Student Loan Guide: Federal vs. Private Loans, Repayment, and Servicers

1. Student Loan Bakery Financial Aid PLP Financial Aid Office

2. KNOW YOUR LOANS • My Financial Aid Portal Access • Federal Loans v. Private Loans • Federal Loan Servicers • Federal Loan Terms and Conditions • Repayment Options • Standard, Graduated, Extended, ICR, IBR • Public Service Loan Forgiveness • Loan Consolidation • Payments

3. Student Financial Aid Portal Access through “Student Records Login” Or https://finaid.wmitchell.edu/NetPartnerStudent/Logon.aspx Value: Real-time information on budgets, current aid awards, online acceptance of financial aid awards, date of aid disbursements

4. Federal v. Private Loans v. • Federal Loans • Originated and Serviced by Federal Government • Loans before 2010 may be serviced under FFEL Program and not the Direct Loan Program ***important for repayment and consolidation*** • Fixed Interest Rates, for loans after 2006 • Private Loans • Guaranteed by Private Banks or Credit Unions • Loan Terms and Conditions: Determined by Lender, all different! • Cannot be included in loan forgiveness, special repayment programs, or discharged after death or permanent disability

5. Loan Servicers: Federal Loans • Direct Loans William D. Ford Direct Loan Program (ACS) • Phone number: 1-800-848-0979 • Website: www.myedaccount.com • Fed Loan Servicing (PHEA) • Phone number: 1-188-699-2908 • Website: www.myfedloan.org • Great Lakes • Phone number: 1-800-236-4300 • Website: www.mygreatlakes.org • NelNet Education Planning and Financing • 1-888-486-4722 • Website: www.nelnet.com • SallieMae Department of Education Loan Services • Phone number: 1-800-722-1300 • Website: www.salliemae.com *** To Retrieve Information on Your Loan Servicer: www.nslds.ed.gov ***

6. Federal Direct Loan Terms and Conditions • Annual Maximum: $20,500 • Lifetime Maximum: $138,500 • Includes Undergraduate Studies • Effective July 2, 2012: Graduate students are not eligible for new subsidized loans • Subsidized Loans: Interest paid by Federal Govt. while student is enrolled at least half-time • Unsubsidized Loans: Interest accrues on loan while student is enrolled at least half-time • Interest Rate: Fixed 6.8% • Loan Origination Fee: 1% • Loan Request: $1000, Funds Received for $990 • Grace Period: 6 months • begins once the student graduates, withdraws, or drops below half-time enrollment

7. Direct Grad PLUS Loans Terms and Conditions • Annual Maximum: Cost of Attendance minus all other aid • Other Aid: Scholarships, Perkins loans, Federal Direct Loans, and Work-Study • Lifetime Maximum: None- subject to credit approval • If denied: request credit report from www.annualcreditreport.com • Required: to fix credit problem and appeal credit decision or co-signer • Interest Rate: Fixed 7.9% • Loan Origination Fees: 4% • Loan Request : $1000, Funds Received by Student: $960 • No interest subsidy, interest accrues immediately • Grace Period: None, but student requests a loan deferment • Loan deferment: ends after student graduates, withdraws, or drops below half-time enrollment • Student may request an additional 6 month deferment if disbursed on or after July 1st, 2008

8. Repayment Plan Options • Standard Repayment (sliced bread) • Graduated Repayment: (sloped sliced bread) • Extended Repayment: (baguette) • Fixed or Graduated • Income Contingent Repayment (ICR) (unsliced artisan bread) • Income-Based Repayment (IBR) (unsliced bread)

9. Standard Repayment Plan • Payment Amount: fixed, set by loan balance • Minimum Payment: $50 • Repayment Term: 10 years (plus deferments and forbearances) • The good: • 10 years of loan payments • Least amount in interest paid • Ideal: high income v. loan balance • The bad: • Highest payment amount

10. Graduated Repayment Plan • Payment Amount: set by loan balance, increases with time • Minimum Payment: Interest accrued between payments • Maximum Payment: >3x the minimum payment • Repayment Term: 10 years (plus deferments and forbearances) • The good: • 10 years of loan payments • Less interest than other alternative repayment options • Ideal: • high income v. loan balance • income increases with time • The bad: • Higher interest costs than standard

11. Extended Repayment Plan • Required: >$30,000 in Direct Loan debt • Repayment Term: up to 25 years (plus deferments and forbearances) • Two payment options: • Fixed • Similar to standard payment • Pay same amount each month • Graduated • Similar to graduated repayment plan • Payments start lower and increase every 2 years • The good: • More affordable payments with longer term • Ideal: • medium income v. loan balance • income increases with time • The bad: • Higher interest costs (longer the term, the more interest)

12. Income Contingent Repayment Plan (ICR) • Not available for: • Parent Plus loans • Consolidation loans used to repay Parent Plus loans • Why to bring up: if you take loans out for your children • Minimum Payment: calculated annually, based on AGI, family size, and loan balance • Lesser of: • 20% of monthly discretionary income (based on AGI, family size, state’s income poverty level) OR • Value of: payments based on a 12 year repayment term multiplied by income percentage factor determined by annual income • If payments < accrued interest each month, the unpaid interest is capitalized once a year • Capitalization will not exceed 10% of original loan amount • Interest will continue to accrue, limit on compounding • Repayment Term: up to 25 years (plus deferments and forbearances) • Discharge: any unpaid balance after 25 years

13. Income-Contingent Repayment Plan (ICR) • The good: • Limits loan payments to manageable payment amounts • Discharge: 25 years of payments OR 10 years for Public Service • Interest capitalization cap • Increases flexibility to move to different repayment program • Ideal: • low income v. loan balance • The bad: • Higher costs if no discharge • Discharged loan balance may be taxable • Spousal income is included in calculations ***You will need to consolidate loans to DL if you have FFEL loans***

14. Income-Based Repayment Plan (IBR) • Available for: all Stafford, Graduate PLUS, Consolidation loans (DL or FFEL) • Not available for: defaulted loans, Parent Plus loans, or consolidated Parent Plus loans • Minimum Payment: • calculated annually, documentation submitted annually • Set at 15% of discretionary income (AGI & family size) • Requires “partial financial hardship” • IBR payment > standard repayment • While payments are capped at the 10-year standard repayment, payments are made for 25 years • If payments do not cover accrued interest, the federal government will pay interest on subsidized loans up to 3 years • Borrower is responsible for ALL accrued interest on unsubsidized loans • ALL interest will be capitalized if IBR is left or there is no partial financial hardship • Repayment Term: up to 25 years (plus deferments and forbearances) • Discharge: any unpaid balance after 25 years or 10 years for public service

15. Income-Based Repayment Plan (IBR) • The good: • Likely to be lowest payment • Ability to discharge loans after 25 years of payments • 10-year public service loan forgiveness program • Ideal: • low income v. loan balance and public service work • Spouse student loans can be included in calculation • The bad: • Possibility of increased interest payments • No capitalization cap on interest • Documentation is submitted annually to servicer • Discharged value may be taxable • Spousal income is used in calculation

16. Public Service Loan Forgiveness Program • What: Discharge of Direct Loans • DL Loans including Grad Plus loans • Perkins loans, must be consolidated with DL • Rehabilitated defaulted loans • No FFEL loans: consolidate FFEL loans with DL • When: After 120 qualifying monthly payments • Qualifying payments need not be consecutive • Qualifying payments: made while employed FT by a public service organization • Qualifying employment need not be consecutive • Excluded: time spent in deferment or forbearance • Included: when calculated payment is zero • Pair with: IBR; ICR; Standard Repayment Plan; any other Direct Loan repayment plan • Waived balance is not currently taxable

17. Public Service Loan Forgiveness Program • Required: FT public service job with PSLF eligible employer • PSLF eligible employers: • Public sector employers • Federal, state, local, or tribal agency or entity • Private non-profit employers that is 501(c)(3) • Except: partisan political organizations, labor unions, • Except: organizations engaged in religious activities • If your job duties are related to religious instruction, worship services, or any form of proselytizing • So: individuals working at religiously-affiliated non-profit organizations who perform at least 30 hours of non-religious activities are eligible for PSLF • Private employer: if it is non-profit, is not an excluded group, and provides one or more public services • Examples: military, law enforcement, public interest, early childhood, public health, education

18. Consolidation www.loanconsolidation.ed.gov • Use: Centralize loans to 1 payment when there is multiple servicers or loan programs (DL and FFEL) • Loans: Stafford loans, Plus loans, Perkins Loans, SLS loans, old consolidation loans • PLUS loans: Graduate or Parent, if borrower is parent • Downside: loss of borrower benefits • Perkins loans: loss of interest subsidy in deferments, loss of cancellation benefits, decreased grace period • Principle rebates, interest rate discounts

19. Monthly Payment Plan Example Calculator Inputs: Calculator Outputs:

20. Interest Payments in School Impact on Payments, Standard 10 year repayment plan:

21. Reminders • Live large now, live small later • Set realistic budgets, live like a student • Returning funds to the lender: • All funds returned within 120 days of disbursement, by the student or the school, have all interest and fees forgiven • Ideal: overestimated needs for aid • Student loans are not dischargeable in bankruptcy • Questions: Contact the Financial Aid office, even after you graduate!

22. Helpful Websites www.studentaid.ed.gov www.finaid.org www.nslds.ed.gov www.askheatherjarvis.com www.annualcreditreport.com IBR Website & Calculator http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp www.ibrinfo.org Repayment Plans & Calculator http://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp

23. Questions?