Loan Repayment

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Loan Repayment
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Loan Repayment

• Exit Counseling Requirements
• Communicating with students
• Income Based Repayment
• Loan Forgiveness
• Loan Repayment Programs

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Exit Counseling Requirements

• Must be offered before student drops to less than
  half-time
• Required for Stafford, Perkins, and Grad Plus
• Students withdrawing w/o notice must complete
  online exit or be mailed exit materials within 30
  days
• Schools must maintain documentation of completed
  counseling

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Exit Interview Requirements

• Offer debt management strategies during loan
  repayments
• Provide information on student loan
  ombudspersons office
• Discuss borrower tax benefits
• Provide details on eligibility requirements for
  forbearance and cancellation

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Exit Counseling Requirements

• Explain repayment options, ability to prepay and
  change terms.
• Provide examples of monthly repayment amounts
  based on the borrowers level of indebtedness or
  the average student indebtedness at the same
  school and in the same program
• Review repayment plans and compare
• ---Average Monthly payments
• ---Interest Cost
• ---Total payments for each plan

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Exit Loan Requirements

• Discuss Loan Consolidation
• --interest costs, fee and repayment time
• --borrower benefits on underlying loans
• --prepayment and change repayment plans
• --difference in benefits between lenders
  
• Provide terms and conditions to obtain loan
  forgiveness or discharge
• --Provide copy of DOE publication on
  assistance programs
• Explain and review the terms of the Master Prom
  Note the borrower signed.

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Exit Loan Requirements

• Collect updated information on borrower and
  provide to guarantor within 60 days
• --Name
• --Address
• --SS and DL
• --References
• --Expected Permanent Address
• --Name and Address of Family Member who will
  have knowledge of borrowers location
• --Name and Address of expected employer

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Communicating Exit Loan/Repayment Information

• How do you communicate exit interview
• information to your students?
• On-line Exits
• One-on-one
• Outside speakers
• Use current communication technology
• Games/Quizzes
• Involve the Student

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Loan Repayment

• How Far Will My Paycheck Go?
• INCOME
• My annual salary/wages __________
• My spouses salary/wages __________
• Other income _________________ __________
• Total annual income (sum of above)
  __________
• MONTHLY INCOME (Total annual income
  /12) __________ (1)
• WHAT I HAVE TO PAY FOR
• Taxes (assume 1/3 of Total monthly income)
  __________
• Employment benefits (e.g., your share of
  medical insurance) __________
• Malpractice insurance __________
• My monthly student loan payment __________
• My spouses monthly student loan payment
  __________
• My total monthly credit card payment
  __________
• (assume monthly payment is 3 of total credit
  card balance and include all
• other personal debt payments)
• My spouses total monthly credit card payment
  __________

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Income Based Repayment (IBR)

• Potential Pros
• Lowest initial monthly loan payment
• Possible to exclude spouses income
• ED will pay unpaid interest on subsidized
  Stafford for up to 3 yrs
• Loan cancellation after 25 years of eligible
  payments
• Entitlement

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Income Based Repayment

• Potential Cons
• Increased interest will accrue and may have
  negative amortization
• If married might need to file separate tax
  returns
• Unpaid interest will be capitalized at some point
• Annual income and family size verification
  required
• Monthly payments could change each year

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Repayment Plans

• Standard (Fixed) Repayment
• Graduated Repayment
• Extended Repayment
• Income-Sensitive Repayment
• Income-Based Repayment (available 7/1/2009)
• Choice of a repayment plan may depend on your
  eligibility for that plan. Once you choose a
  plan, you can change to a different plan once a
  year provided you qualify for that plan.

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IBRWho will qualify?Approx. Maximum AGI Needed
to Qualify for IBR at Specified Debt (2009
Poverty Guidelines)

• DEBT AGI Debt AGI
• 5,000 20,848 65,000 76,087
• 10,000 25,451 70,000 80,690
• 15,000 30,055 75,000
  85,293
• 20,000 34,658
  80,000 89,896
• 25,000 39,261
  85,000 94,500
• 30,000 43,864
  90,000 99,103
• 35,000 48,467 95,000 103,706
• 40,000 53,071 100,000 108,309
• 45,000 57,674 105,000
  112,912
• 50,000 62,277 110,000
  117,516
• 55,000 66,880 115,000
  122,119
• 60,000 71,484 120,000
  126,722
  125,000 131,325

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IBR

• Effective date
• July 1, 2009
• Eligibility criteria
• Available for repayment of
  FFEL/Direct Stafford, Grad Plus, and Federal
  Consolidation Loans (FCL)
• Cannot be used to repay Parent PLUS Loans
• Cannot be used to repay FCL that included payoff
  of a Parent PLUS loan
• You must have Partial Financial Hardship

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IBR

• You are considered to have Partial Financial
  Hardship when
• The annual amount due on your total eligible
  federal student loan debt in repayment,
• When calculated using the Standard Repayment Plan
  based on a 10 year repayment period,
• Exceeds 15of your household AGI above 150of the
  poverty line for your family size (includes
  spouses income, if married, and filing joint
  federal tax return).
• If eligible, the IBR monthly payment is 1/12th of
  15 of the AGI above 150 of the poverty line.

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IBR More Payment Provisions

• IBR allows for negative amortization
• Unpaid interest that accrues on qualifying
  subsidized Stafford debt will be paid for up to 3
  years
• Unpaid interest can be capitalized by your loan
  holder if you terminate IBR
• Repayment period using IBR can extend beyond 10
  years

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IBRA Few Things to Consider

• Can reduce minimum monthly payment
• Will increase total cost of debt
• Does not replace Income Sensitive or Income
  Contingent Repayment options
• Extended Repayment- is an option that avoids
  negative amortization and annual income
  verification.

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IBRLoan Cancellation After 25 Years

• Any outstanding eligible FFEL or Direct loan
  balance (other than PLUS) is cancelled after 25
  years.
• To qualify, you must have been economically
  challenged during ALL of the 25 year repayment
  period.
• To be economically challenged, you must have
  used IBR during a portion of the repayment
  period, AND when not using IBR you
• Made monthly loan payments using Income
  Contingent Repayment (ICR), or
• Made monthly payments at least equal to the
  amount required using the Standard 10-Year
  Repayment Plan, or
• Were in an Economic Hardship deferment.
• Any loan amount that is cancelled may be taxable
  in the calendar year in which it is cancelled.

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Loan Forgiveness Program

• --Requirements
• Must have all eligible loans with the Direct
  
• Loan Program
• Stafford Subsidized and Unsubsidized
• Grad Plus
• Certain HHS Loans but the Department is
  unsure
• of which loans
• Perkins not included unless consolidated

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Loan Forgiveness

• Cannot be in default on any eligible loan.
• Must make 120 payments under the IBR/ICR and/or
  Standard Repayment Program beginning 10/07
• Payments do not need to be consecutive
• Must be employed by a 501C3 organization during
  the repayment period and at the time that they
  apply for forgiveness
• Designation of 501C3 organization must be intact
  the entire 120 months

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Loan Forgiveness

• Burden of proof is on borrower. No clear
  guidance on what proof must be kept.
• Program is not funded currently because initial
  qualifying borrowers wont qualify until 2017.
• Value of forgiven loan is not taxable

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Loan Repayment

• Other Repayment Programs
• National Health Service Corp
• NIH
• State Loan Repayment Programs
• Hospital Loan Repayment Programs
• County Loan Repayment Programs
• AAMC Web Site

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