Meet The Speakers. Sasha Grabenstetter, AFC Consumer Economics Educator University of Illinois Extension

Transcription

1 Welcome to 1

2 Meet The Speakers Sasha Grabenstetter, AFC Consumer Economics Educator University of Illinois Extension Andrea Pellegrini Assistant Director Student Money Management Center 2

3 Where are you in the student loan process? In School Deferment Grace Period Repayment Forbearance

4 Questions to Answer How much do I owe? What types of loans do I have? Who are my loan servicers? What are my repayment plan options? How can I get student loan forgiveness? What if I can t pay? What makes it hard to plan for repayment? 4

5 HOW MUCH DO I OWE? WHAT TYPES OF LOANS DO I HAVE? WHO ARE MY LOAN SERVICERS?

6 Student Loan Dashboard Loan Servicers Contact Info Interest Rate Monthly Payment MOHELA (Federal Loans) % $288 ACS (Fed UI) % $21 Willie June WILJ 10% $13 Total $322 Total: $28,000 Principle $28,000 Interest Accrued $??? Total Debt $28,000 Federal State School Private Sub $12,000 N/A $0 Perkins $2,000 Will Jun $1,000 Unsub $13,000

7 Gather the Information StudentLoans.gov (for federal loans) Your School (for campus-based loans) AnnualCreditReport.com (for private loans if you don t know your lender) Interest Rates Loan Amounts Servicers Student Loan Dashboard 7

8 *For more info on Federal Student Loans: Federal Loans Retired Current* Federal Family Education Loan (FFEL) Program Direct Subsidized Direct Unsubsidized Direct PLUS Direct Consolidation Private lenders were able to provide federal loans thru this program. No new loans are being disbursed under this program Undergrads with financial need. Federal government pays interest while you are in school. Undergrad, grad, & professional students. Student does not need to demonstrate financial need. Grad or professional students and parents of dependent undergrads. Must not have adverse credit history. Allow you to combine all eligible federal student loans into a single loan with a single loan servicer.

9 Campus-Based Loans Perkins Awarded to undergraduate and graduate students with exceptional financial need. Loan is repaid by you to your school. Perkins Loan Limits Undergraduate Graduate $5,500 as of April 6, 2015 $8, years (Standard) Interest Rate Repayment Plan 5% Note: The Perkins Loan Program is a Federal Loan where your school is the Lender.

10 Private Loans Private Education Loans are offered by private lenders. These loans are not guaranteed by the Government. Can have higher interest rates. Private or Third Party Loans Private loans are based on credit history. Poor credit will effect your interest rate and ability to obtain these types of loans. Repayment options for private loans vary significantly. Work with your loan servicer(s) to determine your options for repayment.

11 Terms to Know 11

12 When do you have to start repaying your loan? a. Immediately b. 3 months c. 6 months d. 9 months e. One year f. Unsure

13 Grace Period The period after you graduate, leave school, or drop below half-time enrollment before you are required to begin repayment of your loans. 6 months for Federal Direct Loan or Federal Family Education Loan (most common) 9 months for Federal Perkins Loans

14 WHAT ARE MY REPAYMENT OPTIONS? 14

15 Repayment Plans Summary Standard fixed payments of at least $50/mo for 10 yrs; default option Graduated pmts start low & increase every 2 yrs for yrs Extended fixed or graduated pmts up to 25 yrs; debt must be > $30k REPAYE max pmt is 10% of income; pmt could be > 10 yr standard PAYE max pmt is 10% of income; only for new borrowers IBR max pmt is 15% of income for 25 yrs; discharge unpaid amt ICR 25 yr pmt based on AGI, family size & amt of DIRECT loans Income-Sensitive Stafford & FFEL; pmt based on annual income over 15 yrs CFPB Know Your Options:

16 Benefits of ACH ACH Stands for Automated Clearing House a.k.a., Direct Debit, echeck or Automatic Payment Loan servicers will give you an interest rate reduction if you sign up for ACH. An ACH pulls your student loan payment from your checking account. The reduction is.25% off your interest rate.

17 Standard Repayment Example Vanessa is a student in Illinois she is about to graduate with a degree in Business Administration with an emphasis in Marketing. $25,000 in Student Loans How much will her monthly payment be? How much interest will she pay over the life of her repayment plan?

18 Standard Repayment Example Vanessa s Repayment Summary Standard Graduated Principle Loan Amount $25, $25, Interest Rate 6.8% 6.8% Monthsin Standard Repayment Monthly Payment $288 $ $ Total Interest Payment $9, $12, Total Loan Repayment $34, $37, *This example assumes all of Vanessa s loans are federal & she won t be in deferment or forbearance during repayment.

19 Graduated Repayment Schedule $ $ $ $ $ $ $ $ $ $ $ $

20 Vanessa (Income at $20,000) Repayment Plan First Monthly Payment Last Monthly Payment Total Amount Paid Projected Loan Forgiveness Repayment Period (in months) Standard $288 $288 $34,524 $0 120 months Graduated $166 $498 $37,150 $0 120 months REPAYE $18 $278 $36,048 $22, months PAYE $18 $191 $21,572 $37, months IBR $27 $288 $49,620 $16, months IBR for new borrowers $18 $191 $21,572 $37, months ICR $135 $211 $53,648 $2, months

21 Vanessa (Income at $50,000) Repayment Plan First Monthly Payment Last Monthly Payment Total Amount Paid Projected Loan Forgiveness Repayment Period (in months) Standard $288 $288 $34,524 $0 120 months Graduated $166 $498 $37,150 $0 120 months REPAYE $268 $438 $33,446 $0 99 months PAYE $268 $288 $34,744 $0 122 months IBR for new borrowers $268 $288 $34,744 $0 122 months ICR $243 $162 $36,940 $0 147 months

22 Which Repayment Option Would You Choose if You Were Vanessa? Vanessa s Repayment Summary Standard Graduated REPAYE ICR Principle Loan Amount $25, $25, $25, $25, Interest Rate 6.8% 6.8% 6.8% 6.8% Monthsin Repayment Monthly Payment $288 $166-$498 $18-$278 $ Total Amount Paid $34, $37, $36,048 $53,648 This example assumes all of Vanessa s loans are federal & she won t be in deferment or forbearance during repayment. Total interest paid cannot be calculated for REPAYE or ICR since the payments can vary so much depending on income. Total amount paid does not include tax liability of any forgiven amount, which could be $2,759 for ICR & $22,316 for REPAYE.

23 IBR vs ICR Income-Based Repayment Must submit annual documentation Maximum monthly payments will be 10% or 15% of discretionary income Based on income, family size & state of residence Your payments change as your income changes After 20 or 25 years, the unpaid portion will be discharged Income-Contingent Repayment Must submit annual documentation For DIRECT Loans Only Based on adjusted gross income, family size, and total amount of your Direct Loans Flexibility to pay Direct Loan obligations without causing financial hardship 25 year repayment period, after 25 years the unpaid portion will be discharged If the remaining loan is discharged, that amount will be taxed as income.

24 Revised Pay As Your Earn (REPAYE) vs Pay As You Earn (PAYE) features REPAYE PAYE You must be a new borrower on or after 10/1/2007 and received a disbursement of a DIRECT loan on or after 10/1/2011 Payments are recalculated each year and are based on your updated income and family size Your maximum monthly payments will be 10 percent of discretionary income Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full* Good option for those seeking Public Service Loan Forgiveness (PSLF). X X after 20 or 25 years X X X X after 20 years X *If the remaining loan is discharged, that amount will be taxed as income. 24

25 Loan Consolidation

26 Direct Consolidation Loan Students can consolidate (combine) multiple federal student loans with different repayment schedule into one Direct Consolidation Loan. Pros One payment instead of multiple monthly payments Your monthly payment MIGHT be lower Cons May lose access to federal repayment plan options or loan forgiveness Repayment period may be extended up to 30 yrs All federal loans can be consolidated No application fees to consolidate federal education loans into a Direct Consolidation Loan Federal Perkins loans are not automatically included in the Direct Consolidation Loan Typically you can only consolidate once, unless you add new loans Interest rate on your consolidated loan is fixed for the life of the loan, based on weighted average of all the interest rates you consolidate and never exceed 8.25%

27 Consolidation vs Refinancing Loans eligible: Lower interest rate? DIRECT Consolidation Loan All federal loans No, rate is fixed, weighted avg, < 8.25% Private Refinance Loans Private & (sometimes) federal loans Possibly, rate is variable or fixed, based on credit Credit check required? No Yes Will I save money? Not long term, maybe on monthly pmt Probably, if receiving lower interest rate Can lower monthly payment? Maybe Yes Eligible for income-driven repayment plans: Yes No Access to Public Service Loan Forgiveness (PSLF): Yes No Eligible to maintain Federal Perkins Loan Forgiveness: No No

28 Chat Discussion What are the benefits of loan consolidation? What are the limitations of loan consolidation?

29 HOW CAN I GET STUDENT LOAN FORGIVENESS?

30 Types of Loan Forgiveness IBR PAYE REPAYE Cancellation* Teacher Loan Forgiveness Public Service Loan Forgiveness You may have to pay income tax on any amount that is forgiven

31 Public Service Loan Forgiveness The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance* on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Monthly Payments Repayment Plans Employer 31

32 Public Service Loan Forgiveness The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance* on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Monthly Payments Must be made after October 1, 2007 For full amount due as shown on your bill No later than 15 days after your due date Monthly payments made while in an in-school status, the the grace period, a deferment, a forbearance or default do not qualify. 32

33 Public Service Loan Forgiveness The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance* on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Repayment Plans Income-Driven Repayment Plans REPAYE PAYE IBR ICR Standard Repayment Plan Even though the 10-year Standard Repayment Plan is a qualifying repayment plan for PSLF, you will not receive PSLF unless you make the majority of your 120 qualifying monthly payments under an income-driven repayment plan. 33

34 Public Service Loan Forgiveness The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance* on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Serving in a full-time AmeriCorps or Peace Corps position also counts as qualifying employment for the PSLF Program. Employer ü Government organizations (federal, state, local or tribal) ü Not-for-profit organizations that are 501(c)(3) tax-exempt ü Other not-for-profits that provide qualifying public services 34

35 WHAT IF I CAN T PAY?

36 Deferment & Forbearance Deferment Period when repayment of principal and interest of your loan is temporarily delayed You do not need to make payments in deferment For Federal Perkins Loans, Direct Subsidized Loans or Subsidized Federal Stafford Loans, the government may pay interest while in deferment The government does not pay interest on unsubsidized & PLUS loans in deferment Interest may be capitalized while in deferment Forbearance When you can t make your payment, but don t qualify for deferment 2 types: discretionary & mandatory Discretionary forbearance is for financial hardship or illness & your servicer decides to grant it or not Mandatory forbearance is for several reasons & your servicer is required to grant the forbearance To request a forbearance, work with your loan servicer

37 Work with your Loan Servicer To make payments on your student loans To request changes to your payment plan To apply for student loan forgiveness To apply for a loan cancellation (e.g., IBR) To request a deferment or forbearance 37

38 Go to College Move to L.A. Graduate Have a Roommate Get a Raise Get a job Buy a Car Get Injured at Work Get Married Career Change Have a Child WHAT MAKES IT SO HARD TO PLAN FOR LOAN REPAYMENT? Buy a Home

39 What is the best way to get rid of your student loans faster? ü Limit what you spend while in school ü Bi-weekly student loan payments ü Direct Debit (ACH) Discounts ü If paying more than the minimum Apply additional amount directly to the principle Use the debt snowball or waterfall method

40 Reducing Compound Interest Is it better to wait after graduation to start paying for loans or make monthly payments while still in college? The decision is ultimately yours! If you have unsubsidized loans you can make payments on the interest that is accruing while you are in school.

41 What happens if I max out my student loans? Subsidized & Unsubsidized Aggregate Loan Limits Dependent Student $31,000 total No more than $23,000 of this may be in subsidized loans Independent Student $57,500 total No more than $23,000 of this may be in subsidized loans Why is this important? If you max out your student loans you ll be unable to borrow additional loans unless you pay them back.

42 Know WHAT You Owe WHO You Owe WHEN to pay HOW to pay and your RESOURCES

43 Helpful Websites Department of Education s Student Aid Website: studentaid.ed.gov Repayment Estimator:studentloans.gov/myDirectLoan/mobile/repayment/rep aymentestimator.action CFPB s Paying For College: consumerfinance.gov/paying-forcollege/

44 Stay in Contact with Us! Financial Wellness web.extension.illinois.edu/financialwellness Student Money Management Center studentmoney.uillinois.edu 44

45 Financial Literacy Badges Program Want to participate in University of Illinois financial education events and programs while also earning badges that you can display on social media sites? Participate in the Financial Literacy Badges Program! Take the Quiz: go.uillinois.edu/loveyourloanquiz Launch of the Financial Literacy Badges program is supported through the Financial Literacy Counts Grant from HigherOne. Learn more about the the Financial Literacy Badges Program by visiting badges.illinois.edu/usfsco/financialliteracyprogram

46 Questions?

47 Thank You 47