managing your student loans 101 - amazon s3 · the national student loan data system (nslds): •...

Classification: Internal Use

Managing Your Student

Loans 101Basic Understanding of the Repayment Process

March 30, 2019


Today’s Topics

• Student Loan Basics

• Repayment Options

• Consolidation and Refinancing

• Postponing Payments, Default, and

Discharge

• Student Aid Resources


Loan Basics


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


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?


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

http://www.nslds.ed.gov/


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


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


Federal Student Loan Types

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Federal Student Loan

Subsidized Stafford

Unsubsidized Stafford

Parent PLUS

Grad. PLUS

Perkins Loans

Consolidation Loans


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


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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Repayment Plans and Consolidation

Repayment Options

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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


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


Repayment Plans

Based on income

Based on loan debt

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Income-Driven Repayment Plans

16


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


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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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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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


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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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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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


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


www.studentaid.gov/repay

Repayment Estimator

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http://www.studentaid.gov/repay


Estimate your student loan payments!

StudentAid.gov/repayment-estimator

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http://studentaid.gov/repayment-estimator


Postponing Payment, Avoiding Default, Loan Discharge and Forgiveness


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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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.


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


Discharge, Forgiveness, Cancellation

Death (DL, FFEL, Perkins)

Disability (DL, FFEL, Perkins)

Public Service (DL)

Teaching (DL, FFEL, Perkins)


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


Federal Student Aid

Resources

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StudentAid.gov

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NSLDS.ed.gov


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


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


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


PSLF – Qualifying Employment

1• Any government organization

2• 501(c)(3) not-for-profit

organization

3

• 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


Questions?

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