Effective Income-Driven Repayment Plan Counseling presented by Lisa Ciritella, FedLoan Servicing
Agenda A Quick Review Income-Driven Repayment overview Income-Driven Repayment pros and cons Impact and Opportunity New student borrowers During college career Before they go Reach out Proactive and Responsible Borrowing Long Term Solutions Application Forgiveness Best Practices 2
IDR Overview Income-Contingent Repayment Plan (ICR) 1994 Direct Loan Program only Income-Based Repayment Plan (IBR) 2009 Available in both the Direct Loan and FFEL Program Pay As You Earn Plan (PAYE) 2012 Direct Loan Program only For new borrowers in FY 2008 who receive new loans in FY 2012 Modeled on IBR, incorporating statutory IBR changes for new borrowers in 2014 Revised Pay As You Earn Repayment Plan (REPAYE) 2015 Direct Loan Program only More information available at StudentAid.gov 3
IDR Plan Eligible Loans Eligible Payment Amounts Income Contingent Repayment Eligible IDR Loans and Payment The lesser of the following: Amounts 20% of discretionary income or All Direct Loans are eligible except parent PLUS Loans and pre-7/1/2006 Direct PLUS Consolidation Loans Direct Consolidation Loans made on/after 7/1/2006 that repaid parent PLUS loans are eligible what would be paid on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income Income Based Repayment All Direct and FFEL Program loans except parent PLUS loans and Consolidation Loans that repaid parent PLUS loans Generally 10%of discretionary income for a new borrower on or after July 1, 2014*, but never more than the 10-year Standard Repayment Plan amount Generally 15% of discretionary income if not a new borrower on or after July 1, 2014*, but never more than the 10-year Standard Repayment Plan amount Pay As You Earn All Direct Loans are eligible except parent PLUS loans and Consolidation Loans that repaid parent PLUS loans Generally 10% of discretionary income (income-based payments), but never more than the 10-year Standard Repayment amount Revised Pay As You Earn 4 All Direct Loan types except Parent PLUS Loans and consolidation loans that repaid Parent PLUS Loans Generally 10% of discretionary income (income-based payments)
IDR Pro & Cons Pros More manageable, lower monthly payment Avoidance of delinquency and default Remaining principal and interest is forgiven after 20 or 25 years of payments Possibility of Public Service Loan Forgiveness (after 120 qualifying payments) Cons Repayment period could be more than 10 years More interest could be paid over time Required annual submission of information on income and family size to prove continued eligibility for reduced payments Forgiven amount is taxable (except under PSLF) 5
Knowledge is Power! Knowing how to track and manage their loans is the first step in successful repayment. Know Your Options Know Your Servicer Know What You Owe Successful Loan Repayment 6
Knowledge of Loan Debt Lack of Awareness Contributes to Repayment Problems Your servicer is there to help If you withdraw from school, you still have to pay back your loan If you can t find a job, you are still responsible for paying back your loan The amount you have to pay back can be more than you originally borrowed If you don t pay your student loan, there are consequences If you declare bankruptcy, your loan most likely won t go away 7
Impact & Opportunity: New Students Talk to students about repayment plans early and often! We have focused on getting in front of our audiences as many times in as many ways as possible. New Student Orientation Mandatory freshman seminar class Senior seminar class Senior capstone class Graduation celebration in partnership with campus events and alumni relations Community events in partnership with campus and community Library Financial Literacy components throughout their education path Back with the Pack event in partnership with Campus Life The Creative Center 8
Impact & Opportunity: While in School What can you do to increase awareness? Be available Stay informed Collaborate We collaborate with Career Services, if they have a students that needing help on their resume or looking for jobs, our career servicer will automatically connect them with me because, if they are not working they might not paying their student loans).same thing with me, if they come in asking to postpone or lower their payments due to being unemployed, I will connect the student with our career services staff. Wichita Technical Institute 9
Impact & Opportunity: While in School Reach out to individual departments (Social Work, Nursing, Education, etc.) each year and allow them to HOST a workshop for their graduating seniors. What we have found: When we host events like this, attendance is very poor. When individual departments host these workshops, they are completely full. It saves our budget, as the host department provides the space and sometimes food/drink. The response from students/faculty/community members has been overwhelmingly positive! Through these workshops, we get more students requesting additional guidance in follow-up appointments, e-mails, and phone calls. Illinois State University 10
Financial Awareness Counseling Tool Financial Awareness Counseling Tool (FACT) provides tools and information to help you understand your financial aid and assist you in managing your finances. Students can access the tool using their FSA ID 11
Impact & Opportunity: Graduates Senior events All year/semester Before graduation Personalized exit counseling What to know before you go Look at the big picture We offer exit counseling workshops along with information about graduation petitions which includes academic department participation, so we have a high turnout. Platt College We don t open the door to let anyone leave until it is totally over. I stand in front of the door, but they know in advance that they have to stay for the duration. And you will not believe this, but our students always clap and say that they learned so many new things! Bard College 12
Impact & Opportunity: Graduates Each KBYO sheet shows a student s loan amount. We then show an estimate of what their monthly payments would be on the standard repayment plans. We also provide information on the IDR plans. Each graduating student receives a KBYO sheet in an envelope that also contains their degree. We decided to place the KBYO sheet in with their degrees to guarantee 100% awareness. Atlanta s John Marshall Law School 13
Impact & Opportunity: Beyond Exit Counseling Go beyond relying on on-line exit counseling to talk about repayment options. In addition to the mandatory exit counseling session, each graduating student is invited to schedule a one on one counseling session with a member of the financial aid team. We prepare by printing a copy of the student s NSLDS profile. Using the data from NSLDS and including any private student s loans, we estimate a standard repayment amount for the student. Through assessment of the students future plans the counselor is able to suggest an affordable repayment plan which may include IDR options. 14
Outreach Emails Letters Phone Calls How do you reach out to students in repayment? Take notice of where you get results and adjust as necessary! Social Media Text Messages Word of Mouth 15
Repayment Schedule Estimators Check out the Repayment Estimators available at FedLoan Servicing and StudentLoans.gov 16
Promote Long Term Solutions Avoid using unnecessary forbearance and deferment time. Monthly payment amounts as low as $0 per month Qualifying status may lead to loan forgiveness Payment amounts based on loan debt Extended repayment periods 17
Let s See the Numbers! Bob Borrower completed college with $50,000 in Direct Loan debt ($23,000 of which is unsubsidized). The interest rate on all loans is 6%. He is single with no dependents and has an AGI of $35,000 that rises at 5% per year. Without PSLF Standard ICR IBR PAYE REPAYE Time In Repayment 10 yrs. 14 yrs., 8 mos. 18 yrs., 9 mos. 20 yrs. 25 yrs. Total Paid $66,612 $76,339 $91,713 $71,782 $108,426 Total Forgiven $0 $0 $0 $36,538 $0 With PSLF Standard ICR IBR PAYE REPAYE Time In Repayment 10 yrs. 10 years 10 years 10 years 10 years Total Paid $66,612 $50, 501 $36,927 $24,618 $24,618 Total Forgiven $0 $22,459 $45,065 $55,333 $51,746 18
Applying for IDR 19
Income-Driven Repayment Application Borrowers may apply for an IDR on studentloans.gov or complete a paper application. Can be used by borrowers with Direct Loans or FFEL Loans Uses IRS Data Retrieval Tool that is used on the FAFSA Retrieves the most recent tax information from two most recently completed tax years If a borrower selects a specific repayment plan that they are not eligible for, the borrower will be placed on the lowest monthly payment amount IDR plan for which they are eligible. 20
Applying Avoid Application Mistakes The easiest way to apply for an IDR plan is online at studentloans.gov Common Application Mistakes on the Paper Application: Quoting Incorrect Income Incorrect Tax Documents Missing Pay Frequency Skipped Items & Inconsistent Information Missing Pages 21
Recertification of Income and Family Size Borrowers are required to submit updated income documentation annually under all IDR plans by their reevaluation date The reevaluation date is based on when the borrower initially entered the plan (anniversary date) Borrowers will receive notice of the deadline by which they must submit income documentation and the consequences of failing to do so Borrowers must also annually certify their family size or a family size of one will be used Borrowers can use the electronic application to recertify their income and family size Borrowers submitting income documentation within 10 days of the deadline will have their current payment amount maintained until income documentation is processed and new payment amount is calculated 22
Public Service Loan Forgiveness The Public Service Loan Forgiveness Program allows eligible borrowers to cancel the remaining balance of their Direct loans after serving full time at a public service organization for at least 10 years while making 120 qualifying monthly payments after October 1, 2007. 120 qualifying payments PSLF Basics On Direct Loans On qualifying repayment plans While working fill-time at qualifying employer 23
Public Service Loan Forgiveness Income- Driven Income- Driven & PSLF 24
Best Practices in IDR Counseling Talk to students about repayment plans early and often! Go beyond on-line exit counseling to talk about repayment options. If you can't meet with all of your students face to face target your At Risk Students. Collaborate with other departments and groups to be sure the message is heard. Multiple repayment options are available. Don't get bogged down with fine details. 25
What Are Your Peers Doing? Strategy Breakdown Emails Letters Call Group Counseling Individual Counseling 20% 20% 13% 37% 10% Data is based upon responses from participating institutions. Institutions may be utilizing multiple strategies. 26
A Special Thank You To Our IDR Superstars! Appalachian State University Harcum College Savannah Law School Bard College Hebrew College St. John s College Boston College Horry-Georgetown Technical College Truckee Meadows Community College Calumet College of St. Joseph Illinois State University Tufts University School of Medicine Central Christian College of the Bible Indiana University East Ulster County BOCES School of Practical Nursing Central Ohio Technical College Lake Forest College Universidad Metropolitana Chicago State University Laurel Business Institute/Laurel Technical Institute University of Akron (The) Coe College Massage Therapy Training Institute University of Alabama Community Care College Michigan State University College of Law University of Dubuque Creative Center (The) Northland Community and Technical College University of Iowa Creighton University Oklahoma City University University of Montana Western (The) Crossroads Bible College Oregon College of Oriental Medicine University of Nebraska at Kearney Delta State University Pennsylvania State University (The) University of Northern Iowa Delta Tech Philadelphia College of Osteopathic Medicine University of South Florida Douglas Education Center Pikes Peak Community College University of the Arts Eastern Oregon University Pinnacle Career Institute Valencia College Empire College Pittsburg State University Valley Grande Institute for Academic Studies Erie Institute of Technology Platt College Wake Forest University School of Law Gallery College of Beauty Point Loma Nazarene University Western Governors University Gallipolis Career College Post University Western University of Health Sciences General Theological Seminary (The) Quinnipiac University Wichita Technical Institute George Washington University Randolph College Wisconsin Lutheran College Greenville College 27
Resources PSLF Fact Sheet for Financial Aid Professionals http://www.myfedloan.org/schools/docs/student-toolkit/factsheet.pdf StudentLoans.gov Repayment Calculator http://studentaid.ed.gov/repay-loans/understand/plans Federal Student Loan Portfolio https://studentaid.ed.gov/about/data-center/student/portfolio Before You Go/Owe Worksheets http://www.myfedloan.org/schools/products-tools/publications.shtml Public Service Loan Forgiveness Toolkit http://www.myfedloan.org/schools/products-tools/publications.shtml Military Benefits http://www.myfedloan.org/military-service Income-Driven Repayment Plans: Frequently Asked Questions https://studentaid.ed.gov/sa/sites/default/files/income-driven-repayment-q-and-a.pdf Messaging for Student Loan Borrowers Leaving School http://ifap.ed.gov/eannouncements/051316messagingstudentloanborrowersleavingschool.html 28
Lisa Ciritella FedLoan Servicing 717-720-2309 lciritel@pheaa.org Facebook.com/fedloanprivate