Robyn Bowers

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Robyn Bowers Laura Szabo-Kubitz
Student Loans Access, Options, and
Safety Nets
California_at_ticas.org www.ticas.org 510-559-9509
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Who we are

• At the Institute for College Access Success our
  work involves a combination of research,
  analysis, and advocacy to identify cost-effective
  solutions that
• Expand educational opportunity
• Protect family financial security
• Advance economic competitiveness

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Our strategy

• Identify an issue
• Conduct research to deepen understanding
• Raise awareness and build coalitions
• Identify helpful policies
• Move these policies through appropriate college,
  organizational, and/or government channels

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Some of our past work

• Raised awareness of how proposed budget cuts in
  CA would severely impact higher education, such
  as the recent threat to the Competitive Cal Grant

• Simplification of the FAFSA through a direct
  consent-based data transfer from the IRS to the
  Department of Education

• Studied financial aid practices and policies at
  Californias community colleges, where we found
  wide variations in office operations and
  philosophies

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Green Lights Red Tape
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Green Lights Red Tape

• Only 34 of CA community college students apply
  for federal financial aid, compared to 45 of
  community college students nationally
• Financial aid offices make operational decisions
  that make it easier (green lights) or harder
  (red tape) for students to get aid
• As of last December, 16 out of Californias
  (then) 109 community colleges did not participate
  in the federal loan program

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Some of our current CA projects

• Transfer pathways to four-year schools for
  community college students
• Simplification of the FAFSA and points in the aid
  application process where students encounter
  barriers
• College access and affordability for former
  foster youth

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Why were here today

• The College Cost Reduction and Access Act (CCRAA)
  was signed into law by President Bush on 09.27.07
• Two of the provisions of the CCRAA are
  Income-Based Repayment and Public Service Loan
  Forgiveness
• The Department of Education will post final rules
  in November 2008.
• For updated information, please go to
  www.ibrinfo.org

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IBR definition and formula

• Income-Based Repayment (IBR)
• A payment plan with caps based on income and
  family size
• For most eligible borrowers, total yearly
  payments will be less than 10 percent of ones
  income
• IBR will also forgive remaining debt, if any,
  after 25 years of qualifying payments

• IBR Formula
• 15 percent of (your income - 150 of the poverty
  level for your family size) is the most you would
  pay for student loans in one year

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IBR not something to plan on, but
a safety net to know about

• If you make 25,000 a year and you have a family
  of two (yourself and your child), then you would
  not have to pay more than 50 a month on student
  loans.
• Heres the math
• Poverty level for a family of 2 14,000
• X 150 (or 1.5) 21,000 income protected from
  payments
• Subtract 21,000 from annual income of 25,000
  4,000
• Multiply 4,000 by 15 (or 0.15) and get 600
  thats the most you would spend on student loans
  for that year.
• Divide 600 by 12 months, and 50 is the most you
  would pay for student loans in one month

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Some borrowers will pay nothing per month

• If you make 150 of the poverty level or below
  for your family size, then your monthly IBR
  payment would be zero.
• These qualifying 0 payments will count towards
  the 25-year IBR loan forgiveness or the 10-year
  Public Service Loan Forgiveness although keep
  in mind that it will increase the amount of
  interest you pay over time, should you ultimately
  not qualify for forgiveness.

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2008 HHS Poverty Guidelines 150
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Examples of IBR payment caps as a percentage of
the borrowers family income
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Who is eligible for IBR?

• Borrowers in the federal student loan programs,
  who have enough debt relative to their income to
  qualify for a reduced payment.
• That means it would take more than 15 percent of
  whatever you earn above 150 of the poverty level
  for your family size to pay off your loans on a
  standard 10-year payment plan.

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Which loans are eligible for IBR?

• Federal student loans (Stafford, Grad Plus,
  federal Consolidation loans that do not include
  Parent PLUS loans, Perkins loans if they are
  consolidated into a federal Guaranteed (FFEL) or
  Direct loan)
• Private student loans are not eligible for IBR
• You can qualify for IBR if you borrowed before or
  after IBR was created, for either graduate or
  undergraduate study

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What types of payments qualify for IBR loan
forgiveness?

• All payments made on or after July 1, 2009 in the
  IBR, ICR, and Standard (10-year) Repayment plans
• Payments made in the Income-Contingent Repayment
  plan (ICR) before July 1, 2009
• Periods when the borrower has a calculated
  payment of zero in IBR or ICR (this occurs when
  your income is at or below 150 of the poverty
  level for your family size)
• Periods on or after July 1, 2009, when the
  borrower has been granted an economic hardship
  deferment

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Helpful resource IBRinfo.org
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IBRinfo.orgs IBR Calculator
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What are the benefits of IBR?

• Low monthly payments, and thus economic relief in
  times when money is tight
• Loan forgiveness after 10 years if you work in a
  qualifying public service job
• Loan forgiveness after 25 years if you still have
  a student loan balance

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Is there anything I should be cautious about
with IBR?

• In some situations, your reduced payment may not
  cover the interest on your loans.
• If so, the government will pay that interest on
  your Subsidized Stafford Loans for your first
  three years in IBR.
• After three years and for other loan types, the
  interest will be added to the total amount you
  owe.

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For someone who owes 100/month in interest but
qualifies to pay nothing
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Public Service Loan Forgiveness (PSLF)

• A new type of loan forgiveness that will forgive
  remaining debt after 10 years of eligible
  employment and qualifying loan payments
• The 10 years need not be consecutive you must
  have a total of 120 qualifying monthly payments

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When did PSLF go into effect?

• PSLF went into effect October 1, 2007
• Qualifying payments made since October 1, 2007
  count towards the ten years needed for loan
  forgiveness

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Who is eligible for PSLF?

• Borrowers with federal student loans who work
  full-time in a wide range of "public service"
  jobs, including jobs in government and nonprofit
  501(c)(3) organizations
• In most cases, eligibility is based on whether
  you work for an eligible employer. Your job is
  eligible if you
• are employed by any nonprofit, tax-exempt
  501(c)(3)
• are employed by the federal government, a state
  government, local government, or tribal
  government (this includes the military and public
  schools and colleges) or
• serve in a full-time Americorps position.
• If you don't meet these criteria, you may still
  be eligible in certain circumstances.

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Which loans are eligible for PSLF?

• PSLF covers federal Stafford, Grad PLUS, or
  consolidation loans as long as they are in the
  Direct loan program
• Borrowers with loans in the Guaranteed (or FFEL)
  loan program must switch to the Direct loan
  program to get this benefit
• Even if you have already consolidated your
  Guaranteed (or FFEL) loans, you may
  re-consolidate into Direct for the purpose of
  accessing PSLF

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How does one benefit from PSLF?
If your income is low relative to your debt, and
you qualify for reduced payments (under IBR or
ICR) at any time during the 10 years, you will
likely have debt left to be forgiven.
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If your loan principal is 30,000 and
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Is there anything I need to be cautious of with
PSLF?

• You should do a cost/benefit analysis for
  choosing lower monthly payments (if you qualify),
  such as IBR.
• If you end up meeting the conditions for loan
  forgiveness after 10 years (or 120 months), then
  you will have saved money by having paid lower
  monthly payments.
• However, if ultimately you do not qualify, then
  you will likely end up paying more in interest
  until your loans are paid off or you still have
  a balance after 25 years and the remainder is
  forgiven.
• However, owing more in interest later may be
  worth it, if it reduces a debilitating financial
  burden now.

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IBRinfo.org
Again, for comprehensive information on
Income-Based Repayment (IBR) and Public Service
Loan Forgiveness (PSLF), go to www.ibrinfo.org
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What This Means For You

• While student loans should not be taken out
  lightly or needlessly, they are a viable option
  for some students
• If grant aid and income does not cover expenses,
  loans can be a smarter choice than increasing
  work hours or decreasing credit hours.
• California community college students borrow far
  less than other community college students
• 17 nationally 6 in California
• California CC students work an average of 32
  hours per week

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Student Access to Federal Loans

• Private loans are not eligible for IBR / PSLF and
  cannot be consolidated into the Direct Loan
  program
• Schools must choose to participate in the federal
  loan programs in order for students to have
  access to IBR / PSLF

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Private and federal loans compared
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Denied
April 2008, The Institute for College Access
Success www.ticas.org
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How big of a problem is it?

• 40 of undergrads nationwide attend community
  colleges
• One million are enrolled at colleges that do not
  participate in the federal student loan program
• In CA, 65 of the states undergrads attend
  community colleges
• 8.5 are unable to take out federal student loans
  - thats over 200,000 students at 16 schools in CA

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Disproportionate access to federal loans

• Nationally, 10.4 of CC students do not have
  access to federal loans
• Caucasian students 8.6
• African-American students 20.1
• Latino/a students 10.7
• Native American students 19.2
• In California, 8.3 total are denied access
• Caucasian students 7.4
• African-American students 11.2
• Latino/a students 11.6

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Second facet of problem student choices

• Why do community college students not borrow?
• May not be aware of federal loan options
  private loans reach
  students with advertising
• Financial aid offices may strongly discourage
  taking out any loans, meaning that students get
  inadequate advice
• Students believe they have to save eligibility
  for later
• Even when students do have access to federal
  loans, they may instead take out private loans
• Students often use riskier forms of borrowing,
  such as credit cards
• At public 2-year schools, 47 of students with
  private loans do not have federal loans
• Even though it is not ideal, this shows that
  sometimes students do need to borrow, and should
  have access to safer federal loans

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What can you do?

• Find out if your campus offers federal loans.
• Reference our Student Action Guide at
  www.ticas.org
• Try the financial aid website or go and talk to a
  counselor.
• If your campus doesnt offer federal loans, ask
  why.
• Some campuses are concerned about default rates.
• See Denied for an explanation of cohort
  default rates and what they do and dont mean for
  community colleges
• Meet with administrators and consider pushing for
  your campus to start participating in the federal
  loan program.
• Our Student Action Guide and Denied are included
  in the packets weve given you today.

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What can you do, part II

• If your campus does participate in the loan
  program,
• Evaluate the advertising and publicity of the
  federal loan program versus private loans
• Are there posters and brochures in the financial
  aid office?
• Does the office website have links to the
  program?
• If there are not materials, ask the FAO to
  request some
• Evaluate the attitude of the financial aid office
  towards federal loans
• Ask about the differences between private and
  federal loans does the FAO seem to recommend one
  over the other?
• Is it clear to students that loans are
  appropriate for rent and living costs?
• Loans should not be taken out impulsively, but
  can help.

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Educating campus about IBR / PSLF

• Contact us for IBR brochures! Up to 100 per
  school.
• Meet with financial aid administrators to plan
  how to educate borrowers.
• Ask the financial aid office to include a link to
  www.ibrinfo.org on its website.
• See if information can be included in loan exit
  interviews.
• Suggestions?

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Questions?

• Robyn Bowers, rbowers_at_ticas.org
• Laura Szabo-Kubitz, laura_at_ticas.org
• The Institute for College Access Success
• 510.559.9509
• www.ticas.org

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Thank you!

• We look forward to hearing about the hard work
  you all do at your colleges
• Please fill out the information sheet in your
  packet and hand it to one of us or Cristela
  before you leave
• Dont forget to pick up copies of
• Denied
• Green Lights Red Tape
• Student Action Guide and
• Top-Ten List