using your Federal Student Aid PIN at
www.nslds.ed.gov
Classification: Internal Use
Federal Student Loan Programs
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Direct Loan (DL) Program
• Loans made by ED
• Started in 1994, but was relatively small until 2010
Federal Family Education Loan (FFEL) Program
• Loans made by banks, guaranteed by ED
• Started in 1965, and was very big until program ended
• Ended on June 30, 2010
Federal Perkins Loan Program
• Loans made by schools
Classification: Internal Use
Federal Student Loan Types
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Federal Student Loan
Subsidized Stafford
Unsubsidized Stafford
Parent PLUS
Grad. PLUS
Perkins Loans
Consolidation Loans
Classification: Internal Use
Your Loan Servicer
• Collects payments on a loan
• Responds to customer service inquiries
• Performs other administrative tasks associated
with maintaining a loan on behalf of a lender
If you're unsure of who your federal student loan servicer is,
you can look it up on www.nslds.ed.gov
Classification: Internal Use
Loan ServicersThe following are loan servicers for federally held loans made through the Direct Loan
and (FFEL) Programs:
• CornerStone
• ESA/Edfinancial
• FedLoan Servicing (PHEAA)
• Granite State – GSMR
• Great Lakes Educational Loan Services, Inc.
• MOHELA
• Navient
• Nelnet
• OSLA Servicing
• VSAC Federal Loans
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Classification: Internal Use
Repayment Plans and Consolidation
Repayment Options
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Classification: Internal Use
Interest – Simple Daily Interest
• The “simple” in “simple daily interest” means that interest does not compound unless there is a specific reason for it to do so
• The “daily” in “simply daily interest” means that interest accrues every day
• Let’s walk through the calculation to determine how much interest accrues in one day on a $10,000 loan with an interest rate of 4.66%
(Interest Rate ÷ Days in Year) × Outstanding Principal Balance
(0.0466 ÷ 365) × $10,000 = $1.27
Classification: Internal Use
How Payments are Applied
Fees
Interest
Principal
First payment on:
• $10,000 loan
• Interest rate: 4.66%
• Monthly payment amount: $104.41
$0
$38.83
$65.58
Classification: Internal Use
Repayment Plans
Based on income
Based on loan debt
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Income-Driven Repayment Plans
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Eligible Borrowers
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ICR (20%)
• Eligible loan
IBR (15%)
• Eligible loan
• Debt-to-income ratio
PAYE (10%)
• Eligible loan
• Debt-to-income-ratio
• Started borrowing recently
REPAYE (10%)
• Eligible loan
Classification: Internal Use
Eligible Loan Type
Loan Type ICR IBR PAYE REPAYE
Loan received as student X X X X
Loan received as parent
Consolidation (no underlying parent loans)
X X X X
Consolidation (underlying parent loans)
X
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Classification: Internal Use
Income Sensitive Repayment Plan
• Federal Family Education Loans (FFEL)
• Low-income borrowers
• Not applicable to those with Direct Loans
• Payments increase or decrease based on income
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Classification: Internal Use
Repayment Plan Summary
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Billy Borrower has $40,000 in Direct Loan debt, which has a 6% interest rate. His income is $35,000, he is single, and he lives in Colorado. His income increases at a rate of 5% per year.
Repayment Plan Initial Payment
Final Payment
Time to Repay Total Paid
Standard $444 $444 10 years $53,290
Graduated $254 $762 10 years $56,848
Extended - Fixed $258 $258 25 years $77,316
Extended - Graduated $200 $388 25 years $84,115
Revised Pay As You Earn* $143 $507 20 years $71,172
Pay As You Earn* $143 $444 20 years $69,967
Income-Based* $215 $444 15 years, 6 mos. $65,407
Income-Contingent* $315 $373 15 years $61,484
*Income-Driven Repayment Plans
Classification: Internal Use
Consolidation: www.StudentLoans.gov
Components End Result
Direct Sub.
Consol.
Direct Unsub. Consol.
Stafford
PLUS
Perkins
Direct Consolidation
Loan
In-School
• Interest rate is weighted average of consolidated loans
• Interest rate is rounded to nearest higher 1/8 of 1%
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Classification: Internal Use
Loan Consolidation
• One lender and one monthly payment
• Flexible repayment options
• Reduced monthly payments
• Fixed interest rate
• Loan Consolidation Information Call Center at 1-800-
557-7392
Note: Private loans are ineligible for federal loan
consolidation
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Classification: Internal Use
Student Loan Refinancing
• Potential reduction on interest rate
• Simplify management
• Potential to reduce monthly payments
• Choice of new repayment terms
• Can release a cosigner
• Service options
Classification: Internal Use
Refinancing: Questions to ask
• Do I plan to use or am I using federal repayment options
• Do I plan to use or am I using a federal loan forgiveness program
• How much can I save by refinancing
• Do they offer forgiveness in the event of death or disability
• Forbearance offerings
• Can I qualify
Classification: Internal Use
www.studentaid.gov/repay
Repayment Estimator
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Classification: Internal Use
Estimate your student loan payments!
StudentAid.gov/repayment-estimator
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Classification: Internal Use
Postponing Payment, Avoiding Default, Loan Discharge and Forgiveness
Classification: Internal Use
Deferment & Forbearance Reasons
Deferment
• Unemployment
• Economic hardship
• Graduate fellowship
• Rehabilitation training program
• Military
• In-school
Forbearance
• Medical/dental internship residency
• Student loan debt burden
• AmeriCorps
• Teacher Loan Forgiveness
• DOD Student Loan Repayment Program
• National Guard
• Medical/other acceptable reasons
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Classification: Internal Use
Consequences of Default
Reported to credit bureaus
No more eligibility for federal student aid
Loan immediately due and payable in full
Lose eligibility for repayment plans and deferment or forbearance options
Collection agencies
Administrative wage garnishment
Garnish tax refunds
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For most federal student loans, you will default if you have not made a payment in more than 270 days.
Classification: Internal Use
Getting Out of Default
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Consolidate
Choose IDR Plan
Fast
Less beneficial for credit
Rehabilitate
9 income-driven payments over 10
months
Slow
More beneficial for credit
Pay off loan
Impractical for most
Classification: Internal Use
Discharge, Forgiveness, Cancellation
Death (DL, FFEL, Perkins)
Disability (DL, FFEL, Perkins)
Public Service (DL)
Teaching (DL, FFEL, Perkins)
Classification: Internal Use
Repayment Checklist
• Take Inventory or give 3rd party authorization to someone trusted
• Register for online access
• Find out if you are eligible for loan forgiveness
• Establish goal for repayment
• Create a budget and plan to meet your goal
• Consider consolidation and refinancing
• Select a repayment plan that fits your goal and plan
• Enroll in automatic payments
Classification: Internal Use
Federal Student Aid
Resources
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Classification: Internal Use
StudentAid.gov
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Classification: Internal Use
NSLDS.ed.gov
Classification: Internal Use
Public Service Loan Forgiveness
120 qualifying payments
On Direct Loans
On qualifying repayment plans
While working full-time at qualifying employer
• Borrower must also be employed by a qualifying organization at the time that
the borrower applies for and receives PSLF
• According to the IRS, the forgiven amount is not treated as taxable income
• Details about the program: StudentAid.gov/public service
Classification: Internal Use
PSLF – Qualifying Payments
1• Must make 120 separate, monthly payments
2• After October 1, 2007
3• Payments do not need to be consecutive
4• Must be for full amount due under plan
5• Must be made within 15 days of due date
• Multiple, partial payments during the borrower’s monthly billing cycle will qualify if they
add up to equal or exceed the borrower’s monthly payment amount
• A borrower will not receive credit for more than one payment toward PSLF if the
borrower makes a lump sum payment (e.g., makes a single payment equal to two or
more full monthly payments)
• Exception for AmeriCorps and Peace Corps borrowers who make lump sum payments using
education award or transition payment
Classification: Internal Use
PSLF – Qualifying Repayment Plan
10-Year Standard
IBR
ICR
Pay As You Earn
Others ≥ 10-Year Standard
Income-driven plans are most likely to leave a remaining balance for forgiveness after
120 qualifying payments
Classification: Internal Use
PSLF – Qualifying Employment
1• Any government organization
2• 501(c)(3) not-for-profit
organization
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• Other not-for-profit organizations providing specific qualifying services
Doesn’t matter
what the
borrower’s job
duties are.
Borrower can
work at multiple
organizations
while making
the required
120 payments
Classification: Internal Use
Questions?
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