Student Loans 201: Repayment Options Revised 9/2013
Student Loans: NSLDS Retrieve your student loan data from the National Student Loan Data System. nslds.ed.gov
Student Loans: Servicers LOAN SERVICER What does a loan servicer do? Keep your contact info up to date with your loan servicer and make sure to monitor communication so you don’t miss important updates about your loans.
Student Loans: Loan Servicer vs. Financial Aid Office Who do I contact for what?
Student Loans: Servicers Remember that repayment can also be triggered if you stop going to school or drop below ½-time credits The Dept of Ed may or may not assign you a loan servicer. It could also happen multiple times.
Rights • Copies of your promissory notes • Loan disbursement notification • Loan disclosure statement • Repayment schedule • Grace period • Deferment or forbearance • Prepay without penalty • Notification if loan is sold or transferred (FFELP) • Consolidate loans • Notification when loan is paid in full
Responsibilities • Pay back your loan in full • Stay informed about: • Loan balances • Payment amounts • Notify your loan servicer: • Name or contact info changes • Graduation, leaving school, transferring to another school or dropping below half-time enrollment • Trouble with loan payments
Repayment: Overview DIRECT LOAN repayment options
Repayment: Overview FFEL repayment options
Repayment: Standard • Fixed monthly payments • Minimum repayment amount of $50/month • Maximum 10-year repayment period • Borrower pays least interest ** Assumes 3.86% interest rate
Repayment: Graduated • Payments increase over time • Minimum repayment amount of $25/month • Repayment period: 10-30 years • Loan term depends on amount borrowed ** Assumes 3.86% interest rate
Repayment: Income-Contingent • Payments based on income, family size, loan debt • Reapply annually • Minimum repayment amount of $5/month • Loan balance discharged after 25 years • Parent PLUS and FFELP ineligible
Repayment: Extended • Borrowers with over $30K in student loans • 25-year maximum repayment term • Either fixed or graduated payments ** Assumes 3.86% interest rate
Repayment: Income-Based • Payments based on income, family size, loan debt • Parent PLUS and Perkins ineligible • Borrower applies annually • Must repay all eligible loans under this plan • Loan balance discharged after 25 years
Repayment: Pay As You Earn • Available for those considered “new borrowers” as of 10/1/07 and received a loan disbursement on or after 10/1/11 • Payments capped at 10% of discretionarymonthly income • Borrower must have a partial financial hardship to qualify • Parent PLUS and Perkins ineligible • Borrower applies annually • Loan balance discharged after 20 years
Repayment: Income-Sensitive • FFELP borrowers only • Payments between 4-25% of gross monthly income • Minimum payment must cover interest • Repayment period may be over 10 years • Borrower must reapply annually
Repayment: Pick a Plan • Contact your servicer to get information on available repayment plans. • Use repayment calculators to see what you might have to pay with each plan. • Compare the planes to determine which plan fits you best. You can switch plans if you need to! Which plan do I pick?
Repayment: Consolidation • Direct (current) • Consolidates all federal student loans into one big loan • Interest rate the “weighted average” of all loans • Same repayment options as Federal Direct • May reduce monthly payments • Consolidating PLUS loans negates eligibility for income-based repayment plans Consolidation may lower monthly loan payments.
Repayment: Student Loan Interest Deduction • Up to $2500 of student loan interest • Considered an “adjustment” on federal taxes • Can claim only if you • Are not a dependent • Filing status is not married filing separately
Contingency: Delinquency & Default • Delinquency • Being late making payments or missing payments • Begins the first day after the payment is missed • May negatively affect borrower’s credit rating • Allows the lender to charge interest on unpaid interest • Lender may charge late fees • Default • Being delinquent for 9 months • Entire loan balance may be demanded • Wages and tax refunds can be garnished • Will have to pay late fees and collection costs • Negatively affects credit rating for 7 years • Denied future financial aid
Contingency: Deferment Programs ** Unlimited duration while continuing to serve on active duty. Extended periods of deferment are available to borrowers after demobilization.
Contingency: Forbearance • Temporary reduction or suspension of payments • Unpaid interest capitalized • Mandatory • National Service • Applying for loan forgiveness • Teaching in areas that qualify you for loan forgiveness • Payments at or over 20% of monthly income • Up to three years TO DO: Contact your loan servicer about your deferment or forbearance eligibility. Follow your servicer’s instructions to apply for deferment or forbearance. Make scheduled payments until your deferment/forbearance status is confirmed.
Contingency: Forgiveness • Borrowers must repay their loans using a qualified repayment plan • Standard • Income-contingent • Income-based • Pay As You Earn • The Standard Consolidation Plan is NOT an eligible repayment plan for ANY type of loan forgiveness • Borrowers who consolidate their loans must request an income-driven repayment plan for those loans
Contingency: In Delinquency • SO NOW WHAT? • Contact the servicer • Work out a payment schedule with the servicer • Ask servicer for a statement showing when payments were made • Direct Loans: contact the Student Loan Ombudsman • FFELP: contact your guarantor
Contingency: In Default • Consolidation • Borrower eligible for new loans, grants, deferments • No longer listed as in default on credit records, but default will remain on credit history for seven years • Can choose income-based or income-contingent repayment • Rehabilitation • Have to make nine on-time payments in ten months • Loan moved from default status after 9 months • Default moved off credit record • Eligible for new loans and grants
Summary • You have many different tools and repayment options • Pick a repayment plan that works for your budget • Ask for help if you need it • Know your borrower rights and responsibilities • Stay in contact with your loan servicer
Resources • Studentaid.gov – Federal Student Aid Website • Student Loan Ombudsman • FAFSA • Types of Aid • Loans • Repayment Plans • Finaid.org • Studentloanborrowerassistance.org • IRS.gov • Your loan servicer