School of Public HealthExit Counseling

April 22, 2010

Why do I need to attend?

Federal regulations require schools to provide exit counseling for students who have borrowed a Stafford or Grad PLUS loan and who are graduating or have dropped below half-time.

Master Promissory Note (MPN):Borrower Responsibilities

• Agreement to pay back loan(s)• Multi-year feature vs. new promissory note per year• Used for subsidized and unsubsidized Stafford

− Subsidized – need-based loan; government pays interest while enrolled

− Unsubsidized – non-need based loan; student responsible for all interest

• Also used for Grad PLUS• Borrower rights & responsibilities detailed on MPN

When Repayment Begins

• Stafford loans have a grace period: first payment due six months after student graduates, withdraws, or drops below half-time.

• Grad PLUS loans have a deferment period: first payment due six months after student graduates, withdraws, or drops below half-time enrollment

• Lender will advise you of your first payment due date during your grace/deferment period. If you don't receive this information, contact your lender.

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).

Consequences of Default

• Loss of federal financial aid eligibility• Withholding of federal income tax refunds• Inability to renew professional license

(e.g. lawyer, doctor)• Negative credit history (will affect credit

purchase of house, car, etc.)

Consequences of Default

• Wage withholding• May be sued• Collection fees and attorney’s fees assessed• Enforcement of delinquent debt

collection procedures

Repayment Options

• Standard plan• Graduated plan• Extended plan • Income-sensitive plan• Income-based repayment plan (IBR)

Repayment Options

• For all repayment plans, student can:−prepay loans without penalty −pay on a shorter schedule, and −change repayment plans

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

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

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 payment amount may be lower

Income-Sensitive Repayment Plan

• Monthly payment varies according to gross monthly income

• Monthly payment covers at least monthly accruing interest

• Must reapply annually• Total interest costs will be higher over the life

of your loan than with standard repayment

Income-Based Repayment

• Borrowers may qualify for lower monthly payments as determined by income, indebtedness level, and family size

• May forgive any remaining debt after 25 years of eligible payments

• Must reapply annually• Determine eligibility at www.ibrinfo.org• Calculator at www.ibrinfo.org/calculator.php

Income based Repayment (contd.)

Borrowers who can benefit from IBR:• Individuals entering careers with relatively

high loan debt compared to starting salaries, such as:−Medicine−Law−Elementary/secondary education−Social work

Ineligible Loans to include in IBR

• Parent PLUS loans• Consolidation loans that include Parent

PLUS loans • Private (or "alternative") student loans• State loans• Other loans not guaranteed by the

federal government• Defaulted loans

Partial Financial Hardship

Borrower’s monthly loan payment using the standard 10-year repayment plan

is greater than

15% of borrower’s AGI minus 150% of poverty line amount / 12

• Based on family income and size

Examples Single borrowerwith no dependents

Married borrower with two children

(and no spousal income or spousal student loan

debt)

Single medical resident borrower

with no dependents

Eligible student loan debt $40,000 $80,000 $150,000

Interest rate 6.8% 6.8% 6.8%

Adjusted Gross Income $30,000 $60,000 $45,000

10-year standard plan monthly payment

$460 $920 $1,726

Estimated monthly payment under IBR plan

$170 $340 $359

Reduction in monthly payment amount

$290 $580 $1,367

Repayment terms

• Once in IBR, repayment can extend beyond 10 years regardless of the amount of the eligible debt

• Borrower can elect to remain in IBR even when he or she no longer meets PFH

• Borrower is not locked into IBR, but could have consequences if he or she voluntarily leaves plan

Comparison of Sample Repayment Options

ATTACHMENT B

Loan Balance = $60,000, Interest Rate = 6.8%

Standard Income Based

Graduated Income Sensitive

Extended

Monthly Pmt $690 $170 Yr 1: $340

Yr 2-10: $812

Yr 1: $340

Yr 2-11: $690

$416

Term 10 years 25 years 10 years 11 years 25 years

Total Interest

$22,858 $81,981 $26,118 $26,938 $64,933

Total Paid $82,858 $98,564 $86,118 $86,938 $124,933

Loan Balance = $81k, interest rate = 6.8%

Standard Income Based

Graduated Income Sensitive

Extended

Monthly Pmt

$932.15 $234.44 Yr 1-2: $459

Yr 3-10: $1096

Yr 1: $459

Yr 2-11: $932

$562

Term 10 years 25 years 10 years 11 years 25 years

Total Interest

$30,858 $70,332 $35,260 $36,366 $87,660

Total Paid $111,858 $151,332 $116,260 $117,366 $168,660

Consolidation Loans

• Allows borrowers to combine one or more federal education loans

• 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

Consolidation: Factors to Consider

• Negatives −Total interest paid may be greater−May extend repayment period −May lose benefits (e.g., grace period,

deferment, forgiveness, and cancellation)−Borrower benefit programs may vary

among lenders

Consolidation: Factors to Consider

• Positives −May significantly lower monthly payments−Simplifies repayment: one monthly payment−May prepay or change repayment plans

without penalty

Consolidation Tips

• Compare and weigh all options• Start with your financial aid office

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

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.gov, for more information.

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! • www.aie.org/moneytips

Accessing your loan information

• National Student Loan Data System (NSLDS)−U.S. Department of Education's (ED's) central

database for student aid −NSLDS receives data from schools, guaranty

agencies, the Direct Loan program, and other Department of ED programs

−To access loan records visit www.nslds.ed.gov

−Students will need their PIN for access

Reminders!

• Keep copies of all correspondence −Sent to you −You send

• Keep lender informed of status changes−Going to graduate school−Change of address

Problem Resolution Process

• Federal Student Aid Ombudsman of theDepartment of Education−helps resolve disputes −when you have  done all you can do yourself

 and haven’t been able to  reach a solution, the ombudsman provides a  process and resources  to assist student.

− http://www.ombudsman.ed.gov/

Deferments & Forbearance

Deferments•Economic Hardship•Unemployment•Military Deployment•Enrollment in School•Internship •National Service

Forbearance•Lets you suspend or reduce your student loan payments under certain circumstances and for specified periods of up to one year at a time

Bottom Line: If you are ever unable to make the payments on your loans, contact your lender to request assistance through deferment, forbearance or revised repayment plan!!

Public Service Loan Forgiveness

• Public Service Loan Forgiveness is a new program for federal student loan borrowers who work in certain kinds of jobs. It will forgive remaining debt after 10 years of eligible employment and qualifying loan payments

• Only Federal Direct Student Loans are eligible for this program so consolidation of FFEL loans is necessary.

Public Service Loan Forgiveness

To be eligible for forgiveness:

• Borrower has to have made 120 payments on the loan after October 1, 2007

• Loan must not be in default• Borrower must be employed in public service job

− During the period in which each of the 120 payments were made

− At the time forgiveness is applied

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”

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

Definition of Public Service Organization (contd.)

• 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

Definition of PublicService 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 statefundedpre-kindergarten)– Public service for individuals with disabilities and the elderly– Public health (including nurses, nurse practitioners, nurses in a clinical setting, andfull-time professionals engaged in health carepractitioner and health care support occupations)

Definition of PublicService 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

Public Service Loan Forgiveness

• For more information about PSLF access: http://studentaid.ed.gov/PORTALSWebApp/students/english/PSF.jsp

• Check out several PSLF Q&As at the same link

You may wonder??

Q: How can I benefit from the PSLF if I pay off my loans in 10 years??

A: You cannot – reconsider your repayment strategies by incorporating IBR to extend your repayment thus allowing you to benefit from PSLF

Check List

1. Graduate!

2. Find a job

3. Organize all federal loans

4. Consolidate all FFEL (bank) and previously consolidated loans into a Direct Loan (www.loanconsolidation.ed.gov/). Take into consideration grace period on existing loans (consolidating eliminates grace).

5. Contact repayment servicer(s) requesting IBR

6. Maintain employment records to qualify for PSLF