helping borrowers understand loan repayment gina soliz director of financial aid syracuse university...
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Helping Borrowers Understand Loan
RepaymentGina Soliz
Director of Financial AidSyracuse University College of Law
NYSFAAA 44 “On Track for Excellence”
10/11/12
How to educate prospective, current and graduating students about budgeting & creating successful loan repayment strategies
Today’s Topic
Overview of repayment plans Standard Extended Graduated IBR ICR-A
Today’s Topic
Prospective Students• How to finance
higher education• Talking w/admits
Current Students• How to
budget• How to
forecast debt
Graduates• “Exit
Interviews”• 6 months
after graduation
• Life changes (2, 5, 10 years out?)
The lifecycle of a student’s relationship with the FA Office
Tours – appointment with Admissions and Financial Aid
Pre-Law Advisors – make sure they have the correct information
Visitor Days/Open Houses – everything is out in the open
Prospective Students
One-on-one appointments Videos/Testimonials FA Focus Group Workshops
LMFAO Law students managing financial aid
opportunities
Current Students
Students: can you define any of the following acronyms?
IBRPSLF
NSLDSDL
FAFSAOMGLOL
LMFAO
LMFAO – Good Habits vs. Reality
Get 8 hours of sleep each night
Sleep for a few hours or fall asleep watching
TV, or reading, or at our desk…
What We Know We Should Do
What We Actually Do
LMFAO – Good Habits vs. Reality
Eat healthy food Eat burgers and drink
beer
What We Know We Should Do
What We Actually Do
LMFAO – Good Habits vs. Reality
Brew our own coffee at home
Go out to a coffee shop
What We Know We Should Do
What We Actually Do
LMFAO – Good Habits vs. Reality
Stick to a budget, live within our means, save money!
Spend what we have (sometimes more than what we have!)
What We Know We Should Do
What We Actually Do
LMFAO – Good Habits vs. Reality
Write out a “spending plan” and stick to a budget
Feel overwhelmed, lose track of how we spend our money
What We Know We Should Do
What We Actually Do
From LMFAO:Why are you here today?
• You want to understand the jargon and acronyms.
• You taken out student loans and want to know more about them.
• You realize that what you don’t know can hurt you!
• You could use some advice regarding your finances.
• Free cookies!
From LMFAO:How Can You Cut Back?
• Prioritize.• Don’t buy
Starbucks!• Cook at home.
New graduates Six months out Blasts from the past!Do recent alumni contact the office or use the Financial Aid Office as a resource after graduation? Do you hear from graduates long after they have earned their degree?
Alumni
Servicers (who) FFEL vs. DL (what) NSLDS (where) Timing of repayment (when) Repayment options (how)
The Basics
Federal Family Educational Loans (FFEL) Loans borrowed through a lender (ex. Citibank,
Wells Fargo, Chase, Access Group, Sallie Mae) Please note: The FFEL program ended 6/30/10
Direct Loans (DL) Loans borrowed directly from the federal
government (studentloans.gov) All colleges and universities mandated
to use the DL program beginning 7/1/10
What: Federal Student Loans
Where to find a summary: www.nslds.ed.gov
LoansPlease click on the number in first column to see details
Type of Loan Loan Amount
Loan Date Disbursed Amount
Outstanding Principal
Outstanding Interest
DIRECT STAFFORD SUBSIDIZED $8,500 08/15/2011 $8,500 $8,500 $0
DIRECT STAFFORD UNSUBSIDIZED $12,000 08/15/2011 $12,000 $12,000 $340
DIRECT PLUS GRADUATE $18,000 08/15/2011 $18,000 $18,000 $593
STAFFORD UNSUBSIDIZED $12,000 08/07/2009 $12,000 $12,000 $1,632
FFEL PLUS GRADUATE $15,000 08/07/2009 $15,000 $15,000 $2,550
Total STAFFORD/DIRECT SUBSIDIZED
$17,000 $0
Total STAFFORD/DIRECT UNSUBSIDIZED
$24,000 $1,972
Total FFEL/DIRECT GRADUATE $33,000 $3,143
Total All Loans $74,000 $5,115
1
2
3
4
5
www.nslds.ed.gov
The name of each loan servicer and its contact information will display under the loan details.
Borrowers may have several different agencies servicing each loan.Servicer/Lender/Guaranty Agency
Information
Contact Type ContactCurrent Guaranty Agency
DEPT OF ED/NELNET 121 S 13TH ST SUITE 201 LINCOLN NE 68508 888-486-4722 [email protected]
List of servicer websites, addresses, and phone numbers on IFAP
http://www.ifap.ed.gov/ifap/helpContactInformationDetailedList.jsp?lsc=2
ACS, Aspire, Corner Stone, EdFinancial, Granite State, PHEAA, Great Lakes, MOHELA, NelNet, Sallie Mae, etc. etc.
Who is repaid: Servicers
Federal Subsidized & Unsubsidized Loans Law school loans have 6-month grace period
following graduation Loans borrowed prior to law school have a 6-
month grace if they never entered into a prior repayment status
Federal Graduate PLUS Loan Loans borrowed after 7/1/08 have a
6 month Post Enrollment Deferment
When Does Repayment Begin?
Standard Repayment on Federal Loans is 10 years
Extended Repayment prolongs payments over 25 years (must have more than $30,000 in federal student loan debt).
Graduated Repayment – 10 years – payments start low and increase in one or more increment over time.
How do I Successfully Repay?
Comparing Payment PlansLoan Balance When Entering Repayment= $136,500
($25,500 Subsidized, $36,000 Unsubsidized, $25,000 FFELP Grad PLUS, $50,000 DL Grad PLUS)
ProjectedMonthly Payment
Projected# of
Payments
ProjectedTotal Interest
Paid
ProjectedTotal Amt
Paid
Est. remaining balance at end of repayment
period
Standard $1,621 120 $58,056 $194,556 $0
Extended $1,010 300 $166,498 $302,998 $0
Graduated $855 (24 months)
$1,896 (96 months) 120 $66,042 $202,542 $0
IBR *(household size = 1, hh AGI = $50,000)
$416 (initial)
$1,001 (max)* 300 $200,493 $195,562 $190,131
IBR *(household size = 1, hh AGI = $30,000)
$166 (initial)
$430 (max)* 300 $83,643 $83,643 $305,240
*assumes no change in hh size, 3.5% annual increase in yearly income, 3% increase in govt. poverty guideline
Income-Based Repayment caps the monthly payment amount based on your income and family size. May offer the lowest monthly loan repayment All federal student loans are eligible for IBR
(including Federal Stafford and Federal Graduate PLUS loans)
Borrowers in any employment type or situation may apply
Repayment Plans (cont.)
Income-Based Repayment caps the monthly payment amount based on your income and family size – capped at the Standard 10 year repayment amount.
After 25 years, borrowers may receive loan forgiveness (currently, the IRS views IBR loan forgiveness as a taxable event)
Income Based Repayment (IBR) may offer borrowers the lowest monthly loan repayment All federal student loans are eligible for payments under the IBR calculation (including
Federal Stafford and Federal Graduate PLUS loans). Parent PLUS Loans are not eligible (nor are Federal Consolidation Loans that include a Parent PLUS).
Borrowers in any employment type or situation may apply Borrower can choose to exclude spouse’s income (however, tax returns would be filed as
‘married filing separately’) Payments could change annually (annual income and family size verification is required) Payments are applied to the interest first and principal last (negative amortization may
occur) Interest is capitalized when the borrower stops participating in IBR (this will occur if the
borrower no longer demonstrates partial financial hardship)
IBR Can Be Confusing !!
AGI Monthly PaymentHH Size = 1
Monthly PaymentHH Size = 2
Monthly PaymentHH Size = 3
$0 $0 $0 $0
$10,000 $0 $0 $0
$20,000 $41 $0 $0
$30,000 $166 $91 $17
$40,000 $291 $216 $142
$50,000 $416 $341 $267
$60,000 $541 $466 $392
$70,000 $666 $591 $517
$80,000 $791 $716 $642
Income Based Repayment
Income Based Repayment (IBR) examples (based upon 2012 poverty guidelines) assumes borrower resides in 48 contiguous states
ADVANTAGES: You are paying based on what you earn, the government will pay your unpaid accrued interest on your Subsidized Loans for up to three consecutive years from the date you began repaying your loan under IBR, 25 year cancellation, Public Service Loan Forgiveness (if 10 years of payments are made while working in a qualifying job).
DISADVANTAGES: A borrower could pay more over the life of the loan (usually, the more quickly you pay off a debt, the less you pay overall), you may have to pay taxes on the amount that is cancelled.
IBR (continued)
An average law student borrows $61,500 in Federal Direct Unsubsidized Loan ($20,500/year for 3 years)
Assuming the borrower does not pay interest while in-school, the debt upon graduation will be $68,100
10 year standard monthly payment will be $784/month
25 year extended monthly payment will be $473/month
Federal Direct Unsubsidized Loan Repayment Example
An average law student borrows $84,000 in Federal Direct Unsubsidized Loan ($28,000/year for 3 years)
Assuming the borrower does not pay interest while in-school, the debt upon graduation will be $94,500
10 year standard monthly payment will be $1,142/month
25 year extended monthly payment will be $733/month
Federal Direct Grad PLUS Example
10 year standard monthly payment = $1,926
Total paid over 120 months is $231,031
25 year extended monthly payment = $1,206
Total paid over 300 months is $358,734
Grand Total $162,600($20,500/yr Unsub and $28,000/yr Grad
PLUS)
Total Loan Debt
(Grad PLUS $28,000/yr) Interest Rate
10 year repayment plan
25 year repayment plan
Unsubsidized $68,100 6.80% $784/month $473/month
Graduate PLUS $94,500 7.90% $1,142/month $723/month
TOTAL $162,600 $1,926/month $1,196/month
Revised Debt(Grad PLUS $20,000/yr) Interest Rate
10 year repayment plan
25 year repayment plan
Unsubsidized $68,100 6.80% $784/month $473/month
Graduate PLUS $67,500 7.90% $815/month $517/month
TOTAL $135,600 $1,599/month $990/month
Direct Loan Repayment Examples
Total monthly savings: $327/month $206/month
Total saved over life of loan: over $39,000 nearly $62,000
Decrease your spending Increase your “gift aid”
Go to the Outside Scholarships section of our webpage www.law.syr.edu/fa
How Can I Reduce My Borrowing?
From LMFAO:If $20,000 were to come to you unexpectedly, what would your first impulse be?
• Shoe shopping
• Back pack around the world
• Pay down my student loans
• What is your money personality?
Amasser: If you tend to be a money amasser, you are happiest when you have large amounts of money at your disposal to spend, to save, and/or to invest
Avoider: If you tend to be a money avoider, you probably have a hard time balancing your checkbook, paying your bills promptly, and doing your taxes until the very last minute. You may avoid making a budget or keeping any kind of financial record. You won't know how much money you have, how much you owe, or how much you spend
From LMFAO: What is
your money
personality?
Hoarder: If you tend to be a hoarder, you like to save money. You also like to prioritize your financial goals. You probably have a budget and may enjoy the processes of making up a budget and reviewing it periodically
Money Monk: If you are a money monk, you think that money is dirty, that it is bad, and that if you have too much of it, it will corrupt you. In general, you believe that "money is the root of all evil."
From LMFAO: What is
your money
personality?
Spender: If you are a spender, you enjoy using your money to buy yourself goods and services for your immediate pleasure. You probably get satisfaction from spending money on gifts for others. The odds are that you have a hard time saving money and prioritizing the things you'd like in your life.
From LMFAO: What is
your money
personality?
To be successful… develop a short-term plan now (an in-school
budget)and
develop a long-term loan repayment plan (keeping in mind career objectives and job market fluctuations)
Successful Loan Repayment
Employment prospects and salaries for new law graduates have been affected by the economy.
Class of 2010 graduates reported salary ranges from $32,000 (public interest law) to $160,000 (large firm practice). Average starting salary for all employment types
was $67,400
Legal Job Market
Estimate Your Salary after GraduationAnnual Salary
$70,000 Monthly Salary Net Monthly Income
Student Loan Payment ($162,600 debt)
Monthly Disposable
Income
$70,000 $5,833 $3,908 $1,926 (10 year plan) $1,982
$70,000 $5,833 $3,908 $1,196(25 year plan) $2,712
$70,000 $5,833 $3,908 $666(IBR) $3,242
Annual Salary$30,000 Monthly Salary Net Monthly
IncomeStudent Loan Payment ($162,600debt)
Monthly Disposable
Income
$30,000 $2,500 $1,675 $1,926 (10 year plan) -$251
$30,000 $2,500 $1,675 $1,196(25 year plan) $479
$30,000 $2,500 $1,675 $166(IBR) $1,509
Think carefully about your future financial and personal goals and what you might have to give up once you’re working in order to pay back the debt you incurred as a student.
Borrowing Less = Repaying Less!
Public Service Loan Forgiveness Deferments & Forbearances Mandatory Exit Counseling Federal Direct Consolidation Loans ICR-A
Other Talking Points
Know how much is owed and to whom Understand terms & conditions of your loans Define your financial goals Develop an affordable budget Select a repayment plan Be aware of loan forgiveness programs Keep good financial records
Loan Repayment Strategy