Federal Student Loan Exit Counseling

1. Federal Student Loan Exit Counseling Presented by: Financial Aid Office, Thomas Jefferson School of Law November 18, 2010

2. Disclaimer Federal regulations require that the name of the entity who developed and paid for the entrance counseling materials be disclosed. The material presented here was prepared by TG and the U.S. Department of Education. The completed document was reviewed for accuracy by the Financial Aid Office at Thomas Jefferson School of Law

3. Why do I need to attend? • Federal regulations require schools to provide exit counseling for students: • Who have borrowed a Stafford and/or Grad PLUS loan under the Federal Direct Loan Program (Direct Loan) and/or the Federal Family Education Loan Program (FFELP) and • who are graduating, have withdrawn or have dropped below half-time enrollment.

4. Stafford Loan Master Promissory Note (MPN) • An agreement to pay back loan(s) • Multi-year feature vs. new MPN per year • Details borrower rights and responsibilities

5. Stafford MPN • Used for subsidized and unsubsidized Stafford Loans • Subsidized — need-based loan; government pays interest while enrolled • Unsubsidized — non-need based loan; student responsible for all interest

6. PLUS MPN Used for: • Student PLUS loans (FDLP) • Grad PLUS loans (FFELP)

7. When repayment begins • Stafford loans have a grace period; repayment begins six months after student graduates, withdraws, or drops below half-time enrollment. • PLUS loans have a deferment period; repayment begins six months after student graduates, withdraws, or drops below half-time enrollment. • Direct Loan Servicing Center or lender will send notification of your first payment due date during your grace/deferment period.

8. Borrower responsibilities • Borrowing money is a serious matter and all loans must be paid back. • Not receiving billing statement is not an excuse for not making payments. • Even if you did not complete your program, didn't complete your program within the regular time for program completion,are dissatisfied with quality of education, or can’t find a job, you must pay back the loan(s).

9. Consequences of default • Loss of federal financial aid eligibility • Withholding of federal income tax refunds • Inability to renew professional license (e.g., lawyer, State Bar Licensure) • Negative credit history (will affect credit purchase of house, car, etc.)

10. Consequences of default • Wage withholding • May be sued • Collection fees and attorney’s fees assessed • Enforcement of delinquent debt collection procedures

11. Attachment A: Sample monthly repayment amounts Interest Rates

12. Attachment A: Sample monthly repayment amounts Interest Rates

13. Repayment plans Offered under both FDLP & FFELP • Standard • Graduated • Extended • Income-based Specific to loan program • Income-contingent (FDLP) • Income-sensitive (FFELP)

14. Repayment plans • For all repayment plans, student can: • Prepay loanswithout penalty; • Pay on a shorter schedule; and • Change repayment plans once per year.

15. Standard Repayment Plan • Lowest total loan cost • Regular payments of both principal and interest are due monthly, excluding periods of deferment and forbearance • Minimum monthly payment is $50 • 10-year repayment term

16. Graduated Repayment Plan • Monthly payments are smaller at the start of the repayment period and gradually increase • 10-year repayment term • Total amount paid in interest will be greater than under the standard repayment plan

17. Extended Repayment Plan • Lengthens repayment term up to 25 years • Available to borrowers with more than $30,000 in federal student loans • Total interest costs may be higher over life of the loan, although monthly payment amount may be lower

18. Income-Based Repayment Plan (IBR) • Borrowers may qualify for lower monthly payments as determined by adjusted gross income, federal student loan debt, and family size • After 25 years (300 payments), remaining balance and accrued interest is forgiven • Must reapply annually

19. Income-Contingent Repayment Plan • Offered only to borrowers under the Direct Loan Program • Monthly payment based on adjusted gross income, family size, and total Direct Loan debt • If payment does not cover interest accrued, unpaid amount is capitalized annually. • Maximum repayment period is 25 years, and any balance after 25 years is forgiven.

20. Sample Comparison of Repayment Plans

21. Loan consolidation • Option to combine federal education loans • Loans must be in grace or repayment status • Temporary provision to consolidate while in-school (July 1, 2010–June 30, 2011) • Original loans are paid in full • New loan for the combined balances is issued with new terms, including a new interest rate that is fixed for the life of the loan • www.loanconsolidation.ed.gov

22. Consolidation — factors to consider • Negatives • Total interest paid may be greater • May extend repayment period • May lose benefits (e.g., grace period, loan forgiveness, cancellation, deferment, or a reduced interest rate)

23. Consolidation — factors to consider • Positives • May significantly lower monthly payments • Simplifies repayment — one monthly payment • No minimum or maximum loan amounts or fees with Direct Loan consolidation

24. Consolidation tips • Compare and weigh all options • For more information on consolidating your loans, and how to apply go to • www.loanconsolidation.ed.gov

25. Tax benefits • For students and parents • Student loan interest deduction • reduces the taxable income based on the amount of student loan interest paid. • Tuition and fees deduction • reduces the taxable income based on college tuition and fees paid during the tax year

26. Tax benefits • For students and parents • Hope and Lifetime Learning tax credit • a credit against federal income taxes for college tuition and fees paid during the tax year • See IRS publication 970 at www.irs.govfor more information.

27. Debt management strategies • Make a budget • Loan payments are a fixed cost like utilities and rent • Be realistic about expected earnings for your major • Stick to one credit card. Keep in mind that credit cards are loans!

28. Deferments and Forbearances

29. Deferment Contact your lender or servicer to find out if you qualify You could postpone your payments for several reasons, such as: Unemployment Economic hardship Student enrollment

30. Forbearance Forbearance is an option that lenders or servicers can offer that permits: Reduced payments, An extension of time for making payments, or The temporary cessation of payments. Medical or financial problems that do not meet the requirements for a deferment might qualify you for forbearance, as will other special circumstances.

31. Public Service Loan Forgiveness

32. Loans Eligible for Public Service Loan Forgiveness Federal Direct Unsubsidized Stafford Loans Federal Direct Subsidized Stafford Loans Federal Direct PLUS Loans for parents and grad/professional students Federal Direct Consolidation Loans

33. Loans Eligible for Public Service Loan Forgiveness Other Federal loans may qualify for public service loan forgiveness if consolidated into a Direct Consolidation Loan, including: FFEL Subsidized/Unsubsidized Stafford Loans FFEL PLUS Loans for parents and grad/professional students FFEL Consolidation Loans (excluding joint spousal consolidation loans) Federal Perkins Loans Certain Health Professions and Nursing Loans

34. Repayment Plans Under Which 120 Payments Must be Made Income-based repayment plan (not available for parent PLUS loans) Income-contingent repayment plan (except parent PLUS borrower) 10-year Standard repayment plan Any other repayment plan if monthly payment is not less than that paid under Direct Loan standard repayment plan

35. Eligible Public Service Jobs for Loan Forgiveness Employment, in any position, by a public service organization Service in a position in Americorps or the Peace Corps Employment or service must meet the definition of “full-time”

36. Definition of Public Service Organization A Federal, State, local, or Tribal government organization, agency, or entity A job in government excludes time served as a member of the United States Congress A public child or family service agency A non-profit organization under section 501(c)(3) of the Internal Revenue Code that is exempt from taxation under section 501(a) of the Internal Revenue Code A Tribal college or university

37. Definition of Public Service Organization (cont.) Public service organization is a private organization that provides public services: Emergency management Military service Public safety Law enforcement Public interest law services (legal advocacy may be provided “on behalf of” low-income communities at a nonprofit organization rather than strictly “in” low-income communities at a non-profit organization

38. Definition of Public Service Organization (cont.) Public service organization is a private organization that provides public services: Early childhood education (including licensed or regulated health care, Head Start, and state-funded pre-kindergarten) Public service for individuals with disabilities and the elderly Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner and health care support occupations)

39. Definition of Public Service Organization (cont.) Public Service Organization is a private organization that provides public services: Public Education Public Library Services School Library and other school-based services

40. Definition of Public Service Organization (cont.) A private organization is not: A for-profit business A labor union A partisan political organization or An organization engaged in religious activities unless activities are unrelated to religious instruction, worship services, or any form of proselytizing

41. Eligible Public Service Jobs for Loan Forgiveness Americorps position means: A position approved by the Corporation for National and Community Service under section 123 of the National and Community Service Act of 1990 Peace Corps position means: A full-time assignment under the Peace Corps Act as provided for under 22 U.S.C. 2504

42. Treatment of Lump Sum Payments from Americorps or Peace Corps If a borrower makes a lump sum payment using all or part of an Americorps service award or Peace Corps transition payment, qualifying payments equal lesser of: # of payments resulting after dividing the amount of lump sum by monthly payment amount required under appropriate repayment plan or Twelve payments

43. Definition of “Full-time” for Qualifying Employment Full-time means working in qualifying employment in one or more jobs for the greater of: An annual average of at least 30 hours weekly, or For a contractual or employment period of at least 8 months, an average of 30 hours per week; or Unless the qualifying employment is with two or more employers, the number of hours the employer considers full-time.

44. Definition of “Full-time” for Qualifying Employment Definition of full-time (cont.): Vacation or leave time provided by the employer or leave taken for a condition that is a qualifying reason for leave under the Family and Medical Leave Act is not considered in determining the average hours worked on an annual or contract basis.

45. Public Service Loan Forgiveness Process Borrower requests loan forgiveness after making 120 qualifying payments Generally, borrowers repaying under IBR or ICR will have outstanding balances left to forgive after 120 qualifying payments ED will determine borrower’s eligibility and notify borrower accordingly In the interim, ED will: Develop a forgiveness application form Develop a process to review, maintain and track borrower’s employment and payments

46. INCOME-BASED REPAYMENT §682.215 FFEL §685.221 Direct Loans

47. Income-Based Repayment New repayment plan that began July 1, 2009 for FFEL and Direct loan borrowers Caps monthly payments on eligible loans to an affordable amount, based on income and family size

48. Loans Eligible for IBR FFEL or Direct Stafford loans Subsidized and Unsubsidized Grad PLUS loans; not Parent PLUS Consolidation loans, except consolidation loans that paid off Parent PLUS loan Loans must not be in default

49. Borrower Eligibility Determined by comparing monthly payment for all eligible loans under 10-year Standard repayment plan to the calculated IBR payment If IBR amount is less than Standard repayment, borrower is eligible (deemed to have “partial financial hardship”) and may choose to make IBR payment

50. Calculating the IBR payment Annual IBR payment is 15% of the difference between borrower’s income and 150% of the HHS Poverty Guidelines, adjusted for family size and state of residence