STUDENT LOAN REPAYMENT Leslie Tobakos Registrar, Financial Aid & Admissions Manager Cranbrook Academy of Art
In this world nothing can be said to be certain, except death and taxes. Benjamin Franklin, in a letter to Jean-Baptiste Leroy, 1789, which was re-printed in The Works of Benjamin Franklin, 1817
In this world nothing can be said to be certain, except death and taxes and student loan repayment. Leslie Tobakos, with a tip of the hat to Ben Franklin
You borrowed You promised to repay It s your responsibility to repay your loans!
AGENDA Importance of Budgeting Types of Loans / What They Mean for You Federal Loan Repayment Plans Consolidation Tips Public Service Loan Forgiveness What Now? Q & A Final Thoughts
IMPORTANCE OF BUDGETING Income Expenses: Rent Utilities Food Home/Renter Insurance Hygiene Items Telephone Health Insurance Taxes Supplies Transportation Costs Student Loan Payment Internet this doesn t even include fun stuff!
IMPORTANCE OF BUDGETING Your income is what it is Your expenses can be controlled: Less expensive area/apartment (or get roommates) Shop sales/use coupons/go to less-fancy stores Shop around for best insurance rates Less expensive phone/internet plans Income Driven Student Loan Payment Plan
IMPORTANCE OF BUDGETING Creative ways to keep expenses to a minimum: Clothing: Salvation Army; recycle friend s stuff; wear what you already have Phone: less data=less expensive; get on a family plan; switch to prepaid service Internet: use your phone; go to the library Cable: You do not need this! Fun: Find free or inexpensive things to do (they exist!)
IMPORTANCE OF BUDGETING A word about health insurance: You are required by law to have health insurance You will pay a penalty if you don t have health insurance Your CAA insurance covers you through August 31 st You may only enroll using a qualifying event within 60 days before or 60 days after the event; You may qualify for tax subsidies or for Medicaid; Penalty for not having health insurance is at least $695 in 2016
TYPES OF LOANS / WHAT THEY MEAN FOR YOU FFEL Subsidized and Unsubsidized Loans Federal Direct Subsidized and Unsubsidized Loans (DL) FFEL Graduate PLUS Loans Federal Direct Graduate PLUS Loans (DL) Perkins Loans FFEL and DL Consolidation Loans Private Loans Institutional Loans
TYPES OF LOANS / WHAT THEY MEAN FOR YOU FFEL Subsidized and Unsubsidized Loans Federal Loans borrowed prior to July 1, 2010 Loans were borrowed from private lenders Servicers differ from Direct Loan servicers (payment made to each) You may have more than one FFEL servicer (payment made to each) These loans may impact your choice of repayment plans Grace Period: 6 months but If you already used your initial 6-month grace period, your loans become due immediately after graduation
TYPES OF LOANS / WHAT THEY MEAN FOR YOU Federal Direct Subsidized and Unsubsidized Loans (DL) Federal Loans borrowed after July 1, 2010 (some before) Loans are borrowed directly from the federal government Single servicer for all Direct Loans Grace Period: 6 months but If you already used your initial 6-month grace period, your loans become due immediately after graduation
TYPES OF LOANS / WHAT THEY MEAN FOR YOU FFEL Graduate PLUS Loans Federal Loans borrowed prior to July 1, 2010 Loans were borrowed from private lenders Servicers differ from Direct Loan servicers (payment made to each) You may have more than one FFEL servicer (payment made to each) These loans may impact your choice of repayment plans Grace Period: None repayment begins immediately after graduation
TYPES OF LOANS / WHAT THEY MEAN FOR YOU Federal Direct Graduate PLUS Loans (DL) Federal Loans borrowed after July 1, 2010 (some before) Loans are borrowed directly from the federal government Single servicer for all Direct Loans Grace Period: Technically none, but graduate students whose loans were in in-school deferment have a 6-month grace period but If you already used your initial 6-month grace period, your loans become due immediately after graduation
TYPES OF LOANS / WHAT THEY MEAN FOR YOU Perkins Loans Federal loan, but lender is the school Payments go to the school or a servicer the school hires school/servicer contacts you separately from other loans Separate repayment from your FFEL and DL loans unless you take steps to consolidate the Perkins Loan into an existing FFEL or DL loan (to qualify for certain repayment plans requiring DL loans only, the consolidation loan must be a DL loan) Grace Period: 9 months but If you already used your initial 9-month grace period, your loans become due immediately after graduation (and if you consolidate, you lose the grace period)
TYPES OF LOANS / WHAT THEY MEAN FOR YOU FFEL and DL Consolidation Loans Can be FFEL or DL Can include FFEL and DL subsidized, unsubsidized, and Graduate PLUS loans Can include Perkins Loans if borrower includes them Can consolidate FFEL loans into an existing DL loan to make it eligible for certain repayment plans Grace Period: Depends on the underlying loans contact servicer
TYPES OF LOANS / WHAT THEY MEAN FOR YOU Private Loans Exist separately from federal loans Cranbrook Academy of Art has no way of knowing if you have private loans, how much you owe, or what the repayment terms are for your private loans Private loans cannot be included in federal repayment plans There are some companies offering refinancing for private loans. If you choose to refinance, pay careful attention to the terms of the new loan. It is almost never a good idea to include federal loans when refinancing private loans.
TYPES OF LOANS / WHAT THEY MEAN FOR YOU Institutional Loans Exist separately from federal loans Non-federal loans made to you by your college Cranbrook Academy of Art has no way of knowing if you have institutional loans, how much you owe, or what the repayment terms are for your private loans Institutional loans cannot be included in federal repayment plans
TYPES OF LOANS / WHAT THEY MEAN FOR YOU Know your loans Make sure you are repaying all of your loans
FEDERAL LOAN REPAYMENT PLANS Standard Repayment Plan Standard Repayment Plan (you are automatically placed in this plan; you must apply for other plans) Graduated Repayment Plan Graduated Repayment Plan Extended Repayment Plans Extended Repayment Plan Extended Graduated Repayment Plan Income-Driven Repayment Plans Income Based Repayment Plan (IBR) Pay As You Earn Repayment Plan (PAYE) Revised Pay As You Earn Repayment Plan (REPAYE) Income-Contingent Repayment Plan Income-Sensitive Repayment Plan
FEDERAL LOAN REPAYMENT PLANS Standard Repayment Plan FFEL and DL subsidized, unsubsidized, PLUS and consolidation loans eligible Default payment plan you are automatically placed in this plan unless you request a different plan and complete any paperwork necessary Payments are spread out over 10 years Payments are a fixed amount every month Minimum payment is $50 / month You ll pay less over time than with other plans Consolidation loans may have a longer repayment period, up to 30 years
FEDERAL LOAN REPAYMENT PLANS Graduated Repayment Plan FFEL and DL subsidized, unsubsidized, PLUS and consolidation loans eligible Payments are spread out over 10 years Payments are lower at first, then gradually increase every 2 years You ll pay more over time than with the Standard Repayment Plan Consolidation loans may have a longer repayment period, up to 30 years Payments made while in the Graduated Repayment Plan are not eligible to be counted for the Public Service Loan Forgiveness program
Extended Repayment Plans FEDERAL LOAN REPAYMENT PLANS FFEL and DL subsidized, unsubsidized, PLUS and consolidation loans eligible Repayment up to 25 years Payments will be lower than with Standard or Graduated Repayment Plans You ll pay more over time than with Standard Repayment Plan Two types of plans Extended Repayment Plan fixed, equal monthly payment amounts Extended Graduated Repayment Plan graduated payment amount increases over time Payments made while in the Extended Repayment or Extended Graduated Repayment Plans are not eligible to be counted for the Public Service Loan Forgiveness program
FEDERAL LOAN REPAYMENT PLANS Income-Driven Repayment Plans Income Based Repayment Plan (IBR) 2014 Income Based Repayment Plan (IBR) Original Pay As You Earn Repayment Plan (PAYE) Revised Pay As You Earn Repayment Plan (REPAYE) Income-Contingent Repayment Plan Income-Sensitive Repayment Plan
FEDERAL LOAN REPAYMENT PLANS Income-Driven Repayment Plans Terms to know: Partial Financial Hardship exists when the annual amount due on all of a borrower's eligible loans, as calculated under a standard 10-year repayment plan, exceeds 10% or 15%of discretionary income, depending on the plan. Discretionary Income is the difference between your income and 150 percent of the poverty guideline for your family size and state of residence (for all IDR plans except Income Contingent). Poverty Guideline for a single person is $11,880 in all states but Alaska and Hawaii (adjusted annually). 150% of the poverty guideline is $17,820.
FEDERAL LOAN REPAYMENT PLANS Income-Driven Repayment Plans Example: You are single, earn $30,000 per year, and live in New York. Your discretionary income is $12,180. 10% of your discretionary income is $1,218; 15% is $1,827. Your annual payment amount under a standard 10-year repayment plan for $60,000 in debt is $7,992 ($666/month * 12 months) Your annual payment amount exceeds 10% and 15% of discretionary income. You have a partial financial hardship for Income-Driven Repayment Plans.
FEDERAL LOAN REPAYMENT PLANS Income-Driven Repayment Plans Income Based Repayment Plan (IBR) 2014 Direct Loan borrowers who took out their first loan on or after July 1, 2014 Must have a partial financial hardship Payment is 10% of discretionary income, up to the fixed 10-year payment amount If you're married, your spouse s income or loan debt will be considered only if you file a joint tax return Payment can be as low as $0 Balance forgiven after 20 years; amount forgiven is taxable
FEDERAL LOAN REPAYMENT PLANS Income-Driven Repayment Plans Income Based Repayment Plan (IBR) Original All federal student loans (except Perkins loans) Must have a partial financial hardship 15% of discretionary income, up to the fixed 10-year payment amount If you're married, your spouse s income or loan debt will be considered only if you file a joint tax return Payment can be as low as $0 Balance forgiven after 25 years; amount forgiven is taxable
Income-Driven Repayment Plans FEDERAL LOAN REPAYMENT PLANS Pay As You Earn Repayment Plan (PAYE) Direct Loan borrowers who took out their first loan on or after September 30, 2007 and at least one loan after September 30, 2011 Can consolidate FFEL and Perkins Loans into a Direct Consolidation Loan to qualify Must have a partial financial hardship Monthly payment is 10% of discretionary income, up to the fixed 10-year payment amount If you're married, your spouse s income or loan debt will be considered only if you file a joint tax return Payment can be as low as $0 Forgiveness after 20 years; amount forgiven is taxable
FEDERAL LOAN REPAYMENT PLANS Income-Driven Repayment Plans Revised Pay As You Earn Repayment Plan (REPAYE) All Direct Loan borrowers Can consolidate FFEL and Perkins Loans into a Direct Consolidation Loan to qualify No partial financial hardship necessary Monthly payment is 10% of discretionary income; no cap If you're married, both your and your spouse s income or loan debt will be considered, whether taxes are filed jointly or separately (with limited exceptions) Payment can be as low as $0 Forgiveness after 25 years; amount forgiven is taxable
Income-Driven Repayment Plans FEDERAL LOAN REPAYMENT PLANS Income-Contingent Repayment Plan All Direct Loan borrowers Can consolidate FFEL and Perkins Loans into a Direct Consolidation Loan to qualify No partial financial hardship necessary Monthly payment is the lesser of 20% of discretionary income, in this case defined as the amount of AGI above 100% of the poverty guideline; 12-year repayment amount x income percentage factor If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return or you choose to repay your Direct Loans jointly with your spouse
FEDERAL LOAN REPAYMENT PLANS Income-Driven Repayment Plans Income-Sensitive Repayment Plan FFEL loans only, including FFEL consolidation loans that include Perkins loans (not available for Direct Loans) Monthly payment is based on annual income Repayment up to 15 years Probably not the best plan for CAA borrowers Contact your FFEL servicer to discuss how this plan would work for you
FEDERAL LOAN REPAYMENT PLANS Combined Undergraduate Loan Debt of $30,000 in Direct Unsubsidized Loans and Starting Income of $25,000 Repayment Plan Initial Payment Final Payment Time in Repayment Total Paid Standard $333 $333 10 years $39.967 N/A Loan Forgiveness Graduated $190 $571 10 years $42,636 N/A Extended - Fixed Extended Graduated Ineligible (minimum $30,000 debt) Ineligible (minimum $30,000 debt) N/A N/A N/A N/A N/A N/A N/A N/A REPAYE $61 $299 20 years $38,714 $23,672 PAYE & IBR (new borrowers) IBR (not new Borrowers) $61 $299 20 years $38,714 $27,164 $92 $333 21 years, 6 months $60,441 $0 ICR $197 $255 19 years, 2 months $51,838 $0
FEDERAL LOAN REPAYMENT PLANS Combined Undergraduate & Graduate Loan Debt of $60,000 in Direct Unsubsidized Loans and Starting Income of $40,000 Repayment PlanRepayment Plan Initial Payment Final Payment Time in Repayment Total Paid Loan Forgiveness Standard $666 $666 10 years $79,935 N/A Graduated $381 $1,143 10 years $85,272 N/A Extended - Fixed Extended Graduated $387 $387 25 years $115,974 N/A $300 $582 25 years $126,173 N/A REPAYE $186 $819 24 years, 11 months $131,061 $0 PAYE & IBR (new borrowers) IBR (not new Borrowers) $186 $615 20 years $88,314 $41,008 $279 $666 18 years, 1 month $107,385 $0 ICR $471 $586 13 years, 8 months $89,152 $0
CONSOLIDATION Consolidation might make sense if you: Have loans with multiple servicers Have significant student loan debt Have more than one type of federal loan Have loans with variable interest rates Have trouble paying the amount due on your loans and need a lower payment
Pros: CONSOLIDATION Single servicer means single payment Lower monthly payments May be necessary to take advantage of certain repayment plans May be necessary to make loan eligible for forgiveness Cons: More interest to pay Longer repayment period; Interest rate is weighted average of all interest rates in consolidation Loss of borrower benefits
Consolidation is often not necessary CONSOLIDATION No reason to consolidate if all loans are Direct Loans Income Driven Repayment Plans may offer lower payments without the need to consolidate your loans Don t consolidate just because everyone else is consolidating their loans Talk with your servicer about whether or not you would benefit from consolidation
Consolidation tips: CONSOLIDATION If any loan you want to consolidate is still in the grace period, you can delay entering repayment on your new Direct Consolidation Loan until closer to your grace period end date Indicate that you want to wait to enter repayment until the grace period end date when you apply for the Consolidation Loan If you have indicated that you want to wait until the grace period end date to begin repayment on the Consolidation Loan, you consolidation servicer will wait to process your application until the appropriate time Always check and double-check to make sure what you requested is done
TIPS Evaluate your loans: Log onto www.nslds.ed.gov the National Student Loan Data System
TIPS Principal + Interest = Amount Owed Click on the blue number to find the name and contact information for your servicer. Set up online access! Go to www.studentloans.gov to access the Repayment Estimator tool this will populate with your loans, and you can use it to review repayment amounts under various payment plans.
TIPS Set up an account with each servicer set up online access & opt into email communications Update your contact information with each servicer any time it changes Read everything your servicer sends to you! Your grace period will end in November, and your first payment will be due in December (apply for IDR in September) If you have more than one servicer, you will pay each servicer, each month If you are on an IDR plan, you will owe a portion of the payment to each servicer, based on the amount of the total loans owed to each servicer
TIPS Choose your repayment plan and apply 60-75 days before your loans go into repayment! If your plan is not approved on time and you cannot afford the 10-year Standard Repayment amount, you may request a temporary forbearance Your servicer may advise you to wait longer to apply for IDR, but do not apply less than 60 days prior to the end of your grace period Forbearance rarely makes sense for any other reason call me if you are considering forbearance for any reason other than waiting for a payment plan to be approved
TIPS You must reapply annually for Income-Driven Repayment Plans Complete a new application each year before your IDR anniversary date If you fail to reapply, your repayment amount will revert to the 10-year Standard Repayment amount Your repayment amount can increase or decrease each year, depending on your income for the previous year Do not procrastinate send your application on time every year!
TIPS Apply for Income-Driven Repayment plans at www.studentloans.gov You will be asked if you want to choose a plan during Exit Counseling it does not take the place of actually applying for an IDR You will need to either link to your 2015 tax return through an IRS Data Retrieval Tool or you will need to upload your 2015 tax return Let your servicer/s know that you have applied for an IDR Request Graduated and Extended Repayment Plans through your servicer
TIPS What if I can t make my payment? Do NOT stick your head in the sand! Deal with it Stay in contact with your servicer: Your servicer does not want you to default; CAA does not want you to default; You do not want to default; You can change plans if you need to!
PUBLIC SERVICE LOAN FORGIVENESS Must be employed by a non-profit, 501(c)(3) organization Must work full time a total of 30 hours or more a week at one or more qualifying organizations Must provide proof of employment (tip: Do this on a regular basis) Must pay on time Tip: If you pay more than your required payment amount, you will be placed in paid-ahead status your subsequent payments will not count while you are in this status. Solution: Call to tell Fed Loans that you do not want to be put in paid-ahead status (follow up with an email). Do this every time you pay more than your required payment.
PUBLIC SERVICE LOAN FORGIVENESS Qualifying repayment plans: Payments made under all Income-Driven repayment plans qualify Payments made under 10-Year Standard repayment plan qualify you can enroll in PSLF just in case Payments made under Graduated and Extended repayment plans do not qualify After 120 on-time, qualifying payments: The balance of the loans is forgiven The amount forgiven is not taxable (currently)
PUBLIC SERVICE LOAN FORGIVENESS Submit documentation on a regular basis You can submit documentation at any time, but it is much easier to collect the proper documentation when it is still current Forgiveness must be requested/granted while you are still in a qualifying job Do not wait to complete documentation for your 120 th payment Do not quit your job too soon
PUBLIC SERVICE LOAN FORGIVENESS Things to keep in mind: Perkins loans are not eligible for PSLF unless you have consolidated them into a Direct Loan FFEL loans are not eligible for PSLF unless you have consolidated them into a Direct Loan For Perkins or FFEL loans, only payments made after consolidating them into a Direct Loan will not count toward the 120 payments; prior payments do not count If you have both Direct Loans and other types of federal student loans that you want to consolidate to take advantage of PSLF, it s important to understand that if you consolidate your existing Direct Loans with the other loans, you will lose credit for any qualifying PSLF payments you made on your Direct Loans before they were consolidated. In this situation, you may want to leave your existing Direct Loans out of the consolidation and consolidate only your other federal student loans.
PUBLIC SERVICE LOAN FORGIVENESS A qualifying monthly payment is a payment that you make after October 1, 2007; under a qualifying repayment plan; for the full amount due as shown on your bill; no later than 15 days after your due date; and while you are employed full-time by a qualifying employer.
PUBLIC SERVICE LOAN FORGIVENESS You can make qualifying monthly payments only during periods when you are required to make a payment. Therefore, you cannot make a qualifying monthly payment while your loans are in an in-school status, the grace period, a deferment, a forbearance, or default.
PUBLIC SERVICE LOAN FORGIVENESS Your 120 qualifying monthly payments do not need to be consecutive It s the 120 qualifying payments that lead to loan forgiveness PSLF forgiveness may take more than 10 years You can have a variety of qualifying jobs over a period of many years that will lead to eventual forgiveness
WHAT NOW? BREATHE!
WHAT NOW? Complete Exit Counseling at www.studentloans.gov Know your loans, loan servicer/s, and grace periods (www.nslds.ed.gov and servicer websites) Update your address, telephone, and email now (and any time it changes) with your servicer/s Read all email and snail mail from your servicer/s Use the repayment calculator at www.studentloans.gov to review your payment options Set up your repayment plan before your grace period ends (application needed for IDR plans) If you have loans with no remaining grace period, you can choose to: Repay them immediately after graduation; or Ask your servicer to put them into forbearance until your Cranbrook loans go into repayment Consider whether you want to consolidate Perkins and/or FFEL loans into a Direct Loan
Q & A Q: If my payment is $200 but I can only pay $50, is that okay? A: No. If your payment amount is $200, you have to pay the full $200 unless you are making a voluntary payment while in school or while in grace period. Once your grace period is over, you have to pay the full repayment amount every month. If that amount will be difficult to manage, apply for an income driven repayment plan (PAYE, IBR, ICR). Pay more than your required payment whenever you can, of course, because the more quickly you repay your loan the less you will pay (interest adds up quickly).
Q & A Q: You said that the minimum payment is $50, though A: Minimum in this case is used globally. The minimum payment under standard repayment is $50, but that doesn t mean it is the minimum payment for everyone. If you borrowed just a thousand dollars, your payment might be $50, while you could have borrowed several thousand dollars and still have a $50 payment but if you borrowed more, your payment will be higher.
Q & A Q: If I repay my loan more quickly than the standard 120 payments, do I still owe the interest? A: You can repay the entire amount of your loan at any time without penalty. You will owe the interest that has accumulated through the date of payment in full, but you won t owe anything more. The government will have to live without all the interest it thought it would get from you, and you will have to live happily ever after because you saved a lot of money by not paying so much interest.
Q & A Q: Do the repayment plans include my private loans? A: No. The payment plans are only for federal loans. If you owe for private loans, you will be paying those separately to the lender. In this case, you will want to find out what your repayment will be for your private loans if the combination of your private loan payment and your federal loan standard repayment is more than you can afford, you should talk to your federal servicer(s) about an income driven repayment plan. Your private loans will not be considered in any way when it comes to your eligibility for federal loan repayment. Remember: Perkins loans are not included either, unless you consolidate them into a qualifying loan!
Q & A Q: I still owe a balance on loans I borrowed prior to October 1, 2007. The information about PAYE says that I cannot include these loans in this repayment plan. Is this true? A: Yes. If you have a loan that was borrowed prior to October 1, 2007 or if any loan borrowed prior to October 1, 2007 is included in a consolidation loan, the loan/consolidation loan is not eligible for PAYE. You can use IBR, REPAYE or ICR for these loans, if you qualify. You could also choose to use PAYE for the eligible loans and a different plan for the older loans..
FINAL THOUGHTS Exit Counseling is required in order to walk at Graduation & to receive your diploma!! I will know if you are behind in repayment and I will haunt you I have better things to do, so take care of business set up your repayment pay on time! The sooner you repay your loans, the less you will pay in the long run!
FINAL THOUGHTS I will remind you about repayment at various times. Expect an email from me if your name appears on my Delinquent Loan Payment List Yes, I see when you miss or skip a payment! If you go into default, it affects the borrowing ability of future Cranbrook Academy of Art students. You can stop by, email me or call me if you have questions now and in the future!
FINAL THOUGHTS Plan for last-minute loan requests Loan request forms received from March 22 April 11 Paid to your account April 19 Refund ready April 22 Loan request forms received from April 12 April 25 Paid to your account May 3 Refund ready May 6 Last day to submit a loan request form is April 25
FINAL THOUGHTS Complete Exit Counseling as soon as possible www.studentloans.gov