The Graduate’s Guide to

Introduction

Although a college education is the most important investment in the life of a young adult, paying the rapidly rising tuition costs can become a life-long burden.

Student loans now total over one trillion dollars in the US.

It’s important to understand all the available options for getting these loans paid off. Otherwise, you’ll likely pay more than necessary.

Repayment PlansYou have a choice.

1.Standard Repayment Plan

Fixed payments of at

least $50 monthly.

Repayment period of 10

years.

You’ll pay less in interest in

this than in any other

repayment plan.

Least expensive

option if you’re able to pay

back 100% of your loan.

Your loan servicer is the company that deals with all the billing and other issues associated with your federal student loans.

The standard repayment plan is always the least expensive over the long term.

2.Graduated Repayment Plan

These loans are for a 10-year period.

You’ll pay more over time as principal is paid more slowly

when payback begins.

The total amount of interest paid is higher

at the end.

Payments are never less than amount of

interest accrued between payments.

The principal on your loan doesn’t increase.

Consider this option if your income is low

now but you expect it to increase.

Payments start lower than with the standard repayment plan.

The payment amount increases over time, usually every 2 years.

3.Extended Repayment Plan

Loan balance must be at least $30,000,

depending on loan type.

Payments can be fixed or graduated over the

life of the loan.

If you’re starting your first job, the graduated payments make sense.

This option is best if your loan balance is significant and the standard

payment plan is too expensive.

You can extend your payments for up to 25 years, which can significantly reduce your payments.

However, you’ll likely end up paying more interest over the extended length of the plan.

4. Income-based Repayment Plan

Maximum monthly payment is 15% of your discretionary income.

Lower payments than under the standard plan, but you’ll likely pay more over the lifetime of the loan.

Payments change as income changes.

After 25 years of payments, the remaining balance of your loan will

be forgiven.

It’s possible you’ll owe income tax on the forgiven amount.

Payments are based on your discretionary income.

Discretionary income is the difference between adjusted gross income and 150% of the poverty level for your family size and state of residence.

5. Pay as You Earn Repayment Plan

After 20 years of

payments, the

remaining loan

balance will be

forgiven.

You may have to

pay income taxes on

the forgiven amount.

To qualify, you must

have received money

from your loan on or

after October 1,

2011.

You’re required to be a

new borrower on or after October 1, 2007. This program is

only for recent

borrowers.

Maximum monthly payment: 10% of discretionary income.

As with the income-based repayment plan, your payments change along with your income.

6. Income-Contingent Repayment Plan

25-year repayment plan. Remaining

balance is forgiven but you may owe income taxes on forgiven amount.

Payments change with your income and are based on

your yearly income tax filing.

Payments are based on gross adjusted income & recalculated each year.

Your family size and the amount of your loan is also included in the calculation.

7. Income Sensitive Repayment Plan

Based on monthlyincome.

Payments will change along with your

earnings.

Plan lasts up to 10 years.

About Loan Repayment Plans

Many loan payment options are available.

The standard plan will likely be the least expensive over the lifetime of the loan. However, sometimes the best choice isn’t the most obvious.

Consider all repayment options and choose the best one for your situation.

Use the many calculators available online to determine how much you can expect to pay.

Loan Consolidation

Combine all of your loans into one to make a single payment each month.

Extend your payments up to 30 years.

Should You ConsolidateYour Loans?

Repayment will be more convenient

as you’ll just be paying 1 payment a month.

You’ll get to choose your payment plan. Even changing a variable interest rate to a

fixed one is possible.

Increasing loan payback period

means you’ll pay more interest.

When you consolidate, you can

lose borrower benefits offered on

original loans.

Lower your payments by

increasing length of loan period.

Once loans are consolidated, original loans are paid off and

no longer exist.

Loan Consolidation Requirements

1.

• To consolidate, you have to have at least 1 loan that’s in the grace period or repayment status.

• Grace period=time between end of student status and date of your first payment.

2.

• If any of the loans you want to consolidate are in default status, consolidation becomes more complicated.

• You lose options when you default on a debt, so always pay on time or change to a payment plan that better fits your situation.

3.

• A loan already consolidated usually cannot be consolidated again.• However, if you have a loan that hasn’t been consolidated, you

may consolidate all existing loans whether they have already been consolidated or not.

Facts aboutLoan Consolidation

The interest rate on a consolidation

loan is always fixed over the loan’s lifetime.

Repayment will begin no more

than 60 days after the loan is disbursed.

The loan repayment term

will range from 10 to 30 years.

Deferment & Forbearance

Temporarily stop or reduce your payments.

Deferment:Meet 1 of These Requirements

Be enrolled in school at least ½ time

Have a graduate fellowship or be in an approved

rehabilitation training program for the disabled

You’re unemployed.

You have economic hardship or are in the Peace Corps.

You’re active military in time of war, national

emergency, or military operation.

It’s during the 13 months following qualifying active

military service.

Mandatory Forbearance(Lender must allow forbearance

if you meet any of these requirements.)

You’re in a dental or medical residency.

The total of your student loan payments is 20%+ of your

gross monthly income.

You’re a teacher that qualifies for loan forgiveness .

You’re an activated member of National Guard but

ineligible for deferment.

You’ve received a national service award and are still

serving in that role.

You’re eligible for partial loan repayments through the US

Defense Department Student Loan Repayment Program.

Discretionary Forbearance

A discretionary forbearance is up to the discretion of your lender.

You can request a discretionary forbearance in situations of financial hardship and illness.

Just like a deferment, you’re required to request either type of forbearance from your loan servicer.

Documentation is frequently requested.

Additional Tips

In many cases, you aren’t responsible for the interest during a period of deferment.

Deferments can last for up to three years,

whereas forbearances only last for up to 12

months.

If you aren’t able to qualify for either and you’re struggling to

make your payments, contact your loan

servicer immediately. You might be able to

change your payment plan.

Forgiveness, Cancellation,

and DischargeEliminate some or all of your

student loan debt.

Total and PermanentDisability Discharge

If you’re totally disabled or considered to have a permanent disability, you can be relieved of your student loan obligations.

If you’re a Veteran, the Department of Veterans Affairs can provide documentation that you’re disabled and unemployable.

If you’re receiving Social Security Disability Insurance or Supplemental Security Income, you can qualify for a student loan discharge.

If your doctor can certify you have an impairment that’s expected to result in death, that’s lasted at least 60 months, or that’s expected to last at least 60 months, your student loan might be forgiven.

Death Discharge

If you die, a family member can provide a copy of your death certificate to the loan servicer and have your loan discharged.

3 Other Types of Loan Discharges

Bankruptcy Discharge

• Prove to the court that making loan payments causes you undue hardship by meeting all 3 of the following:

• Can you live a minimal standard of living if you repay the loan?

• Will your hardship continue for a lengthy period of time?

• Did you make good faith effort to pay off the loan before your bankruptcy occurred?

School Closure Discharge

• Your school closes while you’re enrolled and you’re unable to complete the program due to the closure.

False Certification of Student Eligibility or

Unauthorized Payment Discharge

• If you’re a victim of identify theft or the school commits fraud, you can be relieved of your student loan obligations.

More Discharges and Forgiveness

Unpaid Refund Discharge. If you withdraw from school, the school is required to provide a refund to the lender. If they don’t, you can get those funds discharged from your loan.

Teacher Loan Forgiveness. If you’re a teacher and didn’t get a student loan before 10/01/98, you might be able to have up to $17,500 forgiven on your loan. To do so, you must have been teaching full-time for 5 consecutive years in a low-income school.

Public Service Loan Forgiveness. If you’ve made 120 payments or more, and are employed in certain public service jobs, you can apply to have the balance of your student loan forgiven. However, you cannot be in default.

Other Programs

Check with your state and research private organizations active in your community, as some offer to pay some or all of your student loans when you qualify for their program.

Some employers even pay student loans now as an employee benefit. Research the employers in your locale to see if there are any such jobs available in your field.

Understanding Default

Avoid default if at all possible.

The Road to Default

Your loan is technically delinquent the day after you miss a single payment. As soon as your loan is 90 days delinquent, it will be reported to all three major credit bureaus.

Your loan is considered to be in default if you fail to make a payment for 270 days.

Consequences ofBeing in Default

Entire loan balance and unpaid interest is immediately due.

You can lose eligibility for deferment, forbearance, & payment plans.

You’re unable to obtain additional student loans.

Your loan is assigned to a collection agency.

Your tax refunds are withheld and applied to your unpaid balance.

Late fees, extra interest, collection & legal fees, and court costs are added to your debt.

Your wages may be garnished.

You Have Options

At the first sign that you may have challenges making your

student loan payment, contact your loan servicer for

options that can keep you from going into default on

your loan.

Ways to Pay Off Student Loans

QuicklyPay off your loans faster.

Loan Pay-Off Tips

Strive to reduce interest rates:

Some loan providers will give 0.25% discount for using

automatic payments.

Ask your lender how to get additional rate reductions.

Consolidated loans sometimes have lower interest rates.

Loan Pay-Off Tips

Create a budget to fit in your loan payment.

Refrain from borrowing more than you need.

Pay more than the minimum monthly payment.

Earn more money. Take a temporary part-time job and apply 100% of your earnings to your loan.

Conclusion

It’s important to be responsible about student loans as they stand to affect your financial life for a long time.

The government is powerful and could have profound effects on your life, should you not pay your loans as agreed.

Many options are available to you to ease stress about your loans: forgiveness, cancellation, forbearance, and more.

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