Student Loans

Mary Anne HunterCollege Access Team

CO Dept. of Higher Education

Stafford Loans

Subsidized Stafford• Need-based• Interest Rate = 3.40% (2011-12)

• Government pays interest while in school & during grace period

Unsubsidized Stafford Not need-based Interest rate = 6.8% Student pays interest/

accrues while in school & during grace period

Can pay quarterly or capitalize

• Low fixed interest rates – 1% loan fee• 6 month grace period• In student’s name• No credit check/income verification

Federal Perkins Loans• Awarded directly by college – not all participate

• Fixed interest rate of 5% • Based on exceptional financial need

• 9 month grace period

• Award $ vary – up to $5,500 p/yr

• Repay college directly

Federal Parent Loan for Undergraduate Students PLUS Loans

• In parent name - for parents of undergrad. dependent students • Fixed interest rate of 7.9% • Credit check required

– If denied, student is eligible for additional unsubsidized Stafford allowance

• Repayment begins 6 weeks after the loan is fully disbursed – or - parent may defer repayment: – while the student on whose behalf the parent borrowed the loan is

enrolled on at least a half-time basis, and – for an additional six months after the student ceases to be enrolled at

least half-time. • $ = up to unmet need• Fees - up to 4%

Private/Alternative Student Loans

Higher interest rates and variable (Prime/LIBOR) Based on credit score & income = parents typically

co-sign Interest rate & fees determined by credit score Less favorable repayment & deferment terms than

Federal student loans Use federal loans first

Consider PLUS/home equity loans Talk to financial aid office first

Annual Loan LimitsStafford Loan – DEPENDENT STUDENT

Dependent Students(whose parents were not denied a PLUS loan)

Combined Base Limit for Subsidized and Unsubsidized

LoansAdditional Limit for

Unsubsidized Loans

Total Limit for Unsubsidized Loans (minus subsidized

amounts)

First-Year Undergraduate (Freshman)

$3,500 $2,000 $5,500

Second-Year Undergraduate (Sophomore)

$4,500 $2,000 $6,500

Third-Year and Beyond Undergraduate (Junior, Senior)

$5,500 $2,000 $7,500

TOTAL/AGGREGATE LIMIT = $31,000

Annual Loan LimitsStafford Loan – INDEPENDENT STUDENT

Independent Students

Combined Base Limit for Subsidized and Unsubsidized

LoansAdditional Limit for

Unsubsidized Loans

Total Limit for Unsubsidized Loans (minus subsidized

amounts)

First-Year Undergraduate (Freshman)

$3,500 $6,000 $9,500

Second-Year Undergraduate (Sophomore)

$4,500 $6,000 $10,500

Third-Year and Beyond Undergraduate (Junior, Senior)

$5,500 $7,000 $12,500

TOTAL/AGGREGATE LIMIT = $57,500

Examples of Monthly Payments

Examples of Monthly Payments based on 6.8% with 10 year repayment period:

• $3,500 $50 per month • $5,000 $56 per month• $7,000 $78 per month• $10,000 $111 per month• $15,000 $167 per month• $25,000 $278 per month• $45,000 $500 per month

SLOPE Calculator SLOPE Calculator Student Loans Over Projected EarningsStudent Loans Over Projected Earnings

CAREER & SALARYCAREER & SALARY

$25,330/$44,830

INTEREST RATES & TERMSINTEREST RATES & TERMS

HOW MUCH DO YOU PLAN TO BORROW?HOW MUCH DO YOU PLAN TO BORROW?

Total Owed – Payments - Total PaidTotal Owed – Payments - Total Paid

What Slope are YOU On?What Slope are YOU On?

Green – comfortable/safeBlue – good (money) skillsBlack - dangerous/risky

Your Monthly IncomeYour Monthly IncomeWhat’s Coming InWhat’s Coming In

Your Monthly ExpensesYour Monthly ExpensesWhat Goes OutWhat Goes Out

What Does That Leave You?What Does That Leave You?

Loan Repayment Options

Standard Repayment Fixed amount each month 10 year repayment period Higher monthly payments than

other plans least total interest paid

Graduated Payments Start low - Increases every 2 yrs Up to 12 - 30 yr repayment period Minimum payment = amount of

accrued interest/$25 Results in more total interest paid

Income Based Capped at affordable $ - % of

discretionary income\fam size Up to 25 year repayment Possible balance cancellation Submit annual documentation Results in more total interest paid

Extended Payments Smaller fixed monthly payments Up to 12 - 30 year repayment Must have >$30,000 outstanding Results in more total interest paid

Example Repayment Plans

Repayment Plan Monthly Loan Payment

TotalInterest

TotalPayments

Standard – 10 Years $288 $9,524 $34,524

Extended – 12 years $254 $11,639 $36,639

Extended – 15 years $222 $14,946 $39,946

Extended – 20 years $191 $20,802 $45,802

Extended – 25 years $174 $27,054 $52,054

Extended – 30 years $163 $33,674 $58,674

Assumes $25,000 unsubsidized Stafford loan at 6.8% interest and ignores balance-based setting of extended repayment term.

From: Finaid.org

Save – Pay on time – Protect your Credit Rating• DON’T BORROW MORE THAN YOU REALLY NEED

• Set up automatic direct debit from checking/savings account for monthly loan payments

• Many lenders offer discounts for auto-debit payments:– Federal loans offer a 0.25% interest rate reduction– Private student loans offer a 0.25% or 0.50% interest rate reduction

• Auto-debit eliminates missed/late payments = good repayment record

• Deduct up to $2500 of student loan interest payments from taxes – you can’t be claimed by parents

From Fastweb.org

Postponing RepaymentDeferment

• A temporary suspension of loan payments for specific situations (i.e. reenrollment in school, unemployment, economic hardship)

• Can receive a deferment for certain defined periods. • You don’t have to pay interest on Subsidized Stafford Loans

during deferment - Must pay interest on Unsbubsidized • Must apply to loan servicer (the organization that handles

your loan)• Must continue to make payments until notified of deferment

approval

Postponing RepaymentForbearance

• A temporary postponement or reduction of payments for a period of time because you are experiencing financial difficulty

• Can receive forbearance if not eligible for a deferment• Interest continues to accrue (whether subsidized or

unsubsidized) - you’re responsible for repaying it.• Can be granted in intervals of up to 12 months at a time for up

to 3 years• Must apply to your loan servicer and continue making

payments until notified your forbearance has been granted

Consequences of Default

• Reported to credit bureau (borrower & cosigner)

• Loan becomes immediately due in full

• Ineligible to receive state and/or federal financial aid

• Federal and state income tax refunds withheld (borrower & cosigner)

• Wages may be garnished

• Assigned to collection agency or federal government

• Borrower responsible for attorneys fees and collection costs

• Suspension of professional license or certificate

Information About My Loans

• Total Loans – balance owning – lender(s)• Repayment Options• Trouble Making Payments• Consolidation• Default• Money Saving Tips

www.nslds.ed.gov

Your Loan History

www.StudentLoans.gov

Loan Forgiveness Programs

Federal Perkins Loan Teacher CancellationUp to 100% cancellation (discharge) if served full -time in public or nonprofit

elementary or secondary school system as a teacher:In a school serving students: • from low-income families• special-education teacher - infants, toddlers, children, or youth with disabilitiesIn the fields of:• mathematics • Science• foreign languages• bilingual education• or in any other field of expertise determined by a state education agency to have a

shortage of qualified teachers in that state

Perkins Loan Cancellation RatesUp to 100 percent of the loan may be canceled, including the interest

that accrued during the year, for teaching service, in the following increments:

• 15 percent canceled per year for the first and second years of service,

• 20 percent canceled for the third and fourth years, and

• 30 percent canceled for the fifth year

Stafford Loan Forgiveness Program for Teachers

• Teach full-time for five consecutive, complete academic years • Certain elementary and secondary schools that serve low-income families

and meet other qualifications • May be eligible for forgiveness of up to a combined total of $17,500 in

principal and interest on their FFEL and/or Direct Loan program loans• Must have an outstanding balance on FFEL or Direct Loan• Amount of forgiveness based on completion year and certification by Chief

Administrator Officer of school

www.studentaid.ed.gov/PORTALSWebApp/students/english/cancelstaff.jsp?tab=repaying

Public Service Loan Forgiveness (PSLF)• Created to encourage individuals to enter and continue to work full-time

in public service jobs

• You may qualify for forgiveness of the remaining balance due on your eligible federal student loans after you have made 120 payments on loans under certain repayment plans while employed full-time by certain public service employers

• Only for non-defaulted loans made under the Direct Loan Program

• Federal Family Education Loans (FFEL) may qualify for forgiveness if they are consolidated into a Direct Consolidation Loan

Eligible Public Service Jobs• emergency management• government (excluding time served as a

member of Congress)• military service• public safety and law enforcement (police

and fire)• public health (including nurses, nurse

practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)

• public education • early childhood education (including

licensed or regulated childcare, Head Start, and State-funded prekindergarten)

• social work in a public child or family service agency

• public services for individuals with disabilities or the elderly

• public interest legal services (including prosecutors

• public defenders and legal advocacy on behalf of low-income communities at a nonprofit organization)

• public librarians, school librarians and other school-based services, and employees of tax exempt 501(c)(3) organizations

• Full-time faculty at tribal colleges and universities; faculty teaching in high-need subject/shortage areas (including nurse faculty, foreign language faculty, and part-time faculty at community colleges)

Other Loan Forgiveness ProgramsThe Nursing Education Loan Repayment Program • helps alleviate the critical shortage of registered nurses currently experienced by

certain types of non-profit health care facilities by helping nurses working at them to repay their student loans.

• In exchange for two years of service, participants receive 60 percent of their total qualifying nursing education loan balance

The Federal Student Loan Repayment Program • allows federal agencies to establish loan forgiveness programs to help recruit and

retain • agencies make payments directly to the loan holder - payments represent taxable

income to the • employees must agree to work for the agency for at least 3 years.

Helpful Websites

• www.StudentLoans.gov

• www.Studentaid.ed.gov

• www.Loanconsolidation.ed.gov

• www.Finaid.org

www.educationcents.org

Questions?