STUDENT LOANS: AFTER YOU BORROW
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
STUDENT
LOANS:
AFTER YOU BORROW
Student Loan Basics – Nearly Everyone CAN
Borrow, however:
• Loans have to be repaid! Borrow only what you
need!!
• Interest
– What you are charged for using someone
else’s money
• Capitalization
– The addition of unpaid interest to the
principal balance. Then new interest is
applied to the ENTIRE balance (principal
plus capitalized interest)
Federal Subsidized Stafford Loan
• Self help and need-based
• Must be REPAID
• Must sign Master Promissory Note
• Must be at least half-time
• 4.66% starting July 1, 2014 - Can change each year
• No interest to the student while in school
• Repay 6 months after no longer half-time. Interest begins
immediately.Federal Unsubsidized Stafford Loan • Self help but is NOT need-based • Must be REPAID • Must sign Master Promissory Note • Must be at least half-time • 4.66% for unsubsidized loans (undergraduate) • Fees and Repayment – same as Subsidized Loan
Financial Aid Programs – Unsubsidized Federal
/Graduate/Professional Loans
• NOT need-based but student must file FAFSA
• Must be REPAID
• Must sign Master Promissory Note
• 6.21%
• Interest accrues
• Fees
– 4% OriginationFinancial Aid Programs – Federal Parent Loan
(PLUS) and Graduates who have already borrowed
maximum in federal direct loans.
• Must not have adverse credit history
• Parent borrows on behalf of student
• 7.21%
• Repayment begins 60 days after loan is disbursed
• Repayment can be deferred while student is enrolled at
least half-time
– Interest continues to accrue
• Maximum: Cost of Attendance minus Other Financial AidLoan Limits For Dependent Students
Grade Level Subsidized Amt Unsubsidized Annual Limit
Amt
1st Undergrad $3,500 $2,000 $5,500
2nd Undergrad $4,500 $2,000 $6,500
3rd & 4th $5,500 $2,000 $7,500
Undergrad
Aggregate limit for undergraduate dependent students is
$31,000 with no more than $23,000 in Subsidized Loans. You
cannot borrow more than your cost of attendance minus any
other financial aid you'll get, so you may receive less than the
annual maximum amounts.Loan Limits - Independent Students and
Dependent Students Whose Parents Are Denied PLUS
Grade Level Subsidized Amt Unsubsidized Annual Limit
Amt
1st Undergrad $3,500 $6,000 $9,500
2nd Undergrad $4,500 $6,000 $10,500
3rd & 4th $5,500 $7,000 $12,500
Undergrad
Graduate or Not eligible $20,500 $20,500
Professional
Aggregate limit for undergraduate students is $57,500 with no more
than $23,000 in Subsidized Loans.
Aggregate limit for graduate/professional students is $138,500 with no
more than $65,000 in Subsidized LoansYour Master Promissory Note (MPN) • Contains your Rights and Responsibilities • Is a binding legal document that you signed • You indicated your commitment to repay your loans by signing the MPN • Your MPN may have been used for only one year at a time or as a multi-year note • Your MPN expires after 10 years or if you declare bankruptcy or for other reasons – check with your lender • Check with your loan servicer or your campus if you have questions about your MPN
Loan Disbursement • Schools pay for direct costs (charged by the school, like tuition and fees, for example) first. • Any loan funds in excess of direct costs are disbursed to the borrower. • Schools use a variety of methods to disburse funds – Checks – Direct Deposit to student accounts – Debit cards • Check with the campus for more information
Private Loans • Come from company or bank • Have variable interest rates – Can raise up to 19% • May want to pay these loans off first if possible. Federal loans have more flexibility.
You Have to Repay Your Loan Even If
• You did not complete your education
• You are not employed
• You did not find employment in your field of study
• You feel the education you received did not meet your
expectationsRepayment Begins – Direct Stafford Loan • 6-month grace period • Begins the day after you stop attending on at least a half-time basis • Each loan has only one 6-month grace period. • Your loan servicer advises you of your first payment due date during your grace period. • You are responsible for beginning repayment of your loan on time even if your loan servicer’s communication fails to reach you.
Standard Repayment Schedule • Minimum monthly payment is $50 – amount of monthly payment depends on how much borrowed; payment required may be higher than the minimum • Maximum standard repayment period is 10 years
Graduated Repayment Schedule • Begins with lower payments • Payments increase over time • More interest will accrue over the life of the loan • Principal balance decreases at a slower rate
Income-Driven Plans
Eligible Borrowers
• Income Contingent Repayment:
• Direct Loan borrowers with eligible loans
• Income Based Repayment:
• Direct Loan and FFEL Program borrowers with eligible loans and
• Their payments would be lower on IBR relative to what would have been
paid under the 10-year standard repayment plan (called “partial financial
hardship”)
• Pay As You Earn:
• Direct Loan borrowers with eligible loans
• Must be a new borrower on/after 10/1/2007 who received new loan
on/after 10/1/2011 and
• Their payments would be lower on Pay As You Earn relative to what
would have been paid under the 10-year standard repayment plan
(called “partial financial hardship”)
16Income-Driven Plans
Loan Forgiveness
• All three plans provide for forgiveness
• For Income Continent and Income Based, remaining balance forgiven
after 25 years of qualifying repayment
• For Pay As You Earn, remaining balance forgiven after 20 years of
qualifying repayment
• For all three plans, qualifying repayment includes:
• Payments under an income-driven plan
• Payments under the 10-year standard repayment plan (or any
other repayment plan with a payment amount at least equal to
the 10-year standard plan amount) or
• Economic hardship deferment
• According to the IRS, the forgiven amount is considered taxable income
17Income-Driven Plan Example
• Billy Borrower:
• Is single with no dependents and lives in
Florida
• Has an AGI of $35,000 and
• Has $50,000 in Direct Loan debt ($23,000 of
which is subsidized), all of which has a 6.8%
interest rate
18ICR – Example Borrower
• Under Income Contingent Repayment, Billy will*:
• Have an initial monthly payment of $397.17
• Have a final monthly payment of $535.23
• Make payments that cover all accruing interest, and therefore
not have annual capitalization
• Pay off his loans in 164 months (13 years, 8 months), and
therefore receive no forgiveness
• Pay a total of $78,444.28 on his $50,000 loan debt, compared
to:
• $69,037.44 under the 10-year Standard Repayment Plan or
• $104,080.83 under the Extended Plan or Consolidation
Standard Plan
*Assumes a 5% increase in Billy’s
19 income each year and a 3% annual increase in the poverty guidelines.IBR – Example Borrower
• Under Income Based Repayment, Billy will*:
• Have an initial monthly payment of $228.06
• Have a final monthly payment of $575.40
• Receive $653.16 in interest subsidy during the first three consecutive years
of IBR repayment (because the payment will not cover all accruing interest
on subsidized loans)
• Have a payment that is no longer based on his income (no longer have a
partial financial hardship) in his 16th year of IBR
• Pay off his loan at the beginning of his 21st year of IBR (and therefore
receive no loan forgiveness)
• Pay a total of $101,673.34 on his $50,000 loan debt, compared to:
• $69,037.44 under the 10-year Standard Repayment Plan or
• $104,080.83 under the Extended Plan or Consolidation Standard Plan
*Assumes a 5% increase in Billy’s income each year and a 3% annual increase in the poverty guidelines.
20Pay As You Earn – Example Borrower
• Under Pay As You Earn, Billy will*:
• Have an initial monthly payment of $152.04
• Have a final monthly payment of $492.19
• Receive $1,999.79 in interest subsidy, during all of the first three consecutive
years of Pay As You Earn repayment (because the monthly payment will not
cover all accruing interest on subsidized loans)
• Always have a payment that is based on his income (will always have a partial
financial hardship)
• Receive forgiveness in the amount of $44,979.06
• Pay a total of $70,709.53 on his $50,000 loan debt, compared to:
– $69,037.44 under the 10-year Standard Repayment Plan or
– $104,080.83 under the Extended Plan or Consolidation Standard Plan
*Assumes a 5% increase in Billy’s income each year and a 3% annual increase in the poverty guidelines.
21Borrower Example - Recap
ICR IBR Pay As You Earn
Initial Payment $397.17 $228.06 $152.04
Final Payment $535.23 $575.40 $492.19
Time in Repayment 13 years, 8 months 20 years, 2 months 20 years
Total Paid $78,444.28 $101,673.34 $70,709.53
Forgiveness $0 $0 $44,979.06
For comparison:
10-year Standard Extended & Consolidation
Standard
Payment $575.40 $347.04
Time in Repayment 10 years 25 years
Total Paid $69,037.44 $104,080.83
22Federal Consolidation Loan
• Benefits
– Extended repayment of up to 30 years, based on your
loan balance
– One monthly payment
– Can prepay or change repayment plans
– Fixed interest rateTrouble Paying?
• Contact your Direct Loan Servicer!
– You may be able to reduce your monthly payments if
you qualify for an alternate repayment schedule
– You may be able to temporarily postpone your
payments if you qualify for a deferment or if you
qualify for a forbearanceDeferment
• Time period when repayment is temporarily suspended
• A deferment period may be granted for:
– At least half-time enrollment at an eligible school
– Graduate fellowship
– Rehabilitation program
– Unemployment
– Economic hardship
– Military Service
These deferments apply to loans made on or after July
1, 1993. If you have a loan made before that date,
check your promissory note.Forbearance • You are unable to make your scheduled payments but you do not qualify for a deferment • Forbearance allows you to – Reduce the amount of your payment – Temporarily stop payments • Most forbearance is discretionary – it is up to your lender to decide to grant forbearance.
Forbearance
• You are still responsible for the interest that accrues during
forbearance.
– Try to pay it. Capitalized interest is added to the
principal balance and increases your total outstanding
debt and possibly your monthly paymentsLoan Cancellation – Direct Stafford Loan
• Your death
• You become totally and permanently disabled
• Your school fails to pay a refund if you withdraw
• Your school closes and you are unable to complete your
program of study as a result
• Your loan was falsely certified as a result of identity theft
• Your school falsely certified or fraudulently completed a loan
application in your name without your approvalLoan Forgiveness
• Teacher Loan Forgiveness – Direct Stafford Loans
– First loan was made on or after October 1, 1998
– You teach in a qualifying low-income school for 5
consecutive yearsLoan Forgiveness
• Public Sector Employee Forgiveness – Direct Stafford &
Direct Grad PLUS Loans
– You made 120 monthly payments on eligible loans
after October 1, 2007
– You are employed in a public-service job at the time
of forgiveness and have been employed in a public-
service job during the 120 month periodPSLF – Qualifying Employment
• Each of the 120 payments must have been made during a period of qualifying
employment
• Qualifying employment includes any job at:
• A government organization
• A not-for-profit, 501(c)(3) organization or
• Any other not-for-profit organization that is not a labor union or partisan
political organization and that provides public services in the following
categories:
• Emergency management, military service, public safety, law
enforcement, public interest legal services, early childhood education,
public service for individuals with disabilities, public health, public
education, public library services, school library services, or other school-
based services
• Borrower can work at multiple organizations while making the required120
payments
31Loan Forgiveness – Direct Stafford Loan
• Service in Areas of National Need
– For each school, academic or calendar year of full
time employment in an area of national need that you
complete on or after August 14, 2008
– Up to $2,000 of your outstanding loan balance will be
forgiven
– Maximum of $10,000 can be forgiven
– Cannot receive forgiveness for more than 5 years of
service
• This program is subject to federal funding and availabilityUse NSLDS • National Student Loan Data System (NSLDS) • Use NSLDS to monitor all of your federal student loan debt • Use NSLDS to identify who is servicing your loan • www.NSLDS.ed.gov • 800-999-8219 • You’ll need your federal student aid PIN to access. • Any private or alternative loans you have borrowed will not be listed on NSLDS.
Use NSLDS • Federal Direct Loan Servicers include – FedLoan Servicing (AES/PHEAA) – Great Lakes Educational Loan Services, Inc. – Nelnet – Sallie Mae – Some additional non-profit servicers
Delinquency and Default • When you fail to make your payment on time, you are delinquent in meeting your obligation • When you fail to make your payments for 270 days, you will be in default on your student loan • There are serious consequences to defaulting on your student loan obligation
Consequences of Default
• Damaged credit rating
• Referral to a collection agency
• Collection costs are added to your debt
• Garnishment of your wages
• Federal or state tax refunds, Social Security benefits, etc. can
be withheld
• Civil lawsuit filed against you (court costs and legal fees)
• Loss of deferment and forbearance entitlements
• Loss of repayment option flexibility
• Loss of eligibility for further financial aid
• Suspension of professional licensePLEASE BE ALERT TO LOAN PAYMENT SCAMS!
37Questions and More Information • 866-866-CFNC (866-866-2362) • Visit CFNC.org • Laura Misner Laura.misner@cfi.org 828-712-9840 • Mappingyourfuture.org • Studentaid.ed.gov
You can also read
