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Welcome to…

Meet The Speakers

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Sasha Grabenstetter, AFC®Consumer Economics EducatorUniversity of Illinois Extension

Andrea PellegriniAssistant Director

Student Money Management Center

Where are you in the student loan process?

In School Deferment Grace Period Repayment Forbearance

Questions to Answer

• How much do I owe?• What types of loans do I have?• Who are my loan servicers?• What are my repayment plan options?• How can I get student loan forgiveness?• What if I can’t pay?• What makes it hard to plan for repayment?

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HOW MUCH DO I OWE?

WHAT TYPES OF LOANS DO I HAVE?

WHO ARE MY LOAN SERVICERS?

Student Loan Dashboard

Total: $28,000

Federal State School Private

Sub $12,000

Unsub $13,000N/A $0 Perkins $2,000 Will Jun $1,000

Loan Servicers Contact Info Interest Rate Monthly PaymentMOHELA (Federal Loans) 1-888-866-4352 6.8% $288

ACS (Fed Perkins @ UI) 1-800-826-4470 5% $21

Willie June 1-800-555-WILJ 10% $13

Total $322

Principle $28,000

Interest Accrued $???

Total Debt $28,000

Gather the Information

• StudentLoans.gov (for federal loans)

• Your School (for campus-based loans)

• AnnualCreditReport.com (for private loans if you don’t know your lender)

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Student Loan Dashboard

Servicers

Interest Rates

Loan Amounts

Federal Loans

Retired Current*

Federal Family Education Loan (FFEL) Program

Direct Subsidized

Direct Unsubsidized Direct PLUS

Direct Consolidation

Private lenders wereable to provide federalloans thru this program.

No new loans are being disbursed under this program

Undergrads with financial

need.

Federal government pays interest

while you are in school.

Undergrad, grad, &

professional students.

Student does not need to

demonstrate financial need.

Grad or professional students and

parents of dependent

undergrads.

Must not have adverse credit

history.

Allow you to combine all

eligible federal student loans into a single loan with a single loan

servicer.

*For more info on Federal Student Loans: http://studentaid.ed.gov/types/loans#what-types-of-federal-student-loans-are-available

Campus-Based Loans

• Awarded to undergraduate and graduate students with exceptionalfinancial need. Loan is repaid by you to your school.Perkins

Note: The Perkins Loan Program is a Federal Loan where your school is the Lender.

$5,500Undergraduate Graduate

Interest Rate

Repayment PlanPerkins Loan Limits

$8,000

10 years (Standard)

5%as of April 6, 2015

Private Loans

Private Education Loans are offered byprivate lenders.These loans are not guaranteed by theGovernment.Can have higher interest rates.

Private or “Third Party”

Loans

Private loans are based on credit history.

Poor credit will effect your interest rate andability to obtain these types of loans.

Repayment options for private loansvary significantly. Work with your loanservicer(s) to determine your optionsfor repayment.

Terms to Know

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When do you have to start repaying your loan?

a. Immediatelyb. 3 monthsc. 6 monthsd. 9 monthse. One yearf. Unsure

The period after you graduate, leaveschool, or drop below half-timeenrollment before you are required tobegin repayment of your loans.

Grace Period

• 6 months for Federal Direct Loan or Federal Family Education Loan (most common)

• 9 months for Federal Perkins Loans

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WHAT ARE MY REPAYMENT OPTIONS?

Repayment Plans Summary

Standard fixed payments of at least $50/mo for 10 yrs; default optionGraduated pmts start low & increase every 2 yrs for 10–25 yrsExtended fixed or graduated pmts up to 25 yrs; debt must be > $30kREPAYE max pmt is 10% of income; pmt could be > 10 yr standardPAYE max pmt is 10% of income; only for “new borrowers”IBR max pmt is 15% of income for 25 yrs; discharge unpaid amtICR 25 yr pmt based on AGI, family size & amt of DIRECT loansIncome-Sensitive Stafford & FFEL; pmt based on annual income over 15 yrs

CFPB Know Your Options: http://www.consumerfinance.gov/paying-for-college/repay-student-debt/

Benefits of ACH

An ACH pulls your student loan payment from your checking account.

ACHStands for Automated Clearing House

a.k.a., Direct Debit, eCheck or Automatic Payment

Loan servicers will give you an interestrate reduction if you sign up for ACH.

The reduction is .25% off

your interest rate.

Standard Repayment Example

Vanessa is a student in Illinois – she is about to graduate with a degree in Business Administration with an emphasis in Marketing.

– How much will her monthly payment be? – How much interest will she pay over the life of her

repayment plan?

$25,000 in Student Loans

Standard Repayment Example

Vanessa’s RepaymentSummary

Standard Graduated

Principle Loan Amount $25,000.00 $25,000.00

Interest Rate 6.8% 6.8%

Months in Standard Repayment 120 120

Monthly Payment $288 $165.95-$497.85

Total Interest Payment $9,524.00 $12,149.53

Total Loan Repayment $34,524.00 $37,149.53

*This example assumes all of Vanessa’s loans are federal & she won’t be in deferment or forbearance during repayment.

Graduated Repayment Schedule

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$165.95

$218.41

$287.45

$378.31

$497.85

$-

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

1 2 3 4 5 6 7 8 9 10

Vanessa (Income at $20,000)Repayment Plan

First Monthly Payment

Last Monthly Payment

Total AmountPaid

Projected LoanForgiveness

Repayment Period (in months)

Standard $288 $288 $34,524 $0 120 months

Graduated $166 $498 $37,150 $0 120 months

REPAYE $18 $278 $36,048 $22,316 300 months

PAYE $18 $191 $21,572 $37,428 240 months

IBR $27 $288 $49,620 $16,904 300 months

IBR for new borrowers

$18 $191 $21,572 $37,428 240 months

ICR $135 $211 $53,648 $2,759 300 months

Vanessa (Income at $50,000)Repayment Plan

First Monthly Payment

Last Monthly Payment

Total AmountPaid

Projected LoanForgiveness

Repayment Period (in months)

Standard $288 $288 $34,524 $0 120 months

Graduated $166 $498 $37,150 $0 120 months

REPAYE $268 $438 $33,446 $0 99 months

PAYE $268 $288 $34,744 $0 122 months

IBR for new borrowers

$268 $288 $34,744 $0 122 months

ICR $243 $162 $36,940 $0 147 months

Which Repayment Option Would You Choose if You Were Vanessa?

Vanessa’s RepaymentSummary

Standard Graduated REPAYE ICR

Principle Loan Amount $25,000.00 $25,000.00 $25,000.00 $25,000.00

Interest Rate 6.8% 6.8% 6.8% 6.8%

Months in Repayment 120 120 300 300

Monthly Payment $288 $166-$498 $18-$278 $135-211

Total Amount Paid $34,524.00 $37,149.53 $36,048 $53,648

• This example assumes all of Vanessa’s loans are federal & she won’t be in deferment or forbearance during repayment.• Total interest paid cannot be calculated for REPAYE or ICR since the payments can vary so much depending on income.• Total amount paid does not include tax liability of any forgiven amount, which could be $2,759 for ICR & $22,316 for REPAYE.

IBR vs ICR

If the remaining loan is discharged, that amount will be taxed as income.

Income-Based RepaymentMust submit annual documentation

Maximum monthly payments will be 10% or 15% of discretionary incomeBased on income, family size & state of residenceYour payments change as your income changes

After 20 or 25 years, the unpaid portion will be discharged

Income-Contingent RepaymentMust submit annual documentation

For DIRECT Loans Only

Based on adjusted gross income, family size, and total amount of your Direct LoansFlexibility to pay Direct Loan obligations without causing financial hardship25 year repayment period, after 25 years the unpaid portion will be discharged

Revised Pay As Your Earn (REPAYE) vsPay As You Earn (PAYE)

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features REPAYE PAYEYou must be a new borrower on or after 10/1/2007 and received a disbursement of a DIRECT loan on or after 10/1/2011

X

Payments are recalculated each year and are based on your updated income and family size X X

Your maximum monthly payments will be 10 percent of discretionary income

X X

Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full* after 20 or 25 years after 20 years

Good option for those seeking Public Service Loan Forgiveness (PSLF). X X

*If the remaining loan is discharged, that amount will be taxed as income.

Loan Consolidation

Direct Consolidation Loan

Pros ConsOne payment instead of multiple monthly payments

May lose access to federal repayment plan options or loan forgiveness

Your monthly payment MIGHT be lower Repayment period may be extended up to 30 yrs

All federal loans can be consolidated Federal Perkins loans are not automatically included in the Direct Consolidation Loan

No application fees to consolidate federal education loans into a Direct Consolidation Loan

Typically you can only consolidate once, unless you add new loans

Interest rate on your consolidated loan is fixed for the life of the loan, based on weighted average of all the interest rates you consolidate and never exceed 8.25%

Students can consolidate (combine) multiple federal student loans with different repayment schedule into one Direct Consolidation Loan.

Consolidation vs RefinancingDIRECT

Consolidation LoanPrivate Refinance

Loans

Loans eligible: All federal loans Private & (sometimes) federal loans

Lower interest rate? No, rate is fixed, weighted avg, < 8.25%Possibly, rate is variableor fixed, based on credit

Credit check required? No Yes

Will I save money? Not long term, maybe on monthly pmtProbably, if receiving

lower interest rate

Can lower monthly payment? Maybe Yes

Eligible for income-driven repayment plans: Yes No

Access to Public Service Loan Forgiveness (PSLF): Yes No

Eligible to maintain Federal Perkins Loan Forgiveness: No No

Chat Discussion

What are the benefits of loan consolidation?

What are the limitations of loan consolidation?

HOW CAN I GET STUDENT LOAN FORGIVENESS?

Types of Loan Forgiveness

You may have to pay income tax on any amount that is forgiven

IBRPAYE

REPAYECancellation*

Teacher Loan Forgiveness

Public Service Loan

Forgiveness

Public Service Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance* on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

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Repayment PlansMonthly Payments Employer

Public Service Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance* on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

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Monthly Payments • Must be made after October 1, 2007• For full amount due as shown on your bill• No later than 15 days after your due date

Monthly payments made while in an in-school status, the the grace period, a deferment, a forbearance or default do not qualify.

Public Service Loan Forgiveness

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Repayment Plans

Income-Driven Repayment Plans Standard Repayment PlanREPAYE Even though the 10-year Standard Repayment Plan is a

qualifying repayment plan for PSLF, you will not receive PSLF unless you make the majority of your 120 qualifying monthly payments under an income-driven repayment plan.

PAYEIBRICR

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance* on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

Public Service Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance* on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

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Employer

ü Government organizations (federal, state, local or tribal)ü Not-for-profit organizations that are 501(c)(3) tax-exemptü Other not-for-profits that provide qualifying public services

Serving in a full-time AmeriCorps or Peace Corps position also counts as qualifying employment for the PSLF Program.

WHAT IF I CAN’T PAY?

Deferment & Forbearance

DefermentPeriod when repayment of principal and interest of your loan is temporarily delayedYou do not need to make payments in deferment

For Federal Perkins Loans, Direct Subsidized Loans or Subsidized Federal Stafford Loans, the government may pay interest while in defermentThe government does not pay interest on unsubsidized & PLUS loans in defermentInterest may be capitalized while in deferment

ForbearanceWhen you can’t make your payment, but don’t qualify for deferment

2 types: discretionary & mandatory

Discretionary forbearance is for financial hardship or illness & your servicer decides to grant it or not

Mandatory forbearance is for several reasons & your servicer is required to grant the forbearance

To request a forbearance, work with your loan servicer

Work with your Loan Servicer

• To make payments on your student loans• To request changes to your payment plan• To apply for student loan forgiveness• To apply for a loan cancellation (e.g., IBR)• To request a deferment or forbearance

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Go to College

Graduate

Buy a CarGet a job

Have a Roommate

Move to L.A.

Get a Raise

Get Injured at Work

Get Married

Have a Child

Buy a Home

Career Change

WHAT MAKES IT SO HARD TO PLAN FOR LOAN REPAYMENT?

What is the best way to get rid of your student loans faster?

üLimit what you spend while in schoolüBi-weekly student loan paymentsüDirect Debit (ACH) Discountsü If paying more than the minimum

– Apply additional amount directly to the principle – Use the debt snowball or waterfall method

Reducing Compound Interest

Is it better to wait after graduation to start paying for loans or make monthly payments while still in college?

The decision is ultimately yours!If you have unsubsidized loans – you can make payments on the

interest that is accruing while you are in school.

What happens if I max out my student loans?

https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

Why is this important?If you max out your student loans – you’ll be unable to

borrow additional loans unless you pay them back.

Subsidized & Unsubsidized

Aggregate Loan Limits

Dependent Student Independent Student

$31,000 totalNo more than $23,000 of this may be in subsidized loans

$57,500 totalNo more than $23,000 of this may be in subsidized loans

Know…

• WHAT You Owe

• WHO You Owe

• WHEN to pay

• HOW to pay

• and your RESOURCES

Helpful WebsitesDepartment of Education’s Student Aid Website:studentaid.ed.gov

Repayment Estimator:studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

CFPB’s Paying For College: consumerfinance.gov/paying-for-college/

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Stay in Contact with Us!

Financial Wellnessweb.extension.illinois.edu/financialwellness

Student Money Management Centerstudentmoney.uillinois.edu

Financial Literacy Badges Program

Launch of the Financial Literacy Badges program is supported through the Financial Literacy Counts Grant from HigherOne. Learn more about the the Financial Literacy Badges Program by visiting badges.illinois.edu/usfsco/financialliteracyprogram

Want to participate in University of Illinois financial education events and programs while also earning badges that you can display on social media sites?

Participate in the Financial Literacy Badges Program!

Take the Quiz: go.uillinois.edu/LoveYourLoanQuiz

Questions?

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Thank You